Slide 1: Investor Presentation June 2016
Investor Presentation June 2016
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 in Canada and the United States including the Private Securities Litigation Reform Act of 1995. Forward-looking statements i
Slide 3: A leader in North American utility operations
A leader in North American utility operations Fortis’ Utility Operations Based in St. John’s, NL 9 utility operations in Canada, U.S. and Caribbean 278.6 C$11.6 BC AB million billion weighted average shares (Fiscal 2015) market cap (as of May 27, 2016) PEI ON C$16.4 NL C$6.7 billion billion (1) NY R
Slide 4: Broad geographic reach with nine utility operations
Broad geographic reach with nine utility operations 4
Slide 5: Focused on constructive regulatory relationships
Focused on constructive regulatory relationships Significant Filings and Applications Regulated Utility Application/Proceeding Filing Date Expected Decision TEP 2017 General Rate Application November 2015 Q4 2016 UNS Electric 2016 General Rate Application May 2015 Q3 2016 Central Hudson Reforming th
Slide 6: Delivering superior shareholder returns
Delivering superior shareholder returns • Average annualized total shareholder return of 8.2% over last 10 years • Market capitalization increased over 75% over past 5 years • Assets have grown by over $24B in past 10 years $B 35 UNS Energy US$4.5B 30 25 Central Hudson US$1.5B 20 FortisBC (Gas) Fort
Slide 7: Economic, geographic and regulatory diversification contributes to Fortis' strength
Economic, geographic and regulatory diversification contributes to Fortis’ strength Diversity in Assets are highly (1) operating earnings diversified by jurisdiction TTM Q1 2016 Regulated Assets as at March 31, 2016 7% 5% 11% 9% 37% 14% 36% 31% 30% 20% Regulated Electric Canada & Caribbean Regulated
Slide 8: Virtually all assets are regulated, producing predictable returns
Virtually all assets are regulated, producing predictable returns Future Test Year Allowed 2015 ROE (%): 8.75-9.15 Equity in Capital (%): 38.5-40 96% regulated assets As at March 31, 2016 Historic Test Year Allowed 2015 ROE (%): 9.50-10.0(1) Equity in Capital (%): 43.5-52.6(1) 4% Future Test Year Al
Slide 9: Strong growth in 2015 driven by all businesses
Strong growth in 2015 driven by all businesses 589M 50% • Focus on core regulated operations $ • Successful integration of UNS Energy Adjusted earnings(1) in Arizona 2.11 21% • Strong EPS growth $ • Two dividend increases and introduction Adjusted EPS(2) of dividend guidance • Largest capital plan e
Slide 10: Q1 results consistent with expectations
Q1 results consistent with expectations • Strong financial metrics support financial capacity $ 190M 6% Adjusted Earnings(1) • On track to invest $1.9B of capital in 2016 • Continued focus on 2016 $ 0.67 3% regulatory proceedings Adjusted EPS(2) • Advanced initiatives to increase rate base growth $
Slide 11: Our strategic focus delivers results
Our strategic focus delivers results Strategy Leverage the footprint of our utilities, operating expertise, reputation and financial strength to develop growth opportunities Dividend Target: Investment-Grade 6% Annual Growth Credit Ratings Through 2020 Strategic Initiatives Execute Target Increase E
Slide 12: Superior risk adjusted returns
Superior risk adjusted returns • Consistent and predictable returns Strong Financial • Adjusted EPS grew at a CAGR of 5% over past 10 years Metrics • Investment-grade credit rating • 42 consecutive years of annual dividend increases Consistent Dividend • Commenced dividend guidance in 2015 Growth Ba
Slide 13: Delivered 6% EPS CAGR since 2011
Delivered 6% EPS CAGR since 2011 Strong financial metrics $ 2.50 $2.11 2.00 $1.72 $1.70 $1.75 $1.65 1.50 1.00 0.50 0.00 2011 2012 2013 2014 2015 (1) Adjusted EPS (1) Earnings adjusted for non-recurring items. 13
Slide 14: Investment-grade credit ratings and ample liquidity
Investment-grade credit ratings and ample liquidity Strong financial metrics (1) (2) Investment-Grade Credit Ratings Consolidated Credit Facilities 4.0 Fortis Inc. 3.0 S&P A- / BBB+ 2.4 2.3 ($ billions) DBRS A(low) 2.0 1.0 1.2 1.2 0.0 Mar 31/16 Utilized Strong Financial Metrics (1) In February 2016,
Slide 15: Strong track record of dividend growth
Strong track record of dividend growth Consistent dividend growth $1.40 $1.24 $1.28 $1.16 $1.20 $1.04 $1.12 $1.00 $0.82 73% 73% $0.67 70% 70% 68% 66% $0.59 64% 61% 59% 47% 44% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Dividend paid per common share Dividend payout ratio 42 consecutive y
Slide 16: Capital program drives rate base growth
Capital program drives rate base growth Base capital plan delivers growth ~4.5% CAGR midyear rate base 2.2 1.9 1.9 1.8 1.6 1.6 ($ billions) 20.3 19.8 19.0 18.4 17.5 16.4 0.00 2015A 2016F 2017F 2018F 2019F 2020F Capital spend by year Midyear rate base Note: US dollar denominated CAPEX and midyear rat
Slide 17: Opportunities beyond capital plan
Opportunities beyond capital plan Additional growth opportunities Tilbury, Woodfibre, LNG & Gas Infrastructure Renewables and Natural Gas Rural Electrification Associations REV Demonstration Projects & NY Transco LLC, Gas Infrastructure Wataynikaneyap Project & Municipal Utility Consolidation 17
Slide 18: LNG opportunities can deliver significant upside
LNG opportunities can deliver significant upside Additional growth opportunities • Favourable alignment with provincial goals • Tilbury 1A • $440 million storage and liquefaction • In service Q4 2016 • Further Tilbury Expansion • 20-year supply agreement with HECO • Commencing delivery in 2021 • Pen
Slide 19: Proven acquisition track record
Proven acquisition track record Accelerating growth through strategic utility acquisitions (1) Fortis C$/share $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 (1) Indicates date of a
Slide 20: ITC Acquisition Strategic Rationale
ITC Acquisition Strategic Rationale Accelerating growth through strategic utility acquisitions Increases Accretive to EPS Diversification Premier Electric Transmission Utility Accretive in First Full Pro Forma 38% Fully Regulated Year Following Close FERC-Regulated Earnings Supportive FERC Long-Term
Slide 21: Acquisition Overview
Acquisition Overview Accelerating growth through strategic utility acquisitions Acquisition of the largest independent fully-regulated electric transmission utility in the U.S. A Premier with rates regulated by FERC Fully-Regulated Electric Transmission Establishes scale and an additional platfo
Slide 22: Acquisition Overview
Acquisition Overview Accelerating growth through strategic utility acquisitions FERC is a policy-driven regulator committed to providing incentives for upgrading and expanding the electric transmission system FERC has been one of the most consistently supportive utility regulators in North Ameri
Slide 23: ITC Acquisition Financing Plan
ITC Acquisition Financing Plan Accelerating growth through strategic utility acquisitions Issue ~US$3.5B in Fortis shares ~US$11.3B Assume ~US$4.4B in ITC debt Transaction Issue ~US$2.0B in new debt Funded through Raise US$1.228B through minority investment Fortis to maintain consistent capital stru
Slide 24: Acquisition delivers increased US presence and FERC regulated returns
Acquisition delivers increased US presence and FERC regulated returns Accelerating growth through strategic utility acquisitions • Singular opportunity for Fortis to significantly diversify its business in terms of regulatory jurisdictions, business risk profile and regional economic mix • Based on
Slide 25: Acquisition still on track for late 2016 targeted transaction close
Acquisition still on track for late 2016 targeted transaction close Accelerating growth through strategic utility acquisitions • Minority Investor - Definitive agreement with GIC completed in April 2016 - Value achieved within expectations: 19.9% stake for US$1.228 billion - Completion of process in
Slide 26: Focused on core regulated utility business
Focused on core regulated utility business • Consistent and predictable returns Strong Financial • Adjusted EPS grew at a CAGR of 5% over past 10 years Metrics • Investment-grade credit rating • 42 consecutive years of annual dividend increases Consistent Dividend • Commenced dividend guidance in 20
Slide 27: Appendix
FORTIS... _ Appendix
Slide 28: UNS Energy
UNS Energy Tucson UNS UNS Electric Electric Gas Type of utility Electricity Electricity Gas distribution Customers 417,000 94,000 152,000 Employees 1,478 145 184 Regulator Arizona Corporation Commission Regulatory model Cost of service/Historical Test Year 10% ROE on 9.5% ROE on 9.75% ROE on 2015 fo
Slide 29: Central Hudson
Central Hudson Central Hudson Gas and Electric Type of utility Gas and electricity Customers – gas/electric 79,000/300,000 Employees 966 Regulator NY State Public Service Commission Regulatory model Cost of service on future test year 2015 formula 9% ROE on 48% equity 2015 Assets % of total 11% 2015
Slide 30: FortisBC Energy
FortisBC Energy FortisBC Energy Type of utility Gas distribution Customers 982,000 Employees 1,620 Regulator BC Utilities Commission Regulatory model Cost of service + PBR 2015 formula 8.75% ROE on 38.5% equity 2015 Assets % of total 21% 2015 Earnings % of total 19% 30
Slide 31: FortisAlberta
FortisAlberta FortisAlberta Type of utility Electricity distribution Customers 539,000 Employees 1,162 Regulator Alberta Utilities Commission Regulatory model Cost of service + PBR 2015 formula 8.3% on 40% equity 2015 Assets % of total 13% 2015 Earnings % of total 19% 31
Slide 32: FortisBC Electric
FortisBC Electric FortisBC Electric Type of utility Electricity Customers 168,000 Employees 507 Regulator BC Utilities Commission Regulatory model Cost of service + PBR 2015 formula 9.15% ROE on 40.0% equity 2015 Assets % of total 7% 2015 Earnings % of total 7% 32
Slide 33: Eastern Canadian Regulated Electric Utilities
Eastern Canadian Regulated Electric Utilities FortisOntario (1) Maritime Electric Newfoundland Power Type of utility Electricity Electricity Electricity Customers 65,000 78,000 262,000 Employees 198 182 653 Newfoundland and Labrador Board Island Regulatory and Appeals Regulator Ontario Energy Board
Slide 34: Caribbean Regulated Electric Utilities
Caribbean Regulated Electric Utilities Caribbean Utilities (1) Fortis Turks & Caicos Type of utility Electricity Electricity Customers 28,000 14,000 Employees 201 155 Regulator Electricity Regulatory Authority Government of the Turks and Caicos Islands Regulatory model Cost of service/historical tes