Fortis Inc. · TSX:FTS
Fortis — Q1 2020 Earnings Presentation
31 slides from Fortis's earnings presentation, May 6, 2020
Slide 1: First Quarter 2020 Earnings Conference Call
First Quarter 2020 Earnings Conference Call May 6, 2020
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: Barry Perry, President and Chief Executive Officer
Barry Perry President and Chief Executive Officer
Slide 4: We Thank Our Employees, Customers & Communities
We Thank Our Employees, Customers & Communities 9,000 3.3M ~$4M Employees Customers Donated ~50% Working With Our In Support of The Working in The Field Customers Impacted Communities By COVID-19 We Serve ~50% Working From Home 4
Slide 5: Operating Critical Infrastructure During The Pandemic
Operating Critical Infrastructure During The Pandemic ✓ Essential workers maintaining and operating electricity grids and natural gas networks ✓ Limited impacts on supply chain ✓ Key operational employees sequestered ✓ Social distancing and good hygiene practices in place 5 5
Slide 6: Positioned to Navigate Through COVID-19
Positioned to Navigate Through COVID-19 ✓ 10 Locally Operated Utilities ✓ ~82% of Annual Revenues Protected by Regulatory Mechanisms(1) or From Residential Sales ✓ Strong Liquidity ✓ Foreign Exchange Potential Tailwind from Strengthening U.S. Dollar ✓ Limited Pension Expense Exposure (1) ~63% of ann
Slide 7: ~82% of Revenues Protected by Regulatory Mechanisms or From Residential Sales
~82% of Revenues Protected by Regulatory Mechanisms or From Residential Sales 2019 Revenues EPS Sensitivity 19% Annual EPS Impact ($) UNS Other Electric +/- 1% Residential Sales +/- $0.008 +/- $0.006 18% 63% +/- 1% Commercial and +/- $0.008 +/- $0.004 Industrial Sales (1) Revenues Protected by Regul
Slide 8: Local Economic Overview
Local Economic Overview Regulatory Mechanisms Commentary on Local Economy Protecting Changes in Sales 1st Month into Pandemic Takeaway • Peak load down ~18-25%; Strict Stay-at-Home Order in Michigan ✓ • Auto manufacturers and suppliers considering System Trends: reopening mid-May • Residential sales
Slide 9: 2020 Capital Plan On Track
2020 Capital Plan On Track $4.3B $1.2B $1.7 $0.3 $1.6 $0.6 $0.3 $1.0 (1) (1) Q1 2020A 2020F Regulated - Canadian & Caribbean Electric & Gas Regulated - U.S. Electric & Gas Regulated - Independent Electric Transmission (ITC) (1) US dollar-denominated capital expenditures for Q1 2020 based on USD/CAD
Slide 10: 5-Year Capital Plan & Rate Base Growth Outlook
5-Year Capital Plan & Rate Base Growth Outlook MIDYEAR RATE BASE(1) $38.4B $28.0B $18.8B 5-Year Capital Plan 2019A 2024F Regulated - Canadian & Caribbean Electric & Gas Regulated - U.S. Electric & Gas Regulated - Independent Electric Transmission (ITC) 10 (1) US dollar-denominated rate base for 2019
Slide 11: Our Long-Term Strategy Remains Intact
Our Long-Term Strategy Remains Intact ✓ The safety and health of our employees is the priority ✓ Focused on delivering reliable service to our customers STRATEGY Leverage the operating model, 6% footprint of our businesses, Average Annual operating expertise, reputation Focused on Dividend Growth Ta
Slide 12: Dividend Guidance Supported by Long-Term Growth Strategy
Dividend Guidance Supported by Long-Term Growth Strategy $2.0 6% 46 Years Average Annual Dividend Of Consecutive $1.5 Growth Guidance to 2024 Dividend Increases $1.0 $0.5 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 Dividend Payments 12
Slide 13: First Quarter Highlights
First Quarter Highlights Safe and Reliable Operations (1) Q1 2020 Adjusted EPS of $0.68 FERC Issues Supportive Notice of Proposed Rulemaking on Transmission Incentives S&P and DBRS Affirm Ratings (1) Non-US GAAP measure. 13
Slide 14: Jocelyn Perry, Executive Vice President and Chief Financial Officer
Jocelyn Perry Executive Vice President and Chief Financial Officer
Slide 15: First Quarter Results
First Quarter Results REPORTED EPS ADJUSTED EPS(1) Main Q1 EPS Drivers: +$0.06 Rate Base Growth $0.74 $0.72 $0.68 -$0.06 Q4 2019 Share Issuance $0.67 -$0.06 UNS Energy • Delayed rates at TEP and weather • Decline in value of assets supporting retirement benefits Q1 2019 Q1 2020 Q1 2019 Q1 2020 (1) N
Slide 16: First Quarter EPS Drivers
First Quarter EPS Drivers $0.01 $0.01 ($0.01) $0.02 ($0.06) $0.03 ($0.06) $0.74 $0.68 Q1 2020 adjusted EPS impacted by strong rate base growth, Q4 2019 share issuance and lower earnings at UNS Q1 2019 Western U.S. Central Energy Corporate UNS Weighted Q1 2020 (3) (4) Adjusted Canadian Transmission H
Slide 17: Update on Regulatory Proceedings
Update on Regulatory Proceedings • FERC MISO Return on Equity – No updates to report at this time • NOIs on ROE and Incentives – Transmission Incentive NOPR issued in March 2020 • TEP General Rate Application – Procedural schedule delayed due to COVID-19; decision expected in late 2020 which seeks r
Slide 18: Strong Liquidity Position
Strong Liquidity Position TOTAL LIQUIDITY ($B) ✓ Fortis well positioned on liquidity given 2019 actions • Waneta Asset Sale ~$1B ($1.4) • Q4 Equity Issuance ~$1.2B $5.8 $0.5 $4.9 ✓ ~$5B consolidated credit available on facilities, $4.3 including $1.8B unutilized Corporate credit facilities Billions
Slide 19: Strong Access to Debt Markets & Manageable Maturities
Strong Access to Debt Markets & Manageable Maturities 2020 COMPLETED DEBT ISSUANCES FIXED-TERM DEBT MATURITIES(1) ($B) ✓ ITC $2.0 5-Year Average ~$1.1B Thousands • US$200M term loan • US$75M term loan $1.5 ✓ UNS • US$350M 30-year 4.00% notes $1.0 ✓ Newfoundland Power $0.5 • $100M 40-year 3.61% bonds
Slide 20: Investment-Grade Credit Ratings and Funding Plan Intact
Investment-Grade Credit Ratings and Funding Plan Intact CREDIT RATINGS A-(1) ✓ S&P and DBRS Morningstar Affirmed Ratings in 2020 BBB (high)(2) ✓ Improved Credit Metrics in 2019 ✓ Strong Liquidity Baa3 (1) S&P rating reflects the issuer credit rating. Fortis’ unsecured debt rating is BBB+. Ratings we
Slide 21: COVID-19: Other Financial Implications
COVID-19: Other Financial Implications Defined Benefit Pension Plan Certain U.S. Retirement Benefits ✓ ~46% of assets invested in fixed income ✓ Certain retirement benefits funded through trusts and are subject to market volatility each quarter ✓ ~88% of $3.2B plan assets funded at December 31, 2019
Slide 22: Why Invest In Fortis?
Why Invest In Fortis? Well-Run Sustainability Highly Focused on Strong Virtually 6% Innovative Businesses Leader Diversified Energy Growth All Dividend Delivery Profile Regulated Guidance 22
Slide 23: Expected Upcoming Events
Expected Upcoming Events Upcoming Events 2020 Annual and Special Meeting May 7, 2020 Expected Earnings Release Dates Q2 2020 July 30, 2020 Q3 2020 October 30, 2020 23
Slide 24: First Quarter 2020 Earnings Conference Call
First Quarter 2020 Earnings Conference Call May 6, 2020
Slide 25: Appendix
FORTIS... a Appendix
Slide 26: Q1 2020 Results by Segment
Q1 2020 Results by Segment First Quarter Variance Analysis by Segment Adjusted ($millions, excluding weighted Adjusted Adjusted Q1 2020 Adjustment (1) Q1 2019 Adjustment (1) Q1 average shares and EPS) Q1 2020 Q1 2019 Variance Regulated – Independent Electric Transmission ITC 101 - 101 92 - 92 9 Regu
Slide 27: Q1 Adjusted Earnings Reconciliation
Q1 Adjusted Earnings Reconciliation Non-US GAAP Reconciliation ($millions, except as indicated) Q1 2020 Q1 2019 Variance Common Equity Earnings 312 311 1 Adjusting Item: (1) Unrealized loss on mark-to-market of derivatives 3 5 (2) Adjusted Common Equity Earnings 315 316 (1) Adjusted Basic EPS $0.68
Slide 28: 2019-2024 Rate Base by Segment
2019-2024 Rate Base by Segment (1) Midyear Rate Base 3-Year 5-Year CAGR to CAGR to ($billions) 2019A 2020F 2021F 2022F 2023F 2024F 2022 2024 Regulated - Independent Electric Transmission ITC(2) 8.8 9.5 10.2 10.8 11.4 12.0 7.2% 6.4% Regulated - US Electric & Gas UNS Energy 5.0 5.8 6.1 6.4 6.8 6.9 8.6
Slide 29: 2020-2024 Capital Plan by Segment
2020-2024 Capital Plan by Segment Capital Forecast(1) 2020-2024 ($millions) 2020F 2021F 2022F 2023F 2024F TOTAL Regulated - Independent Electric Transmission ITC 976 987 1,043 1,018 922 4,946 Regulated - US Electric & Gas UNS Energy 1,390 828 710 575 371 3,874 Central Hudson 292 309 359 306 292 1,55
Slide 30: Major Capital Projects
Major Capital Projects(1) Incurred Expected 2020-2024 ($Millions) to End of Year of Plan 2019 Completion ITC Multi-Value Regional Transmission Projects 625(2) 276 2023 Smaller Projects 80% ITC 34.5 to 69 kV Transmission Conversion Project 352(2) 268 Post-2024 UNS Southline Transmission Project - 392
Slide 31: 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 Subsidiaries A A1 n/a 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