Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (March 2021)
45 slides from Fortis's investor presentation, March 2021
Slide 1: Investor Presentation March 2021
INVESTOR PRESENTATION MARCH 2021
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: A Premium Energy Delivery Business
A PREMIUM ENERGY DELIVERY BUSINESS 93% TRANSMISSION & DISTRIBUTION ASSETS High Quality Portfolio ➢ 10 Regulated Utility Businesses ➢ 3.3M Electric & Gas Customers ➢ ~9,000 Employees ➢ 99% Regulated Utility Assets ➢ $23B Market Capitalization(1) ➢ ~13% Average Annual 20-Year Total Shareholder Return(
Slide 4: Long-Term Strategy
LONG-TERM STRATEGY Leveraging our operating model, geographic and regulatory diversity, operating expertise, reputation and financial strength to deliver a cleaner energy future Proven Dividend Track Focus on Growth Strong ESG Profile Record & Outlook 6% Average Annual Execute on growth Strengthenin
Slide 5: Delivering Safe and Reliable Service
DELIVERING SAFE AND RELIABLE SERVICE All Injury Frequency Rate(1) Average Electricity Customer Outage Duration(2) 3.9 3.8 3.6 3.5 1.78 1.50 1.67 1.45 1.45 2.2 1.38 2.1 2.1 1.9 1.8 1.09 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Fortis USA Bureau of Canadian Electricity Fortis Canadian Electri
Slide 6: Carbon Emissions Reduction Target of 75% by 2035
CARBON EMISSIONS REDUCTION TARGET OF 75% BY 2035 Reduction in Scope 1 Emissions by 2035 Achievable Target Largely Driven by Plan Improves Already Using a 2019 Base Year TEP’s Integrated Resource Plan Low Environmental Footprint Adding Clean Energy Today 2,400 MW Wind and Solar Only 5% of Assets 1,40
Slide 7: ESG Leader
ESG LEADER Continued focus on Carbon emissions reduction Energy target of 75% by 2035 Delivery using a 2019 base year Industry leader in Industry recognition(1) for Safety Strong Governance and Reliability grounded in local leadership & independence Continued focus on More than Gender Diversity $15
Slide 8: Navigating Through COVID-19
NAVIGATING THROUGH COVID-19 9,000 3.3M $5M Essential Employees Customers Donated to Pandemic Relief Initiatives Working to Keep the Working with Customers In Support of the Energy Flowing Impacted by Pandemic Communities We Serve 8
Slide 9: Fourth Quarter Sales and Load Trends
FOURTH QUARTER SALES AND LOAD TRENDS SALES UP ~1% AT UTILITIES NOT PROTECTED BY REGULATORY MECHANISMS Regulatory Mechanisms 83% 2020 Revenues Protecting Changes in Sales Q4 2020 vs. Q4 2019 Sales Trends From Residential Sales • Peak load decreased ~10% mainly due to weather and or Protected by ✓ COV
Slide 10: $19.6B Five-Year Capital Plan
$19.6B FIVE-YEAR CAPITAL PLAN Balanced Capital Over the Five-Year Period $4.0B $4.0B $3.8B $3.9B $3.9B 2021F 2022F 2023F 2024F 2025F Regulated – Independent Electric Transmission Regulated – U.S. Electric & Gas Regulated – Canadian & Caribbean Electric & Gas Non-Regulated – Energy Infrastructure Not
Slide 11: Low Risk, Highly Executable Capital Plan
LOW RISK, HIGHLY EXECUTABLE CAPITAL PLAN Focused on delivering safe, reliable and cost-effective service to customers Sustaining Major U.S. 58% Capital 55% Projects Growth 15% 26% Canada 41% Other Smaller Projects Caribbean 16% 85% 4% 11
Slide 12: Capital Plan Concentrated at Three Largest Utilities
CAPITAL PLAN CONCENTRATED AT THREE LARGEST UTILITIES Capital Plan by Company(1) (billions) ITC $5.1 ➢ Infrastructure ➢ Major integrity projects ➢ Distribution FortisBC 4.4 investments including including Inland Gas investments reliability and Upgrades Project and including customer resiliency upgrad
Slide 13: Opportunities to Expand & Extend Capital Plan
OPPORTUNITIES TO EXPAND & EXTEND CAPITAL PLAN Other Electric ➢ Significant renewable capacity ➢ 2020 Integrated Resource Plan ➢ Further develop Tilbury to ➢ Caribbean Utilities: Achieve and battery storage in MISO (IRP) outlined TEP’s ambitious position BC as a marine National Energy Policy goal of
Slide 14: Low-Risk Rate Base Growth
LOW-RISK RATE BASE GROWTH INCREASES BY ~$10B OVER THE FIVE-YEAR PERIOD Five-Year CAGR by Utility $40.3 $38.3 9.1% Central Hudson $36.4 $34.3 $32.2 $30.5 6.2% UNS Energy (Billions) 6.0% ITC 5.6% FortisBC 4.8% Other Regulated Utilities(2) 2020A 2021F 2022F 2023F 2024F 2025F Regulated – Independent Ele
Slide 15: 6% Average Annual Dividend Growth Guidance to 2025
6% AVERAGE ANNUAL DIVIDEND GROWTH GUIDANCE TO 2025 47 Years of Consecutive Dividend Increases 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 15
Slide 16: Funding Plan & Liquidity
FUNDING PLAN & LIQUIDITY ~$3.5B IN LONG-TERM DEBT ISSUED IN 2020 2021-2025 Funding Plan Credit Facilities ($B) 33% (2) Debt 4.3 4.3 5-Year Capital Plan $19.6B 1.3 1.3 61% 6% (1) Cash From DRIP(3) Dec. 31, 2020 Dec. 31, 2019 Operations Remaining Capacity Utilized (1) Cash from operations after divide
Slide 17: Maintaining Investment-Grade Credit Ratings
MAINTAINING INVESTMENT-GRADE CREDIT RATINGS Credit Ratings Credit Metrics(2) CFO / Debt 12.1% 11.6% 10.4% (1) A- 2018 2019 2020 BBB (high) Holdco Debt / Total Debt 39% Baa3 34% 34% 2018 2019 2020 (1) S&P rating reflects the issuer credit rating. Fortis’ unsecured debt rating is BBB+. (2) Based on Mo
Slide 18: Manageable Exposure to Foreign Exchange
MANAGEABLE EXPOSURE TO FOREIGN EXCHANGE Earnings and Capital Plan • ~66% of operating earnings(1) from U.S. and Caribbean • ~60% of $19.6B five-year capital plan from U.S. and Caribbean • Five-year capital plan translated at forecast USD:CAD FX rate of $1.32 Hedging Activities • US dollar-denominate
Slide 19: Constructive Regulatory Outcome at TEP
CONSTRUCTIVE REGULATORY OUTCOME AT TEP NEW RATES EFFECTIVE JANUARY 1, 2021 2017 Rate Case 2020 Rate Case Newly Approved Trackers Reducing Risk: Settlement Decision Test Year June 30, 2015 December 31, 2018 Tax Expense Adjustor Mechanism Rate Base US$2.0B US$2.7B • Allows for flow through of income t
Slide 20: Ongoing Regulatory Proceedings
ONGOING REGULATORY PROCEEDINGS • Notice of Proposed Rulemaking (NOPR) on Incentives – Transmission Incentive NOPR issued in March 2020; comments filed in July 2020; awaiting next steps • General Rate Application – Rate case filed in August 2020 with NYPSC requesting an electric rate increase of US$3
Slide 21: Why Invest in Fortis?
WHY INVEST IN FORTIS? Geographic Focused on Low-Risk Virtually 6% Well-Run ESG Innovative & Regulatory Energy Growth All Dividend Businesses Leader Diversity Delivery Profile Regulated Guidance 21
Slide 22: Appendix
FORTIS APPENDIX FORTIS..
Slide 23: Table of Contents
TABLE OF CONTENTS 1. ITC Holding Corp. 24-27 7. 2020-2025 Rate Base by Segment 40 2. UNS Energy 28-30 8. 2021-2025 Capital by Segment 41 3. Central Hudson 31-32 9. Major Capital Projects 42 4. FortisBC 33-34 10. Investment-Grade Credit Ratings 43 5. FortisAlberta 35-36 11. Manageable Debt Maturities
Slide 24: ITC Holdings Corp.
ITC HOLDINGS CORP. Type of Utility Transmission Regulator FERC Cost of Service with FERC Regulatory Model Formula Rates 10.77-11.41% ROE on Current Regulatory Construct 60% equity Cost-based, forward-looking Significant Regulatory Features formula rates with annual true- up 2021F Rate Base(1) $9.9B
Slide 25: ITC Capital Investment Overview $5.1B
ITC CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL (1) $3.6B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, Infrastructure increased capacity, circuit overloads, pocket load Investments growth $700M New Interconnections Supports economic development, load interconne
Slide 26: ITC Building the Grid of the Future
ITC BUILDING THE GRID OF THE FUTURE OPPORTUNITIES BEYOND THE PLAN New Generation Access to Grid Technologies Shifts Regional Markets Security 4 GW and 9 GW of 78 GW and 105 GW Regional transmission Hardening of battery storage in additional renewable necessary to facilitate telecommunications MISO(1
Slide 27: Generation Portfolio Changes & New Interconnections
GENERATION PORTFOLIO CHANGES & NEW INTERCONNECTIONS POTENTIAL INCREMENTAL OPPORTUNITIES AT ITC MISO Member Announced Generation Mix (% of MWh) MISO Generator Interconnection Queue 2019 2030 Gas 29% Coal 39% Gas Coal 32% 23% Wind 18% Nuclear Nuclear 17% Wind Other 11% Other Solar 3% 9% 3% 16% Source:
Slide 28: UNS Energy
UNS ENERGY Tucson UNS Electric UNS Gas Electric Gas Type of Utility Electricity Distribution Arizona Corporation Commission Regulator & FERC Cost of service/historical test year & Regulatory Model FERC formula transmission rates 9.15% ROE 9.50% ROE 9.75% ROE Current Regulatory on 53.0% on 52.8% on 5
Slide 29: UNS Capital Investment Overview $3.8B
UNS CAPITAL INVESTMENT OVERVIEW (1) 2021-2025 CAPITAL $1.3B Distribution Infrastructure Customer meter infrastructure, grid resiliency, modernization Distribution Transmission Infrastructure Infrastructure $1.1B Transmission Infrastructure Vail-to-Tortolita, new substations $3.8B $800M Generation Di
Slide 30: Arizona Focused on Renewables
ARIZONA FOCUSED ON RENEWABLES TEP Integrated Resource Plan filed in June 2020. With this IRP, TEP expects to have coal-free generation mix by 2032 and TEPs power will be more than 70% renewable by 2035 ~460 MW of New Wind, 3,400 MW Planned Additions of Solar and Storage Wind, Solar and Storage 2020-
Slide 31: Central Hudson
CENTRAL HUDSON Type of Utility Gas and Electricity New York State Public Service Regulator Commission Regulatory Model Cost of service on future test year Current Regulatory Compact 8.8% ROE on 50% equity Significant Regulatory Features Revenue decoupling 2021F Rate Base(1) $2.3B 5-Year Rate Base CA
Slide 32: Central Hudson Capital Investment Overview $1.8B
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL(1) Distribution Infrastructure $1.0B Distribution Infrastructure Distribution automation and modernization $1.8B $240M Transmission Infrastructure Replacement of aging infrastructure $550M IT, General and Other Modernization Building the W
Slide 33: FortisBC
FORTISBC FortisBC FortisBC Gas Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service with incentive mechanisms Current Regulatory Compact 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity Multi-year rates with revenue
Slide 34: FortisBC Capital Investment Overview $4.4B
FORTISBC CAPITAL INVESTMENT OVERVIEW $2.1B Sustainment & Customer Growth 2021-2025 CAPITAL Ongoing maintenance requires significant capital investment Includes customer growth and general plant investment Sustainment & Customer Growth $1.2B Major Integrity Projects Inland Gas Upgrades Project Transm
Slide 35: FortisAlberta
FORTISALBERTA Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR Current Regulatory Compact 8.5% ROE on 37% equity ~85% of revenue derived Significant Regulatory from fixed-billing Features determinants 2021F Rate Base $3.8B 5-Year Rate Base CAGR 2.9
Slide 36: FortisAlberta Capital Investment Overview $2.0B
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL Distribution Infrastructure $1.6B Distribution Infrastructure Safety & reliability of distribution assets, meter upgrades, pole management program, modernization $2.0B $400M IT, General and Other IT, General and Other 36
Slide 37: Other Electric Utilities
OTHER ELECTRIC UTILITIES (1) Type of Utility Electricity Newfoundland and Labrador Island Regulatory and Appeals Regulator Board of Commissioners of Public Ontario Energy Board Commission Utilities Regulatory Model Cost of service on future test year Cost of service on future test year Cost of servi
Slide 38: Other Electric Utilities (Continued)
OTHER ELECTRIC UTILITIES (CONTINUED) (1) Type of Utility Electricity Government of the Turks and Caicos Regulator Utility Regulation and Competition Office Islands Regulatory Model Cost of service Cost of service 2020 Achieved ROE(2) 9.0% 4.1% 2021F Rate Base(3) $0.8B $0.5B 5-Year Rate Base CAGR 8.8
Slide 39: Other Electric Capital Investment Overview $2.4B
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW 2021-2025 CAPITAL(1) Distribution $900M Distribution Infrastructure Newfoundland Power and Caribbean Utilities Infrastructure $650M Generation Diversification $2.4B Caribbean Utilities shift to cleaner energy IT, General and Other Generation $650M Transmiss
Slide 40: 2020-2025 Rate Base by Segment
2020-2025 RATE BASE BY SEGMENT (1) Rate Base 5-Year CAGR to ($billions) 2020A 2021F 2022F 2023F 2024F 2025F 2025 Regulated - Independent Electric Transmission ITC(2) 9.5 9.9 10.6 11.3 11.9 12.5 6.0% Regulated - US Electric & Gas UNS Energy 5.7 6.2 6.7 7.0 7.3 7.6 6.2% Central Hudson 2.1 2.3 2.5 2.7
Slide 41: 2021-2025 Capital by Segment
2021-2025 CAPITAL BY SEGMENT (1) Capital Plan 2021-2025 ($millions) 2021F 2022F 2023F 2024F 2025F TOTAL Regulated - Independent Electric Transmission ITC 1,000 1,007 993 1,107 993 5,100 Regulated - US Electric & Gas UNS Energy 749 781 840 853 547 3,770 Central Hudson 306 416 409 346 310 1,787 Total
Slide 42: Major Capital Projects
MAJOR CAPITAL PROJECTS Total Incurred to Expected the End of 2021-2025 Year of ($ Millions) 2020 Plan(1) Completion Major ITC Multi-Value Regional Transmission Projects 642(2) 261 2023 Capital ITC 34.5 kV to 69 kV Transmission Conversion Project 445 148 Post-2025 Projects 15% UNS Vail-to-Tortolita P
Slide 43: Investment-Grade Credit Ratings
INVESTMENT-GRADE CREDIT RATINGS Company Fortis Inc. A-(1) Baa3 BBB (High) ITC Holdings Corp. A-(1) Baa2 n/a ITC Regulated A A1 n/a Subsidiaries TEP A- A3 n/a Central Hudson A- A3 n/a FortisBC Energy n/a A3 A FortisBC Electric n/a Baa1 A (low) FortisAlberta A- Baa1 A (low) Newfoundland Power n/a A2 A
Slide 44: Manageable Debt Maturities
MANAGEABLE DEBT MATURITIES 5-Year Average ~$0.9B 2.0 1.5 $ billions 1.0 0.5 - 2021F 2022F 2023F 2024F 2025F Fortis Fortis Subsidiaries Note: Debt as at December 31, 2020 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases along with the current porti
Slide 45: Strong Leadership Team
STRONG LEADERSHIP TEAM David Hutchens President & CEO Fortis Inc. Executives Nora Duke James Laurito Jocelyn Perry Jim Reid Gary Smith EVP, Sustainability & EVP, Business EVP, CFO EVP, CLO & EVP, Eastern Canadian & CHRO Development & CTO Corporate Secretary Caribbean Operations Linda Apsey Roger Dal