Ladies and gentlemen, thank you for standing by. My name is Lisa, and I will be your conference operator today. Welcome to the Fortis Q1 2020 Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Ms. Amaimo.

Thanks, Lisa, and good morning, everyone. And welcome to Fortis’ first quarter 2020 results conference call. I’m joined by Barry Perry, President and CEO; and Jocelyn Perry, Executive VP and CFO; other members of the senior management team as well as CEOs from certain subsidiaries. Before we begin today’s call, I want to remind you that the discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide show. Actual results can differ materially from the forecast projections included in the forward-looking information presented today. All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U.S. GAAP financial measures in our first quarter 2020 MD&A. Also, unless otherwise specified, all financial information referenced is in Canadian dollars. With that, I will turn the call over to Barry.

Thank you, Stephanie and good morning everyone. To begin today’s call, I want to take a moment to express our heartfelt thanks to our 9,000 employees, 3 million plus customers and our local communities, all of whom have been impacted by COVID-19. We are especially grateful for our local heroes on the frontlines in our hospitals and our essential employees working to provide the energy that enables our economy. Also we are thankful for our customers who depend on us to provide these services. Thank you. Like many companies, we’ve responded to the call to act. Half of our total employees remain in the field and continue to operate and maintain our critical infrastructure. They have been doing an amazing job. The remainder of our essential employees have been working from home since mid-March. Across North America, our utilities have suspended disconnections and waive late fees to help alleviate the impacts of COVID-19 for our customers that need it most. At the community level, our utilities have supported local charities by donating $4 million to food banks, mental health agencies and other community-based organizations in their local service territories. Our businesses are performing well with essential employees maintaining and operating our systems. With respect to our supply chain, our businesses have access to the necessary supplies to operate effectively. We will continue to monitor our supply chain for the duration of the pandemic. And in some of our harder hit regions like Michigan and New York, we’ve sequestered control room operators to ensure we can continue to operate our networks well. During this time, we’ve adhere to strict health and safety guidelines including ensuring social distancing is in effect in the workplace. For example, our work crews have only one person per truck with other employees following to job sites…

Thank you, Barry and good morning everyone. Reported net earnings for the quarter of 2020 were $312 million or $0.67 per common share compared to net earnings of $311 million or $0.72 per common share for the first quarter of 2019. On an adjusted basis, earnings per common share was $0.68 for the quarter or $0.06 lower compared to the previous year. Our regulated utilities performed well during the quarter with strong rate-based growth. As expected, EPS was tempered by a higher weighted average share count related to the equity issuance completed in late 2019. And during the quarter, EPS decreased as a result of lower earnings at UNS Energy. And I’ll get into the details of UNS on the next slide. On Slide 16 shows the details of the EPS drivers by each reporting segment. And as you can see, our regulated utilities contributed a $0.06 increase in EPS. For our Western Canadian utilities as well as Central Hudson, rate-based growth was the main driver of the increase in EPS. The increase at ITC was driven by rate-based growth as well as lower development – business development expenses and earnings at ITC were also tempered by a lower ROE associated with the FERC order issued in November 2019. Our non-regulated energy infrastructure segment contributed a $0.01 EPS increase driven by higher realized margins at the Aitken Creek natural gas storage facility. And at our corporate and other segment, the $0.01 negative EPS impact was mainly due to net unrealized losses on foreign exchange contracts, partially offset by lower finance charges and operating costs. As noted on the previous slide, lower earnings at UNS decreased EPS by $0.06 for the quarter. Earnings at UNS reflect higher cost associated with rate-based growth, not yet included in rates due to the historical…

Thank you, Jocelyn. To wrap up, I want to reiterate our heartfelt thanks to frontline workers, especially those in healthcare and our own essential personnel. As for Fortis, our fundamentals haven’t changed. We are strong and stand united with our 10 utilities across North America to deliver the essential service that our customers count on by keeping their lights on and the natural gas flowing. We are optimistic that we can navigate back to a sense of normalcy, keeping the health and safety of our employees and customers top of mind. I’ll now turn the call back over to Stephanie.

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

Thank you. [Operator Instructions] And our first question today comes from the line of Robert Kwan from RBC Capital Markets. Your line is open.

Good morning. And if I can just start with COVID-19, in fact, and you’ve got the sensitivity, if the 3% reduction holds on an annual basis. So that’s tracking to $0.02, $0.03 a share. But you also noted the FX impact, if stock holds as well. Are you looking at everything in its entirety being in that’s kind of that commentary about it potentially be just a net positive?

Robert, certainly, this is Jocelyn. Yes, I mean, right now we’re seeing an overall 3% decrease. And so it’s about $0.03. So one could potentially argue that the tailwind with FX could certainly mutes the impact of any variances that we see, as a result of the lower sales in those jurisdictions. Yes, you’re correct.

And just to be clear though, you focused on the sales reduction and not any of the other COVID-19 responses that you outlined, including the return of the DSM in Arizona, the rate deferral in Turks and any of the bill deferrals, is that just in your expectation cash timing and everything from an earnings perspective will be swept up under rate regulated accounting?

I think, Robert, those are fairly minor overall. I don’t think they’re large enough to show up. The one in Arizona I don’t think has an impact. Turks, obviously delaying those rate implementation, does have some impact on bottom line. But they’re not significant in any way or so.

Got it. Okay. And if I can just finish with funding, removing the DRIP discount looks like it’s had a pretty big impact on participation. So if that continues to hold, can you just talk about your approach – excuse me, sorry. Your approach to funding, given the DRIP being on at participation higher than where you are was part of the plan going forward?

So Robert, I’m going to jump in, because I, obviously based on our actions last year to exit the Waneta plan for $1 billion and then $1.2 billion of equity done in December. It’s almost like we predicted the pandemic was coming. You really got out ahead of this thing and created a strong position. But if you think back to when we did the equity, we talked about pre-funding our capital plan. So yes, we got lower participation in the DRIP, which we expected, but we have really no need to go do it equity for some time here. And we created a lot of room for the company. Now if we get some more growth, which is very possible as we look at some of the initiatives we have on – go in the company, then yes, we’ll probably be looking at some more equity. But where we are now, it’s nothing that I’d be worried about anytime soon.

Okay. Just to be clear, absent of new growth, this lower participation rate was what has already been factored into the existing capital plan that doesn’t require material new equity going forward?

Yes. We’ve – we did assume lower DRIP participation. It is a little lower than what we anticipated, but it’s just in one quarter, right? So I think we need to go to two or three quarters, Robert, to really see what the actual DRIP participation is, what we’re leveling off at. So what we’re finding is the banks are doing synthetic DRIPs, that there is – there’s a lot of shareholders acting participating in DRIPs. They’re just not afford the DRIP, right? So the banks are doing their own back office DRIPs and buying shares in the open market, which I think a lot of us weren’t really aware off. So once the discount went away, this is what’s occurring. So we’re looking at that and seeing if there’s anything we can do about that.

Thank you very much.

And our next question comes from the line of Ben Pham from BMO. Your line is open.

Okay, thanks. Good morning. Thanks a lot for all the detail on COVID-19. I was wondering as you’ve gone through this work-from-home and remote and whatnot, is there any sort of potential permit costs savings coming out of this, that has popped up travel and you have a dozen different board meetings and companies you’re looking at. Anything there that you think could be sustainable? I know you mentioned cost reductions of ITC would insure that those were reference to that.

Yes. Ben, it’s a great question. And I would say, first of all, at the top, the transition to work-from-home is gone remarkably well. If you had asked me, three months ago, could we put 5,000 people at home working and have a very effective system and communication system and all that stuff, I would have said, geez, that’s going to be a big challenge. But our IT team especially stepped up and it’s working so well. And we actually are communicating – we’re communicating better I think at this point in terms of the senior team especially, and how we’re monitoring each others’ businesses and we’re learning from each other that. So that’s all going well. I would say, it’s a little early to say, what the savings are associated with this. And whether it’s, some of it becomes permanent, we’re learning – we’re just – I would think in the last couple of weeks here with sort of starting to feel a little more comfortable but how the current system is working. But definitely, we’ll be looking at opportunities to really see if there’s stuff here that we can keep once we get through the crisis. And clearing travels down, all that kind of stuff. That’s evident at this point in time. But maybe there are bigger things around, some proportion of our workforce may be able to stay working from home and that could lessen the need for office space that kind of thing. So we’re going to be looking at that. But at this point, a little early to say, how much it is and what the real benefit could be?

All right, great. And then on the UNS, the hearing scheduled in the summer. Do you know, what is couple of virtual hearing and submissions, if there is a situation where this could keep, can punch it down into the future?

David Hutchens, did you get that question?

Yes, I got that question. Thanks, Ben. Yes, they have got the extremely comfortable with virtual open meetings. And I’m sure we’ll be able to do a virtual hearing for this particular circumstance. It’s not a very complicated one. It’s a single issue. There’s not a whole bunch of interveners for this particular issue. So I think this will easily be done in the June timeframe virtually.

Okay, great. And maybe one last question on the Belize. You had mentioned, Belize in your commentary, that was – looks there’s probably a couple pennies hit last year. Is that because the conditions have improved? Or is it because year-over-year it’s still a challenging?

The water situation of the Belize is definitely still challenging. We’ve been actually holding back a little bit of water, as we go into the dry season to make sure we have some amount of water to provide energy to the country. And so we’re actually above the rule curve, right now. But we’re holding back on generation at the request of the utility there. So I think I’m – Ben, really we’ve got to wait now until August, September, October for the rainy season to start again. And I remind everyone it only takes one big tropical storm to fill that reservoir in Belize are – we’re all dancing for rain at this point. But right now, we are still struggling to a very severe drought there. We did pick up a little bit of earnings from our interest in Belize electricity and a lot of folks maybe have forgotten this, what we do, our own one-third of the utility there. And we did pick up I think a little bit from that in the quarter.

Okay. That’s great. Thank you.

And our next question comes from the line of Rob Hope from Scotiabank. Your line is open.

Yes. Good morning, everyone. Two questions, first, on just can you add a little bit more color on the $0.03 hit at UNS. What type of assets are included in that trust just given that? The $0.03 looks relatively large versus, I believe, Jocelyn said that, the trust had $30 million of assets and I guess subsequently, could we see a reverse of the – your approach numbers for the charge into Q2?

Yes, Rob. Yes, they do have about $30 million and is invested 60-40, I’m going to say between equity and fixed income. It did take a bit of a hit this quarter. But we also had a slight gain in the first quarter of the previous year. So $0.02 actually, I guess happened in this quarter, but it was coupled with the positive gain in the first quarter of last year. We don’t typically see big movement that never ever reaches $0.01 for Fortis. But where the market took a bit of a drop at the end of March there, clearly, it added up to the $0.03 for Fortis.

Yes. This market volatility, Rob, it was – it’s interesting, you think about what happened in the last couple of weeks of the quarter on the stock markets and on foreign exchange for Canada. Like, we were even on foreign exchange, we were like averaging for the quarter, like a $1.34, but the dollar ended up at the end of the quarter at like a $1.40 or something like that. So we had the mark-to-market our contracts at the end of the quarter, but only earned during the quarter at $1.34. So it was a mismatch. So this sort of acute movement in the markets near the end of the quarter, introduced a little bit of volatility for us. And the markets have bounced back. So I know David and his team, they recovered a bit of that sort of trust account already and as markets continue to improve that we’ll get that back. So it’s really, I see not sort of like part of the normal business, it’s definitely something we have to do to fund retirement benefits, but this market – acute market volatility has caused us some issues with those accounts.

All right, that’s helpful. And then just a longer term question, just how are you thinking about the Eagle Pipeline in BC and what is your conversations with the developer there? It looks like you pushed it off to 2024 from late 2023?

Rob, I would say that, we’re still including that project in our five-year plan. We’re still spending money on behalf of that developer, that funding work that we’re doing. So as long as we continue to see that progress from the customer, ultimately that is building the plant. We feel we have to include it. I am very excited about the prospects in BC generally. Our natural gas system there is a very large system. We’re looking at some exciting opportunities to expand our Tilbury site. Jocelyn mentioned that in her upfront comments, to add more, more tank storage for resiliency, maybe some more liquefaction for bunkering and export opportunities. Really don’t have those things in our five-year plan yet, but they’re starting to advance and I’m getting more and more optimistic. I know Roger is on the call and he’s doing really great work for us in British Columbia. So when you think about governments and looking towards shovel-ready projects coming out of this crisis, we’re hopeful that some of the work we’re doing at BC will be on that list and we’ll be able to grow the business even faster in British Columbia.

All right. Thank you for the color.

And our next question comes from the line of Michael Sullivan from Wolfe Research. Your line is open.

Yes. Hey, everyone, good morning, hope you’re all well. I just had a question, I wanted to dig a little deeper on the Arizona sales growth trends. Do you happen to have any of those data points on a weather normal basis just given? I think that was, had a pretty big impact in Q1 and in April as well.

I’m going to – David Hutchens is on the line, I’m going to throw it over to David. And we’ll say this period that we have in that slide, Michael is the period mid-March to mid-April is the shoulder period for the business in Arizona. So it’s the toughest periods to predict trends. But David, you have all the details on that obviously.

Yes. I’d just add, Barry that on a weather normalized basis. Residential is flat to slightly up. And remember also that weather normalization is quite a bit more of an art than science. And there’s a lot of things moving around, particularly, as we see commercial businesses change, how they’re taking energy as well as the residential load shape, et cetera. So our models aren’t really as great as we’d like them because we’ve never seen a load shape really quite like this. But given that, if you take out the weather normalization on an overall perspective, I would say it probably takes out a 1% or maybe 2% at most on that 4% that we were looking at as net down for that last 30 day outlook or look back. So the other thing to keep in mind too though is that, these are shoulder months and we don’t see a ton of weather typically in the March, April time period. As we get into the summer, we’ll see a lot more sensitivity to weather, particularly with that many more people working from home. So the weather on a going forward basis will be something to watch for sure.

Great. Thanks. And then also just sticking with Arizona, the impact of the delayed rate case, I think showed up in the quarter as a $0.02. Just any sense of how big that impact should be over the course of the year, given it’s looking like rates are not going to be in effect until late 2020?

Michael, I tried to say simple on this stuff. We’ve got $700 million rate base. That we’re trying to get into rates, no real issues with that. A lot of the Gila River Unit, the reciprocating engines is sort of like good stuff. You apply 50% equity to that. Maybe just use some estimate of ROE that you feel comfortable with, and for the remaining time period for the year, do the math, it’s pretty simple and that’s sort of what we’re seeing for the rest of the year, at this point. It’s unfortunate, that’s, it’s been that long since we set rates. We’ve done a great job investing in Arizona. We’re looking forward to getting our new rates there and continuing to do our jobs. But there will be a lingering impact on the earnings in Arizona until we get those rates secured at the end of the year.

Okay, great. And then just last one from me. I know you said a little early to talk about credit losses, but just any historical perspective, what those have looked like in past economic downturns and how much of that you’ve ultimately add to – where versus covered by writers?

I would say, first of all, from a Canadian perspective, like if you look back to 2008, 2009. We really didn’t have the U.S. businesses back then. And it gives you a sense of how much we’ve grown. The Canadian customers pay their bills, frankly. And we’ve not seen historically large bad debts even in crisis. I know that the U.S. utilities, maybe there’s a little more of that. But the work we’ve done, Jocelyn, we haven’t like – this has not been a material issue in historically, right?

Certainly, not material, and I do know in New York during the last financial crisis that they actually did apply for a regulatory deferral and they did get it. But again, nothing material to Fortis in terms of the dollar amount we’re talking about. But on our suspect in this case, depending on the amounts of credit losses that we’re – that the utilities may see they very well may file for the regulators, the deferrals of these amounts as well, but nothing material that we expect.

But Michael, we’re on alert for it. We are monitoring it, but it’s a little early also to say that there’s any trend or anything at this point.

Awesome. Thanks again. Take care.

Your next question comes from Julien Dumoulin-Smith from Bank of America. Your line is open.

Good morning everyone. It’s actually Ryan Greenwald on for Julien. I appreciate all the new disclosures and sensitivity. So I was hoping you guys could kindly give us some color, I know the data that you guys provided there as you alluded to is the shoulder months, but can you kind of talk about your internal assumptions for load on a weather normalized basis into the summer, specifically in Arizona?

Ryan, it’s pretty tough. I know the industry, I think what we’re hearing is about a 4% net load between – commercial being down, say 10% and residential being up 6%, 7%, that kind of thing. We’re seeing about the same stuff at Fortis. But I – the business in Arizona is such a wildcard with temperatures at the levels we’re seeing is even today, like 105 degrees, you can quickly overcome any decline in sales on the commercial side by an uptick on the residential side. So on a day-like today, we’re – our sales are probably up in Arizona even factoring in the crisis. So that’s the nuance for Fortis is trying to predict, where the weather is going to be in Arizona. So in the last two or three years, last year maybe it was a little more normal, but the prior two years we had warm weather and that overcame all the regulatory lag that we were experiencing or most of it in the jurisdiction, right?

Yes. Fair enough. And then in terms of kind of – so you have some mechanisms in place, but you have this rate lag in Arizona [Audio Dip] levers that you can pull across your jurisdictions just in terms of mitigating any load impact?

Sorry. We lost the first part of the question. Can you restate it?

Yes. So you have some mechanisms in certain jurisdictions, but then you have the rate lag in Arizona. But just broadly, can you kind of talk about the levers that you can pull in terms of cost cuts in order to kind of mitigate any load impact?

I don’t think there’s a lot we can do, Ryan really, we are doing some – obviously at ITC were load is down probably more than some of the other jurisdictions largely related to the auto plants. I know, Linda and her team are really focused on cost reductions to really mitigate the impact on customer’s there. But it’s not a bottom line issue. It’s more about making sure we do the right thing. So, in the other businesses, we – our focus really is mainly around making sure that grids are operational, that we’re very reliable, that the service we’re providing is there for our customers. And we’ve always done a great job of monitoring our operating costs, as we come in for frequent rate cases, especially in our Canadian jurisdictions. So I don’t think there’s a lot of opportunity to cut costs in the business to sort of create more earnings in one part of the business offset and impact in another part of the business. That’s sort of not the way we operate the business overall. Some other companies like do that way, but for us, our businesses are independent businesses that are implementing their business plans, executing on their capital and currently doing a really good job. We haven’t really seen any, because I think some of the early practices around how we approach the work and safety of our employees, we really haven’t seen much at all in terms of decline in the work that we’re doing in the field.

Got it. Appreciate the time.

Thank you.

Our next question comes from the line of Mark Jarvi from CIBC Capital Markets. Your line is open.

Great. Good morning, everyone. Maybe just following up on that question where you said, you couldn’t necessarily do a lot on the OpEx, given there is a slight push out in the TEP rate case about managing CapEx just as the regulatory lag here gets extended a bit?

No, I don’t think we’re going to do that. The CapEx we’re putting in the ground and TEP is required, the fact is, is we have an historical test year there. The crisis happened. It’s not unusual that the commission would have delayed in this circumstance. The process that’s – we’re seeing that happen across many jurisdictions. So, we knew coming in, that it wasn’t historical test year. Like, I would hope – listen, I’d hope over time and I’m always encouraging David and the team to try to find ways to improve, I suppose the regulatory compact in Arizona is a recently with this case our equity – looks like our equity is going to move up from 50% to 53%. So that’s a positive development. But I don’t see ourselves really cutting CapEx or anything like that. There may be some way of moving capital around a few months here or there that helps a little bit. We’ll take advantage of that. But from an overall direction, how we look at Arizona is that it’s a really fast growing jurisdiction, typically leads the nation in the top one, two or three states in terms of economic growth. Over the long haul, we have tremendous investment opportunities there. And over time, we’re going to see that earnings growth. It’s just that we’ll have these periods of flatness between rate cases. And fortunately, they’re about 20-plus-percent of Fortis overall. We can absorb that, but we’re not looking at severe changes in terms of how we run the business, that’s for sure.

Okay. And then just turning to BC. Can you just clarify whether or not there actually is decoupling in place in the interim rates? Or that comes in how can you get through this rate case? And then given that you’re kind of saying there’s a revenue protection there. What is that from the electric utilities? Is that just a higher fixed charge component?

So was the question about BC, British Columbia?

Yes, that’s correct.

Yes, we have Roger, maybe he can describe the mechanism. But I think it’s a pretty strong mechanism that protects volume, right? Roger Dall’Antonia: Yes. So there’s two metrics we’ve had decoupling for decades on our residential and commercial that protects usage. And then under the PVR that ended in the – at the end of 2019 we had a revenue flow through, it captured all other revenue variances. We’ve applied in the MRP that we’re waiting for on the decision. We’ve applied for a continuation of that revenue flow through. So currently we’re using the revenue flow through and we expect it to be approved when we get to raise order. But absent that, we’ve always had the decoupling going back years that covers our residential and commercial customer classes.

Okay. Thanks for clarifying that. And then I know it’s a small segment of earnings, but the Caribbean, given the drop in tourism. Maybe just speak to what can be done to sort of mitigate some of the drop in the loan there? And how severe could the earnings would be?

I don’t see a material earnings impact coming out of the Caribbean. And in fact, in Grand Cayman right now, we’re not seeing a lot of sales related changes. It’s not as – Grand Cayman is not as subject to the tourism trade as Turks and Caicos is. Turks and Caicos is a little down. We made – I suppose, we really made headway in Turks and Caicos just before the crisis by getting rates settled for the recovery of hurricane cost. And unfortunately when the crisis happened, we did have to delay the implementation of that rate increase. So overall, I remind everyone the Caribbean in total is 3% of the company, so really it’s not significant. And it may be a penny or something like that overall for Fortis, but not significant.

Okay. Thank you.

[Operator Instructions] Our next question comes from the line of Linda Ezergailis from TD Securities. Your line is open.

Thank you. I’m wondering, if you put any thought to maybe reassessing your rate or your revenue allocation across customer classes to the extent that potentially industrial load doesn’t recover in certain jurisdictions very quickly and maybe even some impact remains for commercial customers. What – how quickly could that be done in various jurisdictions? And do you think the regulator would be open to that and/or potentially increasing your fixed charges as well?

Good question, Linda. Hope you’re well. I think first of all, industrial class, we don’t get a lot of margin from industrial customers usually that large volume, customer that got the lowest power rates and we don’t get a lot of volumes. So a lot of margin I should say. But if you extend your questions to commercial customers, there’s obviously more margin there. I think, we’d have to see this sort of pandemic last a little longer here to start thinking about rate design and customer allocation, customer costs, revenue requirements allocation, I guess between customer classes. I think we’ll probably learn something from this. But I think it’s a bit early to say, we’re going to be filing new applications to try to allocate our costs to different classes based on what we’re seeing now on the pandemic. So – but interesting thought for sure.

Okay. And I know it’s early days and you’re focused on the safe operations for your customers and your employees. But you did mention this possibility that if growth were added your equity needs might change. So I’m just wondering if you can comment on at what point the organization would be open to looking at maybe opportunistically acquisitions and what factors would need to be in place that would make you more interested in capitalizing on those opportunities?

Yes. We have this sort of situation that we’re fortunate, we have a strong organic growth story, great, great bunch of businesses now that have – this rate based growth of around 7% and that’s using exchange rate at $1.32. If we believe the Canadian dollar is going to be at $1.39, that rate based number, I think the next three years were 8-plus-percent rate based growth. So we had a big tailwind there. So Linda, no one’s buying anything in the middle of this crisis, unless the company is really in trouble in our sector, I don’t think any transaction happens in this crisis. So really coming out of it into next year, you might see some companies trade. I’m not anxious to get back at that. I really am. I think we’ve got a great company, a great portfolio of businesses that are growing well at this point in time. Acquisitions are risky. I won’t rule it out because we always got to look at the opportunities to create shareholder value. We’ve got a great business model at Fortis and that’s showing up here in this crisis, in terms of our local management teams can imagine centrally managing a crisis like this across multiple jurisdictions in Canada, in the U.S. Like the fact that we have this business model that we have is working out so well Fortis. So I do know that we can add another company to that in the future. Just that not something we’re focused on right now.

Okay. Thank you. And I realized your DRIP participation rate has gone down with elimination of the discount. But I’m just wondering, what options you might have to turn it off and what factors would have to evolve or change for you to consider turning that off entirely?

I think there’s some shareholders have liked the fact that there’s the DRIP. So I’m not thinking we’ll turn it off. I mentioned earlier on the call that the participation rates have declined a little more than what we were expecting. And what we’re learning is the fact that, a lot of the banks are doing their own DRIPs, now that there’s no discount in ours. They don’t – I guess they can figure out how to do that without creating too much risk for themselves and offer these reinvestment programs. So we don’t get issue shares and treasury, they’re just bought in the market by the bank. So we’re not seeing that sort of cash flow coming in. We’re looking at that and see if there’s a way that we can change that. Maybe the possibility is we even go back to adding a little discount on the DRIP again to sort of normalize the participation. So that’s one possibility. So I guess what I’m saying is, I do value the DRIP. I do value what it brings to retail shareholders and I was a little surprised that the mechanics behind it in the Canadian market that allow DRIPs to continue without the company’s involvement basically.

Thank you.

[Operator Instructions] Our next question comes from the line of Patrick Kenny from National Bank Financial. Your line is open.

Yes. Good morning. Just on the rehearing for the base ROE at ITC. Any thoughts on how this recent volatility, both the capital markets and the overall economy might help support your case in convincing the FERC to maintain a methodology that supports a higher base ROE? If I recall, 2008, 2009 had somewhat of a positive impact on base ROEs after the dust settled. So I’m just wondering if you’re expecting a similar outcome this time around with the FERC at ITC and maybe perhaps across some of your other utilities as well.

Patrick, that’s a great question. I’d have to say, we’ll use all the tools available to us and I know Linda’s on the call and she can wait in here. But the messaging is consistency at FERC and the ROE needs to be enough to inset the building a transmission. And that ROE means it’s got to be higher than state level ROEs. So I believe, FERC understands that we just got to figure out how to get to the other end of all these processes that we have in place at this point in time. We are – I think, seeing some positive commentary coming out of the commission chair. And I’m hopeful that over the next maybe 12, 18 months here, we’ll get some of these matters resolved and get back to that – knowing what the ROEs are going to be, so that we can make the decisions necessary to build out the transmission system in the U.S. It’s such a marvellous asset and it’s facilitated such improvement in renewable energy and all those things. So I think FERC understands the importance of it all and we’re hopeful that we’ll come out with the right end of it. Linda anything you can offer as well on the current volatility and how it sort of plays into everything.

Well, Barry, I think you stated it very, very well. And just to kind of repeat what Barry said, look, I mean I think FERC has been, I think it’s keeping a close eye on sort of what is happening in the market. I think they understand very well the impact of the economic downturn and COVID and sort of just how important to have a sustainable healthy ROE is to continue to attract transmission investments. So, while we don’t have any specifics in terms of what actions they might take or when, I think we continue to view this as just I think a reminder to FERC about how important, stable, sustainable ROEs are. And so I think we remain hopeful, that we will see some actions, some decisions before the end of the year on the ROE case. But certainly, we don’t really have any particular insight on timing, but we are hopeful and optimistic.

Okay. That’s great. Thank you. And then maybe just for Jocelyn on to go back to the FX tailwind. You might’ve touched on it, but can you confirm if you’re thinking about locking in perhaps your next 12 to 24 months of U.S. dollar cash flow here at current rates of, call it $1.40. Just to lock in some of that tailwind to offset the impact of COVID.

Yes, Patrick, we’re thinking about it every day and we’re on top of it and we have done some extra hedging, as we’ve seen the rates increase. So, you’re right on the mark there and that’s something that we look at every day and we’re doing more of it.

Maybe can you just remind us on the negative outlook from S&P, outside of the COVID uncertainties and whatnot? What needs to be achieved to get back to the stable outlook and perhaps your internal expectations on when you might hit those targets?

I think we’re S&P for off, the negative outlook similar to the industry outlook is all related to them getting comfortable with how the short-term cash flows are impact. And how we set up potential regulatory mechanisms to deal with them and how long it’s going to take to recover some of those costs over time. So I think they just want to get comfort that the regulatory mechanisms are working as intended, which we have a number of these mechanisms and to have some visibility for the long-term recovery of cash flows. So once I think regulators get through sort of solidifying these mechanisms and implementing these mechanisms in middle of COVID, I think that S&P for us will get comforted on our cash flow.

And any comment on when you might decide to file for future rate recoveries due to credit losses? Is that back half of 2020 process? And perhaps, what’s the timeline for those recoveries to start showing up in the results?

Yes. So that’s a bit of a tough question, because all of our utilities will be impacted differently and it will be either material for some or not material for others. Again, we’re not expecting it to be material support, watching it quite closely clearly. But I suspect that we will have to have a little bit more time to assess credit losses before any of the utilities stand in front of the regulators looking for recovery.

Okay. That’s great. That’s it for me. Keep well everybody.

Thank you, Patrick.

We have no further questions at this time. I would like to turn the call back over to Stephanie Amaimo for any closing remarks.

Thank you, Lisa.

Stephanie, this is Barry. I just want to maybe add a closing comment before we go. I just want to say to everyone, I’m so proud of my team and all the employees Fortis and how we responded to this crisis. We’re doing our darnedest to make sure we can deliver safe, reliable energy right now. And I’m also proud of the industry generally. This industry has responded so well to this crisis. And obviously, knock on wood that hopefully we can keep doing that. And also I’ll tip my hat to the regulators. Regulators are working with us, with the customers to try to make sure we come through this in a good spot where we’re taking care of our customers, but also taking care of the utilities. And I’m really very optimistic that that will come through this crisis and we’re in a good shape and get back to normal business once we get to the other side of it. So thank you very much. Back to you, Stephanie.

Thank you, Barry and thank you everyone for participating in our first quarter 2020 results call. Please contact investor relations, should you need anything further. Thank you for your time. Stay safe and have a great day. Thank you.