Fortis Inc. · TSX:FTS
Fortis — Q3 2021 Earnings Presentation
37 slides from Fortis's earnings presentation, Oct 29, 2021
Slide 1: Q3 2021 Earnings Conference Call
Q3 2021 EARNINGS CONFERENCE CALL OCTOBER 29, 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: David Hutchens, President and CEO
DAVID HUTCHENS PRESIDENT AND CEO
Slide 4: Business Highlights
BUSINESS HIGHLIGHTS Safe and Reliable Operations Q3 Impacted by FX and Weather; Strong Operating Growth YTD 2021 Capital Plan on Track Announced Dividend Increase of ~6% New 2022-2026 Five-Year Capital Outlook 4
Slide 5: Five-Year Plan at a Glance
FIVE-YEAR PLAN AT A GLANCE $20B 6% 6% 2022-2026 Rate Base Average Annual Capital Plan CAGR Dividend Growth $1B of growth, excluding FX, ~$10B growth over Guidance reaffirmed over prior 5-year plan five years through 2025 5
Slide 6: $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 7: Highly Executable Capital Plan
HIGHLY EXECUTABLE CAPITAL PLAN 5-Year Capital Plan Focused on Delivering Safe, Reliable and Cost-Effective Service to Customers PROJECT TYPE Major Capital Projects $20B 15% 2022-2026 Capital Plan Smaller Projects 85% Note: Major capital projects are defined as projects, other than ongoing maintenanc
Slide 8: 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 9: 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 10: 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 11: 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 12: 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 13: Reaffirming Dividend Guidance
REAFFIRMING DIVIDEND GUIDANCE 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 21F 13
Slide 14: Jocelyn Perry, Executive Vice President and CFO
JOCELYN PERRY EXECUTIVE VICE PRESIDENT AND CFO
Slide 15: Third Quarter & YTD September Results
THIRD QUARTER & YTD SEPTEMBER RESULTS REPORTED EPS Q3 ADJUSTED EPS DRIVERS $1.92 $1.89 v • Cooler weather in Arizona ($0.05) EPS impact $0.63 $0.63 • Lower FX ($0.03) EPS impact; YTD September ($0.10) Q3 2020 Q3 2021 YTD 2020 YTD 2021 • Strong regulated utility performance driven by: ADJUSTED EPS •
Slide 16: 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 17: Q3 Retail Sales Trends in Arizona
Q3 RETAIL SALES TRENDS IN ARIZONA HISTORICAL Q3 RETAIL SALES (GWh) Retail sales down 8% Q3 2021 vs. Q3 2020 • Cooler weather EPS impact of ($0.05) Hottest Quarter on Record • July and August 2020 were hottest months on record in Tucson 3,672 Below Normal 3,495 3,495 Weather 3,358 3,383 Absent weathe
Slide 18: Third Quarter EPS Drivers
THIRD QUARTER EPS DRIVERS $0.03 $0.01 ($0.03) $0.05 ($0.03) ($0.01) ($0.03) $0.65 $0.64 Q3 2020 U.S. Western Other U.S. Energy Weighted Foreign Q3 2021 (4) Adjusted Transmission Canadian Electric Electric & Infrastructure Average Exchange Adjusted EPS (1) (ITC) Electric & Gas (2) Gas (3) Shares EPS
Slide 19: Year-to-Date September EPS Drivers
YEAR-TO-DATE SEPTEMBER EPS DRIVERS EXCLUDING FX, EPS $0.18 OVER YTD SEPTEMBER 2020 $0.05 $0.02 ($0.02) ($0.02) ($0.10) $0.06 $0.09 $1.96 $1.88 YTD 2020 U.S. Western U.S. Other Energy Weighted Foreign YTD 2021 Adjusted Transmission Canadian Electric & Electric Infrastructure Average Exchange (4) Adju
Slide 20: Funding Plan Supports Investment-Grade Credit Ratings
FUNDING PLAN SUPPORTS INVESTMENT-GRADE CREDIT RATINGS FUNDING PLAN CREDIT RATINGS • Capital plan funded primarily with cash from operations and debt at regulated utilities A-(1) • Equity funding mainly through DRIP Baa3 ▪ No discrete equity required to fund capital plan • Capital structure expected
Slide 21: Regulatory Update
REGULATORY UPDATE NOTICE OF PROPOSED RULEMAKING (NOPR) ON INCENTIVES – In April 2021, FERC issued a supplemental NOPR proposing to eliminate the 50 bps regional transmission organization (RTO) adder for transmission owners that have been RTO members for more than three years; stakeholder comments fi
Slide 22: Why Invest in Fortis?
WHY INVEST IN FORTIS? Focused on Geographic & 6% DIVIDEND WELL-RUN ENERGY DELIVERY Regulatory DIVERSITY Growth Guidance Local Utilities LOW-RISK Virtually ESG Innovative Growth Profile All REGULATED Leader 22
Slide 23: Upcoming Events
UPCOMING EVENTS EXPECTED EARNINGS RELEASE DATES v • Q4 2021 - February 11, 2022 23
Slide 24: Q3 2021 Earnings Conference Call
Q3 2021 EARNINGS CONFERENCE CALL OCTOBER 29, 2021
Slide 25: Non-U.S. GAAP Reconciliation
NON-U.S. GAAP RECONCILIATION YTD YTD ($MILLIONS, EXCEPT EPS) Q3 2021 Q3 2020 VARIANCE SEPTEMBER SEPTEMBER VARIANCE 2021 2020 Adjusted Net Earnings Net Earnings 295 292 3 903 878 25 Adjusting Items: Unrealized loss on mark-to-market of derivatives(1) 5 10 (5) 16 11 5 May 2020 FERC decision(2) - - - -
Slide 26: Q3 2021 Results by Segment
Q3 2021 RESULTS BY SEGMENT THIRD QUARTER VARIANCE ANALYSIS BY SEGMENT ADJUSTED ADJUSTED ($MILLIONS, EXCEPT WEIGHTED AVERAGE SHARES AND EPS) Q3 2021 ADJUSTMENT (1) Q3 2020 ADJUSTMENT (1) VARIANCE Q3 2021 Q3 2020 Regulated – Independent Electric Transmission ITC 117 - 117 101 - 101 16 Regulated – U.S.
Slide 27: YTD September 2021 Results by Segment
YTD SEPTEMBER 2021 RESULTS BY SEGMENT YEAR-TO-DATE SEPTEMBER VARIANCE ANALYSIS BY SEGMENT ADJUSTED ADJUSTED ($MILLIONS, EXCEPT WEIGHTED AVERAGE SHARES AND EPS) YTD 2021 ADJUSTMENT (1) YTD 2020 ADJUSTMENT (1) VARIANCE YTD 2021 YTD 2020 Regulated – Independent Electric Transmission ITC 323 - 323 340 (
Slide 28: 2021-2026 Rate Base by Segment
2021-2026 RATE BASE BY SEGMENT (1) RATE BASE 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2021F 2022F 2023F 2024F 2025F 2026F 2026 Regulated - Independent Electric Transmission ITC(2) 9.5 10.1 11.0 11.6 12.1 12.6 5.9% Regulated – U.S. Electric & Gas UNS Energy 5.9 6.5 6.7 6.9 7.4 8.0 6.0% Central Hud
Slide 29: 2022-2026 Capital Plan by Segment
2022-2026 CAPITAL PLAN BY SEGMENT (1) CAPITAL PLAN 2022-2026 ($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 30: 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 31: 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 32: 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 33: ESG Leadership
ESG LEADERSHIP Carbon emissions reduction Industry leader in target(1) of 75% BY 2035 SAFETY AND RELIABILITY Continued focus on ENERGY DELIVERY using a 2019 base year Focused on DIVERSITY, EQUITY AND INCLUSION More than $15 MILLION Women represent 50% of the Fortis Board; Industry recognition for ST
Slide 34: 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 35: 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 translated at a forecast USD:CAD FX rate of 1.25 HEDGING ACTIVITIES • U.S. dollar-denominated debt at corporate
Slide 36: 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 ▪ 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. 31,
Slide 37: 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