Fortis Inc. · TSX:FTS
Fortis — 50th EEI Financial Conference 2015
36 slides from Fortis's conference presentation, Nov 10, 2015
Slide 1: 50th EEI Financial Conference
50th EEI Financial Conference Hollywood, FL – November 10, 2015 Barry Perry President & CEO
Slide 2: Forward-Looking Statement
Forward-Looking Statement Fortis Inc. (the “Corporation”) includes forward-looking information in this presentation 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 gr
Slide 3: A Leader in North American Utility Industry
A Leader in North American Utility Industry • Regulated Utilities - 9 utilities serving 3.2 million customers (2.0 million electric, 1.2 million gas) - 7,700 employees • 2015F midyear rate base $16.4B* • Market cap $11B • S&P/TSX 60 Index member * Includes Waneta Hydroelectric Expansion 3
Slide 4: Total Assets $28 billion
(1) Total Assets $28 billion 96% Regulated Assets Electric 70% Gas 26% Generation 4% Regulated Assets by Jurisdiction Central Hudson 11% (New York State) FortisBC 30% (British Columbia) FortisAlberta 14% (Alberta) UNS Energy 32% (Arizona) Eastern Canadian 8% (Newfoundland, Ontario, Prince Edward Isl
Slide 5: What have we accomplished in the past year?
What have we accomplished in the past year? 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 Sale of hotel portfolio $365M Sale of small hydroelec
Slide 6: UNS Energy – A Year Later
UNS Energy – A Year Later • 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 Diversification Plan on track • TEP rate fili
Slide 7: 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 Largest capital project completed to date (1) Strong Platform for
Slide 8: Dividend Guidance Initiated
Dividend Guidance Initiated $ 2.00 1.80 1.60 1.40 • A record 42 consecutive years 1.40 Annual dividend growth of annual dividend increases 1.28 1.24 through 2020 targeted at 6% 1.20 1.16 1.20 • Two dividend increases in 2015 1.00 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F 2020F 8
Slide 9: 1-Year Total Shareholder Return
(1) 1-Year Total Shareholder Return Fortis 5.9% -0.3% S&P 500 Utilities -1.0% S&P/TSX Capped Utilities -4.6% S&P/TSX Composite (1) as of October 30, 2015 Strong Platform for Growth 9
Slide 10: Summary Financial Metrics
(1) Summary Financial Metrics 2013A 2014A Q3 2015 TTM Revenue ($M) 4,047 5,401 6,712 Earnings to Common Shareholders ($M) 344 407 570 Basic EPS ($) 1.70 1.81 2.05 EBITDA ($B) 1.4 1.8 2.3 FFO ($B) 0.9 1.2 1.6 CAPEX ($B) 1.2 1.7 2.5 (1) Adjusted for non-recurring items Strong Platform for Growth 10
Slide 11: 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 Sep 30/2015 Nov 3/2015 Utilized Remaining Capacity 11
Slide 12: 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 (2) 1.0 Other 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 13: Drives Rate Base Growth
(1) Drives Rate Base Growth $B 25 19.8 20.3 19.1 20 18.4 17.3 16.4 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 13
Slide 14: Many Opportunities for Upside to Rate Base Growth
Many Opportunities for Upside to Rate Base Growth FortisOntario: Wataynikaneyap Project & Municipal Utility Consolidation FortisAlberta: Rural Electrification Associations FortisBC: Tilbury, Woodfibre, LNG, Gas Infrastructure Central Hudson: REV Demonstration Projects & UNS Energy: NY Transco LLC, G
Slide 15: Woodfibre LNG
Woodfibre LNG Woodfibre LNG export facility: • Squamish First Nations approved environment certificate in October 2015 • BC’s Environmental Assessment Office Approved • Pending Federal Environment Assessment • Investment decision by Woodfibre LNG expected in 2016 Fortis Pipeline Expansion to Woodfib
Slide 16: FortisBC: Tilbury 1A
FortisBC: 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 A
Slide 17: 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 • Electricity Supply Agreement with BC Hydro • Transport method changed to bulk shipping from ISO containers • Discussions regarding viability
Slide 18: TEP Rate Filing Capital Investments and Rate Base Growth
TEP Rate Filing Capital Investments and Rate Base Growth TEP Cumulative Capital Investment by Category Original Cost Rate Base US$1.3 Billion from 1/1/2012 to 6/30/2015 ($US) $2.1B ($US millions) $1.5B Utility Scale Solar Generation $151 $103 $164 Gila River Acquisition $252 SGS Unit 1 & Coal Handli
Slide 19: Rate Filing Timelines
Rate Filing Timelines Potential Schedule 2015 2016 2017 NOV MAY SEP JAN Rate Case Direct Testimony Hearing New Filed Staff / Intervenors Commences DEC Rates 30/06/15 Effective ACC Test Year Consideration Strong Platform for Growth 19
Slide 20: A Look Forward
A Look Forward • Execute ~ $9B capital expenditure plan • Rate base grows to $20B by 2020 • Annual dividend growth targeted at 6% through 2020 • Navigate significant regulatory applications • Capitalize on additional energy infrastructure opportunities • Disciplined utility acquisitions Strong Platf
Slide 21: Appendix
Appendix
Slide 22: 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 22
Slide 23: Regulatory Overview
Regulatory Overview Rate Equity in Allowed Company Jurisdiction Methodology Test Year Capital 2015 ROE Comments (%) (%) No earnings cap, UNS Energy Arizona COS Historic 43.5-52.6 9.50-10.0 Jurisdiction supports 50% equity thickness COS Central Hudson New York Future 48 9.00 Earnings sharing above 9.
Slide 24: 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 2015 FortisBC 2016 Cost of
Slide 25: Central Hudson Regulatory Update: Rate Case
Central Hudson Regulatory Update: Rate Case • New three-year rate plan through June 2018: - US$45M electric and US$11M natural gas delivery rate increases over 3 years - US$31M of bill credits to mitigate customer bill impacts (merger benefit) - 48% common equity ratio; 9% ROE; Earnings sharing abov
Slide 26: Tucson Electric Power General Rate Application
Tucson Electric Power General Rate Application 2012 Rate Case 2015 Rate Case ($US) 12/31/2011 Test Year 6/30/2015 Test Year Requested Approved Requested Increase in Non-Fuel Revenue Requirement $128 million $84 million $110 million Original Cost Rate Base $1.5 billion $1.5 billion $2.1 billion 46% E
Slide 27: 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 27
Slide 28: UNS Energy - More Solar for Less Money
UNS Energy - 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 28
Slide 29: 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 30: Clean Power Plan Final Arizona Reduction Requirements
Clean Power Plan Final Arizona Reduction Requirements Capacity Station Fuel MW lb/MWh EPA Adjusted Final Baseline Emissions 1,800 1,552 lb/MWh CPP Springerville Interim Generation Coal 582 1,600 2022 Requirement Station 1,263 lb/MWh 1,400 2030 Requirement Baseline 1,031 lb/MWh 34% reduction Sundt 1,
Slide 31: Generation Portfolio - Resource Diversification Strategy
Generation Portfolio - Resource Diversification Strategy TEP Resource Capacity 2014 2020 Forecast Utility Scale Distributed Generation Renewables Utility Scale and Energy Efficiency Renewables Distributed Generation 170 MW 70 MW 250 MW and Energy Efficiency 6% 2% 8% 260 MW 8% Coal Natural Gas & 1,51
Slide 32: Operational Highlights
Operational Highlights REGULATED (as at September 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) 51
Slide 33: Presenter Biographies
FORTIS Presenter Biographies
Slide 34: Barry V. Perry, President and CEO
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 positio
Slide 35: Karl W. Smith, EVP, CFO
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 36: Fortis and utility executives
Barry Perry President & CEO, Fortis Karl Smith Nora Duke Earl Ludlow EVP, CFO, Fortis EVP, Corporate Services & EVP, Eastern Canadian & Chief HR Officer, Fortis Caribbean Operations, Fortis David Hutchens James Laurito Michael Mulcahy Phonse Delaney President & CEO President & CEO President & CEO Pr