Fortis Inc. (FTS): Business Model Canvas [Dec-2025 Updated]

If you're looking to understand how a major North American utility like Fortis Inc. actually makes its money, you need to look past the monthly bill and focus on the regulated asset base. Honestly, the business model isn't flashy; it's a highly predictable, capital-intensive machine designed to earn a steady Return on Equity on its nearly \$41.9 billion regulated assets as of mid-2025. We see this strategy playing out in their massive \$28.8 billion capital plan, anchored by \$5.6 billion in planned 2025 spending, all while promising you a reliable 4-6% dividend growth through 2030. So, let's break down the nine essential blocks of this classic utility play to see exactly how Fortis Inc. locks in those returns below.

Fortis Inc. (FTS) - Canvas Business Model: Key Partnerships

You're looking at the essential relationships Fortis Inc. needs to keep its massive infrastructure build-out on track. These aren't just vendors; they are critical dependencies for regulatory compliance, project execution, and securing the necessary capital.

Regulatory Bodies for Rate Approvals

Regulators are the gatekeepers for Fortis Inc.'s earnings stability. Without their approval, the rate base growth underpinning the dividend guidance can't materialize. You see this play out in specific rate case outcomes across their service territories.

For example, in August 2025, the New York State Public Service Commission approved a three-year rate plan for Central Hudson. This approval is key because it included the continuation of a 9.5% allowed ROE (Return on Equity) and set the common equity component of the capital structure at 48%. This predictability is gold for a regulated utility.

The key regulatory interactions involve securing timely rate base recovery and acceptable allowed returns across their footprint, which spans ten U.S. states, five Canadian provinces, and the Caribbean.

Indigenous Communities for Major Infrastructure Projects

Building and maintaining infrastructure requires deep, respectful engagement with Indigenous communities whose Traditional Territories are crossed by assets. FortisBC, for instance, provides energy to 58 First Nations communities, and its infrastructure crosses 150 Traditional Territories. This relationship is a core operational requirement.

While the Wataynikaneyap Transmission Power project construction finished in the second quarter of 2024, it serves as a concrete example of this partnership type. Fortis Inc. held a 39% share of the capital spending for that project. Furthermore, FortisBC has achieved silver-level designation in Progressive Aboriginal Relations (PAR) from the Canadian Council of Aboriginal Business (CCAB), a multi-year commitment verified by an Indigenous third-party.

FortisBC also actively seeks mutually beneficial business relationships, such as partnering with the Upper Nicola Band and the Okanagan Nation Alliance on a 15-megawatt solar project.

Financial Institutions for Funding the Capital Plan

Funding the new five-year capital plan, which totals $28.8 billion for 2026-2030, demands constant engagement with financial markets and institutions. This funding strategy balances debt, equity, and cash flow from operations.

To support the overall strategy, Fortis Inc. was active in the debt markets early in 2025. During the first quarter of 2025, the company raised over $1 billion in long-term debt. This included specific issuances like $600 million in 7-year notes at 4.09% and US$300 million in 30-year notes at 5.90%. Separately, in September 2025, the company fully repaid an unsecured US$250M non-revolving term credit facility, using proceeds from the sale of FortisTCI to strengthen the balance sheet.

These financial partners are crucial for maintaining the investment-grade credit ratings, such as Moody's Baa3 (Stable) and S&P Global A- (Negative), which keep the cost of capital competitive for the regulated asset base.

Equipment Suppliers and Construction Contractors

Executing the $5.6 billion in expected capital expenditures for 2025 requires a reliable pipeline of equipment and construction services. This segment faces near-term risk from supply chain volatility.

Management specifically monitors government policy on foreign trade, including the imposition of tariffs, due to potential impacts on the supply chain and material costs for these large projects. The capital plan includes significant investments at ITC associated with the MISO Long Range Transmission Plan (LRTP) Tranche 1 and Tranche 2.1 projects, which require substantial construction mobilization.

For its Canadian operations, FortisBC streamlines contractor engagement by using ISNetworld (ISN) as its primary pre-qualification system for all work classified as moderate to high risk. This helps ensure supplier quality and safety compliance.

Here's a quick look at the scale of the capital deployment that relies on these partnerships:

The success of the $28.8 billion capital plan hinges on these external relationships. You need the regulators to sign off on the rates, the financial partners to provide the funds, and the contractors to build the assets safely and on time. It's a complex, interconnected system.

Key partnership focus areas include:

• Securing timely rate base recovery approvals from commissions.
• Managing supply chain risk for materials and equipment.
• Maintaining strong Indigenous relations for project access and support.
• Optimizing debt issuance timing and terms.

Finance: draft 13-week cash view by Friday.

Fortis Inc. (FTS) - Canvas Business Model: Key Activities

Fortis Inc. focuses its key activities on the disciplined execution of its regulated utility growth strategy across its North American footprint.

The company is executing its $5.6 billion annual capital expenditure plan for 2025, which is an increase from the previously anticipated amount for the year. This spending supports the new 2026-2030 capital plan totaling $28.8 billion, which is expected to increase midyear rate base from $41.9 billion in 2025 to $57.9 billion by 2030, representing a 7.0% annual growth rate.

A core activity is managing and operating its portfolio of regulated electric and gas utilities. As of late 2025, Fortis Inc. manages ten regulated electric and gas utilities in Canada, the U.S., and the Caribbean, serving more than three million customers.

Securing regulatory approvals is a constant key activity to ensure investment recovery and earnings stability. For Central Hudson, a joint proposal filed in May 2025 secured a three-year rate plan with retroactive application to July 1, 2025, continuing an allowed Return on Equity (ROE) of 9.5% and a common equity component of 48% of the capital structure.

Investing in transmission for grid modernization, particularly related to the Midcontinent Independent System Operator (MISO) Long Range Transmission Plan (LRTP), is critical. ITC estimates at least US$3 billion in capital expenditures for the MISO LRTP tranche 2.1 projects, though the majority of this investment is anticipated beyond 2029.

Fortis Inc. is actively managing the energy transition through asset conversion. Tucson Electric Power (TEP), a subsidiary, plans to convert Units 1 and 2 at the coal-fired Springerville Generating Station to run on natural gas by 2030, accelerating the retirement of Unit 2 which was previously planned for 2032.

• The conversion will replace nearly 800 megawatts (MW) of retiring coal-fired capacity.
• The fuel conversion is projected to reduce carbon dioxide emissions by 40 percent from those units.
• Salt River Project (SRP) is also converting its portion of the Springerville plant, with a price tag of $60 million for their conversion.

Fortis Inc. (FTS) - Canvas Business Model: Key Resources

When you look at the core assets Fortis Inc. (FTS) relies on to run its business, you see a foundation built on regulated infrastructure and financial strength. These aren't just assets; they are the bedrock of predictable cash flows that define the company's investment profile.

The most significant tangible resource is the Regulated Asset Base (Rate Base). As of mid-2025, this figure stood at approximately $41.9 billion. This base is what Fortis Inc. is allowed to earn a regulated return on, which is the essence of its low-risk utility model. Furthermore, management has a clear growth path, projecting this rate base to climb to $57.9 billion by 2030, supported by a $28.8 billion five-year capital plan announced in late 2025. That's a projected annual growth rate of 7.0% for the rate base through 2030.

The physical network itself is vast and geographically diverse, which helps manage localized regulatory or weather risks. Fortis Inc. operates across five Canadian provinces and ten U.S. states, plus the Caribbean, giving it a footprint in 16 jurisdictions in total. This extensive reach is critical for a company whose business is almost entirely regulated-100% regulated, as they often state.

Here's a quick look at the scale of the physical assets and the human capital supporting them:

The financial resources, specifically the ability to secure low-cost debt, are directly tied to those credit ratings. Fortis Inc. maintains investment-grade ratings, specifically S&P A- and Moody's Baa3, both with a Stable outlook as of late 2025. This strong rating profile is what allows the company to fund its massive capital expenditures efficiently. For instance, the Funds From Operations (FFO)-to-debt ratio was reported at 12.2% for the 12 months ending September 2025, a metric management expects to remain above 12%, which supports these key ratings.

The workforce, numbering approximately 9,600 dedicated employees, is another core asset. This team manages the complex operations across the various subsidiaries. You can see the scale of the network assets they manage, though these numbers are not exhaustive across all entities:

• FortisBC Electric power lines: 7,400 km
• Central Hudson power lines: 15,300 km
• Newfoundland Power power lines: 11,600 km
• Maritime Electric power lines: 7,000 km
• FortisBC natural gas pipelines: 51,700 km
• Central Hudson gas pipelines: 2,400 km

The company's operational focus is heavily weighted toward regulated delivery; ninety-four per cent of its assets are dedicated to electricity and natural gas transmission and distribution. This concentration in regulated T&D (Transmission & Distribution) is a key resource in itself, providing stable and predictable cash flows, which is defintely why investors value it so highly.

Fortis Inc. (FTS) - Canvas Business Model: Value Propositions

You're looking at the core promises Fortis Inc. makes to its investors and customers, which are deeply rooted in the stability of its regulated assets. Honestly, for a utility, the value proposition is all about predictability and commitment.

Highly reliable, low-risk energy delivery from a diversified utility portfolio.

Fortis Inc. anchors its value on being a diversified leader in the North American regulated electric and gas utility space. This structure means revenue streams are generally stable, backed by long-term contracts. As of September 30, 2025, the Corporation reported total assets of $75 billion. The portfolio is heavily weighted toward the low-risk transmission and distribution side, with 93% of assets falling into these categories. You're looking at service to 3.5 million utility customers across five Canadian provinces, ten U.S. states, and the Caribbean. The regulated growth is clear: the midyear rate base is projected to increase from $41.9 billion in 2025 to $57.9 billion by 2030, representing a 7.0% annual growth rate.

Here's a quick look at the scale and growth underpinning this stability:

Predictable, long-term dividend growth, targeting 4-6% annually through 2030.

This is perhaps the most concrete promise Fortis Inc. makes. The company has an incredible track record, having increased its common share dividend for 51 consecutive years as of late 2024, and the guidance has been extended to support increases through 2030. Management explicitly supports an annual dividend growth guidance of 4% to 6% annually through 2030. The latest announced increase in the fourth quarter was 4.1%. At the time of reporting, the stock offered a dividend yield of about 3.5%. This commitment is directly funded by the execution of their long-term capital plan.

Commitment to a coal-free generation mix by 2032 for cleaner energy.

Fortis Inc. is defintely moving its generation mix toward cleaner sources. The primary utility driving this is Tucson Electric Power (TEP), which is committed to achieving a coal-free generation mix by 2032. TEP is actively converting 793 MW of coal-fired generation to natural gas generation, with this conversion expected to be complete by 2030. For context, renewable generation surpassed coal generation for the first time in 2024. Overall, Fortis has reduced its corporate-wide direct greenhouse gas (GHG) emissions by 34% from a 2019 base year.

The cleaner energy transition involves specific investments and progress metrics:

• GHG emissions reduction target: 50% by 2030 from 2019 levels.
• TEP developing a 200 MW energy storage system.
• TEP capability to store 800 MWh of energy in the new system.
• FortisBC's 2030 Renewable Natural Gas (RNG) supply target.

Grid resiliency and security investments to minimize service disruptions.

Minimizing service disruptions is built into the capital deployment strategy. The $28.8 billion capital plan for 2026-2030 explicitly includes 'grid resiliency and climate adaptation investments'. This focus is also seen in the prior 2025-2029 plan, which included resiliency investments at ITC Holdings Corp.. The 2025 capital expenditure forecast of approximately $5.6 billion is driven in part by higher transmission investments at ITC. Furthermore, investments in infrastructure reliability and resiliency upgrades are a key component of the overall capital allocation, which also includes investments in cleaner energy infrastructure across their service territories.

Fortis Inc. (FTS) - Canvas Business Model: Customer Relationships

You're looking at how Fortis Inc. (FTS) manages its relationships with its 3.5 million utility customers across 10 regulated utilities in Canada, the U.S., and the Caribbean as of late 2025. The core of this relationship is stability, locked in by regulatory agreements.

Long-term, stable relationships governed by regulatory frameworks.

The relationship is fundamentally defined by the regulatory environment, which provides a predictable structure for service and investment. For instance, the British Columbia Utilities Commission issued a decision on FortisBC's rate framework for 2025 through 2027, which includes a prescribed approach for operating expenses and capital investments, offering clarity for the next three-year period. Similarly, at Tucson Electric Power (TEP), a general rate application was filed in June 2025 seeking new rates effective in 2026, incorporating an annual rate adjustment mechanism. Central Hudson's joint proposal reflects a three-year rate plan with retroactive application to July 1, 2025, maintaining a 9.5% allowed Return on Equity (ROE) and a 48% common equity component of the capital structure. This regulatory stability underpins the long-term commitment to shareholders, evidenced by Fortis Inc.'s 51 consecutive years of dividend increases, with current guidance targeting 4-6% annual dividend growth through 2029. Reliability is a key metric here; Fortis achieved top quartile performance in 2024, delivering energy to customers 99.9% of the time.

Fortis Inc. manages customer cost pressures by focusing on efficiency; controllable operating costs per customer increased by approximately 2.8% annually over the past five years, which is below inflation for that period.

Digital customer service platforms for billing and outage reporting.

Fortis' utilities are actively enhancing customer information systems and adopting digital technologies, including Artificial Intelligence (AI), to modernize customer engagement. This involves advancing new and modern approaches to how customers interact with the utility for routine tasks like billing and accessing support. While specific adoption rates for digital billing or outage reporting platforms aren't published, the strategic direction points toward increased self-service capabilities.

• Enhancing customer information systems.
• Adopting digital technologies, including AI.
• Advancing new approaches to customer engagement.

Proactive engagement on energy efficiency and demand-side management programs.

Proactive engagement focuses on helping customers manage consumption and supports broader climate goals. FortisBC, for example, made a record combined annual investment of around $172 million in 2024, split between gas programs at close to $159 million and electricity programs at almost $14 million. Over the five years spanning 2020 to 2024, FortisBC invested more than $630 million in these conservation and energy-efficiency programs.

The results from 2024 show tangible customer impact:

• Gas programs lowered annual use by more than 1.6 million gigajoules (GJ), equivalent to about 15,700 homes.
• Electricity programs lowered annual use by 34.1 GWh, enough to power over 2,700 homes.
• FortisBC gas programs reduced carbon dioxide equivalent (tCO2e) by close to one million tonnes in 2024.

Overall, Fortis has made consistent progress toward decarbonization, achieving a 34% reduction in scope 1 greenhouse gas (GHG) emissions through 2024 compared to 2019 levels. Still, energy delivered to customers is rising; electricity deliveries increased 9% and natural gas deliveries increased 6% over the last five years.

Direct negotiations with large, new customers like data center developers.

Significant future load growth is being managed through direct negotiation, driven by demand from data centers, manufacturing, and electrification. At TEP, an agreement was advanced to provide approximately 300 MW of power capacity to a data center, which is subject to Arizona Corporation Commission (ACC) approval. The initial phase of this data center project is expected to be operational as early as 2027. Furthermore, ITC is planning a transmission upgrade to serve up to 1,600 megawatts (MW) of new data center load at the Big Cedar Industrial Center in Iowa. ITC also sees potential for an additional 5 gigawatts of load growth from proposed data center and economic projects that are currently in preliminary stages. Negotiations are also ongoing at TEP for capacity to support another multi-phase data center development.

Fortis Inc. (FTS) - Canvas Business Model: Channels

You're looking at how Fortis Inc. gets its regulated energy services-electricity and natural gas-to the people and businesses that need them. It's a mix of physical infrastructure and modern digital touchpoints, all managed through its operating subsidiaries.

The primary channel is the physical network itself, which is the core of Fortis Inc.'s business. This involves the direct ownership and operation of extensive electric and gas transmission and distribution lines across its service territories.

Service delivery is executed through its local utility subsidiaries, each acting as the direct interface with customers in their specific regulated regions. These subsidiaries manage the day-to-day operations and regulatory compliance for their customer bases.

• FortisBC serves nearly 1.3 million customers across 135 B.C. communities and 58 First Nations communities.
• TEP (Tucson Electric Power) is actively securing large load growth, including an agreement to provide ~300 MW to a data center.
• ITC Holdings Corp. operates under a Cost of Service model with an estimated 10.77-11.41% ROE on 60% equity.
• Fortis Inc. serves utility customers in five Canadian provinces, ten U.S. states and the Caribbean.

For customer interaction and service, Fortis Inc. relies on digital channels. You can expect to use online portals and mobile applications for account management, billing, and service requests, though specific 2025 user metrics aren't publically detailed in the latest reports. Still, the overall customer base accessing these systems is substantial.

Direct sales efforts are focused on securing and managing large commercial and industrial (C&I) load growth, which is a key driver for capital investment, especially at subsidiaries like TEP and ITC. This segment shows tangible growth through the utility portfolio.

Commercial and industrial (C&I) sales were up 6% across the portfolio of utilities during the third quarter of 2025. For instance, ITC has prospective data-center/customer connections totaling approximately 8 GW that could support future growth.

Finance: draft 13-week cash view by Friday.

Fortis Inc. (FTS) - Canvas Business Model: Customer Segments

You're looking at the core of Fortis Inc.'s regulated business: the sheer volume and diversity of the end-users relying on their energy delivery systems. As of late 2025, Fortis Inc. is a massive utility operator, backed by $75 billion in total assets as at September 30, 2025, and supported by 9,600 employees.

The primary customer base is geographically diverse, spanning regulated jurisdictions across North America. This diversity is a key risk mitigator for you as an analyst.

The segments served include:

• Residential customers across five Canadian provinces and ten U.S. states.
• Commercial and industrial customers requiring stable, high-capacity power.
• Large-scale, high-growth users like data centers and manufacturing facilities.

The total utility customer count is substantial, sitting at approximately 3.5 million utility customers served across the electric and gas networks.

Here's a quick look at the scale of operations feeding these segments:

While the majority of the customer base is residential and general commercial, Fortis Inc. is actively positioning for high-growth industrial users. For instance, the utility ITC Holdings Corp. shows a specific concentration risk, where approximately 65% of its revenue is derived from just three customers who maintain investment-grade credit ratings. This concentration highlights a specific, high-capacity segment within the broader customer base. Also, future load growth is explicitly tied to opportunities in sectors like data centers and manufacturing.

The company's strategy focuses on serving these customers reliably, with Fortis achieving top quartile reliability performance in 2024, delivering energy 99.9% of the time.

Fortis Inc. (FTS) - Canvas Business Model: Cost Structure

You're looking at the major outflows for Fortis Inc. (FTS) as of late 2025; it's all about maintaining and growing that massive regulated asset base. The cost structure is heavily weighted toward long-term investment and the fixed costs of running the grid.

Capital Expenditures

The commitment to infrastructure is the single largest cost driver you'll see here. Fortis Inc. expected capital expenditures for the full year 2025 to land around $5.6 billion. This spending is what fuels the rate base growth you're tracking. Furthermore, the company unveiled a new, larger five-year capital plan spanning 2026 through 2030, totaling $28.8 billion, which is an increase of $2.8 billion over the prior plan. This investment focus is heavily weighted toward regulated assets, with transmission making up about 46% and distribution about 31% of that record investment.

Operating Costs

Operating costs cover the day-to-day running of the system-keeping the lights on and the gas flowing safely. This includes everything from the wages for your 9,600 employees across North America to the preventative maintenance schedules that keep regulatory risk low. For the quarter ending September 2025, Fortis Inc. reported Operating Expenses of CAD 2.07B. To give you a clearer picture of the components that feed into that total, here's a look at some of the reported figures from a recent period:

Honestly, keeping those labor and material costs in check while executing a huge capital plan is always the tightrope walk for utility management.

Financing Costs

Since Fortis Inc. is funding its growth primarily through regulated returns and debt, financing costs are a critical component. The new 2026-2030 capital plan is structured to be funded with approximately 30% coming from net debt. You saw higher holding company finance costs noted as an offset to earnings in Q2 2025. For the quarter ending September 2025, the reported Interest Expense on Debt was CAD 370M. This interest expense is directly tied to the regulated debt that underpins a significant portion of their asset base.

Purchased Power and Fuel

This category covers the direct costs associated with the energy Fortis Inc. procures or generates to meet customer demand, though management often separates some of these costs when measuring core operating efficiency. For instance, FortisBC, which generates power from hydroelectric facilities, also purchases a portion of its requirements through contracts and the wholesale market. As a concrete example of fuel cost, FortisBC reported Cost of natural gas expenses of $220 million for the quarter ended March 31, 2025. You should keep an eye on how the transition away from coal-fired generation at TEP, aiming for a coal-free mix by 2032, might shift these fuel procurement costs going forward.

Fortis Inc. (FTS) - Canvas Business Model: Revenue Streams

You're looking at how Fortis Inc. actually brings in the money, which, for a utility giant like this, is pretty straightforward but deeply regulated. The core of the business is collecting money from customers for delivering electricity and natural gas across North America and the Caribbean.

The primary engine for revenue is the regulated utility rates and tariffs approved by various commissions. This isn't a free market; regulators set what Fortis Inc. can charge. For instance, in British Columbia, the BCUC approved a rate framework for FortisBC covering 2025 through 2027, which includes a prescribed approach for operating expenses and capital investments. To be fair, this stability is what investors like about utilities. Also, in the US, Tucson Electric Power (TEP) filed a general rate application in June 2025 requesting new rates effective September 1, 2026, which included a net increase in retail revenue of about US$172 million.

Next up is the Return on Equity (ROE) earned on the growing regulated asset base. This is how Fortis Inc. makes money on its investments in pipes and wires. The asset base itself is expanding nicely; the five-year capital plan projects the midyear rate base growing from $41.9 billion in 2025 to $57.9 billion by 2030, representing a 7.0% annual growth rate. The return they get on that base is set by regulators. For example, for the period covered in the Q2 2025 results, the allowed ROE for FortisBC was 9.65 percent, based on a deemed equity component of 41 percent of the capital structure. You should note that in 2024, a reduction in the MISO base ROE unfavorably impacted earnings, showing that even the allowed return can be a point of contention.

We also need to talk about the Allowance for Funds Used During Construction (AFUDC) from major projects. This is essentially interest income Fortis Inc. gets on the money it spends building new assets before those assets are officially put into service and start earning a regulated return on rate base. It helps fund construction without taking on immediate external debt interest costs. For FortisBC specifically, their 2025 projected capital expenditures were about $187 million, and that figure was inclusive of AFUDC. That's a concrete example of how AFUDC flows through the capital program.

Here's a quick look at the top-line revenue and the growth driver metrics we just discussed. It really grounds the discussion, you know?

The Total revenue for 2024 was approximately $12 billion. That's the big number that all these regulated returns and construction accruals feed into. The company is focused on extending its track record, targeting annual dividend growth of 4-6% through 2029, which is directly supported by this predictable, rate-regulated revenue stream.

The revenue sources are pretty clear, and they rely heavily on regulatory approvals:

• Regulated tariffs for electric and gas service delivery.
• Allowed return on the growing regulated asset base.
• AFUDC earned on ongoing capital projects.
• Revenue growth driven by rate base expansion.

If onboarding takes 14+ days, churn risk rises-similarly, if regulatory lag is too long, the ROE realization gets delayed, which is a defintely near-term risk for the business.

Finance: draft 13-week cash view by Friday.