Fortis Inc. · TSX:FTS
Fortis — RBC Retail Presentation (December 2020)
43 slides from Fortis's conference presentation, Dec 14, 2020
Slide 1: RBC Retail Presentation
RBC RETAIL PRESENTATION DECEMBER 14, 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 Premium Energy Delivery Business
A PREMIUM ENERGY DELIVERY BUSINESS 93% TRANSMISSION & DISTRIBUTION ASSETS HIGH-QUALITY PORTFOLIO: ➢ 10 Regulated Utility Businesses ➢ 3.3M Electric & Gas Customers ➢ 9,000 Employees ➢ 99% Regulated Utility Assets ➢ $24B Market Capitalization(1) ➢ ~14% Average Annual 20-Year Total Shareholder Return(
Slide 4: Five-Year Outlook Highlights
FIVE-YEAR OUTLOOK HIGHLIGHTS ~$19.6B ~6% ~6% 2021-2025 Rate Base Average Annual Capital Plan Growth Dividend Growth Guidance to 2025 $800M increase Rate base grows 47 consecutive years over prior year ~$10B to $40.3B of dividend increases plan of $18.8B over five-year plan 4
Slide 5: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 6% 47 YEARS $2.0 AVERAGE ANNUAL DIVIDEND OF CONSECUTIVE GROWTH GUIDANCE TO 2025 DIVIDEND INCREASES $1.5 $1.0 $0.5 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20F 5
Slide 6: Committed to Improving Our Low-Carbon Emissions Profile
COMMITTED TO IMPROVING OUR LOW-CARBON EMISSIONS PROFILE 2019 Scope 1 Emissions Ranking Relative to Peers ~90% OF SCOPE 1 EMISSIONS 60,000 ARE CONCENTRATED IN ARIZONA AT TEP 50,000 Ktonnes CO2 equivalent 40,000 ➢ Excluding TEP emissions, Fortis would be one of the lowest ranked in 30,000 its peer gro
Slide 7: Corporate-Wide Carbon Emissions Reduction Target of 75% by 2035
CORPORATE-WIDE CARBON EMISSIONS REDUCTION TARGET OF 75% BY 2035 COMPARED TO 2019 LEVELS PROVIDES CUSTOMERS WITH CLEANER ENERGY Reduction in Scope 1 Emissions by 2035 Using a 2019 Base Year 16,000 ➢ Industry leader in sustainability with 14,000 shorter timeframe for reduction and 12,000 using current
Slide 8: Arizona Focused on Renewables
ARIZONA FOCUSED ON RENEWABLES TEP INTEGRATED RESOURCE PLAN FILED IN JUNE 2020 ~460 MW of New Wind, 3,400 MW Planned Additions of Solar and Storage Wind, Solar and Storage ➢ TEP expects to have coal-free generation mix 2020-2021 2022-2035 by 2032 ➢ TEP’s power will be more than 70% renewable by 1,073
Slide 9: Focused on Energy Delivery Assets & Renewable, Carbon-Free Generation
FOCUSED ON ENERGY DELIVERY ASSETS & RENEWABLE, CARBON-FREE GENERATION 75% BY 2035 TARGET WILL BUILD ON EXISTING BY 2035, 99% OF FORTIS ASSETS WILL BE ENERGY DELIVERY OR RENEWABLE GENERATION LOW-EMISSIONS PROFILE 2019 TOTAL ASSETS PROJECTED 2035 TOTAL ASSETS Focused on initiatives Energy beyond targe
Slide 10: Sustainability Leader
SUSTAINABILITY LEADER Continued Focus on Carbon emissions reduction target of Energy 75% by 2035 Delivery using a 2019 base year Industry leader in Industry recognition(1) for Safety Strong Governance and Reliability grounded in local leadership & independence More than 40% of Fortis Inc. Directors
Slide 11: Strategically Positioned to Navigate Through COVID-19
STRATEGICALLY POSITIONED TO NAVIGATE THROUGH COVID-19 Operationally: ➢ Strong business model with seasoned leadership at 10 locally operated utilities ➢ Cohesive culture and relationships supporting effective communication and nimble decision-making ➢ Essential workers maintaining and operating elec
Slide 12: $19.6B Five-Year Capital Plan
$19.6B FIVE-YEAR CAPITAL PLAN $800M INCREASE OVER PRIOR PLAN BALANCED CAPITAL OVER THE FIVE-YEAR PERIOD(1) $3.9B ANNUAL $3.8 $3.9 $3.9 $4.0 APPENDICES $4.0 AVERAGE (Billions) 80% Electric 20% Gas 5-Year Capital by Location: 2021F 2022F 2023F 2024F 2025F 55% U.S. Regulated - Independent Electric Tran
Slide 13: Low Risk, Highly Executable Capital Plan
LOW RISK, HIGHLY EXECUTABLE CAPITAL PLAN CAPITAL PLAN IS FOCUSED ON DELIVERING SAFE, RELIABLE AND COST-EFFECTIVE SERVICE TO OUR CUSTOMERS Regulated 99% Sustaining Major 58% Capital Projects Growth 15% 26% Non-Regulated Other Smaller Projects 1% 16% 85% 13
Slide 14: Opportunities to Expand & Extend Capital Plan
OPPORTUNITIES TO EXPAND & EXTEND CAPITAL PLAN ITC UNS FortisBC CUC ➢ Significant renewable capacity ➢ 2020 Integrated Resource Plan ➢ Further develop Tilbury to ➢ Achieve local government goal and battery storage in MISO and (IRP) filed in June outlined TEP’s position BC as a marine of 70% renewable
Slide 15: Consolidated Rate Base
CONSOLIDATED RATE BASE $40.3B IN APPENDICES RATE BASE BY 2025(1) $40.3 $38.3 $36.4 $34.3 $32.2 $30.2 ➢ Rate base grows by ~$10B over the five-year period (Billions) ➢ Growth driven by asset resiliency, modernization and cleaner energy initiatives 2020F 2021F 2022F 2023F 2024F 2025F Regulated - Indep
Slide 16: 2021-2025 Funding Plan
2021-2025 FUNDING PLAN Debt(3) MAINTAINING 33% APPENDICES INVESTMENT-GRADE CREDIT RATINGS 5-YEAR CAPITAL PLAN ➢ Acceleration of equity funding $19.6B DRIP(2) in late 2019 Cash From 6% Operations(1) 61% ➢ Debt primarily at operating utilities ➢ Subsidiary balance sheets reflect approved capital struc
Slide 17: Update on Regulatory Proceedings
UPDATE ON REGULATORY PROCEEDINGS • Notice of Proposed Rulemaking (NOPR) on Incentives – Transmission Incentive NOPR issued in March 2020; comments filed in July 2020 and awaiting next steps • TEP General Rate Application – Administrative Law Judge recommended order and opinion (ROO) issued in Novemb
Slide 18: Why Invest in Fortis?
WHY INVEST IN FORTIS? Focused on Strong Virtually 6% Well-Run ESG Highly Innovative Energy Growth All Dividend Businesses Leader Diversified Delivery Profile Regulated Guidance 18
Slide 19: Appendix
APPENDIX F@RTIS..
Slide 20: Table of Contents
TABLE OF CONTENTS 1. ITC Holding Corp. 21-24 7. 2021-2025 Rate Base by Segment 38 2. UNS Energy 25-27 8. 2021-2025 Capital by Segment 39 3. Central Hudson 28-29 9. Major Capital Projects 40 4. FortisBC 30-32 10. Investment Grade Credit Ratings 41 5. FortisAlberta 33-34 11. COVID-19: Other Financial
Slide 21: ITC Holdings Corp.
ITC HOLDINGS CORP. Type of Utility Transmission Regulator FERC Cost of Service with FERC Formula Regulatory Model Rates 10.77-11.41% ROE on Current Regulatory Construct 60% equity Cost-based, forward-looking Significant Regulatory Features formula rates with annual true-up 2020F Rate Base(1) $9.4B 5
Slide 22: ITC Capital Investment Overview
ITC CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL(1) $3.6B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, Infrastructure increased capacity, circuit overloads, pocket load Investments growth $700M New Interconnections Supports economic development, load interconnec
Slide 23: ITC Building the Grid of the Future
ITC BUILDING THE GRID OF THE FUTURE OPPORTUNITIES BEYOND THE PLAN Access to ~16,000 New Regional Technologies Markets 4 GW and 9 GW Regional transmission Miles of Transmission of battery storage necessary to facilitate in MISO and SPP increased demand for queues(1) renewables 565 Substations Grid Se
Slide 24: Generation Portfolio Changes & New Interconnections
GENERATION PORTFOLIO CHANGES & NEW INTERCONNECTIONS POTENTIAL INCREMENTAL OPPORTUNITIES AT ITC MISO Member Announced Generation Mix (% of MWh) MISO Generator Interconnection Queue 2019 2030 Gas 29% Coal 39% Gas Coal 32% 23% Wind 18% Nuclear Nuclear 17% 11% Other Other Wind Solar 3% 9% 3% 16% Source:
Slide 25: 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 9.75% ROE 9.75% ROE 9.5% ROE on Current Regulatory Compact on 50% on 50
Slide 26: UNS Capital Investment Overview
UNS CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL(1) $1.3B Distribution Infrastructure Customer meter infrastructure, grid resiliency, Distribution modernization Transmission Infrastructure Infrastructure $1.1B Transmission Infrastructure Vail to Tortolita, new substations $3.8B $800M Generation Div
Slide 27: Arizona Focused on Renewables
ARIZONA FOCUSED ON RENEWABLES TEP INTEGRATED RESOURCE PLAN FILED IN JUNE 2020 ~460 MW of New Wind, 3,400 MW Planned Additions of Solar and Storage Wind, Solar and Storage ➢ TEP expects to have coal-free generation mix 2020-2021 2022-2035 by 2032 ➢ TEP’s power will be more than 70% renewable by 1,073
Slide 28: Central Hudson
CENTRAL HUDSON Type of Utility Gas and Electricity Regulator New York State Public Service Commission Regulatory Model Cost of service on future test year Current Regulatory Compact 8.8% ROE on 50% equity Significant Regulatory Features Revenue decoupling 2020F Rate Base(1) $2.1B 5-Year Rate Base CA
Slide 29: Central Hudson Capital Investment Overview
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL(1) Distribution $1.0B Distribution Infrastructure Infrastructure Distribution automation and modernization $240M Transmission Infrastructure $1.8B Replacement of aging infrastructure $550M IT, General and Other Modernization Building the W
Slide 30: FortisBC
FORTISBC FortisBC FortisBC Gas Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service with incentive mechanisms 9.15% ROE on 40.0% Current Regulatory Compact 8.75% ROE on 38.5% equity equity Multi-year rates with revenue
Slide 31: FortisBC Capital Investment Overview
FORTISBC CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL $2.1B Sustainment & Customer Growth Ongoing maintenance requires significant capital investment Includes customer growth and general plant investment Sustainment & Customer Growth $1.2B Major Integrity Projects Inland Gas Upgrades Project Transm
Slide 32: FortisBC's Clean Growth Pathway
FORTISBC’S CLEAN GROWTH PATHWAY 30% GHG REDUCTION BY 2030 Energy Renewable LNG Zero & Low-Carbon Efficiency Natural Gas Transportation Positioning BC Currently Utilizing as a Domestic & FortisBC Renewable Natural Gas(1) International Owns and Operates Conservation & Efficiency Bunkering Hub --------
Slide 33: 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 3.0
Slide 34: FortisAlberta Capital Investment Overview
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL Distribution Infrastructure $1.6B Distribution Infrastructure Safety & reliability of distribution assets, meter upgrades, pole management program, modernization $2.0B $400M IT, General and Other IT, General and Other 34
Slide 35: Other Electric Utilities
OTHER ELECTRIC UTILITIES (1) Type of Utility Electricity Newfoundland and Labrador Board of Island Regulatory and Appeals Regulator Ontario Energy Board Commissioners of Public Utilities Commission 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 2019 Achieved ROE 12.10% 8.00% 2020F Rate Base(2) $0.7B $0.5B 5-Year Rate Base CAGR 8.8
Slide 37: Other Electric Capital Investment Overview
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL(1) Distribution $900M Distribution Infrastructure Infrastructure Newfoundland Power and Caribbean Utilities $650M Generation Diversification Caribbean Utilities shift to cleaner energy $2.4B IT, General and Other Generation $650M Transmiss
Slide 38: 2020-2025 Rate Base by Segment
2020-2025 RATE BASE BY SEGMENT (1) Rate Base 5-Year CAGR ($billions) 2020F 2021F 2022F 2023F 2024F 2025F to 2025 Regulated - Independent Electric Transmission ITC(2) 9.4 9.9 10.6 11.3 11.9 12.5 6.0% Regulated - US Electric & Gas UNS Energy 5.6 6.2 6.7 7.0 7.3 7.6 6.2% Central Hudson 2.1 2.3 2.5 2.7
Slide 39: 2021-2025 Capital Plan by Segment
2021-2025 CAPITAL PLAN BY SEGMENT (1) Capital Forecast 2021-2025 ($millions) 2021F 2022F 2023F 2024F 2025F TOTAL Regulated - Independent Electric Transmission ITC 1,000 1,007 993 1,107 993 5,100 Regulated - US Electric & Gas UNS Energy 749 781 840 853 547 3,770 Central Hudson 306 416 409 346 310 1,7
Slide 40: Major Capital Projects
MAJOR CAPITAL PROJECTS Expected 2020 2021-2025 Year of ($ Millions) Forecast(1) Plan(1) Completion ITC Multi-Value Regional Transmission Projects 12 261 2023 Major Capital ITC 34.5 kV to 69 kV Transmission Conversion Project 99 148 Post-2025 Projects UNS Vail to Tortolita (2) - 244 2023 15% UNS Oso
Slide 41: 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 42: 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 43: Strong Leadership Team
STRONG LEADERSHIP TEAM Barry Perry(1) President & CEO Fortis Inc. Executives Nora Duke David Hutchens(1) James Laurito Jocelyn Perry Jim Reid Gary Smith EVP, Sustainability & COO, EVP, Business EVP, CFO EVP, CLO & EVP, Eastern Canadian & CHRO CEO UNS Energy Development & CTO Corporate Secretary Cari