Ladies and gentlemen, thank you for standing by. My name is Lisa, and I will be your conference operator today. Welcome to the Fortis Q3 2019 Conference Call and Webcast. During the call, all participants will be in a listen-only mode. There will be a question-and-answer session following the presentation. [Operator Instructions] At this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Ms. Amaimo.

Thanks, Lisa, and good morning, everyone, and welcome to Fortis’s third quarter results conference call. I am joined by Barry Perry, President and CEO; and Jocelyn Perry, Executive VP and CFO, other members of the senior management team, as well as CEOs from certain subsidiaries. Before we begin today’s call, I want to remind you that the discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide show. All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U.S. GAAP financial measures in our 2019 third quarter MD&A. Also, unless otherwise specified, all financial information referenced is in Canadian dollars. With that, I will turn the call over to Barry.

Thank you, Stephanie, and good morning, everyone. Fortis delivered another successful quarter both operationally and financially, positioning us well to achieve our goals in 2019. Adjusted EPS was $0.66 for the third quarter and we reported adjusted EPS of $1.93 to the end of September. These earnings results were in line with our expectations and Jocelyn will speak to this in more detail shortly. Through September, we invested $2.6 billion in our energy delivery businesses across North America to improve reliability, modernize the grid and deliver cleaner energy to our customers. On the shareholder front, our Board declared a fourth quarter common share dividend of $0.4775 per share, representing a 6.1% increase in our quarterly dividend. This increase aligns with growth we are seeing in our business and the guidance we have provided to our shareholders. We have now increased our annual dividend paid to shareholders for 46 consecutive years. Last month, was the three-year anniversary of closing the ITC transaction. As such, it was fitting that we held our Investor Day this year at the ITC headquarters near Detroit, Michigan. Investors were able to see firsthand the culture of operational excellence at ITC through tours of a critical substation, its operations control room as well as its cybersecurity operations center. In addition, we showcased the Motor City and the efforts under way by the transportation sector to shift to electric vehicles and the important role of utilities to support electrification and a lower carbon economy. Beyond highlighting ITC and the Motor City, at Investor Day, we also highlighted innovation and the shift to cleaner energy across our businesses in support of our growth strategy. Fortis is committed to reducing greenhouse gas emissions and increasing renewable energy use. Our teams are discovering innovative ways to deliver energy as clean as…

Thank you, Barry and good morning everyone. As Barry mentioned, third quarter results were in line with our expectation. Reported earnings for the quarter of $278 million or $0.64 per common share were comparable to earnings of $276 million or $0.65 per common share last year. On a year-to-date basis, reported earnings of approximately $1.3 billion or $3.02 per share were significantly higher than last year. You will recall that our second quarter 2019 earnings included a $484 million net gain on the sale of our 51% interest in the Waneta Expansion. Adjusted EPS of $0.66 for the quarter was $0.01 higher compared to the previous year. This increase reflects rate base growth in our regulated businesses, partially offset by decreased production at the Belize hydro generating facilities due to lower rainfall, and a higher weighted average number of common shares outstanding. On a year-to-date basis, adjusted EPS was $0.02 lower than the first nine months of 2018. Rate-base growth, again, driven by our regulated businesses was offset by unfavorable weather impacts in Arizona and Belize as well as reduced earnings at Aitken Creek. Turning to Slide 13, I’ll walk through the EPS drivers for the quarter. Growth at our regulated utility businesses was led by ITC, which contributed $0.02 increase in EPS during the quarter and largely reflect weight-based growth. Next, UNS Energy increased EPS by $0.01 in the quarter, which reflects higher revenues due to operational regulatory recoveries offset by higher costs associated with rate base growth that are not yet included in rate, due to the historical test year. Weather was not a significant driver of results for the third quarter. At our non-regulated energy infrastructure businesses, EPS decreased by $0.01 for the quarter. This was mainly driven by lower production in Belize as the country continues…

Thank you, Jocelyn. We believe Fortis has a strong value proposition supported by our organic growth strategy, our improving credit profiles, unique business model and long track record of delivering on our plans. As another year wraps up and we look ahead to 2020, we are optimistic about our growth trajectory and the important role, our businesses play in shifting to cleaner energy in the communities we serve. Sustainable practices have remained front center and we are committed to doing even more in the future. Now, I’ll turn the call back over to Stephanie.

Thank you, Barry. This concludes the presentation. At this time, we’d like to open the call to address questions from the investment community.

Thank you, ladies and gentlemen. We will now conduct the question-and-answer period. [Operator Instructions] And our first question comes from the line of Robert Kwan from RBC Capital Markets. Your line is open.

Great. Good morning. If I can maybe start with TEP, you had mentioned some of the other filings that have gone in particularly the staff recommendation. I’m just wondering if you could give some kind of higher-level thoughts on what the staff put forward particularly, just on the cost of capital parameters, ROE, fair value return and equity thickness and the link.

Thank you, Robert. I’m going to ask David to comment on that. David?

Yes. This is Dave Hutchens. Good morning, Robert.

Good morning.

Yes, the – without getting too much into the details of what we’ll be putting in our rebuttal here at the end of the month. We are a little disappointed with the ROE that staff came out with as well as a little bit lower fair value increment in what we were expecting. But those are other things that we’re going to address in our rebuttal testimony and obviously in the hearings itself. So we’re generally pretty positive about overall where we’re at from a process perspective, but we’ve got some work to do.

Okay. Maybe just turning to the Alberta side and the decision from the AUC. Just wondering, how are you accounting for this on why you’ve got the earning R&V outstanding?

Jocelyn?

Robert, we’ve not done anything different with respect to recording these transmission investments until we get an order and further clarity, but particularly an order, we will not be making changes to how we account for our transmission investments.

Got it. And I guess maybe just to follow it at a higher level on the asset side. It’s obviously not good if you end up losing and having to transfer it, I guess, net book value, but in some ways, though, how would you look at this with respect to then effectively being an asset sale and boxing out common equity needs. Or another way to think about it is, you’re reducing capital in a low return in questionable regulatory jurisdiction and being able to redeploy that capital into say U.S. utilities with better returns on invested capital?

Robert, it seems like you can find a silver lining in anything. We can right now on this decision, frankly. Clearly, yes, if the transfer did happen at book value, we get the proceeds, and that would create a dividend from FortisAlberta, back up the Fortis. And we’d have to pay down some debt at FortisAlberta as well. It would probably make whole costs associated with it. And these are some of the things we’ve identified for the commission to consider that we’re not part of their deliberations in making this decision. These issues generate other impacts. And so our focus is to work to get this decision reversed and we have filed, I think, some strong arguments to do that. So I – we continue to look at our Canadian business in a positive light, we have work to do on the regulatory compact in Canada. I know that, but we are not redirecting capital from Canada to the U.S. We’re not doing that.

Okay. That’s great. Thank you.

And our next question comes from the line of Ben Pham from BMO. Your line is open.

Okay, thanks. Good morning. I wanted to follow-up on the customer contributions in FortisAlberta and I wanted to clarify isn’t the $400 million, that’s always been a no-cost of capital item for you guys. And really, this is really, you think about it really just a CapEx recovery or depreciation recovery maybe some cash tax impact.

So no, Ben, in the case of this investment, it’s like any other rate base investment we actually funded with equity and debt and earn on it. So it’s not a no-cost investment rate like that. So that’s what fairly unique about the decision to ask one utility to transfer its rate base to another utility at presumably book value. That’s where we have the start. And this should never happen at book value. If it’s going to happen, it’s got to be happen at fair market value. We paid 1.5, 1.6 rate base by FortisAlberta and the regulator asking us to transfer 12% of the rate base at book, presumably book value. That’s just not – I think it’s a precedent setting kind of request, frankly, and one that we do have the challenge.

Okay. So this isn’t though the one where you basically get some contributions from transmission customers and that cash goes in and that’s usually a deduction in the CapEx when you book that’s a separate item.

No, this is – Ben, it’s Jocelyn.

Yes.

No, this is rate base similar to any other rate base that we have. So we earn a full return off of it.

Okay. I got you. Okay. And then on the Belize hydro, thanks for providing some of the generation and whatnot, I can probably try to calculate their earnings impact, but can you share probably just their earnings impact on that for the quarter?

Yes. So BECOL, due to the low rainfall was about $0.01 in the quarter and we outlined that in the presentation. And to date, I mean BECOL is down about $0.04 over last year for us. So and all attributable to the lower rainfall.

Yes, I would say…

…last year as well.

Yes, I would say since I’ve been involved with Fortis, this is the driest year that we’ve had in that jurisdiction, they really have not had any rain and we need to have a good tropical storm go through there to fill the reservoirs soon, so.

Okay. All right. That’s it from me. Thank you.

Our next question comes from the line of Julien Dumoulin-Smith from Bank of America. Your line is open.

Hey, good morning, team.

Good morning.

Good morning.

Howdy. So perhaps just to backfill on these AUC questions, can you talk a little bit more about the just the civil process that you talked about with this appeal. I mean, what kind of timeline could we be looking at with, which you would be making this decision ultimately to take it out the $400 million at net book or otherwise. Just to understand and think about how this could mesh with next year’s update anyway.

So Julien, we have Michael Mosher on the phone, our CEO from Alberta. So I’m going to ask Michael to talk a little bit about the process from here. Michael, looking forward his mute button. We’ve lost him. Okay.

…has granted that.

Sorry, Mike, we weren’t hearing you. You might want to start from the beginning.

I’m sorry, Barry.

I think you might – it seem like you cut in there, maybe start again.

Okay. Can you hear me?

Yes.

Okay. Good morning, Julien. Yes, as Barry said about the process, we filed for review and variance as well as a requesting a stay of the order immediately upon receipt of the order. The commission on their own motion has granted the review and variance and has set forth an expedited schedule, which essentially has a closing of the record in their review by November 7. And they have indicated that is their intent to issue a revised decision prior to year-end.

Got it. So, maybe just to think about it this way, I mean, how does this mentioned in the longer-term update that you will probably do as you roll forward next year. Anyway, I mean, this isn’t that material against the overall outlook across the range of utilities that you own and especially if you have other moving factors in that rate base outlook already.

That’s right, Julien. And this is not really a material thing for Fortis, it’s a disturbing thing, but not material for the company. And obviously, that’s the benefit of Fortis in terms of being the diversified business that we are that not – having a poor decision in any one jurisdiction really doesn’t show up on a consolidated basis, but it doesn’t lessen our resolve to work to get it reverse, that’s for sure.

Well, and then if we can talk a little bit further about the comment made earlier around Canada just briefly. How do you think about further asset sales more broadly, you have some degree of future equity needs? I don’t want to put a number out there per se, but certainly it’s pretty clear cut. How do you think about the fungibility in asset sales versus future equity and making decisions given this outcome and others?

But Julien, we’re always looking at asset sales. It’s part of any big public companies’ processes these days and we’re always open to folks who are interested in our – in some of our assets. They want to make us an offer and go ahead, frankly, and we’ll have to consider it. That being said, I think we do have a very effective funding strategy with our DRIP program, our ATMs and we are showing pretty strong improvement in our balance sheet over the next number of years. And I think when you think about Fortis and some folks would say, yes, you guys got a great wires business. The only thing that rubs us a little badly is your – maybe your credit side of thing. But I can tell you that over the next number of years, that’s going to go away as well. So you’re going to see this company with adding $10 billion of rate base over the next few years with a very much improving balance sheet over that period. And if that generates more value then we’ll capture it.

Got it. But nothing – no commitment as of yet.

No.

Okay, excellent. Well, thank you for the time. All the best.

Thanks, Julien.

Our next question comes from the line of David Quezada from Raymond James. Your line is open.

Thanks. Good morning. My first question here just FortisBC on the LNG marine bunkering topic, does the most recent proposal on, I guess, the government’s apparent support of it, change your timing or maybe just color on the next steps for decision on further expansion at Tilbury?

I’ll just make a comment, again, we’ll have Roger, our CEO in BC, jump in. But I don’t see it changes the timing. We do have it in our five-year plan the bunkering facility. I would say, having the province issue a press release supporting the project with a very positive development and we very much appreciated that. And it gives us strong confidence that this project will move forward. Roger, maybe you can provide some more flavor on it. Roger Dall’Antonia: Thanks, Barry. Good morning, David. Not much more to add to what Barry had said, the timing hasn’t changed to move the LNG bunkering business, it’s going to need number of layers of government support, ports in Vancouver is fairly regulated. Obviously the province has a role in permitting things like that. So we’ve seen the BC government supported, it really helps us get the broader level support to put in place the various initiatives and approvals we need to get there. The timing hasn’t changed. So because of the announcement, it just really an indication of growing support for what it’s going to be hopefully an exciting part of the business.

Great, thank you. Appreciate those comments. My other question here, just on the general topic of renewable gas, sounds like it could be a really interesting opportunity for you guys. Any comments on the scope and scale of that opportunity. And if you could deploy it or kind of capitalize on that opportunity outside of BC at some point.

Well, I would say, from my perspective, it’s big news and a big opportunity and it takes a lot to get to 15%. And Roger, maybe you could comment on this ability to procure outside of British Columbia. Roger Dall’Antonia: Yes, thanks, again, Barry. So the 15% target will be about 30 terajoules of natural gas displacement by 2030, the plan for us, we anticipate probably a third of that in province two-thirds coming from either out of province contracts or other forms of renewal gas such as hydrogen. The – as far as what the shape of that portfolio looks like, it’s still indeterminate we plan to invest in facilities like we have already and the City of Vancouver landfill. But the way we envision the program, it’s really going to be a supply purchase arrangement where offering long-term contracts renewal natural gas allow third parties such as agricultural site landfills to build the facility and then we would enter into long-term contracts with those facilities and those would be in BC, but as well out of province.

Great. Thank you. Appreciate those comments.

Our next question comes from the line of Rob Hope from Scotiabank. Your line is open.

Good morning, everyone. Just one cleanup question. Just on the backdrop of wood fiber inching forward as well as the government being more supportive of LNG bunkering specifically, can you update us on your talks with the regulator on kind of gas security in the Lower Mainland. And if there is something FortisBC could do there longer-term?

Well, Robert, we continue to work on that and I think it will form a part of our plans going forward, we’re not there yet in terms of that. But Roger, again, maybe you could update on exactly where we are at this point. Roger Dall’Antonia: Thanks, again, Barry. I appreciate your question, Robert. We are having high level discussions on the issue driven obviously by the Enbridge situation a year or so ago. No specific plans. We are looking at various options. We are looking at additional on system storage. We are looking at potential pipe expansion. It’s one of those things where there is interest from the provincial government, we’ve had some initial discussions with the regulator, but there is significant work still needs to go before we have any kind of plans that we are sharing with the regulator. So it’s an ongoing discussion, but it’s a new topic or a new area of interest from the government regarding the resiliency of the system.

Okay. Thank you.

Our next question comes from the line of Mark Jarvi from CIBC Capital Markets. Your line is open.

Thanks. Good morning, everyone. I just wanted to go back quickly to Alberta. And just one kind of clean up question was around what the expectation around rate base growth for that transmission business, whether it’s going to just kind of grow in line with the broader expectations for Alberta or any kind of commentary around how much capital you thought you could deploy there?

Rate base growth in Alberta is tracking around 4%, which is a little low, I think, compared to what the industry across North America is growing at right now, but that’s a business that we’ve seen strong growth over the years. But right now we’re looking at about 4% growth.

I guess, more specific, just wondering on those transmission assets that might be transferred, would they grow in line with your broader expectations for Alberto, was there like how much kind on CapEx was expected to be invested in the transmission assets?

Yeah, Mark, this is Jocelyn. Yes, there is actually minimal future in our next five years. We don’t have a lot for transmission investments in our plan. It’s actually less than $100 million.

Okay. That’s helpful. Thanks. And then turning to ITC, which has been performing really strong here anything you’d call out in terms of your short-term tailwinds or something that may be less recurring like one thing you flagged is the effective tax rate, just trying to help us understand if this sort of pace here of earnings growth for ITC can be sustained if there’s anything that’s kind of boosted it in the near term?

I’d Linda on the spot and – but no, I would say, ITC is growing in sort of in relation to the investment that it’s making in rate base. And we do still see a strong five years with them in terms of the capital they have laid out. Linda, maybe you could add some flavor, but they’re still being driven by the renewables push in the Midwest and sort of the integrity of the infrastructure overall, I would think, but maybe you could add some comments.

Yes, thanks, Barry. Yes, that is absolutely right. I mean, primarily our growth has been driven by strong rate base growth. Certainly, both in terms of last year we had a strong rate base additions year and obviously we’re seeing the reflection of that in our earnings this year. And in addition to that so far this year, we’re continuing to have a strong year as it relates to capital additions. We also had the benefit this year, we acquired some assets from the Dearborn Industrial Generation facility. Those are now reflected in rates. We’ve also closed on the acquisition of assets from CMS Energy as well as we acquired some assets from Jo-Carroll cooperative at ITC Midwest. So, those are all helping our rate base growth, but I think more importantly as Barry indicated, we are just continuing to see a lot of different need drivers on our system both in terms of sort of baseline reliability projects, interconnections both load interconnections that are primarily driven by our customers, particularly DTE Energy. We’ve got a lot of load interconnections to respond to the growth, in shifting growth in the Southeast Michigan area. And then ultimately the continued generator interconnections both wind and solar. We’re starting to see quite a large pickup in solar projects and obviously we are working with our – the various developers in utilities to sort of work out the plans to build the needed transmission for the generator interconnections. And then, I think, long-term, we just continue to see the ongoing shift to more and more renewables, which I think long-term is going to continue to drive needed capital investment in transmission. So we’re very optimistic.

Okay. That’s great. Thanks.

Our next question comes from the line of Andrew Kuske from Credit Suisse. Your line is open.

Thank you. Good morning. Maybe say Barry’s voice. So I’ll ask Jocelyn the question just on the ITC adder.

Thank you, Andrew. I think you detected I have a very bad head cold.

I can hear you’re struggling, but I’ll probably ask you something maybe as a follow-up, but first with Jocelyn. Just on the ITC adder, I think you mentioned there is no timeline on the process and core processes are seldom quick, but if you looked at past precedents to what degree you believe you get a decision within, is it a 2020 event, late 2020, 2021 what’s the kind of ballpark, do you think?

Yes, it’s a very difficult question, Andrew. You never can pinpoint exactly when the regulators are going to offer these final decisions. And we’re still hopeful we’re going to get a decision on the ROE side of ITC by the end of the year. On the independence adder, it’s a tough call. There has been some noise in movements at FERC. And so, again, that all adds to the uncertainty as when we’re going to get it. So we’re hopeful it’s coming soon, but you never can tell when things go through the U.S. Court of Appeals and with FERC, the uncertainty is obviously more.

Okay. I appreciate the color. And then I will ask Barry the next question. It’s really just in the context of what we saw yesterday with the Encana announcement of redomiciling the company. When you look at the valuation delta across the border and then a lot of the questions on this call have been about what’s happened in Alberta for you. What do you think about redomiciling the company at some point in time or is this effectively move where you can actually push greater regulatory change in Canada in a positive fashion, because you’ve talked about that for multiple years now.

Great question, Andrew. We’re not considering redomiciling the corporation. But I would say, our focus, as you know, over the last couple years has been reducing the discount that we trade at versus a typical U.S. utility and I think we’ve had a lot of success at that. We probably trade today at the level of the average U.S. utility I always kid my team a little bit and say we should trade at a premium given that we’re a wires business, a T&D business, very diversified and all that. But we made a lot of progress to close the gap. Now, listen I have a lot of sympathy for the things that were outlined yesterday by the CEO of Encana in terms of some of the logic that they’re using. There is a giant sucking sound of capital toward the U.S., this issue around passive investing is a big issue. Typically U.S. utility as its top four shareholders are passive investors, they own about 30% of those businesses. In comparison, for us, we have about 15% maybe of our stock that’s held by passive funds. So we have to go find more institutions to hold our stock. So we have almost been better than the typical U.S. utility. And I’ve said for some time that capital in our sector in North America, it flows from Canada to the U.S., there is no capital coming from U.S. up to Canada. And that’s primarily because of Canadian regulation. And I think that is not sustainable over time. So we will have to have a change in some point in the quality of Canadian regulation. The Alberta situation here I suppose is an added item to that says it’s huge. That’s another wrinkle now, and so that’s not great. I will say…

Okay. I appreciate the color. Thank you.

Our next question comes from the line of Patrick Kenny from National Bank Financial. Your line is open.

Yes. Good morning, guys. Just on TEP approaching 30% renewables by 2021, obviously that’s a big accomplishment. But if we zone in specifically on coal as a percentage of TEP’s generation mix, and correct me if I’m wrong here, but still over 40% or at least one-third. Can you remind me if there is a goal to bring down the percentage of coal to a specific target at some point over the next 5 to 10 years?

David, you want to just jump in on that one?

Yes, there is not currently a goal for that. We’re in the middle of doing our Integrated Resource Plan. Some of those goals may come out of that process. But right now the only – actually the only state goal is to get to 15% renewables by 2025 or obviously doubling that in our efforts, but a lot of that still to be determined.

Okay, great. And then just switching over to BC and the outlook here for your gas storage business up at Aitken Creek, I was just curious if the recent change from NGTL with respect to priority access into Alberta storage might have any impact on the outlook for the profitability of gas storage up in Northern BC, at least on the 50% that isn’t utilized by FortisBC.

I will let Roger jump, but I’ll make a comment about generally that plant. I think as we think about all that’s going to happen in that market in the next decade or so on LNG export. And then the amount of gas it’s going to move through the system in BC and out, I think that asset just continues to get more and more valuable going forward and we should see improving earnings from it over time. Roger, just – that’s the challenge, right. So, maybe you can add some color on that. Roger Dall’Antonia: Thanks, Barry. Thanks, Patrick. The short answer is no real impact. I think that was addressing what’s going on in the producer segment in Alberta that decision really had support of the Alberta Government from what I understand. From our perspective given the nature of our business, we think it might help a little bit with activity but not sure it’s going to make a big difference in the near term on profitability.

Okay, That’s great. That’s it from me. Thanks, guys.

As there are no further questions, I’d like to turn the call back to Stephanie Amaimo for closing remarks.

Thank you, Lisa. We have nothing further at this time. Thank you everyone for participating in our third quarter 2019 results call. Please contact Investor Relations should you need anything further. Thank you for your time, and have a great day.

Thank you for participating, ladies and gentlemen. This concludes today’s conference call. You may now disconnect.