ITC CEO provides update on Lake Erie project, Fortis transaction

ITC Holdings’ (NYSE:ITC) capital projects and maintenance programs are off to a good start in 2016, ITC Chairman, President and CEO Joseph Welch said on April 28 during the company’s 1Q16 earnings call.

“Many reliability, system capacity and customer interconnection projects are in process across all of our operating companies and progressing on schedule,” he said. “One notable project in Detroit that we completed in February is our portion of [a] new … substation, which will support the load requirements for the new Red Wings stadium. With respect to our development efforts, we continue to advance the New Covert project, which is scheduled to go into service later this year, along with preparations and certifications to operate in PJM [Interconnection].”

As TransmissionHub reported, ITC Interconnection LLC (ITCI), a subsidiary of ITC Holdings, has filed a Federal Power Act Section 203 application at FERC to acquire certain facilities in Michigan from New Covert Generating Co. LLC (New Covert) to connect the existing New Covert power plant to the PJM grid.

Welch said that ITC is also “continuing to negotiate bilateral contracts with shippers on the Lake Erie Connector Project.”

According to the company’s website, the Lake Erie project is a proposed 1,000 MW, bi-directional, high-voltage direct current underwater merchant transmission line that will provide a direct link between the markets of the Ontario Independent Electricity System Operator (IESO) and PJM. ITC also said on its site that it anticipates receiving all state, federal, and provincial permits for the project by 2Q17, and beginning construction in 2017, with the project being in commercial operation in 2019. 

Also speaking on the call was Rejji Hayes, senior vice president and CFO of ITC, who noted that in the three months ended March 31, ITC invested $176.6m in capital projects at its operating companies, including $74.8m at ITC Midwest, $47m at METC, $41.1m at ITCTransmission, and $13.7m at ITC Great Plains.

Welch discussed the transaction between ITC and Fortis, which, as TransmissionHub reported, would have Fortis acquire ITC in a deal valued at $11.3bn, subject to shareholder approvals and state and other regulatory approvals. When the deal was announced in February, Fortis said it would seek a minority investor in ITC to aid in financing of the transaction, which is expected to close by the end of the year.

“Fortis and ITC have worked diligently to advance the transaction,” Welch said. “The most material news since our last call [was] last week’s announcement of Fortis entering into a definitive agreement with GIC [Private Limited] to acquire 19.9% equity interest in ITC for over $1.2bn in cash upon closing the transaction. Needless to say, we are delighted with this outcome.”

He added: “With a minority investor secured, we can now proceed with other key milestones in the transaction, including the remaining state and federal regulatory filings, and the shareholder votes for both Fortis and ITC. Overall, the transaction continues to progress as planned, and we expect to close in late 2016.”

On regulatory matters, Welch said, that the Midcontinent ISO (MISO) Transmission Owners in January filed updated testimony in the second base return on equity (ROE) complaint, and have held various hearings and briefings during the last several months. An initial decision in the second base ROE complaint is expected from the administrative law judge (ALJ) by the end of June, he said.

As TransmissionHub reported, in the initial MISO base ROE complaint at FERC, an ALJ issued an initial decision in late December 2015, recommending a base ROE of 10.32%, with a high end of the zone of reasonableness of 11.35%.

While final decisions from FERC are not “expected until late 2016, and the first half of 2017 for the first and second complaints, respectively, we remain confident that FERC will continue to support their historical policies, given the significant investment requirements necessary to modernize the electrical infrastructure of the U.S.,” Welch said.

Responding to a question on FERC Order 1000, Welch said that the order could be regarded “as a complete failure for the whole marketplace.”

He noted that ITC is “not very focused on Order 1000,” and is instead focused on other matters, such as the Lake Erie Connector project.

He added, “We continue to stay involved in Order 1000, but I think it’s a tree that doesn’t bear much fruit for anyone.”

Earnings report

ITC on April 28 reported net income for 1Q16, measured in accordance with Generally Accepted Accounting Principles (GAAP), was $64.2m, or 42 cents per diluted common share, compared to $67.1m, or 43 cents per diluted common share for 1Q15.

Operating earnings for 1Q16 were $84.5m, or 55 cents per diluted common share, compared to operating earnings of $73.1m, or 47 cents per diluted common share for 1Q15, ITC said.

About Corina Rivera-Linares 3061 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.