Fortis Inc. · TSX:FTS
Fortis — Q3 2020 Earnings Presentation
30 slides from Fortis's earnings presentation, Oct 30, 2020
Slide 1: Third Quarter 2020 Earnings Conference Call
THIRD QUARTER 2020 EARNINGS CONFERENCE CALL OCTOBER 30, 2020
Slide 2: Forward Looking Information
FORWARD LOOKING INFORMATION Fortis includes forward-looking information in this presentation within the meaning of applicable Canadian securities laws and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (collectively referred to as "forward-looki
Slide 3: Barry Perry, President & Chief Executive Officer
BARRY PERRY PRESIDENT & CHIEF EXECUTIVE OFFICER
Slide 4: Third Quarter Business Update
THIRD QUARTER BUSINESS UPDATE • PRESIDENT & CEO SUCCESSION • 2021-2025 FIVE-YEAR OUTLOOK • ~6% Q4 DIVIDEND INCREASE AND GUIDANCE TO 2025 ANNOUNCED • CORPORATE-WIDE CARBON REDUCTION TARGET • SAFE & RELIABLE SERVICE DURING COVID-19 4
Slide 5: David Hutchens, Chief Operating Officer
DAVID HUTCHENS CHIEF OPERATING OFFICER
Slide 6: Safe and Reliable Service During COVID-19
SAFE AND RELIABLE SERVICE DURING COVID-19 ~82% OF REVENUES PROTECTED BY REGULATORY MECHANISMS ✓ Essential workers operating electricity OR FROM RESIDENTIAL SALES(1) grids and natural gas networks UNS Energy ✓ Locally operated utilities working with ➢ Q3 retail sales ↑ ~5%; excluding customers and re
Slide 7: On Track to Invest $4.3B in 2020
ON TRACK TO INVEST $4.3B IN 2020 $4.3B $3.8B $1.4B $1.2B $2.9B $2.6B 2020F 2019A 2020F Q4 Capital Expenditures September Year-to-Date Capital Expenditures Note: US dollar-denominated capital expenditures converted at USD:CAD foreign exchange rate of $1.33 for 2019 and forecasted at $1.36 for 2020. 7
Slide 8: Corporate-Wide Carbon Emissions Reduction Target of 75% by 2035
CORPORATE-WIDE CARBON EMISSIONS REDUCTION TARGET OF 75% BY 2035 COMPARED TO 2019 LEVELS PROVIDES CUSTOMERS WITH CLEANER ENERGY Reduction in Scope 1 Emissions by 2035 Using a 2019 Base Year 16,000 ➢ Industry leader in sustainability with 14,000 shorter timeframe for reduction and 12,000 using current
Slide 9: 5-Year Capital Plan & Rate Base Growth Outlook
5-YEAR CAPITAL PLAN & RATE BASE GROWTH OUTLOOK LOW RISK, HIGHLY RATE BASE(1) EXECUTABLE CAPITAL PLAN $40.3B 5-YEAR $30.2B CAPITAL PLAN Smaller Projects 85% Major Projects 15% $19.6B Electric 80% Gas 20% 2020F 2025F Regulated - Canadian & Caribbean Electric & Gas Regulated - U.S. Electric & Gas (1) U
Slide 10: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 6% 47 YEARS $2.0 AVERAGE ANNUAL DIVIDEND OF CONSECUTIVE GROWTH GUIDANCE TO 2025 DIVIDEND INCREASES $1.5 $1.0 $0.5 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20F 10
Slide 11: Jocelyn Perry, Executive Vice President & Chief Financial Officer
JOCELYN PERRY EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER
Slide 12: Third Quarter Results
THIRD QUARTER RESULTS Reported EPS Includes: REPORTED EPS $3.02 ➢ $484M Net Gain on Waneta Asset Sale in Q2 2019 $1.89 ➢ $27M Favourable Impact of $0.63 $0.64 May 2020 FERC order at ITC Q3 Adjusted EPS Impacted by: Q3 2020 Q3 2019 YTD 2020 YTD 2019 • Rate Base Growth ADJUSTED EPS(1) • Weather in Ari
Slide 13: Third Quarter EPS Drivers
THIRD QUARTER EPS DRIVERS $0.02 $0.01 ($0.02) ($0.04) $0.02 $0.66 $0.65 Q3 EPS tempered by earnings at ITC and advanced equity issuance in 2019 Q3 2019 U.S. Corporate & Energy U.S. Weighted Q3 2020 Adjusted Electric & Other Infrastructure Transmission Average Adjusted EPS(1) Gas (ITC) Shares (2) EPS
Slide 14: September Year-to-Date EPS Drivers
SEPTEMBER YEAR-TO-DATE EPS DRIVERS $0.01 ($0.01) $0.01 $0.01 ($0.13) $0.02 $0.04 $1.93 $1.88 YTD EPS tempered by regulatory lag at UNS, COVID-19 impacts and advanced equity issuance in 2019 Q3 YTD 2019 Western Energy Foreign U.S. Corporate & Other Weighted Q3 YTD 2020 Adjusted Canadian Infrastructur
Slide 15: Funding Plan & Strong Liquidity
FUNDING PLAN & STRONG LIQUIDITY MAINTAINING INVESTMENT-GRADE CREDIT RATINGS $3B+ IN LONG-TERM DEBT ISSUED YEAR-TO-DATE 2020 2021-2025 FUNDING PLAN CREDIT FACILITIES ($B) APPENDICES Debt(3) ➢ Strong access to debt markets 33% ➢ Highlighted by inaugural green 5-YEAR bonds at FortisBC and TEP CAPITAL P
Slide 16: Update on Regulatory Proceedings
UPDATE ON REGULATORY PROCEEDINGS • Notice of Proposed Rulemaking (NOPR) on Incentives – Transmission Incentive NOPR issued in March 2020; comments filed in July 2020 and awaiting next steps • TEP General Rate Application – Hearings concluded in June 2020; decision expected in late 2020 • General Rat
Slide 17: Why Invest in Fortis?
WHY INVEST IN FORTIS? Focused on Strong Virtually 6% Well-Run ESG Highly Innovative Energy Growth All Dividend Businesses Leader Diversified Delivery Profile Regulated Guidance 17
Slide 18: Expected Upcoming Events
EXPECTED UPCOMING EVENTS UPCOMING EVENTS EEI – 55th Financial Conference November 9-11, 2020 EXPECTED EARNINGS RELEASE DATES Q4 2020 February 12, 2021 Q1 2021 May 5, 2021 18
Slide 19: Third Quarter 2020 Earnings Conference Call
THIRD QUARTER 2020 EARNINGS CONFERENCE CALL OCTOBER 30, 2020
Slide 20: Q3 2020 Results by Segment
Q3 2020 RESULTS BY SEGMENT Third Quarter Variance Analysis by Segment ($millions, except weighted average shares and Adjusted Adjusted Adjusted Q3 2020 Adjustment (1) Q3 2019 Adjustment (1) EPS) Q3 2020 Q3 2019 Q3 Variance Regulated – Independent Electric Transmission ITC 101 - 101 107 - 107 (6) Reg
Slide 21: September Year-to-Date 2020 Results by Segment
SEPTEMBER YEAR-TO-DATE 2020 RESULTS BY SEGMENT Third Quarter September Year-to-Date Variance Analysis by Segment Adjusted Adjusted Adjusted ($millions, except weighted average shares and Sept YTD 2020 Adjustment Sept YTD Sept YTD 2019 Adjustment Sept YTD Sept YTD EPS) (1) (1) 2020 2019 Variance Regu
Slide 22: Adjusted Earnings Reconciliation
ADJUSTED EARNINGS RECONCILIATION Non-US GAAP Reconciliation ($millions, except as indicated) Q3 2020 Q3 2019 Variance Sept YTD 2020 Sept YTD 2019 Variance Common Equity Earnings 292 278 14 878 1,309 (431) Adjusting Items: May 2020 FERC Order(1) - - - (27) - (27) Anti-hybrid tax regulations(2) - - -
Slide 23: 2020-2025 Rate Base by Segment
2020-2025 RATE BASE BY SEGMENT (1) Rate Base 5-Year CAGR ($billions) 2020F 2021F 2022F 2023F 2024F 2025F to 2025 Regulated - Independent Electric Transmission ITC(2) 9.4 9.9 10.6 11.3 11.9 12.5 6.0% Regulated - US Electric & Gas UNS Energy 5.6 6.2 6.7 7.0 7.3 7.6 6.2% Central Hudson 2.1 2.3 2.5 2.7
Slide 24: 2021-2025 Capital Plan by Segment
2021-2025 CAPITAL PLAN BY SEGMENT (1) Capital Forecast 2021-2025 ($millions) 2021F 2022F 2023F 2024F 2025F TOTAL Regulated - Independent Electric Transmission ITC 1,000 1,007 993 1,107 993 5,100 Regulated - US Electric & Gas UNS Energy 749 781 840 853 547 3,770 Central Hudson 306 416 409 346 310 1,7
Slide 25: Major Capital Projects
MAJOR CAPITAL PROJECTS Expected 2020 2021-2025 Year of ($ Millions) Forecast(1) Plan(1) Completion ITC Multi-Value Regional Transmission Projects 12 261 2023 Major Capital ITC 34.5 kV to 69 kV Transmission Conversion Project 99 148 Post-2025 Projects UNS Vail to Tortolita (2) - 244 2023 15% UNS Oso
Slide 26: Investment-Grade Credit Ratings
INVESTMENT-GRADE CREDIT RATINGS Company Fortis Inc. A-(1) Baa3 BBB (High) ITC Holdings Corp. A-(1) Baa2 n/a ITC Regulated Subsidiaries A A1 n/a TEP A- A3 n/a Central Hudson A- A3 n/a FortisBC Energy n/a A3 A FortisBC Electric n/a Baa1 A (low) FortisAlberta A- Baa1 A (low) Newfoundland Power n/a A2 A
Slide 27: Manageable Debt Maturities
MANAGEABLE DEBT MATURITIES 5-Year Average ~$0.9B 2.0 1.5 $ billions 1.0 0.5 - 2021F 2022F 2023F 2024F 2025F Fortis Fortis Subsidiaries Note: Debt as at September 30, 2020 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases along with the current port
Slide 28: ~82% of Revenues Protected by Regulatory Mechanisms or From Residential Sales
~82% OF REVENUES PROTECTED BY REGULATORY MECHANISMS OR FROM RESIDENTIAL SALES 2019 REVENUES EPS SENSITIVITY Annual EPS UNS Other 19% Impact ($) Energy Electric +/- 1% Residential Sales +/- $0.008 +/- $0.006 18% 63% +/- 1% Commercial and +/- $0.008 +/- $0.004 Industrial Sales Revenues Protected by Re
Slide 29: COVID-19 Q3 Sales and Load Trends
COVID-19 Q3 SALES AND LOAD TRENDS: SALES UP ~3% AT UTILITIES NOT PROTECTED BY REGULATORY MECHANISMS REGULATORY MECHANISMS Q3 2020 VS. Q3 2019 PROTECTING CHANGES SALES TRENDS ✓ • Peak load increased ~1% including weather impacts • Electric sales up ~3% ✓ • Minimal exposure to commercial and industria
Slide 30: COVID-19: Other Financial Implications
COVID-19: OTHER FINANCIAL IMPLICATIONS Defined Benefit Pension Plan Certain U.S. Retirement Benefits ✓ ~46% of assets invested in fixed income ✓ Certain retirement benefits funded through trusts and are subject to market volatility each quarter ✓ ~88% of $3.2B plan assets funded at December 31, 2019