Hydro One Limited · TSX:H
Hydro One — Merger or Acquisition (July 2017)
19 slides from Hydro One's merger presentation, Jul 19, 2017
Slide 1: Hydro One To Acquire Avista: Creating a North American Utility Leader
Hydro One To Acquire Avista Creating a North American Utility Leader July 19, 2017 A preliminary short form prospectus containing important information relating to securities described in this document has not yet been filed with the securities regulatory authorities in each of the provinces and ter
Slide 2: Disclaimers and cautionary statements
Disclaimers and cautionary statements A preliminary short form prospectus containing important information relating to securities described in this document has not yet been filed with the securities regulatory authorities in each of the provinces and territories of Canada. A copy of the preliminary
Slide 3: Disclaimers and cautionary statements (continued)
Disclaimers and cautionary statements (continued) Forward-Looking Information: This presentation contains “forward-looking statements” and “forward-looking information” within the meaning of applicable securities laws of the U.S. and Canada, respectively. Statements that are not historical facts, in
Slide 4: Agenda
Agenda 1 Executive Summary of Transaction 2 Avista Overview 3 Strategic Rationale 4 Commitment to Customers, Communities and Employees 5 Indicative Timeline One of North America’s Largest Electric Utilities 3 TSX: H
Slide 5: Highlights of the transaction
Highlights of the transaction 1 2 3 Increased growth profile Establishes one of North Significant increases in through expansion of Hydro America’s largest regulated stable earnings through fully One into complementary utilities with over C$32 regulated utility operations in and diversified regulate
Slide 6: Transaction details
Transaction details • Offer price of US$53.00 per Avista common share in cash Key transaction ̶ Represents a 24% premium to Avista’s closing price on 18 July, 2017 of US$42.74 terms • Equity purchase price of US$3.4 billion (C$4.4 billion) • Total enterprise value of US$5.3 billion (C$6.7 billion),
Slide 7: Financing plan
Financing plan Planned Transaction Financing Structure • Transaction structure intended to provide Contingent Convertible clarity and minimize execution risk Hydro One Ltd. Debentures ~C$1.4B • Planned financing contemplates a combination of 5-year, 10-year and 30- C$3.4B Proceeds year US$ denominat
Slide 8: Avista overview
Avista overview Business Overview Avista Service Area Service territories across WA, OR, ID, AK, and MT • Avista is a regulated utility headquartered in Spokane, WA Vancouver AB BC SK ─ Avista Utilities, an operating division of Avista supplying Seattle retail electric and natural gas service to cus
Slide 9: Avista financial & operating overview
Avista financial & operating overview (C$ in mm) Financial Highlights 2016 Rate Base 2016 Rate Base by State ID Gas, OR Gas, 2016A WA Gas, 5% 7% 22% Gas 10% AK Revenue $1,824 Electric, 4% $3,877 M $3,877 M WA EBITDA $570 ID Electric, Electric, 49% 78% Electric 25% Net Income $174 Electric Gas 2016 C
Slide 10: Strategic rationale
Strategic rationale • Maintains revenue base as nearly all regulated • Earnings and cash flow accretion in the first full year following close, 1 Building quality excluding transaction costs regulated asset • Increases Hydro One’s total assets pro forma by C$6.8B (26.6%) scale • Establishes top tier
Slide 11: Increased scale reinforces top tier status
Increased scale reinforces top tier status 1 2 3 4 • Hydro One becomes a Top 20 North American investor owned utility with an attractive growth profile Total Enterprise Value1 C$ in billions Top 20 Top 25 160 140 120 100 80 60 40 20 0 Entergy Corporation Sempra Energy FirstEnergy Corp. DTE Energy Co
Slide 12: Sizeable increases in stable regulated earnings
Sizeable increases in stable regulated earnings 1 2 3 4 • Planned pro forma investments of over C$10 billion in T&D through 2021 Pro Forma Capital Expenditures (’17E-’21E) Pro Forma Rate Base (’17E-’21E) C$ in millions C$ in millions $2,746 $26,688 $28,168 $2,506 $2,525 $25,224 $23,981 $4,776 $2,280
Slide 13: Diversification
Diversification 1 2 3 4 (C$ in mm) ’16 Rate Base ’16 Rate Base by Geography ’16 Net Income by Geography Ontario, Ontario, 100% 100% $17,831 $721 Hydro One $17,831 100% Electric AK, 4% OR, 7% 22% Gas Avista Avista $3,877 ID, 30% $3,877 WA, $174 Service 59% Territory 78% Electric OR, 1% WA, Avista, 3%
Slide 14: Regulatory diversity
Regulatory diversity 1 2 3 4 (C$) ON AK WA OR ID Current Rate Base1 $ 17,831 M $ 2,286.6 M $ 1,155.5 M $ 277.6 M $ 157.4 M Allowed ROE 8.78% 9.50% 9.50% 9.40% 12.88% Equity Capitalization 40.00% 48.50% 50.00% 50.00% 53.80% Avista’s assets provide an opportunity to expand and diversify the footprint
Slide 15: Shared culture and values
Shared culture and values 1 2 3 4 • Hydro One will benefit from the team assembled by Scott of well respected industry leaders who have delivered consistent shareholder value • Seasoned leadership team at Avista with an average service of 18 years for the 13 officers Scott Morris • Chairman, Preside
Slide 16: Innovation and knowledge transfer
Innovation and knowledge transfer 1 2 3 4 • Avista is a proven leader in utility innovation with a deep track record of investments in advanced technologies, including energy management solutions ̶ Avista is the founder of Itron, now a global supplier of smart meters with revenues of ~US$2 billion a
Slide 17: Commitment to customers, communities and employees
Commitment to customers, communities and employees • Customer rates in the markets served by Hydro One and Avista will be unaffected by transaction costs • An enhanced transmission and distribution system will achieve operational excellence Customers leading to cost savings over time • Greater finan
Slide 18: Indicative timeline to transaction close
Indicative timeline to transaction close Avista Avista Files Transaction Announcement Shareholder Proxy Statement Approval Transaction Close (2H 2018) Initiate Federal and State Receive Regulatory Approvals Regulatory Filings (State: WUTC, PUCO, IPUC, RCA, PSCSM; Federal: FERC, CFIUS and HSR) Develo
Slide 19: Hydro One To Acquire Avista
Hydro One To Acquire Avista Creating a North American Utility Leader July 19, 2017 One of North America’s Largest Electric Utilities TSX: H