Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (2018)
44 slides from Fortis's investor presentation, 2018
Slide 1: Need to update picture (TH)
Need to update picture (TH)
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 U.S. Private Securities Litigation Reform Act of 1995, collectively referred to as "forw
Slide 3: Our Strategy
Our Strategy S T R AT E G Y 6% Leverage the operating model, footprint of our utilities, operating expertise, reputation and financial Focus on Average Annual Dividend Organic strength to develop growth Growth Target through Growth opportunities 2023 AREAS OF FOCUS: Utility Capital Investment System
Slide 4: High Quality & Diverse Utility Portfolio
High Quality & Diverse Utility Portfolio ~97% REGULATED UTILITY ASSETS 10 UTILITY OPERATIONS Canada, U.S. & Caribbean $ 26.1 BILLION IN MIDYEAR RATE BASE IN 2018 ~60% EARNINGS FROM THE U.S. ~92% TRANSMISSION & DISTRIBUTION 3.3 MILLION UTILITY CUSTOMERS 2.0M Electric & 1.3M Gas Note: All information
Slide 5: Our Unique Business Model
Our Unique Business Model 10 Locally Operated Utilities = 1 Strong North Regulated Electric American Regulated Gas Company FERC-Regulated Electric Transmission Long-Term Contracted Hydro Generation Natural Gas Storage Facility ITC UNS Energy FortisBC FortisAlberta Newfoundland Power Central Hudson F
Slide 6: Sustainability: Environmental Commitment
Sustainability: Environmental Commitment We delivered 19 times more energy to our customers than we generated in 2017 92% of our assets are electricity poles, wires and natural gas lines 63% Decrease in the carbon intensity of operations since 2015 6
Slide 7: Governance and Social Commitment
Governance and Social Commitment $12.5M invested in communities that we serve in 2017 Women on our Women NEOs Board 5 2 1 0 2013 Today 2013 Today 7
Slide 8: Fortis Timeline
Fortis Timeline 1885-2012 2013-2016 2017-Current Focused on Canada U.S. Acquisition Strategy Focused on Organic Growth in North America 8
Slide 9: Strong Financial Track Record
Strong Financial Track Record Adjusted EPS and Dividend Payout Ratio $2.53 $2.31 $2.11 $1.70 $1.75 Adjusted EPS(2) Rate Base 5-Year EPS 5-Year 73% 73% 66% 66% 64% Dividend Payout Ratio(2) Historical CAGR Historical CAGR 7.0%(1) 8.0%(2) 2013 2014 2015 2016 2017 (1) 5-year period ending 2017 and exclu
Slide 10: Average Annualized Total Shareholder Return
0 Average Annualized Total Shareholder Return 5-Year 10-Year 20-Year Fortis 12.4% 9.7% 12.4% S&P/TSX Composite Index 5.6% 8.2% 7.0% S&P/TSX 6.8% 7.8% 8.2% Capped Utilities Index Note: For the period ending November 30, 2018. 10
Slide 11: New 2019-2023 Business Plan Highlights
New 2019-2023 Business Plan Highlights $17.3B 6-7% 6% 5-Year Rate Base Average Annual Capital Plan Growth Dividend Growth Target to 2023 11
Slide 12: Increase in Capital Plan Driven by Proven Growth Strategy
Increase in Capital Plan Driven by Proven Growth Strategy + $0.6B $17.3 + $0.9B $14.5 Billions + $0.6B 2017 Investor Day 2018 Investor Day + $0.6B 12
Slide 13: $17.3B 5-Year Capital Plan
$3.5B Average Annual Capital Expenditures (1) $17.3B 5-Year Capital Plan $3.7 $3.5 $3.6 $3.2 $3.3 Billions 2019F 2020F 2021F 2022F 2023F (1) Capital expenditures are translated at a forecast USD/CAD foreign exchange rate of $1.28. 13
Slide 14: Low Risk, Highly Executable Capital Plan
Low Risk, Highly Executable Capital Plan Regulated 99% Smaller Projects 77% U.S. 55% Canada 42% Non-Regulated 1% Major Capital Projects 23% Caribbean 3% 14
Slide 15: Capital Plan Grows Rate Base to $35 Billion in 2023
Capital Plan Grows Rate Base to $35 Billion in 2023 Rate Base(1) $35.5 $32.0 $33.4 $30.1 $27.9 $26.1 Canadian & Caribbean Billions U.S. 2018F 2019F 2020F 2021F 2022F 2023F (1) Rate base converted at a projected USD/CAD foreign exchange rate of $1.28 for 2018 through 2023. 15
Slide 16: Strong 5-Year Rate Base Growth
Strong 5-Year Rate Base Growth Rate Base Grows 8.4% Central Hudson $9.4B to $35.5B 7.0% ITC 5-Year CAGR Increases from 6.3% UNS Rate Base Growth $8.4 4.5% to 6.3% 5-Year $6.5 6.3% $9.8 6.0% FortisBC Energy $7.7 Growth Mainly $7.7 5.3% Other Canadian & Caribbean Driven by U.S. Utility Investments Not
Slide 17: 45 Years of Dividend Growth and 6% Guidance Extended to 2023
45 Years of Dividend Growth and 6% Guidance Extended to 2023 6% guidance generates annual dividend payment of $2.27 in 2023 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19F 21F 23F Actual dividend paid Forecasted dividend payments 17
Slide 18: Additional Energy Infrastructure Opportunities
Additional Energy Infrastructure Opportunities FortisBC: Tilbury, LNG & Gas Infrastructure FortisOntario: Municipal Utility Consolidation Maritime Electric & Newfoundland Power: Grid Modernization ITC: Lake Erie Connector & Grid Modernization UNS Energy: Renewables, Storage & Electric Transmission C
Slide 19: Current Regulatory Framework
Current Regulatory Framework Weighted Average Weighted Average Allowed ROE(1) Equity Thickness(1) 10.43% 55.2% 9.84% 48.2% 8.73% 39.0% U.S. Utilities Canadian Utilities Combined (1) Based on 2018 rate base and capital structure for the Canadian and U.S. utilities. 19
Slide 20: Regulatory Outlook
Regulatory Outlook Recent Decisions: Independence Incentive Adder Complaint • Adder reduced to 0.25% • Effective April 20, 2018 Upcoming Proceedings and Decisions: MISO Base ROE Complaints Targeted TEP Rate Case Filing in 2019 Targeted PBR Renewal Filing in 2019 20
Slide 21: Effective Funding Plan For 5-Year Capital Program
Effective Funding Plan For 5-Year Capital Program Cash From Operations(1) No Discrete Equity 69% $17.3B Required to Fund Other(2) 5-Year Capital Plan 2% $17.3B Asset Sales Expected Asset Sales 6% 5-Year to Provide $1-$2 Billion Capital Plan in Proceeds ATM Program Unutilized Regulated Debt 23% and P
Slide 22: Strengthening Our Credit Profile
Strengthening Our Credit Profile Improved Holdco Debt / Total Debt Credit Rating Agencies Rank 38% Business Risk Profile as Excellent/Strong(1) 33% Improving Credit Metrics Over The 5-Year Plan 2018F 2019F 2020F 2021F 2022F 2023F (1) S&P ranks business risk profile as excellent and Moody’s ranks it
Slide 23: Why Invest In Fortis?
Why Invest In Fortis? Well-Run Utilities Highly Regulated Highly Diversified Strong Growth Profile 6% Dividend Guidance Opportunities Beyond Capital Plan 23
Slide 24: Need to update picture (TH)
Need to update picture (TH)
Slide 25: Table of Contents
Table of Contents APPENDIX Utility Overview Other ITC Holdings 26 Fortis Delivers Strong Results 33 UNS Energy 27 Q3 2018 Results By Segment 34 Central Hudson 28 September YTD 2018 Results by Segment 35 FortisBC 29 2019-2023 Capital Forecast by Segment 36 FortisAlberta 30 2018-2023 Rate Base Forecas
Slide 26: ITC Holdings
ITC Holdings A Fortis Company APPENDIX Type of Utility Transmission Regulator FERC Regulatory Model Independent Transmission Company 2018 Formula 11.07-12.16% ROE on 60% equity 2018F Midyear Rate Base $7.7B 5-Year CAGR on Midyear Rate Base(1) 7.0% 2017 Assets % of Total Consolidated 38% Regulated As
Slide 27: UNS Energy
UNS Energy A Fortis Company APPENDIX Tucson Electric UNS Electric UNS Gas Type of Utility Electricity Gas distribution Regulator Arizona Corporation Commission Regulatory Model Cost of service/historical test year 9.75% ROE on 9.5% ROE on 9.75% ROE on 2018 Formula 50% equity 52.83% equity 50.8% equi
Slide 28: Central Hudson
Central Hudson A Fortis Company APPENDIX Type of Utility Gas and Electricity Regulator New York State Public Service Commission Regulatory Model Cost of service on future test year 2018 Formula 8.8% ROE on 48% equity 2018F Midyear Rate Base $1.6B 5-Year CAGR on Midyear Rate Base(1) 8.4% 2017 Assets
Slide 29: FortisBC
FortisBC A Fortis Company APPENDIX FortisBC Gas FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service + PBR 2018 Formula 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity 2018F Midyear Rate Base $4.4B $1.3B 5
Slide 30: FortisAlberta
FortisAlberta A Fortis Company APPENDIX Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR 2018 Formula 8.5% ROE on 37% equity 2018F Midyear Rate Base $3.4B 5-Year CAGR on Midyear Rate Base(1) 5.1% 2017 Assets % of Total Consolidated Regulated 10% As
Slide 31: Other Electric Utilities
Other Electric Utilities Fortis Companies APPENDIX (1) Type of Utility Electricity Island Regulatory and Appeals Newfoundland and Labrador Board of Regulator Ontario Energy Board Commission Commissioners of Public Utilities Regulatory Model Cost of service with incentives Cost of service on future t
Slide 32: Other Electric Utilities (Continued)
Other Electric Utilities (Continued) Fortis Companies APPENDIX (1) Type of Utility Electricity Regulator Utility Regulation and Competition Office Government of the Turks and Caicos Islands Regulatory Model Cost of service 2017 Achieved ROE 10.6% 6.1% 2018F Midyear Rate Base $0.6B $0.4B 5-Year CAGR
Slide 33: Fortis Delivers Strong Results
Fortis Delivers Strong Results APPENDIX (1) (1) Adjusted Q3 EPS Adjusted Q3 YTD EPS Strong Utility Performance $1.92 $1.91 Aitken Creek Mark-to-Market $0.65 Tempers Earnings $0.61 $3.2 Billion Capital Plan for 2018 Remains 2017 2018 2017 2018 on Track (1) Non-US GAAP measure. Reported Q3 EPS was $0.
Slide 34: Q3 2018 Results by Segment
Q3 2018 Results by Segment APPENDIX Third Quarter 2018 Variance Analysis by Segment ($millions, excluding weighted Adjusted Q3 Adjusted Q3 Adjusted Q3 Q3 2018 Adjustment (1) Q3 2017 Adjustment (1) average shares and EPS) 2018 2017 Variance Regulated – Independent Electric Transmission ITC 97 - 97 89
Slide 35: September YTD 2018 Results by Segment
September YTD 2018 Results by Segment APPENDIX September Year-to-Date 2018 Variance Analysis by Segment ($millions, excluding weighted Adjusted Adjusted Adjusted YTD YTD 2018 Adjustment (1) YTD 2017 Adjustment (1) average shares and EPS) YTD 2018 YTD 2017 Variance Regulated – Independent Electric Tr
Slide 36: 2019-2023 Capital Forecast by Segment
2019-2023 Capital Forecast by Segment APPENDIX Capital Forecast(1) 2019-2023 ($millions) 2019 2020 2021 2022 2023 Total Regulated - Independent Electric Transmission ITC 865 878 951 943 861 4,498 Regulated - US Electric & Gas UNS Energy 1,076 875 624 476 476 3,527 Central Hudson 280 268 276 291 274
Slide 37: 2018-2023 Rate Base Forecast by Segment
2018-2023 Rate Base Forecast by Segment APPENDIX Rate Base Forecast(1) 3-Year CAGR 5-Year CAGR ($millions) 2018 2019 2020 2021 2022 2023 to 2021 to 2023 Regulated - Independent Electric Transmission ITC 7,706 8,463 9,148 9,745 10,305 10,824 8.1% 7.0% Regulated - US Electric & Gas UNS Energy 4,850 5,
Slide 38: Major Capital Projects
Major Capital Projects AAPPPPEENNDDIIXX Total Expected Year 2018 Significant Capital Projects ($millions) 2019-2023 of Forecast Capital Plan Plan Completion By Project Type ITC Multi-Value Regional Transmission Projects 140 332 Post-2023 ITC 34.5 kV to 69 kV Transmission Conversion Project 118 369 P
Slide 39: Opportunities and Risks
9 Opportunities and Risks APPENDIX Opportunities • Additional Capital Opportunities • Improving Economic Growth Sensitivities • Rising Interest Rates – Higher ROE 2019 EPS Impact • Low Natural Gas Prices 50 Basis Point Change in $0.05 • Renewable Energy Allowed ROE at ITC • New Technology CAD/USD do
Slide 40: Investment-Grade Credit Ratings
Investment-Grade Credit Ratings APPENDIX Credit Ratings 2 0 1 9 - 2 0 23 Pl an S u p p or ts (1) Baa3 CFO/Debt > 11% (2) A- / BBB+ Improved Holdco Debt / Total Debt BBB (high) Commitment to Investment-Grade Credit Ratings (1) In April 2018, Moody’s issued a credit opinion with no change to the Corpo
Slide 41: Utility Debt Credit Ratings
1 Utility Debt Credit Ratings APPENDIX Company ITCTransmission A n/a A1 Michigan Electric Transmission Company (METC) A n/a A1 ITC Midwest A n/a A1 ITC Great Plains A n/a A1 ITC Holdings A-(1) n/a Baa2 Tucson Electric Power A-(1) n/a A3 Central Hudson A- n/a A2(2) FortisBC Energy n/a A A3 FortisBC E
Slide 42: Manageable Debt Maturities and Ample Liquidity
Manageable Debt Maturities and Ample Liquidity APPENDIX Fixed-Term Debt Maturities(1) Consolidated Credit Facilities $3.0 $2.5 $3.8 $3.7 5-Year average fixed-term debt maturities ~$940 million $2.0 Billions Billions $1.5 $1.0 $0.5 $1.3 $1.2 2019 2020 2021 2022 2023 June 30, 2018 Avg. 2019-2023 Forti
Slide 43: Expected Upcoming Events
Expected Upcoming Events APPENDIX Expected Upcoming Earnings Release Dates Q4 – 2018 February 15, 2019 Q1 – 2019 May 1, 2019 43
Slide 44: Executive Team
Executive Team Barry Perry President & CEO APPENDIX Jocelyn Perry Jim Reid Phonse Delaney Nora Duke James Laurito Gary Smith David Hutchens EVP, CFO EVP, Chief Legal EVP, Chief EVP, Sustainability EVP, Business EVP, Eastern Canadian EVP, Western Utility Officer & Corporate Information Officer & CHRO