Fortis Inc. · TSX:FTS
Fortis — Q4 2023 Earnings Presentation
32 slides from Fortis's earnings presentation, Feb 9, 2024
Slide 1: Q4 2023 Earnings Conference Call
Q4 2023 EARNINGS CONFERENCE CALL February 9, 2024
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 and Jocelyn Perry
DAVID HUTCHENS President & Chief Executive Officer JOCELYN PERRY EVP & Chief Financial Officer 3
Slide 4: 2023 Year-in-Review
2023 YEAR-IN-REVIEW Delivered Safe Concluded Key 33% Reduction in Carbon & Reliable Service Regulatory Applications Emissions since 2019 Invested $4.3B of Capital ~9% Adjusted EPS Growth, 50 Consecutive Years in our Energy System Excluding Foreign Exchange of Dividend Increases Impact Note: Adjusted
Slide 5: Delivering Safe, Reliable & Affordable Service
DELIVERING SAFE, RELIABLE & AFFORDABLE SERVICE All-Injury Average Electricity Customer Controllable Operating Frequency Rate(1) Outage Duration (Hours) Costs per Customer 1.73 1.62 4.3 3.8 3.8 3.3 2.3 1.8 1.9 2.0 2.0 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023 For
Slide 6: Total Shareholder Returns
TOTAL SHAREHOLDER RETURNS Cumulative 20-Year Total Shareholder Return Average Annual 665% Total Shareholder Returns 1-Year 4.8% 352% 5-Year 7.6% 349% 10-Year 10.1% 20-Year 10.7% 2003 2008 2013 2018 2023 Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Note: Cumulative 20-year tot
Slide 7: Reducing Carbon Emissions
REDUCING CARBON EMISSIONS 2023 TEP IRP Supports Committed to Targets Exit from Coal • 508 MW of coal retirements since 2017; 2019 coal-free by 2032 Achieved 33% GHG Emissions Reduction Since 2019 • 2,240 MW of renewables and 1,330 MW of energy storage by 2038 • 400 MW of hydrogen-ready natural gas 2
Slide 8: Highly Executable Capital Plan Supports Low-Risk Rate Base Growth of ~6%
HIGHLY EXECUTABLE CAPITAL PLAN SUPPORTS LOW-RISK RATE BASE GROWTH OF ~6% Capital Plan Rate Base $49.4B 6.3%(1) Growth $37.0B Major Capital Projects $34.0B $25B ~20% 2024-2028 Smaller Projects ~80% 2022A 2023A 2028F (1) Annual growth for 2023 and 2023-2028 CAGR calculated based on a constant foreign
Slide 9: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 4.4% Dividend Increase in Q4 2023 4-6% Annual Dividend Growth Guidance Extended through 2028 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 23 9
Slide 10: Fourth Quarter Results
FOURTH QUARTER RESULTS Reported EPS Q4 Adjusted EPS Drivers Reflects ($0.08) adjusted EPS impact for $0.77 $0.78 Aitken Creek, including ($0.05) associated with the removal of adjusted EPS initially recorded in Q2 & Q3 $0.09 ($0.08) Q4 2022 Q4 2023 ($0.01) Adjusted EPS $0.72 $0.72 $0.72 $0.72 Q4 202
Slide 11: Annual Results
ANNUAL RESULTS Reported EPS $3.10 Reported EPS $2.78 $0.32 over 2022 2022 2023 Adjusted EPS Excluding Foreign Exchange Impact ~9% Adjusted EPS Growth $3.09 $2.78 2022 2023 Note: Adjusted EPS is a Non-U.S. GAAP financial measure. Refer to Slide 20 for the Non-U.S. GAAP reconciliation. 11
Slide 12: Annual EPS Drivers
ANNUAL EPS DRIVERS $0.06 $0.02 ($0.09) $0.07 ($0.05) $0.12 $0.18 $3.09 $2.78 Adjusted EPS ~9% over 2022, Excluding FX Impact 2022 Western U.S. Electric & U.S. Other Corporate & Foreign Weighted 2023 (4) Adjusted EPS Canadian Gas(2) Transmission Electric Other(3) Exchange Average Adjusted EPS Electri
Slide 13: Three-Year Look Back
THREE -YEAR LOOK BACK Adjusted EPS & Adjusted Dividend Payout Ratio 3.3 $3.09 115% 3.1 2.9 $2.78 105% Strong Rate Base Growth 2.7 $2.57 $2.59 95% 2.5 2.3 85% 6.3% 2023 Rate Base Growth(1) 2.1 75% 79% 78% 75% 6.5% 3-Year Rate Base CAGR(1) 74% 1.9 65% 1.7 1.5 55% 2020 2021 2022 2023 Adjusted EPS Adjus
Slide 14: Liquidity & Funding Plan
LIQUIDITY & FUNDING PLAN Raised ~$3B Debt Maturities & Balanced Approach in Long-Term Debt(1) Preference Share Dividends To Funding Growth • ITC – US$890M notes • Limited near-term non-regulated debt maturities Cash From Net Debt(4) $25B • UNS Energy – US$425M notes Operations(3) ▪ Fortis Inc. – US$
Slide 15: Investment-Grade Credit Ratings
INVESTMENT-GRADE CREDIT RATINGS Moody’s CFO/Debt S&P FFO/Debt Current funding plan on track ~12.0% ~12.0% to achieve average annual Credit Metrics 11.6% 11.4% 12.0% cash flow to debt metrics of 11.0% ~12% over the next five years 2023A 2024-2028 Average 2023A 2024-2028 Average Rating agency threshol
Slide 16: Ongoing Regulatory Proceedings
ONGOING REGULATORY PROCEEDINGS Recent Activity Regulatory Outlook Iowa Transmission Right of First Refusal • In December 2023, the Iowa District Court ruled 2024 that the Iowa ROFR legislation is unconstitutional, based on procedural grounds • The District Court granted an injunction enjoining Gener
Slide 17: Why Invest in Fortis?
SUSTAINABLE GROWTH Focused on Executing Strong Robust Transmission Transparent Rate Base Growth Investment Pipeline Funding Plan Cleaner 4-6% Annual Investment-Grade Energy Transition Dividend Growth Credit Ratings WHY INVEST IN FORTIS? LOW-RISK Safe, Well-Run Utilities Strong Regulatory & Construct
Slide 18: Upcoming Events
UPCOMING EVENTS Expected Earnings Release Dates Other Investor Events • Q1 2024 – May 1, 2024 • Scotiabank Energy & Power Conference (Miami) – February 28-29, 2024 • Q2 2024 – July 31, 2024 • J.P. Morgan Energy, Power & Renewables Conference (New York) – June 17-18, 2024 18
Slide 19: Q4 2023 Earnings Conference Call
Q4 2023 EARNINGS CONFERENCE CALL February 9, 2024
Slide 20: Non-U.S. GAAP Reconciliation
NON-U.S. GAAP RECONCILIATION ($MILLIONS, EXCEPT EPS) Q4 2023 Q4 2022 VARIANCE 2023 2022 VARIANCE Adjusted Net Earnings: Net Earnings 381 370 11 1,506 1,330 176 Adjusting items: Disposition of Aitken Creek(1) (31) - (31) (15) - (15) Unrealized loss (gain) on mark-to-market of derivatives(2) - (23) 23
Slide 21: Fourth Quarter Results by Business Unit
FOURTH QUARTER RESULTS BY BUSINESS UNIT Fourth Quarter Earnings Variance Analysis by Business Unit ($MILLIONS, EXCEPT WEIGHTED AVERAGE SHARES ADJUSTED ADJUSTED Q4 2023 ADJUSTMENT (1) Q4 2022 ADJUSTMENT (1) VARIANCE AND EPS) Q4 2023 Q4 2022 Regulated – Independent Electric Transmission ITC 136 - 136
Slide 22: Annual Results by Business Unit
ANNUAL RESULTS BY BUSINESS UNIT Annual Earnings Variance Analysis by Business Unit ($MILLIONS, EXCEPT WEIGHTED AVERAGE SHARES ADJUSTED ADJUSTED 2023 ADJUSTMENT 2022 ADJUSTMENT (1) VARIANCE AND EPS) 2023(1) 2022 Regulated – Independent Electric Transmission ITC 508 9 517 454 19 473 44 Regulated – U.S
Slide 23: 2023-2028 Rate Base by Business Unit
2023-2028 RATE BASE BY BUSINESS UNIT Rate Base 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2023A 2024F 2025F 2026F 2027F 2028F 2028 Regulated – Independent Electric Transmission ITC(1) 11.5 12.0 12.7 13.4 14.4 15.6 7.0% Regulated – U.S. Electric & Gas UNS Energy 7.3 7.6 8.1 8.5 9.0 9.5 6.3% Central
Slide 24: 2024-2028 Capital Plan by Business Unit
2024-2028 CAPITAL PLAN BY BUSINESS UNIT Capital Plan 2024-2028 ($MILLIONS) 2024F 2025F 2026F 2027F 2028F TOTAL Regulated – Independent Electric Transmission ITC 1,252 1,474 1,449 1,477 1,537 7,189 Regulated – U.S. Electric & Gas UNS Energy 1,111 854 912 1,310 973 5,160 Central Hudson 408 421 437 421
Slide 25: Major Capital Projects
MAJOR CAPITAL PROJECTS 2024- Estimated Major Capital ($ Millions) 2028F Completion Date Projects ITC MISO LRTP(1) 1,477 Post-2028 ~20% UNS Roadrunner Reserve Battery Storage Project 345 2025 UNS Vail-to-Tortolita Transmission Project 286 2026 $25B UNS IRP Energy Resources(2) 417 2027 FortisBC Eagle
Slide 26: Sensitivity Exposure
SENSITIVITY EXPOSURE Foreign Exchange • Assumed forecast USD:CAD FX rate of 1.30 for 2024-2028 • 65% of regulated earnings(1) / 60% of capital plan in USD at U.S. & Caribbean utilities • +/- $0.05 change in USD:CAD – EPS: ~$0.06 Five-year capital plan: $600M ROE & Equity Ratio ROE Equity +/- 25 bps
Slide 27: Ongoing Regulatory Proceedings
ONGOING REGULATORY PROCEEDINGS MISO Base ROE – In 2022, the U.S. Court of Appeals for the D.C. Circuit vacated certain FERC orders that established the methodology used to calculate the MISO base ROE; matter dates back to complaints filed at FERC in 2013 and 2015; DC Circuit noted FERC did not adequ
Slide 28: ESG Leadership
ESG LEADERSHIP Environmental Social • Building on our strong record of mutually beneficial partnerships with • 2050 net-zero direct emissions goal, with interim targets to reduce GHG Indigenous peoples emissions 50% by 2030 and 75% by 2035 • FortisBC awarded silver-level designation in Progressive A
Slide 29: 2023 Sales Trends
2023 SALES TRENDS CHANGE IN 2023 vs. 2022 RETAIL ENERGY SALES TRENDS SALES N/A • Peak load down 1% • Residential and C&I sales each up 1%; Increases primarily +1% due to warmer weather and customer additions (1) • Decrease primarily due to lower average consumption by -2% residential customers due t
Slide 30: Debt Maturities & Preference Share Dividends
DEBT MATURITIES & PREFERENCE SHARE DIVIDENDS Debt Maturities Preference Share Dividend Rate Resets(2) 10-Year Debt Maturities $2.5 2024 $2.0 Series K - $250M March 1, 2024 billions $1.5 $1.0 Series M - $600M December 1, 2024 $0.5 $- Series H - $192M 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F 20
Slide 31: Strong Investment-Grade Credit Ratings
STRONG INVESTMENT-GRADE CREDIT RATINGS (1) COMPANY Fortis Inc. A-(2) Baa3 A (low) ITC Holdings Corp. A-(2) Baa2 n/a ITC Regulated Subsidiaries A A1 n/a TEP A- A3 n/a Central Hudson BBB+ Baa1 n/a FortisBC Energy n/a A3 A FortisBC Electric n/a Baa1 A (low) FortisAlberta A- Baa1 A (low) Newfoundland Po
Slide 32: Glossary
GLOSSARY ACC Arizona Corporation Commission GHG greenhouse gas Aitken Creek Aitken Creek Gas Storage ULC, a direct 93.8%-owned subsidiary of FortisBC Holdings Inc. IRP Integrated Resource Plan AMI Advanced Metering Infrastructure ITC Investment Holdings Inc., an indirect 80.1%-owned subsidiary of Fo