Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (2020)
48 slides from Fortis's investor presentation, 2020
Slide 1: Investor Presentation Q2 2020
Investor Presentation Q2 2020
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: A Geographically Diverse Energy Delivery Business
A Geographically Diverse Energy Delivery Business 3
Slide 4: ~99% Utility Assets $28B Rate Base 3.3M Customers
High Quality Portfolio 10 Operations Canada, U.S. & Caribbean 3.3M Customers 2.0M Electric & 1.3M Gas Regulated Transmission & ~99% Utility Assets ~93% Distribution 2019 Rate Earnings(1) from $28B Base ~65% the U.S Note: All information as at December 31, 2019. (1) Non-US GAAP measure. 4
Slide 5: Long-Term Strategy
Long-Term Strategy ✓ The safety and health of our employees is the priority ✓ Focused on delivering reliable service to our customers STRATEGY Leverage the operating model, 6% footprint of our businesses, Average Annual operating expertise, reputation Focused on Dividend Growth and financial strengt
Slide 6: Strong Operational Performance
Strong Operational Performance All Injury Frequency Rate(1) 2.0 1.78 1.59 Safety 1.0 0.0 2015 2016 2017 2018 2019 USA Bureau of Labor Statistics Average (2015-2018)(2) Canadian Electricity Association Average (2015-2018)(2) Electricity Customer Average Outage Duration(3) 5.0 (Hours) 4.0 Reliability
Slide 7: Superior 20-Year Total Shareholder Return
Superior 20-Year Total Shareholder Return 1,600 FTS 1,400 1,371% S&P/TSX Capped Utilities Index FTS Total Shareholder 1,200 S&P/TSX Composite Index Returns (Average Annual) 1,000 1-Year 12.7% % 5-Year 10.6% 800 723% 10-Year 10.8% 600 20-Year 14.4% 400 200 164% 0 (200) 2000 2005 2010 2015 2020 Note:
Slide 8: Sustainability: It's How We Do Everything
Sustainability: It’s How We Do Everything 93% of our assets are dedicated to energy transmission and distribution, limiting our impact on the environment. Focused on Delivering Strong Performance Industry Recognition (1) Cleaner Energy MSCI ESG Rating Upgrade to ‘AA’ Outperformed Industry Averages A
Slide 9: Path to Cleaner Energy
Path to Cleaner Energy Generation Shifting from Innovation and Fossil Fuel to Solar, Wind Enabling Technologies and Storage Capital Investment in a Electric Vehicle Green and Resilient Penetration Grid Renewable Gas at FortisBC Energy Efficiency Cleaner Energy 9
Slide 10: Strategically Positioned to Navigate Through COVID-19
Strategically Positioned to Navigate Through COVID-19 Operationally: ✓ 10 locally operated utilities ✓ Essential workers maintaining and operating electricity grids and natural gas networks ✓ Limited impacts on supply chain ✓ Key operational employees sequestered ✓ Social distancing and good hygiene
Slide 11: ~82% of Revenues Protected by Regulatory Mechanisms or From Residential Sales
~82% of Revenues Protected by Regulatory Mechanisms or From Residential Sales 2019 Revenues EPS Sensitivity 19% Annual EPS Impact ($) UNS Other Electric +/- 1% Residential Sales +/- $0.008 +/- $0.006 18% 63% +/- 1% Commercial and +/- $0.008 +/- $0.004 Industrial Sales (1) Revenues Protected by Regul
Slide 12: Local Economic Overview
Local Economic Overview Regulatory Mechanisms Commentary on Local Economy Protecting Changes in Sales 1st Month into Pandemic Takeaway • Peak load down ~20%; Strict Stay-at-Home Order in Michigan ✓ • Auto manufacturers and suppliers beginning to System Trends: reopen starting in mid-May • Residentia
Slide 13: Our Five-Year Plan
Our Five-Year Plan $18.8B ~7% ~6% Capital Rate Base Dividend Plan Growth Growth Guidance 13
Slide 14: Five-Year Capital Plan
Five-Year Capital Plan $18.8B Capital Plan(1) $4.3 2020 Capital $3.8 $3.8 $3.7 Plan on Track $3.2 Billions $1.2B Invested in Q1 2020 2020F 2021F 2022F 2023F 2024F Regulated - Canadian & Caribbean Electric & Gas Regulated Electric & Gas - U.S. U.S. Transmission - ITC (1) Capital expenditures are tran
Slide 15: 2020-2024 Rate Base
2020-2024 Rate Base(1) $38.4 $36.8 $34.5 $32.5 $30.7 Rate base grows over $28.0 $10B to $38.4B during 5-year period 2019A 2020F 2021F 2022F 2023F 2024F Regulated - Canadian & Caribbean Electric & Gas Regulated - U.S. Electric & Gas Regulated - Independent Electric Transmission (ITC) (1) Reflects mid
Slide 16: Dividend Guidance Supported by Long-Term Growth Strategy
Dividend Guidance Supported by Long-Term Growth Strategy $2.0 6% 46 Years Average Annual Dividend Of Consecutive $1.5 Growth Guidance to 2024 Dividend Increases $1.0 $0.5 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 Dividend Payments 16
Slide 17: Growth Expected Beyond 2024
Growth Expected Beyond 2024: Three Largest Utilities Account for 2/3 of Capital Plan Today’s 5-Year $4.9B $3.8B $3.9B Capital Plan • Generation shift to renewables: • Resiliency: • TEP target of 30% renewables 9 ▪ Significant renewable ▪ Tilbury LNG storage years ahead of schedule capacity and batte
Slide 18: Update on Regulatory Proceedings
Update on Regulatory Proceedings • FERC MISO Return on Equity – No updates to report at this time • NOIs on ROE and Incentives – Transmission Incentive NOPR issued in March 2020 • TEP General Rate Application – Procedural schedule delayed due to COVID-19; decision expected in late 2020 which seeks r
Slide 19: Strong Liquidity Position
Strong Liquidity Position TOTAL LIQUIDITY ($B) ✓ Fortis well positioned on liquidity given 2019 actions • Waneta Asset Sale ~$1B ($1.4) • Q4 Equity Issuance ~$1.2B $5.8 $0.5 $4.9 ✓ ~$5B consolidated credit available on facilities, $4.3 including $1.8B unutilized Corporate credit facilities Billions
Slide 20: Strong Access to Debt Markets & Manageable Maturities
Strong Access to Debt Markets & Manageable Maturities DEBT ISSUANCES COMPLETED IN Q2 2020 FIXED-TERM DEBT MATURITIES(1) ($B) $2.0 5-Year Average ~$1.1B Thousands ✓ ITC • US$700M 10-year 2.95% notes ✓ UNS $1.5 • US$350M 30-year 4.00% notes ✓ Central Hudson $1.0 • US$30M 30-year 3.42% notes ✓ FortisBC
Slide 21: Investment-Grade Credit Ratings and Funding Plan Intact
Investment-Grade Credit Ratings and Funding Plan Intact CREDIT RATINGS A-(1) ✓ S&P and DBRS Morningstar Affirmed Ratings in 2020 BBB (high)(2) ✓ Improved Credit Metrics in 2019 ✓ Strong Liquidity Baa3 (1) S&P rating reflects the issuer credit rating. Fortis’ unsecured debt rating is BBB+. Ratings we
Slide 22: Why Invest In Fortis?
Why Invest In Fortis? Well-Run Sustainability Highly Focused on Strong Virtually 6% Innovative Businesses Leader Diversified Energy Growth All Dividend Delivery Profile Regulated Guidance 22
Slide 23: Appendix
FORTIS.. come Appendix
Slide 24: Table of Contents
Table of Contents Utility Overview Other ITC Holdings Corp. 25 – 27 2019-2024 Rate Base by Segment 42 UNS Energy 28 – 31 2020-2024 Capital Plan by Segment 43 Central Hudson 32 – 33 Major Capital Projects 44 FortisBC 34 – 36 COVID-19: Other Financial Implications 45 FortisAlberta 37 – 38 Manageable D
Slide 25: ITC Holdings Corp.
ITC Holdings Corp. Type of Utility Transmission Regulator FERC Cost of Service with FERC Regulatory Model Formula Rates 10.63-12.16% ROE on 60% Current Regulatory Compact equity Cost-based, forward formula Significant Regulatory Features rates with annual true-up 2020F Rate Base(1) $9.5B 5-Year Rate
Slide 26: ITC Capital Plan
ITC Capital Plan 2020-2024 Capital(1) $3.3B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, Infrastructure increased capacity, circuit overloads, pocket load Investments growth $600M Major Capital Projects Multi-Value Regional Transmission Projects & 34.5 to 69kV Tr
Slide 27: ITC Building the Grid of the Future
ITC Building the Grid of the Future ~16,000 Opportunities Beyond the Plan Miles of Transmission & 565 New 3 GW and 7 GW of battery storage in Access to Regional MISO multi-value projects at capacity upon completion Technologies Substations MISO and SPP queues Markets ~6,800 MW Generation 89 GW and 8
Slide 28: UNS Energy
UNS Energy Tucson UNS Electric UNS Gas Electric Gas Type of Utility Electricity distribution Arizona Corporation Commission Regulator and FERC Regulatory Model Cost of service/historical test year 9.75% ROE 9.75% ROE 9.5% ROE on Current Regulatory Compact on 50% on 50.8% 52.8% equity equity equity 2
Slide 29: UNS Capital Plan
UNS Capital Plan 2020-2024 Capital(1) Distribution Generation Infrastructure Diversification $1.2B Distribution Infrastructure Customer meter infrastructure, grid resiliency, modernization $3.9B $1.0B Generation Diversification Reciprocating engines, 250 MW Wind $1.0B Transmission Infrastructure Dir
Slide 30: Arizona Focused on Renewables
Arizona Focused on Renewables TEP’s Resource Transition % Renewable Energy Renewable Energy Production of 28% in 2021 (1) Projects developed through purchase power agreements 30
Slide 31: TEP Collaborating with Local University to Create New Goals
TEP Collaborating with Local University to Create New Goals TEP’s TEP’s Renewable Current Energy Mix Target Developing New 28% 30% Carbon Emission Goals With University 13% of Arizona’s Institute of the Environment 2019 2021 2030 31
Slide 32: Central Hudson
Central Hudson Type of Utility Gas and Electricity New York State Public Service Regulator Commission Regulatory Model Cost of service on future test year Current Regulatory Compact(1) 8.8% ROE on 49% equity(1) Significant Regulatory Features Revenue decoupling 2020F Rate Base(2) $2.1B 5-Year Rate B
Slide 33: Central Hudson Capital Plan
Central Hudson Capital Plan 2020-2024 Capital(1) Distribution Infrastructure $900M Distribution Infrastructure Distribution Automation and Modernization $250M Transmission Infrastructure $1.6B Replacement of Aging Infrastructure $450M IT, General and Other IT, General Transmission and Other Infrastr
Slide 34: FortisBC
FortisBC FortisBC Gas FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service + PBR 9.15% ROE on 40.0% Current Regulatory Compact 8.75% ROE on 38.5% equity equity Multi-year rates with revenue deferrals – changes
Slide 35: FortisBC Capital Plan
FortisBC Capital Plan 2020-2024 Capital $1.9B Sustainment & Customer Growth Ongoing maintenance requires significant capital investment Sustainment & Includes customer growth and general plant investment Customer Growth $1.1B Major Integrity Projects Inland Gas Upgrades Project Sustainability Transm
Slide 36: Path to Cleaner Energy: FortisBC's Clean Growth Pathway
Path to Cleaner Energy: FortisBC’s Clean Growth Pathway Energy Renewable Global Zero & Low-Carbon Efficiency Natural Gas LNG Transportation Conservation & Currently Utilizing Positioning BC FortisBC Efficiency Programs Renewable Natural as a Domestic & Owns and Operates Increased to ~$370M Gas(1) In
Slide 37: FortisAlberta
FortisAlberta Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR Current Regulatory Compact 8.5% ROE on 37% equity ~85% of revenue derived from Significant Regulatory Features fixed-billing determinants 2020F Rate Base $3.7B 5-Year Rate Base CAGR 4.1
Slide 38: FortisAlberta Capital Plan
FortisAlberta Capital Plan 2020-2024 Capital Distribution Infrastructure $1.9B Distribution Infrastructure Safety & Reliability of Distribution Assets, Meter $2.2B Upgrades, Pole Management Program, Modernization IT, General $300M IT, General and Other and Other 38
Slide 39: Other Electric Utilities
Other Electric Utilities (1) Type of Utility Electricity Island Regulatory and Appeals Newfoundland and Labrador Board Regulator Ontario Energy Board Commission of Commissioners of Public Utilities Regulatory Model Cost of service with incentives Cost of service on future test year Cost of service o
Slide 40: Other Electric Utilities (continued)
Other Electric Utilities (continued) (1) Type of Utility Electricity Utility Regulation and Competition Government of the Turks and Caicos Regulator Office Islands Regulatory Model Cost of service Cost of service 2019 Achieved ROE 12.10% 8.00% 2020F Rate Base(2) $0.7B $0.5B 5-Year Rate Base CAGR(2)
Slide 41: Other Electric Capital Plan
Other Electric Capital Plan 2020-2024 Capital Distribution Infrastructure $900M Distribution Infrastructure Newfoundland Power and Caribbean Utilities $600M Generation Diversification $2.3B Caribbean Utilities Shift to Cleaner Energy IT, General $600M Transmission Infrastructure and Other Generation
Slide 42: 2019-2024 Rate Base by Segment
2019-2024 Rate Base by Segment (1) Midyear Rate Base 3-Year 5-Year CAGR to CAGR to ($billions) 2019A 2020F 2021F 2022F 2023F 2024F 2022 2024 Regulated - Independent Electric Transmission ITC(2) 8.8 9.5 10.2 10.8 11.4 12.0 7.2% 6.4% Regulated - US Electric & Gas UNS Energy 5.0 5.8 6.1 6.4 6.8 6.9 8.6
Slide 43: 2020-2024 Capital Plan by Segment
2020-2024 Capital Plan by Segment Capital Forecast(1) 2020-2024 ($millions) 2020F 2021F 2022F 2023F 2024F TOTAL Regulated - Independent Electric Transmission ITC 976 987 1,043 1,018 922 4,946 Regulated - US Electric & Gas UNS Energy 1,390 828 710 575 371 3,874 Central Hudson 292 309 359 306 292 1,55
Slide 44: Major Capital Projects
Major Capital Projects(1) Incurred Expected 2020-2024 ($Millions) to End of Year of Plan 2019 Completion ITC Multi-Value Regional Transmission Projects 625(2) 276 2023 Smaller Projects 80% ITC 34.5 to 69 kV Transmission Conversion Project 352(2) 268 Post-2024 UNS Southline Transmission Project - 392
Slide 45: COVID-19: Other Financial Implications
COVID-19: Other Financial Implications Defined Benefit Pension Plan Certain U.S. Retirement Benefits ✓ ~46% of assets invested in fixed income ✓ Certain retirement benefits funded through trusts and are subject to market volatility each quarter ✓ ~88% of $3.2B plan assets funded at December 31, 2019
Slide 46: Manageable Debt Maturities
Manageable Debt Maturities FIXED-TERM DEBT MATURITIES(1) ($millions) 2020F 2021F 2022F 2023F 2024F Total ITC 49 668(2) 703 352 668 2,440 U.S. Regulated 172 416 36 284 45 953 Canadian and Caribbean Regulated Electric 73 69 79 101 204 526 Corporate 176 176 - 901 267 1,520 Total 470 1,329 818 1,638 1,1
Slide 47: Investment-Grade Credit Ratings
Investment-Grade Credit Ratings Company Fortis Inc. A-(1) Baa3 BBB (High) ITC Holdings Corp. A-(1) Baa2 n/a ITC Regulated Subsidiaries A A1 n/a TEP A- A3 n/a Central Hudson A- A3 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 48: Executive Team
Executive Team Barry Perry President & CEO Jocelyn Perry Jim Reid David Hutchens Nora Duke James Laurito EVP, CFO EVP, CLO & Chief Operating Officer, EVP, Sustainability & EVP, Business Corporate Secretary CEO UNS Energy CHRO Development & CTO Linda Apsey Charles Freni Gary Smith Michael Mosher Roge