Fortis Inc. · TSX:FTS
Fortis — Q1 2022 Earnings Presentation
29 slides from Fortis's earnings presentation, May 4, 2022
Slide 1: Q1 2022 Earnings Conference Call
Q1 2022 EARNINGS CONFERENCE CALL May 4, 2022
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: David Hutchens, President and CEO
DAVID HUTCHENS PRESIDENT AND CEO
Slide 4: Business Update Highlights
BUSINESS UPDATE HIGHLIGHTS ✓ Focused on Reliability and Affordability ✓ Capital Expenditures of ~$1.0B in Q1; $4.0B Annual Capital Forecast on Track ✓ Q1 Adjusted EPS of $0.78 ✓ Progress continued on Woodfibre, MISO Long-Range Transmission Plan and Lake Erie Connector ✓ Announcement of a 2050 Net-Ze
Slide 5: Focused on Reliability & Affordability
FOCUSED ON RELIABILITY & AFFORDABILITY AVERAGE ELECTRICITY MANAGING CONTROLLABLE CUSTOMER OUTAGE DURATION(1) OPERATING COSTS BELOW INFLATION 3.9 3.8 3.5 3.3 2.2 2.3 2.1 1.8 1.9 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 Fortis Electricity Canada and U.S. Energy Fortis compound average gr
Slide 6: 2022 TCFD and Climate Assessment Report Issued
2022 TCFD AND CLIMATE ASSESSMENT REPORT ISSUED BACKGROUND • First TCFD and Climate Assessment Report report issued in March 2022 • Includes four climate-related scenarios identifying risks and opportunities in low and high-carbon scenarios KEY FINDINGS • Well positioned to mitigate risks and pursue
Slide 7: Building on Our Commitment to a Clean Energy Pathway to Net-Zero
PATHWAY TO NET-ZERO BUILDING ON OUR 2019 COMMITMENT TO A Achieved 20% GHG Emissions Reduction Since 2019 CLEAN ENERGY 2021 FUTURE WITH A 2050 50% GHG Emissions Reduction NET-ZERO TARGET 2030 2032 Coal-Free Generation Mix 2035 Net-Zero Target (Scope 1) 75% GHG Emissions Reduction Target by 2035 2050
Slide 8: Highly Executable Capital Plan Supports Low-Risk Rate Base Growth of ~6%
HIGHLY EXECUTABLE CAPITAL PLAN SUPPORTS LOW-RISK RATE BASE GROWTH OF ~6% CAPITAL PLAN RATE BASE $41.6B 30% $31.1B 7% $20B 2022-2026 6% $3.8B 33% Capital Plan 6% Cleaner Energy Investments(1) 4% 5% 9% Distribution Transmission Transmission supporting cleaner energy RNG/LNG Clean Generation Traditiona
Slide 9: The Capex Runway
THE CAPEX RUNWAY Responding to stakeholder expectations Business development in existing footprint Connect more renewable generation Prepare grid for additional to the grid electrification Build more renewable generation Invest in technology to ensure security and improve service and efficiency Prov
Slide 10: Update on Opportunities to Expand & Extend Growth
UPDATE ON OPPORTUNITIES TO EXPAND & EXTEND GROWTH MISO LONG-RANGE TRANSMISSION PLAN • In Q1 2022, MISO announced first tranche of projects, with total associated transmission costs estimated at ~US$10B • ITC estimates investments through 2030 in the range of US$1.0-1.5B of the proposed tranche 1 pro
Slide 11: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 6% Average Annual Dividend Growth Guidance through 2025 48 YEARS of Consecutive Dividend Increases 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 11
Slide 12: Jocelyn Perry, Executive Vice President and CFO
JOCELYN PERRY EXECUTIVE VICE PRESIDENT AND CFO
Slide 13: First Quarter Results
FIRST QUARTER RESULTS ADJUSTED EARNINGS Q1 EPS DRIVERS: $369 $360 • Rate base growth • Higher sales in the Caribbean Q1 2021 Q1 2022 • Lower hydroelectric production in Belize ADJUSTED EPS • Customer information system costs at Central Hudson $0.77 $0.78 Q1 2021 Q1 2022 Note: Adjusted EPS is a Non-U
Slide 14: Q1 EPS Drivers
Q1 EPS DRIVERS $0.01 ($0.01) $0.01 ($0.01) $0.02 ($0.01) $0.78 $0.77 Rate base growth and higher sales in the Caribbean partially offset by lower earnings at Central Hudson and Belize Q1 2021 Western U.S. Other Central Energy Weighted Q1 2022 Adjusted Canadian Transmission Electric Hudson Infrastruc
Slide 15: Liquidity & Credit Ratings
LIQUIDITY & CREDIT RATINGS ~$900M DEBT RAISED IN 2022 CREDIT FACILITIES CREDIT RATINGS • ITC ▪ US$150M 30-year 2.93% bonds A-(2) • UNS Energy $3.3B $3.2B ▪ US$325M 10-year 3.25% notes Baa3 • Central Hudson ▪ US$50M 5-year 2.37% notes $1.5B $1.6B ▪ US$60M 7-year 2.59% notes A (low) • FortisBC Electri
Slide 16: Regulatory Update
REGULATORY UPDATE NOTICE OF PROPOSED RULEMAKING (NOPR) ON INCENTIVES – In April 2021, FERC issued a supplemental NOPR proposing to eliminate the 50-bps regional transmission organization (RTO) adder for transmission owners that have been RTO members for more than three years; stakeholder comments fi
Slide 17: Why Invest in Fortis?
WHY INVEST IN FORTIS? Focused on Geographic & 6% DIVIDEND WELL-RUN ENERGY DELIVERY Regulatory DIVERSITY Growth Guidance Local Utilities LOW-RISK Virtually ESG Growth Profile All REGULATED INNOVATIVE Leader 17
Slide 18: Upcoming Events
UPCOMING EVENTS EXPECTED EARNINGS RELEASE DATES • Q2 2022 – July 28, 2022 • Q3 2022 – October 28, 2022 18
Slide 19: Q1 2022 Earnings Conference Call
Q1 2022 EARNINGS CONFERENCE CALL May 4, 2022
Slide 20: Non-U.S. GAAP Reconciliation
NON-U.S. GAAP RECONCILIATION ($MILLIONS, EXCEPT EPS) Q1 2022 Q1 2021 VARIANCE Adjusted Net Earnings Net Earnings 350 355 (5) Adjusting Item: Unrealized loss on mark-to-market of derivatives(1) 19 5 14 Adjusted Net Earnings 369 360 9 Adjusted Net Earnings per Share $0.78 $0.77 $0.01 Capital Expenditu
Slide 21: Q1 2022 Results by Business Unit
Q1 2022 RESULTS BY BUSINESS UNIT FIRST QUARTER EARNINGS VARIANCE ANALYSIS BY BUSINESS UNIT ADJUSTED ADJUSTED ($MILLIONS, EXCEPT WEIGHTED AVERAGE SHARES AND EPS) Q1 2022 ADJUSTMENT (1) Q1 2021 ADJUSTMENT (1) VARIANCE Q1 2022 Q1 2021 Regulated – Independent Electric Transmission ITC 109 - 109 103 - 10
Slide 22: 2021-2026 Rate Base by Business Unit
2021-2026 RATE BASE BY BUSINESS UNIT (1) RATE BASE 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2021A 2022F 2023F 2024F 2025F 2026F 2026 Regulated - Independent Electric Transmission ITC(2) 9.5 10.1 11.0 11.6 12.1 12.6 5.9% Regulated – U.S. Electric & Gas UNS Energy 5.8 6.5 6.7 6.9 7.4 8.0 6.4% Centr
Slide 23: 2022-2026 Capital Plan by Business Unit
2022-2026 CAPITAL PLAN BY BUSINESS UNIT (1) CAPITAL PLAN 2022-2026 ($MILLIONS) 2022F 2023F 2024F 2025F 2026F TOTAL Regulated - Independent Electric Transmission ITC 998 999 1,010 998 1,000 5,005 Regulated – U.S. Electric & Gas UNS Energy 704 810 924 729 725 3,892 Central Hudson 344 335 311 331 349 1
Slide 24: Major Capital Projects
MAJOR CAPITAL PROJECTS TOTAL INCURRED ESTIMATED 2022-2026 TO THE END OF COMPLETION PLAN(1) ($ MILLIONS) 2021 DATE ITC Multi-Value Regional Transmission Projects 710(2) 154 2023 ITC 34.5 to 69kV Transmission Conversion Project 482 145 Post-2026 Major UNS Vail-to-Tortolita Project 21 240 2025 Capital
Slide 25: 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 Subsidiaries A A1 n/a TEP A- A3 n/a Central Hudson A- Baa1 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 26: Q1 Sales Trends
Q1 SALES TRENDS RETAIL ELECTRIC Q1 2022 vs. Q1 2021 SALES SALES TRENDS N/A • Peak load up 3% mainly due to favourable weather impacts • Increase due to favourable weather impacts, customer +1%(1) growth and higher average consumption by C&I customers; Excluding weather impacts, retail sales relative
Slide 27: ESG Leadership
ESG LEADERSHIP ENVIRONMENTAL SOCIAL GOVERNANCE • 93% energy delivery assets • Strong safety culture and commitment to • Independent chair; 12 of 13 directors are operational excellence independent(1) • GHG emissions reduction target of 75% by 2035 compared to 2019 levels and net zero by 2050 • More
Slide 28: Foreign Exchange Exposure
FOREIGN EXCHANGE EXPOSURE EARNINGS AND CAPITAL PLAN • ~65% of operating earnings(1) in U.S. and Caribbean • ~55% of $20.0B five-year capital plan from U.S. and Caribbean • Five-year plan translated at a forecast USD:CAD FX rate of 1.25 HEDGING ACTIVITIES • U.S. dollar-denominated debt at corporate l
Slide 29: Manageable Debt Maturities
MANAGEABLE DEBT MATURITIES 10-YEAR AVERAGE: $1.0B $2.5 $2.0 $1.5 billions $1.0 $0.5 $- 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F Note: Debt as at March 31, 2022 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases along with the curr