Fortis Inc. · TSX:FTS
Fortis — Q3 2017 Earnings Presentation
38 slides from Fortis's earnings presentation, 2017
Slide 1: Investor Relations Presentation Q3 2017
Investor Relations Presentation Q3 2017
Slide 2: 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 Litigation Reform Act of 1995 (
Slide 3: Fortis Today
Fortis Today • Leader in the North American regulated electric and gas utility business • ITC provides strong platform in electric transmission sector • Tremendous economic, geographic and regulatory diversity • Recent regulatory outcomes provide stability for near term • Visible growth provided by
Slide 4: A Leader in North American Utility Industry
A Leader in North American Utility Industry • Regulated utilities British Newfoundland Prince • 9 U.S. states Columbia Edward Alberta Island • 5 Canadian provinces Ontario • 3 Caribbean countries Minnesota • ~8,400 employees Iowa New York State Michigan • 2017F midyear rate base ~$26B Kansas Illinoi
Slide 5: Highly Diversified: Economic, Geographic and Regulatory Diversification
Highly Diversified: Economic, Geographic and Regulatory Diversification Fortis Has Become a Leading Transmission & Distribution Business Pro Forma Net Earnings(1) Fortis 2017 Midyear Rate Base(2) ~$26 Billion For the Twelve Months Transmission & Distribution Ended June 30, 2017 represents ~86% of ra
Slide 6: Average Annual Dividend Growth Target of ~6% through 2021
Average Annual Dividend Growth Target of ~6% through 2021 $1.53 $1.40 $1.20 $1.24 $1.28 $1.16 $1.12 $1.04 $1.00 73% 73% $0.82 70% 70% 68% 66% 66% $0.67 64% 61% 59% Average annual dividend growth 47% through 2021 targeted at ~6% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F
Slide 7: Delivering Superior Shareholder Returns
Delivering Superior Shareholder Returns • Average annualized total shareholder return over last 5 years (1) Fortis 10.34% S&P/TSX Composite Index 8.55% S&P/TSX Capped Utilities Index 6.69% FORTIS INC. WIRED FOR GROWTH (1) For the 5-year period ending July 31, 2017.
Slide 8: Our Strategic Focus Delivers Results
Our Strategic Focus Delivers Results 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 Credit R
Slide 9: ITC: Transformational Growth for Fortis
ITC: Transformational Growth for Fortis Accretive to EPS Financing complete Integration on track o Minimal impact on day-to-day operations at ITC o ITC’s new board of directors formed o Linda Apsey appointed President and CEO of ITC during Q4 2016 o Joe Welch elected to Fortis’ Board of Direct
Slide 10: Our Focused Strategy Continues to Yield Strong Results
Our Focused Strategy Continues to Yield Strong Results Focused on base growth while making prudent investments to provide safe, reliable and cost effective energy solutions to our customers Benefitting from the acquisition of ITC Maintaining constructive regulatory relationships: • UNS rate ca
Slide 11: Capital Plan Grows Rate Base to ~$30 Billion in 2021
Capital Plan Grows Rate Base to ~$30 Billion in 2021 ~$13B Five-Year Capital Program 2016 – 2021 Midyear Rate Base (2) $3.1 $2.9 $28.9 $29.6 $28.3 $27.1 $2.4 $2.4 $25.7 $2.3 $24.3 ($ billions ) (1) ($ billions ) (1) (3) 2017F 2018F 2019F 2020F 2021F 2016A 2017F 2018F 2019F 2020F 2021F (4) Other Ener
Slide 12: Highly Executable Capital Plan
Highly Executable Capital Plan Major Capital Projects Total Forecast Forecast 2017- $millions(1) (2) 2017 2018-2021 2021 5-Year Capital Forecast Spending Forecast ITC Multi-Value Regional 305 244 549 Transmission Projects (3) Utility Operations (4) ITC 34.5 kV to 69 kV 89 369 458 15% Conversion Proj
Slide 13: Opportunities Beyond Base Plan
Opportunities Beyond Base Plan ITC: Lake Erie Connector Prince Newfoundland Edward and Labrador Alberta Island British Columbia Prince Edward FortisOntario: Island Wataynikaneyap Project & British Columbia Municipal Utility Consolidation Ontario Minnesota Ontario FortisBC: New York Tilbury, Woodfibr
Slide 14: Beyond the Forecast: Development Project Update
Beyond the Forecast: Development Project Update Opportunity to connect remote First Nations communities in Northern Ontario to the grid In Q1 2017, the Ontario Energy Board issued its deferral account approval allowing recovery of spending that occurred since November 2010 Wataynikaneyap Feder
Slide 15: Poised to Deliver Quality Results
Poised to Deliver Quality Results • On track to execute 2017 plan, supported by acquisition of ITC and reasonable rate case outcome at UNS • Consistent dividend growth • 43 years of consecutive dividend increases • 6% average annual dividend growth guidance through 2021 • Highly diversified regulate
Slide 16: Appendix
FORTIS.. Appendix
Slide 17: Appendix Table of Contents
Appendix Table of Contents Utilities Overview: ITC Holdings Corp. 19 UNS Energy 20 Central Hudson 21 FortisBC 22 FortisAlberta 23 Eastern Canadian Regulated Electric Utilities 24 Caribbean Regulated Electric Utilities 25 Financial Strength: Fortis Delivers Strong Q2 2017 Results 26 Q2 2017 Results b
Slide 18: Appendix Table of Contents
Appendix Table of Contents Other: Regulatory Stability 31 2017-2021 Five-Year Forecast by Segment 32 Capital Expenditures Exceeding Expectations 33 Predictable Returns from Highly Regulated Asset Base 34 Utility Debt Credit Ratings 35 Operational Highlights 36 Expected Upcoming Events 37 Executive T
Slide 19: ITC Holdings Corp.
ITC Holdings Corp. Largest US independent transmission company ITC Holdings Corp. Type of utility Transmission Regulator FERC Regulatory model Independent Transmission Company 2017 Formula 10.32-11.35% ROE on 60% equity 2017F Midyear Rate Base $7.3B 5-Year CAGR on Midyear Rate Base (1) 4.9% 2016 Ass
Slide 20: 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 50% 9.5% ROE on 52.83% 9.75% ROE on 2017 Formula equity equity 50.8% equity 2017F Midye
Slide 21: 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 $1.6B 5-Year CAGR on Midyear Rate Base (1) 7.2% 2016 Assets %
Slide 22: 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 23: 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) 5.3% 2016 Assets % of total regulated assets (2) 9% 2016 Earnings $121M
Slide 24: 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 25: 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 26: Fortis Delivers Strong Q2 2017 Results
Fortis Delivers Strong Q2 2017 Results Adjusted Earnings Adjusted EPS 300 600 0.75 1.40 $253 $540 $0.61 $1.31 500 1.30 ($ millions) 200 0.50 $0.45 400 ($) $319 $129 1.20 300 $1.13 100 0.25 200 1.10 0 100 0.00 1.00 2016 2017 2016 2017 2016 2017 2016 2017 Q2 June Year-to-Date Q2 June Year-to-Date FORT
Slide 27: Q2 2017 Results by Segment
Q2 2017 Results by Segment Second Quarter Variance Analysis by Segment ($’s in millions, Q2 2017 Adjustment Q2 2017 Q2 2016 Adjustment Q2 2016 Q2 (Adjusted) excluding EPS) (Adjusted) (Adjusted) Variance Regulated – Independent Electric Transmission ITC Holdings Corp. 93 - 93 - - - 93 Regulated – US
Slide 28: June YTD 2017 Results by Segment
June YTD 2017 Results by Segment June Year-to-Date Variance Analysis by Segment ($’s in millions, June YTD Adjustment June YTD June YTD Adjustment June YTD June YTD excluding EPS) 2017 2017 2016 2016 (Adjusted) (Adjusted) (Adjusted) Variance Regulated – Independent Electric Transmission ITC Holdings
Slide 29: Investment-Grade Credit Ratings and Ample Liquidity
Investment-Grade Credit Ratings and Ample Liquidity Consolidated Credit Facilities 7.0 Credit Ratings(1) 6.0 Fortis Inc. 5.0 S&P A- / BBB+ 4.0 3.7 4.0 ($ billions) DBRS BBB (high) 3.0 2.0 Moody’s Baa3 (2) 1.0 2.2 1.4 0.0 Dec 31/16 June 30/17 Utilized Remaining Capacity (1) In October 2016, following
Slide 30: Manageable Debt Maturities
Manageable Debt Maturities Average Annual fixed-term debt maturities & repayments over the next five years ~$730M (1) $M 3,000 2,500 2,000 1,500 1,000 500 - Subsidiary Corporate $M 2017 2018 2019 2020 2021 5-YR Total Canadian Regulated Electric 6 74 7 36 135 258 Canadian Regulated Gas - - - - - - U.
Slide 31: Regulatory Stability
Regulatory Stability Recent Regulatory Outcomes Agreement/ Regulated Utility Application/Proceeding Outcome Decision Timing ‒ 10.32% base ROE with a high-end zone of ITC Initial MISO Base ROE Complaint September 2016 reasonableness of 11.35% 2016 Application: ROE and Common ‒ Maintained ROE at 8.75%
Slide 32: 2017-2021 Five Year Forecast by Segment
2017-2021 Five Year Forecast by Segment Fortis 2017 Midyear Rate Base(1) 2017 Capital Forecast ($millions) ~$26 Billion Regulated–Independent Transmission (ITC) Transmission & Distribution represents ~86% ITC 958 of rate base Regulated-US Electric & Gas UNS Energy 579 Central Hudson 230 Regulated- I
Slide 33: 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 3,200 3,200 3,200 2,800 2,800 2,800 2,400 2,400 2,400 2,000 2,000 2,000 1,600 1,600 1,600 1,200 1,200 1,200 800 800 800 400 400 400 0
Slide 34: Predictable Returns From Highly Regulated Asset Base
Predictable Returns From Highly Regulated Asset Base PBR through 2019 Allowed/Achieved 2016 ROE (%): 97% Regulated Assets 8.75/9.28(gas), 9.15/9.38(electric) as at June 30, 2017 Allowed 2017 ROE (%): 8.75-9.15 Allowed Equity in Capital (%): 38.5-40 3% Historic Test Year 16% Allowed/Achieved 2016 ROE
Slide 35: 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 Tucson Electric Power A- n/a A3 Central Hudson A- n/a A2 FortisBC (Gas) n/a A A3 FortisBC (Electric) n/a A (low) Baa1 Fo
Slide 36: Operational Highlights
Operational Highlights Regulated (as at June 30, 2017) Q2 2017 2017F Customers Total Peak Demand Volumes Sales Net Midyear Capital Electric Gas Employees Assets Gas Electric Gas Electric Earnings Rate Base Program (#) (#) (#) ($B) (TJ) (MW) (PJ) (GWh) ($M) ($B) ($M) UTILITY ITC(1) N/A - 668 17.9 - 2
Slide 37: Expected Upcoming Events
Expected Upcoming Events Expected Earnings Release Dates Q3 – 2017 November 3, 2017 Save the Date - 2017 Investor Day Toronto October 16, 2017 New York October 18, 2017 FORTIS INC. WIRED FOR GROWTH
Slide 38: Executive Team
Barry Perry President & CEO Karl Smith Nora Duke Gary Smith James Laurito David Bennett Phonse Delaney EVP, CFO EVP, Corporate EVP, Eastern Canadian EVP, EVP, EVP, Services & CHRO & Caribbean Operations Business Development Chief Legal Officer & Chief Information Corporate Secretary Officer David Hu