Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (June 2021)
41 slides from Fortis's investor presentation, June 2021
Slide 1: Investor Presentation June 2021
INVESTOR PRESENTATION JUNE 2021
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: A Premium Energy Delivery Business
A PREMIUM ENERGY DELIVERY BUSINESS 93% TRANSMISSION & DISTRIBUTION ASSETS High Quality Portfolio 10 Regulated Utility Businesses 3.4M Electric & Gas Customers ~9,000 Employees 99% Regulated Utility Assets ~$26B Market Capitalization(1) ~13% Average Annual 20-Year Total Shareholder Return
Slide 4: Long-Term Strategy
LONG-TERM STRATEGY Leveraging our operating model, geographic and regulatory diversity, operating expertise, reputation and financial strength to deliver a cleaner energy future Proven Dividend Track Focus on Growth Strong ESG Profile Record & Outlook 6% Average Annual Execute on growth Strengthenin
Slide 5: Delivering Safe and Reliable Service
DELIVERING SAFE AND RELIABLE SERVICE All Injury Frequency Rate(1) Average Electricity Customer Outage Duration(2) 3.9 3.8 3.6 3.5 1.78 1.50 1.67 1.45 1.45 2.2 1.38 2.1 2.1 1.9 1.8 1.09 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Fortis USA Bureau of Canadian Electricity Fortis Canadian Electri
Slide 6: Carbon Emissions Reduction Target of 75% by 2035
CARBON EMISSIONS REDUCTION TARGET OF 75% BY 2035 Our target represents avoided emissions equivalent to taking ~2 million cars off the road in 2035 compared to 2019 levels Reduction in Scope 1 Emissions by 2035 Achievable Target Largely Driven by Plan Improves Already Using a 2019 Base Year TEP’s Int
Slide 7: ESG Leadership
ESG LEADERSHIP Continued focus on Carbon emissions reduction Energy target of75% by 2035 Delivery using a 2019 base year Industry leader in Industry recognition for Safety Strong Governance and Reliability grounded in local leadership & independence Focused on More than Gender Diversity $15 million
Slide 8: Balanced Capital Plan Supports Low-Risk Growth
BALANCED CAPITAL PLAN SUPPORTS LOW-RISK GROWTH Rate Base 5% 3% 6% 6% 6% $40.3B 8% $30.5B 2021-2025 Capital Plan $19.6 Billion 36% 30% Distribution Transmission 2020A 2025F Transmission supporting clean energy RNG/LNG Clean Generation Traditional Generation (1) Information Technology Other Note: Rate
Slide 9: Opportunities to Expand & Extend Growth
OPPORTUNITIES TO EXPAND & EXTEND GROWTH Other Opportunities Electric Vehicle Infrastructure Lake Erie Connector Project 2020 Integrated Resource Plan Further develop Tilbury to (~$1.7B) (IRP) outlined TEP’s ambitious position BC as a marine Biden Infrastructure Plan and realistic sustainab
Slide 10: Update on Opportunities to Expand & Extend Growth
UPDATE ON OPPORTUNITIES TO EXPAND & EXTEND GROWTH • In March, MISO outlined a long-range transmission planning (LRTP) roadmap with a focus on system constraints and configuration options • Potential new, regional projects • Visibility on initial projects could be as early as this year 10
Slide 11: Update on Opportunities to Expand & Extend Growth
UPDATE ON OPPORTUNITIES TO EXPAND & EXTEND GROWTH • In April, the Canada Infrastructure Bank announced that it would fund up to 40% of the ~$1.7B project cost • Project expected to: • Provide ~$100M of annual savings to customers • Up to 2 to 3 million tons of CO2 reductions annually • Project is no
Slide 12: 6% Average Annual Dividend Growth Guidance to 2025
6% AVERAGE ANNUAL DIVIDEND GROWTH GUIDANCE TO 2025 47 Years of Consecutive Dividend Increases 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 12
Slide 13: Credit Ratings and Liquidity
CREDIT RATINGS AND LIQUIDITY Credit Ratings Credit Facilities ($B) (1) A- 4.0 4.3 A (low) 1.5 1.3 Baa3 Mar. 31, 2021 Dec. 31, 2020 Remaining Capacity Utilized (1)S&P rating reflects the issuer credit rating. Fortis’ unsecured debt rating is BBB+. Ratings were affirmed in April 2021 and outlook revis
Slide 14: Update on Regulatory Proceedings
UPDATE ON REGULATORY PROCEEDINGS • Notice of Proposed Rulemaking (NOPR) on Incentives – In April 2021, FERC issued a supplemental NOPR proposing to eliminate the 50 bps RTO adder for transmission owners that have been RTO members for more than three years; stakeholder comments due in June 2021; init
Slide 15: Why Invest in Fortis?
WHY INVEST IN FORTIS? Geographic Focused on Low-Risk Virtually 6% Well-Run ESG Innovative & Regulatory Energy Growth All Dividend Growth Businesses Leader Diversity Delivery Profile Regulated Guidance 15
Slide 16: Investor Presentation
INVESTOR PRESENTATION JUNE 2021
Slide 17: Table of Contents
TABLE OF CONTENTS 1. ITC Holding Corp. 18-20 8. 2021-2025 Capital Plan by Segment 34 2. UNS Energy 21-23 9. Major Capital Projects 35 3. Central Hudson 24-25 10. Q1 Sales and Load Trends 36 4. FortisBC 26-27 11. Investment-Grade Credit Ratings 37 5. FortisAlberta 28-29 12. Proposed Tax & Infrastruct
Slide 18: ITC Holdings Corp.
ITC HOLDINGS CORP. Type of Utility Transmission Regulator FERC Cost of Service with FERC Formula Regulatory Model Rates 10.77-11.41% ROE on Current Regulatory Construct 60% equity Cost-based, forward-looking Significant Regulatory Features formula rates with annual true-up 2021F Rate Base(1) $9.9B 5
Slide 19: ITC Capital Investment Overview
ITC CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL (1) $3.6B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, Infrastructure increased capacity, circuit overloads, pocket load Investments growth $700M New Interconnections Supports economic development, load interconne
Slide 20: ITC Building the Grid of the Future
ITC BUILDING THE GRID OF THE FUTURE OPPORTUNITIES BEYOND THE PLAN New Generation Access to Grid Technologies Shifts Regional Markets Security 4 GW and 10 GW of 74 GW and 105 GW Regional transmission Hardening of battery storage in additional renewable necessary to facilitate telecommunications MISO(
Slide 21: UNS Energy
UNS ENERGY Tucson UNS Electric UNS Gas Electric Gas Type of Utility Electricity Distribution Arizona Corporation Commission Regulator & FERC Cost of service/historical test year & Regulatory Model FERC formula transmission rates 9.15% ROE 9.50% ROE 9.75% ROE Current Regulatory on 53.0% on 52.8% on 5
Slide 22: UNS Capital Investment Overview
UNS CAPITAL INVESTMENT OVERVIEW (1) 2021-2025 CAPITAL $1.3B Distribution Infrastructure Customer meter infrastructure, grid resiliency, modernization Distribution Transmission Infrastructure Infrastructure $1.1B Transmission Infrastructure Vail-to-Tortolita, new substations $3.8B $800M Generation Di
Slide 23: Arizona Focused on Renewables
ARIZONA FOCUSED ON RENEWABLES TEP Integrated Resource Plan filed in June 2020. With this IRP, TEP expects to have coal-free generation mix by 2032 and TEPs power will be more than 70% renewable by 2035 ~460 MW of New Wind, 3,400 MW Planned Additions of Solar and Storage Wind, Solar and Storage 2020-
Slide 24: Central Hudson
CENTRAL HUDSON Type of Utility Gas and Electricity New York State Public Service Regulator Commission Regulatory Model Cost of service on future test year Current Regulatory Compact 8.8% ROE on 50% equity Significant Regulatory Features Revenue decoupling 2021F Rate Base(1) $2.3B 5-Year Rate Base CA
Slide 25: Central Hudson Capital Investment Overview
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL(1) Distribution Infrastructure $1.0B Distribution Infrastructure Distribution automation and modernization $1.8B $240M Transmission Infrastructure Replacement of aging infrastructure $550M IT, General and Other Modernization Building the W
Slide 26: FortisBC
FORTISBC FortisBC FortisBC Gas Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service with incentive mechanisms Current Regulatory Compact 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity Multi-year rates with revenue
Slide 27: FortisBC Capital Investment Overview
FORTISBC CAPITAL INVESTMENT OVERVIEW $2.1B Sustainment & Customer Growth 2021-2025 CAPITAL Ongoing maintenance requires significant capital investment Includes customer growth and general plant investment Sustainment & Customer Growth $1.2B Major Integrity Projects Inland Gas Upgrades Project Transm
Slide 28: FortisAlberta
FORTISALBERTA Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR Current Regulatory Compact 8.5% ROE on 37% equity ~85% of revenue derived from fixed- Significant Regulatory Features billing determinants 2021F Rate Base $3.8B 5-Year Rate Base CAGR 2.
Slide 29: FortisAlberta Capital Investment Overview
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL Distribution Infrastructure $1.6B Distribution Infrastructure Safety & reliability of distribution assets, meter upgrades, pole management program, modernization $2.0B $400M IT, General and Other IT, General and Other 29
Slide 30: Other Electric Utilities
OTHER ELECTRIC UTILITIES (1) Type of Utility Electricity Newfoundland and Labrador Island Regulatory and Appeals Regulator Board of Commissioners of Public Ontario Energy Board Commission Utilities Regulatory Model Cost of service on future test year Cost of service on future test year Cost of servi
Slide 31: Other Electric Utilities (Continued)
OTHER ELECTRIC UTILITIES (CONTINUED) (1) Type of Utility Electricity Government of the Turks and Caicos Regulator Utility Regulation and Competition Office Islands Regulatory Model Cost of service Cost of service 2020 Achieved ROE(2) 9.0% 4.1% 2021F Rate Base(3) $0.8B $0.5B 5-Year Rate Base CAGR 8.8
Slide 32: Other Electric Capital Investment Overview
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL(1) Distribution $900M Distribution Infrastructure Newfoundland Power and Caribbean Utilities Infrastructure $650M Generation Diversification Caribbean Utilities shift to cleaner energy IT, General $2.4B and Other Generation $650M Transmiss
Slide 33: 2020-2025 Rate Base by Segment
2020-2025 RATE BASE BY SEGMENT (1) Rate Base 5-Year CAGR to ($billions) 2020A 2021F 2022F 2023F 2024F 2025F 2025 Regulated - Independent Electric Transmission ITC(2) 9.5 9.9 10.6 11.3 11.9 12.5 6.0% Regulated - US Electric & Gas UNS Energy 5.7 6.2 6.7 7.0 7.3 7.6 6.2% Central Hudson 2.1 2.3 2.5 2.7
Slide 34: 2021-2025 Capital Plan by Segment
2021-2025 CAPITAL PLAN BY SEGMENT (1) Capital Plan 2021-2025 ($millions) 2021F 2022F 2023F 2024F 2025F TOTAL Regulated - Independent Electric Transmission ITC 1,000 1,007 993 1,107 993 5,100 Regulated - US Electric & Gas UNS Energy 749 781 840 853 547 3,770 Central Hudson 306 416 409 346 310 1,787 T
Slide 35: Major Capital Projects
MAJOR CAPITAL PROJECTS Total Incurred to Expected the End of 2021-2025 Year of ($ Millions) 2020 Plan(1) Completion Major Capital Projects ITC Multi-Value Regional Transmission Projects 642(2) 261 2023 15% ITC 34.5 kV to 69 kV Transmission Conversion Project 445 148 Post-2025 UNS Vail-to-Tortolita P
Slide 36: Q1 Sales and Load Trends
Q1 SALES AND LOAD TRENDS Regulatory Mechanisms 83% 2020 Revenues Protecting Changes in Sales Q1 2021 vs. Q1 2020 Sales Trends From Residential Sales • Peak load flat; decrease in January peak load offset by or Protected by increase in March peak load due to easing of pandemic Regulatory Mechanisms
Slide 37: Investment-Grade Credit Ratings
INVESTMENT-GRADE CREDIT RATINGS Company Fortis Inc. A-(1) Baa3 A (low) ITC Holdings Corp. A-(1) Baa2 n/a ITC Regulated A A1 n/a Subsidiaries 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 (1
Slide 38: Proposed Tax & Infrastructure Plan
PROPOSED TAX & INFRASTRUCTURE PLAN Made in America Tax Plan American Jobs Plan Proposal aims to Increase corporate tax rate to 28% from 21% • Build a resilient grid • Expected to be EPS and cash flow positive • Lower energy bills for Americans • EPS impacts driven by higher tax rate on • Create good
Slide 39: Exposure to Foreign Exchange
EXPOSURE TO FOREIGN EXCHANGE Earnings and Capital Plan • ~66% of operating earnings(1) from U.S. and Caribbean • ~60% of $19.6B five-year capital plan from U.S. and Caribbean • Five-year capital plan translated at forecast USD:CAD FX rate of $1.32 Hedging Activities • US dollar-denominated debt held
Slide 40: 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 March 31, 2021 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases along with the current portion
Slide 41: Strong Leadership Team
STRONG LEADERSHIP TEAM David Hutchens President & CEO Fortis Inc. Exec. Nora Duke James Laurito Jocelyn Perry Jim Reid Gary Smith EVP, Sustainability & EVP, Business EVP, CFO EVP, CLO & EVP, Eastern Canadian & CHRO Development & CTO Corporate Secretary Caribbean Operations Linda Apsey Roger Dall’Ant