Fortis (FTS) Q4 2025: $28.8B Capital Plan Drives 7% Rate Base Growth Trajectory
Fortis outlined a record $28.8 billion five-year capital plan, targeting 7% annual rate base growth anchored in regulated transmission and distribution investments. Management emphasized disciplined cost control, robust dividend growth, and regulatory clarity—particularly in Arizona and Ontario—as pillars for ongoing shareholder returns. With large-scale data center load growth, transmission expansion, and LNG infrastructure on deck, Fortis is positioning for both stability and incremental upside across its North American footprint.
Summary
- Capital Plan Expansion: Largest-ever $28.8B plan prioritizes regulated, low-risk investments for durable growth.
- Regulatory Progress: Arizona data center agreements and formula rate cases provide visibility and revenue stability.
- Dividend Commitment: 52-year dividend streak continues, underpinned by 4% to 6% annual growth guidance through 2030.
Business Overview
Fortis is a North American regulated utility holding company, generating revenue primarily through rate-regulated electric and gas transmission and distribution. The company operates across Canada, the U.S., and the Caribbean, with major segments including ITC Holdings (transmission), FortisBC (gas and electric), UNS Energy (Arizona electric and gas), and several regional utilities. Its business model centers on regulated asset investment, earning returns set by regulators, and delivering predictable cash flows and dividend growth.
Performance Analysis
Fortis delivered adjusted EPS growth, driven by rate base expansion across core utilities, disciplined cost management, and favorable foreign exchange impacts. The year saw $5.6 billion in capital investment, supporting both system resilience and customer reliability, while keeping controllable operating costs at or below inflation—a crucial achievement given persistent supply chain and wage pressures.
Segment analysis reveals Western Canadian utilities contributed the largest EPS increase, led by FortisBC’s pipeline investments, while U.S. operations benefited from Central Hudson’s rate rebasing and regulatory deferrals. ITC’s capital deployment lifted transmission earnings, though offset by higher compensation and finance costs. Offsets included regulatory lag at UNS Energy and the impact of asset dispositions in the Caribbean. Dividend payout ratio improvement to 70% and strong liquidity underscore the company’s capacity to fund growth internally.
- Rate Base Expansion: Average annual rate base and EPS growth of 6.5% over three years, with 7% targeted going forward.
- Cost Control Discipline: Operating costs held below inflation despite sector-wide inflationary pressures.
- Capital Recycling: Asset sales (Belize, Turks and Caicos) streamlined portfolio and funded core utility growth.
Fortis’s performance demonstrates resilience in regulated earnings, a proactive stance on affordability, and a pipeline of incremental growth opportunities—notably in Arizona, ITC, and LNG infrastructure.
Executive Commentary
"Our utilities invested $5.6 billion in capital, which strengthened our systems, enhanced our resilience, and supported the long-term needs of our customers and communities. These investments translated into strong rate base and earnings growth and supported our track record of increases in dividends paid to 52 consecutive years."
David Hutchins, President and CEO
"Looking back over the past three years, Fortis has delivered average annual rate base and EPS growth of approximately 6.5%, continuing our solid growth track record. During this time, we have also successfully reduced our adjusted dividend payout ratio to approximately 70%, highlighting our ability to grow responsibly."
Jocelyn Perry, Executive VP and CFO
Strategic Positioning
1. Record Capital Plan Anchors Growth
The new $28.8 billion, five-year capital plan is Fortis’s largest ever, with 79% allocated to transmission and distribution investments across regulated utilities. Only 21% is tied to major projects, keeping execution risk low. This plan underpins a projected $16 billion increase in rate base and average annual growth of 7%—a clear signal of long-term earnings and dividend visibility.
2. Regulatory Clarity and Constructive Outcomes
Arizona’s regulatory progress stands out, with full-tariff, no-discount data center agreements and formula rate mechanisms advancing. These provide revenue stability and minimize regulatory lag, a key concern in the U.S. utility sector. ITC’s ongoing engagement with FERC and MISO, plus Ontario transmission opportunities, add further optionality.
3. Data Center and Load Growth Tailwinds
Fortis secured a 10-year, 300MW data center contract in Arizona, with a 75% minimum billing clause and no rate discounts, ensuring new load supports system-wide cost recovery. Additional negotiations for up to 1.3GW of incremental capacity signal a durable, multi-year growth engine. Management frames this as a “poster child” for customer affordability and grid optimization.
4. LNG and Transmission Investment Upside
Tilbury LNG expansion in British Columbia and incremental ITC transmission projects (including MISO LRTP and MTEP 26) represent potential upside beyond the base plan. These initiatives hinge on regulatory and permitting milestones but align with government policy shifts toward clean energy and export infrastructure.
5. Balance Sheet and Funding Flexibility
Fortis maintains strong investment-grade ratings and $4 billion in available credit, with capital needs primarily funded by cash from operations, utility-level debt, and the dividend reinvestment plan. The $500 million ATM program remains untapped, preserving flexibility for opportunistic capital raises.
Key Considerations
This quarter’s results reinforce Fortis’s position as a low-risk, rate-regulated compounder with embedded growth levers and a disciplined capital allocation framework. Investors should focus on:
- Execution on Capital Plan: Timely deployment and regulatory approval of major projects, particularly in Arizona, ITC, and LNG.
- Affordability and Cost Recovery: Customer affordability is central, with data center contracts structured to avoid cross-subsidization and ensure system-wide benefit.
- Regulatory Outcomes: Formula rate mechanisms and ROE decisions will shape earnings visibility, especially in the U.S.
- Incremental Growth Catalysts: Watch for updates on Arizona load growth, Ontario transmission, and further LNG infrastructure.
- Dividend Durability: 4% to 6% annual growth guidance through 2030 is underpinned by rate base expansion and payout discipline.
Risks
Regulatory risk remains the primary variable, with outcomes in Arizona and FERC proceedings influencing allowed ROEs and cost recovery. Execution risk on large capital projects—particularly LNG and transmission—could impact timelines and returns. Political scrutiny on customer affordability and energy transition pace introduces potential for policy-driven headwinds, though Fortis’s proactive engagement and contract design mitigate some exposure. Currency volatility and interest rate shifts also bear monitoring, though liquidity is robust.
Forward Outlook
For Q1 2026, Fortis guided to:
- Continued rate base growth in line with the 7% annual target
- Disciplined execution of the $28.8 billion capital plan
For full-year 2026, management maintained:
- 4% to 6% annual dividend growth guidance through 2030
Management highlighted several factors that will shape results:
- Progress on Arizona rate cases and formula mechanisms
- Potential incremental capital deployment in LNG and transmission as regulatory clarity emerges
Takeaways
Fortis’s 2025 results and strategy reinforce its status as a defensive, yield-focused utility with embedded growth and disciplined risk management.
- Low-Risk Growth Engine: Regulated asset expansion and prudent capital allocation drive durable earnings and dividend growth.
- Regulatory Progress: Arizona and ITC clarity are pivotal for future earnings visibility and incremental investment upside.
- Watch for Execution Signals: Track data center load ramp, LNG project milestones, and regulatory decisions for near-term catalysts.
Conclusion
Fortis enters 2026 with a record capital plan, strong regulatory momentum, and a clear focus on shareholder returns. Its blend of low-risk growth, cost discipline, and incremental upside opportunities positions it well for continued outperformance in the North American utility sector.
Industry Read-Through
Fortis’s results highlight the growing importance of regulated utilities as stable, yield-oriented investments amid macro uncertainty. The company’s approach to data center load contracts—full tariff, no discount, minimum billing—sets a benchmark for balancing growth and customer fairness, with implications for peers facing similar demand surges. Transmission and LNG infrastructure remain key battlegrounds for capital allocation, with regulatory outcomes and government policy driving sector-wide opportunity sets. Fortis’s focus on affordability, cost discipline, and regulatory engagement provides a playbook for utilities navigating the dual imperatives of energy transition and customer protection.