Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (August 2023)
46 slides from Fortis's investor presentation, August 2023
Slide 1: Investor Presentation
Investor Presentation August 2023
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 Premium Energy Delivery Business
A PREMIUM ENERGY DELIVERY BUSINESS 93% $4.3 billion transmission & distribution assets 2023F capital expenditures 10 regulated utilities $36 billion in Canada, the U.S. and Caribbean 2023F rate base 3.4 million $27 billion(1) electric and gas customers market capitalization 9,200 ~10% average annual
Slide 4: Driving Sustainable Growth
OUR VISION & STRATEGY A Premium North American Utility DRIVING Delivering a Clean Energy Future SUSTAINABLE GROWTH Operational Excellence Financial Strength Diversified Regulated Portfolio Substantially Autonomous Business Model Strong Governance 4
Slide 5: Delivering Safe and Reliable Service
DELIVERING SAFE AND RELIABLE SERVICE Average Electricity Customer Managing Controllable Operating Outage Duration (Hours)(1) Costs Below Inflation 3.8 3.8 3.5 3.3 2.3 2.1 1.8 1.9 2.0 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 Fortis Electricity Canada and U.S. Energy Fortis compound aver
Slide 6: 20-Year Total Shareholder Return
20-YEAR TOTAL SHAREHOLDER RETURN Cumulative 20-Year Total Shareholder Return Average Annual 669% Total Shareholder Returns 1-Year (3.4%) 402% 5-Year 9.6% 397% 10-Year 9.7% 20-Year 10.7% 2003 2007 2011 2015 2019 2023 Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Note: Cumulative 20-ye
Slide 7: Carbon Emissions Reduction on Track
CARBON EMISSIONS REDUCTION ON TRACK Sustainability Highlights: Achieved 29% • Ranked #1 in the Globe & Mail 2022 Board Games GHG Emissions Reduction Since 2019 2019 • Released first TCFD and Climate Report in 2022 • Completed limited third-party assurance on select 2022 GHG emissions data and board
Slide 8: Sale of Aitken Creek Announced for ~$400M
SALE OF AITKEN CREEK ANNOUNCED FOR ~$400M Transaction Highlights • Agreement with Enbridge to sell Fortis’ interest(1) in its unregulated investment of the Aitken Creek Natural Gas Storage Facility for ~$400M(2) • Proceeds expected to be used to repay Corporate credit facilities and support our regu
Slide 9: 2023 Capital Plan on Track
2023 CAPITAL PLAN ON TRACK HIGHLY EXECUTABLE CAPITAL PLAN SUPPORTS LOW-RISK RATE BASE GROWTH OF ~6% Continued Focus on Capital Plan Rate Base Customer Affordability • Targeting controllable operating cost $46.1B increases below inflation, consistent with historical practice $34.1B $22.3B • Focused o
Slide 10: Five-Year Plan at a Glance
FIVE-YEAR PLAN AT A GLANCE Average Annual Capital of $4.4B Highly Executable Capital Plan $4.7B $4.6B $4.5B • 99% Regulated $4.3B $4.2B • 83% Smaller Projects • 17% Major Projects • 55% U.S. • 41% Canada • 4% Caribbean 2023F 2024F 2025F 2026F 2027F Regulated - Independent Electric Transmission (ITC)
Slide 11: Capital Plan Concentrated at Three Largest Utilities
CAPITAL PLAN CONCENTRATED AT THREE LARGEST UTILITIES • Infrastructure investments including • Reliability and integrity investments • Includes ~$1.2B of renewable and reliability and resiliency upgrades, storage investments to transition to increased capacity, etc. • Natural gas infrastructure inclu
Slide 12: No Discrete Equity Required to Fund 2023-2027 Capital Plan
NO DISCRETE EQUITY REQUIRED TO FUND 2023-2027 CAPITAL PLAN Predictable Funding Plan Capital Plan Funded Primarily with Cash from Operations and Debt at Regulated Subsidiaries • Regulated debt used to repay maturing debt, and fund capital expenditures and operating requirements Net Debt(2) 33% Equity
Slide 13: Beyond the Plan
BEYOND THE PLAN Inflation Reduction Act • A catalyst for future transmission investments • Renewable generation including TEP’s IRP(1) • Interconnecting renewables to the grid • Electric vehicle infrastructure • Funding for community transition from fossil fuels Climate Adaptation & Grid Resiliency
Slide 14: Long Capex Runway
LONG CAPEX RUNWAY Responding to stakeholder expectations and capitalizing on opportunities to expand & extend growth Business development in existing footprint Connect more renewable generation to the grid Prepare grid for additional electrification Build more renewable generation Invest in technolo
Slide 15: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 49 YEARS of Consecutive Dividend Increases 4-6% Annual Dividend Growth Guidance through 2027 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 15
Slide 16: Ongoing Regulatory Proceedings
ONGOING REGULATORY PROCEEDINGS ITC Midwest Capital Structure Complaint – In 2022, FERC denied the complaint filed by the Iowa Coalition for Affordable Transmission (ICAT) seeking to lower ITC Midwest’s equity ratio from 60% to 53%; ICAT’s request for rehearing was denied by FERC in March 2023 MISO B
Slide 17: Ongoing Regulatory Proceedings (Continued)
ONGOING REGULATORY PROCEEDINGS (CONTINUED) Customer Information System (CIS) Implementation – In January 2023, Central Hudson filed a response to the PSC’s show cause order in respect of its new CIS; interim agreement reached with the PSC in July 2023 including independent third-party verification o
Slide 18: Why Invest in Fortis?
WHY INVEST IN FORTIS? WHY INVEST IN FORTIS? Focused on Geographic & 4-6% SAFE, ENERGY Regulatory ANNUAL DIVIDEND WELL-RUN DELIVERY DIVERSITY Growth Guidance Local Utilities LOW-RISK Virtually ESG Growth All Innovative REGULATED Leadership Profile 18
Slide 19: Appendices
Appendices FORTIS...
Slide 20: Table of Contents
TABLE OF CONTENTS ITC HOLDINGS CORP. 21-22 UNS ENERGY 23-27 CENTRAL HUDSON 28-29 FORTISBC 30-31 FORTISALBERTA 32-33 OTHER ELECTRIC UTILITIES 34-36 2022-2027 RATE BASE BY BUSINESS UNIT 37 2023-2027 CAPITAL PLAN BY BUSINESS UNIT 38 MAJOR CAPITAL PROJECTS 39 ESG LEADERSHIP 40 MACRO OUTLOOK & ASSUMPTION
Slide 21: ITC Holdings Corp.
ITC HOLDINGS CORP. Type of Utility Transmission Regulator FERC Regulatory Model Cost of Service with FERC Formula Rates Current Regulatory Construct 10.77-11.41% ROE on 60% equity Cost-based, forward-looking formula rates Significant Regulatory Features with annual true-up 2023F Rate Base(1) $11.1B
Slide 22: ITC Capital Investment Overview
ITC CAPITAL INVESTMENT OVERVIEW 2023-2027 Capital(1) $3.4B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, increased Grid Security capacity, circuit overloads, pocket load growth MISO $1.2B New Interconnections LRTP Supports economic development, load interconnectio
Slide 23: UNS Energy
UNS ENERGY Tucson UNS Electric UNS Gas Electric Gas Type of Utility Electricity Distribution Arizona Corporation Commission Regulator & FERC Cost of service/historical test year & Regulatory Model FERC formula transmission rates 9.15% ROE on 9.50% ROE on 9.75% ROE on Current Regulatory Construct(1)
Slide 24: UNS Capital Investment Overview
UNS CAPITAL INVESTMENT OVERVIEW 2023-2027 Capital(1) $1.3B Distribution Infrastructure Grid resiliency and modernization Generation Maintenance $1.2B Renewable Generation Distribution Energy storage, renewable investments Infrastructure IT, General $1.0B Transmission Infrastructure Vail-to-Tortolita
Slide 25: TEP General Rate Application
TEP GENERAL RATE APPLICATION Application supports TEP’S clean energy transition and continued delivery of safe and reliable service 2019 Rate Case 2022 Rate Case Staff ALJ Application Decision Application(1) Testimony(2) Recommendation(3) Test Year December 31, 2018 December 31, 2021 New Rates May 2
Slide 26: Arizona Focused on Renewables
ARIZONA FOCUSED ON RENEWABLES TEP Integrated Resource Plan filed in 2020 Next IRP expected in November 2023 3,400 MW Planned Additions of Wind, Solar and Storage 250 MW 100 MW 99 MW Coal-free Oso Grande Wilmot Solar (1)(2) Borderlands(1) generation mix by 2032 >70% renewable power 2021 2022-2035 by
Slide 27: Reliable & Affordable Service During Clean Energy Transition
RELIABLE & AFFORDABLE SERVICE DURING CLEAN ENERGY TRANSITION TEP’s goal is to transition to a cleaner grid while maintaining affordable rates and reliable service for our customers 1,073 MW Planned Coal 3,400 MW of Planned Wind, Retirements by 2032 Solar and Storage Resources Steel for Fuel Transiti
Slide 28: Central Hudson
CENTRAL HUDSON Type of Utility Electric and Gas Transmission & Distribution Regulator New York State Public Service Commission Regulatory Model Cost of service on future test year Current Regulatory Construct 9.0% ROE on 48% equity Significant Regulatory Features Revenue decoupling 2023F Rate Base(1
Slide 29: Central Hudson Capital Investment Overview
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW 2023-2027 Capital(1) Transmission $1.1B Distribution Infrastructure Infrastructure Distribution automation and modernization $500M IT, General and Other Modernization $1.8B Distribution Infrastructure Building the Workforce of the Future $200M Transmission
Slide 30: FortisBC
FORTISBC FortisBC Energy FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service with incentive mechanisms Current Regulatory Construct 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity Multi-year rates with re
Slide 31: FortisBC Capital Investment Overview
FORTISBC CAPITAL INVESTMENT OVERVIEW 2023-2027 Capital $2.6B Reliability & Integrity Investments Ongoing maintenance requires significant capital investment Sustainability Includes customer growth and general plant investment Major Integrity Projects LNG $1.3B LNG Projects Tilbury 1B Tilbury LNG Res
Slide 32: FortisAlberta
FORTISALBERTA Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR Current Regulatory Construct 8.5% ROE on 37% equity ~85% of revenue derived from fixed-billing Significant Regulatory Features determinants 2023F Rate Base $4.2B 5-Year Rate Base CAGR (
Slide 33: FortisAlberta Capital Investment Overview
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW 2023-2027 Capital $2.4B Distribution Infrastructure IT, General Safety & reliability of distribution assets, meter and Other upgrades, pole management program, modernization $500M IT, General and Other Distribution $2.9B Infrastructure 33
Slide 34: Other Electric Utilities
OTHER ELECTRIC UTILITIES (1) Type of Utility Electricity Newfoundland and Labrador Board of Regulator Island Regulatory and Appeals Commission Ontario Energy Board Commissioners of Public Utilities Regulatory Model Cost of service on future test year Cost of service on future test year Cost of servi
Slide 35: Other Electric Utilities (Continued)
OTHER ELECTRIC UTILITIES (CONTINUED) (1) Type of Utility Electricity Regulator Utility Regulation and Competition Office Government of the Turks and Caicos Islands Regulatory Model Cost of service Cost of service 2022 Achieved ROE 10.8% 10.8% 2023F Rate Base(2) $0.8B $0.5B 5-Year Rate Base CAGR (202
Slide 36: Other Electric Capital Investment Overview
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW 2023-2027 Capital(1) IT, General $1B Distribution Infrastructure and Other Newfoundland Power, Maritime Electric and Caribbean Utilities Transmission $750M Generation Diversification Infrastructure Caribbean Utilities shift to cleaner energy $2.4B Distribut
Slide 37: 2022-2027 Rate Base by Business Unit
2022-2027 RATE BASE BY BUSINESS UNIT Rate Base 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2022A 2023F 2024F 2025F 2026F 2027F 2027 Regulated – Independent Electric Transmission ITC(1) 10.5 11.1 11.9 12.5 13.2 14.1 6.1% Regulated – U.S. Electric & Gas UNS Energy 6.7 7.0 7.4 7.8 8.5 9.1 6.3% Central
Slide 38: 2023-2027 Capital Plan by Business Unit
2023-2027 CAPITAL PLAN BY BUSINESS UNIT Capital Plan(1) 2023-2027 ($MILLIONS) 2023F 2024F 2025F 2026F 2027F TOTAL Regulated – Independent Electric Transmission ITC 1,103 1,177 1,137 1,180 1,220 5,817 Regulated – U.S. Electric & Gas UNS Energy 1,006 690 986 1,027 891 4,600 Central Hudson 384 343 418
Slide 39: Major Capital Projects
MAJOR CAPITAL PROJECTS Major Capital ESTIMATED Projects 2023-2027 COMPLETION 17% ($ Millions) PLAN DATE ITC MISO Long-Range Transmission Plan(1) 923 Post-2027 UNS Energy Renewable Generation(2) UNS Energy Vail-to-Tortolita Transmission Project 417 378 Various 2027 $22.3B FortisBC Tilbury LNG Storage
Slide 40: ESG Leadership
ESG LEADERSHIP Environmental Social • 2050 net-zero direct emissions goal, with • Focus on Indigenous partnerships and interim targets to reduce GHG emissions business 50% by 2030 and 75% by 2035 • 1,800 KM Wataynikaneyap transmission line • Progress: More than halfway to achieving our connecting 17
Slide 41: Macro Outlook & Assumptions
MACRO OUTLOOK & ASSUMPTIONS Foreign Exchange Interest Rates • Primary exposure to rising rates at Fortis Inc. • USD:CAD FX Rate of 1.30 for 2023-2027 and ITC Holdings (non-regulated) • Non-regulated maturities of ~US$500M at • 65% of operating earnings(1) / 60% of capital Fortis Inc. at ~4% weighted
Slide 42: Q2 Sales Trends
Q2 SALES TRENDS CHANGE IN RETAIL Q2 2023 vs. Q2 2022 ELECTRIC SALES TRENDS SALES • Peak load down 9% due to milder weather and N/A economic conditions • Decrease primarily due to lower air conditioning load -7% associated with milder temperatures; excluding (1) weather impacts, retail sales were fla
Slide 43: Liquidity & Credit Ratings
LIQUIDITY & CREDIT RATINGS Active in Debt Credit Credit Markets Facilities Ratings • ~$1.9B in long-term debt raised YTD June A-(3) • ITC ▪ US$800M notes(1) $4.3B Baa3 • UNS Energy ▪ US$375M 30-year 5.50% notes A (low) • FortisAlberta $1.7B ▪ $200M 30-year 4.86% debentures June 30, 2023 • Central Hu
Slide 44: Debt Maturities
DEBT MATURITIES 10-Year Average: $1.1B $3.0 $2.5 $2.0 billions $1.5 $1.0 $0.5 $- 2023F 2024F(1) 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F Non-Regulated (1) Regulated Note: Debt as at June 30, 2023 and excludes any new debt issuances during the forecast period. Excludes repayments of finance le
Slide 45: 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 BBB+ 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
Slide 46: Strong Leadership Team
STRONG LEADERSHIP TEAM Fortis Inc. Executive David Hutchens Jocelyn Perry Jim Reid Gary Smith Stuart Lochray President & CEO EVP, CFO EVP, Sustainability & CLO EVP, Operations & Innovation Sr. VP Capital Markets & Business Development Linda Apsey Chris Capone Roger Dall’Antonia Ruth Forbes Susan Gra