Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (2020)
48 slides from Fortis's investor presentation, 2020
Slide 1: Investor Presentation Q3 2020
Investor Presentation Q3 2020
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 Geographically Diverse Energy Delivery Business
A Geographically Diverse Energy Delivery Business 3
Slide 4: High Quality Portfolio
High Quality Portfolio Operations 10 Canada, U.S. & Caribbean 3.3M Customers 2.0M Electric & 1.3M Gas Regulated Transmission & ~99% Utility Assets ~93% Distribution 2019 Earnings(1) from $28B Rate Base ~65% the U.S Note: All information as at December 31, 2019. (1) Non-US GAAP measure. 4
Slide 5: Long-Term Strategy
Long-Term Strategy ✓ The safety and health of our employees is the priority ✓ Focused on delivering reliable service to our customers STRATEGY Leverage the operating model, 6% footprint of our businesses, Average Annual operating expertise, reputation Focused on Dividend Growth and financial strengt
Slide 6: Strong Operational Performance
Strong Operational Performance All Injury Frequency Rate(1) 2.0 1.78 1.59 Safety 1.0 0.0 2015 2016 2017 2018 2019 USA Bureau of Labor Statistics Average (2015-2018)(2) Canadian Electricity Association Average (2015-2018)(2) Electricity Customer Average Outage Duration(3) 5.0 (Hours) 4.0 Reliability
Slide 7: Superior 20-Year Total Shareholder Return
Superior 20-Year Total Shareholder Return 1,600 FTS 1,400 S&P/TSX Capped Utilities Index 1,237% FTS Total Shareholder 1,200 Returns (Average Annual) S&P/TSX Composite Index 1,000 1-Year 3.3% 800 5-Year 12.1% 692% % 10-Year 10.7% 600 20-Year 13.8% 400 200 155% 0 (200) 2000 2005 2010 2015 2020 Note: C
Slide 8: Sustainability: It's How We Do Everything
Sustainability: It’s How We Do Everything 93% of our assets are dedicated to energy transmission and distribution, limiting our impact on the environment Focused on Delivering Strong Performance Industry Recognition Cleaner Energy Strong Gender Diversity Throughout Company Including Board, Head Offi
Slide 9: TEP Files 2020 Integrated Resource Plan in Arizona
TEP Files 2020 Integrated Resource Plan in Arizona Fortis Expects to Have a Coal-Free Generation Mix by 2032 TEP Sets Target to Reduce 2,457 MW of new wind Springerville units begin and solar power systems Carbon Emissions by TEP’s power will be more than 70% seasonal operations in 2023. renewable b
Slide 10: 2020 Sustainability Report Issued in July
2020 Sustainability Report Issued in July TEP will reduce carbon emissions by Continued Focus on Energy 80% FortisBC’s by 2035. Delivery 30BY30 goal will reduce greenhouse gas emissions associated with customer energy use by 30% by 2030. More than 70% of our 2020 $4.3 billion capital plan is dedicat
Slide 11: Strategically Positioned to Navigate Through COVID-19
Strategically Positioned to Navigate Through COVID-19 Operationally: ✓ 10 locally operated utilities ✓ Essential workers maintaining and operating electricity grids and natural gas networks ✓ Limited impacts on supply chain ✓ Key operational employees sequestered ✓ Social distancing and good hygiene
Slide 12: ~82% of Revenues Protected by Regulatory Mechanisms or From Residential Sales
~82% of Revenues Protected by Regulatory Mechanisms or From Residential Sales 2019 Revenues EPS Sensitivity 19% Annual EPS Impact ($) UNS Other Electric +/- 1% Residential Sales +/- $0.008 +/- $0.006 18% 63% +/- 1% Commercial and +/- $0.008 +/- $0.004 Industrial Sales (1) Revenues Protected by Regul
Slide 13: COVID-19 Q2 Sales and Load Trends
COVID-19 Q2 Sales and Load Trends: Sales Up ~3% at Utilities Not Protected by Regulatory Mechanisms Regulatory Mechanisms Protecting Changes Q2 2020 vs. Q2 2019 in Sales Sales Trends • Peak load increased ~5% including weather impacts ✓ • Sales improved with reopening of auto manufacturers and suppl
Slide 14: $18.8B Capital Plan
Our Five-Year Plan $18.8B ~7% ~6% Capital Rate Base Dividend Plan Growth Growth Guidance 14
Slide 15: 2020 Capital Plan On Track
2020 Capital Plan On Track $4.3B $2.0B $1.7 $0.7 $1.6 $0.8 $0.5 $1.0 (1) (1) Q2 YTD 2020A 2020F Regulated - Canadian & Caribbean Electric & Gas Regulated - U.S. Electric & Gas Regulated - Independent Electric Transmission (ITC) (1) US dollar-denominated capital expenditures for Q2 YTD 2020 based on
Slide 16: 5-Year Capital Plan & Rate Base Growth Outlook
5-Year Capital Plan & Rate Base Growth Outlook MIDYEAR RATE BASE(1) $38.4B $28.0B $18.8B 5-Year Capital Plan 2019A 2024F Regulated - Canadian & Caribbean Electric & Gas Regulated - U.S. Electric & Gas Regulated - Independent Electric Transmission (ITC) 16 (1) US dollar-denominated rate base for 2019
Slide 17: Dividend Guidance Supported by Long-Term Growth Strategy
Dividend Guidance Supported by Long-Term Growth Strategy $2.0 6% 46 Years Average Annual Dividend Of Consecutive $1.5 Growth Guidance to 2024 Dividend Increases $1.0 $0.5 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 Dividend Payments 17
Slide 18: Growth Expected Beyond 2024: Three Largest Utilities Account for 2/3 of Capital Plan
Growth Expected Beyond 2024: Three Largest Utilities Account for 2/3 of Capital Plan Today’s 5-Year $4.9B $3.8B $3.9B Capital Plan • Generation shift to renewables: • Resiliency: • 2020 Integrated Resource Plan ▪ Significant renewable ▪ Tilbury LNG storage (IRP) filed in June outlined TEP’s capacity
Slide 19: Strong Access to Debt Markets & Strong Liquidity
Strong Access to Debt Markets & Strong Liquidity Over $2B issued since March 2020 DEBT ISSUANCES COMPLETED LIQUIDITY ($B) ✓ ITC • US$700M 10-year 2.95% notes $6 • US$180M 31-year 3.13% bonds(1) ✓ UNS • US$350M 30-year 4.00% notes $4 ✓ Central Hudson 5.2 4.7 • US$30M 30-year 3.42% notes • US$30M 40-y
Slide 20: ITC: MISO Base ROE Order Issued in Q2
ITC: MISO Base ROE Order Issued in Q2 In May, FERC issued an order in response to New ROE Previous ROE Under May Under Nov. requests for rehearing of FERC’s November 2020 Order 2019 Order 2019 decision regarding base ROE MISO Base ROE 10.02% 9.88% The new ROE methodology was revised to ITC’s Incenti
Slide 21: Update on Other Regulatory Proceedings
Update on Other Regulatory Proceedings • NOIs on ROE and Incentives – Transmission Incentive NOPR issued in March 2020; comments filed July 1, 2020 • TEP General Rate Application – Hearings completed in June 2020; decision expected in late 2020 • 2020 Rate Increase Delayed – July 1, 2020 rate increa
Slide 22: Investment-Grade Credit Ratings and Funding Plan Intact
Investment-Grade Credit Ratings and Funding Plan Intact CREDIT RATINGS A-(1) ✓ S&P and DBRS Morningstar Affirmed Ratings in 2020 BBB (high)(2) ✓ Improved Credit Metrics in 2019 ✓ Strong Liquidity Baa3 (1) S&P rating reflects the issuer credit rating. Fortis’ unsecured debt rating is BBB+. Ratings we
Slide 23: Why Invest In Fortis?
Why Invest In Fortis? Well-Run Sustainability Highly Focused on Strong Virtually 6% Innovative Businesses Leader Diversified Energy Growth All Dividend Delivery Profile Regulated Guidance 23
Slide 24: Appendix
FORTIS... Appendix
Slide 25: Table of Contents
Table of Contents Utility Overview Other ITC Holdings Corp. 26 – 28 2019-2024 Rate Base by Segment 42 UNS Energy 29 – 31 2020-2024 Capital Plan by Segment 43 Central Hudson 32 – 33 Major Capital Projects 44 FortisBC 34 – 36 COVID-19: Other Financial Implications 45 FortisAlberta 37 – 38 Manageable D
Slide 26: ITC Holdings Corp.
ITC Holdings Corp. Type of Utility Transmission Regulator FERC Cost of Service with FERC Regulatory Model Formula Rates 10.77-11.41% ROE on Current Regulatory Compact 60% equity Cost-based, forward formula Significant Regulatory Features rates with annual true-up 2020F Rate Base(1) $9.5B 5-Year Rate
Slide 27: ITC Capital Plan
ITC Capital Plan 2020-2024 Capital(1) $3.3B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, Infrastructure increased capacity, circuit overloads, pocket load Investments growth $600M Major Capital Projects Multi-Value Regional Transmission Projects & 34.5 to 69kV Tr
Slide 28: ITC Building the Grid of the Future
ITC Building the Grid of the Future ~16,000 Opportunities Beyond the Plan Miles of Transmission & 565 New 3 GW and 9 GW of battery storage in Access to Regional MISO multi-value projects at capacity upon completion Technologies Substations MISO and SPP queues Markets ~6,800 MW Generation 57 GW and 9
Slide 29: UNS Energy
UNS Energy Tucson UNS Electric UNS Gas Electric Gas Type of Utility Electricity distribution Arizona Corporation Commission Regulator and FERC Regulatory Model Cost of service/historical test year 9.75% ROE 9.75% ROE 9.5% ROE on Current Regulatory Compact on 50% on 50.8% 52.8% equity equity equity 2
Slide 30: UNS Capital Plan
UNS Capital Plan 2020-2024 Capital(1) Distribution Generation Infrastructure Diversification $1.2B Distribution Infrastructure Customer meter infrastructure, grid resiliency, modernization $3.9B $1.0B Generation Diversification Reciprocating engines, 250 MW Wind $1.0B Transmission Infrastructure Dir
Slide 31: TEP's Sustainability Objectives
TEP’s Sustainability Objectives Targeting renewable energy goal of 70% that will reduce carbon emissions by 457 MW of New Wind, 3,400 MW Planned Additions 80% by 2035 Solar and Storage of Wind, Solar and Storage ✓ Developed in partnership with the 2020-2021 2022-2035 University of Arizona’s Institut
Slide 32: 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 49% equity Significant Regulatory Features Revenue decoupling 2020F Rate Base(1) $2.1B 5-Year Rate Base CA
Slide 33: Central Hudson Capital Plan
Central Hudson Capital Plan 2020-2024 Capital(1) Distribution Infrastructure $900M Distribution Infrastructure Distribution Automation and Modernization $250M Transmission Infrastructure $1.6B Replacement of Aging Infrastructure $450M IT, General and Other IT, General Transmission and Other Infrastr
Slide 34: FortisBC
FortisBC FortisBC Gas FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service + PBR 9.15% ROE on 40.0% Current Regulatory Compact 8.75% ROE on 38.5% equity equity Multi-year rates with revenue deferrals – changes
Slide 35: FortisBC Capital Plan
FortisBC Capital Plan 2020-2024 Capital $1.9B 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 Sustainability Transm
Slide 36: FortisBC's Clean Growth Pathway: 30% GHG Reduction by 2030
FortisBC’s Clean Growth Pathway: 30% GHG Reduction by 2030 Energy Renewable Global Zero & Low-Carbon Efficiency Natural Gas LNG Transportation Conservation & Currently Utilizing Positioning BC FortisBC Efficiency Programs Renewable Natural as a Domestic & Owns and Operates Increased to ~$370M Gas(1)
Slide 37: 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 Significant Regulatory Features fixed-billing determinants 2020F Rate Base $3.7B 5-Year Rate Base CAGR 4.1
Slide 38: FortisAlberta Capital Plan
FortisAlberta Capital Plan 2020-2024 Capital Distribution Infrastructure $1.9B Distribution Infrastructure Safety & Reliability of Distribution Assets, Meter $2.2B Upgrades, Pole Management Program, Modernization IT, General $300M IT, General and Other and Other 38
Slide 39: Other Electric Utilities
Other Electric Utilities (1) Type of Utility Electricity Island Regulatory and Appeals Newfoundland and Labrador Board Regulator Ontario Energy Board Commission of Commissioners of Public Utilities Regulatory Model Cost of service with incentives Cost of service on future test year Cost of service o
Slide 40: Other Electric Utilities (continued)
Other Electric Utilities (continued) (1) Type of Utility Electricity Utility Regulation and Competition Government of the Turks and Caicos Regulator Office Islands Regulatory Model Cost of service Cost of service 2019 Achieved ROE 12.10% 8.00% 2020F Rate Base(2) $0.7B $0.5B 5-Year Rate Base CAGR(2)
Slide 41: Other Electric Capital Plan
Other Electric Capital Plan 2020-2024 Capital Distribution Infrastructure $900M Distribution Infrastructure Newfoundland Power and Caribbean Utilities $600M Generation Diversification $2.3B Caribbean Utilities Shift to Cleaner Energy IT, General $600M Transmission Infrastructure and Other Generation
Slide 42: 2019-2024 Rate Base by Segment
2019-2024 Rate Base by Segment (1) Midyear Rate Base 3-Year 5-Year CAGR to CAGR to ($billions) 2019A 2020F 2021F 2022F 2023F 2024F 2022 2024 Regulated - Independent Electric Transmission ITC(2) 8.8 9.5 10.2 10.8 11.4 12.0 7.2% 6.4% Regulated - US Electric & Gas UNS Energy 5.0 5.8 6.1 6.4 6.8 6.9 8.6
Slide 43: 2020-2024 Capital Plan by Segment
2020-2024 Capital Plan by Segment Capital Forecast(1) 2020-2024 ($millions) 2020F 2021F 2022F 2023F 2024F TOTAL Regulated - Independent Electric Transmission ITC 976 987 1,043 1,018 922 4,946 Regulated - US Electric & Gas UNS Energy 1,390 828 710 575 371 3,874 Central Hudson 292 309 359 306 292 1,55
Slide 44: Major Capital Projects
Major Capital Projects(1) Incurred Expected 2020-2024 ($Millions) to End of Year of Plan 2019 Completion ITC Multi-Value Regional Transmission Projects 625(2) 276 2023 Smaller Projects 80% ITC 34.5 to 69 kV Transmission Conversion Project 352(2) 268 Post-2024 UNS Southline Transmission Project - 392
Slide 45: COVID-19: Other Financial Implications
COVID-19: Other Financial Implications Defined Benefit Pension Plan Certain U.S. Retirement Benefits ✓ ~46% of assets invested in fixed income ✓ Certain retirement benefits funded through trusts and are subject to market volatility each quarter ✓ ~88% of $3.2B plan assets funded at December 31, 2019
Slide 46: Manageable Debt Maturities
Manageable Debt Maturities FIXED-TERM DEBT MATURITIES(1) ($B) $2.0 5-Year Average ~$0.9B $1.5 $1.0 $0.5 $0.0 2020F 2021F 2022F 2023F 2024F (1) Debt as at June 30, 2020 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases along with the current portion
Slide 47: Investment-Grade Credit Ratings
Investment-Grade Credit Ratings Company Fortis Inc. A-(1) Baa3 BBB (High) ITC Holdings Corp. A-(1) Baa2 n/a ITC Regulated Subsidiaries A A1 n/a 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
Slide 48: Executive Team
Executive Team Barry Perry President & CEO Jocelyn Perry Jim Reid David Hutchens Nora Duke James Laurito EVP, CFO EVP, CLO & Chief Operating Officer, EVP, Sustainability & EVP, Business Corporate Secretary CEO UNS Energy CHRO Development & CTO Linda Apsey Charles Freni Gary Smith Michael Mosher Roge