6-K - FTS - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2023

Commission File Number: 001-37915

Fortis Inc.

Fortis Place, Suite 1100

5 Springdale Street

St. John's, Newfoundland and Labrador

Canada, A1E 0E4

(Address of Principal Executive Office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40F: Form 20-F o Form 40-F þ

INCORPORATION BY REFERENCE

The registrant's unaudited condensed consolidated interim financial statements as at and for the three months ended March 31, 2023, together with the notes thereto, furnished as Exhibit 99.2 to this report on Form 6-K, and the registrant's management discussion and analysis of financial condition and results of operations for the same periods furnished as Exhibit 99.3 to this report on Form 6-K, are incorporated by reference into the following Registration Statements of the Registrant, as amended or supplemented: Form S-8 (File No. 333-264838); Form S-8 (File No. 333-226663); Form S-8 (File No. 333-236213); Form F-3 (File No. 333-249039); and Form F-10 (File No. 333-268493).

EXHIBITS

Exhibit	Description
99.1	Fortis Inc. Press Release dated May 3, 2023
99.2	Unaudited Condensed Consolidated Interim Financial Statements of Fortis Inc. as at and for the three months ended March 31, 2023, together with the notes thereto
99.3	Management Discussion and Analysis of financial condition and results of operations of Fortis Inc. as at and for the three months ended March 31, 2023

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Fortis Inc.<br><br>(Registrant)
Date: May 3, 2023	/s/ Jocelyn H. Perry
	By:	Jocelyn H. Perry
	Title:	Executive Vice President, Chief Financial Officer

Document

Exhibit 99.1

St. John's, NL - May 3, 2023

FORTIS INC. RELEASES FIRST QUARTER 2023 RESULTS

Fortis Inc. ("Fortis" or the "Corporation") (TSX/NYSE: FTS), a well-diversified leader in the North American regulated electric and gas utility industry, released its first quarter results1.

Highlights

•First quarter net earnings of $437 million, or $0.90 per common share, up from $350 million, or $0.74 per common share in 2022

•Adjusted net earnings per common share2 of $0.91, up from $0.78 in the first quarter of 2022

•Capital expenditures2 of $1.0 billion in the first quarter; $4.3 billion annual capital plan on track

•Significant regulatory applications at Tucson Electric Power and FortisBC continue to progress

•Announced the sale of the Corporation's ownership interest in the Aitken Creek Natural Gas Storage Facility in British Columbia

"Our strong first quarter results reflect the diversified nature of our business and the continued delivery of our low-risk capital plan," said David Hutchens, President and Chief Executive Officer, Fortis. "With capital expenditures of $1.0 billion in the quarter, we are on track to invest $4.3 billion in our systems this year."

"Our funding plan remains intact, and the sale of the Aitken Creek Natural Gas Storage Facility further strengthens our balance sheet and supports financing of our regulated utility investments," said Mr. Hutchens. "We remain confident in our growth strategy as we continue to provide value to shareholders while executing on the transition to a cleaner energy future and delivering safe, reliable and affordable service to our customers."

Net Earnings

The Corporation reported net earnings attributable to common equity shareholders ("Net Earnings") of $437 million for the first quarter, or $0.90 per common share, compared to $350 million, or $0.74 per common share in the first quarter of 2022. The increase reflected rate base growth, mainly at ITC and the western Canadian utilities, as well as higher earnings at UNS Energy. Market conditions resulted in wholesale electricity sales with favourable margin and higher transmission revenue at UNS Energy in the first quarter of 2023 compared to later quarters in 2022. Higher retail electricity sales, including the impact of favourable weather, and lower depreciation expense associated with the retirement of the San Juan generating station in June 2022, also contributed to results in Arizona.

Results for the quarter also reflected higher earnings at Aitken Creek, an increase in the market value of investments that support retirement benefits at UNS Energy and ITC, and a higher U.S.-to-Canadian dollar foreign exchange rate. Growth in earnings was partially offset by higher holding company finance costs.

An increase in the weighted average number of common shares outstanding, largely associated with the Corporation's dividend reinvestment plan, also impacted earnings per share for the quarter.

Adjusted Net Earnings2

Adjusted net earnings attributable to common equity shareholders ("Adjusted Net Earnings") excludes the impact of mark-to-market accounting of natural gas derivatives at Aitken Creek. Adjusted Net Earnings of $439 million for the first quarter, or $0.91 per common share, were $70 million, or $0.13 per common share higher than the same period in 2022. The increase was driven by the same factors discussed for Net Earnings.

____________________

1 Financial information is presented in Canadian dollars unless otherwise specified.

2 Non-U.S. GAAP Financial Measures - Fortis uses financial measures that do not have a standardized meaning under generally accepted accounting principles in the United States of America and may not be comparable to similar measures presented by other entities. Fortis presents these non-U.S. GAAP measures because management and external stakeholders use them in evaluating the Corporation's financial performance and prospects. Refer to the Non-U.S. GAAP Reconciliation provided herein.

i
Non-U.S. GAAP Reconciliation
---	---	---	---
Quarter ended March 31
($ millions, except as indicated)	2023	2022	Variance
Adjusted Net Earnings:
Net Earnings	437	350	87
Adjusting item:
Unrealized loss on mark-to-market of derivatives3	2	19	(17)
Adjusted Net Earnings	439	369	70
Adjusted net earnings per share ($)	0.91	0.78	0.13
Capital Expenditures:
Additions to property, plant and equipment	907	866	41
Additions to intangible assets	47	49	(2)
Adjusting item:
Wataynikaneyap Transmission Power Project4	41	49	(8)
Capital Expenditures	995	964	31

Capital Expenditures

Fortis' $4.3 billion annual capital plan remains on track with $1.0 billion invested through March 2023.

The Corporation's major capital projects continue to progress. In March 2023, FortisBC Energy filed amended transportation rate schedules with the British Columbia Utilities Commission ("BCUC") for the Eagle Mountain Woodfibre Gas Line project. Approval from the BCUC is anticipated in May 2023, which will remove certain of FortisBC Energy's conditions for commencing construction and bring the project one step closer to construction.

The first tranche of approved projects associated with the Midcontinent Independent System Operator, Inc. ("MISO") long-range transmission plan ("LRTP") are advancing at ITC with stakeholder outreach, routing studies and design engineering underway. ITC estimates transmission investments of US$1.4 billion to US$1.8 billion through 2030 associated with six of the 18 LRTP projects.

Regulatory Updates

In March 2023, the Federal Energy Regulatory Commission confirmed its decision to deny the complaint filed by the Iowa Coalition for Affordable Transmission requesting that ITC Midwest's common equity component of capital structure be reduced.

In March 2023, the Iowa Supreme Court granted standing to certain plaintiffs to challenge the right of first refusal ("ROFR") available to incumbent electric transmission owners in Iowa. The court also issued a temporary injunction staying enforcement of the ROFR statute, and remanded the matter to the District Court to decide the merits of the claim. Management does not believe that this proceeding will impact projects at ITC that have already been approved and are under development, including Tranche 1 projects associated with the MISO LRTP. The timing of this proceeding and any impact on future projects, is unknown.

In April 2023, hearings concluded on the Tucson Electric Power general rate application, which seeks new customer rates effective September 1, 2023 using a December 31, 2021 test year. While the timing and outcome of this proceeding is unknown, a recommended order and opinion from the administrative law judge is expected mid-year.

The generic cost of capital proceeding in British Columbia, which includes a review of the common equity component of capital structure and the rate of return on common equity for FortisBC, continues to progress as expected with a decision expected by mid-2023.

_______________________

3 Represents timing differences related to the accounting of natural gas derivatives at Aitken Creek, net of income tax recovery of $1 million for the three months ended March 31, 2023 ($7 million for the three months ended March 31, 2022)

4 Represents Fortis' 39% share of capital spending for the Wataynikaneyap Transmission Power Project

ii

Pending Sale of Unregulated Asset

On May 1, 2023, the Corporation announced that FortisBC Holdings Inc. had entered into a definitive share purchase and sale agreement with a subsidiary of Enbridge Inc. to sell its 93.8% ownership interest in the Aitken Creek Natural Gas Storage Facility for approximately $400 million, subject to customary closing conditions and adjustments. The purchase is subject to required approval, principally by the BCUC, and is expected to close by the end of the year with a March 31, 2023 effective date. Net proceeds from the transaction will further strengthen the balance sheet and support financing of the Corporation's regulated utility growth strategy.

Outlook

Fortis continues to enhance shareholder value through the execution of its capital plan, the balance and strength of its diversified portfolio of regulated utility businesses, and growth opportunities within and proximate to its service territories. While energy price volatility, global supply chain constraints and persistent inflation are issues of potential concern that continue to evolve, the Corporation does not currently expect there to be a material impact on its operations or financial results in 2023.

Fortis is executing on the transition to a cleaner energy future and is on track to achieve its corporate-wide targets to reduce greenhouse gas emissions ("GHG") by 50% by 2030 and 75% by 2035. Upon achieving these targets, 99% of the Corporation's assets will support energy delivery and renewable, carbon-free generation. The Corporation's additional 2050 net-zero direct GHG emissions target reinforces Fortis' commitment to further decarbonize over the long-term, while preserving customer reliability and affordability.

The Corporation's $22.3 billion five-year capital plan is expected to increase midyear rate base from $34.1 billion in 2022 to $46.1 billion by 2027, translating into a five-year compound annual growth rate of 6.2%5.

Beyond the five-year capital plan, additional opportunities to expand and extend growth include: further expansion of the electric transmission grid in the U.S. to facilitate the interconnection of cleaner energy, including infrastructure investments associated with the Inflation Reduction Act of 2022 and the MISO LRTP; climate adaptation and grid resiliency investments; renewable gas solutions and liquefied natural gas infrastructure in British Columbia; and the acceleration of cleaner energy infrastructure investments across our jurisdictions.

Fortis expects its long-term growth in rate base will drive earnings that support dividend growth guidance of 4-6% annually through 2027, and is premised on the assumptions and material factors listed under "Forward-Looking Information".

About Fortis

Fortis is a well-diversified leader in the North American regulated electric and gas utility industry with 2022 revenue of $11 billion and total assets of $65 billion as at March 31, 2023. The Corporation's 9,200 employees serve utility customers in five Canadian provinces, ten U.S. states and three Caribbean countries.

_______________________

5 Calculated using a constant United States dollar-to-Canadian dollar exchange rate

iii

Forward-Looking Information

Fortis includes forward-looking information in this media release within the meaning of applicable Canadian securities laws and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (collectively referred to as "forward-looking information"). Forward-looking information reflects expectations of Fortis management regarding future growth, results of operations, performance and business prospects and opportunities. Wherever possible, words such as anticipates, believes, budgets, could, estimates, expects, forecasts, intends, may, might, plans, projects, schedule, should, target, will, would, and the negative of these terms, and other similar terminology or expressions, have been used to identify the forward-looking information, which includes, without limitation: the expected timing and outcome of the sale of Aitken Creek; forecast capital expenditures for 2023-2027; forecast rate base and rate base growth through 2027; the nature, timing, benefits and expected costs of certain capital projects, including FortisBC Energy's Eagle Mountain Woodfibre Gas Line project and ITC's transmission projects associated with the MISO LRTP, and additional opportunities beyond the capital plan, including investments related to the Inflation Reduction Act of 2022, the MISO LRTP, climate adaptation and grid resiliency, renewable gas solutions and liquefied natural gas infrastructure in British Columbia, and the acceleration of cleaner energy infrastructure; the expected timing, outcome and impact of regulatory proceedings and decisions; the 2030 GHG emissions reduction target; the 2035 GHG emissions reduction target and projected asset mix; the 2050 net-zero direct GHG emissions target; the expectation that volatility in energy prices, global supply chain constraints and persistent inflation will not have a material impact on operations or financial results in 2023; and the expectation that long-term growth in rate base will drive earnings that support dividend growth guidance of 4-6% annually through 2027.

Forward-looking information involves significant risks, uncertainties and assumptions. Certain material factors or assumptions have been applied in drawing the conclusions contained in the forward-looking information, including, without limitation: no material impact from volatility in energy prices, global supply chain constraints and persistent inflation; reasonable outcomes for regulatory proceedings and the expectation of regulatory stability; the successful execution of the capital plan; no material capital project and financing cost overrun; sufficient human resources to deliver service and execute the capital plan; the realization of additional opportunities beyond the capital plan; no significant variability in interest rates; no material changes in the assumed U.S. dollar to Canadian dollar exchange rate; and the Board exercising its discretion to declare dividends, taking into account the business performance and financial condition of the Corporation. Fortis cautions readers that a number of factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking information. For additional information with respect to certain risk factors, reference should be made to the continuous disclosure materials filed from time to time by the Corporation with Canadian securities regulatory authorities and the Securities and Exchange Commission. All forward-looking information herein is given as of the date of this media release. Fortis disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Teleconference to Discuss First Quarter 2023 Results

A teleconference and webcast will be held on May 3, 2023 at 8:30 a.m. (Eastern). David Hutchens, President and Chief Executive Officer and Jocelyn Perry, Executive Vice President and Chief Financial Officer, will discuss the Corporation's first quarter financial results.

Shareholders, analysts, members of the media and other interested parties in North America are invited to participate by calling 1.888.886.7786. International participants may participate by calling 1.416.764.8658. Please dial in 10 minutes prior to the start of the call. No passcode is required.

A live and archived audio webcast of the teleconference will be available on the Corporation's website, www.fortisinc.com. A replay of the teleconference will be available two hours after the conclusion of the call until June 3, 2023. Please call 1.877.674.7070 or 1.416.764.8692 and enter passcode 430311#.

Additional Information

This media release should be read in conjunction with the Corporation's March 31, 2023 Interim Management Discussion and Analysis and Condensed Consolidated Financial Statements. This and additional information can be accessed at www.fortisinc.com, www.sedar.com, or www.sec.gov.

For more information, please contact:

Investor Enquiries	Media Enquiries
Ms. Stephanie Amaimo	Ms. Karen McCarthy
Vice President, Investor Relations	Vice President, Communications & Government Relations
Fortis Inc.	Fortis Inc.
248.946.3572	709.737.5323
investorrelations@fortisinc.com	media@fortisinc.com	iv
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Document

Exhibit 99.2

Interim Financial Statements

FORTIS INC.

Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2023 and 2022

(Unaudited)

1	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Financial Statements
---		CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited)
---	---	---	---	---
FORTIS INC.
	March 31,		December 31,
As at (in millions of Canadian dollars)	2023		2022
ASSETS
Current assets
Cash and cash equivalents	$	576	$	209
Accounts receivable and other current assets (Note 5)	1,876		2,339
Prepaid expenses	145		146
Inventories	569		661
Regulatory assets (Note 6)	995		914
Total current assets	4,161		4,269
Other assets	1,176		1,213
Regulatory assets (Note 6)	3,155		3,095
Property, plant and equipment, net	42,194		41,663
Intangible assets, net	1,511		1,548
Goodwill	12,433		12,464
Total assets	$	64,630	$	64,252
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings (Note 7)	$	361	$	253
Accounts payable and other current liabilities	2,958		3,288
Regulatory liabilities (Note 6)	469		595
Current installments of long-term debt (Note 7)	2,362		2,481
Total current liabilities	6,150		6,617
Regulatory liabilities (Note 6)	3,367		3,320
Deferred income taxes	4,092		4,060
Long-term debt (Note 7)	26,466		25,931
Finance leases	344		336
Other liabilities	1,128		1,146
Total liabilities	41,547		41,410
Commitments and contingencies (Note 13)
Equity
Common shares (1)	14,773		14,656
Preference shares	1,623		1,623
Additional paid-in capital	8		10
Accumulated other comprehensive income	967		1,008
Retained earnings	3,896		3,733
Shareholders' equity	21,267		21,030
Non-controlling interests	1,816		1,812
Total equity	23,083		22,842
Total liabilities and equity	$	64,630	$	64,252

(1) No par value. Unlimited authorized shares. 484.4 million and 482.2 million issued and outstanding as at March 31, 2023 and December 31, 2022, respectively.

See accompanying Notes to Condensed Consolidated Interim Financial Statements

2	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Financial Statements
---		CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS (Unaudited)
---	---	---	---	---
FORTIS INC.
For the quarter ended March 31 (in millions of Canadian dollars, except per share amounts)	2023		2022
Revenue	$	3,319	$	2,835
Expenses
Energy supply costs	1,312		1,083
Operating expenses	741		669
Depreciation and amortization	436		407
Total expenses	2,489		2,159
Operating income	830		676
Other income, net (Note 9)	69		42
Finance charges	315		258
Earnings before income tax expense	584		460
Income tax expense	100		67
Net earnings	$	484	$	393
Net earnings attributable to:
Non-controlling interests	$	31	$	27
Preference equity shareholders	16		16
Common equity shareholders	437		350
	$	484	$	393
Earnings per common share (Note 10)
Basic	$	0.90	$	0.74
Diluted	$	0.90	$	0.74
See accompanying Notes to Condensed Consolidated Interim Financial Statements
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
---	---	---	---	---
For the quarter ended March 31 (in millions of Canadian dollars)	2023		2022
Net earnings	$	484	$	393
Other comprehensive (loss) income
Unrealized foreign currency translation losses (1)	(44)		(161)
Other (2)	(2)		20
	(46)		(141)
Comprehensive income	$	438	$	252
Comprehensive income attributable to:
Non-controlling interests	$	26	$	14
Preference equity shareholders	16		16
Common equity shareholders	396		222
	$	438	$	252

(1)Net of hedging activities and income tax expense of $nil and $1 million, respectively

(2)Net of income tax expense of $1 million and $8 million, respectively

See accompanying Notes to Condensed Consolidated Interim Financial Statements

3	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Financial Statements
---		CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited)
---	---	---	---	---	---
FORTIS INC.
For the quarter ended March 31 (in millions of Canadian dollars)		2023		2022
Operating activities
Net earnings		$	484	$	393
Adjustments to reconcile net earnings to net cash provided by operating activities:
	Depreciation - property, plant and equipment	378		356
	Amortization - intangible assets	38		35
	Amortization - other	20		16
	Deferred income tax expense	31		23
	Equity component, allowance for funds used during construction (Note 9)	(23)		(17)
	Other	6		40
Change in long-term regulatory assets and liabilities		21		(10)
Change in working capital (Note 11)		(40)		(23)
Cash from operating activities		915		813
Investing activities
Additions to property, plant and equipment		(907)		(866)
Additions to intangible assets		(47)		(49)
Contributions in aid of construction		51		39
Other		(38)		(40)
Cash used in investing activities		(941)		(916)
Financing activities
Proceeds from long-term debt, net of issuance costs		634		829
Repayments of long-term debt and finance leases		(333)		(227)
Borrowings under committed credit facilities		1,903		1,424
Repayments under committed credit facilities		(1,737)		(1,600)
Net change in short-term borrowings		108		76
Issue of common shares, net of costs and dividends reinvested		14		22
Dividends
	Common shares, net of dividends reinvested	(170)		(160)
	Preference shares	(16)		(16)
	Subsidiary dividends paid to non-controlling interests	(23)		(20)
Other		8		9
Cash from financing activities		388		337
Effect of exchange rate changes on cash and cash equivalents		5		—
Change in cash and cash equivalents		367		234
Cash and cash equivalents, beginning of period		209		131
Cash and cash equivalents, end of period		$	576	$	365
Supplementary Cash Flow Information (Note 11)
See accompanying Notes to Condensed Consolidated Interim Financial Statements
4	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
---	---	---
Interim Financial Statements
---
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (Unaudited)
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
FORTIS INC.
For the quarter ended March 31<br>(in millions of Canadian dollars, except share numbers)	Common Shares<br><br>(# 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, 2022	482.2	$	14,656	$	1,623	$	10	$	1,008	$	3,733	$	1,812	$	22,842
Net earnings	—	—		—		—		—		453		31		484
Other comprehensive loss	—	—		—		—		(41)		—		(5)		(46)
Common shares issued	2.2	117		—		—		—		—		—		117
Subsidiary dividends paid to non-controlling interests	—	—		—		—		—		—		(23)		(23)
Dividends declared on common shares ($0.565 per share)	—	—		—		—		—		(274)		—		(274)
Dividends on preference shares	—	—		—		—		—		(16)		—		(16)
Other	—	—		—		(2)		—		—		1		(1)
As at March 31, 2023	484.4	$	14,773	$	1,623	$	8	$	967	$	3,896	$	1,816	$	23,083
As at December 31, 2021	474.8	$	14,237	$	1,623	$	10	$	(40)	$	3,458	$	1,628	$	20,916
Net earnings	—	—		—		—		—		366		27		393
Other comprehensive loss	—	—		—		—		(128)		—		(13)		(141)
Common shares issued	2.1	117		—		(1)		—		—		—		116
Subsidiary dividends paid to non-controlling interests	—	—		—		—		—		—		(20)		(20)
Dividends declared on common shares ($0.535 per share)	—	—		—		—		—		(255)		—		(255)
Dividends on preference shares	—	—		—		—		—		(16)		—		(16)
Other	—	—		—		(1)		—		—		2		1
As at March 31, 2022	476.9	$	14,354	$	1,623	$	8	$	(168)	$	3,553	$	1,624	$	20,994
See accompanying Notes to Condensed Consolidated Interim Financial Statements
5	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
---	---	---
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
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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: (i) the impact of seasonal weather conditions on customer demand and market pricing; (ii) the impact of market conditions, particularly with respect to long-term wholesale sales and transmission revenue at UNS Energy, as well as margins realized on gas sold at Aitken Creek; (iii) changes in foreign exchange rates; and (iv) the timing and significance 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. ("UNSE") 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.

REGULATORY MATTERS

Regulation of the Corporation's utilities is generally consistent with that disclosed in Note 2 of the Corporation's annual audited consolidated financial statements ("2022 Annual Financial Statements"). A summary of significant outstanding regulatory matters follows.

ITC

ITC Midwest Capital Structure Complaint: In 2022, FERC issued an order denying the complaint filed by the Iowa Coalition for Affordable Transmission ("ICAT") requesting that ITC Midwest's common equity component of capital structure be reduced from 60% to 53%. In March 2023, FERC confirmed its decision following ICAT's request for rehearing.

MISO Base ROE: In 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.

Transmission Incentives: In 2021, FERC issued a supplemental notice of proposed rulemaking ("NOPR") on transmission incentives modifying the proposal in the initial NOPR released by FERC in 2020. The supplemental NOPR proposes to eliminate the 50-basis point regional transmission organization ("RTO") ROE incentive adder for RTO members that have been members for longer than three years. The timing and outcome of this proceeding is unknown.

6	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
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For the three months ended March 31, 2023 and 2022
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REGULATORY MATTERS (cont'd)

Transmission Right of First Refusal ("ROFR"): The State of Iowa has granted incumbent electric transmission owners, including ITC, a ROFR to construct, own and maintain certain electric transmission assets in the state. A challenge against the ROFR statute by certain plaintiffs was initially dismissed by the District Court on the grounds that the plaintiffs lacked standing. In March 2023, the Iowa Supreme Court determined that the plaintiffs have standing to challenge the Iowa ROFR statute, issued a temporary injunction staying enforcement of the ROFR statute, and remanded the matter to the District Court to decide the merits of the claim. Management does not believe that this proceeding will impact projects that have already been approved and under development, however, the timing of this proceeding and any impact on future projects, is unknown.

UNS Energy

TEP General Rate Application: In April 2023, hearings concluded on the TEP general rate application, which seeks new customer rates effective September 1, 2023 using a December 31, 2021 test year. While the timing and outcome of this proceeding is unknown, a recommended order and opinion from the administrative law judge is expected mid-year.

PPFAC Mechanism: The Purchased Power and Fuel Adjustment Clause ("PPFAC") mechanism allows for the timely recovery or return of purchased power and fuel costs, as compared to that collected in customer rates, at TEP and UNSE. The PPFAC balance has increased in recent years, reflecting higher commodity costs. In January 2023, TEP filed a request to collect a PPFAC balance of US$148 million over a 12-month period. The timing and outcome of this proceeding is unknown. On May 2, 2023, the ACC approved a rate adjustment at UNSE to recover a PPFAC balance of US$104 million over a 33-month period.

Central Hudson

Customer Information System ("CIS") Implementation: In 2022, the New York Public Service Commission ("PSC") released a report into the deployment by Central Hudson of its new CIS. The PSC also issued an Order to Commence Proceeding and Show Cause, which directed Central Hudson to explain why the PSC should not pursue civil or administrative penalties or initiate a proceeding to review the prudence of the CIS implementation costs. Central Hudson was also required to submit a plan to eliminate bi-monthly bill estimates and to evaluate the customer impacts of such a change. Central Hudson's response was filed in January 2023. The timing and outcome of this proceeding is unknown.

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 a final argument with the BCUC in December 2022 and the proceeding remains ongoing, with a decision expected by mid-2023.

FortisAlberta

2024 GCOC Proceeding: In 2022, the Alberta Utilities Commission ("AUC") initiated proceedings to establish the cost of capital parameters for Alberta regulated utilities, including consideration of a formula-based approach to setting the allowed ROE for 2024 and beyond. The proceeding remains ongoing, and a decision is expected in the third quarter of 2023.

Third PBR Term: In 2021, the AUC issued a decision confirming that Alberta distribution utilities will be subject to a third performance-based rate setting ("PBR") term commencing in 2024. The AUC also initiated a new proceeding to consider the design of the third PBR term. The proceeding remains ongoing, and a decision from the AUC is expected in the fourth quarter of 2023.

Rural Electrification Association ("REA") Cost Recovery: In 2021, the AUC determined that costs attributable to REAs, approximating $10 million annually, can no longer be recovered from FortisAlberta's rate payers, effective January 1, 2023. FortisAlberta filed an appeal with the Alberta Court of Appeal, asserting that the AUC erred in preventing the company from recovering these costs from its own rate payers to the extent that such costs cannot be recovered directly from REAs. The Court dismissed the appeal on April 28, 2023. FortisAlberta continues to review the decision and assess other means, including legislative amendments, to recover these costs.

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 2022 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.

7	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

ACCOUNTING POLICIES (cont'd)

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 2022 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.

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 months ended March 31, 2023 and 2022.

The lease of gas storage capacity and gas sales from Aitken Creek to FortisBC Energy of $9 million for the three months ended March 31, 2023 (three months ended March 31, 2022 - $13 million) are inter-company transactions between non-regulated and regulated entities, which were not eliminated on consolidation.

As at March 31, 2023, accounts receivable included $4 million due from Belize Electricity (December 31, 2022 - $7 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 March 31, 2023 and December 31, 2022, there were no inter-segment loans outstanding. Interest charged on inter-segment loans was not material for the three months ended March 31, 2023 and 2022.

8	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

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 March 31, 2023
Revenue	519	740	442	750	179	139	507	3,276	43	—	—	3,319
Energy supply costs	—	337	207	375	—	47	344	1,310	2	—	—	1,312
Operating expenses	135	190	162	96	42	30	60	715	12	14	—	741
Depreciation and amortization	101	87	28	77	64	24	50	431	4	1	—	436
Operating income	283	126	45	202	73	38	53	820	25	(15)	—	830
Other income, net	17	14	14	7	—	1	7	60	—	9	—	69
Finance charges	99	36	18	41	30	20	21	265	—	50	—	315
Income tax expense	47	14	9	45	3	1	6	125	6	(31)	—	100
Net earnings	154	90	32	123	40	18	33	490	19	(25)	—	484
Non-controlling interests	28	—	—	—	—	—	3	31	—	—	—	31
Preference share dividends	—	—	—	—	—	—	—	—	—	16	—	16
Net earnings attributable to common equity shareholders	126	90	32	123	40	18	30	459	19	(41)	—	437
Additions to property, plant and equipment and intangible assets	336	185	78	113	119	27	93	951	3	—	—	954
As at March 31, 2023
Goodwill	8,295	1,868	610	913	228	235	257	12,406	27	—	—	12,433
Total assets	23,686	12,674	5,244	8,826	5,617	2,619	4,975	63,641	796	209	(16)	64,630
Quarter ended March 31, 2022
Revenue	460	538	375	694	167	129	459	2,822	13	—	—	2,835
Energy supply costs	—	210	162	354	—	43	312	1,081	2	—	—	1,083
Operating expenses	123	162	149	83	42	33	53	645	12	12	—	669
Depreciation and amortization	92	89	25	75	60	17	44	402	4	1	—	407
Operating income	245	77	39	182	65	36	50	694	(5)	(13)	—	676
Other income, net	9	3	15	4	1	2	2	36	—	6	—	42
Finance charges	80	31	13	36	26	18	18	222	—	36	—	258
Income tax expense	41	6	9	31	4	2	5	98	1	(32)	—	67
Net earnings	133	43	32	119	36	18	29	410	(6)	(11)	—	393
Non-controlling interests	24	—	—	—	—	—	3	27	—	—	—	27
Preference share dividends	—	—	—	—	—	—	—	—	—	16	—	16
Net earnings attributable to common equity shareholders	109	43	32	119	36	18	26	383	(6)	(27)	—	350
Additions to property, plant and equipment and intangible assets	335	162	64	130	111	30	78	910	5	—	—	915
As at March 31, 2022
Goodwill	7,674	1,728	564	913	228	235	244	11,586	27	—	—	11,613
Total assets	21,075	11,331	4,486	8,214	5,266	2,570	4,403	57,345	724	281	(148)	58,202
9	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
---	---	---
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

ALLOWANCE FOR CREDIT LOSSES

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

($ millions)	2023	2022
Quarter ended March 31
Balance, beginning of period	(58)	(53)
Credit loss expense	(8)	(5)
Credit loss deferral	(1)	—
Write-offs, net of recoveries	8	5
Balance, end of period	(59)	(53)

See Note 12 for disclosure on the Corporation's credit risk.

REGULATORY ASSETS AND LIABILITIES

Detailed information about the Corporation's regulatory assets and liabilities is provided in Note 8 to the 2022 Annual Financial Statements. A summary follows.

	As at
	March 31,	December 31,
($ millions)	2023	2022
Regulatory assets
Deferred income taxes	1,862	1,874
Rate stabilization and related accounts	573	557
Deferred energy management costs	453	445
Employee future benefits	200	207
Derivatives	177	84
Deferred lease costs	142	132
Deferred restoration costs	112	91
Manufactured gas plant site remediation deferral	93	97
Generation early retirement costs	77	78
Other regulatory assets	461	444
Total regulatory assets	4,150	4,009
Less: Current portion	(995)	(914)
Long-term regulatory assets	3,155	3,095
Regulatory liabilities
Deferred income taxes	1,351	1,364
Future cost of removal	1,336	1,306
Rate stabilization and related accounts	355	297
Employee future benefits	265	306
Renewable energy surcharge	126	126
Energy efficiency liability	87	89
Derivatives	83	224
Other regulatory liabilities	233	203
Total regulatory liabilities	3,836	3,915
Less: Current portion	(469)	(595)
Long-term regulatory liabilities	3,367	3,320
10	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
---	---	---
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---
7. LONG-TERM DEBT	As at
---	---	---
	March 31,	December 31,
($ millions)	2023	2022
Long-term debt	27,179	26,921
Credit facility borrowings	1,818	1,657
Total long-term debt	28,997	28,578
Less: Deferred financing costs and debt discounts	(169)	(166)
Less: Current installments of long-term debt	(2,362)	(2,481)
	26,466	25,931
Significant Long-Term Debt Issuances		Interest
---	---	---	---	---	---	---
Year-to-Date March 31, 2023	Month	Rate				Use of
($ millions, except as noted)	Issued	(%)	Maturity	Amount		Proceeds
UNS Energy
Unsecured senior notes	February	5.50	2053	US	375	(1) (2)
Central Hudson
Unsecured senior notes	March	5.68	2033	US	40	(2) (3)
Unsecured senior notes	March	5.78	2035	US	15	(2) (3)
Unsecured senior notes	March	5.88	2038	US	35	(2) (3)

(1) Repay maturing long-term debt

(2) General corporate purposes

(3) Repay short-term and/or credit facility borrowings

In November 2022, 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 March 31, 2023, $2.0 billion remained available under the short-form base shelf prospectus.

			As at
Credit facilities	Regulated	Corporate	March 31,	December 31,
($ millions)	Utilities	and Other	2023	2022
Total credit facilities	3,793	2,048	5,841	5,850
Credit facilities utilized:
Short-term borrowings (1)	(361)	—	(361)	(253)
Long-term debt (including current portion) (2)	(896)	(922)	(1,818)	(1,657)
Letters of credit outstanding	(62)	(38)	(100)	(128)
Credit facilities unutilized	2,474	1,088	3,562	3,812

(1) The weighted average interest rate was 5.3% (December 31, 2022 - 4.9%).

(2) The weighted average interest rate was 5.6% (December 31, 2022 - 5.1%). The current portion was $1,441 million (December 31, 2022 - $1,376 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 2022 Annual Financial Statements for a description of the credit facilities as at December 31, 2022.

In April 2023, ITC increased its total credit facilities available from US$900 million to US$1 billion and extended the maturity to April 2028.

On May 1, 2023, the Corporation extended the maturity on its unsecured US$500 million non-revolving term credit facility to May 2024. The facility is repayable at any time without penalty.

11	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

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<br><br>Pension Plans		OPEB Plans
($ millions)	2023	2022	2023	2022
Quarter ended March 31
Service costs	15	26	5	9
Interest costs	40	28	8	5
Expected return on plan assets	(50)	(49)	(6)	(6)
Amortization of actuarial (gains) losses	(2)	1	(4)	(2)
Regulatory adjustments	4	(2)	2	1
Net benefit cost	7	4	5	7

Defined contribution pension plan expense for the three months ended March 31, 2023 was $16 million (2022 - $14 million).

OTHER INCOME, NET

($ millions)	2023	2022
Quarter ended March 31
Equity component, allowance for funds used during construction	23	17
Non-service component of net periodic benefit cost	16	24
Interest income (1)	16	1
Gain on derivatives, net	9	4
Gain (loss) on retirement investments, net	4	(8)
Other	1	4
	69	42

(1) Includes interest on regulatory deferrals, including the PPFAC at TEP and UNSE

EARNINGS PER COMMON SHARE

Diluted earnings per share ("EPS") was calculated using the treasury stock method for stock options.

	2023			2022
	Net Earnings	Weighted		Net Earnings	Weighted
	to Common	Average		to Common	Average
	Shareholders	Shares	EPS	Shareholders	Shares	EPS
	($ millions)	(# millions)	($)	($ millions)	(# millions)	($)
Quarter ended March 31
Basic EPS	437	483.1	0.90	350	475.7	0.74
Potential dilutive effect of stock options	—	0.3		—	0.4
Diluted EPS	437	483.4	0.90	350	476.1	0.74
12	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
---	---	---
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

SUPPLEMENTARY CASH FLOW INFORMATION

($ millions)	2023	2022
Quarter ended March 31
Change in working capital
Accounts receivable and other current assets	281	(95)
Prepaid expenses	—	5
Inventories	91	69
Regulatory assets - current portion	(4)	(12)
Accounts payable and other current liabilities	(405)	8
Regulatory liabilities - current portion	(3)	2
	(40)	(23)
Non-cash investing and financing activities
Accrued capital expenditures	381	353
Common share dividends reinvested	103	94
Contributions in aid of construction	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.

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 March 31, 2023, unrealized losses of $177 million (December 31, 2022 - $84 million) were recognized as regulatory assets and unrealized gains of $83 million (December 31, 2022 - $224 million) were recognized as regulatory liabilities.

Energy 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. During the three months ended March 31, 2023, unrealized gains of $14 million were recognized in revenue (three months ended March 31, 2022 - unrealized losses of $17 million).

13	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd)

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 $119 million and terms of one to three years expiring at varying dates through January 2026. 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 months ended March 31, 2023, unrealized gains of $6 million were recognized in other income, net (three months ended March 31, 2022 - unrealized losses of $6 million).

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 November 2024 and have a combined notional amount of $417 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 months ended March 31, 2023, unrealized gains recognized in other income, net were $2 million (three months ended March 31, 2022 - $nil).

Interest Rate Locks

In March 2023, the Corporation entered into an interest rate lock with a total notional value of $100 million to manage the interest rate risk associated with the refinancing of long-term debt maturing in the fall of 2023. The lock has a 10-year term and will be terminated no later than November 1, 2023. Fair value is measured using a discounted cash flow method based on Canadian dollar offered rates. Unrealized gains and losses associated with changes in fair value are recognized in other comprehensive income, and will be reclassified to earnings as a component of interest expense over the life of the debt. Unrealized gains were immaterial for the three months ended March 31, 2023.

In April 2023, ITC entered into interest rate locks with 10-year terms and a total notional value of US$260 million to manage interest rate risk associated with the anticipated issuance of long-term debt in 2023.

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. 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 secured overnight financing rates. Unrealized gains of $1 million were recorded in other comprehensive income for the three months ended March 31, 2023.

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 months ended March 31, 2023, gains of $2 million was recognized in other income, net (three months ended March 31, 2022 - losses of $4 million).

14	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd)

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 March 31, 2023
Assets
Energy contracts subject to regulatory deferral (2) (3)	—	106	—	106
Energy contracts not subject to regulatory deferral (2)	—	62	—	62
Total return swaps and interest rate lock (2)	—	4	—	4
Other investments (4)	127	—	—	127
	127	172	—	299
Liabilities
Energy contracts subject to regulatory deferral (3) (5)	—	(200)	—	(200)
Energy contracts not subject to regulatory deferral (5)	—	(8)	—	(8)
Foreign exchange contracts and cross currency swaps (5)	—	(21)	—	(21)
	—	(229)	—	(229)
As at December 31, 2022
Assets
Energy contracts subject to regulatory deferral (2) (3)	—	304	—	304
Energy contracts not subject to regulatory deferral (2)	—	49	—	49
Other investments (4)	150	—	—	150
	150	353	—	503
Liabilities
Energy contracts subject to regulatory deferral (3) (5)	—	(164)	—	(164)
Energy contracts not subject to regulatory deferral (5)	—	(8)	—	(8)
Foreign exchange contracts, total return and cross-currency interest rate swaps (5)	—	(26)	—	(26)
	—	(198)	—	(198)

(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

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 March 31, 2023
Derivative assets	168	37	28	103
Derivative liabilities	(208)	(37)	—	(171)
As at December 31, 2022
Derivative assets	353	54	63	236
Derivative liabilities	(172)	(54)	—	(118)
15	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
---	---	---
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd)

Volume of Derivative Activity

As at March 31, 2023, 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
	March 31,	December 31,
	2023	2022
Energy contracts subject to regulatory deferral (1)
Electricity swap contracts (GWh)	130	586
Electricity power purchase contracts (GWh)	420	224
Gas swap contracts (PJ)	186	185
Gas supply contract premiums (PJ)	128	148
Energy contracts not subject to regulatory deferral (1)
Wholesale trading contracts (GWh)	4,074	1,886
Gas swap contracts (PJ)	19	34

(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.

Central Hudson has seen an increase in accounts receivable due to the suspension of collection efforts in response to the COVID-19 pandemic, as well as higher commodity prices. Central Hudson continues to proactively contact customers regarding past-due balances to advise them of financial assistance available through federal and state programs, and collection efforts are expected to expand in 2023. Under its regulatory framework, Central Hudson can defer uncollectible write-offs that exceed 10 basis points above the amounts collected in customer rates for future recovery.

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, Central Hudson and FortisBC Energy, 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 March 31, 2023 (December 31, 2022 - $178 million).

Hedge of Foreign Net Investments

The reporting currency of ITC, UNS Energy, Central Hudson, Caribbean Utilities, FortisTCI, Fortis Belize 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 reduced this exposure through hedging.

As at March 31, 2023, US$3.0 billion (December 31, 2022 - US$2.9 billion) of corporately issued U.S. dollar-denominated long-term debt has been designated as an effective hedge of net investments, leaving approximately US$10.7 billion (December 31, 2022 - US$10.6 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 March 31, 2023, the carrying value of long-term debt, including current portion, was $29.0 billion (December 31, 2022 - $28.6 billion) compared to an estimated fair value of $27.0 billion (December 31, 2022 - $25.8 billion).

16	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)
---
For the three months ended March 31, 2023 and 2022
---

COMMITMENTS AND CONTINGENCIES

Commitments

There were no material changes in commitments from that disclosed in the Corporation's 2022 Annual Financial Statements.

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.

SUBSEQUENT EVENT

On May 1, 2023, the Corporation announced that FHI had entered into a definitive share purchase and sale agreement with a subsidiary of Enbridge Inc. to sell its 93.8% ownership interest in Aitken Creek for approximately $400 million, subject to customary closing conditions and adjustments. The purchase is subject to required approval, principally by the BCUC, and is expected to close by the end of the year with a March 31, 2023 effective date.

17	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT

Document

Exhibit 99.3

Interim Management Discussion and Analysis
Contents
---	---	---	---
About Fortis	1	Liquidity and Capital Resources	10
Key Development	1	Cash Flow Requirements	10
Performance at a Glance	2	Cash Flow Summary	11
Business Unit Performance	4	Contractual Obligations	12
ITC	4	Capital Structure and Credit Ratings	12
UNS Energy	4	Capital Plan	13
Central Hudson	5	Business Risks	13
FortisBC Energy	5	Accounting Matters	14
FortisAlberta	6	Financial Instruments	14
FortisBC Electric	6	Long-Term Debt and Other	14
Other Electric	6	Derivatives	14
Energy Infrastructure	7	Summary of Quarterly Results	14
Corporate and Other	7	Related-Party and Inter-Company Transactions	15
Non-U.S. GAAP Financial Measures	7	Outlook	16
Regulatory Matters	8	Forward-Looking Information	16
Financial Position	9	Glossary	17
		Condensed Consolidated Interim Financial Statements (Unaudited)	F-1

Dated May 2, 2023

This Interim MD&A has been prepared in accordance with National Instrument 51-102 - Continuous Disclosure Obligations. It should be read in conjunction with the Interim Financial Statements, the 2022 Annual Financial Statements and the 2022 Annual MD&A and is subject to the cautionary statement and disclaimer provided under "Forward-Looking Information" on page 16. Further information about Fortis, including its Annual Information Form filed on SEDAR, can be accessed at www.fortisinc.com, www.sedar.com, or www.sec.gov.

Financial information herein has been prepared in accordance with U.S. GAAP (except for indicated Non-U.S. GAAP Financial Measures) and, unless otherwise specified, is presented in Canadian dollars based, as applicable, on the following U.S. dollar-to-Canadian dollar exchange rates: (i) average of 1.35 and 1.26 for the quarters ended March 31, 2023 and 2022, respectively; (ii) 1.35 and 1.25 as at March 31, 2023 and 2022, respectively; (iii) 1.36 as at December 31, 2022; and (iv) 1.30 for all forecast periods. Certain terms used in this Interim MD&A are defined in the "Glossary" on page 17.

ABOUT FORTIS

Fortis (TSX/NYSE: FTS) is a well-diversified leader in the North American regulated electric and gas utility industry, with 2022 revenue of $11 billion and total assets of $65 billion as at March 31, 2023. The Corporation's 9,200 employees serve 3.4 million utility customers in five Canadian provinces, ten U.S. states and three Caribbean countries.

For additional information on the Corporation's operations, reportable segments and strategy, refer to the "About Fortis" section of the 2022 Annual MD&A and Note 1 to the Interim Financial Statements.

KEY DEVELOPMENT

Pending Sale of Unregulated Asset

On May 1, 2023, the Corporation announced that FortisBC Holdings Inc. had entered into a definitive share purchase and sale agreement with a subsidiary of Enbridge Inc. to sell its 93.8% ownership interest in Aitken Creek for approximately $400 million, subject to customary closing conditions and adjustments. The purchase is subject to required approval, principally by the BCUC, and is expected to close by the end of the year with a March 31, 2023 effective date. Net proceeds from the transaction will further strengthen the balance sheet and support financing of the Corporation's regulated utility growth strategy.

1	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
---
PERFORMANCE AT A GLANCE
---	---	---
Key Financial Metrics
Quarter ended March 31
( millions, except as indicated)	2022	Variance
Revenue	2,835	484
Common Equity Earnings
Actual	350	87
Adjusted (1)	369	70
Basic EPS ()
Actual	0.74	0.16
Adjusted (1)	0.78	0.13
Dividends paid per common share ()	0.535	0.03
Weighted average number of common shares outstanding (# millions)	475.7	7.4
Operating Cash Flow	813	102
Capital Expenditures (1)	964	31

All values are in US Dollars.

(1)See "Non-U.S. GAAP Financial Measures" on page 7

Revenue

The increase in revenue was due primarily to: (i) higher flow-through costs in customer rates, driven by commodity prices; (ii) higher retail and long-term wholesale sales, favourable pricing associated with short-term wholesale sales, and higher transmission revenue, at UNS Energy; (iii) Rate Base growth; and, (iv) favourable foreign exchange of $105 million.

Earnings and EPS

Common Equity Earnings increased by $87 million in comparison to the first quarter of 2022. The increase reflected Rate Base growth, mainly at ITC and the western Canadian utilities, as well as higher earnings at UNS Energy. Market conditions resulted in wholesale electricity sales with favourable margin and higher transmission revenue at UNS Energy in the first quarter of 2023 compared to later quarters in 2022. Higher retail electricity sales, including the impact of favourable weather, and lower depreciation expense associated with the retirement of the San Juan generating station in June 2022, also contributed to results in Arizona.

In addition to the above-noted items impacting earnings, the change in EPS also reflected an increase in the weighted average number of common shares outstanding, largely associated with the Corporation's DRIP.

Adjusted Common Equity Earnings and Adjusted Basic EPS increased by $70 million and $0.13, respectively. Refer to "Non-U.S. GAAP Financial Measures" on page 7 for a reconciliation of these measures. The changes in Adjusted Basic EPS are illustrated in the following charts.

2	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
---

(1) Includes UNS Energy and Central Hudson. Reflects higher earnings at UNS Energy due to: (i) the timing of long-term wholesale electricity sales and transmission revenue; (ii) higher retail electricity sales, including the impact of favourable weather; (iii) an increase in the market value of investments that support retirement benefits; and, (iv) lower depreciation expense associated with the retirement of the San Juan generating station in mid-2022. Also reflects lower earnings at Central Hudson driven by higher operating expenses as well as finance costs in excess of amounts collected in customer rates, partially offset by Rate Base growth

(2) Reflects Rate Base growth and an increase in the market value of investments that support retirement benefits, partially offset by higher holding company finance costs

(3) Includes FortisBC Energy, FortisAlberta and FortisBC Electric. Primarily reflects Rate Base growth

(4) Includes higher volumes and margins on gas sold at Aitken Creek, reflecting market conditions, and higher hydroelectric production in Belize associated with rainfall levels

(5) Average foreign exchange rate of 1.35 in 2023 compared to 1.26 in 2022

(6) Primarily reflects higher finance costs

(7) Weighted average shares of 483.1 million in 2023 compared to 475.7 million in 2022

Dividends and TSR

Fortis paid a dividend of $0.565 in the first quarter of 2023, up 5.6% from the first quarter of 2022.

Fortis has increased its common share dividend for 49 consecutive years and is targeting annual dividend growth of approximately 4-6% through 2027. See "Outlook" on page 16.

Growth of dividends and the market price of the Corporation's common shares have together yielded the following TSR.

TSR (1) (%)	1-Year	5-Year	10-Year	20-Year
Fortis	(3.5)	9.7	9.4	11.9

(1)Annualized TSR per Bloomberg as at March 31, 2023

Operating Cash Flow

The $102 million increase in Operating Cash Flow was due primarily to the timing of flow-through costs in customer rates, including variances in the cost of natural gas, in British Columbia. The increase was also due to: (i) higher cash earnings, reflecting Rate Base growth as well as higher sales and revenue in Arizona; (ii) lower storm restoration costs at Central Hudson; and, (iii) the higher U.S.-to-Canadian dollar exchange rate. The increase was partially offset by lower collateral deposits received at UNS Energy related to derivative energy contracts, and higher interest payments.

Capital Expenditures

Capital Expenditures were approximately $1.0 billion for the first quarter of 2023, representing 23% of the Corporation's annual $4.3 billion Capital Plan, and in-line with the first quarter of 2022.

Capital Expenditures and Capital Plan reflect Non-U.S. GAAP Financial Measures. Refer to "Non-U.S. GAAP Financial Measures" on page 7 and in the "Glossary" on page 17.

3	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
---
BUSINESS UNIT PERFORMANCE
---	---	---	---	---
Common Equity Earnings
Quarter ended March 31			Variance
($ millions)	2023	2022	FX (1)	Other
Regulated Utilities
ITC	126	109	8	9
UNS Energy	90	43	3	44
Central Hudson	32	32	2	(2)
FortisBC Energy	123	119	—	4
FortisAlberta	40	36	—	4
FortisBC Electric	18	18	—	—
Other Electric (2)	30	26	1	3
	459	383	14	62
Non-Regulated
Energy Infrastructure (3)	19	(6)	—	25
Corporate and Other (4)	(41)	(27)	(1)	(13)
Common Equity Earnings	437	350	13	74

(1) The reporting currency of ITC, UNS Energy, Central Hudson, Caribbean Utilities, FortisTCI and Fortis Belize is the U.S. dollar. The reporting currency of Belize Electricity is the Belizean dollar, which is pegged to the U.S. dollar at BZ$2.00=US$1.00. The Corporate and Other segment includes certain transactions denominated in U.S. dollars.

(2) Consists of the utility operations in eastern Canada and the Caribbean: Newfoundland Power; Maritime Electric; FortisOntario; Wataynikaneyap Power; Caribbean Utilities; FortisTCI; and Belize Electricity

(3) Primarily consists of long-term contracted generation assets in Belize and Aitken Creek in British Columbia

(4) Includes Fortis net corporate expenses and non-regulated holding company expenses

ITC
Quarter ended March 31			Variance
($ millions)	2023	2022	FX	Other
Revenue (1)	519	460	33	26
Earnings (1)	126	109	8	9

(1)Revenue represents 100% of ITC. Earnings represent the Corporation's 80.1% controlling ownership interest in ITC and reflect consolidated purchase price accounting adjustments

Revenue

The increase in revenue, net of foreign exchange, was due primarily to Rate Base growth and higher flow-through costs in customer rates.

Earnings

The increase in earnings, net of foreign exchange, was due primarily to Rate Base growth and an increase in the market value of certain investments that support retirement benefits. The increase was partially offset by higher holding company finance costs.

UNS Energy
Quarter ended March 31			Variance
($ millions, except as indicated)	2023	2022	FX	Other
Retail electricity sales (GWh)	2,222	2,175	—	47
Wholesale electricity sales (GWh) (1)	1,379	1,393	—	(14)
Gas sales (PJ)	8	7	—	1
Revenue	740	538	39	163
Earnings	90	43	3	44

(1) Primarily short-term wholesale sales

Sales

The increase in retail electricity and gas sales was due primarily to higher heating load associated with cooler temperatures as compared to the first quarter of 2022. Customer additions also contributed to the increase in retail electricity sales.

4	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
---

The decrease in wholesale electricity sales was driven by lower short-term wholesale sales, partially offset by an increase in long-term wholesale sales. Revenue from short-term wholesale electricity sales is primarily credited to customers through regulatory deferral mechanisms and, therefore, does not materially impact earnings.

Revenue

The increase in revenue, net of foreign exchange, was due primarily to: (i) the recovery of overall higher fuel and non-fuel costs through the normal operation of regulatory mechanisms; (ii) higher revenue from short-term wholesale electricity sales due to favourable pricing; (iii) higher retail and long-term wholesale sales, discussed above; and, (iv) higher transmission revenue. The increase was partially offset by lower short-term wholesale electricity sales.

Earnings

The increase in earnings, net of foreign exchange, included the timing of long-term wholesale electricity sales and transmission revenue. Market conditions resulted in wholesale electricity sales with favourable margin and higher transmission revenue in the first quarter of 2023 compared to later quarters in 2022. Earnings growth was also due to: (i) higher retail electricity sales, including the impact of favourable weather; (ii) an increase in the market value of certain investments that support retirement benefits; and, (iii) lower depreciation expense associated with the retirement of the San Juan generating station in June 2022. The increase was partially offset by higher operating costs, primarily reflecting inflationary increases.

Central Hudson
Quarter ended March 31			Variance
($ millions, except as indicated)	2023	2022	FX	Other
Electricity sales (GWh)	1,267	1,256	—	11
Gas sales (PJ)	9	10	—	(1)
Revenue	442	375	27	40
Earnings	32	32	2	(2)

Sales

Electricity and gas sales were consistent with the first quarter of 2022.

Changes in electricity and gas sales at Central Hudson are subject to regulatory revenue decoupling mechanisms and, therefore, do not materially impact revenue and earnings.

Revenue

The increase in revenue, net of foreign exchange, was due primarily to the flow-through of higher energy supply costs driven by commodity prices.

Earnings

The decrease in earnings, net of foreign exchange, was due primarily to higher operating expenses as well as finance costs in excess of amounts collected in customer rates. The decrease was partially offset by Rate Base growth.

FortisBC Energy
Quarter ended March 31
($ millions, except as indicated)	2023	2022	Variance
Gas sales (PJ)	79	81	(2)
Revenue	750	694	56
Earnings	123	119	4

Sales

The decrease in gas sales was due primarily to lower average consumption by residential and transportation customers.

Revenue

The increase in revenue was due primarily to a higher cost of natural gas recovered from customers, Rate Base growth and higher gas mitigation incentive revenue, partially offset by the normal operation of regulatory mechanisms.

5	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
---

Earnings

The increase in earnings was due primarily to Rate Base growth and higher gas mitigation incentive revenue, partially offset by higher operating costs.

FortisBC Energy earns approximately the same margin regardless of whether a customer contracts for the purchase and delivery of natural gas or only for delivery. Due to regulatory deferral mechanisms, changes in consumption levels and commodity costs do not materially impact earnings.

FortisAlberta
Quarter ended March 31
($ millions, except as indicated)	2023	2022	Variance
Electricity deliveries (GWh)	4,510	4,584	(74)
Revenue	179	167	12
Earnings	40	36	4

Deliveries

The decrease in electricity deliveries was due to lower average consumption by residential customers due to milder weather in the first quarter of 2023, partially offset by customer additions.

As approximately 85% of FortisAlberta's revenue is derived from fixed or largely fixed billing determinants, changes in quantities of energy delivered are not entirely correlated with changes in revenue. Revenue is a function of numerous variables, many of which are independent of actual energy deliveries. Significant variations in weather conditions, however, can impact revenue and earnings.

Revenue and Earnings

The increase in revenue and earnings was due primarily to Rate Base growth. An increase in revenue associated with the PBR efficiency carry-over mechanism was largely offset by lower cost recovery attributable to REAs. See "Regulatory Matters" on page 8 for further detail on REA cost recovery. The timing of operating costs also favourably impacted earnings as compared to the first quarter of 2022.

FortisBC Electric
Quarter ended March 31
($ millions, except as indicated)	2023	2022	Variance
Electricity sales (GWh)	971	968	3
Revenue	139	129	10
Earnings	18	18	—

Sales

Electricity sales were consistent with the first quarter of 2022.

Revenue

The increase in revenue was due to the normal operation of regulatory deferrals and Rate Base growth, partially offset by a decrease in third party contract work.

Earnings

Earnings were consistent with the first quarter of 2022.

Due to regulatory deferral mechanisms, changes in consumption levels do not materially impact earnings.

Other Electric
Quarter ended March 31			Variance
($ millions, except as indicated)	2023	2022	FX	Other
Electricity sales (GWh)	3,037	3,006	—	31
Revenue	507	459	6	42
Earnings	30	26	1	3
6	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
---	---	---
Interim Management Discussion and Analysis
---

Sales

The increase in electricity sales was due to overall higher average consumption by residential and commercial customers, as well as customer additions.

Revenue

The increase in revenue, net of foreign exchange, was due primarily to the flow-through of higher energy supply costs and higher electricity sales, discussed above, as well as the normal operation of regulatory mechanisms at Newfoundland Power.

Earnings

The increase in earnings, net of foreign exchange, was due to Rate Base growth and higher electricity sales, as well as equity income from Wataynikaneyap Power.

Energy Infrastructure
Quarter ended March 31
($ millions, except as indicated)	2023	2022	Variance
Electricity sales (GWh)	31	17	14
Revenue	43	13	30
Earnings	19	(6)	25

Sales

The increase in electricity sales reflected an increase in hydroelectric production in Belize associated with higher rainfall levels.

Revenue and Earnings

Revenue and earnings were impacted by the mark-to-market accounting of natural gas derivatives at Aitken Creek, which resulted in unrealized losses of $2 million in the first quarter of 2023 compared to $19 million for the same period in 2022. Higher volumes and margins on gas sold at Aitken Creek, reflecting market conditions, and higher hydroelectric production in Belize also contributed to the increases in revenue and earnings.

Aitken Creek is subject to commodity price risk, as it purchases and holds natural gas in storage to earn a profit margin from its ultimate sale. Aitken Creek mitigates this risk by using derivatives to materially lock in the profit margin that will be realized upon the sale of natural gas. The fair value accounting of these derivatives creates timing differences and the resultant earnings volatility can be significant.

Corporate and Other
Quarter ended March 31			Variance
($ millions)	2023	2022	FX	Other
Net expenses	(41)	(27)	(1)	(13)

The increase in net expenses, net of foreign exchange, was primarily due to higher finance costs, reflecting higher interest rates and balances outstanding on the Corporation's credit facilities.

NON-U.S. GAAP FINANCIAL MEASURES

Adjusted Common Equity Earnings, Adjusted Basic EPS and Capital Expenditures are Non-U.S. GAAP Financial Measures and may not be comparable with similar measures used by other entities. They are presented because management and external stakeholders use them in evaluating the Corporation's financial performance and prospects.

Net earnings attributable to common equity shareholders (i.e., Common Equity Earnings) and basic EPS are the most directly comparable U.S. GAAP measures to Adjusted Common Equity Earnings and Adjusted Basic EPS, respectively. These adjusted measures reflect the removal of items that management excludes in its key decision-making processes and evaluation of operating results.

Capital Expenditures include additions to property, plant and equipment and additions to intangible assets, as shown on the condensed consolidated statements of cash flows. It also includes Fortis' 39% share of capital spending for the Wataynikaneyap Transmission Power Project, consistent with Fortis' evaluation of operating results and its role as project manager during the construction of this Major Capital Project.

7	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
---
Non-U.S. GAAP Reconciliation
---	---	---	---
Quarter ended March 31
($ millions, except as indicated)	2023	2022	Variance
Adjusted Common Equity Earnings and Adjusted Basic EPS
Common Equity Earnings	437	350	87
Adjusting item:
Unrealized loss on mark-to-market of derivatives (1)	2	19	(17)
Adjusted Common Equity Earnings	439	369	70
Adjusted Basic EPS ($)	0.91	0.78	0.13
Capital Expenditures
Additions to property, plant and equipment	907	866	41
Additions to intangible assets	47	49	(2)
Adjusting item:
Wataynikaneyap Transmission Power Project (2)	41	49	(8)
Capital Expenditures	995	964	31

(1) Represents timing differences related to the accounting of natural gas derivatives at Aitken Creek, net of income tax recovery of $1 million for the three months ended March 31, 2023 ($7 million for the three months ended March 31, 2022), included in the Energy Infrastructure segment

(2)Represents Fortis' 39% share of capital spending for the Wataynikaneyap Transmission Power Project, included in the Other Electric segment

REGULATORY MATTERS

ITC

ITC Midwest Capital Structure Complaint: In 2022, FERC issued an order denying the complaint filed by ICAT requesting that ITC Midwest's common equity component of capital structure be reduced from 60% to 53%. In March 2023, FERC confirmed its decision following ICAT's request for rehearing.

MISO Base ROE: In 2022, the D.C. Circuit Court issued a decision vacating certain FERC orders that had established the methodology for setting the base ROE for transmission owners operating in the 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. Although any potential impact to Fortis is uncertain, every 10-basis point change in ROE at ITC impacts Fortis' annual EPS by approximately $0.01.

Transmission Incentives: In 2021, FERC issued a supplemental NOPR on transmission incentives modifying the proposal in the initial NOPR released by FERC in 2020. The supplemental NOPR proposes to eliminate the 50-basis point RTO ROE incentive adder for RTO members that have been members for longer than three years. The timing and outcome of this proceeding is unknown.

Transmission ROFR: The State of Iowa has granted incumbent electric transmission owners, including ITC, a ROFR to construct, own and maintain certain electric transmission assets in the state. A challenge against the ROFR statute by certain plaintiffs was initially dismissed by the District Court on the grounds that the plaintiffs lacked standing. In March 2023, the Iowa Supreme Court determined that the plaintiffs have standing to challenge the Iowa ROFR statute, issued a temporary injunction staying enforcement of the ROFR statute, and remanded the matter to the District Court to decide the merits of the claim. ITC previously exercised its right to construct certain electric transmission projects approved and awarded by MISO, including projects associated with the first tranche of MISO's LRTP. Management does not believe that this proceeding will impact projects that have already been approved and under development, however, the timing of this proceeding and any impact on future projects, is unknown.

UNS Energy

PPFAC Mechanism: The PPFAC mechanism allows for the timely recovery or return of purchased power and fuel costs, as compared to that collected in customer rates, at TEP and UNSE. The PPFAC balance has increased in recent years, reflecting higher commodity costs. In January 2023, TEP filed a request to collect a PPFAC balance of US$148 million over a 12-month period. The timing and outcome of this proceeding is unknown. On May 2, 2023, the ACC approved a rate adjustment at UNSE to recover a PPFAC balance of US$104 million over a 33-month period.

8	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
---

Central Hudson

CIS Implementation: In 2022, the PSC released a report into the deployment by Central Hudson of its new CIS. The PSC also issued an Order to Commence Proceeding and Show Cause, which directed Central Hudson to explain why the PSC should not pursue civil or administrative penalties or initiate a proceeding to review the prudence of the CIS implementation costs. Central Hudson was also required to submit a plan to eliminate bi-monthly bill estimates and to evaluate the customer impacts of such a change. Central Hudson's response was filed in January 2023. The timing and outcome of this proceeding is unknown.

FortisBC Energy and FortisBC Electric

GCOC Proceeding: In 2021, the BCUC initiated a proceeding including a review of the common equity component of capital structure and the allowed ROE. FortisBC filed a final argument with the BCUC in December 2022 and the proceeding remains ongoing, with a decision expected by mid-2023.

FortisAlberta

2024 GCOC Proceeding: In 2022, the AUC initiated proceedings to establish the cost of capital parameters for Alberta regulated utilities, including consideration of a formula-based approach to setting the allowed ROE for 2024 and beyond. The proceeding remains ongoing, and a decision is expected in the third quarter of 2023.

Third PBR Term: In 2021, the AUC issued a decision confirming that Alberta distribution utilities will be subject to a third PBR term commencing in 2024. The AUC also initiated a new proceeding to consider the design of the third PBR term. The proceeding remains ongoing, and a decision from the AUC is expected in the fourth quarter of 2023.

REA Cost Recovery: In 2021, the AUC determined that costs attributable to REAs, approximating $10 million annually, can no longer be recovered from FortisAlberta's rate payers, effective January 1, 2023. FortisAlberta filed an appeal with the Alberta Court of Appeal, asserting that the AUC erred in preventing the company from recovering these costs from its own rate payers to the extent that such costs cannot be recovered directly from REAs. The Court dismissed the appeal on April 28, 2023. FortisAlberta continues to review the decision and assess other means, including legislative amendments, to recover these costs.

FINANCIAL POSITION

Significant Changes between March 31, 2023 and December 31, 2022
Balance Sheet Account	Increase (Decrease)
($ millions)	FX	Other	Explanation
Cash and cash equivalents	—	367	Due to: (i) the timing of debt issuances and capital investments at UNS Energy; and, (ii) the timing of collection of flow-through costs in customer rates, as well as the receipt of a deposit related to development expenditures to be incurred for the Eagle Mountain Woodfibre Gas Line project, at FortisBC Energy.
Accounts receivable and other current assets	(4)	(459)	Due to: (i) a decrease in the fair value of energy contracts at UNS Energy and FortisBC Energy; and, (ii) the seasonality of sales, particularly in Canada.
Regulatory assets (current and long-term)	(4)	145	Due to: (i) unrealized losses on energy derivatives at FortisBC Energy and UNS Energy; (ii) the normal operation of rate stabilization accounts; and, (iii) the deferral of incremental restoration costs at Central Hudson.
Property, plant and equipment, net	(75)	606	Due to capital expenditures, partially offset by depreciation.
Short-term borrowings	(1)	109	Reflects the issuance of commercial paper at ITC to finance working capital and capital investment requirements.
Accounts payable and other current liabilities	(4)	(326)	Due to lower amounts owing for energy supply costs, primarily at UNS Energy and FortisBC Energy, as well as the timing of payments.	9	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
---	---	---
Interim Management Discussion and Analysis
---
Significant Changes between March 31, 2023 and December 31, 2022
---	---	---	---
Balance Sheet Account	Increase (Decrease)
($ millions)	FX	Other	Explanation
Long-term debt (including current portion)	(52)	468	Reflects debt issuances partially offset by debt repayments, and higher borrowings under committed credit facilities, in support of the Corporation's Capital Plan.
Shareholders' equity	(39)	276	Due primarily to: (i) Common Equity Earnings for the three months ended March 31, 2023, less dividends declared on common shares; and, (ii) the issuance of common shares, largely under the DRIP.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Requirements

At the subsidiary level, it is expected that operating expenses and interest costs will be paid from Operating Cash Flow, with varying levels of residual cash flow available for capital expenditures and/or dividend payments to Fortis. Remaining capital expenditures are expected to be financed primarily from borrowings under credit facilities, long-term debt offerings and equity injections from Fortis. Borrowings under credit facilities may be required periodically to support seasonal working capital requirements.

Cash required of Fortis to support subsidiary growth is generally derived from borrowings under the Corporation's committed credit facility, the operation of the DRIP and issuances of common shares, preference equity and long-term debt. The subsidiaries pay dividends to Fortis and receive equity injections from Fortis when required. Both Fortis and its subsidiaries initially borrow through their committed credit facilities and periodically replace these borrowings with long-term financing. Financing needs also arise to refinance maturing debt.

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 total revolving credit facilities. Approximately $5.6 billion of the total credit facilities are committed with maturities ranging from 2023 through 2027. Available credit facilities are summarized in the following table.

Credit Facilities
As at	Corporate<br>and Other	March 31,<br>2023	December 31,<br>2022
( millions)
Total credit facilities (1)	2,048	5,841	5,850
Credit facilities utilized:
Short-term borrowings	—	(361)	(253)
Long-term debt (including current portion)	(922)	(1,818)	(1,657)
Letters of credit outstanding	(38)	(100)	(128)
Credit facilities unutilized	1,088	3,562	3,812

All values are in US Dollars.

(1) See Note 14 in the 2022 Annual Financial Statements for a description of the credit facilities as at December 31, 2022.

In April 2023, ITC increased its total credit facilities available from US$900 million to US$1 billion and extended the maturity to April 2028.

On May 1, 2023, the Corporation extended the maturity on its unsecured US$500 million non-revolving term credit facility to May 2024. The facility is repayable at any time without penalty, and provides the Corporation with additional, cost effective short-term financing.

The Corporation's ability to service debt and pay dividends is dependent on the financial results of, and the related cash payments from, its subsidiaries. Certain regulated subsidiaries are subject to restrictions that limit their ability to distribute cash to Fortis, including restrictions by certain regulators limiting annual dividends and restrictions by certain lenders limiting debt to total capitalization. There are also practical limitations on using the net assets of the regulated subsidiaries to pay dividends, based on management's intent to maintain the subsidiaries' regulator-approved capital structures. Fortis does not expect that maintaining such capital structures will impact its ability to pay dividends in the foreseeable future.

As at March 31, 2023, consolidated fixed-term debt maturities/repayments are expected to average $1,392 million annually over the next five years and approximately 74% of the Corporation's consolidated long-term debt, excluding credit facility borrowings, had maturities beyond five years.

10	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
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Fortis is well positioned with strong liquidity. This combination of available credit facilities and manageable annual debt maturities/repayments provides flexibility in the timing of access to capital markets. Given current credit ratings and capital structures, the Corporation and its subsidiaries currently expect to continue to have reasonable access to long-term capital in 2023.

Fortis and its subsidiaries were in compliance with debt covenants as at March 31, 2023 and are expected to remain compliant in 2023.

Cash Flow Summary
Summary of Cash Flows
Quarter ended March 31
($ millions)	2023	2022	Variance
Cash and cash equivalents, beginning of quarter	209	131	78
Cash from (used in):
Operating activities	915	813	102
Investing activities	(941)	(916)	(25)
Financing activities	388	337	51
Effect of exchange rate changes on cash and cash equivalents	5	—	5
Cash and cash equivalents, end of quarter	576	365	211

Operating Activities

See "Performance at a Glance - Operating Cash Flow" on page 3.

Investing Activities

The increase in cash used in investing activities reflects the higher U.S.-to-Canadian dollar exchange rate, partially offset by higher customer contributions in aid of construction as well as the timing of capital investments. The Corporation's Capital Plan for 2023 is estimated to be $4.3 billion, an increase of approximately 7% from $4.0 billion in 2022. See "Capital Plan" on page 13.

Financing Activities

Cash flows related to financing activities will fluctuate largely as a result of changes in the subsidiaries' capital expenditures and the amount of Operating Cash Flow available to fund those capital expenditures, which together impact the amount of funding required from debt and common equity issuances. See "Cash Flow Requirements" on page 10.

Debt Financing
Significant Long-Term Debt Issuances		Interest
Year-to-date March 31, 2023	Month	Rate				Use of Proceeds
($ millions, except as noted)	Issued	(%)	Maturity	Amount
UNS Energy
Unsecured senior notes	February	5.50	2053	US	375	(1) (2)
Central Hudson
Unsecured senior notes	March	5.68	2033	US	40	(2) (3)
Unsecured senior notes	March	5.78	2035	US	15	(2) (3)
Unsecured senior notes	March	5.88	2038	US	35	(2) (3)

(1) Repay maturing long-term debt

(2) General corporate purposes

(3) Repay short-term and/or credit facility borrowings

11	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
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Common Equity Financing
---	---	---	---
Common Equity Issuances and Dividends Paid
Quarter ended March 31
($ millions, except as indicated)	2023	2022	Variance
Common shares issued:
Cash (1)	14	22	(8)
Non-cash (2)	103	95	8
Total common shares issued	117	117	—
Number of common shares issued (# millions)	2.2	2.1	0.1
Common share dividends paid:
Cash	(170)	(160)	(10)
Non-cash (3)	(103)	(94)	(9)
Total common share dividends paid	(273)	(254)	(19)
Dividends paid per common share ($)	0.565	0.535	0.03

(1) Includes common shares issued under stock option and employee share purchase plans

(2) Common shares issued under the DRIP and stock option plan

(3) Common share dividends reinvested under the DRIP

On February 9, 2023, Fortis declared a dividend of $0.565 per common share payable on June 1, 2023. The payment of dividends is at the discretion of the board of directors and depends on the Corporation's financial condition and other factors.

Contractual Obligations

There were no material changes to the contractual obligations disclosed in the 2022 Annual MD&A, except issuances of long-term debt and credit facility utilization (see "Cash Flow Summary" on page 11).

Off-Balance Sheet Arrangements

There were no material changes to off-balance sheet arrangements from those disclosed in the 2022 Annual MD&A.

Capital Structure and Credit Ratings

Fortis requires ongoing access to capital and, therefore, targets a consolidated long-term capital structure that will enable it to maintain investment-grade credit ratings. The regulated utilities maintain their own capital structures in line with those reflected in customer rates.

Consolidated Capital Structure	March 31, 2023		December 31, 2022
As at	($ millions)	(%)	($ millions)	(%)
Debt (1)	28,957	55.7	28,792	55.8
Preference shares	1,623	3.1	1,623	3.1
Common shareholders' equity and non-controlling interests (2)	21,460	41.2	21,219	41.1
	52,040	100.0	51,634	100.0

(1) Includes long-term debt and finance leases, including current portion, and short-term borrowings, net of cash

(2) Includes shareholders' equity, net of preference shares, and non-controlling interests. Non-controlling interests represented 3.5% as at March 31, 2023 (December 31, 2022 - 3.5%)

Outstanding Share Data

As at May 2, 2023, the Corporation had issued and outstanding 484.5 million common shares and the following First Preference Shares: 5.0 million Series F; 9.2 million Series G; 7.7 million Series H; 2.3 million Series I; 8.0 million Series J; 10.0 million Series K; and 24.0 million Series M.

Only the common shares of the Corporation have voting rights. The Corporation's first preference shares do not have voting rights unless and until Fortis fails to pay eight quarterly dividends, whether or not consecutive or declared.

If all outstanding stock options were converted as at May 2, 2023, an additional 2.2 million common shares would be issued and outstanding.

12	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
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Credit Ratings

The Corporation's credit ratings shown below reflect its low risk profile, diversity of operations, the stand-alone nature and financial separation of each regulated subsidiary, and the level of holding company debt.

As at March 31, 2023	Rating	Type	Outlook
S&P	A-	Corporate	Stable
	BBB+	Unsecured debt
DBRS Morningstar	A (low)	Corporate	Stable
	A (low)	Unsecured debt
Moody's	Baa3	Issuer	Stable
	Baa3	Unsecured debt

Capital Plan

Year-to-date Capital Expenditures of $1.0 billion are consistent with expectations and the Corporation's annual $4.3 billion Capital Plan is on track.

While global supply chain constraints and persistent inflation remain issues of potential concern that continue to evolve, the Corporation does not expect a material impact on its 2023-2027 Capital Plan, although certain planned expenditures may shift within the five years. The Corporation continues to proactively work to mitigate supply chain constraints by identifying high priority materials and consolidating buying power to improve outcomes, increasing inventory levels, and closely working with suppliers to ensure material availability.

Capital Expenditures (1)
Year-to-date March 31, 2023	Regulated Utilities
		UNS Energy	Central Hudson	FortisBC Energy	Fortis Alberta	FortisBC Electric			Other Electric	Total Regulated Utilities	Non-<br>Regulated
($ millions, except as indicated)	ITC						(2)	Total
Total	336	185	78	113	119	27			134	992	3	995

(1) See "Non-U.S. GAAP Financial Measures" on page 7

(2) Energy Infrastructure segment

Five-Year Capital Plan

The 2023-2027 Capital Plan is targeted at $22.3 billion, reflecting an average of $4.5 billion of Capital Expenditures annually. In total, Fortis expects to invest $5.9 billion in cleaner energy over the five-year period. The Capital Plan is low risk and highly executable, with 99% of planned expenditures to occur at the regulated utilities and only 17% relating to Major Capital Projects. Geographically, 55% of planned expenditures are expected in the U.S., including 26% at ITC, with 41% in Canada and the remaining 4% in the Caribbean.

Planned Capital Expenditures are based on detailed forecasts of energy demand as well as labour and material costs, including inflation, supply chain availability, general economic conditions, foreign exchange rates and other factors. These could change and cause actual expenditures to differ from forecast.

Major Capital Project Updates

FortisBC Energy

In March 2023, FortisBC Energy filed amended transportation rate schedules with the BCUC for the Eagle Mountain Woodfibre Gas Line project. Approval from the BCUC is anticipated in May 2023, which will remove certain of FortisBC Energy's conditions for commencing construction and bring the project one step closer to construction.

With respect to the Tilbury LNG Storage Expansion project, the regulatory process was adjourned in March 2023 in order for FortisBC Energy to prepare further information in support of the CPCN application. In May 2023, FortisBC Energy expects to submit a supplemental filing with the BCUC to provide updates to key evidence in the proceeding for the Okanagan Capacity Upgrade project. As a result, BCUC approval of both projects could be later than originally expected.

BUSINESS RISKS

The Corporation's business risks remain substantially unchanged from those disclosed in its 2022 Annual MD&A. See "Regulatory Matters" on page 8 and "Outlook" on page 16 for applicable updates.

13	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
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ACCOUNTING MATTERS

Accounting Policies

The Interim Financial Statements have been prepared following the same accounting policies and methods as those used to prepare the 2022 Annual Financial Statements.

Critical Accounting Estimates

There were no material changes to the nature of the Corporation's critical accounting estimates or contingencies from that disclosed in the 2022 Annual MD&A.

FINANCIAL INSTRUMENTS

Long-Term Debt and Other

As at March 31, 2023, the carrying value of long-term debt, including the current portion, was $29.0 billion (December 31, 2022 - $28.6 billion) compared to an estimated fair value of $27.0 billion (December 31, 2022 - $25.8 billion). Since Fortis does not intend to settle long-term debt prior to maturity, any excess of fair value over carrying value does not represent an actual liability.

The consolidated carrying value of the remaining financial instruments, other than derivatives, approximates fair value, reflecting their short-term maturity, normal trade credit terms and/or nature.

Derivatives

Derivatives are recorded at fair value with certain exceptions, including those derivatives that qualify for the normal purchase and normal sale exception.

There were no material changes with respect to the nature and purpose, methodologies for fair value determination, and portfolio of the Corporation's derivatives from that disclosed in the 2022 Annual MD&A, except for interest rate locks entered into at ITC and Fortis as disclosed in Note 12 to the Interim Financial Statements.

SUMMARY OF QUARTERLY RESULTS
		Common Equity
	Revenue	Earnings	Basic EPS	Diluted EPS
Quarter ended	($ millions)	($ millions)	($)	($)
March 31, 2023	3,319	437	0.90	0.90
December 31, 2022	3,168	370	0.77	0.77
September 30, 2022	2,553	326	0.68	0.68
June 30, 2022	2,487	284	0.59	0.59
March 31, 2022	2,835	350	0.74	0.74
December 31, 2021	2,583	328	0.69	0.69
September 30, 2021	2,196	295	0.63	0.62
June 30, 2021	2,130	253	0.54	0.54

Generally, within each calendar year, quarterly results fluctuate in accordance with seasonality. Given the diversified nature of the Corporation's subsidiaries, seasonality varies. Most of the annual earnings of the gas utilities are realized in the first and fourth quarters due to space-heating requirements. Earnings for the electric distribution utilities in the U.S. are generally highest in the second and third quarters due to the use of air conditioning and other cooling equipment.

Generally, from one calendar year to the next, quarterly results reflect: (i) continued organic growth driven by the Corporation's Capital Plan; (ii) any significant temperature fluctuations from seasonal norms; (iii) the impact of market conditions, particularly with respect to long-term wholesale sales and transmission revenue at UNS Energy, as well as margins realized on gas sold at Aitken Creek; (iv) the timing and significance of any regulatory decisions; (v) changes in the U.S.-to-Canadian dollar exchange rate; (vi) for revenue, the flow-through in customer rates of commodity costs; and (vii) for EPS, increases in the weighted average number of common shares outstanding.

14	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
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March 2023/March 2022

See "Performance at a Glance" on page 2.

December 2022/December 2021

Common Equity Earnings increased by $42 million and basic EPS increased by $0.08 in comparison to the fourth quarter of 2021 due to: (i) Rate Base growth; (ii) higher retail electricity sales and transmission revenue at UNS Energy; (iii) higher earnings from the energy infrastructure segment driven by hydroelectric production in Belize, as well as the favourable impact of market conditions at Aitken Creek; and (iv) the timing of expenses at FortisAlberta. The translation of U.S. dollar-denominated subsidiary earnings at the higher U.S.-to-Canadian dollar foreign exchange rate and lower stock-based compensation costs also contributed to results with these impacts exceeding the related losses associated with hedging activities. The increase in earnings was partially offset by higher corporate costs, reflecting higher finance costs and a lower income tax recovery, as well as lower earnings at Central Hudson, reflecting the finalization of the company's rate application in late 2021 with retroactive application to July 1, 2021. The change in basic EPS also reflected an increase in the weighted average number of common shares outstanding, largely associated with the Corporation's DRIP.

September 2022/September 2021

Common Equity Earnings increased by $31 million and basic EPS increased by $0.05 in comparison to the third quarter of 2021 due to: (i) Rate Base growth, mainly at ITC; (ii) higher retail electricity sales, transmission revenue and earnings associated with the Oso Grande generating facility in Arizona; (iii) higher earnings from the energy infrastructure segment mainly due to mark-to-market accounting of natural gas derivatives and higher hydroelectric production in Belize; and (iv) the impact of new customer rates and the timing of operating costs at Central Hudson.

Growth was tempered by the timing of expenses in Alberta and a favourable adjustment recognized in 2021 related to interest rate swaps at ITC. Results for the third quarter of 2022 were also impacted by significant items at ITC, including costs associated with the suspension of the Lake Erie Connector project, and the revaluation of deferred income tax assets due to a reduction in the corporate income tax rate in the state of Iowa. The impact of mark-to-market losses associated with hedging activities was more than offset by lower stock-based compensation costs and the translation of U.S. dollar-denominated subsidiary earnings at the higher U.S.-to-Canadian dollar foreign exchange rate. The change in basic EPS also reflected an increase in the weighted average number of common shares outstanding, largely associated with the Corporation's DRIP.

June 2022/June 2021

Common Equity Earnings increased by $31 million and basic EPS increased by $0.05 in comparison to the second quarter of 2021 due to: (i) Rate Base growth; (ii) higher earnings from the energy infrastructure segment, largely reflecting favourable changes in the mark-to-market accounting of natural gas derivatives at Aitken Creek; and (iii) a higher U.S.-to-Canadian dollar foreign exchange rate. Growth in earnings was partially offset by losses on investments that support retirement benefits at UNS Energy and ITC, reflecting market conditions, and the timing of quarterly earnings from Arizona and Alberta. In comparison to the second quarter of 2021, results from UNS Energy were tempered, as expected, by the timing of earnings related to the Oso Grande generating facility, and earnings from FortisAlberta were lower due to the timing of operating expenses. The change in EPS also reflected an increase in the weighted average number of common shares outstanding, largely associated with the Corporation's DRIP.

RELATED-PARTY AND INTER-COMPANY TRANSACTIONS

As at March 31, 2023, accounts receivable included $4 million due from Belize Electricity (December 31, 2022 - $7 million).

15	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
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OUTLOOK

Fortis continues to enhance shareholder value through the execution of its Capital Plan, the balance and strength of its diversified portfolio of regulated utility businesses, and growth opportunities within and proximate to its service territories. While energy price volatility, global supply chain constraints and persistent inflation are issues of potential concern that continue to evolve, the Corporation does not currently expect there to be a material impact on its operations or financial results in 2023.

Fortis is executing on the transition to a cleaner energy future and is on track to achieve its corporate-wide targets to reduce GHG emissions by 50% by 2030 and 75% by 2035. Upon achieving these targets, 99% of the Corporation's assets will support energy delivery and renewable, carbon-free generation. The Corporation's additional 2050 net-zero direct GHG emissions target reinforces Fortis' commitment to further decarbonize over the long-term, while preserving customer reliability and affordability.

The Corporation's $22.3 billion five-year Capital Plan is expected to increase midyear Rate Base from $34.1 billion in 2022 to $46.1 billion by 2027, translating into a five-year CAGR of 6.2%.

Beyond the five-year Capital Plan, additional opportunities to expand and extend growth include: further expansion of the electric transmission grid in the U.S. to facilitate the interconnection of cleaner energy, including infrastructure investments associated with the IRA and the MISO LRTP; climate adaptation and grid resiliency investments; renewable gas solutions and LNG infrastructure in British Columbia; and the acceleration of cleaner energy infrastructure investments across our jurisdictions.

Fortis expects its long-term growth in Rate Base will drive earnings that support dividend growth guidance of 4-6% annually through 2027, and is premised on the assumptions and material factors listed under "Forward-Looking Information".

FORWARD-LOOKING INFORMATION

Fortis includes forward-looking information in the MD&A within the meaning of applicable Canadian securities laws and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, (collectively referred to as "forward-looking information"). Forward-looking information reflects expectations of Fortis management regarding future growth, results of operations, performance, business prospects and opportunities. Wherever possible, words such as anticipates, believes, budgets, could, estimates, expects, forecasts, intends, may, might, plans, projects, schedule, should, target, will, would, and the negative of these terms, and other similar terminology or expressions, have been used to identify the forward-looking information, which includes, without limitation: the expected timing and outcome of the sale of Aitken Creek; forecast capital expenditures for 2023 and 2023-2027, including cleaner energy investments; the expected timing, outcome and impact of regulatory proceedings and decisions; the expectation that volatility in energy prices, global supply chain constraints and persistent inflation will not have a material impact on operations or financial results in 2023 or the 2023-2027 capital plan; forecast Rate Base and Rate Base growth through 2027; the nature, timing, benefits and expected costs of certain capital projects, including FortisBC Energy's Eagle Mountain Woodfibre Gas Pipeline project, Tilbury LNG Storage Expansion project and Okanagan Capacity Upgrade project, and additional opportunities beyond the Capital Plan, including investments associated with the IRA, the MISO LRTP, climate adaptation and grid resiliency, renewable gas solutions and LNG infrastructure in British Columbia, and the acceleration of cleaner energy infrastructure; the 2030 GHG emissions reduction target; the 2035 GHG emissions reduction target and projected asset mix; the 2050 net-zero direct GHG emissions target; the expected funding sources for operating expenses, interest costs and capital expenditures; the expectation that maintaining the capital structures of the regulated operating subsidiaries will not have an impact on the Corporation's ability to pay dividends in the foreseeable future; the expected consolidated fixed-term debt maturities and repayments over the next five years; the expectation that the Corporation and its subsidiaries will continue to have access to long-term capital and will remain compliant with debt covenants in 2023; and the expectation that long-term growth in Rate Base will drive earnings that support dividend growth guidance of 4-6% annually through 2027.

Forward-looking information involves significant risks, uncertainties and assumptions. Certain material factors or assumptions have been applied in drawing the conclusions contained in the forward-looking information including, without limitation: no material impact from volatility in energy prices, global supply chain constraints and persistent inflation; reasonable regulatory decisions and the expectation of regulatory stability; the successful execution of the Capital Plan; no material capital project or financing cost overrun; sufficient human resources to deliver service and execute the Capital Plan; the realization of additional opportunities beyond the Capital Plan; no significant variability in interest rates; the Board exercising its discretion to declare dividends, taking into account the financial performance and condition of the Corporation; no significant operational disruptions or environmental liability or upset; the continued ability to maintain the performance of the electricity and gas systems; no severe and prolonged economic downturn; sufficient liquidity and capital resources; the ability to hedge exposures to fluctuations in foreign exchange rates, natural gas prices and electricity prices; the continued availability of natural gas, fuel, coal and electricity supply; continuation of power supply and capacity purchase contracts; no significant changes in government energy plans, environmental laws and regulations that could have a material negative impact; maintenance of adequate insurance coverage; the ability to obtain and maintain licences and permits; retention of existing service areas; no significant changes in tax laws and the continued tax deferred treatment of earnings from the Corporation's foreign operations; continued maintenance of information technology infrastructure and no material breach of cybersecurity; continued favourable relations with Indigenous Peoples; and favourable labour relations.

Fortis cautions readers that a number of factors could cause actual results, performance or achievements to differ materially from those discussed or implied in the forward-looking information. These factors should be considered carefully and undue reliance should not be placed on the forward-looking information. Risk factors which could cause results or events to differ from current expectations are detailed under the heading "Business Risks" in the 2022 Annual MD&A and in other continuous disclosure materials filed from time to time with Canadian securities regulatory authorities and the Securities and Exchange Commission. Key risk factors for 2023 include, but are not limited to: uncertainty regarding changes in utility regulation, including the outcome of regulatory proceedings at the Corporation's utilities; the physical risks associated with the provision of electric and gas service, which are exacerbated by the impacts of climate change; risks related to environmental laws and regulations; risks associated with capital projects and the impact on the Corporation's continued growth; risks associated with cybersecurity and information and operations technology; the impact of weather variability and seasonality on heating and cooling loads, gas distribution volumes and hydroelectric generation; risks associated with commodity price volatility and supply of purchased power; and risks related to general economic conditions, including inflation, interest rate and foreign exchange risks.

All forward-looking information herein is given as of May 2, 2023. Fortis disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

16	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
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GLOSSARY

2022 Annual Financial Statements: the Corporation's audited consolidated financial statements and notes thereto for the year ended December 31, 2022

2022 Annual MD&A: the Corporation's management discussion and analysis for the year ended December 31, 2022

ACC: Arizona Corporation Commission

Adjusted Basic EPS: Adjusted Common Equity Earnings divided by the basic weighted average number of common shares outstanding

Adjusted Common Equity Earnings: net earnings attributable to common equity shareholders adjusted as shown under "Non-U.S. GAAP Financial Measures" on page 7

Aitken Creek: Aitken Creek Gas Storage ULC, a direct 93.8% owned subsidiary of FortisBC Holdings Inc.

AUC: Alberta Utilities Commission

Belize Electricity: Belize Electricity Limited, in which Fortis indirectly holds a 33% equity interest

BCUC: British Columbia Utilities Commission

CAGR(s): compound average growth rate of a particular item. CAGR = (EV/BV)1-N-1, where: (i) EV is the ending value of the item; (ii) BV is the beginning value of the item; and (iii) N is the number of periods. Calculated on a constant U.S. dollar-to-Canadian dollar exchange rate

Capital Expenditures: cash outlay for additions to property, plant and equipment and intangible assets as shown in the Interim Financial Statements, as well as Fortis' 39% share of capital spending for the Wataynikaneyap Transmission Power Project. See "Non-U.S. GAAP Financial Measures" on page 7

Capital Plan: forecast Capital Expenditures. Represents a non-U.S. GAAP financial measure calculated in the same manner as Capital Expenditures

Caribbean Utilities: Caribbean Utilities Company, Ltd., an indirect approximately 60%-owned (as at December 31, 2022) subsidiary of Fortis, together with its subsidiary

Central Hudson: CH Energy Group Inc., an indirect wholly owned subsidiary of Fortis, together with its subsidiaries, including Central Hudson Gas & Electric Corporation

CIS: customer information system

Common Equity Earnings: net earnings attributable to common equity shareholders

Corporation: Fortis Inc.

CPCN: Certificate of Public Convenience and Necessity

DBRS Morningstar: DBRS Limited

D.C. Circuit Court: U.S. Court of Appeals for the District of Columbia Circuit

DRIP: dividend reinvestment plan

EPS: earnings per common share

FERC: Federal Energy Regulatory Commission

Fortis: Fortis Inc.

FortisAlberta: FortisAlberta Inc., an indirect wholly owned subsidiary of Fortis

FortisBC Electric: FortisBC Inc., an indirect wholly owned subsidiary of Fortis, together with its subsidiaries

FortisBC Energy: FortisBC Energy Inc., an indirect wholly owned subsidiary of Fortis, together with its subsidiaries

FortisOntario: FortisOntario Inc., a direct wholly owned subsidiary of Fortis, together with its subsidiaries

FortisTCI: FortisTCI Limited, an indirect wholly owned subsidiary of Fortis, together with its subsidiary

Fortis Belize: Fortis Belize Limited, an indirect wholly owned subsidiary of Fortis

FX: foreign exchange associated with the translation of U.S. dollar-denominated amounts. Foreign exchange is calculated by applying the change in the U.S. dollar-to-Canadian dollar FX rates to the prior period U.S. dollar balance

GCOC: generic cost of capital

GHG: greenhouse gas

GWh: gigawatt hour(s)

ICAT: Iowa Coalition for Affordable Transmission

Interim Financial Statements: the Corporation's unaudited condensed consolidated interim financial statements and notes thereto for the three months ended March 31, 2023

Interim MD&A: the Corporation's management discussion and analysis for the three months ended March 31, 2023

IRA: Inflation Reduction Act of 2022

ITC: ITC Investment Holdings Inc., an indirect 80.1%-owned subsidiary of Fortis, together with its subsidiaries, including International Transmission Company, Michigan Electric Transmission Company, LLC, ITC Midwest, and ITC Great Plains, LLC

ITC Midwest: ITC Midwest LLC

LNG: liquefied natural gas

LRTP: long-range transmission plan

Major Capital Projects: projects, other than ongoing maintenance projects, individually costing $200 million or more in the forecast/planning period

Maritime Electric: Maritime Electric Company, Limited, an indirect wholly owned subsidiary of Fortis

MISO: Midcontinent Independent System Operator, Inc

Moody's: Moody's Investor Services, Inc.

17	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT
Interim Management Discussion and Analysis
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Newfoundland Power: Newfoundland Power Inc., a direct wholly owned subsidiary of Fortis

Non-U.S. GAAP Financial Measures: financial measures that do not have a standardized meaning prescribed by U.S. GAAP

NOPR: notice of proposed rulemaking

NYSE: New York Stock Exchange

Operating Cash Flow: cash from operating activities

PBR: performance-based rate setting

PJ: petajoule(s)

PPFAC: Purchased Power and Fuel Adjustment Clause

PSC: New York State Public Service Commission

Rate Base: the stated value of property on which a regulated utility is permitted to earn a specified return in accordance with its regulatory construct

REA: Rural Electrification Association

ROE: rate of return on common equity

ROFR: right of first refusal

RTO: regional transmission organization

S&P: Standard & Poor's Financial Services LLC

SEDAR: Canadian System for Electronic Document Analysis and Retrieval

TEP: Tucson Electric Power Company, a direct wholly owned subsidiary of UNS Energy

TSR: total shareholder return, which is a measure of the return to common equity shareholders in the form of share price appreciation and dividends (assuming reinvestment) over a specified time period in relation to the share price at the beginning of the period

TSX: Toronto Stock Exchange

UNSE: UNS Electric, Inc.

UNS Energy: UNS Energy Corporation, an indirect wholly owned subsidiary of Fortis, together with its subsidiaries, including TEP, UNSE and UNS Gas, Inc.

U.S.: United States of America

U.S. GAAP: accounting principles generally accepted in the U.S.

Wataynikaneyap Power: Wataynikaneyap Power Limited Partnership, in which Fortis indirectly holds a 39% equity interest

18	FORTIS INC.	MARCH 31, 2023 QUARTER REPORT