Fortis Inc. · TSX:FTS
Fortis — Q4 2022 Earnings Presentation
32 slides from Fortis's earnings presentation, Feb 10, 2023
Slide 1: Q4 2022 Earnings Conference Call
Q4 2022 EARNINGS CONFERENCE CALL February 10, 2023 1
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: David Hutchens, President and CEO
DAVID HUTCHENS President and CEO 3
Slide 4: 2022 Year-in-Review
2022 YEAR-IN-REVIEW DELIVERED CAPITAL Strong EXPENDITURES OF EPS & RATE BASE Safe and GROWTH Reliable Service $4.0B 28% Ranked #1 ~6% INCREASE REDUCTION IN BY GLOBE AND MAIL IN DIVIDENDS PAID GHG EMISSIONS BOARD GAMES SINCE 2019 4 4
Slide 5: Delivering Safe and Reliable Service
DELIVERING SAFE AND RELIABLE SERVICE Average Electricity Customer Managing Controllable Operating Outage Duration (Hours)(1) Costs Below Inflation 3.8 3.8 3.5 3.3 2.3 2.1 1.8 1.9 2.0 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 Fortis compound average growth rate Fortis Electricity Canada
Slide 6: 20-Year Total Shareholder Return
20-YEAR TOTAL SHAREHOLDER RETURN Cumulative 20-Year Total Shareholder Return 751% Average Annual Total Shareholder Returns 459% 1-Year (7.9%) 409% 5-Year 7.2% 10-Year 8.7% 20-Year 11.3% 2002 2006 2010 2014 2018 2022 Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Note: Cumulative 20-ye
Slide 7: Carbon Emissions Reduction on Track
CARBON EMISSIONS REDUCTION ON TRACK 2022 Sustainability Highlights: Achieved 28% GHG Emissions Reduction Since 2019 • Released first TCFD and Climate Report 2019 • Fortis aligned with GRI and SASB • Strong board diversity with 54% female directors and 2 directors identifying as 50% GHG Emissions Red
Slide 8: Highly Executable Capital Plan Supports Low-Risk Rate Base Growth of ~6%
HIGHLY EXECUTABLE CAPITAL PLAN SUPPORTS LOW-RISK RATE BASE GROWTH OF ~6% Capital Plan Rate Base 35% $46.1B Transmission 7.2% $22.3B Growth $34.1B Capital Plan $31.8B 2023-2027 $5.9B 32% Cleaner Energy Distribution Investments(1) Transmission Transmission supporting cleaner energy (4) Renewable energ
Slide 9: Beyond the Plan
BEYOND THE PLAN Inflation Reduction Act • A catalyst for future transmission investments • Renewable generation including TEP’s IRP(1) • Interconnecting renewables to the grid • Electric vehicle infrastructure • Funding for community transition from fossil fuels Climate Adaptation & Grid Resiliency
Slide 10: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 49 YEARS of Consecutive Dividend Increases 4-6% Annual Dividend Growth Guidance through 2027 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 10
Slide 11: Jocelyn Perry, Executive Vice President and CFO
JOCELYN PERRY Executive Vice President and CFO 11
Slide 12: Fourth Quarter Results
FOURTH QUARTER RESULTS Reported EPS $0.77 $0.69 Q4 Adjusted EPS – Key Drivers • Underlying regulated utility growth Q4 2021 Q4 2022 • Higher production in Belize and higher earnings at Aitken Creek • Higher FX Adjusted EPS • Higher Corporate costs and weighted average shares $0.72 $0.63 Q4 2021 Q4 2
Slide 13: Annual Results
ANNUAL RESULTS Reported EPS $2.78 $2.61 Reported EPS $0.17 OVER 2021 2021 2022 Adjusted EPS Adjusted EPS $0.19 OVER 2021 $2.78 $2.59 2021 2022 Note: Adjusted EPS is a Non-U.S. GAAP financial measure. Refer to Slide 20 for the Non-U.S. GAAP reconciliation. 13
Slide 14: Annual EPS Drivers
ANNUAL EPS DRIVERS $0.06 ($0.11) $0.05 $0.03 ($0.04) $0.06 $0.07 $0.07 $2.78 $2.59 2022 Adjusted EPS $0.19 Over 2021 2021 U.S. Western U.S. Electric & Energy Other Foreign Corporate Weighted 2022 (4) Adjusted Transmission Canadian Gas(3) Infrastructure Electric Exchange and Other Average Adjusted EP
Slide 15: Strong Liquidity & Credit Metrics
STRONG LIQUIDITY & CREDIT METRICS Active in Ample Credit Improving Debt Markets Facilities CFO/Debt Metrics(3) 11.7% • Over $3B in long-term debt raised in 2022 $3.8B 11.1% ▪ Weighted average rate of 3.9%(1) $3.2B ▪ Terms ranging from 5-30 years • Includes ~$400M in green debt $2.1B $1.6B ▪ US$170M
Slide 16: Ongoing Regulatory Proceedings
ONGOING REGULATORY PROCEEDINGS ITC Midwest Capital Structure Complaint Denied – In November 2022, FERC denied the complaint filed by the Iowa Coalition for Affordable Transmission (ICAT) seeking to lower ITC Midwest’s equity ratio from 60% to 53%; ICAT filed a request for rehearing with FERC in Dece
Slide 17: Why Invest in Fortis?
WHY INVEST IN FORTIS? Focused on Geographic & 4-6% SAFE, ENERGY Regulatory ANNUAL DIVIDEND WELL-RUN DELIVERY DIVERSITY Growth Guidance Local Utilities LOW-RISK Virtually ESG Growth All INNOVATIVE REGULATED Leader Profile 17
Slide 18: Upcoming Events
UPCOMING EVENTS Expected Earnings Release Dates • Q1 2023 – May 3, 2023 • Q2 2023 – August 2, 2023 Save the Date • Expected Investor Day – September 19, 2023 (Event hosted in St. John’s, NL with webcast) 18
Slide 19: Q4 2022 Earnings Conference Call
Q4 2022 EARNINGS CONFERENCE CALL February 10, 2023 19
Slide 20: Non-U.S. GAAP Reconciliation
NON-U.S. GAAP RECONCILIATION ($MILLIONS, EXCEPT EPS) Q4 2022 Q4 2021 VARIANCE 2022 2021 VARIANCE Adjusted Net Earnings Net Earnings 370 328 42 1,330 1,231 99 Adjusting Items: Unrealized gain on mark-to-market of derivatives(1) (23) (28) 5 (20) (12) (8) Lake Erie Connector project suspension costs(2)
Slide 21: Fourth Quarter Results by Business Unit
FOURTH QUARTER RESULTS BY BUSINESS UNIT Fourth Quarter Earnings Variance Analysis by Business Unit ($MILLIONS, EXCEPT WEIGHTED AVERAGE SHARES ADJUSTED ADJUSTED Q4 2022 ADJUSTMENT (1) Q4 2021 ADJUSTMENT (1) VARIANCE AND EPS) Q4 2022 Q4 2021 Regulated – Independent Electric Transmission ITC 126 - 126
Slide 22: Annual Results by Business Unit
ANNUAL RESULTS BY BUSINESS UNIT Annual Earnings Variance Analysis by Business Unit ($MILLIONS, EXCEPT WEIGHTED AVERAGE SHARES ADJUSTED ADJUSTED 2022 ADJUSTMENT (1) 2021 ADJUSTMENT (1) VARIANCE AND EPS) 2022 2021 Regulated – Independent Electric Transmission ITC 454 19 473 426 - 426 47 Regulated – U.
Slide 23: 2022-2027 Rate Base by Business Unit
2022-2027 RATE BASE BY BUSINESS UNIT Rate Base 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2022A 2023F 2024F 2025F 2026F 2027F 2027 Regulated - Independent Electric Transmission ITC(1) 10.5 11.1 11.9 12.5 13.2 14.1 6.1% Regulated – U.S. Electric & Gas UNS Energy 6.7 7.0 7.4 7.8 8.5 9.1 6.3% Central
Slide 24: 2023-2027 Capital Plan by Business Unit
2023-2027 CAPITAL PLAN BY BUSINESS UNIT Capital Plan(1) 2023-2027 ($MILLIONS) 2023F 2024F 2025F 2026F 2027F TOTAL Regulated - Independent Electric Transmission ITC 1,103 1,177 1,137 1,180 1,220 5,817 Regulated – U.S. Electric & Gas UNS Energy 1,006 690 986 1,027 891 4,600 Central Hudson 384 343 418
Slide 25: Major Capital Projects
MAJOR CAPITAL PROJECTS Major Capital ESTIMATED Projects 2023-2027 COMPLETION 17% PLAN ($ Millions) DATE ITC MISO Long-Range Transmission Plan(1) 923 Post-2027 UNS Energy Renewable Generation(2) UNS Energy Vail-to-Tortolita Transmission Project 417 378 Various 2027 $22.3B FortisBC Tilbury LNG Storage
Slide 26: ESG Leadership
ESG LEADERSHIP Environmental Social • 2050 net-zero direct emissions goal, with • Focus on Indigenous partnerships and business interim targets to reduce GHG emissions • 1,800 KM Wataynikaneyap transmission line Fortis ranked #1 50% by 2030 and 75% by 2035 connecting 17 remote First Nations communit
Slide 27: Q4 Sales Trends
Q4 SALES TRENDS RETAIL ELECTRIC Q4 2022 vs. Q4 2021 SALES SALES TRENDS • Peak load down 5% due to milder weather impacts and N/A economic conditions • Increase primarily due to favourable weather impacts and +3% customer growth; excluding weather impacts, retail sales (1) up 1% • Residential sales d
Slide 28: 2022 Sales Trends
2022 SALES TRENDS RETAIL ELECTRIC 2022 vs. 2021 SALES SALES TRENDS N/A • Peak load up 1% due to favourable weather impacts • Increase primarily due to higher cooling load associated +1% with warmer temperatures and customer growth; (1) Excluding weather impacts, retail sales flat • Residential sales
Slide 29: Limited Pension Exposure
LIMITED PENSION EXPOSURE Defined Benefit Pension Plans • 101% of $3.1B pension benefit obligation funded at December 31, 2022 • Allocation of plan assets at December 31, 2022 ▪ Equities – 48% ▪ Fixed income – 43% ▪ Other – 9% • ~80% of pension assets subject to regulatory mechanisms ▪ UNS pension pl
Slide 30: Long-Term Debt Issuances
LONG-TERM DEBT ISSUANCES Over $3B in Long-Term Debt issued in 2022 • Fortis Inc. – $500M unsecured 7-year 4.43% notes(1) • ITC ▪ US$300M secured mortgage bonds(2) ▪ US$75M secured 30-year 3.05% notes ▪ US$600M unsecured 5-year 4.95% notes(3) • UNS Energy – US$325M unsecured 10-year 3.25% notes • Cen
Slide 31: Debt Maturities
DEBT MATURITIES 10-Year Average: $1.2B $3.0 $2.5 $2.0 billions $1.5 $1.0 $0.5 $- 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F Non-Regulated (1) Regulated Note: Debt as at December 31, 2022 and excludes any new debt issuances during the forecast period. Excludes repayments of finance l
Slide 32: Investment-Grade Credit Ratings
INVESTMENT-GRADE CREDIT RATINGS COMPANY Fortis Inc. A-(1) Baa3 A (low) ITC Holdings Corp. A-(1) 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 Power n/a A2