Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (October 2018)
41 slides from Fortis's investor presentation, Oct 15, 2018
Slide 1: Empowering, Sustaining and Executing
Empowering, Sustaining and Executing Investor Presentation October 15, 2018 IN OUR REGULATED ENERGY INFRASTRUCTURE SYSTEMS
Slide 2: Forward-Looking Information
Forward-Looking Information EMPOWERING GROWTH 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 U.S. Private Securities Litigation Reform Act of 1995, collectively re
Slide 3: Our Strategy
Our Strategy EMPOWERING GROWTH S T R AT E G Y 6% Leverage the operating model, footprint of our utilities, operating expertise, Average Annual Dividend reputation and financial strength to Focus on Growth Target through 2023 develop growth opportunities Organic Growth AREAS OF FOCUS: Utility Capital
Slide 4: Our Unique Business Model
Our Unique Business Model EMPOWERING GROWTH 10 ITC UNS Energy Locally Operated FortisBC Regulated Electric Regulated Gas Utilities FortisAlberta FERC-Regulated Newfoundland Power Electric Transmission = Central Hudson Long-Term Contracted FortisOntario Hydro Generation Strong 1 Caribbean Utilities N
Slide 5: High Quality & Diverse Utility Portfolio
High Quality & Diverse Utility Portfolio EMPOWERING GROWTH ~97% REGULATED UTILITY ASSETS 10 UTILITY OPERATIONS Canada, U.S. & Caribbean $ 26.1 BILLION IN MIDYEAR RATE BASE IN 2018 ~60% EARNINGS FROM THE U.S. ~92% TRANSMISSION & DISTRIBUTION 3.3 MILLION UTILITY CUSTOMERS 2.0M Electric & 1.3M Gas Note
Slide 6: Sustainability: Environmental Commitment
Sustainability: EMPOWERING GROWTH Environmental Commitment We delivered 19 times more energy to our customers than we generated in 2017 92% of our assets are electricity poles, wires and natural gas lines Decrease in the carbon intensity 63% of operations since 2015 6
Slide 7: Governance and Social Commitment
Governance and Social Commitment EMPOWERING GROWTH $12.5M invested in communities that we serve in 2017 Women on our Board Women NEOs 5 2 1 0 2013 Today 2013 Today 7
Slide 8: Fortis Timeline
Fortis Timeline EMPOWERING GROWTH 1885-2012 2013-2016 2017-Current Focused on Canada U.S. Acquisition Strategy Focused on Organic Growth in North America 8
Slide 9: Strong Financial Track Record
Strong Financial Track Record EMPOWERING GROWTH Adjusted EPS and Dividend Payout Ratio $2.53 $2.31 $2.11 $1.70 $1.75 Adjusted EPS(2) Rate Base 5-Year 73% EPS 5-Year 73% 66% 66% 64% Dividend Payout Historical CAGR Historical CAGR Ratio(2) 7.0%(1) 8.0%(2) 2013 2014 2015 2016 2017 (1) 5-year ending 201
Slide 10: 45 Years of Dividend Growth and 6% Guidance Extended to 2023
45 Years of Dividend Growth and 6% Guidance Extended to 2023 EMPOWERING GROWTH 6% guidance generates annual dividend payment of $2.27 in 2023 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18F 19F 20F 21F 22F 23F
Slide 11: Average Annualized Total Shareholder Return
Average Annualized Total Shareholder Return EMPOWERING GROWTH 5-Year 10-Year 20-Year Fortis 10.1% 9.8% 12.2% S&P/TSX Composite Index 7.8% 6.3% 8.0% S&P/TSX 7.0% 6.6% 8.4% Capped Utilities Index Note: For the period ending September 30, 2018. 11
Slide 12: Five-Year Plan Highlights
Five-Year Plan Highlights EMPOWERING GROWTH $17.3B 6-7% 6% 5-Year Rate Base Average Annual Capital Plan Growth Dividend Growth Target to 2023 12
Slide 13: Increase in Capital Plan Driven by Proven Growth Strategy
Increase in Capital Plan Driven by Proven Growth Strategy EMPOWERING GROWTH + $0.6B + $0.9B $17.3 + $0.6B $14.5 Billions 2017 Investor Day 2018 Investor Day + $0.6B 13
Slide 14: $3.5B Average Annual Capital Expenditures
$3.5B Average Annual Capital Expenditures EMPOWERING GROWTH (1) $17.3B 5-Year Capital Plan $3.7 $3.5 $3.6 $3.2 $3.3 Billions 2019F 2020F 2021F 2022F 2023F (1) Capital expenditures are translated at a forecast USD/CAD foreign exchange rate of $1.28. 14
Slide 15: Low Risk, Highly Executable Capital Plan
Low Risk, Highly Executable Capital Plan EMPOWERING GROWTH Regulated 99% Smaller Projects 77% U.S. 55% Canada 42% Non-Regulated 1% Major Capital Projects 23% Caribbean 3% 15
Slide 16: Capital Plan Grows Rate Base
Capital Plan Grows Rate Base EMPOWERING GROWTH Rate Base(1) $35.5 $32.0 $33.4 $30.1 $27.9 $26.1 Billions Canadian & Caribbean U.S. 2018F 2019F 2020F 2021F 2022F 2023F (1) Rate base converted at a projected USD/CAD foreign exchange rate of $1.28 for 2018 through 2023. 16
Slide 17: Strong 5-Year Rate Base Growth
Strong 5-Year Rate Base Growth EMPOWERING GROWTH Rate Base Grows 8.4% Central Hudson $9.4B to $35.5B 7.0% ITC 5-Year CAGR 6.3% UNS Increases from Rate Base Growth 4.5% to 6.3% $8.4 5-Year $6.5 6.3% $9.8 6.0% FortisBC Energy $7.7 Growth Mainly Driven $7.7 5.3% Other Canadian & Caribbean by U.S. Utili
Slide 18: Additional Energy Infrastructure Opportunities
Additional Energy Infrastructure Opportunities EMPOWERING GROWTH FortisOntario: FortisBC: Municipal Utility Tilbury, Consolidation LNG & Gas Infrastructure Maritime Electric & Newfoundland Power: Grid Modernization UNS Energy: Renewables, Storage & Electric Transmission ITC: Lake Erie Connector & Gr
Slide 19: Current Regulatory Framework
Current Regulatory Framework EMPOWERING GROWTH Weighted Average Weighted Average Allowed ROE(1) Equity Thickness(1) 10.58% 55.2% 9.93% 48.2% 8.73% 39.0% U.S. Utilities Canadian Utilities Combined (1) Based on 2018 rate base and capital structure for the Canadian and U.S. utilities. 19
Slide 20: Regulatory Outlook
Regulatory Outlook EMPOWERING GROWTH MISO Base ROE Complaints Targeted Rate Case Filing in 2019 Targeted PBR Renewal Filing in 2019 20
Slide 21: Effective Funding Plan
Effective Funding Plan EMPOWERING GROWTH 1% No Discrete Equity 6% 1% $17.3B 23% Required to Fund 5-Year Capital Plan 69% Asset Sales Expected to Provide $1-$2 Billion in Proceeds Net Non- Assumed Common 2019-2023 ATM Program Unutilized Cash from Net Regulated Proceeds Provides Financial Flexibility
Slide 22: Manageable Debt Maturities and Ample Liquidity
Manageable Debt Maturities and Ample Liquidity EMPOWERING GROWTH Fixed-Term Debt Maturities(1) Consolidated Credit Facilities $3.0 $2.5 $3.8 $3.7 5-Year average fixed-term debt maturities ~$940 million $2.0 Billions Billions $1.5 $1.0 $0.5 $1.3 $1.2 2019 2020 2021 2022 2023 June 30/18 Avg. 2019-2023
Slide 23: Committed to Our Investment-Grade Credit Ratings
Committed to Our Investment-Grade Credit Ratings EMPOWERING GROWTH Improved Holdco Debt / Total Debt Credit Rating Agencies Rank 38% Business Risk Profile as Excellent/Strong(1) 33% Funding Plan Supports CFO/Debt > 11% 2018F 2019F 2020F 2021F 2022F 2023F (1) S&P ranks business risk profile as excell
Slide 24: Achieving Our Financial Objectives
Achieving Our Financial Objectives EMPOWERING GROWTH Execute Capital Plan $17.3B 5-Year Capital Plan Maintain Investment-Grade Effective Credit Ratings Financing Plan Deliver 6% Average Annual Dividend Growth 6% Dividend Guidance Extended to 2023 24
Slide 25: Why Invest In Fortis?
Why Invest In Fortis? EMPOWERING GROWTH Highly Regulated Diversified Strong Growth Profile 6% Dividend Guidance Opportunities Beyond Capital Plan 25
Slide 26: Appendix
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Slide 27: Table of Contents
Table of Contents APPENDIX Utility Overview Other ITC Holdings 28 2019-2023 Capital Forecast by Segment 35 UNS Energy 29 2018-2023 Rate Base Forecast by Segment 36 Central Hudson 30 Major Capital Projects 37 FortisBC 31 Opportunities & Risks 38 FortisAlberta 32 Investment-Grade Credit Ratings 39 Oth
Slide 28: ITC Holdings
ITC Holdings A Fortis Company APPENDIX Type of Utility Transmission Regulator FERC Regulatory Model Independent Transmission Company 2018 Formula 11.32-12.16% ROE on 60% equity 2018F Midyear Rate Base $7.7B 5-Year CAGR on Midyear Rate Base(1) 7.0% 2017 Assets % of Total Consolidated 38% Regulated As
Slide 29: UNS Energy
UNS Energy A Fortis Company APPENDIX Tucson Electric UNS Electric UNS Gas Type of Utility Electricity Gas distribution Regulator Arizona Corporation Commission Regulatory Model Cost of service/historical test year 9.75% ROE on 9.5% ROE on 9.75% ROE on 2018 Formula 50% equity 52.83% equity 50.8% equi
Slide 30: Central Hudson
Central Hudson A Fortis Company APPENDIX Type of Utility Gas and Electricity New York State Public Service Regulator Commission Regulatory Model Cost of service on future test year 2018 Formula 8.8% ROE on 48% equity 2018F Midyear Rate Base $1.6B 5-Year CAGR on Midyear Rate Base(1) 8.4% 2017 Assets
Slide 31: FortisBC
FortisBC A Fortis Company APPENDIX FortisBC Gas FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service + PBR 2018 Formula 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity 2018F Midyear Rate Base $4.4B $1.3B 5
Slide 32: FortisAlberta
FortisAlberta A Fortis Company APPENDIX Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR 2018 Formula 8.5% ROE on 37% equity 2018F Midyear Rate Base $3.4B 5-Year CAGR on Midyear Rate Base(1) 5.1% 2017 Assets % of Total Consolidated 10% Regulated As
Slide 33: Other Electric Utilities
Other Electric Utilities Fortis Companies APPENDIX (1) Type of Utility Electricity Island Regulatory and Appeals Newfoundland and Labrador Board of Regulator Ontario Energy Board Commission Commissioners of Public Utilities Regulatory Model Cost of service with incentives Cost of service on future t
Slide 34: Other Electric Utilities (Continued)
Other Electric Utilities (Continued) Fortis Companies APPENDIX (1) Type of Utility Electricity Regulator Utility Regulation and Competition Office Government of the Turks and Caicos Islands Regulatory Model Cost of service 2017 Achieved ROE 10.6% 6.1% 2018F Midyear Rate Base $0.6B $0.4B 5-Year CAGR
Slide 35: 2019-2023 Capital Forecast by Segment
2019-2023 Capital Forecast by Segment APPENDIX Capital Forecast ($millions)(1) 2019-2023 2019 2020 2021 2022 2023 Total Regulated- Independent Electric Transmission ITC 865 878 951 943 861 4,498 Regulated- US Electric & Gas UNS Energy 1,076 875 624 476 476 3,527 Central Hudson 280 268 276 291 274 1,
Slide 36: 2018-2023 Rate Base Forecast by Segment
2018-2023 Rate Base Forecast by Segment APPENDIX (1) Rate Base Forecast ($millions) 3-Year CAGR 5-Year CAGR 2018 2019 2020 2021 2022 2023 to 2021 to 2023 Regulated- Independent Electric Transmission ITC 7,706 8,463 9,148 9,745 10,305 10,824 8.1% 7.0% Regulated- US Electric & Gas UNS Energy 4,850 5,3
Slide 37: Major Capital Projects
Major Capital Projects APPENDIX Capital Plan Total 2019- Expected Year of Significant Capital Projects ($millions) 2018 Forecast 2023 Plan Completion By Project Type ITC Multi-Value Regional Transmission Projects 140 332 Post-2023 Major Capital Projects 23% ITC 34.5 kV to 69 kV Transmission Conversi
Slide 38: Opportunities and Risks
Opportunities and Risks APPENDIX Opportunities • Additional Capital Opportunities Sensitivities • Improving Economic Growth 2019 EPS • Rising Interest Rates – Higher ROE Impact • Low Natural Gas Prices 50 Basis Point Change in $0.05 • Renewable Energy Allowed ROE at ITC • New Technology CAD/USD down
Slide 39: Investment-Grade Credit Ratings
Investment-Grade Credit Ratings APPENDIX Credit Ratings 2019-2023 Plan Supports (1) Baa3 CFO/Debt > 11% (2) A- / BBB+ Improved Holdco Debt / Total Debt BBB (high) Commitment to Investment-Grade Credit Ratings (1) In April 2018, Moody’s issued a credit opinion with no change to the Corporation’s cred
Slide 40: Utility Debt Credit Ratings
Utility Debt Credit Ratings APPENDIX Company ITCTransmission A n/a A1 Michigan Electric Transmission Company (METC) A n/a A1 ITC Midwest A n/a A1 ITC Great Plains A n/a A1 ITC Holdings A-(1) n/a Baa2 Tucson Electric Power A-(1) n/a A3 Central Hudson A- n/a A2(2) FortisBC Energy n/a A A3 FortisBC Ele
Slide 41: Executive Team
Executive Team Jocelyn Perry Jim Reid Phonse Delaney Nora Duke James Laurito Gary Smith David Hutchens EVP, CFO EVP, Chief Legal EVP, Chief Information EVP, Sustainability EVP, Business EVP, Eastern Canadian EVP, Western Utility Officer & Corporate Officer & CHRO Development & Caribbean Operations O