Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (November 2022)
49 slides from Fortis's investor presentation, November 2022
Slide 1: Investor Presentation Q4 2022
Investor Presentation Q4 2022 1
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 9,100 Employees 99% Regulated Utility Assets ~$26B Market Capitalization(1) ~9% Average Annual 10-Year Total Shareholder Return(1) $34B 2022F
Slide 4: Driving Sustainable Growth
OUR VISION & STRATEGY A PREMIUM NORTH AMERICAN UTILITY DELIVERING A CLEAN ENERGY FUTURE DRIVING Operational Excellence Financial Strength SUSTAINABLE Diversified Regulated Portfolio GROWTH Substantially Autonomous Business Model Strong Governance 4
Slide 5: Focused on Reliability & Affordability
FOCUSED ON RELIABILITY & AFFORDABILITY AVERAGE ELECTRICITY CUSTOMER MANAGING CONTROLLABLE OUTAGE DURATION (HOURS)(1) OPERATING COSTS BELOW INFLATION 3.9 3.8 3.8 3.5 3.3 2.3 2.2 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 compoun
Slide 6: Average Annual Total Shareholder Return
AVERAGE ANNUAL TOTAL SHAREHOLDER RETURN 6.2% 7.2% 5-YEAR 8.9% 4.0% 8.7% 7.8% 10-YEAR 8.0% 8.6% 11.3% 8.8% 20-YEAR 9.1% 10.7% Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Fortis Peers Note: TSR as at October 31, 2022. 6
Slide 7: Executing on a Cleaner Energy Future
PATHWAY TO 2050 NET-ZERO TARGET EXECUTING ON A CLEANER ENERGY FUTURE 2019 Achieved 20% GHG Emissions Reduction Since 2019 2021 50% GHG Emissions Reduction Target Coal-Free Generation Mix 2030 2032 2035 Net-Zero Target (Scope 1) 75% GHG Emissions Reduction Target by 2035 Compared to 2019 Levels ADDIN
Slide 8: ESG Leadership
ESG LEADERSHIP ENVIRONMENTAL SOCIAL GOVERNANCE • 93% energy delivery assets • Strong safety culture and commitment to • Independent chair; 12 of 13 directors are employee well-being independent • Scope 1 GHG emissions reduction target of 75% by 2035 compared to 2019 levels and net zero by 2050 • Mor
Slide 9: Five-Year Plan at a Glance
FIVE-YEAR PLAN AT A GLANCE 2023-2027 Capital Plan $22.3B Capital Plan Supports Continued Focus on Up $2.3B From Prior Plan Low-Risk Rate Base Growth Customer Affordability $46.1B • Targeting controllable operating cost increases below inflation, consistent with $34.0B historical practice +$0.5B $22.
Slide 10: $22.3B Five-Year Capital Plan
$22.3B FIVE-YEAR CAPITAL PLAN Average Annual Capital of $4.4B Highly Executable Capital Plan $4.7B $4.6B $4.5B $4.3B $4.2B • 83% Smaller Projects • 17% Major Projects • 55% U.S. • 41% Canada • 4% Caribbean 2023F 2024F 2025F 2026F 2027F • 99% Regulated Regulated - Independent Electric Transmission (I
Slide 11: Capital Plan Concentrated at Three Largest Utilities
CAPITAL PLAN CONCENTRATED AT THREE LARGEST UTILITIES $2.3B • Infrastructure investments including • Reliability and integrity investments • Includes ~$1.2B of renewable and reliability and resiliency upgrades, storage investments to transition to • Natural gas infrastructure including cleaner energy
Slide 12: Capital Plan Supports Cleaner Energy Future
CAPITAL PLAN SUPPORTS CLEANER ENERGY FUTURE Direct Cleaner Energy Investments 35% Transmission $2.7B Delivering Renewables to the Grid • ITC MISO LRTP and wind/ solar interconnections $22.3B $1.8B Renewable Energy Capital Plan • UNS Energy: renewables and energy storage 2023-2027 • Caribbean Utiliti
Slide 13: No Discrete Equity Required to Fund 2023-2027 Capital Plan
NO DISCRETE EQUITY REQUIRED TO FUND 2023-2027 CAPITAL PLAN Predictable Funding Plan Capital Plan Funded Primarily with Cash from Operations and Debt at Regulated Subsidiaries Net Debt(2) • Regulated debt used to repay maturing debt, and fund capital 33% expenditures and operating requirements Equity
Slide 14: Beyond the Plan
BEYOND THE PLAN Inflation Reduction Act • A catalyst for MISO’s LRTP Tranche 2 • Renewable generation including TEP’s IRP(1) • Interconnecting renewables to the grid • Electric vehicle infrastructure • Funding for community transition from fossil fuels Climate Adaptation & Grid Resiliency • Investin
Slide 15: Long Capex Runway
LONG CAPEX RUNWAY Responding to stakeholder expectations and capitalizing on opportunities to expand & extend growth Business development in existing footprint Connect more renewable generation to the grid Prepare grid for additional electrification Build more renewable generation Invest in technolo
Slide 16: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 49 YEARS of Consecutive Dividend Increases 4-6% Annual Dividend Growth Guidance 12 through 2027 16 20 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14 18 22F 16
Slide 17: Current Regulatory Calendar
Q3 REGULATORY CURRENT UPDATE & REGULATORY CALENDAR OUTLOOK Q3 UPDATE REGULATORY CALENDAR FERC MISO Base ROE (1) • In August 2022, the DC Circuit Court vacated certain FERC orders that established the methodology used to calculate the MISO base ROE • Matter dates back to complaints filed at FERC in 2
Slide 18: Ongoing Regulatory Proceedings
ONGOING REGULATORY PROCEEDINGS ITC Midwest Capital Structure Complaint Denied – In November 2022, FERC denied the complaint filed by the Iowa Coalition for Affordable Transmission (ICAT), which sought to lower ITC Midwest’s equity ratio from 60% to 53%; FERC concluded that ICAT had not demonstrated
Slide 19: Why Invest in Fortis?
WHY INVEST IN FORTIS? Focused on Geographic & 4-6% SAFE, ENERGY Regulatory ANNUAL DIVIDEND WELL-RUN DELIVERY DIVERSITY Growth Guidance Local Utilities LOW-RISK Virtually ESG Growth All INNOVATIVE REGULATED Leader Profile 19
Slide 20: Fortis Appendix
FORTIS APPENDIX
Slide 21: Table of Contents
TABLE OF CONTENTS ITC HOLDINGS CORP. 22-23 UNS ENERGY 24-28 CENTRAL HUDSON 29-30 FORTISBC 31-32 FORTISALBERTA 33-34 OTHER ELECTRIC UTILITIES 35-37 2022-2027 RATE BASE BY BUSINESS UNIT 38 2023-2027 CAPITAL PLAN BY BUSINESS UNIT 39 MAJOR CAPITAL PROJECTS 40-42 MACRO OUTLOOK & ASSUMPTIONS 43 Q3 SALES T
Slide 22: ITC Holdings Corp.
ITC HOLDINGS CORP. Type of Utility Transmission Regulator FERC Regulatory Model Cost of Service with FERC Formula Rates Current Regulatory Construct 10.77-11.41% ROE on 60% equity Cost-based, forward-looking formula rates Significant Regulatory Features with annual true-up 2023F Rate Base(1) $11.1B
Slide 23: ITC Capital Investment Overview
ITC CAPITAL INVESTMENT OVERVIEW 2023-2027 CAPITAL(1) $3.4B Infrastructure Investments Grid Security Rebuild, reliability, resiliency, system efficiencies, increased capacity, circuit overloads, pocket load growth MISO $1.2B New Interconnections LRTP Supports economic development, load interconnectio
Slide 24: 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 on 9.50% ROE on 9.75% ROE on Current Regulatory Construct(1)
Slide 25: UNS Capital Investment Overview
UNS CAPITAL INVESTMENT OVERVIEW 2023-2027 CAPITAL(1) $1.3B Distribution Infrastructure Grid resiliency and modernization Generation Maintenance $1.2B Renewable Generation Distribution Energy storage, renewable investments Infrastructure IT, General $1.0B Transmission Infrastructure Vail-to-Tortolita
Slide 26: TEP General Rate Application
TEP GENERAL RATE APPLICATION APPLICATION SUPPORTS TEP’S CLEAN REVENUE REQUIREMENT (US$M) ENERGY TRANSITION AND CONTINUED DELIVERY OF SAFE AND RELIABLE SERVICE Clean Energy Transition Springerville 2019 Rate Case 2022 Rate Case Depreciation San Juan Oso Raptor Retirement Application Decision Applicat
Slide 27: Arizona Focused on Renewables
ARIZONA FOCUSED ON RENEWABLES TEP INTEGRATED RESOURCE PLAN FILED IN 2020 • Next IRP expected in mid-2023 3,400 MW Planned Additions of Coal-free Wind, Solar and Storage 99 MW generation mix by 2032 250 MW 100 MW Oso Grande Wilmot Solar (1)(2) Borderlands(1) >70% renewable power by 2035 2021 2022-203
Slide 28: Reliable & Affordable Service During Clean Energy Transition
RELIABLE & AFFORDABLE SERVICE DURING CLEAN ENERGY TRANSITION TEP’s goal is to transition to a cleaner grid while maintaining affordable rates and reliable service for our customers 1,073 MW Planned Coal 3,400 MW of Planned Wind, Retirements by 2032 Steel for Fuel Transition Solar and Storage Resourc
Slide 29: Central Hudson
CENTRAL HUDSON Type of Utility Electric and Gas Transmission & Distribution Regulator New York State Public Service Commission Regulatory Model Cost of service on future test year Current Regulatory Construct(1) 9.0% ROE on 49% equity Significant Regulatory Features Revenue decoupling 2023F Rate Bas
Slide 30: Central Hudson Capital Investment Overview
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW 2023-2027 CAPITAL(1) Transmission $1.1B Distribution Infrastructure Infrastructure Distribution automation and modernization $500M IT, General and Other Modernization $1.8B Distribution Infrastructure Building the Workforce of the Future IT, General and $20
Slide 31: FortisBC
FORTISBC FortisBC Energy FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service with incentive mechanisms Current Regulatory Construct 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity Multi-year rates with re
Slide 32: FortisBC Capital Investment Overview
FORTISBC CAPITAL INVESTMENT OVERVIEW 2023-2027 CAPITAL $2.6B Reliability & Integrity Investments Ongoing maintenance requires significant capital investment Sustainability Includes customer growth and general plant investment Major Integrity Projects LNG $1.3B LNG Projects Tilbury 1B Tilbury LNG Res
Slide 33: FortisAlberta
FORTISALBERTA Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR Current Regulatory Construct 8.5% ROE on 37% equity ~85% of revenue derived from fixed-billing Significant Regulatory Features determinants 2023F Rate Base $4.2B 5-Year Rate Base CAGR (
Slide 34: FortisAlberta Capital Investment Overview
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW 2023-2027 CAPITAL $2.4B Distribution Infrastructure IT, General Safety & reliability of distribution assets, meter and Other upgrades, pole management program, modernization Distribution $500M IT, General and Other $2.9B Infrastructure 34
Slide 35: Other Electric Utilities
OTHER ELECTRIC UTILITIES (1) Type of Utility Electricity Newfoundland and Labrador Board of Regulator Island Regulatory and Appeals Commission Ontario Energy Board Commissioners of Public Utilities Regulatory Model Cost of service on future test year Cost of service on future test year Cost of servi
Slide 36: Other Electric Utilities (Continued)
OTHER ELECTRIC UTILITIES (CONTINUED) (1) Type of Utility Electricity Regulator Utility Regulation and Competition Office Government of the Turks and Caicos Islands Regulatory Model Cost of service Cost of service 2021 Achieved ROE 10.2% 8.5% 2023F Rate Base(2) $0.8B $0.5B 5-Year Rate Base CAGR (2023
Slide 37: Other Electric Capital Investment Overview
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW 2023-2027 CAPITAL(1) IT, General $1B Distribution Infrastructure and Other Newfoundland Power, Maritime Electric and Caribbean Utilities Transmission $750M Generation Diversification Infrastructure Caribbean Utilities shift to cleaner energy $2.4B Distribut
Slide 38: 2022-2027 Rate Base by Business Unit
2022-2027 RATE BASE BY BUSINESS UNIT RATE BASE 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2022F 2023F 2024F 2025F 2026F 2027F 2027 Regulated - Independent Electric Transmission ITC(1) 10.4 11.1 11.9 12.5 13.2 14.1 6.1% Regulated – U.S. Electric & Gas UNS Energy 6.7 7.1 7.4 7.8 8.5 9.1 6.0% Central
Slide 39: 2023-2027 Capital Plan by Business Unit
2023-2027 CAPITAL PLAN BY BUSINESS UNIT (1) CAPITAL PLAN 2023-2027 ($MILLIONS) 2023F 2024F 2025F 2026F 2027F TOTAL Regulated - Independent Electric Transmission ITC 1,103 1,177 1,137 1,180 1,220 5,817 Regulated – U.S. Electric & Gas UNS Energy 1,006 690 986 1,027 891 4,600 Central Hudson 384 343 418
Slide 40: Major Capital Projects
MAJOR CAPITAL PROJECTS ESTIMATED Smaller 2023-2027 COMPLETION Projects PLAN ($ Millions) DATE 83% ITC MISO Long-Range Transmission Projects(1) New 923 Post-2027 UNS Energy Renewables(2) New UNS Energy Vail-to-Tortolita Transmission Project 417 378 Various 2027 $22.3B FortisBC Tilbury LNG Storage Exp
Slide 41: Major Capital Projects
MAJOR CAPITAL PROJECTS MISO Long-Range Vail-to-Tortolita Wataynikaneyap Transmission Projects Renewables Transmission Project Transmission Power Project • First of four tranches of • Reflects planned investments • Investment in one circuit of a • Partnership with 24 First transmission solutions in r
Slide 42: Major Capital Projects
MAJOR CAPITAL PROJECTS Eagle Mountain Okanagan Capacity Tilbury LNG AMI Project Woodfibre Gas Line Tilbury 1B Storage Expansion Upgrade Project • Construction of additional • Replacement or retrofitting • 47 km gas line will service a liquefaction and dispensing in • Construction of a new • Replaces
Slide 43: Macro Outlook & Assumptions
MACRO OUTLOOK & ASSUMPTIONS Foreign Exchange Interest Rates • USD:CAD FX Rate of 1.30 for 2023-2027 • Primary exposure to rising rates at Fortis Inc. • 65% of operating earnings(1) / 60% of capital and ITC Holdings (non-regulated) plan from U.S. & Caribbean • Average annual near-term non-regulated •
Slide 44: Q3 Sales Trends
Q3 SALES TRENDS RETAIL Q3 2022 vs. Q3 2021 ELECTRIC SALES SALES TRENDS N/A • Peak load flat • Increase primarily due to higher cooling load associated +1% with warmer temperatures; Excluding weather impacts, (1) retail sales flat • Residential sales down 6% due to lower average -2% consumption and C
Slide 45: Limited Pension Exposure
LIMITED PENSION EXPOSURE DEFINED BENEFIT PENSION PLANS • 95% of $3.9B pension benefit obligation funded at December 31, 2021 • Allocation of plan assets at December 31, 2021 ▪ Equities – 48% ▪ Fixed income – 45% ▪ Other – 7% • ~80% of pension assets subject to regulatory mechanisms ▪ UNS pension pla
Slide 46: 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 47: Strong Liquidity
STRONG LIQUIDITY ~$2.5B IN DEBT RAISED YTD CREDIT FACILITIES DEBT MATURITIES • ITC • 5-year average debt maturities of $1.4B for ▪ US$300M secured mortgage bonds(1) 2023-2027 ▪ US$75M secured 30-year 3.05% notes • ~75% of long-term debt, excluding credit ▪ US$600M unsecured 5-year 4.95% notes(2) fac
Slide 48: Debt Maturities
DEBT MATURITIES 10-YEAR AVERAGE: $1.2B $3.0 $2.5 $2.0 billions $1.5 $1.0 $0.5 $- 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F Non-Regulated (1) Regulated Note: Debt as at September 30, 2022 and excludes any new debt issuances during the forecast period. Excludes repayments of finance
Slide 49: Strong Leadership Team
STRONG LEADERSHIP TEAM David Hutchens Jocelyn Perry Jim Reid Gary Smith President & CEO EVP, CFO EVP, Sustainability & CLO EVP, Operations & Innovation Fortis Inc. Exec. Stuart Lochray Stephanie Amaimo Julie Avery Karen Gosse Ron Hinsley Karen McCarthy Regan O’Dea Kevin Woodbury Sr. VP Capital Marke