Fortis Inc. · TSX:FTS
Fortis — CIBC 20th Annual Whistler Institutional Investor Conference (January 2017)
39 slides from Fortis's conference presentation, January 2017
Slide 1: CIBC 20th Annual Whistler Institutional Investor Conference
CIBC 20th Annual Whistler Institutional Investor Conference January 2017
Slide 2: Forward-Looking Statement
Forward-Looking Statement Fortis Inc. (“Fortis” or, the “Corporation”) includes forward-looking statements in this presentation within the meaning of applicable securities laws including the Private Securities Litigation Reform Act of 1995. Forward-looking statements included in this presentation re
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 • Successful utility acquisition track record • Tremendous economic, geographic and regulatory diversity • Regulatory outcomes provide stability for
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 • 8,000 employees Iowa New York State Michigan • 2017F pro forma midyear rate base ~$26B Kansas Illinois
Slide 5: Management team
Barry Perry President & CEO Karl Smith Nora Duke Earl Ludlow James Laurito David Bennett EVP, CFO EVP, Corporate EVP, Eastern Canadian EVP, EVP, Services & CHRO & Caribbean Operations Business Development Chief Legal Officer & Corporate Secretary David Hutchens Michael Mosher Linda Blair Michael Mul
Slide 6: ITC Acquisition Closed
ITC Acquisition Closed Secured minority investor with GIC Private Limited to acquire a 19.9% equity interest in ITC for US$1.228B. The process was completed in just over 70 days in April 2016. Received Fortis shareholder approval on May 5, 2016 Received ITC shareholder approval on June 22, 2016 The
Slide 7: How Does ITC Fit With Fortis?
How Does ITC Fit With Fortis? ITC Acquisition Strategic Rationale Premier Electric Increases Transmission Utility Accretive to EPS Diversification Supportive FERC Long-Term Rate Base Proven Management Regulation Growth Prospects Team 7
Slide 8: A Leader in the North American Utility Industry
A Leader in the North American Utility Industry Fortis now among the top 15 North American investor-owned utilities ranked by enterprise value (1) $160 $137 $140 $122 $120 $115 $110 $100 $88 ($ Billions) (2) $80 $67 $64 $57 $56 $60 $49 $48 $48 $46 $42 $39 $37 $36 $36 $40 $35 $28 $28 $26 $25 $25 $24
Slide 9: Economic, Geographic and Regulatory Diversification
Economic, Geographic and Regulatory Diversification Fortis Has Become a Leading Transmission & Distribution Business Pro Forma Operating Fortis Pro Forma 2017 Earnings (1) Midyear Rate Base(2) $26 Billion For the Twelve Months Ended December 31, 2015 Electric Caribbean 3% Electric Regulated- Canada
Slide 10: 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 Target: 6% Average Annual Investment-Grade Growth Through 2021 Credit Ratings Strategic Initi
Slide 11: Sustainable Business Model
Sustainable Business Model SUBSTANTIALLY Local teams empowered to AUTONOMOUS maximize the value of utility Operating Companies operations Small management group able LEAN and EFFICIENT to focus and execute on Corporate Model opportunities quickly From a set of independent operations to leveraging th
Slide 12: Proven Acquisition Track Record
Proven Acquisition Track Record Accelerating growth through strategic utility acquisitions (1) A Fortis Company Networks Canada Fortis $/share $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (1) Indicates date
Slide 13: Acquisitions Have Added Value
Acquisitions Have Added Value $ 1.5B $47B September 30, 2016 Pro Forma Total Assets September 30, 2016 Total Assets $ 1.1B $ 26B 2017 Pro Forma Midyear Rate Base 2016F Midyear Rate Base $ 115M $ 2.9B 2016F CapEx 2017 Pro Forma CapEx 13
Slide 14: 43 Consecutive Years of Annual Dividend Increases
43 Consecutive Years of Annual Dividend Increases $1.53 $1.40 $1.20 $1.24 $1.28 $1.12 $1.16 $1.00 $1.04 $0.82 $0.67 Average annual dividend growth through 2021 targeted at 6% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F Dividend paid per common share Longest
Slide 15: Delivering Superior Shareholder Returns
Delivering Superior Shareholder Returns (1) Average annualized total shareholder return over last 10 years Fortis 7.27% S&P 500 Utility Sector 6.97% S&P/TSX Capped Utilities Index 5.67% S&P/TSX Composite Index 4.71% (1) For the 10-year period ending December 31, 2016. 15
Slide 16: Commencing Period of Regulatory Stability
Commencing Period of Regulatory Stability Summary of Recent Regulatory Outcomes Agreement/Decision Regulated Utility Application/Proceeding Outcome Timing ‒ Settlement agreement reached on revenue TEP 2017 General Rate Application (GRA) requirement August 2016 ‒ 9.75% ROE and common equity thickness
Slide 17: 2017-2021 Capital Program
2017-2021 Capital Program Capital Expenditures ~$13B Five-Year Capital Program $2.9 $2.9 $2.4 $2.4 $2.3 ($ billions ) (1) 2017F 2018F 2019F 2020F 2021F Other Energy Infrastructure Regulated - Canadian & Caribbean Regulated - US Electric & Gas Regulated - Independent Transmission (ITC) (1) US Dollar
Slide 18: 2017-2021 Five Year Capital Program by Segment
2017-2021 Five Year Capital Program by Segment $millions 2017 2018 2019 2020 2021 Total Regulated – Independent Transmission (ITC) $ 958 $872 $590 $619 $616 $3,655 Regulated – US Electric & Gas 742 693 830 825 671 3,761 Regulated – Canadian & Caribbean 1,225 1,244 970 955 958 5,352 Other Energy Infr
Slide 19: 2016-2021 Midyear Rate Base
Midyear Rate Base 2016 – 2021 Midyear Rate Base (1) $28.9 $29.6 $28.3 $27.1 $25.7 $24.2 ($ billions ) (2) 2016F 2017F 2018F 2019F 2020F 2021F Regulated - Independent Transmission (ITC) Regulated - US Electric & Gas (3) Regulated - Canadian & Caribbean (1) Includes the impact of bonus depreciation an
Slide 20: Capital Expenditures Exceeding Expectations
Capital Expenditures Exceeding Expectations 2013-2017 Business 2014-2018 Business Plan 2015-2019 Business Plan Plan Capex Capex Capex $ Millions $ Millions $ Millions 3,000 3,000 3,000 2,500 2,500 2,500 2,000 2,000 2,000 1,500 1,500 1,500 1,000 1,000 1,000 500 500 500 0 0 0 2013 2014 (1) 2015 (1) 20
Slide 21: Opportunities Beyond Base Plan
Opportunities Beyond Base Plan FortisAlberta: Rural Electrification ITC: Associations Lake Erie Connector Prince Newfoundland Edward Alberta Island British Columbia Prince Edward FortisOntario: Island Wataynikaneyap Project & British Columbia Municipal Utility Consolidation Ontario Minnesota Ontario
Slide 22: Long-Term Rate Base Growth Prospects at ITC
Long-Term Rate Base Growth Prospects at ITC In Infancy of Multi-Decade Transmission Investment Cycle – Projected System Needs Require US$120 - US$160 billion of Transmission Investment per Decade Through 2030(1) Changing Power Market Reliability RPS Mandates & Historical Generation Fleet Dynamics In
Slide 23: LNG Can Provide Significant Upside
LNG Can Provide Significant Upside • Massive amounts of natural gas discovered in BC • FortisBC owns substantial natural gas infrastructure in BC • FortisBC has constructive First Nations relationships • Tilbury LNG site has ocean access that can be expanded • Favourable alignment with provincial go
Slide 24: What Sets Fortis Apart?
What Sets Fortis Apart? • Highly diversified; virtually all regulated electric and gas assets • Highly executable base capital plan • Focus on transmission & distribution • Regulatory stability • Consistent dividend growth • 43 years of consecutive dividend increases • 6% average annual dividend gro
Slide 25: Appendix
PY YT r~ Appendix
Slide 26: 2017-2021 Forecast Highlights
2017-2021 Forecast Highlights Capital - ~$13B base capital program Expenditures - Highly executable, low-risk, capital projects - Woodfibre – Potential ~$600 million LNG opportunity Opportunities - ITC Lake Erie Connector – 1,000 MW, bi-directional, HDVC line connecting PJM and IESO Beyond Base Plan
Slide 27: 2015: Transformative year
2015: Transformative year • Focus on core utility business with sale of • non-core assets Successful integration of UNS Energy $ 589M 50% Adjusted earnings(1) • Introduction of dividend guidance and two 2.11 dividend increases • Successful execution of $2.2 billion capital $ 21% plan; largest annual
Slide 28: Diversified Portfolio of Utilities Continues to Deliver Strong Performance in 2016
Diversified Portfolio of Utilities Continues to Deliver Strong Performance in 2016 • Successful completion of ITC transaction on October 14, 2016 • Issued US$2 billion unsecured notes to finance a portion of the acquisition • Listed shares on the NYSE • Significant progress on key regulatory $ 475M
Slide 29: Liquidity and Credit Ratings
Liquidity and Credit Ratings Credit Ratings(1) Credit Facilities 6.0 5.0 Fortis Inc. 4.0 2.2 3.2 ($ billions) S&P A- / BBB+ 3.0 2.2 DBRS BBB (high) 2.0 Moody’s Baa3 1.9 1.0 1.6 0.0 Sept 30/16 Pro forma Sept 30/16 Incl. ITC Utilized Remaining Capacity (1) In October 2016, following the completion of
Slide 30: Utility Credit Ratings
Utility Credit Ratings Company S&P DBRS Moody’s Tucson Electric Power BBB+ n/a A3 Central Hudson A- n/a A2 FortisBC (Gas) n/a A A3 FortisAlberta A- A (low) n/a FortisBC (Electric) n/a A (low) Baa1 Newfoundland Power n/a A A2 A n/a A1 ITCTransmission Michigan Electric Transmission A n/a A1 Company (M
Slide 31: Operational Highlights
Operational Highlights Regulated (as at September 30, 2016) 2015 2016F Customers Total Peak Demand Volumes Sales Operating Midyear Capital Assets Gas Electric Earnings Rate Base Program Electric Gas Employees Gas Electric ($B) (PJ) (GWh) ($M) ($B) ($M) UTILITY (#) (#) (#) (TJ) (MW) UNS Energy 514,42
Slide 32: ITC Holdings Corp. overview
ITC Holdings Corp. overview Largest US independent transmission company • ITC’s business model creates a unique, structurally advantaged infrastructure portfolio • Rate construct supports efficient capitalization of needed investment and timely return of capital − Forward-looking rates − Supportive
Slide 33: 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 10% ROE on 9.5% ROE on 9.75% ROE on 2016 formula 43.5% equity(1) 52.8% equity 50.8% equity 2015 Asse
Slide 34: 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 2016 formula 9% ROE on 48% equity 2015 Assets % of total regulated 12% assets(1) 2015 Earnings ($millions) 58 2015 Earn
Slide 35: FortisBC
FortisBC FortisBC Type of utility Gas distribution Electricity Regulator BC Utilities Commission BC Utilities Commission Regulatory model Cost of service + PBR Cost of service + PBR 2016 formula 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity 2015 Assets % of total 22% 8% regulated assets(1) 201
Slide 36: FortisAlberta
FortisAlberta FortisAlberta Type of utility Electricity distribution Regulator Alberta Utilities Commission Regulatory model PBR 2016 formula 8.3% on 37% equity 2015 Assets % of total regulated assets(1) 14% 2015 Earnings ($millions) 138 2015 Earnings % of total regulated 20% operating earnings (1)
Slide 37: 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 38: Caribbean Regulated Electric Utilities
Caribbean Regulated Electric Utilities Caribbean Utilities (1) 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 historica
Slide 39: Predictable returns from highly regulated asset base
Predictable returns from highly regulated asset base PBR through 2019 Allowed/Achieved 2015 ROE (%): 96% Regulated Assets 8.75/9.19 (gas) 9.15/9.26 (electric) Pro Forma as at Sept 30, 2016 Allowed 2016 ROE (%): 8.75-9.15 Allowed Equity in Capital (%): 38.5-40 4% Historic Test Year Allowed/Achieved 2
Fortis — CIBC 20th Annual Whistler Institutional Investor Conference (January 2017) on 6ix