Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (September 2024)
50 slides from Fortis's investor presentation, Sep 25, 2024
Slide 1: Investor Presentation September 2024
INVESTOR PRESENTATION SEPTEMBER 2024
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: Fortis at a Glance
FORTIS AT A GLANCE TSX/NYSE: FTS 93% transmission and distribution assets 10 regulated utilities in Canada, U.S., and Caribbean 3.5 million electricity and gas customers 9,600 dedicated employees 99% Regulated utility assets $38.8 billion 2024F rate base ~10% average annual(1) 10-year total sharehol
Slide 4: Our Vision & Strategy
OUR VISION & STRATEGY A Premium North American Utility Delivering a Cleaner Energy Future SUSTAINABLE GROWTH • Operational Excellence • Financial Strength • Diversified Regulated Portfolio • Local Business Model • Strong Governance 4
Slide 5: Our Common Ground
OUR COMMON GROUND Provision of Safe & Reliable Service Good Governance Priority #1 Fortis Ranked #2 out of 219 S&P/TSX companies in The Globe & Mail 2023 Board Games • Health and safety of our employees, customers and contractors • Utilities operate within the parameters of common policies and best
Slide 6: Delivering Safe & Reliable Service
DELIVERING SAFE & RELIABLE SERVICE All-Injury Average Electricity Customer Frequency Rate(1) Outage Duration (Hours) 1.73 1.62 4.3 4.2 3.8 3.8 3.3 2.3 1.8 1.9 2.0 2.0 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Fortis USA Bureau of Labor Statistics Fortis(3) Electricity Canada and U.S. Energy
Slide 7: Maintaining Customer Affordability
MAINTAINING CUSTOMER AFFORDABILITY Key Areas of Focus Controllable Operating • Preventative maintenance and the Costs per Customer introduction of innovative practices to reduce costs • Prioritization of capital investment based on operational needs and associated rate impact • Utilization of availa
Slide 8: Reducing Carbon Emissions
REDUCING CARBON EMISSIONS Our planned trajectory to net-zero i 9, Achieved @£22 ————— Actual GHG Emissions Reduction GHG Emissions Reduction Since 2019 ————_ Forecast GHG Emissions Reduction 50% GHG Emissions Reduction Target Illustrative Emissions Reduction 2023 Coal-Free Generation Mix 75% GHG Emi
Slide 9: Sustainability Reporting
SUSTAINABILITY REPORTING Climate Report (March 2024) • Climate scenario analysis conducted using low and high emissions scenarios over three time horizons (present day, 2030 and 2050) • Physical climate risks and opportunities were assessed on priority assets using nine climate hazards • Transition
Slide 10: Five-Year Plan Highlights
FIVE-YEAR PLAN HIGHLIGHTS Capital Rate Funding Dividend Expenditures Base Plan Growth $26B 6.5% >12% 4-6% 2025-2029 2024-2029 Average Cash Flow Annual Dividend Growth Capital Plan CAGR To Debt Metrics Guidance Extended to 2029 $1B ~$14B ~59% ~4% Increase over Increase to $53B Funded by Cash From Q4
Slide 11: 2025-2029 $26B Capital Plan
2025-2029 $26B CAPITAL PLAN $1 Billion Increase Key Drivers Over Prior Plan of Growth(2) ITC >99% $26.0B ↑ $0.4B FortisAlberta ↑ $0.4B Regulated Investments $25.0B • MISO LRTP and reliability improvement projects • Customer growth & incremental expenditures for Only 9 metering & facilities Major Cap
Slide 12: Five-Year Rate Base CAGR of 6.5%
FIVE-YEAR RATE BASE CAGR OF 6.5% Consolidated 5-Year Rate Base Rate Base CAGR by Segment $53.0B ITC 7.0% $38.8B U.S. Electric & Gas(1) 6.8% Other Electric(2) 6.3% Western Canadian 5.8% Electric & Gas(3) 2024F 2029F Note: U.S. dollar-denominated rate base converted at a foreign exchange rate of 1.36
Slide 13: Balanced Approach to Funding Growth
BALANCED APPROACH TO FUNDING GROWTH $26B Key Highlights Capital Plan • Funding plan largely consistent with 2025-2029 Equity prior year plan Corporation’s DRIP at current participation levels(1) 11% and employee share purchase plans • Equity funded through DRIP program 30% Net Debt • $500M ATM progr
Slide 14: Funding Plan Supports Investment-Grade Credit Ratings
FUNDING PLAN SUPPORTS INVESTMENT-GRADE CREDIT RATINGS Credit Ratings & Cash Flow to Outlooks Debt Metrics Baa3 A-(1) A (low) Stable Negative Stable 12.1% 12.2% 11.6% 11.4% 11.6% 11.1%(2) Key Credit Strengths Strong business risk profile Geographic and regulatory 2023A 2024F 2025-2029F Avg. diversity
Slide 15: Strong Liquidity
STRONG LIQUIDITY Raised ~$2.6B Credit in Long-Term Debt Preference Share Dividends Facilities • Fortis Inc. ▪ $500M 7-year notes at 4.17% • ITC ▪ US$485M notes(1) • Preference share dividend rate resets ▪ US$150M bonds(1) $4.3B ▪ Series M – $600M (Q4 2024) $4.4B • UNS Energy ▪ Series H – $192M (Q2 2
Slide 16: Opportunities to Expand and Extend Growth Beyond the Plan
OPPORTUNITIES TO EXPAND AND EXTEND GROWTH BEYOND THE PLAN • MISO LRTP Tranche 2.1 • 2023 IRP • Tilbury LNG Expansion • Transmission Investments At least US$3B expected in Investment opportunity of Marine bunkering Supporting delivery of offshore Michigan and Minnesota with ~US$2.5-$5.0B through 2038
Slide 17: Long Capex Runway
LONG CAPEX RUNWAY Responding to stakeholder expectations and capitalizing on opportunities to expand & extend growth Connect more renewable Replace aging assets to generation to the grid maintain reliability Build more renewable Invest in technology to ensure C02 generation and provide security and
Slide 18: Recent Regulatory Activity
RECENT REGULATORY ACTIVITY Iowa ROFR Matter / ACC Generic 2024 General MISO Variance Analysis Regulatory Lag Docket Rate Application • In 2023, the Iowa District Court ruled that the Iowa • In July 2024, the ACC held a workshop and will hold • In July 2024, the PSC approved a one-year rate plan ROFR
Slide 19: Three-Year Look Back
THREE-YEAR LOOK BACK Adjusted EPS & Rate Base Adjusted Dividend Payout Ratio 41.5 3.3 $3.09 $37.0B 3.1 115% 36.5 $34.1B $30.5B $31.1B 2.9 $2.78 105% 31.5 $2.59 2.7 $2.57 26.5 95% 2.5 21.5 2.3 85% 16.5 2.1 79% 78% 75% 74% 75% 11.5 1.9 6.5 65% 1.7 1.5 1.5 55% 2020 2021 2022 2023 2020 2021 2022 2023 Ad
Slide 20: Total Shareholder Returns
TOTAL SHAREHOLDER RETURNS Cumulative 20-Year Total Shareholder Return 722% Average Annual Total Shareholder Returns 1-Year 16.7% 404% 395% 5-Year 5.5% 10-Year 9.9% 20-Year 11.1% 2004 2009 2014 2019 2024 Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Note: Cumulative and average
Slide 21: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY ~4% Dividend Increase in Q4 2024 51 Years of Consecutive Increases in Dividends Paid 4-6% Annual Dividend Growth Guidance through 2029 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 24F 21 21 21
Slide 22: Why Invest in Fortis?
WHY INVEST IN FORTIS? SUSTAINABLE GROWTH Focused on Executing Strong Robust Transparent Rate Base Growth Transmission Funding Plan Investment Pipeline Cleaner 4-6% Annual Investment-Grade Energy Transition Dividend Growth Credit Ratings LOW-RISK Safe, Well-Run Utilities Regulatory & Constructive Str
Slide 23: Appendix
APPENDIX FORTIS...
Slide 24: Table of Contents
TABLE OF CONTENTS ITC Holdings Corp. 25-26 UNS Energy 27-29 Central Hudson 30-31 FortisBC 32-33 FortisAlberta 34-35 Other Electric Utilities 36-37 2025-2029 Capital Plan by Business Unit 38 Major Capital Projects 39-41 2024-2029 Rate Base by Business Unit 42 Sensitivity Exposure 43 Ongoing Regulator
Slide 25: ITC Overview
ITC OVERVIEW FERC REGULATED ELECTRIC TRANSMISSION UTILITY 26,100 km $12.8 billion Lines of transmission 2025F rate base Assets in 8 U.S. States 22,102 MW Michigan and Iowa key states Peak demand ~750 Fortis owns 80.1% dedicated employees Interest in ITC FERC Rate Regulated 10.77-11.41% Allowed ROE C
Slide 26: ITC Capital Investment Overview
ITC CAPITAL INVESTMENT OVERVIEW $4.0B Infrastructure Investments Grid Security Rebuild, reliability, resiliency, system efficiencies, increased capacity, circuit overloads, pocket load growth MISO LRTP $1.7B MISO Long-Range Transmission Plan Includes portion of investments for Tranche 1 & 2.1 $7.6B
Slide 27: UNS Energy Overview
UNS ENERGY OVERVIEW VERTICALLY INTEGRATED ELECTRIC AND GAS UTILITY 23,200 km $7.7 billion of electric T&D lines 2025F rate base 5,100 km 3,314 MW of natural gas T&D lines Peak demand 719,000 ACC & FERC Regulated electric and gas customers Cost of service/historical test year & FERC formula transmiss
Slide 28: UNS Energy Capital Investment Overview
UNS ENERGY CAPITAL INVESTMENT OVERVIEW Generation $2.0B Energy Resources Maintenance Expected energy storage, renewables and other investments associated with exit from coal IT, General & Other $1.3B Distribution Infrastructure Energy Resources Grid resiliency and modernization $5.3B $1.1B Transmiss
Slide 29: 2023 TEP IRP Supports Exit from Coal
2023 TEP IRP SUPPORTS EXIT FROM COAL Exit from Coal On Track Delivering reliable, cleaner energy that is lower risk and affordable for customers 2017-2023 2024-2032 TEP 2023 IRP Highlights(3,970 MW) 508 MW Coal-free ✓ ✓ 2,240 MW of wind and solar generation 1,330 MW of energy storage Completed Coal
Slide 30: Central Hudson Overview
CENTRAL HUDSON OVERVIEW ELECTRIC AND GAS T&D UTILITY 15,200 km ~1,200 of electric T&D lines dedicated employees 2,400 km $3.4 billion of natural gas T&D lines 2025F rate base New York Public Service 315,000 electric customers Commission Regulated Cost of service on future test year 90,000 9.5% 48% n
Slide 31: Central Hudson Capital Investment Overview
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW Transmission Infrastructure $1.35B Distribution Infrastructure Distribution automation and modernization $2.3B Distribution Infrastructure $600M IT, General & Other Building the workforce of the future Capital Plan(1) 2025-2029 $350M Transmission Infrastruc
Slide 32: FortisBC Overview
FORTISBC OVERVIEW GAS LDC AND INTEGRATED ELECTRIC UTILITY 51,600 km ~2,700 of natural gas T&D lines dedicated employees 7,300 km $8.1 billion of electric T&D lines 2025F rate base 1.1 million BCUC Regulated natural gas customers Cost of service with incentive mechanisms 191,000 Gas 45% 9.65% electri
Slide 33: FortisBC Capital Investment Overview
FORTISBC CAPITAL INVESTMENT OVERVIEW Renewable Gases $2.7B Reliability & Integrity Investments AMI Project Ongoing capital and includes customer growth and general plant investments $1.2B LNG Projects $4.8B Reliability LNG Tilbury 1B Tilbury LNG Storage Expansion Capital Plan & Integrity Investments
Slide 34: FortisAlberta Overview
FORTISALBERTA OVERVIEW ELECTRIC DISTRIBUTION UTILITY 90,500 km $4.7 billion distribution lines 2025F rate base ~85% 592,000 of revenue derived from customers fixed-billing determinants 2,643 MW AUC Regulated Peak demand Performance-based rate-setting (PBR) 9.28% 37% ~1,200 Allowed Equity dedicated e
Slide 35: FortisAlberta Capital Investment Overview
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW IT, General & Other $2.7B Distribution Infrastructure Safety and reliability of distribution assets, meter upgrades, pole management program, modernization Distribution Infrastructure $3.4B $700M IT, General & Other Capital Plan 2025-2029 35
Slide 36: Other Electric Overview
OTHER ELECTRIC OVERVIEW ELECTRIC T&D UTILITIES 23,000 km Five of electric T&D lines regulated electric utilities(1) 484,000 Equity investments customers Wataynikaneyap Partnership & Belize Electricity ~1,550 Three dedicated employees North American countries $4.0 billion 8.75% 43.0% 2025F rate base
Slide 37: Other Electric Capital Investment Overview
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW IT, General & Other $1.1B Distribution Infrastructure Transmission $700M Generation Diversification $2.5B Infrastructure Capital Plan(1) Distribution $400M Transmission Infrastructure Infrastructure 2025-2029 $300M IT, General & Other Generation Diversifica
Slide 38: 2025-2029 Capital Plan by Business Unit
2025-2029 CAPITAL PLAN BY BUSINESS UNIT Capital Plan 2025-2029 ($MILLIONS) 2025F 2026F 2027F 2028F 2029F TOTAL Regulated – Independent Electric Transmission ITC 1,403 1,488 1,523 1,600 1,573 7,587 Regulated – U.S. Electric & Gas UNS Energy 1,276 1,087 1,201 1,138 581 5,283 Central Hudson 462 480 440
Slide 39: Major Capital Projects
MAJOR CAPITAL PROJECTS 2025- Estimated Completion ($ Millions) 2024F 2029F Date Major Capital ITC MISO LRTP(1) 27 1,739 Post-2029 Projects ~23% UNS IRP Related Generation(2) - 1,621 Various UNS Roadrunner Reserve Battery Storage Project 1 313 23 2025 UNS Roadrunner Reserve Battery Storage Project 2
Slide 40: Major Capital Projects
MAJOR CAPITAL PROJECTS MISO IRP Related Roadrunner Reserve Battery Vail-to-Tortolita LRTP Generation Storage Project 1 & 2 Transmission Project • Tranche 1 • Two, 200 MW battery storage • Investment in one circuit of a new • Resource requirements, including ▪ Includes six projects in systems with ea
Slide 41: Major Capital Projects
MAJOR CAPITAL PROJECTS Eagle Mountain Tilbury LNG AMI Tilbury 1B Pipeline Project Storage Expansion Project Project • 50-km pipeline expansion to a • Replacement of current • Construction of additional • Project aims to increase on- liquefaction and dispensing, small-scale LNG facility owned by resi
Slide 42: 2024-2029 Rate Base by Business Unit
2024-2029 RATE BASE BY BUSINESS UNIT Rate Base 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2024F 2025F 2026F 2027F 2028F 2029F 2029 Regulated – Independent Electric Transmission ITC(1) 12.3 12.8 13.9 14.8 15.7 16.5 7.0% Regulated – U.S. Electric & Gas (2) UNS Energy 7.6 7.7 8.3 8.8 9.8 10.7 6.7% Cen
Slide 43: Sensitivity Exposure
SENSITIVITY EXPOSURE Foreign Exchange • Assumed forecast USD:CAD FX rate of 1.30 for 2025-2029 • 65% of regulated earnings(1) / 60% of capital plan in USD at U.S. & Caribbean utilities • +/- $0.05 change in USD:CAD ▪ EPS: ~$0.06 ▪ Five-year capital plan: $600M ROE & Equity Ratio ROE Equity +/- 25 bp
Slide 44: Ongoing Regulatory Proceedings
ONGOING REGULATORY PROCEEDINGS MISO Base ROE In 2022, the U.S. Court of Appeals for the D.C. Circuit vacated certain FERC orders that established the methodology used to calculate the MISO base ROE; matter dates back to complaints filed at FERC in 2013 and 2015; D.C. Circuit noted FERC did not adequ
Slide 45: Sustainability Leadership
SUSTAINABILITY LEADERSHIP Climate and Innovation Community and Indigenous Relations • 2050 net-zero direct emissions goal with interim targets to reduce GHG emissions • Building on our strong record of mutually beneficial partnerships with 50% by 2030 and 75% by 2035 Indigenous peoples • Progress: M
Slide 46: Capital Plan Supports Energy Transition
CAPITAL PLAN SUPPORTS ENERGY TRANSITION $1.1B Renewable Energy • IRP related renewable and energy storage projects, including Roadrunner Reserve 1 & 2 in Arizona • Alternative energy technology investments at Caribbean Utilities $3.2B Delivering Cleaner Energy to the Grid • MISO LRTP/ renewable inte
Slide 47: Debt Maturities & Preference Share Dividends
DEBT MATURITIES & PREFERENCE SHARE DIVIDENDS Debt Maturities Preference Share Dividend Rate Resets 10-Year Debt Maturities 2024 $2.5 $2.0 billions $1.5 Series M - $600M December 1, 2024 $1.0 $0.5 Series H - $192M June 1, 2025 $- (2) 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F 2034F (3) (1)
Slide 48: Strong Investment-Grade Credit Ratings
STRONG INVESTMENT-GRADE CREDIT RATINGS (1) Company Fortis Inc. A-(2) Baa3 A (low) ITC Holdings Corp. A-(2) 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 Po
Slide 49: 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 Utility CEOs Linda Apsey Stephanie Raymond(1) Roger Dall’Antonia
Slide 50: Glossary
GLOSSARY ACC Arizona Corporation Commission GHG greenhouse gas AFUDC Allowance for funds used during construction GWh Gigawatt hours AMI Advanced Metering Infrastructure IRP Integrated Resource Plan ATM At-the-market equity program IT Information technology AUC Alberta Utilities Commission ITC Inves