Fortis Inc. (FTS) Q2 2019 Earnings Call Transcript

Fortis, Inc. (FTS 0.15%)
Q2 2019 Earnings Call
Aug. 2, 2019, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. My name is Sharon and I will be your conference operator today. Welcome to the Fortis Q2 2019 conference call and webcast. During the call, all participants will be in a listen-only mode. There will be a question and answer session following the presentation. At that time, those with questions should press *1 on their telephone. If at any time during the conference you need to reach an operator, please press *0. At this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Ms. Amaimo.

Stephanie Amaimo -- Vice President, Investor Relations

Thanks, Sharon, and good morning, everyone, and welcome to Fortis's second quarter results conference call. I am joined by Barry Perry, President and CEO, and Jocelyn Perry, Executive VP and CFO, other members of the senior management team, as well as CEOs from certain subsidiaries.

Before we begin today's call, I want to remind you that the discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slideshow. All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U.S. GAAP financial measures in our 2019 second-quarter MD&A. Also, unless otherwise specified, all financial information referenced is in Canadian dollars. With that, I will turn the call over to Barry.

Barry V. Perry -- President and Chief Executive Officer

Thanks, Stephanie, and good morning, everyone. Let me start by saying that our team made great progress in the quarter to advance our growth strategy. Most notably, we announced that we are increasing our 2019 capital outlook by CA$600 million to CA$4.3 billion, representing a 16% increase. As part of funding our incremental capital, we raised CA$142 million from the Aftermarket Equity Program, or ATM, to fund the equity component of our increased capital expenditures. Looking beyond 2019, we remain committed to the CA$17.3 billion five-year capital plan. We are currently updating the plan to reflect the 2020-24 five-year period and expect to update the market on September 10th at our Investor Day.

In mid-April, we successfully closed the sale of the Waneta Expansion for proceeds of approximately CA$1 billion and booked a CA$484 million gain related to this transaction. Net proceeds were used to pay down corporate short-term borrowings as well as repurchase a portion of a corporation's outstanding debt. We are pleased with this outcome.

In July, we issued our 2019 sustainability update. The report updated the performance of our utilities and expanded our reporting on indicators related to employees, natural gas operations, and water use. Additionally, we included information on our efforts to advance United Nations sustainable development goals. Our focus on energy delivery limits our impact on the environment. That said, we strive to do better by delivering cleaner energy and being a strong energy partner in our communities.

With our focus on the delivery of cleaner energy, TEP announced they are partnering with key community stakeholders and climate change experts at the University of Arizona to develop new carbon emission reduction goals to prepare for the future energy needs of the customers. We are focused on reducing our environmental footprint and look forward to working with these stakeholders to create measures focused on emission reduction and increased renewable energy to customers.

In British Columbia, we recently announced that Fortis BC entered into a two-year supply agreement to export 53,000 tons of LNG per year to China, equivalent to heating 30,000 homes for a year in B.C. This is the first Canadian agreement to have LNG regularly shipped to China. The LNG supply is contracted through the recently expanded Tilbury facility. This development is an encouraging step for Canada's LNG export industry and for Fortis BC as we think about further LNG expansion at the Tilbury site.

Turning now to slide 5, I'll walk through the drivers of the 2019 CA$600 million capital increase. This increase is evidence of our focused effort to grow the regulated businesses by identifying and executing on opportunities within our existing footprint. Capital spending for 2019 is expected to increase to CA$4.3 billion, up from CA$3.7 billion previously announced. This increase is driven by regulated investments in renewable energy, transmission infrastructure, and grid modernization. UNS is the main driver of the increase, and is forecasting to spend CA$1.4 billion in capital investments this year, up CA$300 million from the CA$1.1 billion we previously disclosed.

In March, TEP announced the construction of the U.S. CA$370 million Oso Grande Wind Project. Construction of the 247-megawatt wind farm is expected to commence later this year and be online by the end of next year. We previously included this project in the plan as a 150-megawatt project, and the increased capacity resulted in more than CA$200 million of additional capital spending in 2019. Once completed, it will become TEP's largest renewable energy resource and generate enough power to supply nearly 100,000 homes per year. This project is expected to increase TEP's renewable energy to approximately 28% of its total production by 2021.

ITC is focused on making needed grid investments in and around its existing operating territories. As a result, ITC identifies additional grid solutions as well as several small transmission asset acquisitions within its existing footprint. These investments result in an approximate CA$100 million increase in capital spending for 2019. The remaining incremental capital spend is a result of investment needed to maintain and upgrade our existing infrastructure at our other regulated utilities and higher foreign exchange.

Our major capital projects for 2019 are progressing well and are on track. ITC recently announced completion of multi-value projects 4 and 7. These new high-voltage transmission lines are part of 17 multi-value projects approved within the Midwest to provide access to low-cost electricity generation, improve reliability and efficiency, and expand access to renewable energy resources.

At UNS, the majority of the capital will be executed in the second half of the year. In addition to the Oso Grande Wind Project, significant project spending for the balance of the year includes the expected purchase of the Gila River Generating Station Unit 2. In addition, UNS expects to begin investing in the 250-megawatt Southline Transmission Project, a transmission line across southern New Mexico and southern Arizona.

A significant milestone was recently achieved in the Wataynikaneyap Power Project when the environmental assessment notice of approval was received for the final two phases of the project. The project was targeted to be completed in 2023 and will reduce greenhouse gas emissions associated with the diesel generations currently used by the remote communities. We are confident in our ability to deliver on our CA$4.3 billion capital plan for 2019. Virtually all of our planned capital investments for the year are in our regulated businesses. As mentioned earlier, we expect to update our new five-year capital plan on September 10th at our Investor Day.

For 45 consecutive years, we have increased our dividend. This consistent track record makes us a leader in dividend growth in Canada. Our strong growth profile, coupled with our low-risk, highly regulated, and geographically diversified energy delivery utility business, gives us confidence that we will be able to continue this track record for the foreseeable future. I'll now turn the call over to Jocelyn for an update on our second quarter 2019 results.

Jocelyn H. Perry -- Executive Vice President and Chief Financial Officer

Thank you, Barry, and good morning, everyone. Reported earnings for the quarter of CA$720 million, or CA$1.66 per common share, is significantly higher than last year. Earnings for the quarter reflect the CA$484 million gain on the sale of our 51% interest in the Waneta Expansion. On a year-to-date basis, reported earnings of approximately CA$1 billion, or CA$2.39 per common share, also reflect the gain on the Waneta sale when compared to the previous year.

Adjusted EPS of CA$0.54 for the quarter was CA$0.05 lower compared to the second quarter in 2018. This decrease was primarily due to weather. Cooler temperatures at UNS and decreased production at the Belize hydro generating facilities driven by lower rainfall reduced EPS by CA$0.06 in the quarter. On a year-to-date basis, adjusted EPS was CA$0.02 lower than the first six months of 2018. Rate-based growth, driven by our regulated businesses as they continue to execute on their capital plans, was offset by unfavorable weather impacts, reduced earnings at Aitken Creek and regulatory lag in Arizona. Weather alone impacted EPS by CA$0.06 in the first half of 2019 when compared to 2018.

Before getting into the specific drivers of the quarterly and year-to-date earnings results, I want to spend some time this morning on the weather impacts during the quarter. Earnings for the second quarter in our Arizona business was down CA$21 million from the prior year. The decrease was driven by an approximate 10% reduction in retail sales due to cooler temperatures, which reduced air conditioning load in the region. In recent years, Tucson has recorded some of its hottest temperatures, with the second quarter of 2018 being the second hottest quarter on record. In comparison, this year, the region experienced its mildest second quarter in the last 20 years. The month of May was particularly cooler in the Tucson region. This resulted in 32% lower cooling degree days than normal during the quarter.

Earnings for the quarter and year to date were also impacted by the weather in Belize, as they are experiencing drought conditions. With the lower rainfall, production in the second quarter was 15 gigawatt-hours compared to 57 gigawatt-hours in the previous year. For the first six months of 2019, production was 39 gigawatt-hours, compared to 120 gigawatt-hours in 2018, so again, in total, weather-driven impacts on earnings per common share was CA$0.06 for the second quarter.

And now, turning to slide 11, let's take a look at the other EPS drivers in the quarter. First and foremost, we saw growth in the majority of our regulated utility businesses. This growth was led by ITC, which contributed to an increase in EPS of CA$0.03, and CA$0.01 was driven by our western Canadian electric and gas businesses. Next, a higher U.S. dollar to Canadian dollar foreign exchange rate favorably impacted results this quarter. This average rate was CA$1.34 compared to CA$1.29 in the second quarter last year.

Furthermore, there was a CA$0.01 EPS increase during the quarter due to lower corporate costs, partially offset by a higher number of weighted average common shares as a result of the shares issued under our dividend reinvestment plan and the ATM. The earnings loss from no longer having the Waneta plant was offset by reduced corporate finance charges and a gain on the U.S. CA$400 million tender offer.

As previously mentioned, lower earnings at UNS, mainly driven by cooler temperatures, reduced EPS by CA$0.06. At our nonregulated energy infrastructure businesses, EPS decreased by CA$0.03 for the quarter. This was driven by lower realized margins at Aitken Creek and lower rainfall decreasing production in Belize. Lastly, earnings at Central Hudson and in our other electric segment reduced EPS by CA$0.02, reflecting timing of insurance proceeds received in 2018 related to Hurricane Irma and timing differences associated with Central Hudson's rate order.

Turning to slide 12, adjusted year-to-date earnings per share decreased CA$0.02 compared to the same period in 2018. Similar to the quarter, a higher U.S. dollar to Canadian dollar foreign exchange rate for the first half of 2019 resulted in a CA$0.04 EPS increase. Additionally, rate-based growth at ITC improved EPS by CA$0.03, and our western Canadian utilities improved EPS by CA$0.02 for the first half of 2019. At Central Hudson, EPS increased CA$0.01, driven by higher delivery rates and lower storm restoration cost.

UNS contributed to a CA$0.05 decrease in EPS for the first half of 2019. Again, this was largely driven by cooler temperatures in Arizona, as well as higher costs associated with rate-based growth that are not yet included in rates, due to the historical test year. The non [audio cuts out] structure businesses was also negatively impacted by weather as a result of lower rainfall in Belize, and lower realized margins at Aitken Creek also impacted EPS year to date. Lastly, EPS was lower by CA$0.01, reflecting a higher number of weighted average common shares, partially offset by lower corporate costs.

Turning now to our 2019 regulatory outlook, at ITC, we await a final decision from FERC on the MISO base ROE. You will also recall that FERC issued two notices of inquiry in March. The first sought comment on its policies for determining the ROE used in setting rates, and the second on how to improve its transmission incentive policy to ensure it appropriately encourages the development of needed infrastructure to the benefit of our customers. Comments were due to FERC at the end of June, and upon review, ITC viewed the submissions as generally aligned with expectations. Reply comments on the base ROE were provided to FERC last week, and reply comments on the incentive NOIs will be provided later this month. And, at this time, it is still uncertain whether and when FERC will [audio cuts out] further on these matters.

As you are aware, FERC ordered last October that ITC was no longer fully independent, and reduced the incentive adder to 25 basis points, down from the approximate 50 basis points that ITC was earning in rates. ITC appealed this decision, but in July, FERC denied ITC's request for rehearing. ITC is now considering its options, including potentially appealing to the U.S. Court of Appeals. As discussed during last quarter, Fortis BC filed its multiyear rate plan earlier this year, as the current term expires at the end of 2019. The proposed plan seeks approval for rate-setting framework for 2020 through to 2024, and we anticipate a decision next year.

Tucson Electric Power filed its rate case April 1st. Current rates at TEP are based on a mid-2015 test year, and our requested rates include approximately $700 million U.S. of additional rate-based investments. Additional requests in the rate filing include an ROE increase of 60 basis points to 10.35% and increased equity thickness to 53%. The rate case hearings are scheduled for early 2020, and a decision is anticipated next year.

Lastly, TEP also filed a proposal with FERC in May, requesting its current stated transmission rates and revenue requirement be replaced with forward-looking formula rates to allow for more timely recovery of transmission-related costs. Just this week, FERC issued an order accepting TEP's proposed rate revisions, effective August 1st, subject to hearing and settlement procedures. This concludes my remarks. I'll now turn the call back to Barry.

Barry V. Perry -- President and Chief Executive Officer

Thanks, Jocelyn. The Fortis business keeps getting stronger. Our portfolio of well-run, highly regulated utilities are focused on delivering energy to customers each and every day. Given our diversification, coupled with the low-risk nature of our assets, we are able to focus on the local needs of customers, which in turn yield opportunities to grow the business for the foreseeable future. As we look ahead to the remainder of 2019 and beyond, our growth profile is strong and supports our 6% dividend guidance. We look forward to rolling out our 2020-24 plans to you at Investor Day in Michigan.

Lastly, Fortis is a leader in the ESG area. Sustainable practices have remained front and center as we serve our communities in North America. We are committed to doing even more in this area in the future. I'll now turn the call back to Stephanie.

Stephanie Amaimo -- Vice President, Investor Relations

Thank you, Barry. This concludes the presentation. At this time, we'd like to open the call to address questions from the investment community.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now conduct the question and answer period. If you would like to register a question, please press *1 on your telephone. If your question has been answered and you would like to withdraw your registration, please press #. If you are using a speakerphone, please lift your handset before entering your request. One moment, please, for the first question. And, our first question comes from Robert Kwan with RBC Capital Markets. Please go ahead with your question.

Robert Kwan -- RBC Capital Markets -- Analyst

Thanks. If I can just come back to the usage of the ATM and managing the uptick in the 2019 capital, I'm just wondering -- was that you proactively looking at funding sources in your credit metrics, or did you have anything specific from the rating agencies? Ultimately, as well, what's the expected use on the ATM for the remainder of the year?

Barry V. Perry -- President and Chief Executive Officer

Robert, really, it's consistent with what we've been saying. We've said if our capital goes beyond the levels that we've disclosed, that we would start using the ATM. There's nothing from the agencies or anything like that. It's just we're seeing, obviously, increased growth here, and we're just tapping into that market. It is a very low-cost, efficient way of raising the equity component of that growth, so...

Robert Kwan -- RBC Capital Markets -- Analyst

Okay. And, I guess just with those -- some of the lead times of converting some of that to cash, should we think about ATM usage being close to the full uptick in capital, though?

Barry V. Perry -- President and Chief Executive Officer

I would say we're going to obviously report our ATM usage on a quarterly basis, and we're going to discuss our full funding plan in September, Robert, so I would just say stay tuned for that. It's a month away. We're putting the final touches on our five-year capital plan and funding strategy, so we'll have a deep dive in September on that.

Robert Kwan -- RBC Capital Markets -- Analyst

Sounds good. Just turning to weather, looking forward here, how is Belize actually shaping up for the second half? And then, for Arizona, following the weaker-weather quarter, weather looked really good in July, so have you seen that uptick in usage for TEP?

Barry V. Perry -- President and Chief Executive Officer

So, David, I think we talked about this yesterday. I think we're about normal for July -- David, is that correct? -- in Arizona.

David G. Hutchens -- Executive Vice President, Western Utility Operations

Yeah, we ended up being actually pretty hot for July. We ended up being the third hottest that we had on record for July compared to last year, where we were the ninth hottest, so there was a little bit of a positive delta, but we haven't even closed the books yet, Robert. We expect it to be at least slightly positive.

Barry V. Perry -- President and Chief Executive Officer

And, in Belize, Robert, drought conditions continue, though this is typically around when the rainy season starts. I'll remind everyone -- in Belize, one tropical storm can fill the reservoir at times, so it doesn't change much, so things can change pretty quickly, but right now, we're still experiencing very dry conditions there.

Robert Kwan -- RBC Capital Markets -- Analyst

Okay. And, just to finish in Arizona, have you spent anything yet to connect or support the Rosemont mine, and if so, are there any recovery provisions, or will that just get rolled in if that continues to go sideways for them?

Barry V. Perry -- President and Chief Executive Officer

David, do you want to take that one?

David G. Hutchens -- Executive Vice President, Western Utility Operations

Sure. The quick answer to that, Robert, is no, and we won't be spending any capital. Rosemont funds the entire transmission line and then turns it over to us, so we don't have any capital at risk or regulatory recovery risk associated with that project or its delay.

Robert Kwan -- RBC Capital Markets -- Analyst

That's great. Thank you.

Barry V. Perry -- President and Chief Executive Officer

Thanks, Robert.

Operator

Next question comes from Ben Pham with BMO. Please proceed with your question.

Ben Pham -- BMO Capital Markets -- Managing Director

Thanks. Good morning. I just want to stay with UNS and some of what are the volatilities you've seen this quarter and last year. I'm just wondering -- as you think about the earnings of this utility going forward, is there an impetus to look at revenue decoupling at UNS at all?

Barry V. Perry -- President and Chief Executive Officer

In a perfect world, yes, Ben, but I always thought it was going to be extremely hot in Arizona, so I guess I'm betting on the heat. Yeah, we had one quarter that was cool there. David, maybe you can comment on historically, have the utilities in Arizona really focused at all on the decoupling issue? I know obviously, we had the historical test year in Arizona as well. The business has grown well over the years, so the utilities there haven't really taken this on recently, so maybe you can share some history, David.

David G. Hutchens -- Executive Vice President, Western Utility Operations

Yeah, Ben, we do have a partial decoupling mechanism that takes into account both energy efficiency and distributed generation reductions. We have a utility here -- Southwest Gas does have a full decoupling mechanism that does include weather. Neither us nor any other utility that I'm aware of in Arizona has a full decoupling mechanism. It has been something that has been discussed in fits and starts over the past decade since we implemented the energy efficiency rules. We don't have that request in our current rate case, but longer-term, that might be something that we look at, but nothing really on the radar screen at this point.

Ben Pham -- BMO Capital Markets -- Managing Director

All right, great. And, maybe to switch to some commentary on FERC transmission ROEs, looking through the commentaries that have been filed, it sounds like everything is in line with your expectations. Can you expand on that a little bit? As you go through a filing, you're not seeing anything that is quite challenging in terms of folks really looking for lower ROEs, or are you just saying in line that you don't expect there's any material to come from these reviews to analyze?

Barry V. Perry -- President and Chief Executive Officer

Ben, the comments are more really reflective of our review of all the submissions and coming up with a conclusion that there's been nothing really new in the submissions from what's been filed before at FERC. Remember, in some cases, this is six or seven years of process now that we've been going through, and FERC did open up the ROE process for further submissions a few months back, and those submissions really didn't create any new ideas in our view, so that was the nature of that comment. Linda, maybe you can add some more flavor than that, but that's sort of my understanding.

Linda Blair Apsey -- President and Chief Executive Officer, ITC Holdings Corporation

Yeah, Barry. I would categorize it as when we say that the comments were as expected, I would say industry, the transmission owners, the utilities, EEI, groups like WIRES obviously supported, obviously, the continuation of incentives, as well as it relates to the ROE NOI -- very supportive of the new methodology that FERC has established in the New England proceeding.

On the other side of the coin, state commissions, consumer advocates, customer groups were -- as expected -- opposed to additional incentives for investment and transmission. And then, I would say there was a third category of the renewable energy industry that supported and advocated for incentives to incent transmission to interconnect renewables. So, I think when we say "as expected," that's sort of the genesis of the comments. I think it's still too early to say or suggest what FERC might do with these NOI proceedings. I think obviously, FERC is going to have to wade through all the comments and ultimately make some policy decisions in terms of what direction they want to go in terms of the NOI proceeding.

Ben Pham -- BMO Capital Markets -- Managing Director

All right, that's great. That's very helpful. Thank you.

Barry V. Perry -- President and Chief Executive Officer

Thanks, Ben.

Operator

Your next question comes from Julien Dumoulin-Smith with Bank of America. Please proceed with your question.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Hey, good morning.

Barry V. Perry -- President and Chief Executive Officer

Good morning, Julien.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Hey. So, just wanted to follow a little bit up on that last question on transmission, if you can. Can you elaborate a little bit on some of the latest on the 2019 transmission expansion plan, since the deadline is about...where that's shaping out in the MISO region specifically, and how it reconciles against your own current budget? Just sort of curious. And then, even to the extent to which that's pre-empting September's draft release of the '20 MTEP. Any sense of where this is all heading versus where you projected last go-around? And, I recall last year's update itself was pretty material already, so a little bit of a pre-emption of September's updates. Just curious.

Barry V. Perry -- President and Chief Executive Officer

So, Julien, I'm not going to spill all my good material for September, but I will tell you that we still see good growth at ITC and we're very strong on the business there, so, Linda, maybe you can offer some specific comments regarding the MISO stuff for Julien.

Linda Blair Apsey -- President and Chief Executive Officer, ITC Holdings Corporation

Yeah, Julien. I would just say look, if history is any indication of the future, I would not focus on -- in terms of what's submitted in terms of the specific projects versus what MISO recommends, history always demonstrates that what comes out of the MISO process is less than we submit, and I would just say our forecast -- our capital forecast and our five-year plan is solid, and we do not anticipate any outcome of the MISO preliminary recommendations, or ultimately, the MTEP decision having any effect or impact on our capital forecast.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Okay, fair enough. And then, Hickory -- just while we're on the subject of transmission -- any updates in your confidence you'll be able to get the thing done?

Barry V. Perry -- President and Chief Executive Officer

Linda, keep going.

Linda Blair Apsey -- President and Chief Executive Officer, ITC Holdings Corporation

Sorry, your question was on the Cardinal-Hickory Creek MVP 5 line?

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Yes.

Linda Blair Apsey -- President and Chief Executive Officer, ITC Holdings Corporation

Yup, that is obviously proceeding. We've gone through the hearings process in Wisconsin, and we now await a decision from the Wisconsin commission. I would say we feel very confident on the outcome of that decision, primarily based on, obviously, the need for the project. Obviously, I would say it's been a pretty contentious case just in terms of the environmental interests that have come out and opposed the project, but we remain confident that we will get approval for the project, given the need for the project.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Got it. And lastly, maybe high level, with respect to Arizona and everything going on in that state with some of your peers, confidence still in the rate case process and the integrity of the progress altogether? I'd just be curious if you have anything to add without getting too specific, if there's anything you want to throw out there.

Barry V. Perry -- President and Chief Executive Officer

Well, Julien, from my perspective -- and, I'm going to let David weigh in here, but just from my perspective, we still have positive relations with the commission, and I'm still very positive overall on Arizona. Our business there has done extremely well since we purchased it, and the economy is strong. Yes, there's some noise with the regulator and some of the issues, I would think more specifically with APS, but obviously, we get dragged into that from time to time. So, David, maybe you can provide some more color since you're on the ground there.

David G. Hutchens -- Executive Vice President, Western Utility Operations

Yeah, I don't think that we see anything that's going to necessarily affect or impact our pending rate case. We do have a lot of policy topics under discussion at the commission, and I think we'll do -- as our state generally does -- a very orderly and thoughtful process in evaluating energy policy and everything else that's on the dockets here. So, we have a lot under discussion, and again, if we do it in that orderly fashion, I think we can meet both the requirements and desires of our customers and our regulators. So, nothing that we're super worried about at this point.

Operator

Your next question comes from Mark Jarvi with CIBC Capital Markets. Please proceed with your question.

Mark Jarvi -- CIBC World Markets -- Director

Good morning. Just wanted to go back to UNS and just think about some of the timelines for capital deployment in the back half, or maybe into 2020. With Oso Grande and the bill transfer agreement, can you just remind us how you actually see capital deployed at TEP as that has progressed and eventually completed?

Barry V. Perry -- President and Chief Executive Officer

David, do you want to take that?

David G. Hutchens -- Executive Vice President, Western Utility Operations

Yeah. I don't have the schedule right in front of me, but that $370 million U.S. -- I think it's about two thirds of it that goes in this year, in essence, in writing checks, just based on the funding agreement that we have with the constructor there. So, it is fairly heavy loaded here toward the tail end of this year, and then, the rest of that capital will be dribbling in over the entire 2020 time period up until that year ends, so that's why we had that little bit of a difference in uptick in the 2019 capital budget. When we upsized that project from 150 to that roughly 250-megawatt number, we also finalized the payments and that schedule, and that's what pulled a little extra into 2019.

Mark Jarvi -- CIBC World Markets -- Director

Okay, that's helpful. And then, on some of the other bigger-ticket items like Southline and Gila Unit 2, just wondering about your confidence that that happens in 2019 or the chance that gets pushed out a bit.

David G. Hutchens -- Executive Vice President, Western Utility Operations

We're still very confident with Gila. That is just, in essence, triggering an option to buy that plant and writing the check to Salt River Project for it, so that capital, I think, is pretty well on schedule. As far as the Southline Project, we don't have much in the 2019 year, but we do still expect to spend that here, and then, the vast majority of that is over the next couple years.

Mark Jarvi -- CIBC World Markets -- Director

Okay. And then, maybe just turning around the corner to the Investor Day in a month's time, but the incremental CA$100 million spend at some of the utilities -- maybe you can just comment on where you're finding those opportunities and whether or not it's just this year, or you see that carrying forward into future years.

Barry V. Perry -- President and Chief Executive Officer

I think you're going to have to stay tuned, Mark, for the Investor Day. Obviously, that CA $100 million is spread over a bunch of businesses. Some of it is renewables, those kind of things, but I think that we'll have much more to say about that in September.

Mark Jarvi -- CIBC World Markets -- Director

Fair enough. And, maybe just last question on ITC and some of these small tuck-ins and add-on assets, how much more of that do you guys see in the footprint and the pace of those types of small additions?

Barry V. Perry -- President and Chief Executive Officer

All of our businesses are looking for this kind of stuff -- things that's in their footprint, that may be owned by industrial firms or whatever that we can actually get in and run a little better because it's our business, so, it's always a little bit of that, but I don't see it as being material in any way to long-term growth, but we'll get one of them every now and then. I sort of put, for example, the REAs in Alberta in the same category, maybe small immunities in Ontario -- these are things that occasionally, we'll be able to successfully get one of them over the line, but they're really now in the CA$30-40-50 million range, and they're good stuff, but again, not material.

Mark Jarvi -- CIBC World Markets -- Director

Okay, thanks.

Operator

Your next question comes from Rob Hope with Scotia Capital. Please go ahead with your question.

Robert Hope -- Scotia Capital -- Director

Morning, everyone. First question, back on Arizona -- just wanted to know if you have any comments on the commission's hearing about looking at retail competition once again in the state.

Barry V. Perry -- President and Chief Executive Officer

My only comment is I think it's the third time this has been looked at in Arizona, and obviously, we're going to work with the commission if there's a process regarding that, and we are involved in those discussions. So, I will say that generally, Fortis has always been focused on poles and wires, so that's a core business, and we're comfortable there, and clearly, Arizona is the place that we have generation, and it's in rates right now. I always look at competition -- as long as you're treated fairly when it's deregulated in terms of your investments in that generation, then you should be OK, but David, do you want to offer some more comments?

David G. Hutchens -- Executive Vice President, Western Utility Operations

Yeah, I'd just echo what you just said, Barry. If we go through a nice, detailed, thoughtful review and process on this, I think you're going to come out with one of two options. One is that folks will see that there's a lot of unintended consequences in a competitive market, and that there's really no problem here that we're trying to fix, and I think at the end of the day, with that sort of review, you'd probably say it's not worth it, but if, at the end, you do -- and the commission decides that we need to go to a competitive generation market -- remember, this is generation only -- it just depends on how you set the rules and how you do that. It's very difficult, extremely complicated, to get all of that stuff right, but if you do get all of that right, it can be beneficial.

So, at the end of the day, it's not something that we're extremely worried about, but we do want to make sure that this takes into account the opinions of all the stakeholders, and there's quite a few folks lining up against competition, as they have in other states recently, but it takes away some of the policy decision-making capability of our commission if you go to a competitive wholesale market. We think the state loses a lot of its ability to drive energy policy in a competitive market. So, a lot of discussion still to be had around this, a lot of workshops, and still, hopefully, a lot of input from all the stakeholders.

Robert Hope -- Scotia Capital -- Director

All right. And then, switching over to the west side of the continent, I just saw that you secured some additional contracts on the LNG, but on a longer-term basis, how are you thinking about increased LNG volumes out of B.C. versus the need to reinforce and increase the reliability of the system?

Barry V. Perry -- President and Chief Executive Officer

We continue to become more and more excited about our prospects for our gas business in British Columbia. I keep reminding folks that we have a large gas LBC there serving over a million customers, and we currently own the lion's share of gas infrastructure in the province, and we are right now in the midst of conversations regarding further investment in that gas infrastructure related to resiliency of the pipeline network to get more redundancy into the lower mainland, whether it be also tank storage to be able to ride through any problems on the system, and LNG export from our Tilbury site. So, none of this is really in our plans at this point in time, but I'm really optimistic that Fortis will be able to find some ways to deploy capital to make the business better in British Columbia, and we're really excited about that, and hopefully, we can talk a little more about that over the next little while.

Robert Hope -- Scotia Capital -- Director

Good stuff. Looking forward to the Investor Day. Thank you.

Operator

Your next question comes from Patrick Kenny with National Bank Financial. Please proceed with your question.

Patrick Kenny -- National Bank Financial -- Managing Director

Good morning, and thanks for the sustainability update. Obviously, TEP is well on pace to reach that 30% renewables target on the generation front. Just wondering if you can comment longer-term around potential opportunities to accelerate coal-to-gas or ramp up new renewables, and again, what this might mean for potential rate base upsides, say, over the next five years plus.

Barry V. Perry -- President and Chief Executive Officer

Patrick, thanks for the question on this, because I am so proud of my team in Arizona, David really agreeing to work with the University of Arizona and community stakeholders to really work together to develop the right plan for that community, and that hasn't been done in all cases in different regions around North America, and I am proud of the team for taking that on. So, I do believe that this will allow more investments to occur in that region and in renewables over time, and I'm going to let David talk a little bit about those prospects.

David G. Hutchens -- Executive Vice President, Western Utility Operations

Yeah, Patrick. We're going through that integrated resource planning process right now, and obviously, when people see that we're hitting our 2030 goal in just a couple years, we're going to likely see the desire and our own desire to increase that a little bit more. Now, we're going to shift to hopefully greenhouse gas reduction targets because I think that's really what we should be focusing on from integrated resource planning and from a climate perspective, but during that process, I'm sure we'll have stakeholders all over the map on how far and how fast we want to go related to renewables. I think it will provide significant upside in our business to invest in some of these renewables, and of course, the renewable supporting technology.

I think going forward, when we're already at 30%, any time you say "additional renewables," you have to add "storage" in that next breath, so we're going to be looking at that stuff really hard over this next year and developing a plan for what that looks like for the next 15 years is what our IRP is, but we're going to be looking out even further than that.

Barry V. Perry -- President and Chief Executive Officer

Patrick, I should mention that one thing we haven't talked about, really, is renewable natural gas that much. We continue to increase the amount of renewable natural gas that we have in British Columbia, and I see that as, again, another area that potentially will grow our business in over the next decade, so we're pretty excited about what I'll call the ESG component of that gas business in British Columbia as well.

Patrick Kenny -- National Bank Financial -- Managing Director

That's interesting as well. I was also going to follow up and ask if there was any update on Big Chino at this point.

Barry V. Perry -- President and Chief Executive Officer

So, Big Chino -- big project, the right kind of project for the region in Arizona. ITC obviously was spearheading this very large pump storage facility. It would take about eight to 10 years to do it, maybe in the same kind of range of probably CA$6-8 billion, so we really took a step back in this project in the last few months here, and really are now looking at how do we move forward. So, we've slowed down the spending a little bit because it really was too large of a project for the company, so we're looking at engagement with some other partners to see if we can move it forward from here. So, I would say it's slowed a little bit here at this point.

Patrick Kenny -- National Bank Financial -- Managing Director

Okay. I appreciate those comments.

Operator

Once again, if you'd like to ask a question, please press *1 on your telephone keypad. We have a question from Chris Turner with J.P. Morgan. Please proceed with your question.

Christopher Turner -- J.P. Morgan -- Executive Director

Good morning, everyone. I just wanted to maybe get some help understanding the decision to raise the capex guidance today. Obviously, you have discrete projects, but I think maybe you could have pushed back some capex in other areas or waited until the Analyst Day, so maybe some help around that decision on the messaging there, and I wanted to just confirm that it's still your message that the base capex plan ex this does not require external equity, just the DRIP.

Barry V. Perry -- President and Chief Executive Officer

So, Chris, I guess it's just August 1st, and we were seeing significant increase in '19, so we just felt that for the year, we couldn't wait until September, given that we were issuing our second-quarter results here, to be transparent, but for the five-year plan, we felt that we could wait. It's not yet been finalized that we can wait until September 10th. That was sort of the logic. I suppose we could have easily just added CA$600 million to the five-year and been done with it, but I guess we wanted to update the full five years at once rather than dripping it in overtime.

So, in terms of the equity, we do -- when we look at how we identify the funding last year for the CA$17.3 billion, we talked about the equity we get from our DRIP plan, dividend reinvestment, we talked about asset sales, the Waneta sale, so we've been executing on that. Nothing has really changed on that. We did, as well, say that if capex was going up, we would start using the ATM, which is what's happened now in this quarter, so I think everything we've done has been consistent with what we've been talking about for the last year.

Christopher Turner -- J.P. Morgan -- Executive Director

Okay. And then, my second question is on EPS growth. I think in 2018, your growth was negative 1%. It's down 2% year to date, but consensus still has you guys growing 4% year over year. Any color on how to think of the back half or any drivers that might help growth at that time?

Barry V. Perry -- President and Chief Executive Officer

We don't comment on EPS guidance, Chris, other than I'll just say we're feeling really good about the business, we're investing a lot of capital in our regulated businesses, they're high-quality businesses, and that capital will increase the earnings of those businesses over time and will be reflected in Fortis's growth over the period. When you think about it, we're basically a big wires business in North America that's growing its rate base in the 7% range right now, so that's pretty strong growth, and that's going to end up being reflected in EPS growth over time.

Christopher Turner -- J.P. Morgan -- Executive Director

All right. Thank you, Barry.

Barry V. Perry -- President and Chief Executive Officer

Thank you.

Operator

Once again, if you'd like to ask a question, please press *1 on your telephone keypad. As there are no further questions at this time, I will turn the call over to Ms. Amaimo for any closing remarks.

Stephanie Amaimo -- Vice President, Investor Relations

Thank you, Sharon. We have nothing further at this time. Thank you, everyone, for participating in our second quarter 2019 results call. Please contact Investor Relations should you need anything further. Thank you for your time, and have a great day.

Operator

Thank you for participating. Ladies and gentlemen, this concludes today's conference. You may disconnect.

Duration: 48 minutes

Call participants:

Stephanie Amaimo -- Vice President, Investor Relations

Barry V. Perry -- President and Chief Executive Officer

Jocelyn H. Perry -- Executive Vice President and Chief Financial Officer

David G. Hutchens -- Executive Vice President, Western Utility Operations

Linda Blair Apsey -- President and Chief Executive Officer, ITC Holdings Corporation

Robert Kwan -- RBC Capital Markets -- Analyst

Ben Pham -- BMO Capital Markets -- Managing Director

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Mark Jarvi -- CIBC World Markets -- Director

Robert Hope -- Scotia Capital -- Director

Patrick Kenny -- National Bank Financial -- Managing Director

Christopher Turner -- J.P. Morgan -- Executive Director

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