Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (December 2021)
47 slides from Fortis's investor presentation, December 2021
Slide 1: Investor Presentation
INVESTOR PRESENTATION December 2021
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 ~$26B Market Capitalization(1) ~13% Average Annual 20-Year Total Shareholder Return(1) $31.2B 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 FREQUENCY RATE(1) AVERAGE ELECTRICITY CUSTOMER OUTAGE DURATION(2) 3.9 3.8 3.6 3.5 1.72 1.64 1.67 1.45 1.45 1.38 2.2 2.1 2.1 2.1 1.9 1.8 1.09 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Fortis USA Bureau of Canadian Electricity Canadian Electricit
Slide 6: Q3 Sales Trends
Q3 SALES TRENDS RETAIL SALES Q3 2021 vs. Q3 2020 SALES TRENDS N/A • Peak load flat • Overall decrease due to cooler weather and lower cooling -8% load; Excluding weather, retail sales down 1% • Overall decrease mainly due to cooler weather and lower -5% cooling load; Residential sales down 7%; C&I d
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 15% 12 Carbon Emissions Reduction in 2020 10 ~2M tonnes CO2e Fortis target to be largely achieved through TEP’s carbon emissions reduction plan: 8 • Exiting coal-fired generation by
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 More than $15 MILLION Women represent 50% of the Fortis Board; Industry recognition for ST
Slide 9: $20B Five-Year Capital Plan
$20B FIVE-YEAR CAPITAL PLAN DRIVERS OF INCREASE 2022-2026 CAPITAL VS. PRIOR PLAN BY SEGMENT +$1.0B ($0.6B) $20.0B $19.6B 28% 99% 46% Regulated 25% 2021-2025 Regulated Foreign 2022-2026 1% (1) (2) (1) Capital Plan Utility Growth Exchange Capital Plan Regulated - Independent Electric Transmission Regu
Slide 10: Highly Executable Capital Plan $20B
HIGHLY EXECUTABLE CAPITAL PLAN 5-YEAR CAPITAL PLAN FOCUSED ON DELIVERING SAFE, RELIABLE AND COST-EFFECTIVE SERVICE TO CUSTOMERS PROJECT TYPE Major Capital $20B Projects 15% 2022-2026 Capital Plan Smaller Projects 85% Note: Major capital projects are defined as projects, other than ongoing maintenanc
Slide 11: Capital Plan Supports Delivery of Cleaner Energy
CAPITAL PLAN SUPPORTS DELIVERY OF CLEANER ENERGY CLEANER ENERGY INVESTMENTS COMPOSITION UNS Energy • Battery Storage, Solar and Other Renewables 30% ITC • Interconnection of Renewables 7% $3.8B • Multi-Value Projects Cleaner Energy Investments(1) Western Canadian Electric & Gas(2) 6% $500M increase
Slide 12: Low-Risk Rate Base Growth of ~6%
LOW-RISK RATE BASE GROWTH OF ~6% 5-YEAR RATE BASE CAGR(1) BY SEGMENT RATE BASE $41.6B Central Hudson 7.3% $31.2B FortisBC Energy 6.4% UNS Energy 6.0% ITC 5.9% Other Regulated Utilities(2) 5.3% 2021F 2026F Note: U.S. dollar-denominated rate base converted at a foreign exchange rate of 1.25 for 2021-2
Slide 13: 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 14: 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 14
Slide 15: 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 16: 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 17: 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 18: 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 Innovative Growth Profile All REGULATED Leader 18
Slide 19: Investor Presentation
INVESTOR PRESENTATION Q4 2021
Slide 20: Table of Contents
TABLE OF CONTENTS ITC HOLDINGS CORP. 21-25 UNS ENERGY 26-28 CENTRAL HUDSON 29-30 FORTISBC 31-32 FORTISALBERTA 33-34 OTHER ELECTRIC UTILITIES 35-37 2022-2026 CAPITAL PLAN BY SEGMENT 38 2021-2026 RATE BASE BY SEGMENT 39 MAJOR CAPITAL PROJECTS 40-42 INVESTMENT-GRADE CREDIT RATINGS 43 STRONG ACCESS TO D
Slide 21: 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 22: ITC Capital Investment Overview $5.0B
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 23: ITC Building the Grid of the Future
ITC BUILDING THE GRID OF THE FUTURE OPPORTUNITIES BEYOND THE PLAN NEW TECHNOLOGIES GENERATION SHIFTS ACCESS TO GRID SECURITY REGIONAL MARKETS 15 GW and 12 GW of 127 GW and 81 GW Regional transmission Hardening of secure fibre battery storage in additional renewable necessary to facilitate networks,
Slide 24: Opportunities to Expand & Extend Growth
OPPORTUNITIES TO EXPAND & EXTEND GROWTH LONG RANGE TRANSMISSION PLANNING ROADMAP • In March 2021, MISO outlined a long-range transmission planning (LRTP) roadmap with a focus on system constraints and configuration options • Potential new, regional projects • Visibility on initial projects expected
Slide 25: Opportunities to Expand & Extend Growth
OPPORTUNITIES TO EXPAND & EXTEND GROWTH LAKE ERIE CONNECTOR • In April, the Canada Infrastructure Bank announced that it would fund up to 40% of the ~$1.7B project cost • In May, the Ontario government authorized IESO to commence contract negotiations and report back by the end of 2021 • Project exp
Slide 26: 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 Compact 53.0%
Slide 27: UNS Capital Investment Overview $3.9B
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 28: 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 generation mix by 2032 250 MW 100 MW 99 MW Oso Grande Wilmot Solar (1)(2) Borderlands(1) >70% renewable power by 2035 2021 2022-2035 Over 50 million tonnes of CO2
Slide 29: 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(1) 9.0% ROE on 50% equity Significant Regulatory Features Revenue decoupling 2022F Rate Base(2) $2.4B 5-Year Rate Base
Slide 30: Central Hudson Capital Investment Overview $1.7B
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 31: 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 Compact 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity Multi-year rates with revenue
Slide 32: FortisBC Capital Investment Overview $4.5B
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 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 fixed-billing Significant Regulatory Features determinants 2022F Rate Base $4.0B 5-Year Rate Base CAGR (20
Slide 34: FortisAlberta Capital Investment Overview $2.5B
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 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 2020 Achieved ROE(2) 9.0% 4.1% 2022F Rate Base(3) $0.8B $0.5B 5-Year Rate Base CAGR (20
Slide 37: Other Electric Capital Investment Overview $2.3B
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 $2.3B Generation and Other Diversification
Slide 38: 2022-2026 Capital Plan by Segment
2022-2026 CAPITAL PLAN BY SEGMENT (1) CAPITAL PLAN 2022-2026 ($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 1,670 T
Slide 39: 2021-2026 Rate Base by Segment
2021-2026 RATE BASE BY SEGMENT (1) RATE BASE 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2021F 2022F 2023F 2024F 2025F 2026F 2026 Regulated - Independent Electric Transmission ITC(2) 9.5 10.1 11.0 11.6 12.1 12.6 5.9% Regulated – U.S. Electric & Gas UNS Energy 5.9 6.5 6.7 6.9 7.4 8.0 6.0% Central Hud
Slide 40: Major Capital Projects
MAJOR CAPITAL PROJECTS TOTAL INCURRED ESTIMATED 2021 2022-2026 TO THE END OF COMPLETION FORECAST(1) PLAN(1) ($ MILLIONS) 2020 DATE ITC Multi-Value Regional Transmission Projects 642(2) 88 154 2023 ITC 34.5 to 69kV Transmission Conversion Project 445 53 145 Post-2026 UNS Vail-to-Tortolita Project - 2
Slide 41: Major Capital Projects
MAJOR CAPITAL PROJECTS ITC MULTI-VALUE REGIONAL TRANSMISSION FORTISBC EAGLE MOUNTAIN WOODFIBRE GAS PROJECTS LINE PROJECT • MVP 5 Hickory Creek Line comprised of ~100-mile 345kV • 47-km gas line will service a small-scale, third-party owned transmission line from Iowa to Wisconsin facility for export
Slide 42: Major Capital Projects
MAJOR CAPITAL PROJECTS FORTISBC OKANAGAN CAPACITY UPGRADE FORTISBC GAS ADVANCED METERING INFRASTRUCTURE PROJECT • Replacement or retrofitting of residential, commercial and industrial gas meters and installation of ~700,000 by-pass • Construction of a new section of pipeline and associated valves fa
Slide 43: 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 44: Strong Access to Debt and Liquidity
STRONG ACCESS TO DEBT AND LIQUIDITY DEBT ISSUANCES COMPLETED CONSOLIDATED OVER $1B DEBT RAISED IN 2021 CREDIT FACILITIES ($B) • UNS Energy (TEP) US$325M 30-year 3.25% notes • FortisBC Energy (2) 3.6 4.3 $150M 10-year 2.42% debentures • Fortis 1.4 1.3 $500M 7-year 2.18% notes Sept. 30, 2021 Dec
Slide 45: Foreign Exchange Exposure
FOREIGN EXCHANGE EXPOSURE EARNINGS AND CAPITAL PLAN • ~66% 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 converted at a forecast USD:CAD FX rate of 1.25 HEDGING ACTIVITIES • U.S. dollar-denominated debt at corporate
Slide 46: Manageable Debt Maturities
MANAGEABLE DEBT MATURITIES 5-YEAR AVERAGE: $1.2B $2.5 $2.0 billions $1.5 $1.0 $0.5 $- 2022F 2023F 2024F 2025F 2026F Fortis Fortis Subsidiaries Note: Debt as at September 30, 2021 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases along with the curr
Slide 47: Strong Leadership Team
STRONG LEADERSHIP TEAM David Hutchens President & CEO Fortis Inc. Exec. Nora Duke James Laurito Jocelyn Perry Jim Reid Gary Smith EVP, Sustainability & EVP, Business EVP, CFO EVP, CLO & EVP, Eastern Canadian & CHRO Development & CTO Corporate Secretary Caribbean Operations Linda Apsey Roger Dall’Ant