Transmission Firm ITC Boosts Capex Budget to $4.5 Billion Over Five Years

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--ITC Holdings Corporation (NYSE:ITC) (Novi, Michigan) plans to make $4.5 billion of capital investments in its transmission business over 2014-18, the company recently told investors. This compares to a previous investment plan of $4.2 billion during 2012-16.

The new five-year plan reflects expected investments of approximately $2.2 billion in ITC's base operating companies, approximately $1.2 billion in regional infrastructure projects, and approximately $1.1 billion in additional development projects. ITC's subsidiaries own and operate 15,000 circuit-miles of transmission lines in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma. Its transmission lines can carry a peak of 26,000 megawatts (MW).

"ITC's new five-year capital investment plan is premised on achieving and maintaining operational excellence at all of our existing operating companies, as well as continuing our leadership role in the development and advancement of critical new regional infrastructure," said Joseph L. Welch, chairman, president and chief executive officer of ITC, to investors April 15. "These investments in our business are a core component of our balanced capital allocation strategy, and reflect our commitment to reinvesting in the business to drive long-term value for both our customers and shareholders."

ITC is the nation's largest standalone transmission company. In late 2011, it proposed to combine its business with the transmission assets of Entergy Corporation (NYSE:ETR) (New Orleans, Louisiana) in a $2 billion deal. For more on that transaction, see December 22, 2011, article - Big and Getting Bigger: ITC Doubles its Transmission Business with Entergy Deal. But the combination was abandoned two years later after the Mississippi Public Service Commission (Jackson, Mississippi) determined the combination was not in the public interest of Mississippians. That decision knocked about $250 million off ITC's market capitalization at the time, though it has recovered that and more over the last six months.

ITC has not abandoned the potential for opportunistic acquisitions of transmission assets. But in the meeting with investors in mid-April, it said it plans mainly organic growth during the next five years.

As ITC assesses the transmission markets around the country, the ones it likes best are the Southwest Power Pool (SPP) (Little Rock, Arkansas), with its nine-state footprint, and the northern and southern portions of Midcontinent Independent System Operator Incorporated (MISO) (Carmel, Indiana), a regional transmission organization (RTO) operating in parts of 15 states and the Canadian province of Manitoba. Less-attractive reliability organizations include PJM, California ISO (CAISO), ERCOT, NYISO and ISO-New England.

Click on the images at right to see maps for the SPP and MISO footprints.

ITC has several high-voltage transmission projects under construction or under development, including:

• Saint Clair grassroot, 345-kV Greenwood-Fitz Transmission Line, a $510 million project that is under construction. This project is scheduled to be completed by year-end 2014.
• Cedar Rapids grassroot, 345/161-kV Winnco-Hazleton Transmission Line , a $480 million project scheduled to kick off in early 2016 and to be operating by year-end 2018.
• Protection 345-kV Kansas V Plan Grassroot Transmission Line, a $356 million project under construction and scheduled to be operating by year-end 2014.
• Dubuque grassroot, 345-kV Cardinal Bluffs Transmission Line, a $280 million project scheduled to kick off in early 2018 and to be operating by year-end 2020.
• Lakefield 345-kV Minnesota-Iowa Transmission Line, a $150 million project scheduled to begin construction in the third quarter of 2015 and to be operating by early 2017.
• Ottumwa-Adair 345-kV Transmission Line Rebuild, a $148 million project scheduled to kick off in early 2018 and to be operating by year-end 2020.

"Our five-year plan and strategy position the company for continued growth in the changing transmission landscape," said Cameron Bready, ITC's executive vice president and chief financial officer, to Industrial Info. "Our strategy remains focused on providing our customers with highly reliable service and access to low-cost power, while also pursuing expansion through our development initiatives in our existing regions, and potentially in new regions that offer robust opportunities in a post-Order 1000 environment."

Bready continued: "Our-five year plan also reflects the company's transition to an established growth enterprise, and contemplates a balanced capital allocation strategy that serves to effectively capitalize investment opportunities in the business, maintain ITC's financial flexibility, and return capital to shareholders in an efficient manner. ITC's proven independent (transmission company) model, top-tier performance, regional approach, and financial strength provide a unique and strong foundation to identify effective transmission solutions and develop a 21st century grid."

"The U.S. transmission grid is badly in need of new investment, both to increase reliability and to bring on new renewable generation," said Brock Ramey, Industrial Info's research manager for North American Power. "In many ways, ITC is leading the charge on building out and strengthening the nation's transmission grid. But companies seeking to invest in transmission face the same regulatory and public perils as companies trying to invest in generation. That means there's no guarantee ITC's future projects will start on schedule or be completed on time."

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