Significant progress has been made towards completing the acquisition of ITC Holdings (NYSE:ITC), which remains on track to close by year-end, Fortis President and CEO Barry Perry said on July 29 during Fortis’ 2Q16 earnings call.
“As the largest, independent, fully regulated electric transmission utility in the U.S., the acquisition of ITC is a singular opportunity to diversify our business in terms of regulatory jurisdiction, business risk profile and regional economic mix,” Perry said.
ITC on July 28 said that reported net income for 2Q16, measured in accordance with Generally Accepted Accounting Principles (GAAP), was $70.7m, or 46 cents per diluted common share, compared to $72.3m, or 46 cents per diluted common share for 2Q15. For the six months ended June 30, reported net income was $135m, or 88 cents per diluted common share, compared to $139.5m, or 89 cents per diluted common share for the same period last year, ITC said.
Operating earnings for 2Q16 were $88.7m, or 58 cents per diluted common share, compared to operating earnings of $80.8m, or 52 cents per diluted common share for 2Q15. ITC also said that for the six months ended June 30, operating earnings were $173.1m, or $1.13 per diluted common share, compared to operating earnings of $153.9m, or 98 cents per diluted common share for the same period last year.
ITC also said that it invested $374.5m in capital projects during the six month period ended June 30, including $85.2m at ITCTransmission, $104.9m at METC, $154.3m at ITC Midwest, $21.5m at ITC Great Plains and $8.6m of Development.
Discussing the scale of the business combination of Fortis and ITC, Perry said during the call that “enterprise value is about $42bn, and our 2017 combined capital expenditures are expected to be approximately $2.9bn.”
As noted in a July 29 Fortis statement, the company in April announced that it reached a definitive agreement with an affiliate of GIC Private Limited, Singapore’s sovereign wealth fund, to acquire a 19.9% equity interest in ITC for aggregate consideration of about US$1.2bn in cash upon closing of the acquisition. In May and June, Fortis and ITC received shareholder approvals to proceed with the acquisition, Fortis said, adding that the transaction review by the Committee on Foreign Investment in the United States was completed this month.
The closing of the acquisition remains subject to certain regulatory, state and federal approvals including those of FERC and the U.S. Federal Trade Commission/Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act, as well as the satisfaction of other customary closing conditions, Fortis said. The FERC and all of the state regulatory applications associated with the transaction were filed in 2Q16, the company said.
Among other things, Perry said during the call that across the business, Fortis has invested, managed and advanced key projects to drive growth in its portfolio.
He said, “Our $9.3bn, five-year capital plan remains on track and we expect to invest $1.9bn this year.”
Fortis’ capital program is largely focused on transmission and distribution across its utilities and is reflective of the company’s ongoing capital needs in each business to continue to provide safe, reliable and cost-effective energy service to customers, Perry said. Excluding ITC, Fortis expects its 2016 mid-year rate base to be $17.3bn, and to exceed $20bn by 2020, growing at a compound annual growth rate of about 4.5%, he said.
Fortis continues to have success in bringing major projects in on time and on budget, he said, adding, for instance that “the New York Transco projects continue to advance, with FERC approving rates earlier this year, and three projects being placed in service during the second quarter.”
As noted in a New York Transco June 1 statement, its initial portfolio of electric transmission projects and substation improvements is up and running. The initial investment by New York Transco includes three newly built projects, ordered by the New York Public Service Commission (PSC) in its Indian Point Reliability Contingency Proceeding:
- A new 345-kV transmission line between a Consolidated Edison Company of New York (Con Edison) substation in Rockland County and a Central Hudson Gas and Electric substation in Orange County, as well as upgrades to connecting substations
- Upgrades to a Con Edison substation in Staten Island and a substation in Linden, N.J., to improve power flows into New York City
- Upgrades to a 345-kV transmission line between two New York State Electric & Gas (NYSEG) substations, including associated substation upgrades
New York Transco is a New York limited liability company that is owned by affiliates of the New York investor-owned utilities (IOUs), which are Central Hudson; Con Edison; Orange & Rockland Utilities (O&R); Niagara Mohawk Power d/b/a National Grid; NYSEG; and Rochester Gas and Electric (RG&E). The affiliates of the IOUs that own New York Transco are Consolidated Edison Transmission; Grid NY; Iberdrola USA Networks New York Transco; and Central Hudson Electric Transmission.
In its July 29 statement, Fortis said that its net earnings attributable to common equity shareholders for 2Q16 were $107m, or 38 cents per common share, compared to $244m, or 88 cents per common share, for 2Q15. On a year-to-date basis, earnings were $269m, or 95 cents per common share, compared to $442m, or $1.59 per common share, for 2015 Fortis said, adding that the most significant difference in quarterly and year-to-date earnings compared to 2015 related to the gains on sale of assets recognized in 2Q15.
On an adjusted basis, net earnings attributable to common equity shareholders for the second quarter were $131m, or 46 cents per common share, an increase of $8m, or 2 cents per common share, over 2Q15, Fortis said. On a year-to-date basis, adjusted earnings were $321m, or $1.13 per common share, an increase of $19m, or 4 cents per common share, over 2015, the company said.