Fortis Earn $ 151 mln in 3Q

Fortis Inc. released its third quarter results today.  Driven by its U.S. utility acquisitions, completion of the Waneta Expansion, and strong results from its other utilities, Fortis' net earnings attributable to common equity shareholders were $151 million, or $0.54 per common share, and $145 million, or $0.52 per common share, on an adjusted basis.

"All of our businesses contributed to our strong third quarter earnings," said Barry Perry, President and Chief Executive Officer of Fortis.  "With our exit from the commercial real estate and hotel business, we have tightened our focus on the growth of our core utility business."

Strong earnings and cash flow; capital expenditure plan on track
 * Net earnings attributable to common equity shareholders for the third quarter were $151 million, or $0.54 per common share, compared to $14 million, or $0.06 per common share, for the third quarter of 2014.
 * On an adjusted basis, net earnings attributable to common equity shareholders for the third quarter were $145 million, or $0.52 per common share, an increase of $78 million, or $0.21 per common share, over the third quarter of 2014.

 * Factors that resulted in earnings growth included:
    - a full quarter's contribution from UNS Energy, which was acquired in mid-August 2014.  UNS Energy's earnings are highly seasonal, with the second and third quarter representing approximately 75% of annual earnings, due to the use of air conditioning and other cooling equipment.
    - a $5 million contribution from the Waneta Expansion hydroelectric generating facility, which came online in early April 2015.
    - higher capital tracker revenue and customer growth at FortisAlberta.
    - the resetting of customer rates at Central Hudson, effective July 1, 2015.

    - the continued strength of the U.S. dollar relative to the Canadian dollar.  Approximately 41% of Fortis' assets are in the United States.  On an annual basis, earnings per common share are affected by approximately $0.01 for each $0.01 change in the US dollar exchange rate.
    - lower operating expenses and a higher equity component of allowance for funds used during construction at FortisBC Energy.

 * Earnings growth was tempered by timing of regulatory deferral mechanisms at FortisBC Energy, that are expected to reverse in the fourth quarter.

 * Cash flow from operating activities for the first nine months of 2015 totalled $1.3 billion, almost double compared to the same period last year.  The increase was driven by the acquisition of UNS Energy.
 * Proforma unused credit facilities totalled approximately $2.3 billion as at September 30, 2015, after considering the closing of the sale of hotels in October 2015.

 * Almost $400 million in debt was raised at the regulated utilities in the quarter, and $1.0 billion was raised year to date, at attractive interest rates.

 * Capital expenditures were $0.5 billion in the quarter and $1.7 billion year to date.  Consolidated capital expenditures for 2015 are forecast to be approximately $2.2 billion. 
 
Increasing total shareholder return and sharpening focus on the core utility business
During the third quarter Fortis increased its dividend per common share over 10% to $0.375 per quarter, or $1.50 on an annualized basis.  This increase follows a 6.25% increase that was implemented in March 2015.  Fortis also announced dividend guidance in the quarter, targeting annual dividend per common share growth through 2020 of 6% based on a 2016 dividend of $1.50.

After the sale of the commercial real estate and hotel assets, as well as the disposition of non‑regulated generation assets in New York and Ontario, substantially all of Fortis' assets are comprised of regulated utilities and long-term contracted energy infrastructure. Net proceeds of almost $900 million from these sales were used by the Corporation to repay credit facility borrowings, largely associated with the acquisition of UNS Energy, and for other general corporate purposes.  The sale of the hotel assets closed in mid-October.

"We remain committed to profitable growth, and we believe building on the strength of our core business and further diversifying our asset base in regulated utilities will achieve this," continued Mr. Perry.  "Our confidence in our business, supported by investing in additional energy infrastructure opportunities, and executing on a robust capital expenditure plan, supports our forecast rate base growth and our targeted annual dividend growth rate of 6% through 2020."

Regulatory and Legal Proceedings
In November 2015 Tucson Electric Power Company ("TEP"), UNS Energy's largest utility, filed a general rate application with the Arizona Corporation Commission requesting new retail rates to be effective January 1, 2017, using June 30, 2015 as a historical test year.  Since its last approved rate order in 2013, which used a 2011 historical test year, TEP's total rate base has increased by approximately US$0.6 billion and the common equity component of capital structure increased from approximately 43.5% to approximately 50%.

The Corporation's regulatory calendar for its utilities in Canada continues to be extensive.  Newfoundland Power and Maritime Electric recently filed general rate applications for 2016 and FortisBC Energy, the benchmark utility in British Columbia, filed its application to review cost of capital for 2016.  The regulator in Alberta has also initiated a generic cost of capital proceeding for 2016 and 2017, which will impact FortisAlberta.
 
In August 2015 the Corporation agreed to terms of a settlement with the Government of Belize ("GOB") regarding the GOB's expropriation of the Corporation's approximate 70% interest in Belize Electricity Limited ("Belize Electricity") in June 2011.  The terms of the settlement included a one‑time US$35 million cash payment to Fortis from the GOB and an approximate 33% equity investment in Belize Electricity.

Outlook
Fortis' focus, and virtually all of the Corporations' assets, are low‑risk, regulated utility businesses and long‑term contracted energy infrastructure.  No single regulatory jurisdiction comprises more than one third of total assets.

Over the five-year period through 2020, the Corporation's capital program is expected to be approximately $9 billion. This investment in energy infrastructure is expected to increase rate base to approximately $20 billion in 2020 and produce a five-year compound annual growth rate of approximately 4.5%.  In addition to the base capital expenditure program, Fortis is pursuing additional investment opportunities in existing and new franchise areas, including further investment in natural gas related infrastructure.  Fortis expects this capital investment to support growth in earnings and dividends.

During the third quarter of 2015, Fortis initiated dividend guidance.  Fortis is targeting annual dividend growth of 6% through 2020.  This guidance takes into account many factors, including the expectation of reasonable outcomes for regulatory proceedings at its utilities, the successful execution of its $9 billion five‑year capital plan, and management's continued confidence in the strength of its diversified portfolio of assets and record of operational excellence.