Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (November 2023)
47 slides from Fortis's investor presentation, November 2023
Slide 1: Investor Presentation
Investor Presentation November 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: Fortis at a Glance
FORTIS AT A GLANCE 93% 10 regulated utilities 3.4 million 9,200 transmission & in Canada, the U.S. & electric and gas customers dedicated employees distribution assets Caribbean 99% $36 billion ~9.5% average annual(1) 82% of Fortis utilities regulated utility assets 2023F rate base 10-year total sha
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 #1 in The Globe & Mail 2022 Board Games • Health and safety of our employees, customers and contractors • Utilities operate within the parameters of common policies and best practices • Doing whatever it
Slide 6: Ensuring Safe & Reliable Service
ENSURING SAFE & RELIABLE SERVICE SAFE OPERATIONS RELIABLE SERVICE All-Injury Average Electricity Customer Frequency Rate(1) Outage Duration (Hours)(3) 1.73 1.60 4.3 3.8 3.8 3.5 3.3 2.3 2.1 1.8 1.9 2.0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 USA Bureau of Labor Statistics Fortis Fortis Elec
Slide 7: Maintaining Customer Affordability
MAINTAINING CUSTOMER AFFORDABILITY KEY AREAS OF FOCUS Managing Controllable Operating Costs Targeting controllable Focused on preventative operating costs in line with maintenance and historical levels innovation to reduce operating costs Helping customers manage Cleaner energy their energy costs in
Slide 8: Recent Regulatory Decisions
RECENT REGULATORY DECISIONS General Rate Application GCOC Proceeding GCOC & Third PBR Term Proceedings • AUC decisions reached in • ACC issued a decision in August 2023 October 2023 • BCUC issued a decision in September 2023 • Non-fuel revenue increase of • GCOC decision allows for formulaic US$100M
Slide 9: Sale of Aitken Creek Completed
SALE OF AITKEN CREEK COMPLETED TRANSACTION OVERVIEW • On November 1, 2023, Fortis completed the sale of the Aitken Creek natural gas storage facilities(1) in British Columbia to Enbridge for ~$400M(2) • Sale of Aitken Creek strengthens Fortis’ balance sheet and provides additional funding flexibilit
Slide 10: 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) ✓ 2,240 MW of wind and solar generation 508 MW Coal-free ✓ ✓ 1,330 MW of energy storage 400 MW hydrog
Slide 11: Reducing Carbon Emissions
REDUCING CARBON EMISSIONS Committed to Targets 2019 Achieved 29% GHG Emissions Reduction Since 2019 2022 50% GHG Emissions Reduction Target Coal-Free Generation Mix 2030 2032 2035 Net-Zero Target (Scope 1) 75% GHG Emissions Reduction Target 2050 Actual GHG Emissions Reduction Forecast GHG Emissions
Slide 12: Building Climate Resiliency
BUILDING CLIMATE RESILIENCY 2021 • Committed as a TCFD supporter • Identified risks and opportunities under four climate scenarios at five largest utilities It is no longer enough to design our systems based on historical weather, we 2022 • Inaugural TCFD and Climate Assessment are planning for futu
Slide 13: $25B Capital Plan Supports Low-Risk Rate Base Growth
$25B CAPITAL PLAN SUPPORTS LOW-RISK RATE BASE GROWTH Transmission Driving Strong Rate Base Growth Regulated Incremental Capital Across Regulated Utilities Growth Drivers +$0.4B $25.0B $49.4B +$0.3B +$0.6B +$1.4B Other • Transmission investments Regulated Utilities • Clean energy capital $22.3B $36.8
Slide 14: $25B Capital Plan at a Glance
$25B CAPITAL PLAN AT A GLANCE 18% $6.8B 57% Major Capital Cleaner Energy Sustaining Projects Capital(1) Capital(2) (1) Cleaner energy investments defined as capital that supports reductions in air emissions, water usage and/or increases customer energy efficiency. (2) Capital expenditures required t
Slide 15: Balanced Approach to Funding Growth
BALANCED APPROACH TO FUNDING GROWTH Equity from DRIP Supplemented 4-6% Annual Dividend Growth by ATM Program Guidance Range Cash From Operations(1) • Annual proceeds from DRIP of ~$400M • Flexibility to fund more capital with internally $25B 55% Net Debt(2) 34% generated funds • $500M ATM program to
Slide 16: Investment-Grade Credit Ratings
INVESTMENT-GRADE CREDIT RATINGS Moody’s CFO/Debt(1) S&P FFO/Debt(1) 11.7% ~12.0% ~12.0% 11.4% 12.0% CREDIT METRICS 11.0% 11.0% 11.0% 2022A 2023F 2024-2028 2022A 2023F 2024-2028 Average Average Rating agency thresholds Credit Ratings Key Credit Strengths • Strong business risk profile A-(2) Baa3 A (l
Slide 17: Beyond the Plan
BEYOND THE PLAN Inflation Climate Adaption & Renewable Fuel Reduction Act Grid Resiliency Solutions & LNG • A catalyst for future transmission • Investing to withstand more severe • RNG & hydrogen to support investments weather British Columbia • Generation supporting IRPs in Arizona(1) • Under vari
Slide 18: 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 generation ensure security and improve service
Slide 19: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 4.4% Announced Q4 2023 Dividend Increase 4-6% Annual Dividend Growth Guidance Extended through 2028 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 23F 19
Slide 20: 20-Year Total Shareholder Return
20-YEAR TOTAL SHAREHOLDER RETURN Cumulative 20-Year Total Shareholder Return Average Annual 698% Total Shareholder Returns 1-Year 7.4% 326% 313% 5-Year 8.8% 10-Year 9.5% 2003 2008 2013 2018 2023 20-Year 10.9% Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Note: Cumulative 20-y
Slide 21: Why Invest in Fortis?
SUSTAINABLE GROWTH Focused on Executing Strong Robust Transmission Transparent Rate Base Growth Investment Pipeline Funding Plan Cleaner 4-6% Annual Investment-Grade Energy Transition Dividend Growth Credit Ratings WHY INVEST IN FORTIS? LOW-RISK Safe, Well-Run Utilities Strong Regulatory & Construct
Slide 22: Appendix
APPENDIX FORTIS...
Slide 23: Table of Contents
ITC HOLDINGS CORP. 24-25 UNS ENERGY 26-27 CENTRAL HUDSON 28-29 FORTISBC 30-31 FORTISALBERTA 32-33 OTHER ELECTRIC UTILITIES 34-35 2024-2028 CAPITAL PLAN BY BUSINESS UNIT 36 TABLE OF MAJOR CAPITAL PROJECTS 37 CONTENTS 2024-2028 RATE BASE BY BUSINESS UNIT ESG LEADERSHIP 38 39 SENSITIVTY EXPOSURE 40 ONG
Slide 24: ITC Overview
ITC OVERVIEW FERC regulated electric transmission utility 25,800 km $12.0 billion GREATER GRID> GREENER FUTURE Lines of transmission 2024F rate base Assets in 8 U.S. States 22,971 MW Michigan and Iowa key states Peak demand ~700 Fortis owns 80.1% dedicated employees Interest in ITC FERC Rate Regulat
Slide 25: ITC Capital Investment Overview
ITC CAPITAL INVESTMENT OVERVIEW $3.9B Infrastructure Investments Grid Security Rebuild, reliability, resiliency, system efficiencies, increased capacity, circuit overloads, pocket load growth MISO LRTP $1.5B MISO Long-Range Transmission Plan Includes portion of investments for Tranche 1 $7.2B Infras
Slide 26: UNS Energy Overview
UNS ENERGY OVERVIEW BUILDING A SUSTAINABLE & Vertically integrated electric and gas utility RELIABLE ENERGY FUTURE 23,500 km $7.6 billion of electric T&D lines 2024F rate base 5,100 km 2,949 MW of natural gas T&D lines Peak demand 712,000 ACC & FERC Regulated electric and gas customers Cost of servi
Slide 27: UNS Energy Capital Investment Overview
UNS ENERGY CAPITAL INVESTMENT OVERVIEW Generation $2.0B Energy Resources Maintenance Expected energy storage, renewables and other IT, General & investments associated with exit from coal Other $1.4B Distribution Infrastructure Grid resiliency and modernization Transmission Infrastructure $5.2B Ener
Slide 28: Central Hudson Overview
CENTRAL HUDSON OVERVIEW Electric and gas T&D utility TOGETHER WE 15,100 km of electric T&D lines ~1,100 dedicated employees POWER ENDLESS POSSIBILITIES 2,400 km $3.1 billion of natural gas T&D lines 2024F rate base 300,000 New York Public Service electric customers Commission Regulated Cost of servi
Slide 29: Central Hudson Capital Investment Overview
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW Transmission Infrastructure $1.3B Distribution Infrastructure Distribution automation and modernization $2.2B Distribution $600M IT, General & Other Building the Workforce of the Future Capital Plan(1) Infrastructure 2024-2028 $300M Transmission Infrastruct
Slide 30: FortisBC Overview
FORTISBC OVERVIEW Gas LDC and integrated electric utility 51,200 km ~2,600 of natural gas T&D lines dedicated employees 7,300 km $7.6 billion of electric T&D lines 2024F rate base 1.1 million BCUC Regulated natural gas customers Cost of service with incentive mechanisms 188,000 electric customers 9.
Slide 31: FortisBC Capital Investment Overview
FORTISBC CAPITAL INVESTMENT OVERVIEW Renewable Gases Major Integrity $2.6B Reliability & Integrity Investments Projects Ongoing maintenance requires significant capital investment Includes customer growth and general plant investment $4.9B LNG $1.4B LNG Projects Tilbury 1B Reliability Tilbury LNG St
Slide 32: FortisAlberta Overview
FORTISALBERTA Electric distribution utility OVERVIEW 90,200 km $4.4 billion distribution lines 2024F rate base ~85% 584,000 of revenue derived from customers fixed-billing determinants AUC Regulated 2,767 MW PBR setting Peak demand 8.50% 37% ~1,100 dedicated employees Allowed ROE(1) Equity Ratio THE
Slide 33: FortisAlberta Capital Investment Overview
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW IT, General $2.5B Distribution Infrastructure & Other Safety and reliability of distribution assets, meter upgrades, pole management program, modernization $3.1B $600M IT, General & Other Capital Plan 2024-2028 Distribution Infrastructure 33
Slide 34: Other Electric Overview
OTHER ELECTRIC OVERVIEW Electric T&D utilities 23,110 km Five of electric T&D lines regulated electric utilities(1) 480,000 customers Equity investments Wataynikaneyap Partnership & DELIVERING A CLEANER ENERGY Belize Electricity FUTURE ~1,500 Three dedicated employees North American countries $3.7 b
Slide 35: Other Electric Capital Investment Overview
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW IT, General & Other $900M Distribution Infrastructure Transmission $900M Generation Diversification $2.5B Infrastructure Capital Plan(1) Distribution $400M Transmission Infrastructure Infrastructure 2024-2028 $300M IT, General & Other Generation Diversifica
Slide 36: 2024-2028 Capital Plan by Business Unit
2024-2028 CAPITAL PLAN BY BUSINESS UNIT Capital Plan 2024-2028 ($MILLIONS) 2024F 2025F 2026F 2027F 2028F TOTAL Regulated – Independent Electric Transmission ITC 1,252 1,474 1,449 1,477 1,537 7,189 Regulated – U.S. Electric & Gas UNS Energy 1,111 854 912 1,310 973 5,160 Central Hudson 408 421 437 421
Slide 37: Major Capital Projects
MAJOR CAPITAL PROJECTS Major Capital 2024- Estimated 2023F Projects ($ Millions) 2028F Completion Date 18% ITC MISO LRTP(1) 16 1,486 Post-2028 UNS Energy Vail-to-Tortolita Transmission Project 101 273 2026 UNS Energy Renewable Generation(2) UNS Energy Battery Storage(3) 137 - 417 345 2027 2025 $25B
Slide 38: 2023-2028 Rate Base by Business Unit
2023-2028 RATE BASE BY BUSINESS UNIT Rate Base 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2023F 2024F 2025F 2026F 2027F 2028F 2028 Regulated – Independent Electric Transmission ITC(1) 11.3 12.0 12.7 13.4 14.4 15.6 7.0% Regulated – U.S. Electric & Gas UNS Energy 7.2 7.6 8.1 8.5 9.0 9.5 6.0% Central
Slide 39: ESG Leadership
ESG LEADERSHIP Environmental Social • 2050 net-zero direct emissions goal, with interim targets to reduce GHG • Building on our strong record of mutually beneficial partnerships with Indigenous peoples emissions 50% by 2030 and 75% by 2035 • FortisBC awarded silver-level designation in Progressive A
Slide 40: Sensitivity Exposure
SENSITIVITY EXPOSURE Foreign Exchange • Assumed forecast USD:CAD FX rate of 1.30 for 2024-2028 • 65% of operating 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: $500M ROE & Equity Ratio ROE Equity +/- 25 bps +
Slide 41: 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; DC Circuit noted FERC did not adequ
Slide 42: Q3 Sales Trends
Q3 SALES TRENDS CHANGE IN Q3 2023 vs. Q3 2022 RETAIL ENERGY SALES TRENDS SALES • Peak load up 1% due to warmer weather and economic N/A conditions • Increase primarily due to higher air conditioning load +7% associated with warmer temperatures; excluding weather (1) impacts, retail sales up 1% -1% •
Slide 43: Liquidity & Credit Ratings
LIQUIDITY & CREDIT RATINGS Raised YTD $2.0B+ Credit Credit in Long-Term Debt Facilities Ratings • ITC – US$800M notes(1) $4.0B A-(5) • UNS Energy – US$425M notes(2) • FortisAlberta – $200M 30-year 4.86% debentures • Central Hudson – US$90M notes(3) Baa3 • Other Electric - $150M bonds(4) $2.0B A (low
Slide 44: Debt Maturities & Preference Share Dividends
DEBT MATURITIES & PREFERENCE SHARE DIVIDENDS Debt Maturities Preference Share Dividend Rate Resets 10-Year Debt Maturities 2024 $2.5 Series K - $250M $2.0 March 1, 2024 billions $1.5 Series M - $600M $1.0 December 1, 2024 $0.5 Series H - $192M $- June 1, 2025 2024F 2025F 2026F 2027F 2028F 2029F 2030
Slide 45: 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 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 Utility Linda Apsey Chris Capone Roger Dall’Antonia Ruth Forbes S
Slide 47: Glossary
GLOSSARY ACC Arizona Corporation Commission GCOC generic cost of capital AFUDC allowance for funds used during construction GHG greenhouse gas Aitken Creek Aitken Creek Gas Storage ULC, a direct 93.8%-owned subsidiary of FortisBC Holdings Inc. IRA Inflation Reduction Act of 2022 AMI Advanced Meterin