EX-99.2 3 a2022q3exhibit992fs.htm EX-99.2
Exhibit 99.2

Interim Financial Statements

FORTIS INC.
Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)

1 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Interim Financial Statements

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited)
FORTIS INC. |  |  |
| September 30, |  | December 31,
As at (in millions of Canadian dollars) | 2022 |  | 2021
ASSETS |  |  |
Current assets |  |  |
Cash and cash equivalents | $ | 395 |  |  | $ | 131 |
Accounts receivable and other current assets (Note 5) | 1,808 |  |  | 1,511 |
Prepaid expenses | 195 |  |  | 116 |
Inventories | 690 |  |  | 478 |
Regulatory assets (Note 6) | 739 |  |  | 492 |
Total current assets | 3,827 |  |  | 2,728 |
Other assets | 1,253 |  |  | 955 |
Regulatory assets (Note 6) | 3,291 |  |  | 3,097 |
Property, plant and equipment, net | 41,549 |  |  | 37,816 |
Intangible assets, net | 1,477 |  |  | 1,343 |
Goodwill | 12,687 |  |  | 11,720 |
Total assets | $ | 64,084 |  |  | $ | 57,659 |
LIABILITIES AND EQUITY |  |  |
Current liabilities |  |  |
Short-term borrowings (Note 7) | $ | 232 |  |  | $ | 247 |
Accounts payable and other current liabilities | 2,832 |  |  | 2,570 |
Regulatory liabilities (Note 6) | 509 |  |  | 357 |
Current installments of long-term debt (Note 7) | 2,570 |  |  | 1,628 |
Total current liabilities | 6,143 |  |  | 4,802 |
Regulatory liabilities (Note 6) | 3,281 |  |  | 2,865 |
Deferred income taxes | 4,009 |  |  | 3,627 |
Long-term debt (Note 7) | 25,929 |  |  | 23,707 |
Finance leases | 341 |  |  | 333 |
Other liabilities | 1,430 |  |  | 1,409 |
Total liabilities | 41,133 |  |  | 36,743 |
Commitments and contingencies (Note 13) |  |  |
Equity |  |  |
Common shares (1) | 14,558 |  |  | 14,237 |
Preference shares | 1,623 |  |  | 1,623 |
Additional paid-in capital | 8 |  |  | 10 |
Accumulated other comprehensive income (loss) | 1,300 |  |  | (40) |
Retained earnings | 3,635 |  |  | 3,458 |
Shareholders' equity | 21,124 |  |  | 19,288 |
Non-controlling interests | 1,827 |  |  | 1,628 |
Total equity | 22,951 |  |  | 20,916 |
Total liabilities and equity | $ | 64,084 |  |  | $ | 57,659 |

(1) No par value. Unlimited authorized shares. 480.3 million and 474.8 million issued and outstanding as at September 30, 2022 and December 31, 2021, respectively.
See accompanying Notes to Condensed Consolidated Interim Financial Statements

2 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Interim Financial Statements

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS (Unaudited)
FORTIS INC.
| Quarter |  | Year-to-Date
For the periods ended September 30 (in millions of Canadian dollars, except per share amounts) | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenue | $ | 2,553 |  |  | $ | 2,196 |  |  | $ | 7,875 |  |  | $ | 6,865 |
Expenses |  |  |  |  |  |  |
Energy supply costs | 804 |  |  | 624 |  |  | 2,684 |  |  | 2,066 |
Operating expenses | 630 |  |  | 594 |  |  | 1,958 |  |  | 1,855 |
Depreciation and amortization | 422 |  |  | 380 |  |  | 1,246 |  |  | 1,121 |
Total expenses | 1,856 |  |  | 1,598 |  |  | 5,888 |  |  | 5,042 |
Operating income | 697 |  |  | 598 |  |  | 1,987 |  |  | 1,823 |
Other income, net (Note 9) | 19 |  |  | 37 |  |  | 96 |  |  | 129 |
Finance charges | 280 |  |  | 244 |  |  | 804 |  |  | 751 |
Earnings before income tax expense | 436 |  |  | 391 |  |  | 1,279 |  |  | 1,201 |
Income tax expense | 65 |  |  | 49 |  |  | 185 |  |  | 167 |
Net earnings | $ | 371 |  |  | $ | 342 |  |  | $ | 1,094 |  |  | $ | 1,034 |
Net earnings attributable to: |  |  |  |  |  |  |
Non-controlling interests | $ | 29 |  |  | $ | 31 |  |  | $ | 86 |  |  | $ | 83 |
Preference equity shareholders | 16 |  |  | 16 |  |  | 48 |  |  | 48 |
Common equity shareholders | 326 |  |  | 295 |  |  | 960 |  |  | 903 |
|  | $ | 371 |  |  | $ | 342 |  |  | $ | 1,094 |  |  | $ | 1,034 |
Earnings per common share (Note 10) |  |  |  |  |  |  |
Basic | $ | 0.68 |  |  | $ | 0.63 |  |  | $ | 2.01 |  |  | $ | 1.92 |
Diluted | $ | 0.68 |  |  | $ | 0.62 |  |  | $ | 2.01 |  |  | $ | 1.92 |
See accompanying Notes to Condensed Consolidated Interim Financial Statements

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
| Quarter |  | Year-to-Date
For the periods ended September 30 (in millions of Canadian dollars) | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Net earnings | $ | 371 |  |  | $ | 342 |  |  | $ | 1,094 |  |  | $ | 1,034 |
Other comprehensive income (loss) |  |  |  |  |  |  |
Unrealized foreign currency translation gains (losses) (1) | 1,165 |  |  | 337 |  |  | 1,452 |  |  | (40) |
Other (2) | 25 |  |  | (7) |  |  | 49 |  |  | (3) |
| 1,190 |  |  | 330 |  |  | 1,501 |  |  | (43) |
Comprehensive income | $ | 1,561 |  |  | $ | 672 |  |  | $ | 2,595 |  |  | $ | 991 |
Comprehensive income attributable to: |  |  |  |  |  |  |
Non-controlling interests | $ | 154 |  |  | $ | 64 |  |  | $ | 247 |  |  | $ | 76 |
Preference equity shareholders | 16 |  |  | 16 |  |  | 48 |  |  | 48 |
Common equity shareholders | 1,391 |  |  | 592 |  |  | 2,300 |  |  | 867 |
| $ | 1,561 |  |  | $ | 672 |  |  | $ | 2,595 |  |  | $ | 991 |

(1)Net of hedging activities and income tax recovery of $37 million and $40 million for the three and nine months ended September 30, 2022, respectively (three and nine months ended September 30, 2021 - income tax recovery (expense) of $3 million and $(1) million, respectively).
(2)Net of income tax expense of $11 million and $21 million for the three and nine months ended September 30, 2022, respectively (three and nine months ended September 30, 2021 - income tax recovery of $2 million and $1 million, respectively )
See accompanying Notes to Condensed Consolidated Interim Financial Statements

3 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Interim Financial Statements

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited)
FORTIS INC.
| Quarter |  | Year-to-Date
For the periods ended September 30 (in millions of Canadian dollars) | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Operating activities |  |  |  |  |  |  |
Net earnings | $ | 371 |  |  | $ | 342 |  |  | $ | 1,094 |  |  | $ | 1,034 |
Adjustments to reconcile net earnings to net cash provided by operating activities: |  |  |  |  |  |  |
|  | Depreciation - property, plant and equipment | 369 |  |  | 332 |  |  | 1,091 |  |  | 978 |
|  | Amortization - intangible assets | 37 |  |  | 34 |  |  | 108 |  |  | 102 |
|  | Amortization - other | 16 |  |  | 14 |  |  | 47 |  |  | 41 |
|  | Deferred income tax expense | 64 |  |  | 44 |  |  | 119 |  |  | 109 |
|  | Equity component, allowance for funds used during construction (Note 9) | (19) |  |  | (18) |  |  | (54) |  |  | (57) |
|  | Other | 66 |  |  | 26 |  |  | 120 |  |  | 93 |
Change in long-term regulatory assets and liabilities | 80 |  |  | 15 |  |  | 94 |  |  | 15 |
Change in working capital (Note 11) | (351) |  |  | (78) |  |  | (414) |  |  | (125) |
Cash from operating activities | 633 |  |  | 711 |  |  | 2,205 |  |  | 2,190 |
Investing activities |  |  |  |  |  |  |
Additions to property, plant and equipment | (907) |  |  | (777) |  |  | (2,600) |  |  | (2,292) |
Additions to intangible assets | (44) |  |  | (41) |  |  | (151) |  |  | (120) |
Contributions in aid of construction | 24 |  |  | 21 |  |  | 85 |  |  | 55 |
Contributions to equity-accounted investees | (100) |  |  | — |  |  | (100) |  |  | — |
Other | (46) |  |  | (48) |  |  | (141) |  |  | (146) |
Cash used in investing activities | (1,073) |  |  | (845) |  |  | (2,907) |  |  | (2,503) |
Financing activities |  |  |  |  |  |  |
Proceeds from long-term debt, net of issuance costs | 936 |  |  | 92 |  |  | 2,581 |  |  | 1,218 |
Repayments of long-term debt and finance leases | (670) |  |  | (440) |  |  | (1,506) |  |  | (562) |
Borrowings under committed credit facilities | 1,674 |  |  | 1,209 |  |  | 4,660 |  |  | 3,477 |
Repayments under committed credit facilities | (1,066) |  |  | (881) |  |  | (4,218) |  |  | (3,453) |
Net change in short-term borrowings | (204) |  |  | (32) |  |  | (46) |  |  | 112 |
Issue of common shares, net of costs and dividends reinvested | 6 |  |  | 8 |  |  | 46 |  |  | 52 |
Dividends |  |  |  |  |  |  |
|  | Common shares, net of dividends reinvested | (168) |  |  | (152) |  |  | (492) |  |  | (449) |
|  | Preference shares | (16) |  |  | (16) |  |  | (48) |  |  | (48) |
|  | Subsidiary dividends paid to non-controlling interests | (21) |  |  | (18) |  |  | (52) |  |  | (46) |
Other | — |  |  | (19) |  |  | 7 |  |  | (24) |
Cash from (used in) financing activities | 471 |  |  | (249) |  |  | 932 |  |  | 277 |
Effect of exchange rate changes on cash and cash equivalents | 26 |  |  | 9 |  |  | 34 |  |  | 12 |
Change in cash and cash equivalents | 57 |  |  | (374) |  |  | 264 |  |  | (24) |
Cash and cash equivalents, beginning of period | 338 |  |  | 599 |  |  | 131 |  |  | 249 |
Cash and cash equivalents, end of period | $ | 395 |  |  | $ | 225 |  |  | $ | 395 |  |  | $ | 225 |
Supplementary Cash Flow Information (Note 11)
See accompanying Notes to Condensed Consolidated Interim Financial Statements

4 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Interim Financial Statements

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (Unaudited)
FORTIS INC.
For the three months ended September 30 (in millions of Canadian dollars, except share numbers) | Common Shares (# millions) |  | Common Shares |  | Preference Shares |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Income (Loss) |  | Retained Earnings |  | Non-Controlling Interests |  | Total Equity
As at June 30, 2022 | 478.7 |  |  | $ | 14,465 |  |  | $ | 1,623 |  |  | $ | 8 |  |  | $ | 235 |  |  | $ | 3,837 |  |  | $ | 1,692 |  |  | $ | 21,860 |
Net earnings | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 342 |  |  | 29 |  |  | 371 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | 1,065 |  |  | — |  |  | 125 |  |  | 1,190 |
Common shares issued | 1.6 |  |  | 93 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 93 |
Subsidiary dividends paid to non-controlling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (21) |  |  | (21) |
Dividends declared on common shares ($1.10 per share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (528) |  |  | — |  |  | (528) |
Dividends on preference shares | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (16) |  |  | — |  |  | (16) |
Other | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2 |  |  | 2 |
As at September 30, 2022 | 480.3 |  |  | $ | 14,558 |  |  | $ | 1,623 |  |  | $ | 8 |  |  | $ | 1,300 |  |  | $ | 3,635 |  |  | $ | 1,827 |  |  | $ | 22,951 |
As at June 30, 2021 | 471.2 |  |  | $ | 14,040 |  |  | $ | 1,623 |  |  | $ | 8 |  |  | $ | (299) |  |  | $ | 3,581 |  |  | $ | 1,569 |  |  | $ | 20,522 |
Net earnings | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 311 |  |  | 31 |  |  | 342 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | 297 |  |  | — |  |  | 33 |  |  | 330 |
Common shares issued | 1.7 |  |  | 95 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 95 |
Subsidiary dividends paid to non-controlling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (18) |  |  | (18) |
Dividends declared on common shares ($1.04 per share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (491) |  |  | — |  |  | (491) |
Dividends on preference shares | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (16) |  |  | — |  |  | (16) |
Other | — |  |  | — |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | 1 |  |  | 2 |
As at September 30, 2021 | 472.9 |  |  | $ | 14,135 |  |  | $ | 1,623 |  |  | $ | 9 |  |  | $ | (2) |  |  | $ | 3,385 |  |  | $ | 1,616 |  |  | $ | 20,766 |
See accompanying Notes to Condensed Consolidated Interim Financial Statements |  |  |  |  |  |  |

5 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Interim Financial Statements

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (Unaudited)
FORTIS INC.
For the nine months ended September 30 (in millions of Canadian dollars, except share numbers) | Common Shares (# millions) |  | Common Shares |  | Preference Shares |  | Additional Paid-In Capital |  | Accumulated Other Comprehensive Income (Loss) |  | Retained Earnings |  | Non-Controlling Interests |  | Total Equity
As at December 31, 2021 | 474.8 |  |  | $ | 14,237 |  |  | $ | 1,623 |  |  | $ | 10 |  |  | $ | (40) |  |  | $ | 3,458 |  |  | $ | 1,628 |  |  | $ | 20,916 |
Net earnings | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,008 |  |  | 86 |  |  | 1,094 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | 1,340 |  |  | — |  |  | 161 |  |  | 1,501 |
Common shares issued | 5.5 |  |  | 321 |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | 319 |
Subsidiary dividends paid to non-controlling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (52) |  |  | (52) |
Dividends declared on common shares ($1.635 per share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (783) |  |  | — |  |  | (783) |
Dividends on preference shares | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (48) |  |  | — |  |  | (48) |
Other | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  | 4 |
As at September 30, 2022 | 480.3 |  |  | $ | 14,558 |  |  | $ | 1,623 |  |  | $ | 8 |  |  | $ | 1,300 |  |  | $ | 3,635 |  |  | $ | 1,827 |  |  | $ | 22,951 |
As at December 31, 2020 | 466.8 |  |  | $ | 13,819 |  |  | $ | 1,623 |  |  | $ | 11 |  |  | $ | 34 |  |  | $ | 3,210 |  |  | $ | 1,587 |  |  | $ | 20,284 |
Net earnings | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 951 |  |  | 83 |  |  | 1,034 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | (36) |  |  | — |  |  | (7) |  |  | (43) |
Common shares issued | 6.1 |  |  | 316 |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | 314 |
Subsidiary dividends paid to non-controlling interests | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (46) |  |  | (46) |
Dividends declared on common shares ($1.545 per share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (728) |  |  | — |  |  | (728) |
Dividends on preference shares | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (48) |  |  | — |  |  | (48) |
Other | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1) |  |  | (1) |
As at September 30, 2021 | 472.9 |  |  | $ | 14,135 |  |  | $ | 1,623 |  |  | $ | 9 |  |  | $ | (2) |  |  | $ | 3,385 |  |  | $ | 1,616 |  |  | $ | 20,766 |
See accompanying Notes to Condensed Consolidated Interim Financial Statements |  |  |  |  |  |  |

6 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

1. DESCRIPTION OF BUSINESS
Nature of Operations
Fortis Inc. ("Fortis" or the "Corporation") is a well-diversified North American regulated electric and gas utility holding company.
Earnings for interim periods may not be indicative of annual results due to the impact of seasonal weather conditions on customer demand and market pricing, changes in foreign exchange rates and the timing and recognition of regulatory decisions. Earnings of the gas utilities tend to be highest in the first and fourth quarters due to space-heating requirements. Earnings of the electric distribution utilities in the U.S. tend to be highest in the second and third quarters due to the use of air conditioning and other cooling equipment.
Entities within the reporting segments that follow operate with substantial autonomy.
Regulated Utilities
ITC: ITC Investment Holdings Inc., ITC Holdings Corp. and the electric transmission operations of its regulated operating subsidiaries, which include International Transmission Company, Michigan Electric Transmission Company, LLC, ITC Midwest LLC ("ITC Midwest") and ITC Great Plains, LLC. Fortis owns 80.1% of ITC and an affiliate of GIC Private Limited owns a 19.9% minority interest.
UNS Energy: UNS Energy Corporation, which primarily includes Tucson Electric Power Company ("TEP"), UNS Electric, Inc. and UNS Gas, Inc.
Central Hudson: CH Energy Group, Inc., which primarily includes Central Hudson Gas & Electric Corporation.
FortisBC Energy: FortisBC Energy Inc.
FortisAlberta: FortisAlberta Inc.
FortisBC Electric: FortisBC Inc.
Other Electric: Eastern Canadian and Caribbean utilities, as follows: Newfoundland Power Inc.; Maritime Electric Company, Limited; FortisOntario Inc.; a 39% equity investment in Wataynikaneyap Power Limited Partnership; an approximate 60% controlling interest in Caribbean Utilities Company, Ltd. ("Caribbean Utilities"); FortisTCI Limited and Turks and Caicos Utilities Limited (collectively "FortisTCI"); and a 33% equity investment in Belize Electricity Limited ("Belize Electricity").
Non-Regulated
Energy Infrastructure: Long-term contracted generation assets in Belize and the Aitken Creek natural gas storage facility ("Aitken Creek") in British Columbia.
Corporate and Other: Captures expenses and revenues not specifically related to any reportable segment and those business operations that are below the required threshold for segmented reporting, including net corporate expenses of Fortis and non-regulated holding company expenses.
2. REGULATORY DEVELOPMENTS
Regulation of the Corporation's utilities is generally consistent with that disclosed in Note 2 of the Corporation's annual audited consolidated financial statements ("2021 Annual Financial Statements"). A summary of significant regulatory developments year-to-date 2022 follows.
ITC
ITC Midwest Capital Structure Complaint: In May 2022, the Iowa Coalition for Affordable Transmission filed a complaint with the Federal Energy Regulatory Commission ("FERC") under Section 206 of the Federal Power Act requesting that ITC Midwest's common equity component of capital structure be reduced from 60% to 53%. The complaint alleges that ITC Midwest does not meet FERC's three-part test for authorizing the use of the utility's actual capital structure for rate-making purposes. ITC Midwest filed a response to the complaint in June 2022. As at September 30, 2022, ITC Midwest has not recorded a regulatory liability related to the complaint. The timing and outcome of this proceeding remain unknown.
MISO Base ROE: In August 2022, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision vacating certain FERC orders that had established the methodology for setting the base return on equity (“ROE”) for transmission owners operating in the Midcontinent Independent System Operator, Inc. (“MISO”) region, including ITC. This matter dates back to complaints filed at FERC in 2013 and 2015 challenging the MISO base ROE then in effect. The court has remanded the matter to FERC for further process, the timing and outcome of which is unknown.

7 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

2. REGULATORY DEVELOPMENTS (cont'd)
UNS Energy
TEP General Rate Application: In June 2022, TEP filed a general rate application with the Arizona Corporation Commission requesting new rates effective September 1, 2023 using a December 31, 2021 test year. The application reflects a US$136 million net increase in non-fuel and fuel-related revenue, as well as proposals to eliminate certain adjustor mechanisms, and modify an existing adjustor to provide more timely recovery of clean energy investments. The timing and outcome of this proceeding is unknown.
FERC Rate Case: In March 2022, FERC approved the settlement agreement for formula transmission rates at TEP, including an ROE of 9.79%.
FortisBC Energy and FortisBC Electric
Generic Cost of Capital ("GCOC") Proceeding: In 2021, the British Columbia Utilities Commission ("BCUC") initiated a proceeding including a review of the common equity component of capital structure and the allowed ROE. FortisBC filed evidence with the BCUC in the first quarter of 2022 and the proceeding remains ongoing. The timing and outcome of this proceeding, including the effective date of any change in the cost of capital in 2023, remain unknown.
FortisAlberta
2023 GCOC Proceeding: In March 2022, the Alberta Utilities Commission ("AUC") issued a decision extending the existing allowed ROE of 8.5% using a 37% equity component of capital structure through 2023.
2023 Cost of Service ("COS") Application: In July 2022, the AUC issued a decision largely accepting the forecast requested in FortisAlberta's COS application. The AUC directed FortisAlberta to update and refile its 2023 revenue requirement, which was filed in September 2022. A final decision on this filing is expected in the fourth quarter of 2022.
3. ACCOUNTING POLICIES
These condensed consolidated interim financial statements ("Interim Financial Statements") have been prepared and presented in accordance with accounting principles generally accepted in the United States of America for rate-regulated entities and are in Canadian dollars unless otherwise indicated.
The Interim Financial Statements include the accounts of the Corporation and its subsidiaries and reflect the equity method of accounting for entities in which Fortis has significant influence, but not control, and proportionate consolidation for assets that are jointly owned with non-affiliated entities.
Intercompany transactions have been eliminated, except for transactions between non-regulated and regulated entities in accordance with U.S. GAAP for rate-regulated entities.
These Interim Financial Statements do not include all of the disclosures required in the annual financial statements and should be read in conjunction with the Corporation's 2021 Annual Financial Statements. In management's opinion, these Interim Financial Statements include all adjustments that are of a normal recurring nature, necessary for fair presentation.
The preparation of the Interim Financial Statements required management to make estimates and judgments, including those related to regulatory decisions, that affect the reported amounts of, and disclosures related to, assets, liabilities, revenues, expenses, gains, losses and contingencies. Actual results could differ materially from estimates.
The accounting policies applied herein are consistent with those outlined in the Corporation's 2021 Annual Financial Statements.
Future Accounting Pronouncements
The Corporation considers the applicability and impact of all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board. Any ASUs not included in these Interim Financial Statements were assessed and determined to be either not applicable to the Corporation or are not expected to have a material impact on the Interim Financial Statements.

8 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

4. SEGMENTED INFORMATION
Fortis segments its business based on regulatory jurisdiction and service territory, as well as the information used by its President and Chief Executive Officer in deciding how to allocate resources. Segment performance is evaluated principally on net earnings attributable to common equity shareholders.
Related-Party and Inter-Company Transactions
Related-party transactions are in the normal course of operations and are measured at the amount of consideration agreed to by the related parties. There were no material related-party transactions for the three and nine months ended September 30, 2022 and 2021.
The lease of gas storage capacity and gas sales from Aitken Creek to FortisBC Energy of $7 million and $27 million for the three and nine months ended September 30, 2022, respectively (three and nine months ended September 30, 2021 - $6 million and $21 million, respectively) are inter-company transactions between non-regulated and regulated entities, which were not eliminated on consolidation.
As at September 30, 2022, accounts receivable included approximately $14 million due from Belize Electricity (December 31, 2021 - $22 million).
Fortis periodically provides short-term financing to subsidiaries to support capital expenditures and seasonal working capital requirements, the impacts of which are eliminated on consolidation. As at September 30, 2022, inter-segment loans of $35 million were outstanding (December 31, 2021 - $126 million). Interest charged on inter-segment loans was not material for the three and nine months ended September 30, 2022 and 2021.

9 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

4. SEGMENTED INFORMATION (cont'd)

| Regulated |  | Non-Regulated |  |
|  |  |  |  |  | Energy |  | Inter- |
|  | UNS | Central | FortisBC | Fortis | FortisBC | Other | Sub |  | Infra- | Corporate | segment |
($ millions) | ITC | Energy | Hudson | Energy | Alberta | Electric | Electric | Total |  | structure | and Other | eliminations | Total
Quarter ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue | 478 |  | 856 |  | 273 |  | 269 |  | 175 |  | 114 |  | 361 |  | 2,526 |  |  | 27 |  | — |  | — |  | 2,553 |
Energy supply costs | — |  | 380 |  | 84 |  | 104 |  | — |  | 35 |  | 200 |  | 803 |  |  | 1 |  | — |  | — |  | 804 |
Operating expenses | 120 |  | 168 |  | 133 |  | 88 |  | 38 |  | 30 |  | 52 |  | 629 |  |  | 9 |  | (8) |  | — |  | 630 |
Depreciation and amortization | 97 |  | 95 |  | 26 |  | 74 |  | 61 |  | 17 |  | 48 |  | 418 |  |  | 4 |  | — |  | — |  | 422 |
Operating income | 261 |  | 213 |  | 30 |  | 3 |  | 76 |  | 32 |  | 61 |  | 676 |  |  | 13 |  | 8 |  | — |  | 697 |
Other income, net | 11 |  | 6 |  | 13 |  | 7 |  | 1 |  | 2 |  | 2 |  | 42 |  |  | — |  | (23) |  | — |  | 19 |
Finance charges | 90 |  | 32 |  | 13 |  | 37 |  | 28 |  | 19 |  | 18 |  | 237 |  |  | — |  | 43 |  | — |  | 280 |
Income tax expense | 55 |  | 24 |  | 6 |  | (11) |  | 3 |  | 2 |  | 4 |  | 83 |  |  | 3 |  | (21) |  | — |  | 65 |
Net earnings | 127 |  | 163 |  | 24 |  | (16) |  | 46 |  | 13 |  | 41 |  | 398 |  |  | 10 |  | (37) |  | — |  | 371 |
Non-controlling interests | 22 |  | — |  | — |  | 1 |  | — |  | — |  | 6 |  | 29 |  |  | — |  | — |  | — |  | 29 |
Preference share dividends | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |  | — |  | 16 |  | — |  | 16 |
Net earnings attributable to common equity shareholders | 105 |  | 163 |  | 24 |  | (17) |  | 46 |  | 13 |  | 35 |  | 369 |  |  | 10 |  | (53) |  | — |  | 326 |
Additions to property, plant and equipment and intangible assets | 313 |  | 139 |  | 83 |  | 150 |  | 126 |  | 32 |  | 98 |  | 941 |  |  | 10 |  | — |  | — |  | 951 |
As at September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill | 8,487 |  | 1,911 |  | 624 |  | 913 |  | 228 |  | 235 |  | 262 |  | 12,660 |  |  | 27 |  | — |  | — |  | 12,687 |
Total assets | 23,704 |  | 12,892 |  | 5,156 |  | 8,474 |  | 5,464 |  | 2,636 |  | 4,773 |  | 63,099 |  |  | 861 |  | 179 |  | (55) |  | 64,084 |
Quarter ended September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue | 429 |  | 716 |  | 225 |  | 220 |  | 168 |  | 107 |  | 331 |  | 2,196 |  |  | — |  | — |  | — |  | 2,196 |
Energy supply costs | — |  | 289 |  | 63 |  | 62 |  | — |  | 33 |  | 177 |  | 624 |  |  | — |  | — |  | — |  | 624 |
Operating expenses | 115 |  | 157 |  | 127 |  | 80 |  | 35 |  | 26 |  | 49 |  | 589 |  |  | 6 |  | (1) |  | — |  | 594 |
Depreciation and amortization | 74 |  | 88 |  | 22 |  | 70 |  | 58 |  | 17 |  | 45 |  | 374 |  |  | 5 |  | 1 |  | — |  | 380 |
Operating income | 240 |  | 182 |  | 13 |  | 8 |  | 75 |  | 31 |  | 60 |  | 609 |  |  | (11) |  | — |  | — |  | 598 |
Other income, net | 11 |  | 6 |  | 9 |  | 3 |  | — |  | 1 |  | 3 |  | 33 |  |  | — |  | 4 |  | — |  | 37 |
Finance charges | 65 |  | 32 |  | 11 |  | 36 |  | 27 |  | 18 |  | 18 |  | 207 |  |  | — |  | 37 |  | — |  | 244 |
Income tax expense | 44 |  | 25 |  | 2 |  | (7) |  | 1 |  | 2 |  | 5 |  | 72 |  |  | — |  | (23) |  | — |  | 49 |
Net earnings | 142 |  | 131 |  | 9 |  | (18) |  | 47 |  | 12 |  | 40 |  | 363 |  |  | (11) |  | (10) |  | — |  | 342 |
Non-controlling interests | 25 |  | — |  | — |  | 1 |  | — |  | — |  | 5 |  | 31 |  |  | — |  | — |  | — |  | 31 |
Preference share dividends | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |  | — |  | 16 |  | — |  | 16 |
Net earnings attributable to common equity shareholders | 117 |  | 131 |  | 9 |  | (19) |  | 47 |  | 12 |  | 35 |  | 332 |  |  | (11) |  | (26) |  | — |  | 295 |
Additions to property, plant and equipment and intangible assets | 230 |  | 177 |  | 76 |  | 125 |  | 87 |  | 34 |  | 80 |  | 809 |  |  | 9 |  | — |  | — |  | 818 |
As at September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill | 7,782 |  | 1,752 |  | 572 |  | 913 |  | 228 |  | 235 |  | 246 |  | 11,728 |  |  | 27 |  | — |  | — |  | 11,755 |
Total assets | 20,865 |  | 11,318 |  | 4,125 |  | 7,893 |  | 5,201 |  | 2,506 |  | 4,291 |  | 56,199 |  |  | 772 |  | 217 |  | (51) |  | 57,137 |

10 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

4. SEGMENTED INFORMATION (cont'd)

| Regulated |  | Non-Regulated |  |
|  |  |  |  |  | Energy |  | Inter- |
|  | UNS | Central | FortisBC | Fortis | FortisBC | Other | Sub |  | Infra- | Corporate | segment |
($ millions) | ITC | Energy | Hudson | Energy | Alberta | Electric | Electric | Total |  | structure | and Other | eliminations | Total
Year-to-date September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue | 1,406 |  | 2,042 |  | 929 |  | 1,359 |  | 511 |  | 351 |  | 1,204 |  | 7,802 |  |  | 73 |  | — |  | — |  | 7,875 |
Energy supply costs | — |  | 862 |  | 347 |  | 639 |  | — |  | 96 |  | 736 |  | 2,680 |  |  | 4 |  | — |  | — |  | 2,684 |
Operating expenses | 363 |  | 497 |  | 425 |  | 259 |  | 122 |  | 96 |  | 157 |  | 1,919 |  |  | 29 |  | 10 |  | — |  | 1,958 |
Depreciation and amortization | 283 |  | 276 |  | 77 |  | 224 |  | 182 |  | 51 |  | 139 |  | 1,232 |  |  | 12 |  | 2 |  | — |  | 1,246 |
Operating income | 760 |  | 407 |  | 80 |  | 237 |  | 207 |  | 108 |  | 172 |  | 1,971 |  |  | 28 |  | (12) |  | — |  | 1,987 |
Other income, net | 30 |  | 12 |  | 43 |  | 16 |  | 2 |  | 5 |  | 5 |  | 113 |  |  | — |  | (17) |  | — |  | 96 |
Finance charges | 253 |  | 93 |  | 39 |  | 108 |  | 82 |  | 56 |  | 55 |  | 686 |  |  | — |  | 118 |  | — |  | 804 |
Income tax expense | 137 |  | 43 |  | 18 |  | 25 |  | 10 |  | 7 |  | 15 |  | 255 |  |  | 5 |  | (75) |  | — |  | 185 |
Net earnings | 400 |  | 283 |  | 66 |  | 120 |  | 117 |  | 50 |  | 107 |  | 1,143 |  |  | 23 |  | (72) |  | — |  | 1,094 |
Non-controlling interests | 72 |  | — |  | — |  | 1 |  | — |  | — |  | 13 |  | 86 |  |  | — |  | — |  | — |  | 86 |
Preference share dividends | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |  | — |  | 48 |  | — |  | 48 |
Net earnings attributable to common equity shareholders | 328 |  | 283 |  | 66 |  | 119 |  | 117 |  | 50 |  | 94 |  | 1,057 |  |  | 23 |  | (120) |  | — |  | 960 |
Additions to property, plant and equipment and intangible assets | 920 |  | 460 |  | 212 |  | 414 |  | 356 |  | 92 |  | 276 |  | 2,730 |  |  | 21 |  | — |  | — |  | 2,751 |
As at September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill | 8,487 |  | 1,911 |  | 624 |  | 913 |  | 228 |  | 235 |  | 262 |  | 12,660 |  |  | 27 |  | — |  | — |  | 12,687 |
Total assets | 23,704 |  | 12,892 |  | 5,156 |  | 8,474 |  | 5,464 |  | 2,636 |  | 4,773 |  | 63,099 |  |  | 861 |  | 179 |  | (55) |  | 64,084 |
Year-to-date September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue | 1,273 |  | 1,794 |  | 717 |  | 1,123 |  | 488 |  | 335 |  | 1,097 |  | 6,827 |  |  | 38 |  | — |  | — |  | 6,865 |
Energy supply costs | — |  | 693 |  | 203 |  | 424 |  | — |  | 94 |  | 650 |  | 2,064 |  |  | 2 |  | — |  | — |  | 2,066 |
Operating expenses | 347 |  | 487 |  | 374 |  | 252 |  | 113 |  | 89 |  | 146 |  | 1,808 |  |  | 24 |  | 23 |  | — |  | 1,855 |
Depreciation and amortization | 216 |  | 254 |  | 67 |  | 211 |  | 173 |  | 49 |  | 135 |  | 1,105 |  |  | 13 |  | 3 |  | — |  | 1,121 |
Operating income | 710 |  | 360 |  | 73 |  | 236 |  | 202 |  | 103 |  | 166 |  | 1,850 |  |  | (1) |  | (26) |  | — |  | 1,823 |
Other income, net | 32 |  | 33 |  | 26 |  | 8 |  | 1 |  | 4 |  | 4 |  | 108 |  |  | 1 |  | 20 |  | — |  | 129 |
Finance charges | 222 |  | 91 |  | 34 |  | 109 |  | 80 |  | 54 |  | 54 |  | 644 |  |  | — |  | 107 |  | — |  | 751 |
Income tax expense | 126 |  | 43 |  | 11 |  | 27 |  | 5 |  | 8 |  | 16 |  | 236 |  |  | 2 |  | (71) |  | — |  | 167 |
Net earnings | 394 |  | 259 |  | 54 |  | 108 |  | 118 |  | 45 |  | 100 |  | 1,078 |  |  | (2) |  | (42) |  | — |  | 1,034 |
Non-controlling interests | 71 |  | — |  | — |  | 1 |  | — |  | — |  | 11 |  | 83 |  |  | — |  | — |  | — |  | 83 |
Preference share dividends | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  |  | — |  | 48 |  | — |  | 48 |
Net earnings attributable to common equity shareholders | 323 |  | 259 |  | 54 |  | 107 |  | 118 |  | 45 |  | 89 |  | 995 |  |  | (2) |  | (90) |  | — |  | 903 |
Additions to property, plant and equipment and intangible assets | 776 |  | 514 |  | 209 |  | 317 |  | 273 |  | 92 |  | 218 |  | 2,399 |  |  | 13 |  | — |  | — |  | 2,412 |
As at September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill | 7,782 |  | 1,752 |  | 572 |  | 913 |  | 228 |  | 235 |  | 246 |  | 11,728 |  |  | 27 |  | — |  | — |  | 11,755 |
Total assets | 20,865 |  | 11,318 |  | 4,125 |  | 7,893 |  | 5,201 |  | 2,506 |  | 4,291 |  | 56,199 |  |  | 772 |  | 217 |  | (51) |  | 57,137 |

11 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

5. ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses balance, which is recorded in accounts receivable and other current assets, changed as follows.

| Quarter |  | Year-to-Date
($ millions) | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Periods ended September 30 |  |  |  |  |  |  |
Balance, beginning of period | (53) |  |  | (62) |  |  | (53) |  |  | (64) |
Credit loss expense | (6) |  |  | (1) |  |  | (16) |  |  | (9) |
Credit loss deferral | (4) |  |  | — |  |  | (4) |  |  | — |
Write-offs, net of recoveries | 10 |  |  | 5 |  |  | 21 |  |  | 13 |
Foreign exchange | (2) |  |  | (2) |  |  | (3) |  |  | — |
Balance, end of period | (55) |  |  | (60) |  |  | (55) |  |  | (60) |

See Note 12 for disclosure on the Corporation's credit risk.
6. REGULATORY ASSETS AND LIABILITIES
Detailed information about the Corporation's regulatory assets and liabilities is provided in Note 8 to the 2021 Annual Financial Statements. A summary follows.

| As at
| September 30, |  | December 31,
($ millions) | 2022 |  |  | 2021 |
Regulatory assets |  |  |
Deferred income taxes | 1,869 |  |  | 1,806 |
Rate stabilization and related accounts | 535 |  |  | 339 |
Deferred energy management costs | 413 |  |  | 384 |
Employee future benefits | 397 |  |  | 388 |
Deferred lease costs | 139 |  |  | 127 |
Manufactured gas plant site remediation deferral | 99 |  |  | 96 |
Generation early retirement costs | 85 |  |  | 48 |
Deferred storm costs (1) | 67 |  |  | 17 |
Derivatives | 40 |  |  | 20 |
Other regulatory assets | 386 |  |  | 364 |
Total regulatory assets | 4,030 |  |  | 3,589 |
Less: Current portion | (739) |  |  | (492) |
Long-term regulatory assets | 3,291 |  |  | 3,097 |
Regulatory liabilities |  |  |
Deferred income taxes | 1,399 |  |  | 1,289 |
Future cost of removal | 1,284 |  |  | 1,217 |
Derivatives | 232 |  |  | 52 |
Rate stabilization and related accounts | 220 |  |  | 116 |
Employee future benefits | 208 |  |  | 196 |
Renewable energy surcharge | 126 |  |  | 107 |
Energy efficiency liability | 102 |  |  | 83 |
Electric and gas moderator account | 41 |  |  | 37 |
Other regulatory liabilities | 178 |  |  | 125 |
Total regulatory liabilities | 3,790 |  |  | 3,222 |
Less: Current portion | (509) |  |  | (357) |
Long-term regulatory liabilities | 3,281 |  |  | 2,865 |

(1) Includes incremental costs incurred at Central Hudson associated with restoration activities due to significant storm events. Incremental costs incurred in excess of that collected in customer rates are recovered through Central Hudson's rate stabilization account.

12 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

7. LONG-TERM DEBT | As at
| September 30, |  | December 31,
($ millions) | 2022 |  |  | 2021 |
Long-term debt | 26,810 |  |  | 24,177 |
Credit facility borrowings | 1,856 |  |  | 1,305 |
Total long-term debt | 28,666 |  |  | 25,482 |
Less: Deferred financing costs and debt discounts | (167) |  |  | (147) |
Less: Current installments of long-term debt | (2,570) |  |  | (1,628) |
| 25,929 |  |  | 23,707 |

Long-Term Debt Issuances |  | Interest |  |  |  |
Year-to-Date September 30, 2022 | Month | Rate |  |  |  | Use of
($ millions, except as noted) | Issued | (%) |  | Maturity | Amount | Proceeds
ITC |  |  |  |  |  |
Secured first mortgage bonds | January | 2.93 |  |  | 2052 | US | 150 |  | (1) (2) (3) (4)
Secured senior notes | May | 3.05 |  |  | 2052 | US | 75 |  | (1) (3) (4)
Unsecured senior notes | September | 4.95 |  |  | 2027 | US | 600 |  | (1) (4) (5)
UNS Energy |  |  |  |  |  |
Unsecured senior notes | February | 3.25 |  |  | 2032 | US | 325 |  | (4) (5)
Central Hudson |  |  |  |  |  |
Unsecured senior notes | January | 2.37 |  |  | 2027 | US | 50 |  | (4) (5)
Unsecured senior notes | January | 2.59 |  |  | 2029 | US | 60 |  | (4) (5)
Unsecured senior notes | September | 5.07 |  |  | 2032 | US | 100 |  | (1) (4)
Unsecured senior notes | September | 5.42 |  |  | 2052 | US | 10 |  | (1) (4)
FortisBC Electric |  |  |  |  |  |
Unsecured debentures | March | 4.16 |  |  | 2052 | 100 |  | (1)
Newfoundland Power |  |  |  |  |  |
First mortgage sinking fund bonds | April | 4.20 |  |  | 2052 | 75 |  | (1) (4) (5)
FortisAlberta |  |  |  |  |  |
Senior unsecured debentures | May | 4.62 |  |  | 2052 | 125 |  | (1)
Fortis |  |  |  |  |  |
Unsecured senior notes | May | 4.43 |  | (6) | 2029 | 500 |  | (4) (7)

(1) Repay short-term and/or credit facility borrowings
(2) US$20 million to fund or refinance a portfolio of eligible green projects
(3) Fund capital expenditures
(4) General corporate purposes
(5) Repay maturing long-term debt
(6) The Corporation entered into cross-currency interest rate swaps to effectively convert the debt into US$391 million with an interest rate of 4.34% (Note 12)
(7) Fund the June 2022 redemption of the Corporations $500 million, 2.85% senior unsecured notes due December 2023
In October 2022, ITC issued 5-year US$75 million and 30-year US$75 million secured first mortgage bonds at 3.87% and 4.53%, respectively. The net proceeds are expected to be used to fund or refinance a portfolio of eligible renewable energy projects.
In December 2020, Fortis filed a short-form base shelf prospectus with a 25-month life under which it may issue common or preference shares, subscription receipts or debt securities in an aggregate principal amount of up to $2.0 billion. As at September 30, 2022, $1.0 billion remained available under the short-form base shelf prospectus.

13 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

7. LONG-TERM DEBT (cont'd)

|  |  |  |  | As at
Credit facilities | Regulated |  | Corporate |  | September 30, |  | December 31,
($ millions) | Utilities |  | and Other |  | 2022 |  |  | 2021 |
Total credit facilities | 3,748 |  |  | 2,068 |  |  | 5,816 |  |  | 4,846 |
Credit facilities utilized: |  |  |  |  |  |  |
Short-term borrowings (1) | (232) |  |  | — |  |  | (232) |  |  | (247) |
Long-term debt (including current portion) (2) | (1,144) |  |  | (712) |  |  | (1,856) |  |  | (1,305) |
Letters of credit outstanding | (68) |  |  | (52) |  |  | (120) |  |  | (115) |
Credit facilities unutilized | 2,304 |  |  | 1,304 |  |  | 3,608 |  |  | 3,179 |

(1) The weighted average interest rate was 3.6% (December 31, 2021 - 0.6%).
(2) The weighted average interest rate was 3.7% (December 31, 2021 - 0.9%). The current portion was $1,451 million (December 31, 2021 - $888 million).
Credit facilities are syndicated primarily with large banks in Canada and the U.S., with no one bank holding more than approximately 20% of the Corporation's total revolving credit facilities. Approximately $5.6 billion of the total credit facilities are committed with maturities ranging from 2023 through 2027.
See Note 14 in the 2021 Annual Financial Statements for a description of the credit facilities as at December 31, 2021.
In April 2022, Central Hudson increased its total credit facilities available from US$200 million to US$250 million.
In May 2022, the Corporation amended its unsecured $1.3 billion revolving term committed credit facility agreement to extend the maturity to July 2027, and to establish a sustainability-linked loan structure based on the Corporation’s achievement of targets for diversity on the Board of Directors and Scope 1 greenhouse gas emissions for 2022 through 2025. Maximum potential annual margin pricing adjustments are +/- 5 basis points and +/- 1 basis point for drawn and undrawn funds, respectively.
Also in May 2022, the Corporation entered into an unsecured US$500 million non-revolving term cr edit facility. The facility has an initial one-year term and is repayable at any time without penalty.

14 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

8. EMPLOYEE FUTURE BENEFITS
Fortis and each subsidiary maintain one or a combination of defined benefit pension plans and defined contribution pension plans, as well as other post-employment benefit ("OPEB") plans, including health and dental coverage and life insurance benefits, for qualifying members. The net benefit cost is detailed below.

| Defined Benefit Pension Plans |  | OPEB Plans
($ millions) | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Quarter ended September 30 |  |  |  |  |  |  |
Service costs | 27 |  |  | 27 |  |  | 9 |  |  | 8 |
Interest costs | 28 |  |  | 24 |  |  | 5 |  |  | 5 |
Expected return on plan assets | (50) |  |  | (45) |  |  | (6) |  |  | (5) |
Amortization of actuarial losses (gains) | — |  |  | 9 |  |  | (2) |  |  | (1) |
Amortization of past service credits/plan amendments | — |  |  | — |  |  | — |  |  | (1) |
Regulatory adjustments | (2) |  |  | (1) |  |  | 1 |  |  | 1 |
Net benefit cost | 3 |  |  | 14 |  |  | 7 |  |  | 7 |
Year-to-date September 30 |  |  |  |  |  |  |
Service costs | 79 |  |  | 82 |  |  | 26 |  |  | 26 |
Interest costs | 84 |  |  | 73 |  |  | 16 |  |  | 14 |
Expected return on plan assets | (147) |  |  | (133) |  |  | (17) |  |  | (14) |
Amortization of actuarial losses (gains) | 2 |  |  | 27 |  |  | (7) |  |  | (2) |
Amortization of past service credits/plan amendments | (1) |  |  | (1) |  |  | (1) |  |  | (1) |
Regulatory adjustments | (7) |  |  | (2) |  |  | 3 |  |  | 2 |
Net benefit cost | 10 |  |  | 46 |  |  | 20 |  |  | 25 |

Defined contribution pension plan expense for the three and nine months ended September 30, 2022 was $11 million and $37 million, respectively (three and nine months ended September 30, 2021 - $11 million and $34 million, respectively).
9. OTHER INCOME, NET

| Quarter |  | Year-to-Date
($ millions) | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Periods ended September 30 |  |  |  |  |  |  |
Non-service component of net periodic benefit cost | 19 |  |  | 14 |  |  | 68 |  |  | 37 |
Equity component, allowance for funds used during construction | 19 |  |  | 18 |  |  | 54 |  |  | 57 |
(Loss) gain on retirement investments (1) | (4) |  |  | (2) |  |  | (21) |  |  | 4 |
(Loss) gain on derivatives, net | (27) |  |  | 3 |  |  | (25) |  |  | 16 |
Other | 12 |  |  | 4 |  |  | 20 |  |  | 15 |
| 19 |  |  | 37 |  |  | 96 |  |  | 129 |

(1) Includes investments that support supplemental retirement benefits at ITC, UNS Energy and Central Hudson

15 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

10. EARNINGS PER COMMON SHARE
Diluted earnings per share ("EPS") was calculated using the treasury stock method for stock options.

| 2022 | 2021
| Net Earnings | Weighted |  | Net Earnings | Weighted |
| to Common | Average |  | to Common | Average |
| Shareholders | Shares | EPS | Shareholders | Shares | EPS
| ($ millions) | (# millions) | ($) | ($ millions) | (# millions) | ($)
Quarter ended September 30 |  |  |  |  |  |
Basic EPS | 326 |  | 479.4 |  | 0.68 |  | 295 |  | 472.0 |  | 0.63 |
Potential dilutive effect of stock options | — |  | 0.5 |  |  | — |  | 0.5 |  |
Diluted EPS | 326 |  | 479.9 |  | 0.68 |  | 295 |  | 472.5 |  | 0.62 |
Year-to-date September 30 |  |  |  |  |  |
Basic EPS | 960 |  | 477.7 |  | 2.01 |  | 903 |  | 470.0 |  | 1.92 |
Potential dilutive effect of stock options | — |  | 0.5 |  |  | — |  | 0.5 |  |
Diluted EPS | 960 |  | 478.2 |  | 2.01 |  | 903 |  | 470.5 |  | 1.92 |

11. SUPPLEMENTARY CASH FLOW INFORMATION

| Quarter |  | Year-to-Date
($ millions) | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Periods ended September 30 |  |  |  |  |  |  |
Change in working capital |  |  |  |  |  |  |
Accounts receivable and other current assets | (73) |  |  | 31 |  |  | (119) |  |  | 73 |
Prepaid expenses | (91) |  |  | (80) |  |  | (69) |  |  | (57) |
Inventories | (129) |  |  | (108) |  |  | (174) |  |  | (108) |
Regulatory assets - current portion | (139) |  |  | 26 |  |  | (182) |  |  | (43) |
Accounts payable and other current liabilities | 74 |  |  | 65 |  |  | 91 |  |  | 54 |
Regulatory liabilities - current portion | 7 |  |  | (12) |  |  | 39 |  |  | (44) |
| (351) |  |  | (78) |  |  | (414) |  |  | (125) |
Non-cash investing and financing activities |  |  |  |  |  |  |
Accrued capital expenditures | 401 |  |  | 361 |  |  | 401 |  |  | 361 |
Common share dividends reinvested | 88 |  |  | 86 |  |  | 274 |  |  | 262 |
Contributions in aid of construction | 11 |  |  | — |  |  | 11 |  |  | — |

12. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Derivatives
The Corporation generally limits the use of derivatives to those that qualify as accounting, economic or cash flow hedges, or those that are approved for regulatory recovery.
Derivatives are recorded at fair value with certain exceptions including those derivatives that qualify for the normal purchase and normal sale exception. Fair values reflect estimates based on current market information about the derivatives as at the balance sheet dates. The estimates cannot be determined with precision as they involve uncertainties and matters of judgment and, therefore, may not be relevant in predicting the Corporation's future consolidated earnings or cash flow.
Cash flow associated with the settlement of all derivatives is included in operating activities on the condensed consolidated interim statements of cash flows.

16 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

12. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd)
Energy Contracts Subject to Regulatory Deferral
UNS Energy holds electricity power purchase contracts, customer supply contracts and gas swap contracts to reduce its exposure to energy price risk. Fair values are measured primarily under the market approach using independent third-party information, where possible. When published prices are not available, adjustments are applied based on historical price curve relationships, transmission costs and line losses.
Central Hudson holds swap contracts for electricity and natural gas to minimize price volatility by fixing the effective purchase price. Fair values are measured using forward pricing provided by independent third-party information.
FortisBC Energy holds gas supply contracts to fix the effective purchase price of natural gas. Fair values reflect the present value of future cash flows based on published market prices and forward natural gas curves.
Unrealized gains or losses associated with changes in the fair value of these energy contracts are deferred as a regulatory asset or liability for recovery from, or refund to, customers in future rates, as permitted by the regulators. As at September 30, 2022, unrealized losses of $40 million (December 31, 2021 - $20 million) were recognized as regulatory assets and unrealized gains of $232 million (December 31, 2021 - $52 million) were recognized as regulatory liabilities.
E nergy Contracts Not Subject to Regulatory Deferral
UNS Energy holds wholesale trading contracts to fix power prices and realize potential margin, of which 10% of any realized gains is shared with customers through rate stabilization accounts. Fair values are measured using a market approach incorporating, where possible, independent third-party information.
Aitken Creek holds gas swap contracts to manage its exposure to changes in natural gas prices, capture natural gas price spreads, and manage the financial risk posed by physical transactions. Fair values are measured using forward pricing from published market sources.
Unrealized gains or losses associated with changes in the fair value of these energy contracts are recognized in revenue. For the three and nine months ended September 30, 2022, unrealized gains of $2 million and $4 million, respectively were recognized in revenue (three and nine months ended September 30, 2021 - unrealized losses of $1 million and $14 million, respectively).
Total Return Swaps
The Corporation holds total return swaps to manage the cash flow risk associated with forecast future cash settlements of certain stock-based compensation obligations. The swaps have a combined notional amount of $114 million and terms of one to three years expiring at varying dates through January 2025. Fair value is measured using an income valuation approach based on forward pricing curves. Unrealized gains and losses associated with changes in fair value are recognized in other income, net. During the three and nine months ended September 30, 2022, unrealized losses of $17 million and $25 million, respectively were recognized in other income, net (three and nine months ended September 30, 2021 - unrealized gains of $3 million and $6 million, respectively).
Foreign Exchange Contracts
The Corporation holds U.S. dollar denominated foreign exchange contracts to help mitigate exposure to foreign exchange rate volatility. The contracts expire at varying dates through February 2024 and have a combined notional amount of $342 million. Fair value was measured using independent third-party information. Unrealized gains and losses associated with changes in fair value are recognized in other income, net. During the three and nine months ended September 30, 2022, unrealized losses recognized in other income, net were $11 million and $13 million, respectively (three and nine months ended September 30, 2021 - unrealized losses of $7 million and $9 million, respectively).
Interest Rate Swaps
ITC entered into forward-starting interest rate swaps to manage the interest rate risk associated with planned borrowings. The swaps, which had a combined notional value of US$450 million, were terminated in September 2022 with the issuance of US$600 million senior notes and realized gains of $52 million (US$39 million) were recognized in other comprehensive income, which will be reclassified to earnings as a component of interest expense over five years.
Cross-Currency Interest Rate Swaps
In May 2022, the Corporation entered into cross-currency interest rate swaps with a 7-year term to effectively convert its $500 million, 4.43% unsecured senior notes to US$391 million, 4.34% debt (Note 7). The Corporation designated this notional U.S. debt as an effective hedge of its foreign net investments and unrealized gains and losses associated with exchange rate fluctuations on the notional U.S. debt are recognized in other comprehensive income, consistent with the translation adjustment related to the net investments. Other changes in the fair value of the swaps are also recognized in other comprehensive income but are excluded from the assessment of hedge effectiveness. Fair value is measured using a discounted cash flow method based on SOFR rates. Unrealized losses of $14 million and $26 million were recorded in other comprehensive income for the three and nine months ended September 30, 2022, respectively.

17 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

12. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd)
Other Investments
UNS Energy holds investments in money market accounts, and ITC and Central Hudson hold investments in trust associated with supplemental retirement benefit plans for select employees, which include mutual funds and money market accounts. These investments are recorded at fair value based on quoted market prices in active markets. Gains and losses are recognized in other income, net. During the three and nine months ended September 30, 2022 losses on these funds of $2 million and $11 million, respectively, were recognized in other income, net (three and nine months ended September 30, 2021 - losses of $2 million and gains of $4 million, respectively).
Recurring Fair Value Measures
The following table presents assets and liabilities that are accounted for at fair value on a recurring basis.

($ millions) | Level 1 (1) |  | Level 2 (1) |  | Level 3 (1) |  | Total
As at September 30, 2022 |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Energy contracts subject to regulatory deferral (2) (3) | — |  |  | 250 |  |  | — |  |  | 250 |
Energy contracts not subject to regulatory deferral (2) | — |  |  | 27 |  |  | — |  |  | 27 |
Other investments (4) | 241 |  |  | — |  |  | — |  |  | 241 |
| 241 |  |  | 277 |  |  | — |  |  | 518 |
Liabilities |  |  |  |  |  |  |
Energy contracts subject to regulatory deferral (3) (5) | — |  |  | (59) |  |  | — |  |  | (59) |
Energy contracts not subject to regulatory deferral (5) | — |  |  | (14) |  |  | — |  |  | (14) |
Foreign exchange contracts, total return and cross-currency interest rate swaps (5) | — |  |  | (41) |  |  | — |  |  | (41) |
| — |  |  | (114) |  |  | — |  |  | (114) |
As at December 31, 2021 |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Energy contracts subject to regulatory deferral (2) (3) | — |  |  | 78 |  |  | — |  |  | 78 |
Energy contracts not subject to regulatory deferral (2) | — |  |  | 16 |  |  | — |  |  | 16 |
Foreign exchange contracts, total return, and interest rate swaps (2) | 23 |  |  | 2 |  |  | — |  |  | 25 |
Other investments (4) | 137 |  |  | — |  |  | — |  |  | 137 |
| 160 |  |  | 96 |  |  | — |  |  | 256 |
Liabilities |  |  |  |  |  |  |
Energy contracts subject to regulatory deferral (3) (5) | — |  |  | (46) |  |  | — |  |  | (46) |
Energy contracts not subject to regulatory deferral (5) | — |  |  | (3) |  |  | — |  |  | (3) |
| — |  |  | (49) |  |  | — |  |  | (49) |

(1)Under the hierarchy, fair value is determined using: (i) level 1 - unadjusted quoted prices in active markets; (ii) level 2 - other pricing inputs directly or indirectly observable in the marketplace; and (iii) level 3 - unobservable inputs, used when observable inputs are not available. Classifications reflect the lowest level of input that is significant to the fair value measurement.
(2)Included in accounts receivable and other current assets or other assets
(3)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.
(4)Included in cash and cash equivalents and other assets
(5)Included in accounts payable and other current liabilities or other liabilities

18 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

12. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd)
Energy Contracts
The Corporation has elected gross presentation for its derivative contracts under master netting agreements and collateral positions, which apply only to its energy contracts. The following table presents the potential offset of counterparty netting.

| Gross Amount |  | Counterparty |  |  |  |
| Recognized in |  | Netting of |  | Cash Collateral |  |
($ millions) | Balance Sheet |  | Energy Contracts |  | Received/Posted |  | Net Amount
As at September 30, 2022 |  |  |  |  |  |  |
Derivative assets | 277 |  |  | 33 |  |  | 52 |  |  | 192 |
Derivative liabilities | (73) |  |  | (33) |  |  | — |  |  | (40) |
As at December 31, 2021 |  |  |  |  |  |  |
Derivative assets | 94 |  |  | 25 |  |  | 7 |  |  | 62 |
Derivative liabilities | (49) |  |  | (25) |  |  | — |  |  | (24) |

Volume of Derivative Activity
As at September 30, 2022, the Corporation had various energy contracts that will settle on various dates through 2029. The volumes related to electricity and natural gas derivatives are outlined below.

| As at
| September 30, |  | December 31,
| 2022 |  |  | 2021 |
Energy contracts subject to regulatory deferral (1) |  |  |
Electricity swap contracts (GWh) | 663 |  |  | 509 |
Electricity power purchase contracts (GWh) | 122 |  |  | 731 |
Gas swap contracts (PJ) | 175 |  |  | 151 |
Gas supply contract premiums (PJ) | 184 |  |  | 144 |
Energy contracts not subject to regulatory deferral (1) |  |  |
Wholesale trading contracts (GWh) | 3,211 |  |  | 1,886 |
Gas swap contracts (PJ) | 38 |  |  | 29 |

(1)GWh means gigawatt hours and PJ means petajoules.
Credit Risk
For cash equivalents, accounts receivable and other current assets, and long-term other receivables, credit risk is generally limited to the carrying value on the consolidated balance sheets. The Corporation's subsidiaries generally have a large and diversified customer base, which minimizes the concentration of credit risk. Policies in place to minimize credit risk include requiring customer deposits, prepayments and/or credit checks for certain customers, performing disconnections and/or using third-party collection agencies for overdue accounts.
ITC has a concentration of credit risk as approximately 70% of its revenue is derived from three customers. The customers have investment-grade credit ratings and credit risk is further managed by MISO by requiring a letter of credit or cash deposit equal to the credit exposure, which is determined by a credit-scoring model and other factors.
FortisAlberta has a concentration of credit risk as distribution service billings are to a relatively small group of retailers. Credit risk is managed by obtaining from the retailers either a cash deposit, letter of credit, an investment-grade credit rating, or a financial guarantee from an entity with an investment-grade credit rating.
UNS Energy, Central Hudson, FortisBC Energy, Aitken Creek and the Corporation may be exposed to credit risk in the event of non-performance by counterparties to derivatives. Credit risk is managed by net settling payments, when possible, and dealing only with counterparties that have investment-grade credit ratings. At UNS Energy and Central Hudson, certain contractual arrangements require counterparties to post collateral.
The value of derivatives in net liability positions under contracts with credit risk-related contingent features that, if triggered, could require the posting of a like amount of collateral was $63 million as at September 30, 2022 (December 31, 2021 - $59 million).

19 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT

Notes to Condensed Consolidated Interim Financial Statements (Unaudited)

For the three and nine months ended September 30, 2022 and 2021

12. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd)
Hedge of Foreign Net Investments
The reporting currency of ITC, UNS Energy, Central Hudson, Caribbean Utilities, FortisTCI, Fortis Belize Limited (formerly Belize Electric Company Limited), and Belize Electricity is, or is pegged to, the U.S. dollar. The earnings and cash flow from, and net investments in, these entities are exposed to fluctuations in the U.S. dollar-to-Canadian dollar exchange rate. The Corporation has limited this exposure through hedging.
As at September 30, 2022, US$2.9 billion (December 31, 2021 - US$2.2 billion) of corporately issued U.S. dollar-denominated long-term debt has been designated as an effective hedge of net investments, leaving approximately US$10.6 billion (December 31, 2021 - US$10.8 billion) unhedged. Exchange rate fluctuations associated with the hedged net investment in foreign subsidiaries and the debt serving as the hedge are recognized in accumulated other comprehensive income.
Financial Instruments Not Carried at Fair Value
Excluding long-term debt, the consolidated carrying value of the Corporation's remaining financial instruments approximates fair value, reflecting their short-term maturity, normal trade credit terms and/or nature.
As at September 30, 2022, the carrying value of long-term debt, including current portion, was $28.7 billion (December 31, 2021 - $25.5 billion) compared to an estimated fair value of $25.8 billion (December 31, 2021 - $28.8 billion).
13. COMMITMENTS AND CONTINGENCIES
Commitments
There were no material changes in commitments from that disclosed in the Corporation's 2021 Annual Financial Statements except that in 2022, FortisBC Energy signed new long-term biomethane purchase agreements to acquire renewable natural gas. The 20-year agreements allow FortisBC Energy to purchase a maximum annual volume of 9.3 PJs of renewable natural gas and has increased gas purchase obligations from those disclosed as at December 31, 2021 as follows.

As at September 30, 2022 ($ millions) | Total |  | Year 1 |  | Year 2 |  | Year 3 |  | Year 4 |  | Year 5 |  | Thereafter
Gas purchase obligations | 2,723 |  |  | 18 |  |  | 58 |  |  | 106 |  |  | 151 |  |  | 151 |  |  | 2,239 |

Contingencies
In April 2013, FortisBC Holdings Inc. ("FHI") and Fortis were named as defendants in an action in the British Columbia Supreme Court by the Coldwater Indian Band ("Band") regarding interests in a pipeline right-of-way on reserve lands. The pipeline was transferred by FHI (then Terasen Inc.) to Kinder Morgan Inc. in 2007. The Band seeks cancellation of the right-of-way and damages for wrongful interference with the Band's use and enjoyment of reserve lands. In 2016, the Federal Court dismissed the Band's application for judicial review of the ministerial consent. In 2017, the Federal Court of Appeal set aside the minister's consent and returned the matter to the minister for redetermination. No amount has been accrued in the Interim Financial Statements as the outcome cannot yet be reasonably determined.

20 | FORTIS INC. | SEPTEMBER 30, 2022 QUARTER REPORT