Slide 1: Q2 Investor Marketing Presentation
Q2 Investor Marketing Presentation FORTIS INC. WIRED FOR GROWTH
Slide 2: Forward-Looking Information
Forward-Looking Information Fortis Inc. (“Fortis” or, the “Corporation”) 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 (
Slide 3: Fortis Today
Fortis Today • Leader in the North American regulated electric and gas utility business • ITC provides strong platform in electric transmission sector • Tremendous economic, geographic and regulatory diversity • Recent regulatory outcomes provide stability for near term • Visible growth provided by
Slide 4: A Leader in North American Utility Industry
A Leader in North American Utility Industry • Regulated utilities British Newfoundland Prince • 9 U.S. states Columbia Edward Alberta Island • 5 Canadian provinces Ontario • 3 Caribbean countries Minnesota • ~8,400 employees Iowa New York State Michigan • 2017F midyear rate base ~$26B Kansas Illinoi
Slide 5: Highly Diversified: Economic, Geographic and Regulatory Diversification
Highly Diversified: Economic, Geographic and Regulatory Diversification Fortis Has Become a Leading Transmission & Distribution Business Pro Forma Operating Fortis 2017 Earnings (1) Midyear Rate Base(2) For the Twelve Months ~$26 Billion Ended March 31, 2017 Generation represents ~14% of rate base O
Slide 6: Average Annual Dividend Growth Target of ~6% through 2021
Average Annual Dividend Growth Target of ~6% through 2021 $1.53 $1.40 $1.20 $1.24 $1.28 $1.16 $1.12 $1.04 $1.00 73% 73% $0.82 70% 70% 68% 66% 66% $0.67 64% 61% 59% Average annual dividend growth 47% through 2021 targeted at ~6% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F
Slide 7: Delivering Superior Shareholder Returns
Delivering Superior Shareholder Returns • Average annualized total shareholder return over last 5 years (1) Fortis 9.39% S&P/TSX Composite Index 8.06% S&P/TSX Capped Utilities Index 6.45% (1) For the 5-year period ending April 30, 2017.
Slide 8: Our Strategic Focus Delivers Results
Our Strategic Focus Delivers Results Strategy Leverage the operating model, footprint of our utilities, operating expertise, reputation and financial strength to develop growth opportunities Dividend Growth Dividend Target: Growth Target: Investment-Grade 6% Average Annual 6% Average Annual Credit R
Slide 9: Proven Acquisition Track Record
Proven Acquisition Track Record Networks Canada Fortis $/share 50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Note: Indicates date of announcement by Fortis that it had entered into an agreement to acquire th
Slide 10: ITC: Transformational Growth for Fortis
ITC: Transformational Growth for Fortis Accretive to EPS Financing complete Integration on track o Minimal impact on day-to-day operations at ITC o ITC’s new board of directors formed o Linda Blair appointed President and CEO of ITC during Q4 2016 o Joe Welch elected to Fortis’ board of direct
Slide 11: Waneta Dam Agreement: Fits Strategy of Diversification and Growth
Waneta Dam Agreement: Fits Strategy of Diversification and Growth within our Existing Franchise Regions High-quality, renewable energy facility located in current operational area. Currently operated by FortisBC. Stable long-term contracted asset that will generate strong cash flows secured by
Slide 12: Capital Plan Grows Rate Base to ~$30 Billion in 2021
Capital Plan Grows Rate Base to ~$30 Billion in 2021 ~$13B Five-Year Capital Program (2) 2016 – 2021 Midyear Rate Base $3.0 $2.9 $28.9 $29.6 $28.3 $27.1 $2.4 $2.4 $25.7 $2.3 $24.3 ($ billions ) (1) ($ billions ) (1) (3) 2017F 2018F 2019F 2020F 2021F 2016A 2017F 2018F 2019F 2020F 2021F (4) Other Ener
Slide 13: Highly Executable Capital Plan
Highly Executable Capital Plan: Contains Few Major Capital Projects & Focuses on Sustaining Capital Expenditures Major Capital Projects (1) Total Forecast Forecast 2017- $millions(2) (3) 2017 2018-2021 2021 5-Year Capital Forecast Spending Forecast ITC Multi-Value Regional 305 244 549 Utility Transm
Slide 14: Opportunities Beyond Base Plan
Opportunities Beyond Base Plan ITC: Lake Erie Connector Prince Newfoundland Edward Alberta Island British Columbia FortisOntario: Wataynikaneyap Project Ontario Minnesota FortisBC: Prince Tilbury, Woodfibre Edward New York State LNG, Gas Infrastructure Island British Columbia Iowa Michigan Illinois
Slide 15: Development Project Update
Development Project Update • Potential pipeline expansion to the Woodfibre LNG export site • Project estimate of up to $600 million, not currently in forecast Woodfibre LNG • Earliest expected in service date is late 2020 • Proposed 1,000 MW, bi-directional, high-voltage direct current transmission
Slide 16: Poised to Deliver Quality Results
Poised to Deliver Quality Results • On track to execute 2017 plan, supported by acquisition of ITC and new UNS rates • Consistent dividend growth • 43 years of consecutive dividend increases • 6% average annual dividend growth guidance through 2021 • Highly diversified regulated utilities, focused o
Slide 17: Appendix
Appendix FORTIS INC. WIRED FOR GROWTH
Slide 18: Appendix Table of Contents
Appendix Table of Contents Utilities Overview: ITC Holdings Corp. 20 UNS Energy 21 Central Hudson 22 FortisBC 23 FortisAlberta 24 Eastern Canadian Regulated Electric Utilities 25 Caribbean Regulated Electric Utilities 26 Financial Strength: Fortis Delivers Strong Results in 2016 27 First Quarter Per
Slide 19: Appendix Table of Contents
Appendix Table of Contents Other: Regulatory Stability 33 Predictable Returns from Highly Regulated Asset Base 34 Utility Debt Credit Ratings 35 Operational Highlights 36 U.S. Tax Reform 37 ITC’s MISO Base ROE Complaint – Status Update 38 Expected Upcoming Events 39 Executive Team 40 FORTIS INC. WIR
Slide 20: ITC Holdings Corp.
ITC Holdings Corp. Largest US independent transmission company ITC Holdings Corp. Type of utility Transmission Regulator FERC Regulatory model Independent Transmission Company 2017 formula 10.32-11.35% ROE on 60% equity 2017F Midyear Rate Base $7.3M 5-Year CAGR on Midyear Rate Base (1) 4.9% 2016 Ass
Slide 21: UNS Energy
UNS Energy Tucson UNS UNS Electric Electric Gas Type of utility Electricity Electricity Gas distribution Regulator Arizona Corporation Commission Regulatory model Cost of service/Historical Test Year 9.75% ROE on 50% 9.5% ROE on 52.83% 9.75% ROE on 2017 formula equity equity 50.8% equity 2017F Midye
Slide 22: Central Hudson
Central Hudson Central Hudson Gas and Electric Type of utility Gas and electricity Regulator NY State Public Service Commission Regulatory model Cost of service on future test year 2017 formula 9% ROE on 48% equity 2017F Midyear Rate Base $1.6M 5-Year CAGR on Midyear Rate Base (1) 7.2% 2016 Assets %
Slide 23: FortisBC
FortisBC FortisBC Type of utility Gas distribution Electricity Regulator BC Utilities Commission BC Utilities Commission Regulatory model Cost of service + PBR Cost of service + PBR 2017 formula 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity 2017F Midyear Rate Base $4.1M $1.3M 5-Year CAGR on Mi
Slide 24: FortisAlberta
FortisAlberta FortisAlberta Type of utility Electricity distribution Regulator Alberta Utilities Commission Regulatory model PBR 2017 formula 8.5% on 37% equity 2017F Midyear Rate Base $3.2M 5-Year CAGR on Midyear Rate Base (1) 5.3% 2016 Assets % of total regulated assets (2) 9% 2016 Earnings $121M
Slide 25: Eastern Canadian Regulated Electric Utilities
Eastern Canadian Regulated Electric Utilities FortisOntario (1) Maritime Electric Newfoundland Power Type of utility Electricity Electricity Electricity Island Regulatory and Appeals Newfoundland and Labrador Board of Regulator Ontario Energy Board Commission Commissioners of Public Utilities Regula
Slide 26: Caribbean Regulated Electric Utilities
Caribbean Regulated Electric Utilities Caribbean Utilities (1) Fortis Turks & Caicos Type of utility Electricity Electricity Regulator Electricity Regulatory Authority Government of the Turks and Caicos Islands Regulatory model Cost of service with historical test year Cost of service with historica
Slide 27: Fortis Delivers Strong Results in 2016
Fortis Delivers Strong Results in 2016 Transformative Acquisition Completed Execution of Growth Strategy Closed the acquisition of ITC in a Invested $2.1 billion in 2016 transaction valued at ~$16 billion Major capital projects progressing on closing Pursuing additional opportunities Liste
Slide 28: First Quarter Performance In Line with Plan
First Quarter Performance In Line with Plan Earnings & Cash Flows • Q1 2017 adjusted EPS of $0.69 • An increase of $0.02 compared to Q1 2016 • Earnings growth driven by UNS and accretion from ITC • Tempered by lower earnings at FortisAlberta as well unfavourable foreign exchange associated with US d
Slide 29: Diversified Portfolio of Utilities Continues to Deliver Strong Performance
Diversified Portfolio of Utilities Continues to Deliver Strong Performance Adjusted Earnings Adjusted EPS $2.33 750 300 2.30 0.70 $0.69 $721 $281 $0.67 $2.11 ($ millions) ($) $190 0.60 650 200 2.05 $589 550 100 1.80 0.50 2015 2016 2016 2017 2015 2016 2016 2017 Annual Q1 Annual Q1 FORTIS INC. WIRED F
Slide 30: Q1 2017 Results by Segment
Q1 2017 Results by Segment FORTIS INC. WIRED FOR GROWTH 30
Slide 31: Investment-Grade Credit Ratings and Ample Liquidity
Investment-Grade Credit Ratings and Ample Liquidity Will Assist In Execution of Growth Strategy Credit Ratings(1) Consolidated Credit Facilities 7.0 Fortis Inc. 6.0 S&P A- / BBB+ 5.0 DBRS BBB (high) 4.0 3.7 3.8 ($ billions) Moody’s Baa3 3.0 Capital Structure(3) 2.0 (2) Debt 59.3% 1.0 2.2 1.6 Preferr
Slide 32: Manageable Debt Maturities
Manageable Debt Maturities Average Annual fixed-term debt maturities over the next five years ~$900M $M 3,000 2,500 2,000 1,500 1,000 500 - Subsidiary Corporate $M 2017 2018 2019 2020 2021 Total Canadian Regulated Electric 94 73 6 35 65 273 Canadian Regulated Gas - - - - - - U.S. Regulated 166 1.086
Slide 33: Regulatory Stability
Regulatory Stability Recent Regulatory Outcomes Agreement/ Regulated Utility Application/Proceeding Outcome Decision Timing ‒ 10.32% base ROE with a high-end zone of ITC Initial MISO Base ROE Complaint September 2016 reasonableness of 11.35% 2016 Application: ROE and Common ‒ Maintained ROE at 8.75%
Slide 34: Predictable Returns From Highly Regulated Asset Base
Predictable Returns From Highly Regulated Asset Base PBR through 2019 Allowed/Achieved 2016 ROE (%): 97% Regulated Assets 8.75/9.28(gas), 9.15/9.38(electric) as at March 31, 2017 Allowed 2017 ROE (%): 8.75-9.15 Allowed Equity in Capital (%): 38.5-40 3% Historic Test Year 16% Allowed/Achieved 2016 RO
Slide 35: Utility Debt Credit Ratings
Utility Debt Credit Ratings Company S&P DBRS Moody’s Tucson Electric Power A- n/a A3 Central Hudson A- n/a A2 FortisBC (Gas) n/a A A3 FortisAlberta A- A (low) n/a FortisBC (Electric) n/a A (low) Baa1 Newfoundland Power n/a A A2 A n/a A1 ITCTransmission Michigan Electric Transmission A n/a A1 Company
Slide 36: Operational Highlights
Operational Highlights Regulated (as at March 31, 2017) Q1 2017 2017F Customers Total Peak Demand Volumes Sales Operating Midyear Capital Assets Gas Electric Earnings Rate Base Program Electric Gas Employees Gas Electric ($B) (PJ) (GWh) ($M) ($B) ($M) (#) (#) (#) (TJ) (MW) UTILITY ITC(1) N/A - 650 1
Slide 37: U.S. Tax Reform
U.S. Tax Reform Key Assumptions in Fortis Sensitivity Analysis Corporate Tax Rate Stress tested corporate tax rates at 20% and assumed remeasurement of existing deferred tax liabilities would be offset by a regulatory deferral mechanism 100% Deductibility of Assumes deductibility is required rather
Slide 38: ITC's MISO Base ROE Complaint – Status Update
ITC’s MISO Base ROE Complaint – Status Update MISOComplaint MISO Complaint1 1- EL14-12 - EL14-12 MISO Complaint 2 - EL15-45 Effective Effective November November 12,12, 2013 2013 – February – February 11,11, 2015 2015 Effective February 12, 2015 – May 11, 2016 September 2015 - Testimony filed by I
Slide 39: Expected Upcoming Events
Expected Upcoming Events Expected Earnings Release Dates Q2 – 2017 July 28, 2017 Q3 – 2017 November 3, 2017 Save the Date - 2017 Investor Day Toronto October 16, 2017 New York October 18, 2017 FORTIS INC. WIRED FOR GROWTH
Slide 40: Executive Team
Barry Perry President & CEO Karl Smith Nora Duke Gary Smith (1) James Laurito David Bennett Phonse Delaney (1) EVP, CFO EVP, Corporate EVP, Eastern Canadian EVP, EVP, EVP, Services & CHRO & Caribbean Operations Business Development Chief Legal Officer & Chief Information Corporate Secretary Officer