Fortis Inc. · TSX:FTS
Fortis — Investor Day (November 2017)
39 slides from Fortis's investor day presentation, November 2017
Slide 1: Investor Relations Presentation
Investor Relations Presentation Q4 2017 2017 INVESTOR DAY 1
Slide 2: Forward-Looking Information
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 Liti
Slide 3: Our Strategy – Simple, Effective, Proven
Our Strategy – Simple, Effective, Proven 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 Cred
Slide 4: High Quality & Diverse Utility Portfolio
High Quality & Diverse Utility Portfolio Highly regulated, predominantly wires and gas LDCs $47 Billion in ~97% ~91% (1) (1) Total Assets (2) TRANSMISSION, REGULATED UTILITY DISTRIBUTION & OTHER ASSETS ASSETS 10 Utility Operations 3.2 Million Utility Customers ~60% EARNINGS FROM THE U.S. (1) As at S
Slide 5: High Quality & Diverse Utility Portfolio
High Quality & Diverse Utility Portfolio One of the lowest-risk utility businesses in North America 2017 INVESTOR DAY 5
Slide 6: Executing Well in 2017
Executing Well in 2017 ~6.25% ~$3.1B Dividend Increase 2017F Capital Plan in Q4 ‘17 44 th consecutive annual Focused on organic growth On track dividend payment increase Fortis 2017F Rate Base $25.4B Regulated- Independent Regulated- Transmission Canadian & (ITC) Caribbean 29% (Electric & Gas) 47
Slide 7: Strong Track Record of Rate Base and EPS Growth
Strong Track Record of Rate Base and EPS Growth 2011 – 2016 Rate Base Adjusted Earnings Per Share ($ billions(1)) ($ millions) $24.3 5-Year CAGR Rate base ~25% $6.9 $2.33 Rate base excluding ~7% acquisitions of U.S. subsidiaries $2.11 $16.4 10% $1.72 $1.70 $1.75 $14.0 $6.1 $1.65 $5.5 21% $4.5 3% $10
Slide 8: Past Acquisition Success Delivers Strong Growth Platform Today
Past Acquisition Success Delivers Strong Growth Platform Today Rate Base from Acquisition to 2017F(1) 5.0 $4.7 4.5 $4.1 4.0 3.5 $3.2 $3.3 $2.9 ($ billions) 3.0 2.5 2.0 $1.5 1.5 $1.3 $1.0 1.0 $0.5 $0.6 0.5 0.0 2004 2017F 2004 2017F 2007 2017F 2013 2017F 2014 2017F FortisBC Electric FortisAlberta Fort
Slide 9: 44 Consecutive Years of Annual Dividend Payment Increases
44 Consecutive Years of Annual Dividend Payment Increases Guidance extended through 2022 Average annual dividend 73% 73% growth through 2022 70% 66% targeted at ~6% 66% 65% (1) 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F Dividend payout ratio (2) (1) 2017 forecast dividend payout ra
Slide 10: Supporting the Delivery of Superior Total Shareholder Returns
Supporting the Delivery of Superior Total Shareholder Returns (1) • Average annualized total shareholder return over last 5 years Fortis 11.2% S&P/TSX Composite Index 8.4% S&P/TSX Capped Utilities Index 7.1% (1) For the 5-year period ending October 31, 2017. 2017 INVESTOR DAY 10
Slide 11: Credit Metrics Support Credit Ratings
Credit Metrics Support Credit Ratings Ample liquidity through forecast period (1) Credit Ratings Consolidated Credit Facilities 6.0 Fortis Inc. 5.0 S&P A- / BBB+ 4.0 2.2 4.0 3.2 DBRS BBB (high) ($ billions) 3.0 2.2 3.3 Moody’s (2) Baa3 2.0 1.9 1.6 “Fortis Inc. has a very strong business risk profile
Slide 12: Regulatory Stability Supporting Highly Regulated Asset Base
Regulatory Stability Supporting Highly Regulated Asset Base 97% Regulated Utility Assets as at September 30, 2017 Remaining Significant Regulatory Decisions 3% Regulated Expected 16% Application/Proceeding Filing Date Utility Decision 44% Second MISO Base ROE Not To be ITC Complaint applicable deter
Slide 13: Capital Program Increases Rate Base to ~$32B by 2022
Capital Program Increases Rate Base to ~$32B by 2022 Capital Expenditures(1) Rate Base(2) (billions) (billions) $14.5 Five-Year Capital Plan $3.2 $31.7 $29.6 $30.4 $2.8 $2.9 $2.9 $28.5 $2.7 $26.8 $25.4 2018F 2019F 2020F 2021F 2022F 2017F 2018F 2019F 2020F 2021F 2022F (3) Other Energy Infrastructure
Slide 14: Improved Five-Year Capital Program
Improved Five-Year Capital Program $1.5B Increase in $16.0 Five-Year Capital Plan $15.0 +$0.2 +$0.1 $14.5 +$0.5 $14.0 +$0.7 $13.0 (Billions) $13.0 $12.0 $11.0 $10.0 2017-2021 FortisBC UNS FortisAlberta Central Hudson 2018-2022 Capital Plan Capital Plan 2017 INVESTOR DAY 14
Slide 15: FortisBC 2018-2022 Base Capital Plan
FortisBC 2018-2022 Base Capital Plan Unlocking incremental value in our gas LDC business for delivery to customers • Pipeline Integrity Management Program – Program to improve pipeline safety and integrity – Focused on transmission pressure systems – Includes pipeline modifications and looping – Tot
Slide 16: UNS 2018-2022 Base Capital Plan
UNS 2018-2022 Base Capital Plan Modernizing natural gas generating resources supports new base capital plan • Flexible Generation Resource – Facilitating renewables on the grid – Provide ramping and peaking requirements – Replace aging, less efficient combustion turbines – Reciprocating engines to b
Slide 17: Opportunities Beyond the Base Capital Plan
Opportunities Beyond the Base Capital Plan Newfoundland and Labrador Prince MECL & NP: Edward Grid Alberta Island Modernization British Columbia FortisOntario: Wataynikaneyap Project & Municipal Utility Consolidation Minnesota Ontario FortisBC: New York Tilbury, LNG, Gas Infrastructure Iowa Michigan
Slide 18: Near-Term Projects Beyond the Base Capital Plan: Wataynikaneyap
What is the Near-Term opportunity Projects forBase Beyond the LNG?Capital Plan Wataynikaneyap Power Project highlighted in Ontario’s Long-Term Energy Plan 1 Recent Milestones: Remaining Milestones: • Ontario Energy Board (OEB) approved a • Completion of environmental assessments deferral account in
Slide 19: Near-Term Projects Beyond the Base Capital Plan
Near-Term Projects Beyond the Base Capital Plan Lake Erie Connector only contracted transmission project in Ontario’s Long-Term Energy Plan 2 • 1,000 MW HVDC transmission line would connect the IESO and PJM markets for the first time • ~73 miles – majority buried in Lake Erie • ~ US$1 billion capita
Slide 20: Blueprint for Growth Beyond the Base Capital Plan
Blueprint for Growth Beyond the Base Capital Plan Focused on capitalizing organic opportunities and business trends $25 Incremental Near-Term and Organic Growth Opportunities will Augment Capital Plan Existing Utilities $20 Driving Visible Organic Growth +~$1-$4 ~$15.5-$18.5 $15 (Billions) +$1.5 $14
Slide 21: Our Strategy – Simple, Effective, Proven
Our Strategy – Simple, Effective, Proven 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 Cred
Slide 22: Appendix
Appendix 2017 INVESTOR DAY 22
Slide 23: Appendix Table of Contents
Appendix Table of Contents Utilities Overview: ITC Holdings Corp. 25 UNS Energy 26 Central Hudson 27 FortisBC 28 FortisAlberta 29 Eastern Canadian Regulated Electric Utilities 30 Caribbean Regulated Electric Utilities 31 Financial Strength: Fortis Delivers Strong Q3 2017 Results 32 Q3 2017 Results b
Slide 24: Appendix Table of Contents
Appendix Table of Contents Other: 2018-2022 Five-Year Capital Forecast by Segment 36 Capital Expenditures Exceeding Expectations 37 Utility Debt Credit Ratings 38 Expected Upcoming Events 39 2017 INVESTOR DAY 24
Slide 25: ITC Holdings Corp.
ITC Holdings Corp. ITC Holdings Corp. Type of utility Transmission Regulator FERC Regulatory model Independent Transmission Company 2017 Formula 11.32-12.16% ROE on 60% equity 2017F Midyear Rate Base $7.1B 5-Year CAGR on Midyear Rate Base (1) 4.8% 2016 Assets % of total regulated 39% assets (2) 2016
Slide 26: 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 9.5% ROE on 9.75% ROE on 2017 Formula 50% equity 52.83% equity 50.8% equity 2017F Midye
Slide 27: 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 $1.5B 5-Year CAGR on Midyear Rate Base (1) 8.6% 2016 Assets %
Slide 28: 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 $4.1B $1.3B 5-Year CAGR on Mi
Slide 29: 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 $3.2B 5-Year CAGR on Midyear Rate Base (1) 5.6% 2016 Assets % of total regulated assets (2) 9% 2016 Earnings $121M
Slide 30: 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 31: Caribbean Regulated Electric Utilities
Caribbean Regulated Electric Utilities(1) Caribbean Utilities 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 historical
Slide 32: Fortis Delivers Strong Q3 2017 Results
Fortis Delivers Strong Q3 2017 Results Adjusted Earnings Adjusted EPS 300 900 0.80 2.00 $254 $794 $1.92 0.70 1.90 700 $0.61 ($ millions) 200 0.60 $153 $0.54 1.80 $472 ($) 500 0.50 100 1.70 $1.66 0.40 300 0.30 1.60 0 100 0.20 1.50 2016 2017 2016 2017 2016 2017 2016 2017 Q3 September Year to Date Q3 S
Slide 33: Q3 2017 Results by Segment
Q3 2017 Results by Segment Third Quarter Variance Analysis by Segment ($s in millions, excluding EPS) Q3 2017 Adjustment Q3 2017 Q3 2016 Adjustment Q3 2016 Q3 (Adjusted) (Adjusted) (Adjusted) Variance Regulated – Independent Electric Transmission ITC Holdings Corp. 89 - 89 - - - 89 Regulated – US El
Slide 34: YTD September 2017 Results by Segment
YTD September 2017 Results by Segment September Year-to-Date Variance Analysis by Segment ($s in millions, excluding EPS) September Adjustment September September Adjustment September September YTD YTD 2017 YTD 2017 YTD 2016 YTD 2016 (Adjusted) (Adjusted) (Adjusted) Variance Regulated – Independent
Slide 35: Manageable Debt Maturities
Manageable Debt Maturities Average annual long-term debt maturities 3,000 2,500 ($millions) 2,000 1,500 1,000 500 - Subsidiary Corporate Average annual long-term debt maturities (1) ($millions) 2017 2018 2019 2020 2021 2022 Total Canadian Regulated Electric 7 73 7 36 31 34 188 U.S. Regulated 60 1,03
Slide 36: 2018-2022 Five-Year Capital Forecast by Segment
2018-2022 Five-Year Capital Forecast by Segment Fortis 2018F 2018 Capital Forecast ($millions) Rate Base(1) Regulated–Independent Transmission (ITC) ~$26.8 Billion ITC 863 Regulated-U.S. Electric & Gas UNS Energy 759 Regulated- Central Hudson 275 Regulated- Independent Regulated-Canadian & Caribbean
Slide 37: Capital Expenditures Exceeding Expectations
Capital Expenditures Exceeding Expectations 2013-2017 Business Plan Capex 2014-2018 Business Plan Capex 2015-2019 Business Plan Capex ($Millions) ($Millions) ($Millions) 3,300 3,300 3,300 3,000 3,000 3,000 2,700 2,700 2,700 2,400 2,400 2,400 2,100 2,100 2,100 1,800 1,800 1,800 1,500 1,500 1,500 1,20
Slide 38: Utility Debt Credit Ratings
Utility Debt Credit Ratings Company S&P DBRS Moody’s ITCTransmission A n/a A1 Michigan Electric Transmission A n/a A1 Company (METC) ITC Midwest A n/a A1 ITC Great Plains A n/a A1 ITC Holdings Corp. A- n/a Baa2 Tucson Electric Power A- n/a A3 Central Hudson A- n/a A2 FortisBC (Gas) n/a A A3 FortisBC
Slide 39: Expected Upcoming Events
Expected Upcoming Events Expected Upcoming Events Expected Upcoming Earnings Release Dates Q4 – 2017 February 15, 2018 Q1 – 2018 May 1, 2018 Q2 – 2018 July 31, 2018 Q3 – 2018 November 2, 2018 2017 INVESTOR DAY 39