Fortis (FTS) Q3 2025: $2.8B CapEx Expansion Anchors 7% Rate Base Growth Through 2030
Fortis unveiled a $28.8 billion five-year capital plan, up $2.8 billion, targeting 7% annual rate base growth and a 100% regulated asset mix. Transmission investments and data center-driven load growth are fueling the expansion, while recent asset sales strengthen the balance sheet and reduce risk. Execution hinges on regulatory approvals and infrastructure delivery, with significant upside tied to incremental generation and LNG projects.
Summary
- Transmission-Led CapEx Surge: Fortis’ capital plan lifts transmission and distribution to 77% of spend, driving rate base growth.
- Regulated Asset Focus: Recent divestitures complete the shift to a 100% regulated portfolio, lowering risk profile.
- Data Center Demand Tailwind: Large-scale customer interconnections and grid upgrades underpin future upside beyond the base plan.
Performance Analysis
Fortis delivered adjusted EPS of $0.87, up 2 cents YoY, with broad-based growth across its regulated utilities. The U.S. electric and gas businesses contributed a $0.03 EPS increase, reflecting higher transmission revenue and capital project returns at UNS, though regulatory lag from $700 million of unfunded rate base tempered gains. ITC, Fortis’ largest transmission unit, posted a $0.02 EPS boost from continued capital deployment, but higher stock-based comp and holding company costs offset some upside. Western Canadian operations saw a $0.01 lift, led by FortisBC’s pipeline investments, but were partially offset by lower allowed ROE and the expiration of Alberta’s performance-based regulation mechanism.
Asset sales, notably Fortis TCI and Belize, trimmed non-core exposure and had a modest $0.02 EPS drag for the year. Adjusted EPS for the first nine months reached $2.63, up $0.18 YoY, supported by regulated rate base expansion and favorable FX. On the funding side, over $2 billion of debt raised year-to-date, including a $750 million hybrid issue, provided flexibility to execute on the enlarged capital program.
- Transmission and Distribution Dominance: 77% of the new CapEx plan targets grid infrastructure, supporting stable, regulated returns.
- Dividend Growth Commitment: The board approved a 4.1% dividend increase, marking 52 consecutive annual hikes.
- Balance Sheet Fortification: Proceeds from asset sales and hybrid debt issuance were used to repay credit facilities, increasing financial resilience.
Regulatory outcomes and customer affordability remain central themes, with management emphasizing cost discipline and customer-funded growth for large new loads.
Executive Commentary
"Our new $28.8 billion five-year capital plan is up $2.8 billion compared to the prior plan. This supports rate-based growth of 7% and annual dividend growth guidance of 4% to 6% through 2030. This new plan was developed with a strong emphasis on maintaining customer affordability."
David Hutchins, President and CEO
"Adjusted EPS growth to date in 2025 reflects strong performance across all our regulated utilities. The growth in our capital plan is expected to be funded largely from cash from operations, utility debt, and our dividend reinvestment plan."
Jocelyn Perry, Executive Vice President and CFO
Strategic Positioning
1. Transmission Expansion and Grid Modernization
Transmission investments are the primary driver of the capital plan increase, especially at ITC, which accounts for $9.8 billion of spend and targets 8% rate base growth. Projects like the MISO long-range transmission plan and Big Cedar expansion address both reliability and surging demand from data centers and economic development. ITC’s pipeline of new interconnections grew by 3 gigawatts this quarter, signaling ongoing opportunity beyond the base plan.
2. Customer-Funded Growth and Affordability
Management is explicit that large load additions, such as data centers, will be structured so that growth pays for growth, protecting existing customers from rate shock. In Arizona, negotiations for 600 megawatts of new demand are underway, with further upside possible if additional agreements are finalized. Regulatory approval and customer commitment are prerequisites before incremental CapEx is added to the plan.
3. Asset Mix Simplification and Risk Reduction
With the sale of Fortis TCI and Belize, Fortis is now a 100% regulated utility operator, eliminating non-core, non-regulated exposure and reinforcing its low-risk profile. Management signaled no further asset sales are planned, with funding needs addressed through internal cash flow, utility debt, and DRIP (Dividend Reinvestment Plan).
4. LNG and Clean Energy Infrastructure Upside
FortisBC’s capital plan includes major LNG storage and infrastructure projects, with the recent BCUC approval of the Tilbury LNG expansion introducing $300 million of potential upside, contingent on environmental approval. Additional opportunities in marine bunkering and Okanagan load growth could further lift the plan.
5. Funding Flexibility and Credit Strength
Fortis maintains ample liquidity and targets a cash flow to debt ratio of 12.4%, with a cushion of 75 to 100 basis points above S&P’s threshold by the end of the plan. No discrete equity issuance is planned, with the ATM (At-The-Market) program on standby and hybrids as an optional lever for incremental growth.
Key Considerations
Fortis’ five-year capital plan marks an inflection in both scale and composition, with transmission and regulated asset focus shaping the long-term strategic narrative.
Key Considerations:
- Transmission Buildout Pace: Execution risk centers on permitting, equipment availability, and regulatory approvals for large-scale grid projects.
- Data Center and Economic Development Load: Realization of incremental generation and infrastructure relies on customer agreements and timely regulatory sign-off.
- Customer Affordability Messaging: Management is positioning growth as customer-funded, but public and regulatory scrutiny on rate impacts remains a watchpoint.
- Funding Plan Resilience: Asset sales and hybrid debt have strengthened the balance sheet, but FX volatility and interest rates could affect future capital costs.
- Dividend Growth Continuity: The 4% to 6% annual dividend growth target through 2030 is underpinned by regulated rate base expansion and disciplined CapEx execution.
Risks
Execution on the enlarged capital plan faces risks from regulatory lag, permitting delays, and supply chain constraints, particularly for large-scale transmission and generation projects tied to new load growth. Customer affordability remains a sensitive issue, and while management intends for growth to be customer-funded, public and regulatory acceptance is not guaranteed. FX fluctuations and capital market conditions could also pressure funding flexibility and credit metrics if macro conditions shift.
Forward Outlook
For Q4 2025, Fortis guided to:
- Full-year CapEx of approximately $5.6 billion
- Dividend growth of 4% to 6% annually through 2030
For full-year 2025, management reiterated:
- 7% average annual rate base growth
- No material impact from recent asset sales on adjusted earnings
Management highlighted several factors that will influence results:
- Regulatory outcomes in Arizona and New York
- Progress on customer agreements for incremental load and generation
Takeaways
Fortis is leaning into transmission-led growth and regulated asset stability, positioning itself as a low-risk, dividend-growth utility with upside tied to North American electrification and data center demand.
- Transmission and Data Center Demand: ITC and UNS are at the center of a multi-year investment cycle, with data center and economic development loads driving both base and upside CapEx.
- Regulated Asset Purity: The portfolio is now 100% regulated, reducing earnings volatility and simplifying the funding model.
- Watch for Execution on Incremental Projects: Timely regulatory approvals and customer signings will determine whether upside projects are realized within the plan period.
Conclusion
Fortis’ Q3 results and five-year outlook solidify its position as a transmission and regulated utility leader, with a disciplined approach to growth, funding, and customer affordability. The capital plan’s upside is real but contingent on execution and regulatory clarity.
Industry Read-Through
Fortis’ capital plan expansion and focus on transmission echo broader North American utility trends, as grid modernization and data center-driven load growth reshape investment priorities. The company’s customer-funded growth model and regulated asset mix set a template for peers facing similar demand surges and affordability pressures. LNG infrastructure and clean energy integration, especially in Western Canada, remain key themes for utilities seeking both growth and decarbonization. Investors should monitor regulatory dynamics and permitting timelines, as these will dictate how quickly utilities can capitalize on the electrification and digital infrastructure wave.