Slide 1: Investor Presentation Second Quarter 2019
Investor Presentation Second Quarter 2019
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 U.S. Private Securities Litigation Reform Act of 1995, collectively referred to as "forw
Slide 3: Our Strategy
Our Strategy S T R AT E G Y 6% Leverage the operating model, footprint of our utilities, operating expertise, reputation and financial Average Annual Dividend Focus on strength to develop growth Growth Target through Growth opportunities 2023 AREAS OF FOCUS: Utility Capital System Sustainability & C
Slide 4: High Quality & Diverse Utility Portfolio
High Quality & Diverse Utility Portfolio 10 UTILITY OPERATIONS Canada, U.S. & Caribbean 3.3 MILLION UTILITY CUSTOMERS 2.0M Electric & 1.3M Gas ~99% REGULATED UTILITY ASSETS ~93% TRANSMISSION & DISTRIBUTION $ 26.1 BILLION IN MIDYEAR RATE BASE IN 2018 ~65% EARNINGS FROM THE U.S. Note: All information
Slide 5: Fortis Timeline
Fortis Timeline 1885-2012 2013-2016 2017-Current Focused on Canada U.S. Acquisition Strategy Focused on Growth in North America 5
Slide 6: Our Unique Business Model
Our Unique Business Model A HIGHLY REGULATED, GEOGRAPHICALLY DIVERSE, ENERGY DELIVERY COMPANY. 6
Slide 7: Sustainability: It's How We Do Everything
Sustainability: It’s How We Do Everything Ranked Top Decile on Focused on Delivering Governance Matters(1) Cleaner Energy • Women represent • Carbon Intensity • 60% of Head Office Decreased 63% since 2015 • 42% of Board • Renewable Generation • 1/3 of Executive team Expansion in Arizona 93% of our a
Slide 8: Strong Financial Track Record
Strong Financial Track Record 2018 Key Statistics $2.33 $2.47 $2.51 8,800 Employees $2.11 $1.75 $8.4B Revenues 73% 66% 65% 66% 69% $1.1B Net Earnings Strong Rate Base Growth 2014 2015 2016 2017 2018 Adjusted EPS(2) Dividend Payout Ratio(2) 6% 2018 Rate Base Growth 6% 5-Year Historical(3) (1) 5-year
Slide 9: Consistently Delivering Superior Average Annualized Total Shareholder Returns
Consistently Delivering Superior Average Annualized Total Shareholder Returns 1-Year 5-Year 10-Year 20-Year 19.5% 13.2% 12.6% 13.0% 9.6% 5.6% 9.1% 7.0% 16.3% 7.5% 9.9% 9.1% Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Note: For the period ending April 30, 2019. 9
Slide 10: 2019-2023 Business Plan Highlights
2019-2023 Business Plan Highlights $17.3B 6-7% 6% 5-Year Rate Base Average Annual Capital Plan Growth Dividend Growth Target to 2023 10
Slide 11: Capital Plan Supports 6-7% Average Annual Rate Base Growth
Capital Plan Supports 6-7% Average Annual Rate Base Growth (1) $17.3B 5-Year Capital Plan Rate Base(2) $3.7 $35.5 $3.5 $3.6 $33.4 $32.0 $3.2 $3.3 $30.1 $27.9 $26.1 Billions Billions 2019F 2020F 2021F 2022F 2023F 2018A 2019F 2020F 2021F 2022F 2023F Canadian & Caribbean U.S. (1) Capital expenditures a
Slide 12: Executing on Capital Plan Supporting a Cleaner Energy Future
Executing on Capital Plan Supporting a Cleaner Energy Future FortisBC Obtained TEP Oso Grande Energy Conservation & Leave to Construct 247 MW Wind Project Efficiency Program from OEB Increased to ~$370M Once complete: Expected to: Next steps include: • Renewable energy • Decrease CO2 • Environmental
Slide 13: 2019-2023 Capital Forecast by Segment
2019-2023 Capital Forecast by Segment Capital Forecast(1) 2019-2023 ($millions) 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 1,389 Tot
Slide 14: Major Capital Projects
Major Capital Projects AA PP PP EE N NDD II XX Total Expected Year Significant Capital Projects ($millions)(1) 2019 2019-2023 of Capital Plan Forecast By Project Type Plan Completion ITC Multi-Value Regional Transmission Projects 88 332 2023 ITC 34.5 kV to 69 kV Transmission Conversion Project 87 34
Slide 15: Strong 5-Year Rate Base Growth
Strong 5-Year Rate Base Growth(1) 2018 2023F CAGR UNS $4.7B $6.6B 6.9% Growth Mainly ITC $7.8B $10.8B 6.8% Driven by U.S. FortisBC Energy $4.4B $5.9B 6.0% Utility Investments Other(2) $9.2B $12.2B 5.9% Total $26.1B $35.5B 6.3% (1) US dollar-denominated rate base for 2018 is based on the actual avera
Slide 16: Powering Arizona
Powering Arizona 3 ,3 7 7 M W Peak Electricity Demand $3.5B 1 3 PJ $2.9B Natural Gas Sales Volume 685MW By 2030, TEP expects to triple the amountRenewable of wind and solarEnergy power they have today 16
Slide 17: TEP's Focused on Renewables
TEP’s Focused on Renewables TEP’s Resource Transition 30% Renewables by % Renewable Energy 2030 TEP’s Renewable TEP’s Energy Mix Current Target 30% Existing 28% State Standard 15% 13% 2025 2030 2018 2021F (1) Project developed through purchase power agreements. 17
Slide 18: TEP Rate Case Filing
TEP Rate Case Filing Summary of TEP Rate Case Applications 2017 General Rate 2019 Rate Case 2018 Approved Application Requested Application Test Year Test Year June 30, 2015 December 31, 2018 New Rates Effective February 2017 May 1, 2020 Annual Customer Rate Base US$2.0B US$2.7B Rate Increases Non-F
Slide 19: ITC: Pure Play Transmission
ITC: Pure Play Transmission 16,000 Miles of Transmission Legacy Transmission Systems Acquired from State Utilities FERC Forward-Looking Formula Rates 60% ~11% Equity ROEs 19
Slide 20: ITC: Building the Grid of the Future
ITC: Building the Grid of the Future Opportunities Beyond the Plan $4.5 New 580MW and 2GW of Access to MISO multi-value $3.6 projects at capacity Technologies battery storage in Regional upon completion Billions(1) MISO and SPP queues Markets 46GW and 70GW of Grid Hardening of physical Generation as
Slide 21: FortisBC: A Premier Natural Gas & Electric Business
FortisBC: A Premier Natural Gas & Electric Business 1.0M 0.2M Natural Gas Electricity Customers Customers 49,500km 7,300km Natural Gas Electric T&D Lines Lines $3.5B $2.9B FortisBC Electric FortisBC Energy 2018 - 2022 2019 - 2023 Capital Plan Capital Plan 21
Slide 22: FortisBC: Strong Customer Growth & Leading Innovation
FortisBC: Strong Customer Growth & Leading Innovation • Economic fundamentals driving growth with 22,000 gas customers added in 2018 • Natural gas for transportation including ferries • Assessing hydrogen injection • Renewable natural gas option available • Energy conservation and efficiency incenti
Slide 23: 2019 Regulatory Outlook
2019 Regulatory Outlook MISO Base ROE Complaints • FERC recently established new supportive methodology • Awaiting final decision from FERC Notice of Inquiries (NOIs) issued by FERC in March 2019 to seek stakeholder comments on: • Incentive policies for transmission investment • Methodology for esta
Slide 24: Execution of Funding Plan Supports Investment-Grade Credit Ratings
Execution of Funding Plan Supports Investment-Grade Credit Ratings Investment-Grade Credit Ratings Cash From S&P Global A- / BBB+(3) Operations(1) DBRS BBB (high) Capital 68% Moody’s Baa3 Plan Funding CFO/Debt > 11% Regulated (4) Debt 24% & Improved Holdco Other(2) Waneta Debt / Total Debt 2% Asset
Slide 25: Regulated Utility Subsidiaries Have Very Strong Investment-Grade Credit Ratings
Regulated Utility Subsidiaries Have Very Strong Investment-Grade Credit Ratings Company ITC Regulated Subsidiaries A A1 n/a Tucson Electric Power A- A3 n/a Central Hudson A- A2 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 2
Slide 26: Leader in Dividend Growth With 45 Years of Dividend Increases
Leader in Dividend Growth With 45 Years of Dividend Increases (1) 6% guidance generates annual dividend payment of $2.27 in 2023 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19F 21F 23F Actual dividend paid Forecasted dividend payments (1) Based on an annualized dividend of $
Slide 27: Why Invest In Fortis?
Why Invest In Fortis? Well-Run Utilities Virtually All Regulated Highly Diversified Strong Growth Profile 6% Dividend Guidance Opportunities Beyond Capital Plan 27
Slide 28: Appendix
Appendix Second Quarter 2019
Slide 29: Table of Contents
Table of Contents APPENDIX Utility Overview Other ITC Holdings 30 Q1 2019 Business Highlights 37 UNS Energy 31 Q1 2019 Results by Segment 38 Central Hudson 32 Additional Energy Infrastructure Opportunities 39 FortisBC 33 2018-2023 Rate Base Forecast by Segment 40 FortisAlberta 34 Manageable Debt Mat
Slide 30: ITC Holdings
ITC Holdings A Fortis Company APPENDIX Type of Utility Transmission Regulator FERC Regulatory Model Independent Transmission Company 2019 Formula 11.07-12.16% ROE on 60% equity 2019F Rate Base $8.5B 5-Year CAGR on Rate Base(1) 6.8% 2018 Assets % of Total Consolidated 38% Regulated Assets(2) 2018 Ear
Slide 31: 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 2019 Formula 50% equity 52.83% equity 50.8% equi
Slide 32: Central Hudson
Central Hudson A Fortis Company APPENDIX Type of Utility Gas and Electricity Regulator New York State Public Service Commission Regulatory Model Cost of service on future test year 2019 Formula(1) 8.8% ROE on 48% equity 2019F Rate Base $1.8B 5-Year CAGR on Rate Base(2) 8.5% 2018 Assets % of Total Co
Slide 33: 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 2019 Formula 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity 2019F Rate Base $4.5B $1.3B 5-Year CA
Slide 34: FortisAlberta
FortisAlberta A Fortis Company APPENDIX Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR 2019 Formula 8.5% ROE on 37% equity 2019F Rate Base $3.6B 5-Year CAGR on Rate Base(1) 5.1% 2018 Assets % of Total Consolidated Regulated 9% Assets(2) 2018 Earn
Slide 35: 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 36: 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 Cost of service 2018 Achieved ROE 11.62% 8.95% 2019F Rate Base $0.7B $0.4B 5-
Slide 37: Q1 2019 Business Highlights
Q1 2019 Business Highlights APPENDIX Q1 2019 Adjusted EPS of $0.74 Utilities Invested $740M in Q1 TEP Rate Case Filed Closed $1B Waneta Asset Sale Settled Tender Offer for US$400M of the 3.055% 2026 Notes 37
Slide 38: Q1 2019 Results by Segment
Q1 2019 Results by Segment APPENDIX First Quarter 2019 Variance Analysis by Segment ($millions, excluding weighted Adjusted Adjusted Adjusted Q1 2019 Adjustment (1) Q1 2018 Adjustment (1) average shares and EPS) Q1 2019 Q1 2018 Q1 Variance Regulated – Independent Electric Transmission ITC 92 - 92 86
Slide 39: Additional Energy Infrastructure Opportunities
Additional Energy Infrastructure Opportunities APPENDIX FortisOntario: Municipal Utility Consolidation FortisBC: Tilbury, LNG & Gas Infrastructure Maritime Electric & Newfoundland Power: Grid Modernization UNS Energy: Renewables, Storage & Electric Transmission ITC: Lake Erie Connector & Grid Modern
Slide 40: 2018-2023 Rate Base by Segment
2018-2023 Rate Base by Segment APPENDIX (1) Rate Base 3-Year CAGR 5-Year CAGR ($billions) 2018A 2019F 2020F 2021F 2022F 2023F to 2021 to 2023 Regulated - Independent Electric Transmission ITC(2) 7.8 8.5 9.1 9.7 10.3 10.8 7.7% 6.8% Regulated - US Electric & Gas UNS Energy 4.7 5.3 6.0 6.3 6.4 6.6 10.1
Slide 41: Manageable Debt Maturities and Ample Liquidity
Manageable Debt Maturities and Ample Liquidity APPENDIX Fixed-Term Debt Maturities(1) Consolidated Credit Facilities $3.0 $2.5 $3.9 $3.1B 5-Year average fixed-term debt maturities ~$912 million $2.0 Billions $1.5 $1.0 $0.5 $1.9B 2019 2020 2021 2022 2023 Avg. 2019-2023 Fortis Fortis Subsidiaries Util
Slide 42: Expected Upcoming Events
Expected Upcoming Events APPENDIX Upcoming Events Investor Day at ITC September 10, 2019 Expected Upcoming Earnings Release Dates Q2 – 2019 August 2, 2019 Q3 – 2019 November 1, 2019 42
Slide 43: Executive Team
Executive Team APPENDIX Barry Perry President & CEO Jocelyn Perry Jim Reid Nora Duke James Laurito Gary Smith David Hutchens EVP, CFO EVP, Chief Legal EVP, Sustainability EVP, Business EVP, Eastern Canadian EVP, Western Utility Officer & Corporate & CHRO Development & Chief & Caribbean Operations, S