We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type |
---|---|---|---|
Fortis Inc | NYSE:FTS | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.13 | 0.33% | 39.91 | 40.27 | 39.76 | 40.12 | 546,219 | 01:00:00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
|
Description
|
|
|
99.1
|
Fortis Inc. 2017 Annual Report
|
|
|
|
|
|
|
|
Fortis Inc.
(Registrant)
|
|
|||
Date: March 15, 2018
|
/s/ James R. Reid
|
||||
|
By:
|
James R. Reid
|
|||
|
Title:
|
Executive Vice President, Chief Legal Officer and
|
|||
|
|
Corporate Secretary
|
|
CONTENTS
|
|||
Forward-Looking Information
|
Liquidity and Capital Resources
|
||
Corporate Overview
|
Summary of Consolidated Cash Flows
|
||
Corporate Strategy
|
Contractual Obligations
|
||
Key Trends, Risks and Opportunities
|
Capital Structure
|
||
Significant Item
|
Credit Ratings
|
||
Summary Financial Highlights
|
Capital Expenditure Program
|
||
Consolidated Results of Operations
|
Additional Investment Opportunities
|
||
Segmented Results of Operations
|
Cash Flow Requirements
|
||
Regulated Utilities
|
Credit Facilities
|
||
Regulated Utilities – United States
|
Off-Balance Sheet Arrangements
|
||
ITC
|
Business Risk Management
|
||
UNS Energy
|
Changes in Accounting Policies
|
||
Central Hudson
|
Future Accounting Pronouncements
|
||
Regulated Utilities – Canada
|
Financial Instruments
|
||
FortisBC Energy
|
Critical Accounting Estimates
|
||
FortisAlberta
|
Related-Party and Inter-Company Transactions
|
||
FortisBC Electric
|
Selected Annual Financial Information
|
||
Eastern Canadian
|
Fourth Quarter Results
|
||
Regulated Utilities – Caribbean
|
Summary of Quarterly Results
|
||
Non-Regulated
|
Management's Evaluation of Disclosure Controls and Procedures and Internal Controls over Financial Reporting
|
||
Energy Infrastructure
|
|||
Corporate and Other
|
|||
Regulatory Highlights
|
Outlook
|
||
Consolidated Financial Position
|
Outstanding Share Data
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
1
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
2
|
December 31, 2017
|
|
a.
|
ITC
: Primarily comprised of ITC Holdings Corp. and the electric transmission operations of its regulated operating subsidiaries, which include International Transmission Company ("ITCTransmission"), Michigan Electric Transmission Company, LLC ("METC"), ITC Midwest LLC ("ITC Midwest"), and ITC Great Plains, LLC, (collectively "ITC"). ITC was acquired by Fortis in October 2016, with Fortis owning 80.1%
of ITC and an affiliate of GIC Private Limited ("GIC") owning a
19.9%
minority interest
.
Also included in the ITC segment is the net corporate expenses and activity of ITC Investment Holdings.
|
b.
|
UNS Energy:
Primarily comprised of Tucson Electric Power Company ("TEP"), UNS Electric, Inc. ("UNS Electric") and UNS Gas, Inc. ("UNS Gas"), (collectively "UNS Energy")
.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
3
|
December 31, 2017
|
|
c.
|
Central Hudson:
Primarily comprised of Central Hudson Gas & Electric Corporation ("Central Hudson"), which is a regulated electric and gas transmission and distribution utility, serving
approximately
300,000
electricity customers and
80,000
natural gas customers in
portions of New York State's Mid-Hudson River Valley. The Company owns gas-fired and hydroelectric generating capacity totalling
64
MW.
Also included in the Central Hudson segment is the net corporate expenses and activity of CH Energy Group, Inc. ("CH Energy Group").
|
a.
|
FortisBC Energy:
FortisBC Energy Inc. ("FortisBC Energy") is the largest regulated distributor of natural gas in British Columbia, serving
approximately
1,008,000
customers in more than 135 communities.
FortisBC Energy provides transmission and distribution services to customers, and obtains natural gas supplies on behalf of most residential, commercial and industrial customers. Gas supplies are sourced primarily from northeastern British Columbia and, through FortisBC Energy's Southern Crossing pipeline, from Alberta.
|
b.
|
FortisAlberta:
FortisAlberta Inc. ("FortisAlberta") is a regulated electricity distribution utility
serving approximately 556,000 customers, in a substantial portion of southern and central Alberta. The Company does not own or operate generation or transmission assets and is not involved in the direct sale of electricity.
|
c.
|
FortisBC Electric
: Includes FortisBC Inc. ("FortisBC Electric"), an integrated regulated electric utility operating in the southern interior of British Columbia
, serving approximately
172,000
customers directly and indirectly. FortisBC Electric owns four hydroelectric generating facilities with a combined capacity of
225
MW.
Also included in the FortisBC Electric segment are the operating, maintenance and management services relating to
five
hydroelectric generating facilities in British Columbia primarily owned by third parties, one of which is the
335
-MW Waneta Expansion hydroelectric generating facility ("Waneta Expansion"), owned by Fortis and Columbia Power Corporation and Columbia Basin Trust ("CPC/CBT").
|
d.
|
Eastern Canadian:
Comprised of Newfoundland Power Inc. ("Newfoundland Power"), Maritime Electric Company, Limited ("Maritime Electric"), FortisOntario Inc. ("FortisOntario"), and the Corporation's 49% equity investment in Wataynikaneyap Power Limited Partnership ("Wataynikaneyap Partnership").
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
4
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
5
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
6
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
7
|
December 31, 2017
|
|
For the Years Ended December 31
|
2017
|
|
2016
|
|
Variance
|
|
Net Earnings Attributable to Common Equity Shareholders
($ millions)
|
963
|
|
585
|
|
378
|
|
Basic Earnings per Common Share
($)
|
2.32
|
|
1.89
|
|
0.43
|
|
Adjusted Basic Earnings per Common Share
($)
(1)
|
2.53
|
|
2.31
|
|
0.22
|
|
Weighted Average Number of Common Shares Outstanding
(millions)
|
415.5
|
|
308.9
|
|
106.6
|
|
Cash Flow from Operating Activities
($ billions)
|
2.8
|
|
1.9
|
|
0.9
|
|
Dividends Paid per Common Share
($)
|
1.625
|
|
1.525
|
|
0.10
|
|
Total Assets
($ billions)
|
47.8
|
|
47.9
|
|
(0.1
|
)
|
Capital Expenditures
($ billions)
|
3.0
|
|
2.1
|
|
0.9
|
|
Long-Term Debt Offerings
($ billions)
|
2.5
|
|
4.1
|
|
(1.6
|
)
|
(1)
|
Adjusted basic earnings per common share is a non-US GAAP measure. For a definition and reconciliation of this non-US GAAP measure, refer to the "Consolidated Results of Operations" section of this MD&A.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
8
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
9
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
10
|
December 31, 2017
|
|
Years Ended December 31
|
|
|
|
|||
($ millions)
|
2017
|
|
2016
|
|
Variance
|
|
Revenue
|
8,301
|
|
6,838
|
|
1,463
|
|
Energy Supply Costs
|
2,361
|
|
2,341
|
|
20
|
|
Operating Expenses
|
2,261
|
|
2,031
|
|
230
|
|
Depreciation and Amortization
|
1,179
|
|
983
|
|
196
|
|
Other Income, Net
|
127
|
|
53
|
|
74
|
|
Finance Charges
|
914
|
|
678
|
|
236
|
|
Income Tax Expense
|
588
|
|
145
|
|
443
|
|
Net Earnings
|
1,125
|
|
713
|
|
412
|
|
Net Earnings Attributable to:
|
|
|
|
|||
Non-Controlling Interests
|
97
|
|
53
|
|
44
|
|
Preference Equity Shareholders
|
65
|
|
75
|
|
(10
|
)
|
Common Equity Shareholders
|
963
|
|
585
|
|
378
|
|
Net Earnings
|
1,125
|
|
713
|
|
412
|
|
Basic Earnings per Common Share
|
2.32
|
|
1.89
|
|
0.43
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
11
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
12
|
December 31, 2017
|
|
Non-US GAAP Reconciliation
|
|
|
|
|||
Years Ended December 31
|
|
|
|
|||
($ millions, except for common share data)
|
2017
|
|
2016
|
|
Variance
|
|
Net Earnings Attributable to Common Equity Shareholders
|
963
|
|
585
|
|
378
|
|
Adjusting Items:
|
|
|
|
|
|
|
ITC -
|
|
|
|
|
|
|
U.S. Tax Reform
|
91
|
|
—
|
|
91
|
|
Accelerated vesting of stock-based compensation awards
|
—
|
|
22
|
|
(22
|
)
|
UNS Energy -
|
|
|
|
|
|
|
U.S. Tax Reform
|
5
|
|
—
|
|
5
|
|
Settlement of FERC-ordered transmission refunds
|
(11
|
)
|
—
|
|
(11
|
)
|
FERC-ordered transmission refunds
|
—
|
|
18
|
|
(18
|
)
|
Central Hudson -
|
|
|
|
|
|
|
U.S. Tax Reform
|
2
|
|
—
|
|
2
|
|
Corporate and Other -
|
|
|
|
|
|
|
U.S. Tax Reform
|
48
|
|
—
|
|
48
|
|
Unrealized foreign exchange gain on affiliate loan
|
(21
|
)
|
—
|
|
(21
|
)
|
Acquisition break fee
|
(24
|
)
|
—
|
|
(24
|
)
|
Acquisition-related transaction costs
|
—
|
|
90
|
|
(90
|
)
|
Adjusted Net Earnings Attributable to Common Equity
|
|
|
|
|
|
|
Shareholders
|
1,053
|
|
715
|
|
338
|
|
Adjusted Basic Earnings per Common Share
($)
|
2.53
|
|
2.31
|
|
0.22
|
|
Weighted Average Number of Common Shares Outstanding
|
|
|
|
|
|
|
(# millions)
|
415.5
|
|
308.9
|
|
106.6
|
|
Segmented Net Earnings Attributable to Common Equity Shareholders
|
||||||
Years Ended December 31
|
|
|||||
($ millions)
|
2017
|
|
2016
|
|
Variance
|
|
Regulated Utilities - United States
|
|
|
|
|||
ITC
|
272
|
|
59
|
|
213
|
|
UNS Energy
|
270
|
|
199
|
|
71
|
|
Central Hudson
|
70
|
|
70
|
|
—
|
|
Regulated Utilities - Canada
|
|
|
|
|||
FortisBC Energy
|
154
|
|
151
|
|
3
|
|
FortisAlberta
|
120
|
|
121
|
|
(1
|
)
|
FortisBC Electric
|
55
|
|
54
|
|
1
|
|
Eastern Canadian
|
64
|
|
64
|
|
—
|
|
Regulated Utilities - Caribbean
|
34
|
|
46
|
|
(12
|
)
|
Non-Regulated
|
|
|
|
|||
Energy Infrastructure
|
94
|
|
60
|
|
34
|
|
Corporate and Other
|
(170
|
)
|
(239
|
)
|
69
|
|
Net Earnings Attributable to Common Equity Shareholders
|
963
|
|
585
|
|
378
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
13
|
December 31, 2017
|
|
Financial Highlights
(1)
|
|
|
|
||
Years Ended December 31
|
2017
|
|
|
2016
|
|
Average US:CAD Exchange Rate
(2)
|
1.30
|
|
|
1.34
|
|
Revenue
($ millions)
|
1,575
|
|
|
334
|
|
Earnings
($ millions)
|
272
|
|
|
59
|
|
(1)
|
Revenue represents 100% of ITC, while earnings represent the Corporation's 80.1% controlling ownership interest in ITC and reflects consolidated purchase price accounting adjustments.
|
(2)
|
The reporting currency of ITC is the US dollar. The average US:CAD exchange rate for 2016 is from October 14, 2016, the date of acquisition.
|
Financial Highlights
|
|
|
|
|
|||
Years Ended December 31
|
2017
|
|
|
2016
|
|
Variance
|
|
Average US:CAD Exchange Rate
(1)
|
1.30
|
|
|
1.33
|
|
(0.03
|
)
|
Electricity Sales
(gigawatt hours ("GWh"))
|
14,971
|
|
|
14,387
|
|
584
|
|
Gas Volumes
(petajoules ("PJ"))
|
13
|
|
|
13
|
|
—
|
|
Revenue
($ millions)
|
2,080
|
|
|
2,002
|
|
78
|
|
Earnings
($ millions)
|
270
|
|
|
199
|
|
71
|
|
(1)
|
The reporting currency of UNS Energy is the US dollar.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
14
|
December 31, 2017
|
|
Financial Highlights
|
|
|
|
|
|||
Years Ended December 31
|
2017
|
|
|
2016
|
|
Variance
|
|
Average US:CAD Exchange Rate
(1)
|
1.30
|
|
|
1.33
|
|
(0.03
|
)
|
Electricity Sales
(GWh)
|
4,891
|
|
|
5,112
|
|
(221
|
)
|
Gas Volumes
(PJ)
|
22
|
|
|
24
|
|
(2
|
)
|
Revenue
($ millions)
|
872
|
|
|
849
|
|
23
|
|
Earnings
($ millions)
|
70
|
|
|
70
|
|
—
|
|
(1)
|
The reporting currency of Central Hudson is the US dollar.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
15
|
December 31, 2017
|
|
Financial Highlights
|
|
|
|
|||
Years Ended December 31
|
2017
|
|
2016
|
|
Variance
|
|
Gas Volumes
(PJ)
|
221
|
|
197
|
|
24
|
|
Revenue
($ millions)
|
1,198
|
|
1,151
|
|
47
|
|
Earnings
($ millions)
|
154
|
|
151
|
|
3
|
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2017
|
|
2016
|
|
Variance
|
|
Energy Deliveries
(GWh)
|
17,018
|
|
16,788
|
|
230
|
|
Revenue
($ millions)
|
600
|
|
572
|
|
28
|
|
Earnings
($ millions)
|
120
|
|
121
|
|
(1
|
)
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
16
|
December 31, 2017
|
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2017
|
|
2016
|
|
Variance
|
|
Electricity Sales
(GWh)
|
3,305
|
|
3,119
|
|
186
|
|
Revenue
($ millions)
|
398
|
|
377
|
|
21
|
|
Earnings
($ millions)
|
55
|
|
54
|
|
1
|
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2017
|
|
2016
|
|
Variance
|
|
Electricity Sales
(GWh)
|
8,355
|
|
8,374
|
|
(19
|
)
|
Revenue
($ millions)
|
1,062
|
|
1,063
|
|
(1
|
)
|
Earnings
($ millions)
|
64
|
|
64
|
|
—
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
17
|
December 31, 2017
|
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2017
|
|
2016
|
|
Variance
|
|
Average US:CAD Exchange Rate
(1)
|
1.30
|
|
1.33
|
|
(0.03
|
)
|
Electricity Sales
(GWh)
|
841
|
|
837
|
|
4
|
|
Revenue
($ millions)
|
301
|
|
301
|
|
—
|
|
Earnings
($ millions)
|
34
|
|
46
|
|
(12
|
)
|
(1)
|
The reporting currency of Caribbean Utilities and Fortis Turks and Caicos is the US dollar. The reporting currency of Belize Electricity is the Belizean dollar, which is pegged to the US dollar at BZ$2.00=US$1.00.
|
Financial Highlights
|
|
|||||
Years Ended December 31
|
2017
|
|
2016
|
|
Variance
|
|
Energy Sales
(GWh)
|
918
|
|
901
|
|
17
|
|
Revenue
($ millions)
|
226
|
|
193
|
|
33
|
|
Earnings
($ millions)
|
94
|
|
60
|
|
34
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
18
|
December 31, 2017
|
|
Financial Highlights
|
|
|
|
|||
Years Ended December 31
|
|
|||||
($ millions)
|
2017
|
|
2016
|
|
Variance
|
|
Revenue
|
1
|
|
9
|
|
(8
|
)
|
Operating Expenses
|
13
|
|
108
|
|
(95
|
)
|
Depreciation and Amortization
|
2
|
|
4
|
|
(2
|
)
|
Other Income, Net
|
29
|
|
—
|
|
29
|
|
Finance Charges
|
189
|
|
162
|
|
27
|
|
Income Tax Recovery
|
(69
|
)
|
(101
|
)
|
32
|
|
|
(105
|
)
|
(164
|
)
|
59
|
|
Preference Share Dividends
|
65
|
|
75
|
|
(10
|
)
|
Corporate and Other Expenses
|
(170
|
)
|
(239
|
)
|
69
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
19
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
20
|
December 31, 2017
|
|
Regulated Utility
|
Application/Proceeding
|
Filing Date
|
Expected Decision
|
ITC
|
MISO Base ROE Complaints
|
Not applicable
|
To be determined
|
Central Hudson
|
General Rate Application
|
July 2017
|
August 2018
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
21
|
December 31, 2017
|
|
Significant Changes in the Consolidated Balance Sheets between December 31, 2017 and December 31, 2016
|
||
Balance Sheet Account
|
Increase/
(Decrease)
($ millions)
|
Explanation
|
Regulatory assets - current and long-term
|
112
|
The increase was primarily due to the reclassification of generation assets at UNS Energy from property, plant and equipment, partially offset by the impact of foreign exchange associated with the translation of US dollar-denominated regulatory assets.
|
Property, plant and equipment, net
|
331
|
The increase was mainly due to capital expenditures, partially offset by depreciation, the impact of foreign exchange on the translation of US dollar-denominated property, plant and equipment, the reclassification of a reserve from regulatory liabilities at UNS Energy and the reclassification of the net book value of generation assets, planned for early retirement, to regulatory assets at UNS Energy.
|
Goodwill
|
(720)
|
The decrease was mainly due to the impact of foreign exchange associated with the translation of US dollar-denominated goodwill.
|
Short-term borrowings
|
(946)
|
The decrease was mainly due to the repayment of the Corporation's equity bridge credit facility, which was used to finance a portion of the acquisition of ITC. The decrease was also due to the repayment of commercial paper at ITC and short-term borrowings at other regulated entities using proceeds from the issuance of long-term debt.
|
Regulatory liabilities - current and long-term
|
1,263
|
The increase was primarily due to a one-time remeasurement of net deferred income tax liabilities at the Corporation's US subsidiaries due to U.S. Tax Reform resulting in the recognition of a regulatory liability of $1.5 billion. The increase was partially offset by a reduction in regulatory liabilities at ITC associated with the refund payment associated with the Initial Complaint, the reclassification of a reserve to property, plant and equipment at UNS Energy, and the impact of foreign exchange associated with the translation of US dollar-denominated regulatory liabilities.
|
Long-term debt (including current portion)
|
328
|
The increase was mainly due to the issuance of senior notes at ITC used primarily to repay maturing long-term debt and borrowings under its commercial paper program. The increase was also due to debt issuances at other regulated utilities, partially offset by the impact of foreign exchange associated with the translation of US dollar-denominated debt and regularly scheduled debt repayments.
|
Deferred income tax liabilities
|
(965)
|
The decrease was primarily due to a one-time remeasurement of net deferred income tax liabilities at the Corporation's U.S. subsidiaries due to U.S. Tax Reform totalling $1.3 billion and the impact of foreign exchange associated with the translation of US dollar-denominated deferred income tax liabilities, partially offset by timing differences associated with capital expenditures at the regulated utilities.
|
Shareholders' equity (before non-controlling interests)
|
406
|
The increase was primarily due to: (i) the issuance of $500 million of common shares; (ii) net earnings attributable to common equity shareholders for 2017, less dividends declared on common shares; and (iii) the issuance of common shares under the Corporation's dividend reinvestment and other share plans. The increase was partially offset by a decrease in accumulated other comprehensive income associated with the translation of the Corporation's US dollar-denominated investments in subsidiaries, net of hedging activities and tax.
|
Non-controlling interests
|
(107)
|
The decrease was mainly due to the impact of foreign exchange associated with the translation of US dollar-denominated non-controlling interests.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
22
|
December 31, 2017
|
|
Summary of Consolidated Cash Flows
|
|
|
|
|||
Years ended December 31
|
|
|
|
|||
($ millions)
|
2017
|
|
2016
|
|
Variance
|
|
Cash, Beginning of Year
|
269
|
|
242
|
|
27
|
|
Cash Provided by (Used in):
|
|
|
|
|||
Operating Activities
|
2,756
|
|
1,884
|
|
872
|
|
Investing Activities
|
(3,025
|
)
|
(6,891
|
)
|
3,866
|
|
Financing Activities
|
339
|
|
5,050
|
|
(4,711
|
)
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
(12
|
)
|
(16
|
)
|
4
|
|
Cash, End of Year
|
327
|
|
269
|
|
58
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
23
|
December 31, 2017
|
|
(1)
|
In
March 2017
ITC entered into
1
-year and
2
-year unsecured term loan credit agreements at floating interest rates of a one-month LIBOR plus a spread of
0.90%
and
0.65%
, respectively. Borrowings under the term loan credit agreements were US$
200 million
and US$
50 million
, respectively, representing the maximum amounts available under the agreements. The net proceeds from these borrowings were used to repay credit facility borrowings and for general corporate purposes. The US$
200 million
term loan was subsequently repaid using long-term debt issued in November 2017. In
April 2017
ITC issued
30
-year US
$200 million
secured first mortgage bonds at
4.16%
. The net proceeds from the issuance were used to repay credit facility borrowings and for general corporate purposes. In
November 2017
ITC issued
5
-year US$
500 million
unsecured notes at
2.70%
and
10
-year US$
500 million
unsecured notes at
3.35%
. The net proceeds from the issuances were used to repay long-term debt, including borrowings under the term loan as discussed above, to repay short-term borrowings, and for general corporate purposes. In
October 2016
a
12
-year shareholder note of US$
199
million at
6.00%
was issued to an affiliate of GIC as part of its minority investment in ITC. The proceeds were used to finance a portion of the cash purchase price of the acquisition of ITC.
|
(2)
|
In
August 2017
Central Hudson issued
30
-year US$
30 million
unsecured notes at
4.05%
and
40
-year US$
30 million
unsecured notes at
4.20%
. The net proceeds from the issuances were used to repay long-term debt and for general corporate purposes. In
June 2016
Central Hudson issued
4
-year US$
24
million unsecured notes at
2.16%
. The net proceeds were used to finance capital expenditures and for general corporate purposes. In
October 2016
Central Hudson issued US$
30
million of unsecured notes in a dual tranche of
10
-year US$
10
million unsecured notes at
2.56%
and
30
-year US$
20
million unsecured debentures at
3.63%
. The net proceeds were used to finance capital expenditures and for general corporate purposes.
|
(3)
|
In
October 2017
FortisBC Energy issued
30
-year $
175 million
unsecured debentures at
3.69%
. The net proceeds from the issuance were used to repay short-term borrowings and to finance capital expenditures. In
April 2016
FortisBC Energy issued $
300
million of unsecured debentures in a dual tranche of
10
-year $
150
million unsecured debentures at
2.58%
and
30
-year $
150
million unsecured debentures at
3.67%
. In
December 2016
FortisBC Energy issued
30
-year $
150
million unsecured debentures at
3.78%
. The net proceeds from the issuances were used to repay short-term borrowings and to finance capital expenditures.
|
(4)
|
In
September 2017
FortisAlberta issued
30
-year $
200 million
unsecured debentures at
3.67%
. The net proceeds from the issuance were used to repay credit facility borrowings, to finance capital expenditures and for general corporate purposes. In
September 2016
FortisAlberta issued
30
-year $
150
million unsecured debentures at
3.34%
. The net proceeds were used to repay credit facility borrowings, to finance capital expenditures and for general corporate purposes.
|
(5)
|
In
December 2017
FortisBC Electric issued
32
-year $
75 million
unsecured debentures at
3.62%
. The net proceeds from the issuance were used to repay short-term borrowings.
|
(6)
|
In
June 2017
Newfoundland Power issued
40
-year $
75 million
first mortgage sinking fund bonds at
3.815%
. The net proceeds from the issuance were used to repay credit facility borrowings and for general corporate purposes.
|
(7)
|
In
August 2016
Maritime Electric issued
40
-year $
40
million secured first mortgage bonds at
3.657%
. The net proceeds were primarily used to repay long-term debt and short-term borrowings.
|
(8)
|
In
March
and
May 2017
, Caribbean Utilities issued US$
60 million
of unsecured notes in a dual tranche of
15
-year US$
40 million
at
3.90%
and
30
‑year US$
20 million
at
4.64%
, respectively. The net proceeds from the issuances were used to finance capital expenditures and repay short-term borrowings.
|
(9)
|
In May and
September 2016
, Fortis Turks and Caicos issued
15
-year US$
45
million unsecured notes in a dual tranche of US$
22.5
million at
5.14%
and
5.29%
, respectively. In
July 2016
Fortis Turks and Caicos issued
15
-year US$
5
million unsecured bonds at
5.14%
. The net proceeds were used to finance capital expenditures and for general corporate purposes.
|
(10)
|
In
October 2016
the Corporation issued
5
-year US$
500
million unsecured notes at
2.100%
and
10
-year US$
1.5
billion unsecured notes at
3.055%
. The net proceeds were used to finance a portion of the cash purchase price of the acquisition of ITC. In
December 2016
the Corporation issued
7
-year $
500
million unsecured notes at
2.85%
. The net proceeds were used to repay credit facility borrowings, mainly related to the financing of the acquisition of Aitken Creek in
April 2016
and the redemption of First Preference Shares, Series E in
September 2016
, and for general corporate purposes.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
24
|
December 31, 2017
|
|
Contractual Obligations
|
|
Due
within
1 year
|
|
Due in
year 2
|
|
Due in
year 3
|
|
Due in
year 4
|
|
Due in year 5
|
|
Due
after
5 years
|
|
|
As at December 31, 2017
|
|
|||||||||||||
($ millions)
|
Total
|
|
||||||||||||
Long-term debt
|
21,535
|
|
705
|
|
282
|
|
673
|
|
1,219
|
|
1,060
|
|
17,596
|
|
Interest obligations on long-term debt
|
14,575
|
|
892
|
|
878
|
|
858
|
|
837
|
|
792
|
|
10,318
|
|
Capital lease and finance obligations
(1)
|
2,314
|
|
90
|
|
74
|
|
73
|
|
78
|
|
49
|
|
1,950
|
|
Power purchase obligations
(2)
|
2,240
|
|
275
|
|
157
|
|
126
|
|
118
|
|
117
|
|
1,447
|
|
Renewable power purchase obligations
(3)
|
1,428
|
|
93
|
|
92
|
|
92
|
|
92
|
|
91
|
|
968
|
|
Gas purchase obligations
(4)
|
1,085
|
|
278
|
|
201
|
|
189
|
|
147
|
|
112
|
|
158
|
|
Long-term contracts - UNS Energy
(5)
|
910
|
|
157
|
|
158
|
|
125
|
|
79
|
|
50
|
|
341
|
|
ITC easement agreement
(6)
|
413
|
|
13
|
|
13
|
|
13
|
|
13
|
|
13
|
|
348
|
|
Renewable energy credit purchase agreements
(7)
|
125
|
|
20
|
|
13
|
|
11
|
|
10
|
|
10
|
|
61
|
|
Debt Collection Agreement
(8)
|
122
|
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
107
|
|
Purchase of Springerville Common Facilities
(9)
|
85
|
|
—
|
|
—
|
|
—
|
|
85
|
|
—
|
|
—
|
|
Waneta Partnership promissory note
|
72
|
|
—
|
|
—
|
|
72
|
|
—
|
|
—
|
|
—
|
|
Operating lease obligations
|
53
|
|
11
|
|
9
|
|
7
|
|
4
|
|
4
|
|
18
|
|
Joint-use asset and shared service agreements
|
52
|
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
37
|
|
Other
(10)
|
462
|
|
97
|
|
53
|
|
71
|
|
31
|
|
32
|
|
178
|
|
Total
|
45,471
|
|
2,637
|
|
1,936
|
|
2,316
|
|
2,719
|
|
2,336
|
|
33,527
|
|
(1)
|
Includes principal payments, imputed interest and executory costs, mainly related to FortisBC Electric's capital lease obligations.
|
(2)
|
Power purchase obligations include various power purchase contracts held by the Corporation's regulated utilities, of which the most significant contracts are described below.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
25
|
December 31, 2017
|
|
(3)
|
TEP and UNS Electric are party to long-term renewable PPAs that require them to purchase
100%
of the output of certain renewable energy generating facilities once commercial operation is achieved. While TEP and UNS Electric are not required to make payments under these contracts if power is not delivered, the Contractual Obligations table includes estimated future payments. These agreements have various expiry dates from 2027 through 2036.
|
(4)
|
Certain of the Corporation's subsidiaries, mainly FortisBC Energy, enter into contracts for the purchase of gas, gas transportation and storage services. FortisBC Energy's gas purchase obligations are based on gas commodity indices that vary with market prices and the obligations are based on index prices as at
December 31, 2017
.
|
(5)
|
UNS Energy enters into various long-term contracts for the purchase and delivery of coal to fuel its generating facilities, the purchase of gas transportation services to meet its load requirements, and the purchase of transmission services for purchased power.
Amounts paid under contracts for the purchase and delivery of coal depend on actual quantities purchased and delivered. Certain of these contracts also have price adjustment clauses that will affect future costs under the contracts.
|
(6)
|
ITC is party to an easement agreement with Consumers Energy, the primary customer of METC, which provides the Company with an easement for transmission purposes and rights-of-way, leasehold interests, fee interests and licenses associated with the land over which its transmission lines cross. The agreement expires in December 2050, subject to 10 additional 50-year renewals thereafter.
|
(7)
|
UNS Energy and Central Hudson are party to renewable energy credit purchase agreements, mainly for the purchase of environmental attributions from retail customers with solar installations. Payments for the renewable energy credit purchase agreements are made in contractually agreed-upon intervals based on metered renewable energy production.
|
(8)
|
Maritime Electric is party to a debt collection agreement with the PEI Energy Corporation for the initial capital cost of the submarine cables and associated parts of the New Brunswick Transmission system interconnection. The agreement expires in
February 2056
. Payments under the agreement will be collected from customers in future rates.
|
(9)
|
UNS Energy has an obligation to purchase an undivided
32.2%
interest in the Springerville Common Facilities if the related two leases are not renewed.
|
(10)
|
Other contractual obligations include various other commitments entered into by the Corporation and its subsidiaries, including
Performance Share Unit, Restricted Share Unit and Directors' Deferred Share Unit
plan obligations, land easements, asset retirement obligations, and defined benefit pension plan funding obligations.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
26
|
December 31, 2017
|
|
Capital Structure
|
|
|
|
|
||
As at December 31
|
2017
|
2016
|
||||
|
($ millions)
|
|
(%)
|
($ millions)
|
|
(%)
|
Total debt and capital lease and finance
obligations (net of cash)
(1)
|
21,739
|
|
59.2
|
22,490
|
|
60.6
|
Preference shares
|
1,623
|
|
4.4
|
1,623
|
|
4.4
|
Common shareholders' equity
|
13,380
|
|
36.4
|
12,974
|
|
35.0
|
Total
|
36,742
|
|
100.0
|
37,087
|
|
100.0
|
(1)
|
Includes long-term debt and capital lease and finance obligations, including current portion, and short-term borrowings, net of cash
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
27
|
December 31, 2017
|
|
Rating Agency
|
Credit Rating
|
Type of Rating
|
Outlook
|
Standard & Poor's ("S&P")
|
A-
|
Corporate
|
Stable
|
|
BBB+
|
Unsecured debt
|
|
DBRS
|
BBB (high)
|
Corporate
|
Stable
|
|
BBB (high)
|
Unsecured debt
|
|
Moody's Investor Service ("Moody's")
|
Baa3
|
Issuer
|
Stable
|
|
Baa3
|
Unsecured debt
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
28
|
December 31, 2017
|
|
Consolidated Capital Expenditures
(1)
|
||||||||||||||||||||||
Year Ended December 31, 2017
|
||||||||||||||||||||||
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
Regulated Utilities
|
|
|
|
|||||||||||||||||
|
ITC
|
UNS
Energy
|
Central
Hudson
|
FortisBC
Energy
|
Fortis
Alberta
|
FortisBC
Electric
|
Eastern
Canadian
|
Caribbean
|
Total
Regulated
Utilities
|
Non-Regulated
(2)
|
Total
|
|||||||||||
Generation
|
—
|
|
231
|
|
1
|
|
—
|
|
—
|
|
4
|
|
8
|
|
45
|
|
289
|
|
6
|
|
295
|
|
Transmission
|
883
|
|
43
|
|
35
|
|
188
|
|
—
|
|
15
|
|
20
|
|
16
|
|
1,200
|
|
—
|
|
1,200
|
|
Distribution
|
—
|
|
181
|
|
138
|
|
156
|
|
342
|
|
43
|
|
110
|
|
67
|
|
1,037
|
|
—
|
|
1,037
|
|
Facilities, equipment, vehicles and other
(3)
|
66
|
|
29
|
|
26
|
|
79
|
|
53
|
|
34
|
|
9
|
|
15
|
|
311
|
|
15
|
|
326
|
|
Information technology
|
33
|
|
50
|
|
20
|
|
23
|
|
19
|
|
9
|
|
9
|
|
3
|
|
166
|
|
—
|
|
166
|
|
Total
|
982
|
|
534
|
|
220
|
|
446
|
|
414
|
|
105
|
|
156
|
|
146
|
|
3,003
|
|
21
|
|
3,024
|
|
(1)
|
Represents cash payments to construct property, plant and equipment and intangible assets, as reflected on the consolidated statement of cash flows. Excludes the non-cash equity component of AFUDC.
|
(2)
|
Includes Energy Infrastructure and Corporate and Other segments
|
(3)
|
Includes capital expenditures associated with the Tilbury LNG facility expansion at FortisBC Energy and Alberta Electric System Operator ("AESO") transmission-related capital expenditures at FortisAlberta
|
(1)
|
Represents forecast cash payments to construct property, plant and equipment and intangible assets, as would be reflected on the consolidated statement of cash flows. Excludes the non-cash equity component of AFUDC. Forecast capital expenditures for
2018
are based on a forecast exchange rate of US$1.00=CAD$1.28. Based on the closing foreign exchange rate on
December 31, 2017
of US$1.00=CAD$1.25 forecast capital expenditures for 2018 would be approximately $3.1 billion.
|
(2)
|
Includes Energy Infrastructure and Corporate and Other segments
|
(3)
|
Includes forecast capital expenditures associated with the Tilbury LNG facility expansion at FortisBC Energy and AESO transmission-related capital expenditures at FortisAlberta
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
29
|
December 31, 2017
|
|
(1)
|
Capital expenditures to connect new customers and infrastructure upgrades required to meet customer and associated load growth, including capital expenditures associated with the Tilbury LNG facility expansion at FortisBC Energy and AESO transmission‑related capital expenditures at FortisAlberta
|
(2)
|
Capital expenditures required to ensure continued and enhanced performance, reliability and safety of generation, transmission and distribution assets
|
(3)
|
Relates to facilities, equipment, vehicles, information technology systems and other assets
|
(1)
|
Actual midyear rate base for
2017
is based on the actual average exchange rate of US$1.00=CAD$1.30 and forecast midyear rate base for
2018
is based on a forecast exchange rate of US$1.00=CAD$1.28. Based on the closing foreign exchange rate on
December 31, 2017
of US$1.00=CAD$1.25 forecast midyear rate base for 2018 would be approximately $26.4 billion.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
30
|
December 31, 2017
|
|
Significant Capital Projects
(1)
|
|
|
|
Forecast
|
|
Expected
|
||||
($ millions)
|
|
Pre-
|
|
Actual
|
|
Forecast
|
|
2019 -
|
|
Year of
|
Company
|
Nature of Project
|
2017
|
|
2017
|
|
2018
|
|
2022
|
|
Completion
|
ITC
(2) (3)
|
Multi-Value Regional Transmission
|
|
|
|
|
|
||||
|
Projects ("MVPs")
|
57
|
|
313
|
|
169
|
|
194
|
|
Post-2022
|
|
34.5 to 69 kilovolt ("kV")
|
|
|
|
|
|
||||
|
Conversion Project
|
11
|
|
75
|
|
111
|
|
369
|
|
Post-2022
|
UNS Energy
(3)
|
Flexible Generation - Reciprocating Engines
|
—
|
|
30
|
|
150
|
|
45
|
|
2019-2020
|
|
Gila River Generating Station Unit 2
|
—
|
|
—
|
|
—
|
|
211
|
|
2019
|
FortisBC Energy
|
Tilbury LNG Facility Expansion
|
406
|
|
44
|
|
12
|
|
8
|
|
2018
|
|
Lower Mainland System Upgrade
(4)
|
43
|
|
145
|
|
177
|
|
55
|
|
2019
|
|
Eagle Mountain Woodfibre Gas Pipeline Project
(5)
|
—
|
|
—
|
|
—
|
|
350
|
|
2021/2022
|
|
Pipeline Integrity Management Program
|
—
|
|
—
|
|
—
|
|
312
|
|
Post-2022
|
(1)
|
Represents property, plant and equipment and intangible asset expenditures, including both the capitalized debt and equity components of AFUDC, where applicable. Significant capital projects are identified as those with a total project cost of $150 million or greater and exclude ongoing capital maintenance projects.
|
(2)
|
Capital expenditures prior to 2017 are from the date of acquisition of October 14, 2016.
|
(3)
|
Forecast capital expenditures are based on a forecast exchange rate of US$1.00=CAD$1.28 for
2018
through
2022
.
|
(4)
|
FortisBC Energy is currently in the process of reassessing costs following completion of detailed engineering work and evaluation of construction bids and other costs.
|
(5)
|
Net of forecast customer contributions.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
31
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
32
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
33
|
December 31, 2017
|
|
Credit Facilities
|
Regulated
Utilities
|
|
Corporate
and Other
|
|
|
|
||
As at December 31
($ millions)
|
2017
|
|
2016
|
|
||||
Total credit facilities
(1)
|
3,567
|
|
1,385
|
|
4,952
|
|
5,976
|
|
Credit facilities utilized:
|
|
|
|
|
||||
Short-term borrowings
(1)
|
(209
|
)
|
—
|
|
(209
|
)
|
(1,155
|
)
|
Long-term debt (including current portion)
(2)
|
(465
|
)
|
(206
|
)
|
(671
|
)
|
(973
|
)
|
Letters of credit outstanding
|
(73
|
)
|
(56
|
)
|
(129
|
)
|
(119
|
)
|
Credit facilities unused
|
2,820
|
|
1,123
|
|
3,943
|
|
3,729
|
|
(1)
|
As at
December 31, 2017
, there was no commercial paper outstanding (
December 31, 2016
-
$195 million
). Outstanding commercial paper does not reduce available capacity under the Corporation's consolidated credit facilities.
|
(2)
|
As at
December 31, 2017
, credit facility borrowings classified as long-term debt included
$312 million
in current installments of long-term debt on the consolidated balance sheet (
December 31, 2016
-
$61 million
).
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
34
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
35
|
December 31, 2017
|
|
1
|
Operating revenue and operating earnings are non-US GAAP measures and refer to total revenue, excluding Corporate and Other segment revenue and inter-segment eliminations, and net earnings attributable to common equity shareholders, excluding Corporate and Other segment expenses, respectively. Operating revenue and operating earnings are measures used by the chief operating decision maker in evaluating the performance of the Corporation's operating subsidiaries.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
36
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
37
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
38
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
39
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
40
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
41
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
42
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
43
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
44
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
45
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
46
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
47
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
48
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
49
|
December 31, 2017
|
|
Financial Instruments
|
2017
|
2016
|
||||||
Liability as at December 31
|
Carrying
|
|
Estimated
|
|
Carrying
|
|
Estimated
|
|
($ millions)
|
Value
|
|
Fair Value
|
|
Value
|
|
Fair Value
|
|
Long-term debt, including current portion
|
21,535
|
|
23,481
|
|
21,219
|
|
22,523
|
|
Waneta Partnership promissory note
|
63
|
|
64
|
|
59
|
|
61
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
50
|
December 31, 2017
|
|
Financial Instruments Carried at Fair Value
|
December 31, 2017
|
|||||||
($ millions)
|
Level 1
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
Assets
|
|
|
|
|
||||
Energy contracts subject to regulatory deferral
(1) (2)
|
—
|
|
19
|
|
2
|
|
21
|
|
Energy contracts not subject to regulatory deferral
(1)
|
—
|
|
26
|
|
4
|
|
30
|
|
Foreign exchange contracts
(3)
|
3
|
|
—
|
|
—
|
|
3
|
|
Other investments
(4)
|
78
|
|
—
|
|
—
|
|
78
|
|
Total assets
|
81
|
|
45
|
|
6
|
|
132
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
Energy contracts subject to regulatory deferral
(2) (5)
|
(1
|
)
|
(103
|
)
|
(2
|
)
|
(106
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
—
|
|
(1
|
)
|
(1
|
)
|
Interest rate and total return swaps
(3)
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
Total liabilities
|
(1
|
)
|
(104
|
)
|
(3
|
)
|
(108
|
)
|
Financial Instruments Carried at Fair Value
|
December 31, 2016
|
|||||||
($ millions)
|
Level 1
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
Assets
|
|
|
|
|
||||
Energy contracts subject to regulatory deferral
(1) (2)
|
1
|
|
13
|
|
5
|
|
19
|
|
Energy contracts not subject to regulatory deferral
(1)
|
—
|
|
1
|
|
2
|
|
3
|
|
Interest rate swaps
(3)
|
—
|
|
11
|
|
—
|
|
11
|
|
Other investments
(4)
|
69
|
|
—
|
|
—
|
|
69
|
|
Total assets
|
70
|
|
25
|
|
7
|
|
102
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
||||
Energy contracts subject to regulatory deferral
(2) (5)
|
—
|
|
(21
|
)
|
(5
|
)
|
(26
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
(9
|
)
|
—
|
|
(9
|
)
|
Interest rate and total return swaps
(3)
|
—
|
|
(3
|
)
|
—
|
|
(3
|
)
|
Total liabilities
|
—
|
|
(33
|
)
|
(5
|
)
|
(38
|
)
|
(1)
|
The fair value of the Corporation's energy contracts is recognized in accounts receivable and other current assets and long-term other assets.
|
(2)
|
Unrealized gains and losses arising from changes in fair value of these contracts are deferred as a regulatory asset or liability for recovery from, or refund to, customers in future rates as permitted by the regulators, with the exception of long-term wholesale trading contracts and certain gas swap contracts.
|
(3)
|
The fair value of the Corporation's foreign exchange contracts, interest rate and total return swaps is recognized in accounts receivable and other current assets, accounts payable and other current liabilities and long-term other liabilities.
|
(4)
|
Included in long-term other assets on the consolidated balance sheet
|
(5)
|
The fair value of the Corporation's energy contracts is recognized in accounts payable and other current liabilities and non-current other liabilities.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
51
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
52
|
December 31, 2017
|
|
Volume
|
2017
|
|
2016
|
|
Energy contracts subject to regulatory deferral
(1)
|
|
|
||
Electricity swap contracts (GWh)
|
1,291
|
|
2,184
|
|
Electricity power purchase contracts (GWh)
|
761
|
|
1,252
|
|
Gas swap contracts (PJ)
|
216
|
|
35
|
|
Gas supply contract premiums (PJ)
|
219
|
|
240
|
|
Energy contracts not subject to regulatory deferral
(1)
|
|
|
||
Wholesale trading contracts (GWh)
|
2,387
|
|
2,058
|
|
Gas supply contract premiums (PJ)
|
—
|
|
15
|
|
Gas swap contracts (PJ)
|
36
|
|
4
|
|
(1)
|
GWh means gigawatt hours and PJ means petajoules.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
53
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
54
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
55
|
December 31, 2017
|
|
(1)
|
At FortisBC Energy and FortisBC Electric certain defined benefit pension plans have pension indexing provisions that provide for a portion of investment returns to be allocated in order to provide for indexing of pension benefits. Therefore, a change in the expected long‑term rate of return on pension plan assets has an impact on the projected benefit obligation.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
56
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
57
|
December 31, 2017
|
|
|
Quarter Ended
|
|
Annual
|
||||||||
($ millions)
|
March
2016
|
|
June
2016
|
|
September
2016
|
|
December
2016
|
|
|
2016
|
|
As reported
|
|
|
|
|
|
|
|||||
Net repayments and borrowings under committed credit facilities
|
92
|
|
421
|
|
83
|
|
(503
|
)
|
|
93
|
|
As corrected
|
|
|
|
|
|
|
|||||
Borrowings under committed credit facilities
|
105
|
|
124
|
|
72
|
|
367
|
|
|
668
|
|
Repayments under committed credit facilities
|
(82
|
)
|
(58
|
)
|
(99
|
)
|
(260
|
)
|
|
(499
|
)
|
Net borrowings and repayments under committed credit facilities
|
69
|
|
355
|
|
110
|
|
(610
|
)
|
|
(76
|
)
|
|
Quarter Ended
|
|
Year to Date
|
||||||
($ millions)
|
March
2017
|
|
June
2017
|
|
September
2017
|
|
|
September
2017
|
|
As reported
|
|
|
|
|
|
||||
Net repayments and borrowings under committed credit facilities
|
65
|
|
(241
|
)
|
(221
|
)
|
|
(397
|
)
|
As corrected
|
|
|
|
|
|
||||
Borrowings under committed credit facilities
|
483
|
|
324
|
|
659
|
|
|
1,466
|
|
Repayments under committed credit facilities
|
(545
|
)
|
(507
|
)
|
(648
|
)
|
|
(1,700
|
)
|
Net borrowings and repayments under committed credit facilities
|
127
|
|
(58
|
)
|
(232
|
)
|
|
(163
|
)
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
58
|
December 31, 2017
|
|
Related-party and inter-company transactions
|
|
|
||
Years ended December 31
|
|
|
||
($ millions)
|
2017
|
|
2016
|
|
Sale of capacity from Waneta Expansion to FortisBC Electric
|
46
|
|
45
|
|
Sale of energy from BECOL to Belize Electricity
|
35
|
|
33
|
|
Lease of gas storage capacity and gas sales from Aitken Creek to
FortisBC Energy
|
24
|
|
17
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
59
|
December 31, 2017
|
|
Selected Annual Financial Information
|
|
|
|
|||
Years ended December 31
|
|
|
|
|||
($ millions, except per share amounts)
|
2017
|
|
2016
|
|
2015
|
|
Revenue
|
8,301
|
|
6,838
|
|
6,757
|
|
Net earnings
|
1,125
|
|
713
|
|
840
|
|
Net earnings attributable to common equity shareholders
|
963
|
|
585
|
|
728
|
|
Basic earnings per common share
|
2.32
|
|
1.89
|
|
2.61
|
|
Diluted earnings per common share
|
2.31
|
|
1.89
|
|
2.59
|
|
|
|
|
|
|||
Total assets
|
47,822
|
|
47,904
|
|
28,804
|
|
Long-term debt (excluding current portion)
|
20,691
|
|
20,817
|
|
10,784
|
|
Preference shares
|
1,623
|
|
1,623
|
|
1,820
|
|
Common shareholders' equity
|
13,380
|
|
12,974
|
|
8,060
|
|
|
|
|
|
|||
Dividends declared per:
|
|
|
|
|||
Common share
|
1.65
|
|
1.55
|
|
1.43
|
|
First Preference Share, Series E
(1)
|
—
|
|
0.6126
|
|
1.2250
|
|
First Preference Share, Series F
|
1.2250
|
|
1.2250
|
|
1.2250
|
|
First Preference Share, Series G
|
0.9708
|
|
0.9708
|
|
0.9708
|
|
First Preference Share, Series H
(2)
|
0.6250
|
|
0.6250
|
|
0.7344
|
|
First Preference Share, Series I
(2)
|
0.5262
|
|
0.4874
|
|
0.3637
|
|
First Preference Share, Series J
|
1.1875
|
|
1.1875
|
|
1.1875
|
|
First Preference Share, Series K
|
1.0000
|
|
1.0000
|
|
1.0000
|
|
First Preference Share, Series M
|
1.0250
|
|
1.0250
|
|
1.0250
|
|
(1)
|
In September 2016 the Corporation redeemed all of the issued and outstanding First Preference Shares, Series E.
|
(2)
|
On June 1, 2015, 2,975,154 of the 10,000,000 First Preference Shares, Series H were converted on a one-for-one basis into First Preference Shares, Series I. The annual fixed dividend per share for the First Preference Shares, Series H was reset from $1.0625 to $0.6250 for the five-year period from and including June 1, 2015 to but excluding June 1, 2020. The First Preference Shares, Series I are entitled to receive floating rate cumulative dividends, which rate is reset every quarter based on the then current three-month Government of Canada Treasury Bill rate plus 1.45%.
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
60
|
December 31, 2017
|
|
Summary of Electricity and Energy Sales and Gas Volumes
|
|
|
|
|||
Fourth Quarters Ended December 31
|
2017
|
|
2016
|
|
Variance
|
|
Regulated Utilities - United States
|
|
|
|
|||
UNS Energy - Electricity Sales
(GWh)
|
3,553
|
|
3,356
|
|
197
|
|
UNS Energy - Gas Volumes
(PJ)
|
4
|
|
4
|
|
—
|
|
Central Hudson - Electricity Sales
(GWh)
|
1,195
|
|
1,195
|
|
—
|
|
Central Hudson - Gas Volumes
(PJ)
|
6
|
|
6
|
|
—
|
|
Regulated Utilities - Canada
|
|
|
|
|||
FortisBC Energy
(PJ)
|
69
|
|
67
|
|
2
|
|
FortisAlberta
(GWh)
|
4,328
|
|
4,352
|
|
(24
|
)
|
FortisBC Electric
(GWh)
|
869
|
|
856
|
|
13
|
|
Eastern Canadian
(GWh)
|
2,177
|
|
2,207
|
|
(30
|
)
|
Regulated Utilities - Caribbean
(GWh)
|
199
|
|
205
|
|
(6
|
)
|
Non-Regulated - Energy Infrastructure
(GWh)
|
137
|
|
115
|
|
22
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
61
|
December 31, 2017
|
|
Summary of Consolidated Cash Flows
|
|
|
|
|||
Fourth Quarters Ended December 31
|
|
|
|
|||
($ millions)
|
2017
|
|
2016
|
|
Variance
|
|
Cash, Beginning of Period
|
252
|
|
301
|
|
(49
|
)
|
Cash Provided by (Used in):
|
|
|
|
|||
Operating Activities
|
766
|
|
475
|
|
291
|
|
Investing Activities
|
(882
|
)
|
(5,187
|
)
|
4,305
|
|
Financing Activities
|
191
|
|
4,685
|
|
(4,494
|
)
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
—
|
|
(5
|
)
|
5
|
|
Cash, End of Period
|
327
|
|
269
|
|
58
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
62
|
December 31, 2017
|
|
Summary of Quarterly Results
|
|
Net Earnings
|
|
|
|
|
Attributable to
|
||
|
|
Common Equity
|
Earnings per Common Share
|
|
|
Revenue
|
Shareholders
|
Basic
|
Diluted
|
Quarter Ended
|
($ millions)
|
($ millions)
|
($)
|
($)
|
December 31, 2017
|
2,111
|
134
|
0.32
|
0.31
|
September 30, 2017
|
1,901
|
278
|
0.66
|
0.66
|
June 30, 2017
|
2,015
|
257
|
0.62
|
0.62
|
March 31, 2017
|
2,274
|
294
|
0.72
|
0.72
|
December 31, 2016
|
2,053
|
189
|
0.49
|
0.49
|
September 30, 2016
|
1,528
|
127
|
0.45
|
0.45
|
June 30, 2016
|
1,485
|
107
|
0.38
|
0.38
|
March 31, 2016
|
1,772
|
162
|
0.57
|
0.57
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
63
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
64
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
65
|
December 31, 2017
|
|
MANAGEMENT DISCUSSION AND ANALYSIS
|
66
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
Management's Report on Internal Control Over Financial Reporting
|
|
|
NOTE 12
|
Goodwill
|
||
Report of Independent Registered Public
Accounting Firm Deloitte LLP - Opinion
on the Consolidated Financial Statements
|
|
NOTE 13
|
Accounts Payable and Other Current Liabilities
|
|
||
Report of Independent Registered Public
Accounting Firm Deloitte LLP - Opinion
on Internal Control over Financial Reporting
|
|
NOTE 14
|
Long-Term Debt
|
|||
Independent Auditors' Report of Registered
Public Accounting Firm Ernst & Young LLP
|
|
NOTE 15
|
Capital Lease and Finance Obligations
|
|||
Consolidated Balance Sheets
|
|
NOTE 16
|
Other Liabilities
|
|||
Consolidated Statements of Earnings
|
|
NOTE 17
|
Earnings per Common Share
|
|||
Consolidated Statements of Comprehensive
Income
|
|
|
NOTE 18
|
Preference Shares
|
||
Consolidated Statements of Cash Flows
|
|
NOTE 19
|
Accumulated Other Comprehensive Income
|
|||
Consolidated Statements of Changes in Equity
|
|
NOTE 20
|
Non-Controlling Interests
|
|||
Notes to Consolidated Financial Statements
|
|
NOTE 21
|
Stock-Based Compensation Plans
|
|||
NOTE 1
|
Description of Business
|
|
NOTE 22
|
Other Income, Net
|
||
NOTE 2
|
Nature of Regulation and Regulatory Matters
|
|
|
NOTE 23
|
Income Taxes
|
|
NOTE 3
|
Summary of Significant Accounting Policies
|
|
NOTE 24
|
Employee Future Benefits
|
||
NOTE 4
|
Future Accounting Pronouncements
|
|
NOTE 25
|
Business Acquisitions
|
||
NOTE 5
|
Segmented Information
|
|
NOTE 26
|
Dispositions
|
||
NOTE 6
|
Accounts Receivable and Other Current Assets
|
|
|
NOTE 27
|
Supplementary Information to Consolidated Statements of Cash Flows
|
|
NOTE 7
|
Inventories
|
|
NOTE 28
|
Fair Value Measurements and Financial Instruments
|
||
NOTE 8
|
Regulatory Assets and Liabilities
|
|
NOTE 29
|
Variable Interest Entity
|
||
NOTE 9
|
Other Assets
|
|
NOTE 30
|
Commitments and Contingencies
|
||
NOTE 10
|
Property, Plant and Equipment
|
|
NOTE 31
|
Comparative Figures
|
||
NOTE 11
|
Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
i
|
|
|
|
|
|
ii
|
|
|
|
|
|
iii
|
|
|
|
|
|
iv
|
|
|
|
|
|
v
|
|
Fortis Inc.
|
|||||||
Consolidated Balance Sheets
|
|||||||
As at December 31
|
|||||||
(in millions of Canadian dollars)
|
|||||||
|
2017
|
|
|
2016
|
|
||
|
|
|
|
||||
ASSETS
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
327
|
|
|
$
|
269
|
|
Accounts receivable and other current assets (Note 6)
|
1,131
|
|
|
1,127
|
|
||
Prepaid expenses
|
79
|
|
|
85
|
|
||
Inventories (Note 7)
|
367
|
|
|
372
|
|
||
Regulatory assets (Note 8)
|
303
|
|
|
313
|
|
||
Total current assets
|
2,207
|
|
|
2,166
|
|
||
Other assets (Note 9)
|
480
|
|
|
406
|
|
||
Regulatory assets (Note 8)
|
2,742
|
|
|
2,620
|
|
||
Property, plant and equipment, net (Note 10)
|
29,668
|
|
|
29,337
|
|
||
Intangible assets, net (Note 11)
|
1,081
|
|
|
1,011
|
|
||
Goodwill (Note 12)
|
11,644
|
|
|
12,364
|
|
||
Total assets
|
$
|
47,822
|
|
|
$
|
47,904
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Short-term borrowings (Note 14)
|
$
|
209
|
|
|
$
|
1,155
|
|
Accounts payable and other current liabilities (Note 13)
|
2,053
|
|
|
1,970
|
|
||
Regulatory liabilities (Note 8)
|
490
|
|
|
492
|
|
||
Current installments of long-term debt (Note 14)
|
705
|
|
|
251
|
|
||
Current installments of capital lease and finance obligations (Note 15)
|
47
|
|
|
76
|
|
||
Total current liabilities
|
3,504
|
|
|
3,944
|
|
||
Other liabilities (Note 16)
|
1,210
|
|
|
1,279
|
|
||
Regulatory liabilities (Note 8)
|
2,956
|
|
|
1,691
|
|
||
Deferred income taxes (Note 23)
|
2,298
|
|
|
3,263
|
|
||
Long-term debt (Note 14)
|
20,691
|
|
|
20,817
|
|
||
Capital lease and finance obligations (Note 15)
|
414
|
|
|
460
|
|
||
Total liabilities
|
31,073
|
|
|
31,454
|
|
||
Commitments and Contingencies (Note 30)
|
|
|
|
||||
Equity
|
|
|
|
||||
Common shares
(1)
|
11,582
|
|
|
10,762
|
|
||
Preference shares (Note 18)
|
1,623
|
|
|
1,623
|
|
||
Additional paid-in capital
|
10
|
|
|
12
|
|
||
Accumulated other comprehensive income (Note 19)
|
61
|
|
|
745
|
|
||
Retained earnings
|
1,727
|
|
|
1,455
|
|
||
Shareholders' equity
|
15,003
|
|
|
14,597
|
|
||
Non-controlling interests (Note 20)
|
1,746
|
|
|
1,853
|
|
||
Total equity
|
16,749
|
|
|
16,450
|
|
||
Total liabilities and equity
|
$
|
47,822
|
|
|
$
|
47,904
|
|
|
|
|
|
||||
(1)
No par value. Unlimited authorized shares; 421.1 million and 401.5 million
issued and outstanding as at December 31, 2017 and 2016, respectively |
Approved on Behalf of the Board
|
||||||
|
/s/ Douglas J. Haughey
|
|
/s/ Tracey C. Ball
|
||||
|
|
||||||
|
Douglas J. Haughey,
|
Tracey C. Ball,
|
|||||
|
|||||||
See accompanying Notes to Consolidated Financial Statements
|
Director
|
|
Director
|
Fortis Inc.
|
|||||||||||||||||||||||||||||
Consolidated Statements of Changes in Equity
|
|||||||||||||||||||||||||||||
For the years ended December 31, 2017 and 2016
|
|||||||||||||||||||||||||||||
(in millions of Canadian dollars, except share numbers)
|
|||||||||||||||||||||||||||||
|
Common Shares
|
Common Shares
|
|
Preference Shares
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
Non-Controlling Interests
|
|
Total Equity
|
|||||||||||||||
|
(# millions)
|
|
|
(Note 18)
|
|
|
|
(Note 19)
|
|
|
|
(Note 20)
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
As at December 31, 2016
|
401.5
|
|
$
|
10,762
|
|
|
$
|
1,623
|
|
|
$
|
12
|
|
|
$
|
745
|
|
|
$
|
1,455
|
|
|
$
|
1,853
|
|
|
$
|
16,450
|
|
Net earnings
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,028
|
|
|
97
|
|
|
1,125
|
|
|||||||
Other comprehensive loss
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(684
|
)
|
|
—
|
|
|
(99
|
)
|
|
(783
|
)
|
|||||||
Common shares issued under private offering (Note 14)
|
12.2
|
|
500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
500
|
|
|||||||
Common shares issued under dividend reinvestment
plan and other
|
7.4
|
|
320
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
315
|
|
|||||||
Stock-based compensation
|
—
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||||
Advances from non-controlling interests
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|||||||
Subsidiary dividends paid to non-controlling interests
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(109
|
)
|
|
(109
|
)
|
|||||||
Dividends declared on common shares ($1.65 per share)
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(691
|
)
|
|
—
|
|
|
(691
|
)
|
|||||||
Dividends declared on preference shares
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(65
|
)
|
|
—
|
|
|
(65
|
)
|
|||||||
As at December 31, 2017
|
421.1
|
|
$
|
11,582
|
|
|
$
|
1,623
|
|
|
$
|
10
|
|
|
$
|
61
|
|
|
$
|
1,727
|
|
|
$
|
1,746
|
|
|
$
|
16,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
As at December 31, 2015
|
281.6
|
|
$
|
5,867
|
|
|
$
|
1,820
|
|
|
$
|
14
|
|
|
$
|
791
|
|
|
$
|
1,388
|
|
|
$
|
473
|
|
|
$
|
10,353
|
|
Net earnings
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
660
|
|
|
53
|
|
|
713
|
|
|||||||
Other comprehensive loss
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46
|
)
|
|
—
|
|
|
—
|
|
|
(46
|
)
|
|||||||
Common shares issued under public offering
(Notes 25 and 27)
|
114.4
|
|
4,684
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,684
|
|
|||||||
Common shares issued under dividend reinvestment
plan and other
|
5.5
|
|
211
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
207
|
|
|||||||
Stock-based compensation
|
—
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||||
Advances from non-controlling interests
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,361
|
|
|
1,361
|
|
|||||||
Foreign currency translation impacts
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
19
|
|
|||||||
Subsidiary dividends paid to non-controlling interests
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53
|
)
|
|
(53
|
)
|
|||||||
Redemption of preference shares
|
—
|
|
—
|
|
|
(197
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(197
|
)
|
|||||||
Dividends declared on common shares ($1.55 per share)
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(534
|
)
|
|
—
|
|
|
(534
|
)
|
|||||||
Dividends declared on preference shares
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
|
—
|
|
|
(75
|
)
|
|||||||
Adoption of new accounting policy
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
|||||||
As at December 31, 2016
|
401.5
|
|
$
|
10,762
|
|
|
$
|
1,623
|
|
|
$
|
12
|
|
|
$
|
745
|
|
|
$
|
1,455
|
|
|
$
|
1,853
|
|
|
$
|
16,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
See accompanying Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
a.
|
ITC
: Primarily comprised of ITC Holdings Corp. and the electric transmission operations of its regulated operating subsidiaries, which include International Transmission Company ("ITCTransmission"), Michigan Electric Transmission Company, LLC ("METC"), ITC Midwest LLC ("ITC Midwest"), and ITC Great Plains, LLC, (collectively "ITC"). ITC was acquired by Fortis in
October 2016, with Fortis owning
80.1%
of ITC and an affiliate of GIC Private Limited ("GIC") owning a
19.9%
minority interest
(Notes
20
and
25
).
Also included in the ITC segment is the net corporate expenses and activity of ITC Investment Holdings.
|
b.
|
UNS Energy:
Primarily comprised of Tucson Electric Power Company ("TEP"), UNS Electric, Inc. ("UNS Electric") and UNS Gas, Inc. ("UNS Gas"), (collectively "UNS Energy")
.
|
c.
|
Central Hudson:
Primarily comprised of Central Hudson Gas & Electric Corporation ("Central Hudson"), which is a regulated electric and gas transmission and distribution utility, serving
portions of New York State's Mid-Hudson River Valley. The Company owns gas-fired and hydroelectric generating capacity totalling
64
MW.
Also included in the Central Hudson segment is the net corporate expenses and activity of CH Energy Group, Inc. ("CH Energy Group").
|
a.
|
FortisBC Energy:
FortisBC Energy Inc. ("FortisBC Energy") is the largest regulated distributor of natural gas in British Columbia, serving
more than
135
communities.
FortisBC Energy provides transmission and distribution services to customers, and obtains natural gas supplies on behalf of most residential, commercial and industrial customers. Gas supplies are sourced primarily from northeastern British Columbia and, through FortisBC Energy's Southern Crossing pipeline, from Alberta.
|
|
5
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
b.
|
FortisAlberta:
FortisAlberta Inc. ("FortisAlberta") is a regulated electricity distribution utility
operating in a substantial portion of southern and central Alberta. The Company does not own or operate generation or transmission assets and is not involved in the direct sale of electricity.
|
c.
|
FortisBC Electric
: Includes FortisBC Inc. ("FortisBC Electric"), an integrated regulated electric utility operating in the southern interior of British Columbia
. FortisBC Electric owns
four
hydroelectric generating facilities with a combined capacity of
225
MW.
Also included in the FortisBC Electric segment are the operating, maintenance and management services relating to
five
hydroelectric generating facilities in British Columbia primarily owned by third parties, one of which is the
335
-MW Waneta Expansion hydroelectric generating facility ("Waneta Expansion"), owned by Fortis and Columbia Power Corporation and Columbia Basin Trust ("CPC/CBT").
|
d.
|
Eastern Canadian:
Comprised of Newfoundland Power Inc. ("Newfoundland Power"), Maritime Electric Company, Limited ("Maritime Electric"), FortisOntario Inc. ("FortisOntario"), and the Corporation's
49%
equity investment in Wataynikaneyap Power Limited Partnership ("Wataynikaneyap Partnership")
(Note 9).
|
|
6
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
7
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
8
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
9
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
10
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
11
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
12
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
|
2017
|
2016
|
|||
(Years)
|
Service Life Ranges
|
Weighted Average Remaining Service Life
|
|
Service Life Ranges
|
Weighted Average Remaining Service Life
|
|
Distribution
|
|
|
|
|
|
|
|
Electric
|
5-80
|
33
|
|
5-80
|
32
|
|
Gas
|
14-95
|
34
|
|
7-95
|
33
|
Transmission
|
|
|
|
|
|
|
|
Electric
|
20-80
|
41
|
|
20-80
|
41
|
|
Gas
|
5-80
|
34
|
|
7-80
|
34
|
Generation
|
5-85
|
28
|
|
5-85
|
26
|
|
Other
|
3-70
|
14
|
|
3-70
|
14
|
|
13
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
|
2017
|
|
2016
|
||
(Years)
|
Service Life Ranges
|
Weighted Average Remaining Service Life
|
|
Service Life Ranges
|
Weighted Average Remaining Service Life
|
|
Computer software
|
3-10
|
4
|
|
3-10
|
4
|
|
Land, transmission and water rights
|
36-80
|
57
|
|
30-80
|
57
|
|
Other
|
10-100
|
10
|
|
10-104
|
15
|
|
14
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
15
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
16
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
17
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
18
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
19
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
20
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
21
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
22
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
23
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
REGULATED
|
|
NON-REGULATED
|
|
|
|||||||||||||||||||||||
Year Ended
|
United States
|
|
Canada
|
|
|
Energy
|
|
|
Inter-
|
|
||||||||||||||||||
December 31, 2017
|
|
UNS
|
|
Central
|
|
|
FortisBC
|
|
Fortis
|
|
FortisBC
|
|
Eastern
|
|
|
|
|
Infra-
|
|
Corporate
|
|
segment
|
|
|||||
($ millions)
|
ITC
|
|
Energy
|
|
Hudson
|
|
|
Energy
|
|
Alberta
|
|
Electric
|
|
Canadian
|
|
Caribbean
|
|
Total
|
|
|
structure
|
|
and Other
|
|
eliminations
|
Total
|
|
|
Revenue
|
1,575
|
|
2,080
|
|
872
|
|
|
1,198
|
|
600
|
|
398
|
|
1,062
|
|
301
|
|
8,086
|
|
|
226
|
|
1
|
|
(12
|
)
|
8,301
|
|
Energy supply costs
|
—
|
|
711
|
|
260
|
|
|
411
|
|
—
|
|
142
|
|
692
|
|
144
|
|
2,360
|
|
|
2
|
|
—
|
|
(1
|
)
|
2,361
|
|
Operating expenses
|
436
|
|
609
|
|
402
|
|
|
298
|
|
198
|
|
89
|
|
134
|
|
44
|
|
2,210
|
|
|
49
|
|
13
|
|
(11
|
)
|
2,261
|
|
Depreciation and amortization
|
220
|
|
260
|
|
65
|
|
|
198
|
|
190
|
|
62
|
|
95
|
|
55
|
|
1,145
|
|
|
32
|
|
2
|
|
—
|
|
1,179
|
|
Operating income
|
919
|
|
500
|
|
145
|
|
|
291
|
|
212
|
|
105
|
|
141
|
|
58
|
|
2,371
|
|
|
143
|
|
(14
|
)
|
—
|
|
2,500
|
|
Other income, net
|
40
|
|
19
|
|
8
|
|
|
20
|
|
2
|
|
1
|
|
1
|
|
7
|
|
98
|
|
|
1
|
|
29
|
|
(1
|
)
|
127
|
|
Finance charges
|
259
|
|
101
|
|
41
|
|
|
116
|
|
93
|
|
37
|
|
56
|
|
18
|
|
721
|
|
|
5
|
|
189
|
|
(1
|
)
|
914
|
|
Income tax expense
|
371
|
|
148
|
|
42
|
|
|
40
|
|
1
|
|
14
|
|
22
|
|
—
|
|
638
|
|
|
19
|
|
(69
|
)
|
—
|
|
588
|
|
Net earnings
|
329
|
|
270
|
|
70
|
|
|
155
|
|
120
|
|
55
|
|
64
|
|
47
|
|
1,110
|
|
|
120
|
|
(105
|
)
|
—
|
|
1,125
|
|
Non-controlling interests
|
57
|
|
—
|
|
—
|
|
|
1
|
|
—
|
|
—
|
|
—
|
|
13
|
|
71
|
|
|
26
|
|
—
|
|
—
|
|
97
|
|
Preference share dividends
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
65
|
|
—
|
|
65
|
|
Net earnings attributable
to common equity shareholders |
272
|
|
270
|
|
70
|
|
|
154
|
|
120
|
|
55
|
|
64
|
|
34
|
|
1,039
|
|
|
94
|
|
(170
|
)
|
—
|
|
963
|
|
Goodwill
|
7,698
|
|
1,733
|
|
566
|
|
|
913
|
|
227
|
|
235
|
|
67
|
|
178
|
|
11,617
|
|
|
27
|
|
—
|
|
—
|
|
11,644
|
|
Total assets
|
17,581
|
|
8,596
|
|
3,188
|
|
|
6,418
|
|
4,454
|
|
2,197
|
|
2,489
|
|
1,325
|
|
46,248
|
|
|
1,605
|
|
76
|
|
(107
|
)
|
47,822
|
|
Capital expenditures
|
982
|
|
534
|
|
220
|
|
|
446
|
|
414
|
|
105
|
|
156
|
|
146
|
|
3,003
|
|
|
21
|
|
—
|
|
—
|
|
3,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenue
|
334
|
|
2,002
|
|
849
|
|
|
1,151
|
|
572
|
|
377
|
|
1,063
|
|
301
|
|
6,649
|
|
|
193
|
|
9
|
|
(13
|
)
|
6,838
|
|
Energy supply costs
|
—
|
|
740
|
|
253
|
|
|
347
|
|
—
|
|
132
|
|
698
|
|
137
|
|
2,307
|
|
|
35
|
|
—
|
|
(1
|
)
|
2,341
|
|
Operating expenses
|
151
|
|
605
|
|
387
|
|
|
295
|
|
189
|
|
88
|
|
136
|
|
45
|
|
1,896
|
|
|
39
|
|
108
|
|
(12
|
)
|
2,031
|
|
Depreciation and amortization
|
46
|
|
264
|
|
61
|
|
|
198
|
|
180
|
|
57
|
|
91
|
|
54
|
|
951
|
|
|
28
|
|
4
|
|
—
|
|
983
|
|
Operating income
|
137
|
|
393
|
|
148
|
|
|
311
|
|
203
|
|
100
|
|
138
|
|
65
|
|
1,495
|
|
|
91
|
|
(103
|
)
|
—
|
|
1,483
|
|
Other income, net
|
9
|
|
7
|
|
5
|
|
|
17
|
|
3
|
|
—
|
|
2
|
|
9
|
|
52
|
|
|
2
|
|
—
|
|
(1
|
)
|
53
|
|
Finance charges
|
54
|
|
102
|
|
40
|
|
|
125
|
|
85
|
|
37
|
|
55
|
|
15
|
|
513
|
|
|
4
|
|
162
|
|
(1
|
)
|
678
|
|
Income tax expense
|
20
|
|
99
|
|
43
|
|
|
51
|
|
—
|
|
9
|
|
21
|
|
—
|
|
243
|
|
|
3
|
|
(101
|
)
|
—
|
|
145
|
|
Net earnings
|
72
|
|
199
|
|
70
|
|
|
152
|
|
121
|
|
54
|
|
64
|
|
59
|
|
791
|
|
|
86
|
|
(164
|
)
|
—
|
|
713
|
|
Non-controlling interests
|
13
|
|
—
|
|
—
|
|
|
1
|
|
—
|
|
—
|
|
—
|
|
13
|
|
27
|
|
|
26
|
|
—
|
|
—
|
|
53
|
|
Preference share dividends
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
75
|
|
—
|
|
75
|
|
Net earnings attributable
to common equity shareholders |
59
|
|
199
|
|
70
|
|
|
151
|
|
121
|
|
54
|
|
64
|
|
46
|
|
764
|
|
|
60
|
|
(239
|
)
|
—
|
|
585
|
|
Goodwill
|
8,246
|
|
1,854
|
|
605
|
|
|
913
|
|
227
|
|
235
|
|
67
|
|
190
|
|
12,337
|
|
|
27
|
|
—
|
|
—
|
|
12,364
|
|
Total assets
|
18,000
|
|
8,935
|
|
3,214
|
|
|
6,230
|
|
4,057
|
|
2,143
|
|
2,394
|
|
1,344
|
|
46,317
|
|
|
1,502
|
|
130
|
|
(45
|
)
|
47,904
|
|
Capital expenditures
|
223
|
|
524
|
|
233
|
|
|
336
|
|
375
|
|
74
|
|
161
|
|
106
|
|
2,032
|
|
|
19
|
|
10
|
|
—
|
|
2,061
|
|
|
24
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
Sale of capacity from Waneta Expansion to FortisBC Electric
|
$
|
46
|
|
$
|
45
|
|
Sale of energy from BECOL to Belize Electricity
|
35
|
|
33
|
|
||
Lease of gas storage capacity and gas sales from Aitken Creek to
FortisBC Energy
|
24
|
|
17
|
|
(in millions)
|
2017
|
|
2016
|
|
||
Trade accounts receivable
|
$
|
492
|
|
$
|
507
|
|
Unbilled accounts receivable
|
575
|
|
551
|
|
||
Allowance for doubtful accounts
|
(31
|
)
|
(33
|
)
|
||
Income tax receivable
|
8
|
|
26
|
|
||
Other
|
87
|
|
76
|
|
||
|
$
|
1,131
|
|
$
|
1,127
|
|
(in millions)
|
2017
|
|
2016
|
|
||
Materials and supplies
|
$
|
238
|
|
$
|
244
|
|
Gas and fuel in storage
|
97
|
|
98
|
|
||
Coal inventory
|
32
|
|
30
|
|
||
|
$
|
367
|
|
$
|
372
|
|
|
25
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
|
|
Remaining recovery period
|
||||
(in millions
)
|
2017
|
|
2016
|
|
(Years)
|
||
Regulatory assets
|
|
|
|
||||
Deferred income taxes
(i)
|
$
|
1,403
|
|
$
|
1,260
|
|
To be determined
|
Employee future benefits
(ii)
|
510
|
|
576
|
|
Various
|
||
Deferred energy management costs
(iii)
|
200
|
|
178
|
|
1-10
|
||
Generation early retirement costs (iv)
|
105
|
|
—
|
|
11-13
|
||
Deferred lease costs
(v)
|
104
|
|
97
|
|
Various
|
||
Rate stabilization accounts
(vi)
|
95
|
|
183
|
|
Various
|
||
Deferred operating overhead costs
(vii)
|
91
|
|
78
|
|
Various
|
||
Derivative instruments
(viii)
|
87
|
|
19
|
|
Various
|
||
Manufactured gas plant ("MGP") site remediation deferral
(ix)
|
75
|
|
107
|
|
To be determined
|
||
Greenhouse gas reduction regulatory incentives
(x)
|
35
|
|
40
|
|
10
|
||
Other regulatory assets
(xi)
|
340
|
|
395
|
|
Various
|
||
Total regulatory assets
|
3,045
|
|
2,933
|
|
|
||
Less: current portion
|
(303
|
)
|
(313
|
)
|
1
|
||
Long-term regulatory assets
|
$
|
2,742
|
|
$
|
2,620
|
|
|
|
|
|
|
||||
Regulatory liabilities
|
|
|
|
||||
Deferred income taxes
(i)
|
$
|
1,484
|
|
$
|
—
|
|
To be determined
|
Asset removal cost provision
(xii)
|
1,095
|
|
1,194
|
|
To be determined
|
||
Rate stabilization accounts
(vi)
|
254
|
|
230
|
|
Various
|
||
ROE refund liability
(xiii)
|
182
|
|
346
|
|
1
|
||
Energy efficiency liability
(xiv)
|
82
|
|
49
|
|
Various
|
||
Renewable energy surcharge
(xv)
|
66
|
|
53
|
|
To be determined
|
||
Electric and gas moderator account
(xvi)
|
58
|
|
71
|
|
To be determined
|
||
Employee future benefits
(ii)
|
47
|
|
42
|
|
Various
|
||
Other regulatory liabilities
(xvii)
|
178
|
|
198
|
|
Various
|
||
Total regulatory liabilities
|
3,446
|
|
2,183
|
|
|
||
Less: current portion
|
(490
|
)
|
(492
|
)
|
1
|
||
Long-term regulatory liabilities
|
$
|
2,956
|
|
$
|
1,691
|
|
|
|
26
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(i)
|
Deferred Income Taxes
|
(ii)
|
Employee Future Benefits
|
(iii)
|
Deferred Energy Management Costs
|
|
27
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(iv)
|
Generation Early Retirement Costs
|
(v)
|
Deferred Lease Costs
|
(vi)
|
Rate Stabilization Accounts
|
|
28
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(vii)
|
Deferred Operating Overhead Costs
|
(viii)
|
Derivative Instruments
|
(ix)
|
MGP Site Remediation Deferral
|
(x)
|
Greenhouse Gas Reduction Regulatory Incentives
|
(xi)
|
Other Regulatory Assets
|
(xii)
|
Asset Removal Cost Provision
|
|
29
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(xiii)
|
ROE Refund Liability
|
(xiv)
|
Energy Efficiency Liability
|
(xv)
|
Renewable Energy Surcharge
|
(xvi)
|
Electric and Gas Moderator Account
|
(xvii)
|
Other Regulatory Liabilities
|
|
30
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
Supplemental Executive Retirement Plan assets
|
$
|
130
|
|
$
|
115
|
|
Equity investment - Belize Electricity
|
73
|
|
78
|
|
||
Renewable Energy Credits (Note 8
(xv)
)
|
62
|
|
39
|
|
||
Defined benefit pension plan assets (Note 24)
|
31
|
|
32
|
|
||
Other investments
|
29
|
|
21
|
|
||
Deferred compensation plan assets
|
24
|
|
24
|
|
||
Equity investment - Wataynikaneyap Partnership
|
22
|
|
3
|
|
||
Other
(1)
|
109
|
|
94
|
|
||
|
$
|
480
|
|
$
|
406
|
|
(1)
|
Other assets are generally recorded at cost and recovered/amortized over the estimated period of future benefit, where applicable. Other assets also includes the fair value of derivative instruments
(Note 28)
.
|
|
|
2017
|
||||||||||
(in millions)
|
Cost
|
|
Accumulated Depreciation
|
|
Net Book Value
|
|
||||||
Distribution
|
|
|
|
|
|
|||||||
|
Electric
|
$
|
9,963
|
|
|
$
|
(2,864
|
)
|
|
$
|
7,099
|
|
|
Gas
|
4,093
|
|
|
(1,157
|
)
|
|
2,936
|
|
|||
Transmission
|
|
|
|
|
|
|
|
|
||||
|
Electric
|
12,571
|
|
|
(2,838
|
)
|
|
9,733
|
|
|||
|
Gas
|
1,954
|
|
|
(596
|
)
|
|
1,358
|
|
|||
Generation
|
6,079
|
|
|
(1,996
|
)
|
|
4,083
|
|
||||
Other
|
3,608
|
|
|
(1,130
|
)
|
|
2,478
|
|
||||
Assets under construction
|
1,717
|
|
|
—
|
|
|
1,717
|
|
||||
Land
|
264
|
|
|
—
|
|
|
264
|
|
||||
|
|
$
|
40,249
|
|
|
$
|
(10,581
|
)
|
|
$
|
29,668
|
|
|
31
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
|
2016
|
||||||||||
(in millions)
|
Cost
|
|
Accumulated Depreciation
|
|
|
Net Book Value
|
|
|||||
Distribution
|
|
|
|
|
|
|||||||
|
Electric
|
$
|
9,616
|
|
|
$
|
(2,752
|
)
|
|
$
|
6,864
|
|
|
Gas
|
3,956
|
|
|
(1,096
|
)
|
|
2,860
|
|
|||
Transmission
|
|
|
|
|
|
|
|
|
||||
|
Electric
|
12,616
|
|
|
(2,876
|
)
|
|
9,740
|
|
|||
|
Gas
|
1,776
|
|
|
(562
|
)
|
|
1,214
|
|
|||
Generation
|
6,884
|
|
|
(2,474
|
)
|
|
4,410
|
|
||||
Other
|
3,497
|
|
|
(1,096
|
)
|
|
2,401
|
|
||||
Assets under construction
|
1,559
|
|
|
—
|
|
|
1,559
|
|
||||
Land
|
289
|
|
|
—
|
|
|
289
|
|
||||
|
|
$
|
40,193
|
|
|
$
|
(10,856
|
)
|
|
$
|
29,337
|
|
|
32
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
Ownership
|
|
Accumulated
|
|
Net Book
|
|
||||
(in millions)
|
%
|
Cost
|
Depreciation
|
|
Value
|
|
||||
San Juan Unit 1
|
50.0
|
$
|
351
|
|
$
|
(104
|
)
|
$
|
247
|
|
Four Corners Units 4 and 5
|
7.0
|
210
|
|
(98
|
)
|
112
|
|
|||
Luna Energy Facility
|
33.3
|
69
|
|
(4
|
)
|
65
|
|
|||
Gila River Common Facilities
|
25.0
|
41
|
|
(14
|
)
|
27
|
|
|||
Springerville Coal Handling Facilities
|
83.0
|
253
|
|
(102
|
)
|
151
|
|
|||
Transmission Facilities
|
1.0-80.0
|
854
|
|
(302
|
)
|
552
|
|
|||
|
|
$
|
1,778
|
|
$
|
(624
|
)
|
$
|
1,154
|
|
|
2017
|
||||||||
|
|
Accumulated
|
|
Net Book
|
|
||||
(in millions
)
|
Cost
|
|
Amortization
|
|
Value
|
|
|||
Computer software
|
$
|
784
|
|
$
|
(474
|
)
|
$
|
310
|
|
Land, transmission and water rights
|
743
|
|
(103
|
)
|
640
|
|
|||
Other
|
117
|
|
(49
|
)
|
68
|
|
|||
Assets under construction
|
63
|
|
—
|
|
63
|
|
|||
|
$
|
1,707
|
|
$
|
(626
|
)
|
$
|
1,081
|
|
|
|
|
|
||||||
|
2016
|
||||||||
|
|
Accumulated
|
|
Net Book
|
|
||||
(in millions
)
|
Cost
|
|
Amortization
|
|
Value
|
|
|||
Computer software
|
$
|
748
|
|
$
|
(447
|
)
|
$
|
301
|
|
Land, transmission and water rights
|
700
|
|
(108
|
)
|
592
|
|
|||
Other
|
128
|
|
(56
|
)
|
72
|
|
|||
Assets under construction
|
46
|
|
—
|
|
46
|
|
|||
|
$
|
1,622
|
|
$
|
(611
|
)
|
$
|
1,011
|
|
|
33
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
Balance, beginning of year
|
$
|
12,364
|
|
$
|
4,173
|
|
Acquisition of ITC (Note 2
5)
|
(6
|
)
|
8,106
|
|
||
Acquisition of Aitken Cree
k (Note 25)
|
—
|
|
27
|
|
||
Foreign currency translation impacts
|
(714
|
)
|
58
|
|
||
Balance, end of year
|
$
|
11,644
|
|
$
|
12,364
|
|
(in millions)
|
2017
|
|
2016
|
|
||
Trade accounts payable
|
$
|
696
|
|
$
|
554
|
|
Interest payable
|
223
|
|
218
|
|
||
Customer and other deposits
|
204
|
|
287
|
|
||
Dividends payable
|
185
|
|
166
|
|
||
Employee compensation and benefits payable
|
184
|
|
178
|
|
||
Accrued taxes other than income taxes
|
178
|
|
168
|
|
||
Gas and fuel cost payable
|
146
|
|
175
|
|
||
Fair value of derivative instruments (Note 28)
|
71
|
|
28
|
|
||
MGP site remediation (Notes 8
(ix)
and 16)
|
35
|
|
21
|
|
||
Defined benefit pension and OPEB liabilities (Note 24)
|
22
|
|
26
|
|
||
Other
|
109
|
|
149
|
|
||
|
$
|
2,053
|
|
$
|
1,970
|
|
|
34
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions
)
|
Maturity Date
|
2017
|
|
2016
|
|
|||
Regulated Utilities
|
|
|
|
|||||
ITC
|
|
|
|
|||||
Secured US First Mortgage Bonds -
|
|
|
|
|||||
|
4.67% weighted average fixed rate (2016 - 4.81%)
|
2018-2055
|
$
|
2,063
|
|
$
|
1,994
|
|
Secured US Senior Notes -
|
|
|
|
|||||
|
4.19% weighted average fixed rate (2016 - 4.19%)
|
2040-2046
|
596
|
|
638
|
|
||
Unsecured US Senior Notes -
|
|
|
|
|||||
|
3.98% weighted average fixed rate (2016 - 4.80%)
|
2020-2043
|
3,618
|
|
3,160
|
|
||
Unsecured US Shareholder Note -
|
|
|
|
|||||
|
6.00% fixed rate (2016 - 6.00%)
|
2028
|
250
|
|
267
|
|
||
Unsecured US Term Loan Credit Agreement -
|
|
|
|
|||||
|
2.03% weighted average variable rate
|
2019
|
63
|
|
—
|
|
||
UNS Energy
|
|
|
|
|||||
Unsecured US Tax-Exempt Bonds - 4.04% weighted
|
|
|
|
|||||
|
average fixed and variable rate (2016 - 3.87%)
|
2020-2040
|
773
|
|
827
|
|
||
Unsecured US Fixed Rate Notes -
|
|
|
|
|||||
|
4.26% weighted average fixed rate (2016 - 4.26%)
|
2021-2045
|
1,411
|
|
1,511
|
|
||
Central Hudson
|
|
|
|
|||||
Unsecured US Promissory Notes - 4.28% weighted
|
|
|
|
|||||
|
average fixed and variable rate (2016 - 4.25%)
|
2018-2057
|
770
|
|
768
|
|
||
FortisBC Energy
|
|
|
|
|||||
Unsecured Debentures -
|
|
|
|
|||||
|
5.13% weighted average fixed rate (2016 - 5.24%)
|
2026-2047
|
2,395
|
|
2,220
|
|
||
FortisAlberta
|
|
|
|
|||||
Unsecured Debentures -
|
|
|
|
|||||
|
4.70% weighted average fixed rate (2016 - 4.82%)
|
2024-2052
|
2,035
|
|
1,834
|
|
||
FortisBC Electric
|
|
|
|
|||||
Secured Debentures -
|
|
|
|
|||||
|
8.80% fixed rate (2016 - 8.80%)
|
2023
|
25
|
|
25
|
|
||
Unsecured Debentures -
|
|
|
|
|||||
|
5.05%
weighted average fixed rate (2016 - 5.22%)
|
2021-2050
|
710
|
|
635
|
|
||
Eastern Canadian
|
|
|
|
|||||
Secured First Mortgage Sinking Fund Bonds -
|
|
|
|
|||||
|
6.14% weighted average fixed rate (2016 - 6.48%)
|
2020-2057
|
585
|
|
516
|
|
||
Secured First Mortgage Bonds -
|
|
|
|
|||||
|
6.19% weighted average fixed rate (2016 - 6.19%)
|
2018-2061
|
195
|
|
195
|
|
||
Unsecured Senior Notes -
|
|
|
|
|||||
|
6.11% weighted average fixed rate (2016 - 6.11%)
|
2018-2041
|
104
|
|
104
|
|
||
Caribbean Electric
|
|
|
|
|||||
Unsecured US Senior Loan Notes and Bonds - 4.80% weighted
|
|
|
|
|||||
|
average fixed and variable rate (2016 - 4.92%)
|
2018-2048
|
525
|
|
499
|
|
||
Corporate
|
|
|
|
|||||
Unsecured US Senior Notes and Promissory Notes -
|
|
|
|
|||||
|
3.41% weighted average fixed rate (2016 - 3.43%)
|
2019-2044
|
4,046
|
|
4,353
|
|
||
Unsecured Debentures -
|
|
|
|
|||||
|
6.50% weighted average fixed rate (2016 - 6.50%)
|
2039
|
200
|
|
200
|
|
||
Unsecured Senior Notes - 2.85% fixed rate (2016 - 2.85%)
|
2023
|
500
|
|
500
|
|
|||
Long-term classification of credit facility borrowings
|
671
|
|
973
|
|
||||
Total long-term debt (Note 28)
|
|
21,535
|
|
21,219
|
|
|||
Less: Deferred financing costs and debt discounts
|
|
(139
|
)
|
(151
|
)
|
|||
Less: Current installments of long-term debt
|
|
(705
|
)
|
(251
|
)
|
|||
|
|
|
$
|
20,691
|
|
$
|
20,817
|
|
|
35
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
36
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
Regulated
Utilities |
|
Corporate
and Other |
|
2017
|
|
2016
|
|
||||
Total credit facilities
(1)
|
$
|
3,567
|
|
$
|
1,385
|
|
$
|
4,952
|
|
$
|
5,976
|
|
Credit facilities utilized:
|
|
|
|
|
|
|
|
|
||||
Short-term borrowings
(1) (2)
|
(209
|
)
|
—
|
|
(209
|
)
|
(1,155
|
)
|
||||
Long-term debt
(including current portion)
(3)
|
(465
|
)
|
(206
|
)
|
(671
|
)
|
(973
|
)
|
||||
Letters of credit outstanding
|
(73
|
)
|
(56
|
)
|
(129
|
)
|
(119
|
)
|
||||
Credit facilities unused
|
$
|
2,820
|
|
$
|
1,123
|
|
$
|
3,943
|
|
$
|
3,729
|
|
(1)
|
As at
December 31, 2017
, there was
no
commercial paper outstanding (
December 31, 2016
-
$195 million
). Outstanding commercial paper does not reduce available capacity under the Corporation's consolidated credit facilities.
|
(2)
|
The weighted average interest rate on short-term borrowings was approximately
1.8%
as at
December 31, 2017
(
December 31, 2016
-
1.7%
).
|
(3)
|
As at
December 31, 2017
, credit facility borrowings classified as long-term debt included $
312 million
in current installments of long-term debt on the consolidated balance sheet (
December 31, 2016
- $
61 million
). The weighted average interest rate on credit facility borrowings classified as long‑term debt was approximately
2.5%
as at
December 31, 2017
(
December 31, 2016
-
1.8%
).
|
|
37
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
Regulated
|
|
Corporate
|
|
|
||||
|
Utilities
|
|
and Other
|
|
Total
|
|
|||
Year
|
(in millions)
|
|
(in millions)
|
|
(in millions)
|
|
|||
2018
|
$
|
499
|
|
$
|
206
|
|
$
|
705
|
|
2019
|
169
|
|
113
|
|
282
|
|
|||
2020
|
516
|
|
157
|
|
673
|
|
|||
2021
|
435
|
|
784
|
|
1,219
|
|
|||
2022
|
1,060
|
|
—
|
|
1,060
|
|
|||
Thereafter
|
13,904
|
|
3,692
|
|
17,596
|
|
|||
|
$
|
16,583
|
|
$
|
4,952
|
|
$
|
21,535
|
|
|
38
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
39
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
Capital
|
|
Finance
|
|
|
||||
|
Leases
|
|
Obligations
|
|
Total
|
|
|||
Year
|
(in millions)
|
|
(in millions)
|
|
(in millions)
|
|
|||
2018
|
$
|
58
|
|
$
|
32
|
|
$
|
90
|
|
2019
|
59
|
|
15
|
|
74
|
|
|||
2020
|
68
|
|
5
|
|
73
|
|
|||
2021
|
46
|
|
32
|
|
78
|
|
|||
2022
|
46
|
|
3
|
|
49
|
|
|||
Thereafter
|
1,950
|
|
—
|
|
1,950
|
|
|||
|
$
|
2,227
|
|
$
|
87
|
|
$
|
2,314
|
|
Less: Amounts representing imputed interest and executory costs on capital lease and finance obligations
|
|
|
(1,853
|
)
|
|||||
Total capital lease and finance obligations
|
|
|
461
|
|
|||||
Less: Current installments
|
|
|
(47
|
)
|
|||||
|
|
|
$
|
414
|
|
(in millions)
|
2017
|
|
2016
|
|
|||
Defined benefit pension plan liabilities (Note 24)
|
$
|
393
|
|
$
|
410
|
|
|
OPEB plan liabilities (Note 24)
|
381
|
|
411
|
|
|||
Asset retirement obligations
|
71
|
|
58
|
|
|||
Customer and other deposits
|
67
|
|
69
|
|
|||
Waneta Partnership promissory note (Notes 28, 29 and 30)
|
63
|
|
59
|
|
|||
Mine reclamation and retiree health care liabilities
|
40
|
|
40
|
|
|||
DSU, PSU and RSU liabilities (Note 21)
|
39
|
|
24
|
|
|||
Fair value of derivative instruments (Note 28)
|
37
|
|
10
|
|
|||
MGP site remediation (Notes 8
(ix)
and 13)
|
34
|
|
77
|
|
|||
Deferred compensation plan liabilities (Note 9)
|
28
|
|
27
|
|
|||
Other
|
57
|
|
94
|
|
|||
|
|
$
|
1,210
|
|
$
|
1,279
|
|
|
40
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
2017
|
2016
|
||||||||||||||
|
Net Earnings
|
|
Weighted
|
|
|
Net Earnings
|
|
Weighted
|
|
|
||||||
|
to Common
|
|
Average
|
|
|
to Common
|
|
Average
|
|
|
||||||
|
Shareholders
|
|
Shares
|
|
|
Shareholders
|
|
Shares
|
|
|
||||||
|
($ millions)
|
|
(# millions)
|
|
EPS
|
|
($ millions)
|
|
(# millions)
|
|
EPS
|
|
||||
Basic EPS
|
$
|
963
|
|
415.5
|
|
$
|
2.32
|
|
$
|
585
|
|
308.9
|
|
$
|
1.89
|
|
Effect of potential dilutive
securities:
|
|
|
|
|
|
|
||||||||||
Stock Options
|
—
|
|
0.7
|
|
|
—
|
|
0.7
|
|
|
||||||
Preference Shares
|
—
|
|
—
|
|
|
7
|
|
3.8
|
|
|
||||||
Diluted EPS
|
$
|
963
|
|
416.2
|
|
$
|
2.31
|
|
$
|
592
|
|
313.4
|
|
$
|
1.89
|
|
|
41
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(a)
|
an unlimited number of First Preference Shares, without nominal or par value
|
(b)
|
an unlimited number of Second Preference Shares, without nominal or par value
|
|
2017
|
2016
|
||||||||||
First Preference Shares
|
Number
|
|
|
|
Number
|
|
|
|
||||
of Shares
|
|
|
Amount
|
|
of Shares
|
|
|
Amount
|
|
|||
(in thousands)
|
|
|
(in millions)
|
|
(in thousands)
|
|
|
(in millions)
|
|
|||
Series F
|
5,000
|
|
|
$
|
122
|
|
5,000
|
|
|
$
|
122
|
|
Series G
|
9,200
|
|
|
225
|
|
9,200
|
|
|
225
|
|
||
Series H
|
7,025
|
|
|
172
|
|
7,025
|
|
|
172
|
|
||
Series I
|
2,975
|
|
|
73
|
|
2,975
|
|
|
73
|
|
||
Series J
|
8,000
|
|
|
196
|
|
8,000
|
|
|
196
|
|
||
Series K
|
10,000
|
|
|
244
|
|
10,000
|
|
|
244
|
|
||
Series M
|
24,000
|
|
|
591
|
|
24,000
|
|
|
591
|
|
||
|
66,200
|
|
|
$
|
1,623
|
|
66,200
|
|
|
$
|
1,623
|
|
|
42
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
|
|
|
Earliest
|
|
|
|||||
|
|
|
Reset
|
|
Redemption
|
|
Right to
|
|
|||
|
Initial
|
|
Annual
|
|
Dividend
|
|
and/or
|
Redemption
|
|
Convert on
|
|
|
Yield
|
|
Dividend
|
|
Yield
|
|
Conversion
|
Value
|
|
a One For
|
|
First Preference Shares
(1) (2)
|
(%)
|
|
($)
|
|
(%)
|
|
Option Date
|
($)
|
|
One Basis
|
|
Perpetual fixed rate
|
|
|
|
|
|
|
|||||
Series F
|
4.90
|
|
1.2250
|
|
—
|
|
December 1, 2011
|
25.00
|
|
—
|
|
Series J
(3)
|
4.75
|
|
1.1875
|
|
—
|
|
December 1, 2017
|
26.00
|
|
—
|
|
Fixed rate reset
(4) (5)
|
|
|
|
|
|
|
|||||
Series G
|
5.25
|
|
0.9708
|
|
2.13
|
|
September 1, 2013
|
25.00
|
|
—
|
|
Series H
|
4.25
|
|
0.6250
|
|
1.45
|
|
June 1, 2015
|
25.00
|
|
Series I
|
|
Series K
|
4.00
|
|
1.0000
|
|
2.05
|
|
March 1, 2019
|
25.00
|
|
Series L
|
|
Series M
|
4.10
|
|
1.0250
|
|
2.48
|
|
December 1, 2019
|
25.00
|
|
Series N
|
|
Floating rate reset
(5) (6)
|
|
|
|
|
|
|
|||||
Series I
(3)
|
2.10
|
|
—
|
|
1.45
|
|
June 1, 2015
|
25.50
|
|
Series H
|
|
Series L
|
—
|
|
—
|
|
2.05
|
|
March 1, 2024
|
—
|
|
Series K
|
|
Series N
|
—
|
|
—
|
|
2.48
|
|
December 1, 2024
|
—
|
|
Series M
|
|
(1
)
|
Holders are entitled to receive a fixed or floating cumulative quarterly cash dividend as and when declared by the Board of Directors of the Corporation, payable in equal quarterly installments on the first day of each quarter.
|
(2
)
|
On or after the specified redemption dates, the Corporation has the option to redeem for cash the outstanding First Preference Shares, in whole or in part, at the specified per share redemption value plus all accrued and unpaid dividends up to but excluding the dates fixed for redemption, and in the case of the First Preference Shares that reset, on every fifth anniversary date, thereafter.
|
(3)
|
First Preference Shares, Series J are redeemable at
$26.00
until December 1, 2018, such redemption price decreasing by
$0.25
each year until December 1, 2021 and redeemable at
$25.00
per share thereafter. First Preference Shares, Series I are redeemable at
$25.50
per share, up to but excluding June 1, 2020, and at
$25.00
per share on June 1, 2020, and on every fifth anniversary date of June 1, 2020, thereafter.
|
(4
)
|
On the redemption and/or conversion option date, and each
five
-year anniversary thereafter, the reset annual dividend per share will be determined by multiplying
$25.00
per share by the annual fixed dividend rate, which is the sum of the
five
-year Government of Canada Bond Yield on the applicable reset date, plus the applicable reset dividend yield.
|
(5)
|
On each conversion option date, the holders have the option, subject to certain conditions, to convert any or all of their Shares into an equal number of Cumulative Redeemable First Preference Shares of a specified series.
|
(6)
|
The floating quarterly dividend rate will be reset every quarter based on the then current three‑month Government of Canada Treasury Bill rate plus the applicable reset dividend yield.
|
|
43
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
2017
|
||||||||
(in millions)
|
Opening balance January 1
|
|
Net Change
|
|
Ending balance December 31
|
|
|||
Net unrealized foreign currency translation gains (losses):
|
|
|
|
||||||
Unrealized foreign currency translation gains (losses) on net investments in foreign operations
|
$
|
1,227
|
|
$
|
(980
|
)
|
$
|
247
|
|
(Losses) gains on hedges of net investments in foreign operations
|
(472
|
)
|
300
|
|
(172
|
)
|
|||
Income tax recovery (expense)
|
1
|
|
(2
|
)
|
(1
|
)
|
|||
|
756
|
|
(682
|
)
|
74
|
|
|||
Cash flow hedges:
(Note 28)
|
|
|
|
||||||
Net change in fair value of cash flow hedges
|
8
|
|
(2
|
)
|
6
|
|
|||
Reclassification of cash flow hedges to finance charges
|
—
|
|
4
|
|
4
|
|
|||
Income tax expense
|
(3
|
)
|
—
|
|
(3
|
)
|
|||
|
5
|
|
2
|
|
7
|
|
|||
Unrealized employee future benefits (losses) gains:
(Note 24)
|
|
|
|
||||||
Unamortized net actuarial losses
|
(19
|
)
|
(3
|
)
|
(22
|
)
|
|||
Unamortized past service costs
|
(3
|
)
|
(1
|
)
|
(4
|
)
|
|||
Income tax recovery
|
6
|
|
—
|
|
6
|
|
|||
|
(16
|
)
|
(4
|
)
|
(20
|
)
|
|||
Accumulated other comprehensive income
|
$
|
745
|
|
$
|
(684
|
)
|
$
|
61
|
|
|
|
|
|
||||||
|
2016
|
||||||||
(in millions)
|
Opening balance January 1
|
|
Net Change
|
|
Ending
balance
December 31
|
|
|||
Net unrealized foreign currency translation gains (losses):
|
|
|
|
||||||
Unrealized foreign currency translation gains (losses) on net investments in foreign operations
|
$
|
1,281
|
|
$
|
(54
|
)
|
$
|
1,227
|
|
(Losses) gains on hedges of net investments in foreign operations
|
(476
|
)
|
4
|
|
(472
|
)
|
|||
Income tax recovery
|
1
|
|
—
|
|
1
|
|
|||
|
806
|
|
(50
|
)
|
756
|
|
|||
Available-for-sale investment:
|
|
|
|
||||||
Realized gain on available-for-sale investment
|
(2
|
)
|
2
|
|
—
|
|
|||
|
|
|
|
||||||
Cash flow hedges:
(Note 28)
|
|
|
|
||||||
Net change in fair value of cash flow hedges
|
3
|
|
5
|
|
8
|
|
|||
Income tax expense
|
(1
|
)
|
(2
|
)
|
(3
|
)
|
|||
|
2
|
|
3
|
|
5
|
|
|||
Unrealized employee future benefits (losses) gains:
(Note 24)
|
|
|
|
||||||
Unamortized net actuarial (losses) gains
|
(20
|
)
|
1
|
|
(19
|
)
|
|||
Unamortized past service costs
|
(1
|
)
|
(2
|
)
|
(3
|
)
|
|||
Income tax recovery
|
6
|
|
—
|
|
6
|
|
|||
|
(15
|
)
|
(1
|
)
|
(16
|
)
|
|||
Accumulated other comprehensive income
|
$
|
791
|
|
$
|
(46
|
)
|
$
|
745
|
|
|
44
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
ITC
|
$
|
1,290
|
|
$
|
1,385
|
|
Waneta Partnership
|
322
|
|
330
|
|
||
Caribbean Utilities
|
118
|
|
122
|
|
||
Other
|
16
|
|
16
|
|
||
|
$
|
1,746
|
|
$
|
1,853
|
|
|
2017
|
|
2016
|
|
Options granted (#)
|
774,924
|
|
788,188
|
|
Exercise price ($)
(1)
|
42.36
|
|
37.30
|
|
Grant date fair value ($)
|
3.22
|
|
2.41
|
|
Assumptions:
|
|
|
||
Dividend yield (%)
(2)
|
3.8
|
|
3.9
|
|
Expected volatility (%)
(3)
|
16.1
|
|
16.4
|
|
Risk-free interest rate (%)
(4)
|
1.2
|
|
0.7
|
|
Weighted average expected life (years)
(5)
|
5.6
|
|
5.5
|
|
(1)
|
Five
-day VWAP immediately preceding the date of grant
|
(2)
|
Based on average annual dividend yield up to the date of grant and the weighted average expected life of the options
|
(3)
|
Based on historical experience over a period equal to the weighted average expected life of the options
|
(4)
|
Government of Canada benchmark bond yield in effect at the date of grant that covers the weighted average expected life of the options
|
(5)
|
Based on historical experience
|
|
45
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
Total Options
|
|
Non-vested Options
(1)
|
||||||||||
|
Number of Options
|
|
|
Weighted Average
Exercise Price |
|
|
Number of Options
|
|
|
Weighted Average
Grant Date Fair Value |
|
||
Options outstanding, January 1, 2017
|
4,160,192
|
|
|
$
|
34.45
|
|
|
1,815,018
|
|
|
$
|
2.78
|
|
Granted
|
774,924
|
|
|
$
|
42.36
|
|
|
774,924
|
|
|
$
|
3.22
|
|
Exercised
|
(1,217,029
|
)
|
|
$
|
32.73
|
|
|
n/a
|
|
|
n/a
|
|
|
Vested
|
n/a
|
|
|
n/a
|
|
|
(761,830
|
)
|
|
$
|
3.03
|
|
|
Cancelled/Forfeited
|
(15,793
|
)
|
|
$
|
40.27
|
|
|
(15,793
|
)
|
|
$
|
2.88
|
|
Options outstanding, December 31, 2017
|
3,702,294
|
|
|
$
|
36.65
|
|
|
1,812,319
|
|
|
$
|
2.86
|
|
Options vested, December 31, 2017
(2)
|
1,889,975
|
|
|
$
|
34.25
|
|
|
|
|
|
(1)
|
As at
December 31, 2017
, there was
$5 million
of unrecognized compensation expense related to stock options not yet vested, which is expected to be recognized over a weighted average period of approximately
three
years.
|
(2)
|
As at
December 31, 2017
, the weighted average remaining term of vested options was
six
years with an aggregate intrinsic value of
$22 million
.
|
(in millions)
|
2017
|
|
2016
|
|
||
Stock option expense recognized
|
$
|
3
|
|
$
|
2
|
|
Stock options exercised:
|
|
|
|
|
||
Cash received for exercise price
|
40
|
|
28
|
|
||
Intrinsic value realized by employees
|
15
|
|
15
|
|
||
Fair value of options that vested
|
2
|
|
3
|
|
Number of DSUs
|
2017
|
|
2016
|
|
DSUs outstanding, beginning of year
|
199,411
|
|
167,762
|
|
Granted
|
31,453
|
|
30,165
|
|
Granted - notional dividends reinvested
|
7,294
|
|
6,994
|
|
DSUs paid out
|
(53,363
|
)
|
(5,510
|
)
|
DSUs outstanding, end of year
|
184,795
|
|
199,411
|
|
|
46
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
Number of PSUs
|
2017
|
|
2016
|
|
PSUs outstanding, beginning of year
|
931,951
|
|
694,386
|
|
Granted
|
711,749
|
|
351,737
|
|
Granted - notional dividends reinvested
|
44,893
|
|
34,439
|
|
PSUs paid out
|
(239,509
|
)
|
(148,168
|
)
|
PSUs cancelled/ forfeited
|
(16,910
|
)
|
(443
|
)
|
Transferred to RSU Plan
|
(81,214
|
)
|
—
|
|
PSUs outstanding, end of year
|
1,350,960
|
|
931,951
|
|
|
47
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
Number of RSUs
|
2017
|
|
2016
|
|
RSUs outstanding, beginning of year
|
123,612
|
|
58,740
|
|
Granted
|
349,496
|
|
70,393
|
|
Granted - notional dividends reinvested
|
15,407
|
|
4,709
|
|
RSUs paid out
|
(74,876
|
)
|
(10,201
|
)
|
RSUs cancelled/ forfeited
|
(12,090
|
)
|
(29
|
)
|
Transferred from PSU Plan
|
81,214
|
|
—
|
|
RSUs outstanding, end of year
|
482,763
|
|
123,612
|
|
|
48
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
Equity component of AFUDC
|
$
|
74
|
|
$
|
37
|
|
Net foreign exchange gain
(1)
|
26
|
|
—
|
|
||
Interest income
|
14
|
|
7
|
|
||
Equity income - Belize Electricity
|
4
|
|
7
|
|
||
Other
|
9
|
|
2
|
|
||
|
$
|
127
|
|
$
|
53
|
|
(1)
|
The net foreign exchange gain includes a one-time
$21 million
unrealized foreign exchange gain on US dollar-denominated affiliate loan.
|
(in millions)
|
2017
|
|
2016
|
|
||
Gross deferred income tax assets
|
|
|
||||
Tax loss and credit carryforwards
|
$
|
571
|
|
$
|
675
|
|
Regulatory liabilities
|
596
|
|
292
|
|
||
Employee future benefits
|
143
|
|
155
|
|
||
Fair value of long-term debt adjustment
|
43
|
|
88
|
|
||
Unrealized foreign exchange losses on long-term debt
|
28
|
|
56
|
|
||
Other
|
8
|
|
57
|
|
||
|
1,389
|
|
1,323
|
|
||
Deferred income tax assets valuation allowance
|
(44
|
)
|
(56
|
)
|
||
Net deferred income tax assets
|
$
|
1,345
|
|
$
|
1,267
|
|
|
|
|
||||
Gross deferred income tax liabilities
|
|
|
||||
Property, plant and equipment
|
$
|
(3,353
|
)
|
$
|
(4,213
|
)
|
Regulatory assets
|
(203
|
)
|
(242
|
)
|
||
Intangible assets
|
(87
|
)
|
(75
|
)
|
||
|
(3,643
|
)
|
(4,530
|
)
|
||
Net deferred income tax liability
|
$
|
(2,298
|
)
|
$
|
(3,263
|
)
|
|
49
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
Total unrecognized tax benefits, beginning of year
|
$
|
23
|
|
$
|
13
|
|
Additions related to the current year
|
13
|
|
10
|
|
||
Adjustments related to prior years and U.S. Tax Reform
|
(8
|
)
|
—
|
|
||
Total unrecognized tax benefits, end of year
|
$
|
28
|
|
$
|
23
|
|
(in millions)
|
2017
|
|
2016
|
|
||
Canadian
|
|
|
||||
Earnings before income taxes
|
$
|
461
|
|
$
|
357
|
|
|
|
|
||||
Current income taxes
|
41
|
|
66
|
|
||
Deferred income taxes
|
16
|
|
(23
|
)
|
||
Total Canadian
|
$
|
57
|
|
$
|
43
|
|
|
|
|
||||
Foreign
|
|
|
||||
Earnings before income taxes
|
$
|
1,252
|
|
$
|
501
|
|
|
|
|
||||
Current income taxes
|
3
|
|
(19
|
)
|
||
Deferred income taxes
|
528
|
|
121
|
|
||
Total Foreign
|
$
|
531
|
|
$
|
102
|
|
Income tax expense
|
$
|
588
|
|
$
|
145
|
|
|
50
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions, except as noted)
|
2017
|
|
2016
|
|
||
Earnings before income taxes
|
$
|
1,713
|
|
$
|
858
|
|
Combined Canadian federal and provincial statutory income tax rate
|
28.0
|
%
|
28.0
|
%
|
||
Expected federal and provincial taxes at statutory rate
|
$
|
480
|
|
$
|
240
|
|
Increase (decrease) resulting from:
|
|
|
||||
Enactment of U.S. Tax Reform
|
168
|
|
—
|
|
||
Foreign and other statutory rate differentials
|
31
|
|
(28
|
)
|
||
Allowance for funds used during construction
|
(26
|
)
|
(14
|
)
|
||
Effects of rate-regulated accounting:
|
|
|
||||
Difference between depreciation claimed for income tax and accounting purposes
|
(26
|
)
|
(25
|
)
|
||
Items capitalized for accounting purposes but expensed for income tax purposes
|
(21
|
)
|
(26
|
)
|
||
Release of valuation allowance and non-taxable portion of gain on dispositions
|
(17
|
)
|
—
|
|
||
Other
|
(1
|
)
|
(2
|
)
|
||
Income tax expense
|
$
|
588
|
|
$
|
145
|
|
Effective tax rate
|
34.3
|
%
|
16.9
|
%
|
(in millions)
|
Expiring Year
|
2017
|
|
|
Canadian
|
|
|
||
Capital loss
|
n/a
|
$
|
70
|
|
Non-capital loss
|
2025-2037
|
326
|
|
|
Other tax credits
|
2026-2037
|
2
|
|
|
|
|
398
|
|
|
Unrecognized in the consolidated financial statements
|
|
(65
|
)
|
|
|
|
$
|
333
|
|
Foreign
|
|
|
||
Capital loss
|
2018
|
$
|
1
|
|
Federal and state net operating loss
|
2022-2037
|
1,850
|
|
|
Other tax credits
|
2021-2037
|
126
|
|
|
|
|
1,977
|
|
|
Unrecognized in the consolidated financial statements
|
|
(1
|
)
|
|
|
|
$
|
1,976
|
|
Total tax carryforwards
|
|
$
|
2,309
|
|
|
51
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
Plan assets as at December 31
|
2017 Target Allocation
|
|
|
||
(%)
|
2017
|
|
2016
|
|
|
Equities
|
48
|
47
|
|
50
|
|
Fixed income
|
45
|
46
|
|
45
|
|
Real estate
|
6
|
6
|
|
4
|
|
Cash and other
|
1
|
1
|
|
1
|
|
|
100
|
100
|
|
100
|
|
|
52
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
Balance, beginning of year
|
$
|
113
|
|
$
|
107
|
|
Actual return on plan assets held at end of year
|
12
|
|
8
|
|
||
Foreign currency translation impacts
|
(2
|
)
|
(1
|
)
|
||
Purchases, sales and settlements
|
67
|
|
(1
|
)
|
||
Balance, end of year
|
$
|
190
|
|
$
|
113
|
|
|
Defined Benefit
Pension Plans |
OPEB Plans
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
||||
Change in benefit obligation
(1)
|
|
|
|
|
||||||||
Balance, beginning of year
|
$
|
3,037
|
|
$
|
2,828
|
|
$
|
676
|
|
$
|
574
|
|
Liabilities assumed on acquisition
|
—
|
|
167
|
|
—
|
|
111
|
|
||||
Service costs
|
76
|
|
66
|
|
27
|
|
18
|
|
||||
Employee contributions
|
16
|
|
17
|
|
2
|
|
2
|
|
||||
Interest costs
|
115
|
|
112
|
|
25
|
|
23
|
|
||||
Benefits paid
|
(133
|
)
|
(119
|
)
|
(22
|
)
|
(23
|
)
|
||||
Actuarial losses (gains)
|
217
|
|
45
|
|
(14
|
)
|
(1
|
)
|
||||
Past service credits/plan amendments
|
—
|
|
(10
|
)
|
(3
|
)
|
—
|
|
||||
Foreign currency translation impacts
|
(113
|
)
|
(69
|
)
|
(26
|
)
|
(28
|
)
|
||||
Balance, end of year
(2)
|
$
|
3,215
|
|
$
|
3,037
|
|
$
|
665
|
|
$
|
676
|
|
|
|
|
|
|
||||||||
Change in value of plan assets
|
|
|
|
|
||||||||
Balance, beginning of year
|
$
|
2,646
|
|
$
|
2,466
|
|
$
|
252
|
|
$
|
181
|
|
Assets assumed on acquisition
|
—
|
|
85
|
|
—
|
|
65
|
|
||||
Actual return on plan assets
|
336
|
|
187
|
|
37
|
|
13
|
|
||||
Benefits paid
|
(127
|
)
|
(119
|
)
|
(22
|
)
|
(23
|
)
|
||||
Employee contributions
|
16
|
|
17
|
|
2
|
|
2
|
|
||||
Employer contributions
|
69
|
|
47
|
|
26
|
|
18
|
|
||||
Foreign currency translation impacts
|
(99
|
)
|
(37
|
)
|
(18
|
)
|
(4
|
)
|
||||
Balance, end of year
|
$
|
2,841
|
|
$
|
2,646
|
|
$
|
277
|
|
$
|
252
|
|
|
|
|
|
|
||||||||
Funded status
|
$
|
(374
|
)
|
$
|
(391
|
)
|
$
|
(388
|
)
|
$
|
(424
|
)
|
(1)
|
Amounts reflect projected benefit obligation for defined benefit pension plans and accumulated benefit obligation for OPEB plans.
|
(2)
|
The accumulated benefit obligation for defined benefit pension plans, excluding assumptions about future salary levels, was
$2,940 million
as at
December 31, 2017
(
December 31, 2016
-
$2,741 million
).
|
|
53
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
Defined Benefit
Pension Plans |
OPEB Plans
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
||||
Assets
|
|
|
|
|
||||||||
Defined benefit pension assets:
|
|
|
|
|
||||||||
Long-term (Note 9)
|
$
|
31
|
|
$
|
32
|
|
$
|
—
|
|
$
|
—
|
|
OPEB plan assets:
|
|
|
|
|
||||||||
Long-term (Note 9)
|
—
|
|
—
|
|
3
|
|
—
|
|
||||
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|||||||
Defined benefit pension liabilities:
|
|
|
|
|
|
|||||||
Current (Note 13)
|
12
|
|
13
|
|
—
|
|
—
|
|
||||
Long-term (Note 16)
|
393
|
|
410
|
|
—
|
|
—
|
|
||||
OPEB plan liabilities:
|
|
|
|
|
||||||||
Current (Note 13)
|
—
|
|
—
|
|
10
|
|
13
|
|
||||
Long-term (Note 16)
|
—
|
|
—
|
|
381
|
|
411
|
|
||||
Net liabilities
|
$
|
374
|
|
$
|
391
|
|
$
|
388
|
|
$
|
424
|
|
|
Defined Benefit
Pension Plans |
OPEB Plans
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
||||
Components of net benefit cost
|
|
|
|
|
||||||||
Service costs
|
$
|
76
|
|
$
|
66
|
|
$
|
27
|
|
$
|
18
|
|
Interest costs
|
115
|
|
112
|
|
25
|
|
23
|
|
||||
Expected return on plan assets
|
(151
|
)
|
(145
|
)
|
(14
|
)
|
(12
|
)
|
||||
Amortization of actuarial losses
|
45
|
|
48
|
|
2
|
|
2
|
|
||||
Amortization of past service credits/plan amendments
|
—
|
|
1
|
|
(12
|
)
|
(10
|
)
|
||||
Regulatory adjustments
|
2
|
|
6
|
|
4
|
|
9
|
|
||||
Net benefit cost
|
$
|
87
|
|
$
|
88
|
|
$
|
32
|
|
$
|
30
|
|
|
54
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
Defined Benefit
Pension Plans
|
OPEB Plans
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
||||
Unamortized net actuarial losses
|
$
|
22
|
|
$
|
19
|
|
$
|
—
|
|
$
|
—
|
|
Unamortized past service costs
|
1
|
|
1
|
|
3
|
|
2
|
|
||||
Income tax recovery
|
(5
|
)
|
(5
|
)
|
(1
|
)
|
(1
|
)
|
||||
Accumulated other comprehensive loss
(Note 19)
|
$
|
18
|
|
$
|
15
|
|
$
|
2
|
|
$
|
1
|
|
|
|
|
|
|
||||||||
Net actuarial losses
|
$
|
443
|
|
$
|
479
|
|
$
|
17
|
|
$
|
53
|
|
Past service credits
|
(11
|
)
|
(11
|
)
|
(23
|
)
|
(31
|
)
|
||||
Amount deferred due to actions of regulators
|
10
|
|
12
|
|
27
|
|
32
|
|
||||
|
$
|
442
|
|
$
|
480
|
|
$
|
21
|
|
$
|
54
|
|
|
|
|
|
|
||||||||
Regulatory assets (Note 8
(ii)
)
|
$
|
442
|
|
$
|
480
|
|
$
|
68
|
|
$
|
96
|
|
Regulatory liabilities (Note 8
(ii)
)
|
—
|
|
—
|
|
(47
|
)
|
(42
|
)
|
||||
Net regulatory assets
|
$
|
442
|
|
$
|
480
|
|
$
|
21
|
|
$
|
54
|
|
|
Defined Benefit
Pension Plans
|
OPEB Plans
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
||||
Current year net actuarial losses (gains)
|
$
|
5
|
|
$
|
4
|
|
$
|
(1
|
)
|
$
|
(2
|
)
|
Past service costs/plan amendments
|
—
|
|
—
|
|
2
|
|
—
|
|
||||
Amortization of actuarial losses
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
||||
Foreign currency translation impacts
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
||||
Income tax recovery
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
||||
Total recognized in comprehensive income
|
$
|
3
|
|
$
|
3
|
|
$
|
1
|
|
$
|
(2
|
)
|
|
|
|
|
|
||||||||
Assets assumed on acquisition
|
$
|
—
|
|
$
|
23
|
|
$
|
—
|
|
$
|
3
|
|
Current year net actuarial losses (gains)
|
24
|
|
(1
|
)
|
(35
|
)
|
—
|
|
||||
Past service credits/plan amendments
|
—
|
|
(10
|
)
|
(5
|
)
|
—
|
|
||||
Amortization of actuarial losses
|
(44
|
)
|
(47
|
)
|
(1
|
)
|
(4
|
)
|
||||
Amortization of past service (costs) credits
|
—
|
|
(1
|
)
|
12
|
|
13
|
|
||||
Foreign currency translation impacts
|
(17
|
)
|
(9
|
)
|
2
|
|
1
|
|
||||
Regulatory adjustments
|
(1
|
)
|
(11
|
)
|
(6
|
)
|
(6
|
)
|
||||
Total recognized in regulatory assets
|
$
|
(38
|
)
|
$
|
(56
|
)
|
$
|
(33
|
)
|
$
|
7
|
|
|
55
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
Significant weighted average assumptions
|
Defined Benefit
Pension Plans |
OPEB Plans
|
||||||
(%)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Discount rate during the year
(1)
|
3.98
|
|
4.08
|
|
3.96
|
|
4.14
|
|
Discount rate as at December 31
|
3.58
|
|
4.00
|
|
3.59
|
|
4.00
|
|
Expected long-term rate of return on plan assets
(2)
|
5.97
|
|
6.25
|
|
5.81
|
|
6.25
|
|
Rate of compensation increase
|
3.34
|
|
3.36
|
|
—
|
|
—
|
|
Health care cost trend increase as at December 31
(3)
|
—
|
|
—
|
|
4.71
|
|
4.70
|
|
(1)
|
ITC and UNS use the split discount rate methodology for determining current service and interest costs. All other subsidiaries use the single discount rate approach.
|
(2)
|
Developed by management with assistance from external actuaries using best estimates of expected returns, volatilities and correlations for each class of asset. The best estimates are based on historical performance, future expectations and periodic portfolio rebalancing among the diversified asset classes.
|
(3)
|
The projected
2018
weighted average health care cost trend rate is
6.38%
for OPEB plans and is assumed to decrease over the next
11 years
by
2028
to the weighted average ultimate health care cost trend rate of
4.71%
and remain at that level thereafter.
|
(in millions)
|
1% increase in rate
|
|
1% decrease in rate
|
|
||
Increase (decrease) in accumulated benefit obligation
|
$
|
96
|
|
$
|
(74
|
)
|
Increase (decrease) in service and interest costs
|
26
|
|
(19
|
)
|
|
Defined Benefit
Pension Payments |
|
OPEB Payments
|
|
||
Year
|
(in millions)
|
|
(in millions)
|
|
||
2018
|
$
|
134
|
|
$
|
23
|
|
2019
|
137
|
|
24
|
|
||
2020
|
142
|
|
25
|
|
||
2021
|
148
|
|
27
|
|
||
2022
|
156
|
|
29
|
|
||
2023-2027
|
860
|
|
160
|
|
|
56
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
57
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
Total
|
|
|
|
|
||
Share consideration
|
$
|
4,684
|
|
Cash consideration
|
4,658
|
|
|
Total consideration
|
$
|
9,342
|
|
|
|
||
Purchase consideration for 80.1% of ITC common shares
|
$
|
7,721
|
|
19.9% minority shareholder investment and shareholder note
|
1,621
|
|
|
|
$
|
9,342
|
|
|
|
||
Fair value assigned to net assets:
|
|
||
Current assets
|
$
|
319
|
|
Long-term regulatory assets
|
319
|
|
|
Property, plant and equipment
|
8,345
|
|
|
Intangible assets
|
399
|
|
|
Other long-term assets
|
71
|
|
|
Current liabilities
|
(625
|
)
|
|
Assumed short-term borrowings
|
(311
|
)
|
|
Assumed long-term debt (including current portion)
|
(6,006
|
)
|
|
Long-term regulatory liabilities
|
(327
|
)
|
|
Deferred income taxes
|
(910
|
)
|
|
Other long-term liabilities
|
(166
|
)
|
|
|
1,108
|
|
|
Cash and cash equivalents
|
134
|
|
|
Fair value of net assets acquired
|
1,242
|
|
|
Goodwill (Note 12)
|
$
|
8,100
|
|
(in millions)
|
2016
|
|
|
Pro forma revenue
|
$
|
7,995
|
|
Pro forma net earnings attributable to common equity shareholders
(1)
|
919
|
|
(1)
|
Pro forma net earnings attributable to common equity shareholders exclude all after-tax acquisition-related expenses incurred by ITC and the Corporation. A pro forma adjustment has been made to net earnings for the year presented to reflect the Corporation's after‑tax financing costs associated with the acquisition.
|
|
58
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
Cash paid for:
|
|
|
||||
Interest
|
$
|
927
|
|
$
|
644
|
|
Income taxes
|
69
|
|
62
|
|
||
|
|
|
||||
Change in working capital:
|
|
|
||||
Accounts receivable and other current assets
|
$
|
(74
|
)
|
$
|
43
|
|
Prepaid expenses
|
(3
|
)
|
(4
|
)
|
||
Inventories
|
(6
|
)
|
17
|
|
||
Regulatory assets - current portion
|
39
|
|
(58
|
)
|
||
Accounts payable and other current liabilities
|
119
|
|
25
|
|
||
Regulatory liabilities - current portion
|
(172
|
)
|
(1
|
)
|
||
|
$
|
(97
|
)
|
$
|
22
|
|
|
|
|
||||
Non-cash investing and financing activities:
|
|
|
||||
Common share dividends reinvested
|
253
|
|
162
|
|
||
Common shares issued on business acquisition (Note 25)
|
—
|
|
4,684
|
|
||
Additions to property, plant and equipment, and intangible assets
included in current and long-term liabilities
|
307
|
|
296
|
|
||
Commitment to purchase capital lease interest
|
—
|
|
48
|
|
||
Transfer of deposit on business acquisition (Note 25)
|
—
|
|
38
|
|
||
Contributions in aid of construction
|
35
|
|
9
|
|
||
Exercise of stock options into common shares
|
5
|
|
4
|
|
|
59
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
Level 3:
|
Fair value determined using unobservable inputs only when relevant observable inputs are not available.
|
As at December 31, 2017
|
|
|||||||||||
(in millions)
|
Level 1
|
Level 2
|
|
Level 3
|
|
Total
|
|
|||||
Assets
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(1) (2)
|
$
|
—
|
|
$
|
19
|
|
$
|
2
|
|
$
|
21
|
|
Energy contracts not subject to regulatory deferral
(1)
|
—
|
|
26
|
|
4
|
|
30
|
|
||||
Foreign exchange contracts
(3)
|
3
|
|
—
|
|
—
|
|
3
|
|
||||
Other investments
(4)
|
78
|
|
—
|
|
—
|
|
78
|
|
||||
Total assets
|
$
|
81
|
|
$
|
45
|
|
$
|
6
|
|
$
|
132
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(2) (5)
|
$
|
(1
|
)
|
$
|
(103
|
)
|
$
|
(2
|
)
|
$
|
(106
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
—
|
|
(1
|
)
|
(1
|
)
|
||||
Interest rate and total return swaps
(3)
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
||||
Total liabilities
|
$
|
(1
|
)
|
$
|
(104
|
)
|
$
|
(3
|
)
|
$
|
(108
|
)
|
|
60
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
As at December 31, 2016
|
|
|||||||||||
(in millions)
|
Level 1
|
Level 2
|
|
Level 3
|
|
Total
|
|
|||||
Assets
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(1) (2)
|
$
|
1
|
|
$
|
13
|
|
$
|
5
|
|
$
|
19
|
|
Energy contracts not subject to regulatory deferral
(1)
|
—
|
|
1
|
|
2
|
|
3
|
|
||||
Interest rate swaps
(3)
|
—
|
|
11
|
|
—
|
|
11
|
|
||||
Other investments
(4)
|
69
|
|
—
|
|
—
|
|
69
|
|
||||
Total assets
|
$
|
70
|
|
$
|
25
|
|
$
|
7
|
|
$
|
102
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
||||||||
Energy contracts subject to regulatory deferral
(2) (5)
|
$
|
—
|
|
$
|
(21
|
)
|
$
|
(5
|
)
|
$
|
(26
|
)
|
Energy contracts not subject to regulatory deferral
(5)
|
—
|
|
(9
|
)
|
—
|
|
(9
|
)
|
||||
Interest rate and total return swaps
(3)
|
—
|
|
(3
|
)
|
—
|
|
(3
|
)
|
||||
Total liabilities
|
$
|
—
|
|
$
|
(33
|
)
|
$
|
(5
|
)
|
$
|
(38
|
)
|
(1)
|
The fair value of the Corporation's energy contracts is recognized in accounts receivable and other current assets and long-term other assets.
|
(2)
|
Unrealized gains and losses arising from changes in fair value of these contracts are deferred as a regulatory asset or liability for recovery from, or refund to, customers in future rates as permitted by the regulators, with the exception of long-term wholesale trading contracts and certain gas swap contracts.
|
(3)
|
The fair value of the Corporation's foreign exchange contracts, interest rate and total return swaps is recognized in accounts receivable and other current assets, accounts payable and other current liabilities and long-term other liabilities.
|
(4)
|
Included in long-term other assets on the consolidated balance sheet
(Note 9)
.
|
(5)
|
The fair value of the Corporation's energy contracts is recognized in accounts payable and other current liabilities and non-current other liabilities.
|
As at December 31, 2017
(in millions) |
Gross Amount Recognized in Balance Sheet
|
|
Counterparty Netting of Energy Contracts
|
|
Cash Collateral Received/Posted
|
|
Net Amount
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Energy contracts
|
$
|
51
|
|
$
|
17
|
|
$
|
7
|
|
$
|
27
|
|
Derivative liabilities
|
|
|
|
|
||||||||
Energy contracts
|
(107
|
)
|
(17
|
)
|
—
|
|
(90
|
)
|
As at December 31, 2016
(in millions) |
Gross Amount Recognized in Balance Sheet
|
|
Counterparty
Netting of
Energy
Contracts
|
|
Cash Collateral Received/
Posted
|
|
Net
Amount
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Energy contracts
|
$
|
22
|
|
$
|
9
|
|
$
|
—
|
|
$
|
13
|
|
Derivative liabilities
|
|
|
|
|
||||||||
Energy contracts
|
(35
|
)
|
(9
|
)
|
—
|
|
(26
|
)
|
|
61
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
62
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
2016
|
|
|||
Balance, beginning of year
|
$
|
2
|
|
$
|
(18
|
)
|
Realized losses
|
(10
|
)
|
(19
|
)
|
||
Unrealized (losses) gains
|
(3
|
)
|
12
|
|
||
Settlements
|
12
|
|
27
|
|
||
Transfers of assets out of level 3
|
(2
|
)
|
—
|
|
||
Transfers of liabilities out of level 3
|
4
|
|
—
|
|
||
Balance, end of year
|
$
|
3
|
|
$
|
2
|
|
|
63
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
2017
|
|
2016
|
|
Energy contracts subject to regulatory deferral
(1)
|
|
|
||
Electricity swap contracts (GWh)
|
1,291
|
|
2,184
|
|
Electricity power purchase contracts (GWh)
|
761
|
|
1,252
|
|
Gas swap contracts (PJ)
|
216
|
|
35
|
|
Gas supply contract premiums (PJ)
|
219
|
|
240
|
|
Energy contracts not subject to regulatory deferral
(1)
|
|
|
||
Wholesale trading contracts (GWh)
|
2,387
|
|
2,058
|
|
Gas supply contract premiums (PJ)
|
—
|
|
15
|
|
Gas swap contracts (PJ)
|
36
|
|
4
|
|
(1)
|
GWh means gigawatt hours and PJ means petajoules.
|
|
64
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
2017
|
2016
|
|||||||||
(in millions)
|
Carrying
Value |
|
Estimated
Fair Value |
|
Carrying
Value |
|
Estimated
Fair Value |
|
|||
Long-term debt, including current portion (Note 14)
(1)
|
$
|
21,535
|
|
23,481
|
|
$
|
21,219
|
|
$
|
22,523
|
|
Waneta Partnership promissory note (Note 16)
|
63
|
|
64
|
|
59
|
|
61
|
|
(1)
|
Long-term debt is valued using Level 2 inputs.
|
|
65
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
2017
|
|
2016
|
|
||
Assets
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
16
|
|
$
|
15
|
|
Accounts receivable and other current assets
|
14
|
|
14
|
|
||
Property, plant and equipment
|
688
|
|
696
|
|
||
Intangible assets
|
30
|
|
30
|
|
||
|
$
|
748
|
|
$
|
755
|
|
Liabilities
|
|
|
|
|
||
Accounts payable and other current liabilities
|
$
|
(28
|
)
|
$
|
(3
|
)
|
Other liabilities
|
(63
|
)
|
(79
|
)
|
||
|
(91
|
)
|
(82
|
)
|
||
Net assets before partners' equity
|
$
|
657
|
|
$
|
673
|
|
(in millions)
|
2017
|
|
2016
|
|
||
Revenue
|
$
|
93
|
|
$
|
91
|
|
Expenses
|
|
|
||||
Operating expense
|
17
|
|
17
|
|
||
Depreciation and amortization
|
18
|
|
18
|
|
||
Finance charges
|
4
|
|
3
|
|
||
|
39
|
|
38
|
|
||
Net earnings
|
$
|
54
|
|
$
|
53
|
|
|
66
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(in millions)
|
Total
|
|
Due within 1 year
|
|
Due in year 2
|
|
Due in year 3
|
|
Due in year 4
|
|
Due in year 5
|
|
Due after
5 years |
|
|||||||
Interest obligations on long-term debt
|
$
|
14,575
|
|
$
|
892
|
|
$
|
878
|
|
$
|
858
|
|
$
|
837
|
|
$
|
792
|
|
$
|
10,318
|
|
Power purchase obligations
(1)
|
2,240
|
|
275
|
|
157
|
|
126
|
|
118
|
|
117
|
|
1,447
|
|
|||||||
Renewable power purchase obligations
(2)
|
1,428
|
|
93
|
|
92
|
|
92
|
|
92
|
|
91
|
|
968
|
|
|||||||
Gas purchase obligations
(3)
|
1,085
|
|
278
|
|
201
|
|
189
|
|
147
|
|
112
|
|
158
|
|
|||||||
Long-term contracts - UNS Energy
(4)
|
910
|
|
157
|
|
158
|
|
125
|
|
79
|
|
50
|
|
341
|
|
|||||||
ITC easement agreement
(5)
|
413
|
|
13
|
|
13
|
|
13
|
|
13
|
|
13
|
|
348
|
|
|||||||
Renewable energy credit purchase agreements
(6)
|
125
|
|
20
|
|
13
|
|
11
|
|
10
|
|
10
|
|
61
|
|
|||||||
Debt Collection Agreement
(7)
|
122
|
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
107
|
|
|||||||
Operating lease obligations
|
53
|
|
11
|
|
9
|
|
7
|
|
4
|
|
4
|
|
18
|
|
|||||||
Purchase of Springerville Common Facilities
(8)
|
85
|
|
—
|
|
—
|
|
—
|
|
85
|
|
—
|
|
—
|
|
|||||||
Waneta Partnership promissory note (Note 16)
|
72
|
|
—
|
|
—
|
|
72
|
|
—
|
|
—
|
|
—
|
|
|||||||
Joint-use asset and shared service agreements
|
52
|
|
3
|
|
3
|
|
3
|
|
3
|
|
3
|
|
37
|
|
|||||||
Other
(9)
|
462
|
|
97
|
|
53
|
|
71
|
|
31
|
|
32
|
|
178
|
|
|||||||
Total
|
$
|
21,622
|
|
$
|
1,842
|
|
$
|
1,580
|
|
$
|
1,570
|
|
$
|
1,422
|
|
$
|
1,227
|
|
$
|
13,981
|
|
(1)
|
Power purchase obligations include various power purchase contracts held by the Corporation's regulated utilities, of which the most significant contracts are described below.
|
(2)
|
TEP and UNS Electric are party to long-term renewable PPAs
that require TEP and UNS Electric to purchase
100%
of the output of certain renewable energy generating facilities once commercial operation is achieved. While TEP and UNS Electric are not required to make payments under these contracts if power is not delivered, the Commitments table includes estimated future payments. These agreements have various expiry dates from 2027 through 2036.
|
|
67
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
(3)
|
Certain of the Corporation's subsidiaries, mainly FortisBC Energy, enter into contracts for the purchase of gas, gas transportation and storage services. FortisBC Energy's gas purchase obligations are based on gas commodity indices that vary with market prices and the obligations are based on index prices as at
December 31, 2017
.
|
(4)
|
UNS Energy enters into various long-term contracts for the purchase and delivery of coal to fuel its generating facilities, the purchase of gas transportation services to meet its load requirements, and the purchase of transmission services for purchased power.
Amounts paid under contracts for the purchase and delivery of coal depend on actual quantities purchased and delivered. Certain of these contracts also have price adjustment clauses that will affect future costs under the contracts.
|
(5)
|
ITC is party to an easement agreement with Consumers Energy, the primary customer of METC, which provides the Company with an easement for transmission purposes and rights-of-way, leasehold interests, fee interests and licenses associated with the land over which its transmission lines cross. The agreement expires in December 2050, subject to
10
additional
50
-year renewals thereafter.
|
(6)
|
UNS Energy and Central Hudson are party to renewable energy credit purchase agreements, mainly for the purchase of environmental attributions from retail customers with solar installations. Payments for the renewable energy credit purchase agreements are made in contractually agreed-upon intervals based on metered renewable energy production.
|
(7)
|
Maritime Electric is party to a debt collection agreement with the PEI Energy Corporation for the initial capital cost of the submarine cables and associated parts of the New Brunswick Transmission system interconnection. The agreement expires in
February 2056
. Payments under the agreement will be collected from customers in future rates.
|
(8
)
|
UNS Energy has an obligation to purchase an undivided
32.2%
interest in the Springerville Common Facilities if the related two leases are not renewed (Note 15).
|
(9)
|
Other contractual obligations include various other commitments entered into by the Corporation and its subsidiaries, including
PSU, RSU and DSU
plan obligations, land easements, asset retirement obligations, and defined benefit pension plan funding obligations.
|
|
68
|
|
FORTIS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2017 and 2016
|
|
69
|
|
1 Year Fortis Chart |
1 Month Fortis Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions