Fortis Inc.

Overview Key strengths Key risks Low-risk utility operations across U.S., Canada, and the Caribbean. Large capital spending program over our forecast period. Large scale with geographic and regulatory diversity. Negative discretionary cash flows over our forecast period indicate external funding needs. Fortis and its subsidiaries have a consistent track record of service reliability. Potential changes in incentive return on equity (ROE) for its U.S. subsidiary ITC Holdings Corp. (ITC) business. Effective regulatory risk management. Managing energy transition risk at subsidiary Tucson Electric Power Co.(TEP). Minimal cushion in financial measures, largely due to elevated capital spending that we expect to persist. TEP rate case in Arizona: TEP filed for a rate case in mid-2022, seeking a net rate increase of about

...We are monitoring regulatory developments across the Fortis Inc. group. TEP rate case in Arizona: TEP filed for a rate case in mid-2022, seeking a net rate increase of about US$136 million. (Note: All values are in C$ unless stated otherwise.) Hearings concluded in April 2023 and a recommended order and opinion from the administrative law judge was issued on July 12, 2023. FortisBC: In 2021, the British Columbia Utilities Commission (BCUC) initiated a proceeding including a review of the common equity component of FortisBC's capital structure and the allowed ROE. The company filed a final argument with the BCUC in December 2022 and the proceeding remains ongoing, with a decision expected by mid-2023. FortisAlberta: In 2022, the Alberta Utilities Commission (AUC) initiated proceedings to establish the cost of capital parameters for Alberta regulated utilities, including consideration of a formula-based approach to setting the allowed ROE for 2024 and beyond. In March 2022, the AUC issued...

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