Fortis Inc. · TSX:FTS
Fortis — Investor Day (October 2015)
110 slides from Fortis's investor day presentation, Oct 6, 2015
Slide 1: Investor Day
Investor Day October 6, 2015
Slide 2: Barry Perry
J Rac Barry Perry President & CEO
Slide 3: Forward-looking Statement
Forward-looking Statement Fortis includes forward-looking information in this material within the meaning of applicable securities laws in Canada. The purpose of the forward-looking information is to provide management’s expectations regarding the Corporation’s future growth, results of operations,
Slide 4: A Leader in North American Utility Industry
A Leader in North American Utility Industry • Guided by Profitable Growth Strong Platform for Growth 4
Slide 5: Strategic Outlook
Strategic Outlook Our Strategy Our Position Our Focus STRATEGY Leverage the footprint of our utilities, operating expertise, reputation and financial strength to develop growth opportunities. Dividend Target: 6% Annual Growth Strong Balance Sheet Through 2020 STRATEGIC INITIATIVES Execute Target Inc
Slide 6: What have we accomplished in the past year?
What have we accomplished in the past year? Our Strategy Our Position Our Focus Successful integration of UNS Energy Completion of Waneta Expansion Project Three-year rate plan at Central Hudson Strong EPS growth/Two dividend increases Sale of commercial real estate portfolio $430M Pending sale of h
Slide 7: UNS Energy – A Year Later
UNS Energy – A Year Later Our Strategy Our Position Our Focus • Management team retained • Significant EPS accretion in 2015 • Merger conditions met - Equity level at TEP increased by 650 bps to 50% • Significant capital investments since acquisition • Credit rating upgrades • TEP Resource Diversifi
Slide 8: Waneta: Largest Capital Project Completed to Date
Waneta: Largest Capital Project Completed to Date Our Strategy Our Position Our Focus Strong Platform for Growth 8
Slide 9: Waneta Expansion Project
Waneta Expansion Project • 2-unit 335-MW hydroelectric plant • $900M (51% FTS) • Supported by 40-year PPAs with BC Hydro and FortisBC Electric • Commissioned and online in Q2 2015 - Ahead of time and on budget • Performing as expected (1) Strong Platform for Growth 9
Slide 10: 1-Year Total Shareholder Return
1-Year Total Shareholder Return (1) Our Strategy Our Position Our Focus Fortis 14.3% S&P/TSX Capped Utilities Index 2.7% -0.6% S&P 500 Utilities -8.4% S&P/TSX Composite Index (1) as of September 30, 2015 Strong Platform for Growth 10
Slide 11: Investment Opportunities
Investment Opportunities Our Strategy Our Position Our Focus Distribution: • New York – REV Demonstration Projects • Alberta – Rural Electrification Associations • Ontario – Municipal Utility Consolidation Transmission: • FortisOntario – Wataynikaneyap Project • NY Transco LLC, 2014 Generation: • UN
Slide 12: Investment Opportunities
Investment Opportunities Our Strategy Our Position Our Focus Natural Gas: • British Columbia: • Tilbury LNG • Eagle Mountain Woodfibre Transmission • New York Transmission Strong Platform for Growth 12
Slide 13: Dividend Guidance Initiated
Dividend Guidance Initiated Our Strategy Our Position Our Focus $ 2.00 1.80 1.60 • A record 42 consecutive years of annual dividend increases 1.40 1.40 • Two dividend increases in 2015 Annual dividend growth 1.28 1.24 through 2020 targeted at 6% 1.20 1.20 1.16 1.00 2011 2012 2013 2014 2015 2016 2017
Slide 14: Proven Acquisition Framework – “Stand-Alone” Model
Proven Acquisition Framework – “Stand-Alone” Model Our Strategy Our Position Our Focus Accretive to EPS Strong Supportive Credit Regulatory Ratings Environment North American Utility Acquisitions Growth Portfolio Prospects Diversity Experienced Management Team Strong Platform for Growth 14
Slide 15: Our Focus
Our Focus Our Strategy Our Position Our Focus • Continue to grow dividends • Execute ~$9B capital expenditure plan • Navigate significant regulatory applications • Target additional energy infrastructure opportunities Strong Platform for Growth 15
Slide 16: Karl Smith
Karl Smith EVP, Chief Financial Officer
Slide 17: Financial Outlook
Financial Outlook • Strong financial metrics • Diversified earnings and assets • Strong balance sheet • Increasing dividends Strong Platform for Growth 17
Slide 18: Summary Financial Metrics
(1) Summary Financial Metrics 2013A 2014A Q2 2015 TTM Earnings to Common Shareholders ($M) 344 407 492 Basic EPS ($) 1.70 1.81 1.91 EBITDA ($B) 1.4 1.8 2.1 FFO ($B) 0.9 1.2 1.4 CAPEX ($B) 1.2 1.7 2.4 (1) Adjusted for non-recurring items Strong Platform for Growth 18
Slide 19: Growing Enterprise Value and Market Capitalization
Growing Enterprise Value and Market Capitalization $B 24.3 24.4 25 1.5 20 15.8 13.7 14.3 1.0 15 10.8 10.7 10 6.3 6.6 6.5 0.5 5 0 (1) 2011 2012 2013 2014 Sep 30/15 Market Capitalization ($B) Enterprise Value ($B) (1) Except for debt, which is as at June 30, 2015 Strong Platform for Growth 19
Slide 20: Diversity in Assets
Diversity in Assets 96% Regulated Assets Electric 70% Gas 26% Regulated Assets by Jurisdiction Generation 4% Central Hudson 11% FortisBC 30% (New York State) (British Columbia) FortisAlberta 14% (Alberta) UNS Energy 31% (Arizona) Eastern Canadian 9% (Newfoundland, Ontario, Prince Edward Island) Cari
Slide 21: Building Diversity of Operating Earnings
(1) Building Diversity of Operating Earnings $M $M 617 700 (2) 508 Non-Utility 600 (1) 412 Generation 500 Regulated Electric & Gas U.S. 400 Regulated Gas Canada 300 Regulated Electric Canada & Caribbean 200 100 0 2013 2014 Q2 2015 TTM (1) Operating earnings before Corporate segment net expenses (2)
Slide 22: Returns and Equity
Returns and Equity 2015 Weighted Average (%) Canada U.S. Combined Allowed ROE 8.73 9.88 9.16 Actual Equity Thickness 40.0 49.5 43.5 Strong Platform for Growth 22
Slide 23: Capital Structure
Capital Structure % Dec 31/13 Dec 31/14 Jun 30/15 (1) Debt 55 55 54 Preferred 9 9 9 Common 36 36 37 Total 100 100 100 (1) Excludes capital lease and finance obligations Strong Platform for Growth 23
Slide 24: Liquidity
Liquidity Ample Credit Facilities Strong Credit Ratings $B 4.0 Fortis Inc. 3.0 S&P A- 2.0 DBRS A(low) 1.0 0.0 (1) Jun 30/2015 Proforma Jun 30/2015 Utilized Remaining Capacity (1) Adjusted to reflect proceeds from the sale of commercial real estate and hotel assets Strong Platform for Growth 24
Slide 25: Utility Credit Ratings
Utility Credit Ratings Company S&P DBRS Moody’s Tucson Electric Power (1) BBB+ n/a A3 Central Hudson A n/a A2 FortisBC (Gas) n/a A A3 FortisAlberta A- A (low) n/a FortisBC (Electric) n/a A (low) Baa1 Newfoundland Power n/a A A2 (1) Fitch rating A-; S&P Positive Outlook Strong Platform for Growth 25
Slide 26: Looking Forward
Looking Forward
Slide 27: Capital Program ~ $9 Billion
(1) Capital Program ~ $9 Billion $B 2.5 2.2 2016-2020 Average $1.8 Billion 1.9 1.9 1.8 2.0 1.6 1.6 1.5 Growth 1.0 Other (2) Sustaining 0.5 0.0 2015F 2016F 2017F 2018F 2019F 2020F (1) US dollar denominated CAPEX converted at a USD/CAD exchange rate of 1.30 (2) Capital expenditures related to faciliti
Slide 28: Highly Executable Capital Plan
Highly Executable Capital Plan $M 2015 2016 2017 2018 2019 2020 2016-2020 Total FortisBC Tilbury Expansion - Phase 1A 188 105 5 - - - 110 FortisBC Lower Mainland System Upgrade 15 50 151 205 2 - 408 UNS Energy Springerville Leases 148 - 49 - - - 49 UNS Energy Pinal Transmission 98 - - - - - - Centra
Slide 29: Drives Rate Base Growth
(1) Drives Rate Base Growth $B 25 19.8 20.3 19.1 20 18.4 16.4 17.3 Waneta Expansion 15 Regulated Electric Canada & Caribbean Regulated Electric & Gas U.S. Regulated Gas Canada 10 5 0 15F 16F 17F 18F 19F 20F (1) Midyear Rate Base Strong Platform for Sustained Growth 29
Slide 30: Low Debt Maturities
Low Debt Maturities Average annual debt maturities over next 5 years ~$200M $M 800 600 400 200 0 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40 '41 '42 '43 '44 '45 >'45 Subsidiary Corporate Strong Platform for Growth 30
Slide 31: Funding Strategy
Funding Strategy • Strong balance sheet and investment-grade credit rating • Subsidiary balance sheets in line with approved levels • Ample liquidity • Debt primarily at operating company level • Debt at corporate level issued in US dollars • No anticipated common equity issuance - DRIP generates ~
Slide 32: Earl Ludlow
Earl Ludlow EVP, Eastern Canadian and Caribbean Operations
Slide 33: Caribbean
Caribbean • CUC and FortisTCI performing well • Strong sales growth • New generation projects on time, on budget • Potential renewable projects Strong Platform for Growth 33
Slide 34: Regulation
Regulation • Newfoundland Power - 2016 Capex Program approved at $107M, as filed - General Rate Application to be filed on October 16, 2015 • Maritime Electric - General Rate Application to be filed Fall 2015 Strong Platform for Growth 34
Slide 35: Ontario LDC-Consolidation Policy Changes
Ontario LDC-Consolidation Policy Changes • Ontario 2015/16 Budget cites benefits of consolidation of municipal utilities and important role private capital can play in facilitating consolidation • Time-limited relief on taxes pertaining to transfers of electricity assets, including transfers to the
Slide 36: FortisOntario Strengths
FortisOntario Strengths • FortisOntario only private owner/operator of electric distribution utilities in Ontario - Canadian Niagara Power, Cornwall Electric and Algoma Power - 10% equity in three other distribution utilities • Strong reputation with municipal-owned LDCs, the OEB, and the Province •
Slide 37: FortisOntario Strengths
FortisOntario Strengths Strong Platform for Growth 37
Slide 38: Wataynikaneyap Transmission Project
Wataynikaneyap Transmission Project Strong Platform for Growth 38
Slide 39: Wataynikaneyap Transmission Project
Wataynikaneyap Transmission Project • 20 First Nations consortium majority ownership in partnership with FortisOntario-RES (Fortis 24.5%) • $1.35B estimated total project capital cost • Phase 1: line to Pickle Lake; Phase 2: lines to connect 16 remote First Nations communities • 1,800 km of new 230-
Slide 40: Ontario Long-Term Energy Plan
Ontario Long-Term Energy Plan “This unprecedented agreement between Wataynikaneyap Power and Fortis-RES to expand grid connection to 16 First Nation communities in northwestern Ontario demonstrates a significant step forward in that plan.” Hon. Bob Chiarelli Minister of Energy Strong Platform for Gr
Slide 41: Top Priorities
Top Priorities • Capital programs • Renewable energy in the Caribbean • Regulatory agenda at Eastern Canadian utilities • FortisOntario growth opportunities Strong Platform for Growth 41
Slide 42: James Laurito
James Laurito President and CEO
Slide 43: Central Hudson
Central Hudson • Regulatory Update - Rate case - REV Proceeding • Regional Growth Opportunities - Electric Transmission - Natural Gas Transmission Strong Platform for Growth 43
Slide 44: Regulatory Update: Rate Case
Regulatory Update: Rate Case • Rate-setting policies supportive of “A” bond ratings - Forward-looking test year - Multi-year rate agreements - Revenue decoupling mechanisms - Full recovery of electricity and natural gas purchases - Deferral treatment for pensions, other post-employment benefits, env
Slide 45: Regulatory Update: Rate Case
Regulatory Update: Rate Case • New three-year rate plan through June 2018: - US$45M electric and US$11M natural gas delivery rate increases over three years - US$31M of bill credits to mitigate customer bill impacts (merger benefit) - 48% common equity ratio; 9% ROE; Earnings sharing above 9.5% ROE
Slide 46: Regulatory Update: REV Proceeding
Regulatory Update: REV Proceeding • Regulatory proceeding to reform the electric distribution industry • Essential purpose is to: - Improve system efficiency - Empower customer choice - Encourage greater penetration of distributed energy resources (energy efficiency, demand response, distributed gen
Slide 47: Regulatory Update: REV Policy Goals
Regulatory Update: REV Policy Goals • Enhance customer knowledge and tools that will support effective management of their total energy bill • Market animation and leverage of ratepayer contributions • System-wide efficiency • Fuel and resource diversity • System reliability and resiliency • Reducti
Slide 48: Regulatory Update: REV Status
Regulatory Update: REV Status TRACK 1 TRACK 2 • Addressed Distributed System • Regulatory and ratemaking reforms Provider (DSP) • Cost recovery for REV initiatives and • Market design and platform utility incentives technology • New utility business model • Customer engagement • Cost-benefit analysi
Slide 49: Regulatory Update: REV Opportunities
Regulatory Update: REV Opportunities • Increased investment as DSP - Distribution System Automation (DA) - Distribution Management Systems (DMS) These are consistent with - Network strategy communications our capital plan and strategy • Implementation of demonstration projects • Increased customer e
Slide 50: Regulatory Update: REV Strategy
Regulatory Update: REV Strategy REV ‘foundational’ Customer investments engagement Customer value Provider and Demonstration integrator projects Strong Platform for Growth 50
Slide 51: Regulatory Update: REV Strategy
Regulatory Update: REV Strategy Generation becomes Consumers become more flexible energy producers T&D becomes more Loads become more controllable and resilient interactive and dynamic Strong Platform for Growth 51
Slide 52: Regulatory Update: REV Strategy
Regulatory Update: REV Strategy Demonstration projects – accelerating DER growth Community Demand Energy Microgrids solar response exchange Strong Platform for Growth 52
Slide 53: Regional Growth Opportunities
Regional Growth Opportunities Electric Transmission • NY Transco formed in November 2014 – FERC-regulated projects – PSC-approved projects await FERC approval (up to US$500M) – Additional proposed projects (up to US$1.2B) – Potential new Western NY projects • Central Hudson Electric Transmission (CH
Slide 54: Regional Growth Opportunities
Regional Growth Opportunities Natural Gas Transmission • Strategic position - Marcellus to Northeast • Pipeline infrastructure benefits - Lower cost gas - System reliability - Supply source for generators Strong Platform for Growth 54
Slide 55: Top Priorities
Top Priorities • Execute Rate Plan • Execute REV Projects • Pursue transmission investment opportunities Positioned for Growth Strong Platform for Growth 55
Slide 56: Phonse Delaney
Phonse Delaney President and CEO
Slide 57: Overview
Overview • Alberta’s Economy • Regulatory Environment • Opportunities Strong Platform for Growth 57
Slide 58: Alberta Economic Indicators
Alberta Economic Indicators 2015 2016 2013 2014 Current Estimate Forecast Real GDP Growth (%) 3.8 4.3 -1.3 0.6 Housing Starts (#) 36,011 40,590 34,184 32,281 Strong Platform for Growth 58
Slide 59: Capital Expenditures Remain Strong
Capital Expenditures Remain Strong $M 450 400 350 300 Externally Driven 250 Sustainment 200 Customer Growth 150 100 50 0 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F 2020F Strong Platform for Growth 59
Slide 60: Components of Revenue
Components of Revenue Energy Revenue 15% Demand Revenue 55% Fixed Customer Charges 30% Strong Platform for Growth 60
Slide 61: Revenue Growth Remains Strong
Revenue Growth Remains Strong $M 600 550 500 Miscellaneous Revenue Capital Tracker Revenue 450 Base Revenue (I – X, growth) 400 350 300 (1) 2015 2016 (1) Based on regulatory filings Strong Platform for Growth 61
Slide 62: Regulatory Environment
Regulatory Environment • Performance Based Regulation • Capital Trackers • Generic Cost of Capital • Utility Asset Disposition Strong Platform for Growth 62
Slide 63: Opportunities
Opportunities • Municipal-Owned Utilities • Rural Electrification Associations • Technology Deployment Strong Platform for Growth 63
Slide 64: Michael Mulcahy
Michael Mulcahy President and CEO
Slide 65: FortisBC Background
FortisBC Background FortisBC Energy Inc. • Serve ~ 970,000 customers in more than 125 communities in BC • Owns & operates ~ 47,500 km of natural gas transmission & distribution pipelines • Largest distributor of natural gas in BC FortisBC Inc. • Serve directly and indirectly ~167,000 customers • Own
Slide 66: Regulatory Overview
Regulatory Overview • Regulated by the BCUC • Rates are set to recover costs, including return of capital and an allowed return on equity as determined by the BCUC • FEI and FBC in Multi-Year PBR Plans through 2019 • Controllable O&M and base capital set by formula • Earnings sharing mechanism • Cos
Slide 67: LNG – FortisBC Strategic Advantage
LNG – FortisBC Strategic Advantage Fort Nelson • Existing infrastructure British McMahon Western Canada • Brownfield sites Sedimentary Basin Station 2 PNG Pine River Alberta • Proximity to Asia/Hawaii Prince Rupert Kitimat Columbia AECO/NIT • Alignment with provincial energy objectives TCPL • Constr
Slide 68: Tilbury LNG Site
Tilbury LNG Site • 35-acre site zoned for LNG • Ocean access • Site scalable • Full build out up to 3 to 3.5 MTPA (1) Strong Platform for Growth 68
Slide 69: Tilbury 1A
Tilbury 1A • Expansion to add a 1 BCF storage tank and up to 0.23 MTPA of liquefaction • Construction began in October 2014 • On budget • Estimated rate base addition ~ $440 million • Expected in-service date: Q4 2016 • Supports domestic LNG market • Supports the Greenhouse Gas Reduction Act (1) Str
Slide 70: LNG Still Half the Price of Diesel
LNG Still Half the Price of Diesel (1) Energy Equivalent Price Comparison CAD$/DLE Plant Gate Price $ 0.92 1.00 • Diesel Price Shell Vancouver Rack Price 0.80 0.62 • Prices in Canadian Dollars 0.60 excluding taxes 0.40 $106 per barrel 0.29 (WTI Price) $45 per barrel • LNG Price for Sep 2015 (WTI Pri
Slide 71: Tilbury 1B
Tilbury 1B • Government approval for ~ $400M in rate base (not in forecast) • Incremental 0.85 MTPA of liquefaction • Conditional agreements signed with HECO • Transport method changed to bulk shipping from ISO containers • Capital cost under review • Hawaii Public Utilities Commission approval requ
Slide 72: Tilbury Competitive Advantage
Tilbury Competitive Advantage Indicative Delivered Cost of LNG to Asia Market US$/MMBTU 12.00 10.00 8.00 6.00 4.00 2.00 - (1) (1) (1) (1) Tilbury LNG US Gulf Coast US West Coast Western Canada (1) Source: Wood Mackenzie Strong Platform for Growth 72
Slide 73: Woodfibre LNG
Woodfibre LNG • Pipeline expansion to supply Woodfibre LNG site near Squamish • Government approval received • Estimated rate base of $600M (not in forecast) • Environmental assessment process underway (1) Strong Platform for Growth 73
Slide 74: Top Priorities
Top Priorities • Maintaining rate stability • Customer focus • Increased productivity • System integrity and safety • Execute capital program • LNG expansion – transportation, remote communities, storage & marketplace (1) Strong Platform for Growth 74
Slide 75: David Hutchens
David Hutchens President & CEO
Slide 76: Arizona Corporation Commission (ACC)
Arizona Corporation Commission (ACC) Terms End January 2019 Terms Ends January 2017 Tom Forese Susan Bob Burns Bob Stump Doug Little (R) Bitter Smith (R) (R) (R) (R) Chairman • Constitutionally created branch • Five Commissioners elected of Arizona government state-wide • Sets retail energy rates •
Slide 77: Constructive Regulatory Environment
Constructive Regulatory Environment • Authorized ROEs 9.5% – 10.0% • Adjustor mechanisms mitigate risk • No stay-out or rate-freeze provisions • Last two rate cases completed in less than one year • New dockets to address rate design, including effects of distributed generation and net metering Stro
Slide 78: Solar Distributed Generation
Solar Distributed Generation • Solar DG Challenges - Rooftop solar twice as expensive as utility-scale # kWh - Net metering, rate design cost shift - System reliability investments • Solar DG Customer Choices - Community Solar Program (2010) • Customers purchase blocks of utility-scale solar at a pr
Slide 79: Our Strategy - More Solar for Less Money
Our Strategy - More Solar for Less Money • Develop more community scale arrays tied to the distribution system • Offer customers more cost-effective options for going solar • Modify net metering tariff & rate design to send more accurate, equitable price signals Strong Platform for Growth 79
Slide 80: Net Metering Rules & Rate Design Proposals
Net Metering Rules & Rate Design Proposals • Net Metering - No carry over or “banking” of excess solar generation - Bill credits for excess solar generation at current solar PPA price (5.8 cents/kWh) “Avoided Cost of Solar” • Rate Design Proposals - Fixed Cost Recovery • Increase basic service charg
Slide 81: TEP Capital Investments Since Last Test Year (2011)
TEP Capital Investments Since Last Test Year (2011) US$M Utility Scale Solar Other Generation $51 $108 Distribution • Total Cumulative Capital $245 Gila River Acquisition Investments $1,317 $163 SGS Unit 1 & Coal • Equity level increased to 50% Handling Facilities $151 Transmission $213 Generation -
Slide 82: Rate Filing Timelines
Rate Filing Timelines Rate Case Direct Filed Testimony Anticipated 31/12/14 Staff / Hearing ACC Effective Date Test Year Intervenors Commences Consideration for New Rates UNS Electric, Inc. MAY NOV 6 MAR 1 APR MAY 1 2015 2016 2017 MAY SEP JAN NOV Direct Testimony Hearing New Rate Case Staff / Interv
Slide 83: Generation Portfolio - Resource Diversification Strategy
Generation Portfolio - Resource Diversification Strategy TEP Resource Capacity 2014 2020 Forecast Utility Scale Utility Scale Renewables Renewables Distributed Distributed Generation 170 MW 250 MW Generation and and Energy Efficiency Energy Efficiency 6% 70 MW 8% 260 MW 2% 8% Natural Gas & Coal Natu
Slide 84: UNS Plants & Clean Power Plan (CPP) Regions
UNS Plants & Clean Power Plan (CPP) Regions NEVADA UTAH COLORADO Navajo San Juan Four Corners Black Mountain Flagstaff Prescott Cholla Coronado NEW Coal – No UNS Ownership MEXICO CALIFORNIA Springerville Coal Gas Combined Cycle Gas Combustion Turbine Phoenix Wind Gila & Merchants Solar Tucson Luna A
Slide 85: Major Revisions to the Draft CPP
Major Revisions to the Draft CPP • Uniform National Emission Rate • Addressed Arizona’s “Cliff ” & Timing Concerns • Improved State Equity • Reliability “Safety Valve” • More Definition on Mass Based Alternative • Clean Energy Incentive Program (CEIP) Strong Platform for Growth 85
Slide 86: Clean Power Plan - Final Arizona Reduction Requirements
Clean Power Plan - Final Arizona Reduction Requirements lb/MWh Final Capacity EPA Adjusted Station Fuel MW 1,800 Baseline Emissions CPP 1,552 lb/MWh Interim 1,600 2022 Requirement Springerville 1,263 lb/MWh Generation Coal 582 1,400 Station Baseline 2030 Requirement Emissions 1,031 lb/MWh 1,200 1,45
Slide 87: Clean Power Plan - New Mexico CO2 Reduction Requirements
Clean Power Plan - New Mexico CO2 Reduction Requirements Capacity Final Station Fuel lb/MWh EPA Adjusted MW Baseline Emissions CPP 2000 1,798 lb/MWh Interim San Juan 1800 2022 Requirement Generating Coal 170 (1) 1,453 lb/MWh Station 1600 2030 Requirement Baseline 1400 1,146 lb/MWh Emissions 36% redu
Slide 88: Clean Power Plan - Navajo Nation CO2 Reduction Requirements
Clean Power Plan Navajo Nation CO2 Reduction Requirements Capacity lb/MWh Station Fuel MW 2500 2030 Requirement 1,989 lb/MWh Four 6% reduction Corners Coal 110 2000 Power Plant Baseline Proposed Emissions 2,121 lb/MWh CPP 1500 Interim 2022 Navajo Requirement 1,671 lb/MWh Generating Coal 168 2030 Req
Slide 89: Proposed CPP Emissions Reductions
Proposed CPP Emissions Reductions Strong Platform for Growth 89
Slide 90: Final CPP Emissions Reductions
Final CPP Emissions Reductions Strong Platform for Growth 90
Slide 91: Many Questions Remain
Many Questions Remain • Final Federal Plan - Allowance allocation methodology • State Plan Decisions - Rate (lbCO2/MWh) vs Mass (tons) - Multi state plans & timing - Allowance allocation & Trading • Carbon Markets - Size and diversity (liquidity) - Pricing • Litigation is certain, outcome is not Str
Slide 92: Growth Opportunities
Growth Opportunities • Clean Power Plan • Transmission - Further resource diversification − Expand Import Capability - Clean Energy Incentive Plan − Mexico Opportunities • Distribution System - Grid Modernization - Solar Integration • Solar Strategy - Community Scale Projects - Residential Programs
Slide 93: Top Priorities
Top Priorities • Operational Excellence • Execute Resource Diversification Strategies - Customer Satisfaction - EPA’s Clean Power Plan - Safety - Existing Coal Generation - Reliability • Execute Regulatory Strategies - Cost containment - Rate Design Modernization - UNSE Rate Case - TEP Rate Case • N
Slide 94: Barry Perry
Barry Perry President & CEO
Slide 95: A Look Forward
A Look Forward Our Strategy Our Position Our Focus • Rate base grows to $20B+ by 2020 • Annual dividend growth targeted at 6% through 2020 • Capitalize on additional energy infrastructure opportunities • Disciplined utility acquisitions Strong Platform for Growth 95
Slide 96: Shareholder Value Proposition
Shareholder Value Proposition Our Strategy Our Position Our Focus Well-Run Utilities Strong Low Risk and Diversified Platform for Financial Strength Growth Predictable Dividend Growth Strong Platform for Growth 96
Slide 97: Appendix
— J Appendix
Slide 98: Dividend Growth
Dividend Growth • 42 consecutive years of annual dividend increases • Longest record of a public corporation in Canada $ $1.40 1.40 1.20 1.00 0.80 0.60 0.40 0.20 $0.09 0.00 '72 '75 '78 '81 '84 '87 '90 '93 '96 '99 '02 '05 '08 '11 '14 '15 Strong Platform for Growth 98
Slide 99: Regulatory Overview
Regulatory Overview Rate Equity in Allowed Company Jurisdiction Methodology Test Year Capital 2015 ROE Comments (%) (%) No earnings cap, regulator UNS Energy Arizona COS Historic 43.5-52.6 9.50-10.0 supportive of 50% equity thickness COS Central Hudson New York (3-yr Rate Future 48 9.00 Earnings sha
Slide 100: Significant Regulatory Proceedings
Significant Regulatory Proceedings Impact of Proposed Clean Power Plan on Arizona Operations Newfoundland Power 2016 Rates Decision End of CH 3-Year Rate Plan MECL 2016 Rates Decision New York State REV Hearing FortisAlberta Capital Tracker 2016 & 2017 End of FortisBC PBR FortisBC 2016 Cost of Capit
Slide 101: Operational Highlights
Operational Highlights REGULATED (as at June 30, 2015) 2014 2015F Customers Total Peak Demand Volumes Sales Operating Midyear Capital Electric Gas Employees Assets Gas Electric Gas Electric Earnings Rate Base Program UTILITY (#) (#) (#) ($B) (TJ) (MW) (PJ) (GWh) ($M) ($B) ($M) UNS Energy (1) 511,000
Slide 102: Presenter Biographies
Presenter Biographies
Slide 103: Barry V. Perry, President and CEO, Fortis
Barry V. Perry, President and CEO, Fortis, effective December 31, 2014 Prior to his current position, Mr. Perry served as VP, Finance and CFO of the Corporation since 2004. He joined the Fortis organization in 2000 as VP, Finance and CFO of Newfoundland Power. Previously, Mr. Perry held the position
Slide 104: Karl W. Smith, EVP, CFO, Fortis
Karl W. Smith, EVP, CFO, Fortis, effective June 30, 2014 Prior to his current position, Mr. Smith served as President and CEO of FortisAlberta since 2007. He served as President and CEO, Newfoundland Power from 2004 through 2007 and as CFO, Fortis from 1999 through 2003. Mr. Smith earned a Bachelor
Slide 105: Earl A. Ludlow, EVP, Eastern Canadian & Caribbean Operations
Earl A. Ludlow, EVP, Eastern Canadian & Caribbean Operations, Fortis, effective August 1, 2014. He is responsible for Newfoundland Power, Maritime Electric, FortisOntario, Fortis Turks and Caicos and Caribbean Utilities, as well as non-regulated generating assets in Belize. Mr. Ludlow has a career w
Slide 106: James Laurito, President and CEO, Central Hudson
James Laurito, President and CEO, Central Hudson Mr. Laurito joined Central Hudson in 2009. Prior to that, he served as President & CEO of both New York State Electric and Gas Corporation and Rochester Gas & Electric Corporation. Mr. Laurito earned a Bachelor of Science in Civil Engineering from Wes
Slide 107: Phonse Delaney, President and CEO, FortisAlberta
Phonse Delaney, President and CEO, FortisAlberta, effective June 30, 2014 Mr. Delaney began his career with the Fortis Group of Companies with Newfoundland Power in 1987. Prior to his current position at FortisAlberta, he served as EVP, Operations, Engineering and Information Technology, FortisAlber
Slide 108: Mike Mulcahy, President and CEO of FortisBC
Mike Mulcahy, President and CEO of FortisBC Holdings Inc., FortisBC Energy Inc. and FortisBC Inc., effective August 1, 2014 Mr. Mulcahy began his career with the Fortis Group of Companies in 1993 at Maritime Electric and has held continuously progressive positions since that time, most recently as E
Slide 109: David G. Hutchens, President and CEO of UNS Energy Corporation
David G. Hutchens, President and CEO of UNS Energy Corporation (“UNS Energy”), parent company of Tucson Electric Power (“TEP”) and Unisource Energy Services (“UES”) Mr. Hutchens has been with UNS Energy for nearly 20 years. He advanced through various management positions overseeing wholesale energy
Slide 110: Fortis Presenters and Executive Team
Barry Perry President & CEO, Fortis Nora Duke Earl Ludlow Karl Smith EVP, Corporate Services EVP, Eastern Canadian & EVP, CFO, Fortis and Chief HR Officer, Fortis Caribbean Operations, Fortis David Hutchens James Laurito Michael Mulcahy Phonse Delaney President & CEO President & CEO President & CEO