Fortis Inc. · TSX:FTS
Fortis — Investor Day (October 2017)
128 slides from Fortis's investor day presentation, October 2017
Slide 1: Investor Day Presentation
Investor Day Presentation October 2017 2017 INVESTOR DAY 1
Slide 2: Wired for Growth
Wired for Growth Strategic Overview and Capital Plan Barry Perry Fortis Inc., President & CEO WIRED FOR GROWTH 2017 INVESTOR DAY 2
Slide 3: 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 (c
Slide 4: Investor day agenda
Investor day agenda 1 Wired for Growth – Strategic Overview and Capital Plan Barry Perry, President & CEO Blueprint for Growth – Business Trends, Near and Long-Term 2 Incremental Opportunities Jim Laurito, EVP, Business Development Financial Outlook – 5-Year Plan and Outlook 3 Karl Smith, EVP & CFO
Slide 5: Fortis management and subsidiary CEOs
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
Slide 6: 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 7: Substantially autonomous operating model
Substantially autonomous operating model Thinking globally, acting locally Corporate Oversight Local Presence • Strategy • Customer Focus • Capital Attraction • Local Management Team • Investor Relations • Community Giving • Public Company Reporting • Mostly locally based • Talent Management indepen
Slide 8: High quality & diverse utility portfolio
High quality & diverse utility portfolio One of the lowest risk utility businesses in North America WIRED FOR GROWTH 2017 INVESTOR DAY 8
Slide 9: High quality & diverse utility portfolio
High quality & diverse utility portfolio Highly regulated, predominantly wires and gas LDCs ~91% (1) ~97% (1) (2) TRANSMISSION, REGULATED UTILITY DISTRIBUTION & OTHER ASSETS ASSETS ~60% EARNINGS FROM THE U.S. (1) As at June 30, 2017. (2) As at December 31, 2016. WIRED FOR GROWTH 2017 INVESTOR DAY 9
Slide 10: We have now achieved scale
We have now achieved scale • Fortis is a top 15 North American investor-owned utility ranked by enterprise value(1) $160 $139 $140 $129 $125 $120 $111 $100 $92 (Billions) $80 $70 $67 $61 $58 $60 $51 $51 $49 $46 $44 $44 $40 $38 $38 $37 $40 $28 $28 $26 $25 $25 $25 $20 $0 Rank 1 2 3 4 5 6 7 8 9 10 11 1
Slide 11: Addition of ITC augments high-quality regulatory construct
Addition of ITC augments high-quality regulatory construct Key Facts 2017F Rate Base $7.1B 5-Year CAGR on Rate Base(1) 4.8% 5-Year Capital Spending $3.6B 11.32%–12.16% 60% Allowable ROE Equity Thickness 668 90,000 Employees Square Miles of Service Territory Development Activity Incremental Regulated
Slide 12: Swift action to support Hurricane Irma relief efforts
Swift action to support Hurricane Irma relief efforts Our hurricane response team was on the ground just 48 hours following the aftermath of Hurricane Irma in Turks and 60 48 PEOPLE HRS Caicos to support restoration efforts WIRED FOR GROWTH 2017 INVESTOR DAY 12
Slide 13: Constructive regulatory relationships
Constructive regulatory relationships “They truly are as separate and, you know, Regulated Utility Assets independent as you can be while still owning As at June 30, 2017 all of the common stock of the company” – Kansas Corporation Commission Eastern FortisAlberta Canadian and “Fortis has experience
Slide 14: Strong track record of rate base and EPS growth
Strong track record of rate base and EPS growth 2011 – 2016 Rate Base Adjusted Earnings Per Share ($ 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 15: 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 $0.6 0.5 0.0 2004 2017F 2004 2017F 2007 2017F 2013 2017F 2014 2017F FortisBC Electric FortisAlberta Fort
Slide 16: 44 consecutive years of annual dividend payment increases
44 consecutive years of annual dividend payment increases Guidance extended through 2022 Average annual dividend 73% 73% growth through 2022 70% 66% targeted at ~6% 66% 65% (1) 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F Dividend payout ratio (2) (1) 2017 forecast dividend payout ra
Slide 17: Supporting the delivery of superior total shareholder returns
Supporting the delivery of superior total shareholder returns (1) • Average annualized total shareholder return over last 5 years Fortis 10.0% S&P/TSX Composite Index 8.1% S&P/TSX Capped Utilities Index 6.6% (1) For the 5-year period ending September 29, 2017. WIRED FOR GROWTH 2017 INVESTOR DAY 17
Slide 18: Strong outlook – capital program and rate base growth
Strong outlook – capital program and rate base growth Capital Expenditures(1) Rate Base(2) ($ 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 Infrastruc
Slide 19: Improved five-year capital program
Improved five-year capital program Increase resulting from sustainable growth platform $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
Slide 20: 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 21: UNS 2018-2022 base capital plan
UNS 2018-2022 base capital plan Modernizing natural gas generating resources support 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 be
Slide 22: Asset mix results in low environmental impact
Asset mix results in low environmental impact Minimal amount of generation, mainly in Arizona 91% Transmission, Distribution & Other Assets as at December 31, 2016 3% 6% 91% Transmission, Distribution & Other Renewable Generation Fossil Fuel-Based Generation WIRED FOR GROWTH 2017 INVESTOR DAY 22
Slide 23: Tucson Electric Power's resource diversification plan
Tucson Electric Power’s resource diversification plan Exceeding Arizona’s renewable energy standard with a balanced portfolio Coal-fired kilowatt hours declining Renewable Energy Standard vs. TEP Estimated Performance 120% 27% 100% 4% 11% 16% 19% 31% 80% 20% 31% 15% 60% 12% 31% 40% 80% 69% 6% 50% 20
Slide 24: 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 25: 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 26: Blueprint for Growth
Blueprint for Growth Business Trends, Near and Long-Term Incremental Opportunities Jim Laurito Fortis Inc., EVP, Business Development BLUEPRINT FOR GROWTH 2017 INVESTOR DAY 26
Slide 27: Business trends driving investment opportunities
Business trends driving investment opportunities Move to cleaner energy Innovative technology Electric vehicles Industry consolidation Increased focus on cybersecurity Grid resiliency Changing customer expectations BLUEPRINT FOR GROWTH 2017 INVESTOR DAY 27
Slide 28: North American footprint rich with natural resources
North American footprint rich with natural resources will present energy infrastructure opportunities for Fortis BLUEPRINT FOR GROWTH 2017 INVESTOR DAY 28
Slide 29: Investing in innovative technology through Energy Impact Partners
Investing in innovative technology through Energy Impact Partners Priority Sectors Investments BLUEPRINT FOR GROWTH 2017 INVESTOR DAY 29
Slide 30: Formula for success beyond the base capital plan
Formula for success beyond the base capital plan Investment in Identified Development Projects Pursue Additional Energy Infrastructure Base Capital Plan Opportunities in and Near Existing Service Territories Growth Support targeted average annual dividend growth of 6% and superior total shareholder
Slide 31: Focus areas of growth empowered by diverse, high-quality platform
Focus areas of growth empowered by diverse, high-quality platform and industry trends Existing Incremental Incremental Platform Near-Term Long-Term Opportunities Opportunities CORE Utilities Invest in Existing Organic Platform BLUEPRINT FOR GROWTH 2017 INVESTOR DAY 31
Slide 32: Disciplined approach to development projects
Disciplined approach to development projects Accretive to EPS Credit neutral to credit enhancing Regulated assets or “regulated-like” long-term contracted assets Predictable and stable cash flows Proximity relative to existing utilities BLUEPRINT FOR GROWTH 2017 INVESTOR DAY 32
Slide 33: 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 34: Near-term projects beyond the base capital plan
What is the opportunity for LNG? Near-term projects beyond the base capital plan Wataynikaneyap 1 Power Project 2 Lake Erie Connector Asset Description • ~1,800km of new transmission line • 1,000 MW bi-directional to connect 22 remote First Nations high-voltage direct current (HVDC) to the grid for
Slide 35: Wataynikaneyap Power Project milestones
What is the Near-term opportunity projects for beyond the LNG? base capital plan Wataynikaneyap Power Project – “Line that brings light” 1 Recent Milestones: Remaining Milestones: • Ontario Energy Board (OEB) approved a • Completion of environmental assessments deferral account in March 2017 to reco
Slide 36: ITC - Lake Erie Connector
Near-term projects beyond the base capital plan ITC - Lake Erie Connector 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 capital investment opportunity • ~ 3 full years to construct from commen
Slide 37: Long-term opportunities: ITC Regulated Transmission U.S.
Long-term opportunities beyond the base capital plan ITC – Regulated Transmission U.S. Transmission focuses on North America “Grid of the Future”- reliable, resilient, and efficient grid to connect energy resources to customers Regulated Transmission – U.S. • Potential incremental needs within exist
Slide 38: Long-term opportunities: ITC Contracted Transmission and Energy Storage
Long-term opportunities beyond the base capital plan ITC – Contracted Transmission and Energy Storage Transmission focuses on North America “Grid of the Future”- reliable, resilient, and efficient grid to connect energy resources to customers Contracted Transmission Energy Storage New Transmission •
Slide 39: Long-term opportunities: UNS cleaner energy and reliability
Long-term opportunities beyond the base capital plan UNS - Delivery of cleaner energy and increased reliability • Renewable Generation – Purchase existing renewable facilities • Purchase options in existing contracts – Self-build utility-scale projects • Grid Modernization – Distribution automation
Slide 40: Long-term opportunities: FortisBC LNG infrastructure
Long-term opportunities beyond the base capital plan FortisBC - LNG infrastructure opportunities Site of potential future marine Existing facility terminal • Tilbury LNG facility • Site is scalable with ocean access • Tilbury 1B - $400M approved for regulated expansion but not yet started • To serve
Slide 41: 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 42: Financial Outlook
Financial Outlook 5-Year Plan and Outlook Karl Smith Fortis Inc., EVP & CFO FINANCIAL OUTLOOK 2017 INVESTOR DAY 42
Slide 43: 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 44: 2018 – 2022 plan highlights
2018 – 2022 plan highlights - ~$14.5B base capital program consists of very few major projects Capital - On average $2.9B to be invested annually Expenditures - Highly executable, low-risk capital projects - Wataynikaneyap Transmission Project Near-Term - ITC Lake Erie Connector Opportunities - LNG
Slide 45: Nature of capital investments
Nature of capital investments Technology Sustaining Capital & Other 13% • Infrastructure resilience and modernization required to improve the Sustaining reliability and safety of our utility assets Growth Capital Capital 53% Growth Capital 34% • Connecting new customers to the grid • Addressing chan
Slide 46: Nature of capital investments
Nature of capital investments Highly executable and low-risk capital plan of $14.5 billion Caribbean Utilities 4% Major Capital Projects (1) 14% Canadian Utilities Other Capital U.S. Utilities 41% Projects 55% 86% (1) Major capital projects are identified as those with a total project cost of $150 m
Slide 47: Highly-executable capital plan
Highly-executable capital plan Low-risk capital plan of $14.5 billion Significant Capital Projects (1) Forecast Forecast Forecast ($millions) (2) 2018 2019-2022 Total 2018-2022 ITC Multi-Value Regional Transmission Projects(3) 165 192 357 ITC 34.5 kV to 69 kV Conversion Project 110 361 471 UNS Flexi
Slide 48: 2018-2022 capital forecast by segment
2018-2022 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 Electric
Slide 49: Constructive regulatory outcomes
Constructive regulatory outcomes TEP general rate application 2012 2015 ACC-Approved Rate Case Rate Case Rate Request Settlement 12/31/2011 6/30/2015 6/30/2015 Test Year Test Year Test Year Requested Approved Requested Approved Increase in Non-Fuel $128M $84M $110M $81.5M Revenue Requirement Origina
Slide 50: Arizona utilities provide long-term earnings growth
Arizona utilities provide long-term earnings growth Historical test year results in capital recovery lag Rate base (billions) FINANCIAL OUTLOOK 2017 INVESTOR DAY 50
Slide 51: Funding strategy
Funding strategy Strong balance sheet and investment-grade credit ratings • Subsidiary balance sheets consistent with approved levels • Ample liquidity • Debt issued primarily at operating company level • Only debt refinancing at corporate level • Improving credit metrics • Maintain investment-grade
Slide 52: Manageable debt maturities
Manageable debt maturities Average annual fixed-term debt maturities 3,000 2,500 ($millions) 2,000 1,500 1,000 500 - Subsidiary Corporate Average annual fixed-term debt maturities ~$775M (1) ($millions) 2017 2018 2019 2020 2021 2022 Total Canadian Regulated Electric 6 74 7 36 135 34 292 U.S. Regulat
Slide 53: Credit metrics support credit ratings
Credit metrics support credit ratings Ample liquidity through forecast period (1) Credit Ratings 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 Baa3 2.0 1.9 1.6 “Fortis Inc. has a very strong business risk profile, 1.0 1.4 1.7 whi
Slide 54: Virtually all utility credit ratings are in the A category
Virtually all utility credit ratings are in the A category 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 F
Slide 55: Hedging strategy reduces volatility in earnings and cash flow
Hedging strategy reduces volatility in earnings, cash flow and net investment US dollar-denominated borrowings reduce net foreign exchange exposure Current Cash Flow Hedging Target Cash Flow Hedging 1/3 1/3 1/3 Hedged Naturally Naturally Hedged 2/3 Hedged Unhedged 1/3 Unhedged $0.05 change in foreig
Slide 56: Risks and opportunities
Risks and opportunities Opportunities Risks • Potential rising ROEs • Regulatory outcomes • Continued low natural gas prices • Government policies • Additional capital investment beyond • Taxes base plan • Cross-border trade • Environment • Customer rate impacts • Foreign exchange FINANCIAL OUTLOOK
Slide 57: 2018 risks and opportunities
2018 risks and opportunities • ITC Base ROE complaints • Central Hudson rate case • Foreign exchange Sensitivity 2018 Impact 50 Basis Point Change in Allowed ROE (1) $0.06 EPS Foreign exchange rate decrease from $1.28 to $200M change in 5-year capital $1.25 expenditure forecast (1) Sensitivity based
Slide 58: Significant regulatory items
Significant regulatory items 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
Slide 59: Predictable returns from highly regulated asset base
Predictable returns from highly regulated asset base Future Test Year Allowed/Achieved 2016 ROE (%): 9.00/9.98 97% Regulated Utility Assets Allowed 2017 ROE (%): 9.00 as at June 30, 2017 Allowed Equity in Capital (%): 48 3% FERC Regulated Forward-Looking Rate Construct with True-Up 16% Allowed/Achie
Slide 60: Sustainable business model key to our success
Sustainable business model key to our success • Highly diversified, low-risk regulated utilities focused on wires & gas business • Strong and stable cash flow • Focused on organic growth opportunities • Highly executable, low-risk capital plan • Regulatory stability Improved credit metrics, capital
Slide 61: Closing Remarks and Q&A
Closing Remarks and Q&A Barry Perry Fortis Inc., President & CEO WIRED FOR GROWTH 2017 INVESTOR DAY 61
Slide 62: 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 63: ITC Holdings Corp.
ITC Holdings Corp. Building the grid of the future Linda Apsey Gretchen Holloway President & CEO SVP & CFO ITC HOLDINGS CORP. 2017 INVESTOR DAY 63
Slide 64: Key Facts
Key Facts 2017F Rate Base $7.1B 5-Year CAGR on Rate Base(1) 4.8% 5-Year Capital Spending $3.6B 11.32%–12.16% 60% Allowable ROE Equity Thickness 668 90,000 Square Miles of Employees Service Territory Development Activity Incremental Regulated Transmission, (not included in base 5-year capital plan) C
Slide 65: The opportunity ahead
The opportunity ahead The energy industry is experiencing transformational change A reliable, resilient and efficient grid will be a key enabler of North America’s energy future. ITC is positioned to play a key role in building the grid of the future • Change is driven by the potential for distribut
Slide 66: ITC – Building the grid of the future
ITC – Building the grid of the future 2018-2022 Key Initiatives Sources of Organic Growth Key Macro Trends Local Trends • Execute on base capital plan and • Reliability, security and • Grid modernization to • Transmission system complete major capital projects maintenance of existing meet system dem
Slide 67: Grid modernization drivers & demands
Grid modernization drivers & demands • Much of the system predates the 20th century and the 640,000 miles of high-voltage • Changes in generation mix transmission lines in the lower • Changes in customer use 48 states are at full capacity • Adaptive loads Evolving Use (distributed generation) of the
Slide 68: Strong regulatory relationships with FERC
Strong regulatory relationships with FERC Year FERC actions Energy Policy Act of 1992 mandated open 1992 • FERC has consistently promoted policies to access transmission tariffs facilitate and support transmission investment Order 2000 provided for voluntary RTO 1999 formation and regional wholesale
Slide 69: Regulatory update
Regulatory update MISO • MISO Base ROE ROE Complaints Complaints FERC Quorum • FERC Quorum – Initial Complaint – FERC Order issued in – With the departure of Commissioner Bay in September 2016 setting the base ROE of early 2017, FERC has lacked a quorum 10.32% and high-end of the zone at 11.35% – In
Slide 70: Capital program & rate base growth
Capital program & rate base growth Capital Expenditures Rate Base ($ millions)(1) ($ billions)(1)(2) $3.6B Five-Year Capital Plan 8.8 9.0 863 8.6 8.3 7.6 727 7.1 682 677 690 2018F 2019F 2020F 2021F 2022F 2017F 2018F 2019F 2020F 2021F 2022F • ITC will represent approximately 30% of the 2017F Fortis r
Slide 71: ITC– Opportunities beyond the base capital plan
ITC– Opportunities beyond the base capital plan Transmission focuses on North America “Grid of the Future” - reliable, resilient, and efficient grid to connect energy resources to customers Regulated Transmission – U.S. • Potential incremental needs within existing systems to address additional secu
Slide 72: ITC– Opportunities beyond the base capital plan
ITC– Opportunities beyond the base capital plan Transmission focuses on North America “Grid of the Future” - reliable, resilient, and efficient grid to connect energy resources to customers Generator Interconnection Ties Mexico Energy Storage • Ability to build, own and operate • Evaluating governme
Slide 73: Development approach
Development approach • Disciplined growth through new development projects is a key strategic objective and incorporates the following parameters: • Regulated or sufficiently contracted Strategically • New systems with identified need for base capital investments • Large footprint supports increment
Slide 74: UNS Energy Corporation
UNS Energy Corporation Sustainable Power Resource Diversification in a Growing Market David Hutchens Frank Marino President & CEO CFO UNS ENERGY CORPORATION 2017 INVESTOR DAY 74
Slide 75: Key Facts
Key Facts 2017F Rate Base $4.7B 5-Year CAGR on Rate Base(1) 4.7% 5-Year Capital Spending $2.95B Allowable ROE Equity Thickness Tucson Electric Power 9.75% 50.00% UNS Electric 9.50% 52.83% UNS Gas 9.75% 50.80% 2,040 518,000 155,000 Employees Electric Customers Gas Customers Renewables, Transmission D
Slide 76: Track record & the opportunity ahead
Track record & the opportunity ahead • With a history of producing strong operating results, UNS successfully manages operating expenses while exceeding safety, reliability and customer service targets – Healthy balance sheet with ‘A’ rated utility subsidiaries • UNS is well positioned to continue p
Slide 77: UNS – Strategic outlook
UNS – Strategic outlook Key Initiatives Sources of Organic Growth Key macro trends Local trends • Focus on “winning the • Reliability, security and • Arizona’s long-term • Positive trends with customer” maintenance of regulated economic outlook is unemployment levels • Diversifying our systems stron
Slide 78: Strong regulatory relationships
Strong regulatory relationships Review update Phase 1 Rate Cases Concluded (2016 & 2017) • Decisions included revenue requirements and rate TEP UNS Electric design for non-solar customers • Enhanced fixed cost recovery Test Year 6/30/15 12/31/14 – Higher monthly customer charges – Reduction in volum
Slide 79: Resource diversification plan
Resource diversification plan Building a sustainable, cost-effective resource portfolio TEP Energy Portfolio Mix Coal-fired kilowatt hours declining Coal Natural Gas & Market Purchases Renewables 4% 11% 19% 16% 31% 20% 31% 31% 80% 69% 50% 38% 2014 2017 2023 2032 UNS ENERGY CORPORATION 2017 INVESTOR
Slide 80: Resource diversification plan
Resource diversification plan TEP - Diversifying resource mix while mitigating rate impacts Jointly-Owned Coal Plant “Off-ramps” • Fuel switching • Coal contracts • Land leases • Participation agreements • Environmental regulations 2014 2017 2019 2021 2023 2025 2030 2015 Sundt Unit 4 Fuel Switch -12
Slide 81: Resource diversification plan
Resource diversification plan Modernizing natural gas generating resources • Flexible Generation Resource – Facilitating renewables on the grid – Provide ramping and peaking requirements – Replace aging, less efficient combustion turbines – Reciprocating engines to be constructed in Tucson – 200 MW
Slide 82: Resource diversification plan
Resource diversification plan Exceeding Arizona’s Renewable Energy Standard with a balanced portfolio Renewable Energy Standard Current TEP Solar Resources vs. TEP Estimated Performance Megawatts (456 Total) 27% 300 254 250 198 Power Purchase 202 200 105 Commercial 15% 150 12% 100 97 Residential 6%
Slide 83: Favorable Tucson economic indicators
Favorable Tucson economic indicators 2017 – 2020 Projected CAGR Personal Income Job Growth +5.1% +1.7% UNS Customer Growth ~1.0% 2017E 2020E 2017E 2020E Population Housing Permits +0.9% +2.9% 2017E 2020E 2017E 2020E 2017E 2020E Source: University of Arizona Economic & Business Research Center UNS EN
Slide 84: Capital program and rate base growth
Capital program and rate base growth Capital Expenditures Rate Base ($ millions(1)) ($ billions(1)) $2.95B Five-Year Capital Plan 759 5.9 722 5.7 5.5 5.2 4.9 4.7 560 479 427 2018F 2019F 2020F 2021F 2022F 2017F 2018F 2019F 2020F 2021F 2022F (2018-2020 – includes distribution modernization, RICE, Mexi
Slide 85: Capital investments span the value chain
Capital investments span the value chain UNS CAPITAL INVESTMENTS 2018-2022E $2.95 BILLION Technology & Other, 16% Growth, 47% Sustaining, 37% UNS ENERGY CORPORATION 2017 INVESTOR DAY 85
Slide 86: Opportunities beyond the base capital plan
Opportunities beyond the base capital plan • Renewable Generation – Purchase existing renewable facilities • Purchase options in existing contracts – Self-build utility-scale projects • Grid Modernization – Distribution automation – Utility-scale storage • Infrastructure Resiliency – Physical securi
Slide 87: Underlying financial strength
Underlying financial strength Fortis support drives capital structure and credit rating improvement • Fortis contributed US$287 million of equity to UNS in 2014 and US$180 million in 2015 TEP 2011 Test Year Capital TEP 2015 Test Year Capital TEP 2017E Structure Structure Capital Structure US$1.07B U
Slide 88: Central Hudson Gas & Electric Corporation
Central Hudson Gas & Electric Corporation Leveraging strengths to deliver solid operating and financial performance Michael Mosher Christopher Capone President & CEO EVP & CFO CENTRAL HUDSON 2017 INVESTOR DAY 88
Slide 89: Key Facts
Key Facts 2017F Rate Base $1.5B 5-Year CAGR on Rate Base(1) 8.6% 5-Year Capital Spending $1.5B 9.0% 48% Allowable ROE Equity Thickness 992 Employees 300,000 80,000 Electric Customers Gas Customers Development Activity (not included in base capital) Transmission Investments (1) 5-Year CAGR on rate ba
Slide 90: Our track record & the opportunity ahead
Our track record & the opportunity ahead • We are delivering solid operating and financial performance and have robust plans for increased capital investment within the rate plan – Strong operational expertise – Established risk management – Experienced management team • Our investment in recent yea
Slide 91: Central Hudson – Strategic Outlook
Central Hudson – Strategic Outlook Capitalizing on the transformation of the traditional energy model 2018-2022 Key Initiatives Sources of Organic Growth Key Macro Trends Local Trends • Execute robust capital plan • Leak prone pipe replacement • Evolving regulatory • Unemployment rate including IT s
Slide 92: Leadership on policy issues
Leadership on policy issues Shaping the evolving regulatory model: NYS Public Service Commission • Central Hudson is actively engaged in the current regulatory process - Reforming the Energy Vision (REV) - which seeks to redesign the utility business model in New York State. It is unprecedented in s
Slide 93: Leadership on policy issues
Leadership on policy issues Shaping the evolving regulatory model • Our policy driven opportunities include: – NYS REV-Related • Community Distributed Generation (CDG) • Value of D Order on Net Energy Metering Transition Issued March 9, 2017 – Interim Successor to Net Metering – Value Stack- several
Slide 94: Regulatory timeline
Regulatory timeline • Central Hudson Rate Filing in July 2017 for new rates to go into effect on July 1, 2018. Rate filing driven by initiatives to enhance or improve: → Grid Modernization and Efficiency → Vegetation Management/System Reliability → Financial Strength → Low Income Programs → Customer
Slide 95: Capital program & rate base growth
Capital program & rate base growth Capital Expenditures Rate Base ($ millions)(1) ($ billions)(1) $1.5B Five-Year Capital Plan 2.3 2.1 2.0 306 1.8 289 285 292 1.7 275 1.5 2018F 2019F 2020F 2021F 2022F 2017F 2018F 2019F 2020F 2021F 2022F • Infrastructure replacement and modernization are driving grow
Slide 96: Opportunities beyond the base capital plan
Opportunities beyond the base capital plan • NY Transco LLC – Pending competitive Alternating Current (AC) proceeding proposals – Potential investment opportunities with CES mandate CENTRAL HUDSON 2017 INVESTOR DAY 96
Slide 97: FortisBC Energy Inc. & FortisBC Inc.
FortisBC Energy Inc. & FortisBC Inc. Pursuing major gas infrastructure opportunities Ian Lorimer Michael Mulcahy President & CEO Vice President, Finance & CFO Doyle Sam Douglas Stout Executive Vice President, Vice President, Marketing Development Operations and Engineering and External Relations FO
Slide 98: Key Facts
Key Facts $4.1B $1.3B Gas Distribution Electricity 3.8% Gas Distribution 2.6% Electricity 2017F 5-Year CAGR on Rate Base Rate Base(1)(2) $2.4B Gas Distribution $0.5B Electricity 5-Year Capital Spending 8.75% 38.5% 9.15% 40.0% Gas Equity Electricity Equity Allowable ROE Thickness Allowable ROE Thickn
Slide 99: FortisBC – Positioned for growth
FortisBC – Positioned for growth 2018-2022 Sources of Organic Local Trends Key Macro Trends Key Initiatives Growth • Continued strong GDP • Change in provincial government • Renewal of regulatory • System integrity growth • Increasing focus on climate rate-setting structure projects • Housing starts
Slide 100: Key growth drivers
Key growth drivers • Changing environment related to integrity management programs and initiatives • Development of markets to support alternative use of natural gas • New end-use technologies that utilize natural gas, but offer the ability to reduce greenhouse gas (GHG) content • Installation of te
Slide 101: Regulatory overview
Regulatory overview • Regulatory – Current Performance Based Regulation (PBR) expires end of 2019 • PBR framework providing benefits to customers and shareholder • Pass through of costs of major capital projects and commodity/power purchase costs • Revenue deferral accounts – Decoupling of capital s
Slide 102: Eagle Mountain – Woodfibre Gas Pipeline
Eagle Mountain – Woodfibre Gas Pipeline Overview • 47-km gas line to serve Squamish-based Woodfibre LNG (WLNG) for export to Asianmarkets • ~$350 million rate base • Regulated investment • The Woodfibre facility will export up to 2.1 MTPA of LNG Illustration of WLNG’s proposed facility 2013 2015 201
Slide 103: Pipeline Integrity Management Program
Pipeline Integrity Management Program Pipeline System Overview • 48,200 kilometres of distribution and transmission lines • 3,700 kilometres of transmission pipe ranging from 2-42” diameter • Up to 2,160 psi Project Overview • Primary driver: asset integrity • Focused on transmission pressure system
Slide 104: Transmission Pressure Laterals Project
Transmission Pressure Laterals Project Overview • We have in-line inspection capacity on 2,000 km of our pipelines (blue on map) • Multi-year project will provide in-line inspection capability to an additional 30 lateral gas lines (400 km) FORTISBC 2017 INVESTORCORP. ITC HOLDINGS DAY 9 104 104
Slide 105: Emerging technology: EMAT In-Line Inspection
Emerging technology: EMAT In-Line Inspection • Technology advancements in In-Line Inspection • Increasing industry adoption • Provides ability for proactive, enhanced inspection • Multi-year program FORTISBC 2017 INVESTORCORP. ITC HOLDINGS DAY 10 105 105
Slide 106: FortisBC – Capital program and rate base growth
FortisBC – Capital program and rate base growth Capital Expenditures Rate Base ($ millions) ($ billions) (2) $3.0B Five-Year Capital Plan 6.5 763 6.0 6.0 6.1 760 5.4 5.6 607 518 406 2018F 2019F 2020F 2021F 2022F 2017F 2018F 2019F 2020F 2021F 2022F FortisBC Gas FortisBC Electric Other (1) FortisBC Ga
Slide 107: Capital investment overview
Capital investment overview FortisBC Gas & Electric Combined Investments 2018-2022E $3.0 billion Technology & Other 12% Sustainment LNG 13% 40% Growth 35% FORTISBC 2017 INVESTORCORP. ITC HOLDINGS DAY 12 107
Slide 108: Long-term opportunities: LNG infrastructure
Long-term opportunities LNG infrastructure opportunities Site of potential future marine Existing facility terminal • Tilbury LNG facility • Site is scalable with ocean access • Tilbury 1B - $400M approved for regulated expansion but not yet started • Serves marine bunkering, transportation, and rem
Slide 109: FortisAlberta Inc.
FortisAlberta Inc. Keeping pace with customers in an evolving energy industry Karl Bomhof Janine Sullivan President & CEO VP, Finance & CFO FORTISALBERTA 2017 INVESTOR DAY 109
Slide 110: Key Facts
Alberta, Canada Electrical Distribution Key Facts 2017F Rate Base $3.2B 5-Year CAGR on Rate Base(1) 5.6% 5-Year Capital Spending $2.1B 8.50% 37% Allowable ROE Equity Thickness 1,113 551,000 Employees Electric Customers Renewables, Distribution System Development Activity (not included in base Invest
Slide 111: FortisAlberta – Supporting the integration of distributed energy resources
FortisAlberta – Supporting the integration of distributed energy resources 2018-2022 Local Trends Sources of Organic Growth Key Macro Trends Key Initiatives • Strategic acquisition of • Recovering Alberta • Industry restructuring • Performance Based economy small distribution systems • Evolving gove
Slide 112: Current trends and developments
Current trends and developments Provincial government policy • Alberta’s Climate Leadership Plan – Coal-fired plants will be phased out and replaced by renewable energy and natural gas-fired electricity. Approximately 5,000 MW of renewable generation is forecast – Introduction of a carbon tax and im
Slide 113: Current trends and developments
Current trends and developments Industry Restructuring • In November 2016, the Provincial Government announced that by 2021 Alberta will transition to a capacity market for electricity generation, providing a more stable market for power generators • In an effort to protect consumers, a price cap on
Slide 114: Current trends and developments
Current trends and developments Economy • Alberta economy demonstrating signs of improvement after two-year recession • Economic forecasts estimate that Alberta’s real GDP will grow by 2.5 percent in 2017 • Stabilization of the oil market, albeit at lower commodity prices, is expected to support mod
Slide 115: Current trends and developments
Current trends and developments Regulation • Performance Based Ratemaking (PBR) – 2017 is the last year of the current 5-year PBR term – In December 2016, the AUC issued a decision outlining the manner in which distribution rates will be determined during the second PBR term, which will be 2018 to 2
Slide 116: Capital program and rate base growth
Capital program and rate base growth Capital Expenditures Rate Base ($ millions) ($ billions) $2.1B Five-Year Capital Plan 4.0 4.1 3.8 3.6 3.4 3.2 434 425 433 407 409 2018F 2019F 2020F 2021F 2022F 2017F 2018F 2019F 2020F 2021F 2022F • FortisAlberta’s capital program consists of projects to connect n
Slide 117: Opportunities beyond the base capital plan
Opportunities beyond the base capital plan • The Province of Alberta will support the creation of 5,000 MW of additional renewable energy capacity by 2030 – FortisAlberta is assessing the acquisition and/or operation of the distribution systems of large-scale wind farms in Alberta – Findings of DG I
Slide 118: Opportunities beyond the base capital plan
Opportunities beyond the base capital plan • Strategic acquisitions provide opportunities to consolidate distribution system assets in our service territory – In 2015, FortisAlberta purchased the distribution assets of two REAs. Opportunities exist to purchase the distribution assets of additional R
Slide 119: Eastern Canadian & Caribbean Operations
Eastern Canadian & Caribbean Operations Investing in sustainability of our infrastructure & pursuing opportunities to reduce the carbon footprint Gary Smith Jocelyn Perry Fortis Inc., EVP, Eastern Newfoundland Power, Canadian & Caribbean President & CEO Operations EASTERN CANADIAN AND CARIBBEAN 2017
Slide 120: Key Facts – Eastern Canadian Operations
Key Facts EASTERN CANADIAN OPERATIONS Newfoundland Maritime Fortis Power (NP) Electric (MECL) Ontario (FON) 2017F Rate Base $1.1B $347M $265M 5-Year CAGR on Rate Base(1) 2.2% 2.3% 3.8% 5-Year Capital Spending $513M $175M $119M Allowable ROE 8.50%+/- 50bp 9.35% 8.93%-9.30%(2) Equity Thickness 45% 40%
Slide 121: Key Facts – Caribbean Operations
CARIBBEAN OPERATIONS Fortis Caribbean Utilities Key Facts Company (CUC) Turks & Caicos (TCI) $607M $361M 2017F Rate Base 3.2% 6.9% 5-Year CAGR on Rate Base(1) 5-Year Capital Spending $310M $215M 2016 Achieved ROE 11.5% 10.3% Employees 210 165 Customers 29,000 15,000 Belize Electricity Limited (BEL)
Slide 122: Strong track records & future opportunities
Strong track records & future opportunities Eastern Canadian Operations • Ability to earn at or above allowed ROE • Stable regulatory outlook • History of reasonable regulatory decisions Caribbean Operations • Strong sales growth and favorable earnings outlook • Recent hurricanes reaffirm Caribbean
Slide 123: Eastern Canada - Stable operations with focus on customers, safety and reliability
Eastern Canada - Stable operations with focus on customers, safety and reliability 2018-2022 Key Initiatives Sources of Organic Growth Key Macro Trends Local Trends • Wataynikaneyap Project will • Sustaining capital projects • Load growth as customers • Economic growth in connect remote First Nation
Slide 124: Caribbean – Uptick in economy and a focus on renewables
Caribbean – Uptick in economy and a focus on renewables 2018-2022 Key Initiatives Sources of Organic Growth Key Macro Trends Local Trends • Introduction of solar and wind to • Development of power • Regulatory changes anticipated • Strong customer and the generation mix systems to keep pace to benef
Slide 125: Regulatory overview
Regulatory overview Stable in the near term Newfoundland and Regulator Ontario Energy Board Island Regulatory and Labrador Board of Appeals Commission Commissioners of Public Utilities Cost of service with Cost of service on future Cost of service on future Regulatory Model incentives test year test
Slide 126: Regulatory overview
Regulatory overview Stable in the near term Regulator Electricity Regulatory Government of the Turks Authority and Caicos Islands Cost of service with Cost of service with Regulatory Model historical test year historical test year Formula driven with 6.75%- Rates and sales growth drive 2017 Formula
Slide 127: Capital program and rate base growth
Capital program and rate base growth Capital Expenditures Rate Base ($ millions1) ($ billions1) $1.3B Five-Year Capital Plan $3.1 $3.1 $3.0 $2.9 $287 $2.8 $271 $2.7 $256 $256 $262 2018F 2019F 2020F 2021F 2022F 2017F 2018F 2019F 2020F 2021F 2022F (1) U.S. dollar-denominated capital expenditures and r
Slide 128: Opportunities beyond the base capital plan
Opportunities beyond the base capital plan Eastern Canadian & Caribbean Operations • Renewables at CUC – In February 2017, the Cayman Islands Government released a new National Energy Policy target indicating that by 2037, 70% of electricity generation in Cayman must be powered by renewables – CUC h