Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (February 2022)
42 slides from Fortis's investor presentation, February 2022
Slide 1: Investor Presentation Q1 2022
INVESTOR PRESENTATION Q1 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: 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 ~$29B Market Capitalization(1) ~13% Average Annual 20-Year Total Shareholder Return(1) $31.1B 2
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 Dividend Execute on Growth Str
Slide 5: Delivering Safe and Reliable Service
DELIVERING SAFE AND RELIABLE SERVICE ALL INJURY AVERAGE ELECTRICITY CUSTOMER FREQUENCY RATE(1) OUTAGE DURATION(2) 3.9 3.8 3.5 1.73 3.3 1.64 1.45 1.45 1.40 1.38 2.3 2.2 2.1 1.09 1.8 1.9 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Fortis USA Bureau of Canadian Electricity Fortis Canadian Electri
Slide 6: Superior 20-Year Total Shareholder Return
SUPERIOR 20-YEAR TOTAL SHAREHOLDER RETURN CUMULATIVE 20-YEAR TOTAL SHAREHOLDER RETURN AVERAGE ANNUAL TOTAL SHAREHOLDER RETURNS 975% 1-Year 21.8% 5-Year 12.1% 549% 10-Year 10.2% 373% 20-Year 12.6% 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 FTS S&P/TSX Capped Utilities Index S&P/TSX Compos
Slide 7: Carbon Emissions Reduction Target on Track
CARBON EMISSIONS REDUCTION TARGET ON TRACK 75% REDUCTION IN SCOPE 1 EMISSIONS BY 2035 COMPARED TO 2019 LEVELS Achieved 20% 12 Carbon Emissions 0 2021 CLEAN GENERATION ADDITIONS IN ARIZONA Reduction Since 2019 -0.1 10 ~2.5M tonnes CO2e -0.2 2021 Actual Forecast -0.3 8 -0.4 250 MW 100 MW 99 MW Oso Gra
Slide 8: ESG Leadership
ESG LEADERSHIP Carbon emissions reduction Industry leader in target of 75% BY 2035 SAFETY AND RELIABILITY Continued focus on ENERGY DELIVERY using a 2019 base year(1) Focused on DIVERSITY, EQUITY AND INCLUSION Industry recognition for More than $10 MILLION Women represent 50% of the Fortis Board; ST
Slide 9: 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 33% Capital Plan 6% $3.8B 6% Cleaner Energy Investments(1) 4% 5% 9% Distribution Transmission Transmission supporting cleaner energy RNG/LNG Clean Generation Traditiona
Slide 10: Update on Opportunities to Expand & Extend Growth
UPDATE ON OPPORTUNITIES TO EXPAND & EXTEND GROWTH LONG RANGE TRANSMISSION PLAN LAKE ERIE CONNECTOR • In March 2021, MISO outlined a long-range transmission • In January 2022, the Ontario government issued a letter acknowledging planning roadmap with a focus on system constraints and the project bene
Slide 11: Opportunities to Expand & Extend Growth
OPPORTUNITIES TO EXPAND & EXTEND GROWTH ITC UNS ENERGY FORTISBC OTHER OPPORTUNITIES • Lake Erie Connector Project • 2020 Integrated Resource • Further develop Tilbury to • Electric Vehicle Infrastructure (~$1.7B) Plan (IRP) outlines TEP’s position BC as a marine bunkering sustainability objectives h
Slide 12: 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 1212
Slide 13: Funding Plan Supports Investment-Grade Credit Ratings
FUNDING PLAN SUPPORTS INVESTMENT-GRADE CREDIT RATINGS FUNDING PLAN CREDIT RATINGS • Capital plan funded primarily with cash from operations and debt at regulated utilities A-(1) • Equity funding mainly through DRIP Baa3 No discrete equity required to fund capital plan • Capital structure expected
Slide 14: Strong Access to Debt and Liquidity
STRONG ACCESS TO DEBT AND LIQUIDITY OVER $1B DEBT RAISED IN 2021 DEBT ISSUANCES COMPLETED • Fortis CONSOLIDATED $500M 7-year 2.18% notes CREDIT FACILITIES ($B) • UNS Energy (TEP) US$325M 30-year 3.25% notes • FortisBC Energy $150M 10-year 2.42% debentures (2) 3.2 4.3 • ITC (METC) US$75M 30-y
Slide 15: 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 16: 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 16
Slide 17: Investor Presentation
INVESTOR PRESENTATION Q1 2022
Slide 18: Table of Contents
TABLE OF CONTENTS ITC HOLDINGS CORP. 19-21 UNS ENERGY 22-24 CENTRAL HUDSON 25-26 FORTISBC 27-28 FORTISALBERTA 29-30 OTHER ELECTRIC UTILITIES 31-33 2022-2026 CAPITAL PLAN BY BUSINESS UNIT 34 2021-2026 RATE BASE BY BUSINESS UNIT 35 MAJOR CAPITAL PROJECTS 36 COMMODITY & SUPPLY CHAIN CONSIDERATIONS 37 I
Slide 19: 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 2022F Rate Base(1) $10.1B
Slide 20: ITC Capital Investment Overview
ITC CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL(1) $3.6B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, increased Infrastructure capacity, circuit overloads, pocket load growth Investments $800M New Interconnections Supports economic development, load interconnec
Slide 21: Opportunities Beyond the Plan
OPPORTUNITIES BEYOND THE PLAN NEW TECHNOLOGIES GENERATION SHIFTS ACCESS TO GRID SECURITY REGIONAL MARKETS 14 GW and 13 GW of 114 GW and 88 GW Regional transmission Hardening of secure fibre battery storage in additional renewable necessary to accommodate networks, physical and MISO(1) and SPP(1) cap
Slide 22: 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 23: UNS Capital Investment Overview
UNS CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL(1) $1.5B Distribution Infrastructure Distribution Customer meter infrastructure, grid resiliency, modernization Infrastructure Transmission Infrastructure $900M Transmission Infrastructure $3.9B Vail-to-Tortolita, new substations $1.0B Generation Div
Slide 24: Arizona Focused on Renewables
ARIZONA FOCUSED ON RENEWABLES TEP INTEGRATED RESOURCE PLAN FILED IN 2020 3,400 MW Planned Additions of Coal-free Wind, Solar and Storage 250 MW 100 MW 99 MW generation mix by 2032 Oso Grande Wilmot Solar (1)(2) Borderlands(1) >70% renewable power by 2035 2021 2022-2035 Over 50 million tonnes of CO2
Slide 25: 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 50% equity Significant Regulatory Features Revenue decoupling 2022F Rate Bas
Slide 26: Central Hudson Capital Investment Overview
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL(1) $1.0B Distribution Infrastructure Distribution Distribution automation and modernization Infrastructure $200M Transmission Infrastructure $1.7B Replacement of aging infrastructure $500M IT, General and Other Modernization Transmission B
Slide 27: FortisBC
FORTISBC FortisBC Gas 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 reven
Slide 28: FortisBC Capital Investment Overview
FORTISBC CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL $2.1B Sustainment & Customer Growth Ongoing maintenance requires significant capital investment Sustainment Includes customer growth and general plant investment & Customer Growth $1.1B Major Integrity Projects Inland Gas Upgrades Project Transm
Slide 29: 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 2022F Rate Base $4.0B 5-Year Rate Base CAGR (
Slide 30: FortisAlberta Capital Investment Overview
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL $2.1B Distribution Infrastructure Distribution Safety & reliability of distribution assets, meter Infrastructure upgrades, pole management program, modernization $400M IT, General and Other $2.5B IT, General and Other 30
Slide 31: 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 32: 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(2) 10.2% 8.5% 2022F Rate Base(2) $0.8B $0.5B 5-Year Rate Base CAGR (2
Slide 33: Other Electric Capital Investment Overview
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL(1) $900M Distribution Infrastructure Distribution Newfoundland Power and Caribbean Utilities Infrastructure $750M Generation Diversification Caribbean Utilities shift to cleaner energy IT, General $2.3B Generation and Other Diversification
Slide 34: 2022-2026 Capital Plan by Business Unit
2022-2026 CAPITAL PLAN BY BUSINESS UNIT (1) CAPITAL PLAN 2022-2026 ($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 35: 2021-2026 Rate Base by Business Unit
2021-2026 RATE BASE BY BUSINESS UNIT (1) RATE BASE 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2021A 2022F 2023F 2024F 2025F 2026F 2026 Regulated - Independent Electric Transmission ITC(2) 9.5 10.1 11.0 11.6 12.1 12.6 5.9% Regulated – U.S. Electric & Gas UNS Energy 5.8 6.5 6.7 6.9 7.4 8.0 6.4% Centr
Slide 36: Major Capital Projects
MAJOR CAPITAL PROJECTS TOTAL INCURRED ESTIMATED 2022-2026 TO THE END OF COMPLETION PLAN(1) ($ 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 37: Commodity & Supply Chain Considerations
COMMODITY & SUPPLY CHAIN CONSIDERATIONS HIGHER NATURAL GAS PRICES • Impacts fuel and power costs at electric utilities and gas supply costs for gas utilities • Recovered from customers through regulatory mechanisms • Causes upward bill pressure MITIGATING CUSTOMER IMPACTS • Promoting energy efficien
Slide 38: 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 39: 2021 Sales Trends
2021 SALES TRENDS RETAIL ELECTRIC 2021 vs. 2020 SALES(1) SALES TRENDS • Peak load up 2% mainly due to weather and temporary N/A closure of auto manufacturers and suppliers in Q2 2020 • Overall decrease due to milder weather and reduced -3% heating load; Excluding weather, retail sales down 1% +1% •
Slide 40: Foreign Exchange Exposure
FOREIGN EXCHANGE EXPOSURE EARNINGS AND CAPITAL PLAN • ~65% of operating earnings(1) from 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
Slide 41: Manageable Debt Maturities
MANAGEABLE DEBT MATURITIES 10-YEAR AVERAGE: $1.0B $3.0 $2.5 $2.0 billions $1.5 $1.0 $0.5 $- 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F Note: Debt as at December 31, 2021 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases along with
Slide 42: Strong Leadership Team
STRONG LEADERSHIP TEAM David Hutchens President & CEO Fortis Inc. Exec. Nora Duke Jocelyn Perry Jim Reid Gary Smith EVP, Sustainability & EVP, CFO EVP, CLO & EVP, Operations and CHRO Corporate Secretary Innovation Linda Apsey Roger Dall’Antonia Ruth Forbes Charles Freni Susan Gray Scott Hawkes Utili