Fortis Inc. · TSX:FTS
Fortis — Non-Deal Roadshow (March 2018)
38 slides from Fortis's roadshow presentation, March 2018
Slide 1: Investor Relations Presentation
Investor Relations Presentation March 2018 2017 INVESTOR DAY 1
Slide 2: Forward-Looking Information
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, colle
Slide 3: Our Strategy – Simple, Effective, Proven
Our Strategy – Simple, Effective, Proven Strategy Leverage the operating model, footprint of our utilities, operating expertise, reputation and financial strength to develop growth opportunities Dividend Growth Dividend Target: Growth Target: Investment-Grade 6% Average Annual 6% Average Annual Cred
Slide 4: High Quality & Diverse Utility Portfolio
High Quality & Diverse Utility Portfolio Highly regulated, predominantly wires and gas LDCs ~97% $48 ~92% (1) (1) Billion in Total Assets (1) REGULATED TRANSMISSION, UTILITY DISTRIBUTION ASSETS & OTHER ASSETS 10 Utility Operations 3.2 Million Utility Customers ~64% (1) EARNINGS FROM THE U.S. (1) As
Slide 5: High Quality & Diverse Utility Portfolio
High Quality & Diverse Utility Portfolio One of the lowest-risk utility businesses in North America Newfoundland & Labrador 2017 INVESTOR DAY 5
Slide 6: Executed Well in 2017
Executed Well in 2017 Reinforcing the Strength of Fortis as a North American Utility Leader Successful integration of ITC Constructive rate case settlement in Arizona Safe and timely restoration of Exceeded $1B in electricity on Turks and Caicos adjusted earnings following Hurricane Irma 6.25% $3.0B
Slide 7: Strong Track Record of Rate Base and EPS Growth
Strong Track Record of Rate Base and EPS Growth Historical Rate Base Growth Aligned with EPS Growth Over the Past 5 Years 2012 – 2017 Rate Base Adjusted Earnings Per Share ($ billions)(1) 3-Year 5-Year $25.4 CAGR CAGR $24.3 Rate base ~22% ~24% Rate base excluding ~8% ~7% $7.2 $6.9 acquisitions of U.
Slide 8: 44 Years of Consecutive Annual Dividend Growth
44 Years of Consecutive Annual Dividend Growth Average annual dividend 73% 73% growth through 2022 70% 66% 66% targeted at ~6% 64% 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F Dividend payout ratio (1) (1) Dividend payout ratio adjusted for non-operating items. 2017 INVESTOR DAY 8
Slide 9: Supporting the Delivery of Superior Total Shareholder Returns
Supporting the Delivery of Superior Total Shareholder Returns (1) • Average annualized total shareholder return over last 5 years Fortis 8.5% S&P/TSX Composite Index 6.9% S&P/TSX Capped Utilities Index 4.6% (1) For the 5-year period ending February 28, 2018. 2017 INVESTOR DAY 9
Slide 10: U.S. Tax Reform Benefits Customers Immediately and Shareholders Over the Long Term
U.S. Tax Reform Benefits Customers Immediately and Shareholders Over the Long Term Lower Corporate Tax Rate Bonus Depreciation Interest Expense (From 35% to 21%) Exemption Deductibility Preserved • One-time remeasurement of • Regulated utilities exempt from • Fortis view: U.S. utility business defer
Slide 11: U.S. Tax Reform Affects Near-Term Cash Flow
U.S. Tax Reform Affects Near-Term Cash Flow U.S. Tax Reform Cash Flow Impacts • Provides opportunity to reduce customer rates at ITC, UNS Energy and Central Hudson • Lower corporate tax rate reduces cash from operations from U.S. utilities in the near-term • Provides opportunity to invest further to
Slide 12: Investment-Grade Credit Ratings and Ample Liquidity
Investment-Grade Credit Ratings and Ample Liquidity Consolidated Credit Facilities 7.0 Credit Ratings 6.0 5.0 Fortis Inc. 4.0 3.7 ($ billions) S&P A- / BBB+ 3.0 3.9 2.0 DBRS BBB (high) (1) 1.0 2.2 Moody’s Baa3 1.1 - 0.0 Dec 31/16 Dec 31/17 Utilized Remaining Capacity (1) Included $500 million non-re
Slide 13: U.S. Tax Reform Improves Rate Base Growth
U.S. Tax Reform Improves Rate Base Growth 3 & 5-Year Rate Base CAGRs Improve by 70bps & 50bps, Respectively Pre-Tax Reform Rate Base(1) Post-Tax Reform Rate Base(2) (billions) (billions) +70bps 3-year CAGR +50bps 5-year CAGR $31.7 $32.4 $30.4 $31.2 $29.6 $30.3 $28.5 $28.9 $26.8 $26.8 $25.4 $25.4 201
Slide 14: Highly-Executable Capital Plan
Highly-Executable Capital Plan 2018-2022 Capital Expenditure Program of ~$14.5 Billion Reaffirmed Capital Expenditures(1) Forecast Forecast (billions) Significant Projects(2) Forecast 2019- Total $14.5 Five-Year Capital Plan ($millions)(1) 2018 2022 2018- 2022 ITC Multi-Value Regional $3.2 169 194 3
Slide 15: Opportunities Beyond the Base Capital Plan
Opportunities Beyond the Base Capital Plan Newfoundland and Labrador Prince MECL & NP: Edward Grid Alberta Island Modernization British Ontario Columbia FortisOntario: Wataynikaneyap Project & Municipal Utility Consolidation Minnesota FortisBC: New York Tilbury, LNG, Gas Infrastructure Iowa Michigan
Slide 16: Additional Opportunities Beyond the Forecast
Additional Opportunities Beyond the Forecast Continuing to Advance the Wataynikaneyap Transmission Power Project • Partnership with First Nations to connect remote communities in Northern Ontario to the grid via 1,800 kilometers of transmission line • Estimated total capital project cost of ~$1.35B,
Slide 17: Regulatory Stability Supports Regulated Asset Base
Regulatory Stability Supports Regulated Asset Base 97% Regulated Utility Assets as at December 31, 2017 3% 16% Remaining Significant Regulatory Decisions Regulated Expected 44% Application/Proceeding Filing Date Utility Decision 37% To be ITC MISO Base ROE Not applicable determined Central Hudson Ge
Slide 18: Our Strategy – Simple, Effective, Proven
Our Strategy – Simple, Effective, Proven Strategy Leverage the operating model, footprint of our utilities, operating expertise, reputation and financial strength to develop growth opportunities Dividend Growth Dividend Target: Growth Target: Investment-Grade 6% Average Annual 6% Average Annual Cred
Slide 19: Appendix
Appendix 2017 INVESTOR DAY 19
Slide 20: Appendix Table of Contents
Appendix Table of Contents Utilities Overview: ITC Holdings Corp. 22 UNS Energy 23 Central Hudson 24 FortisBC Gas and FortisBC Electric 25 FortisAlberta 26 Eastern Canadian Regulated Electric Utilities 27 Caribbean Regulated Electric Utilities 28 Financial Strength: Fortis Delivers Strong Results in
Slide 21: Appendix Table of Contents
Appendix Table of Contents Other: 2018-2022 Five-Year Capital Forecast by Segment 33 Capital Expenditures Exceeding Expectations 34 Utility Debt Credit Ratings 35 Focused on Sustainability and Delivering Cleaner Energy to Customers 36 Expected Upcoming Events 37 Executive Team 38 2017 INVESTOR DAY 2
Slide 22: ITC Holdings Corp. – Transmission
Type of utility Transmission Regulator FERC Regulatory model Independent Transmission Company 2018 Formula 11.32-12.16% ROE on 60% equity 2017 Midyear Rate Base $7.2B 5-Year CAGR on Midyear Rate 5.6% Base (1) 2017 Assets % of total 38% regulated assets (2) 2017 Earnings (3) $272M 2017 Earnings % of
Slide 23: UNS Energy
Tucson UNS UNS Electric Electric 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 2018 Formula 50% equity 52.83% equity 50.8% equity 2017 Midyear Rate Base $4.6B 5-Yea
Slide 24: Central Hudson
Type of utility Gas and electricity Regulator NY State Public Service Commission Regulatory model Cost of service on future test year 2018 Formula 9% ROE on 48% equity 2017 Midyear Rate Base $1.6B 5-Year CAGR on Midyear Rate 9.7% Base (1) 2017 Assets % of total 7% regulated assets (2) 2017 Earnings
Slide 25: FortisBC Gas and FortisBC Electric
FortisBC Gas FortisBC Electric Type of utility Gas distribution Electricity Regulator BC Utilities Commission Regulatory model Cost of service + PBR 2018 Formula 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity 2017 Midyear Rate Base $4.1B $1.3B 5-Year CAGR on Midyear 3.8% 2.6% Rate Base (1) 2017
Slide 26: FortisAlberta
Type of utility Electricity distribution Regulator Alberta Utilities Commission Regulatory model PBR 2018 Formula (1) 8.5% ROE on 37% equity 2017 Midyear Rate Base $3.1B 5-Year CAGR on Midyear Rate 5.7% Base (2) 2017 Assets % of total 10% regulated assets (3) 2017 Earnings $120M 2017 Earnings % of t
Slide 27: Eastern Canadian Regulated Electric Utilities
Eastern Canadian Regulated Electric Utilities (1) Type of utility Electricity Island Regulatory and Appeals Newfoundland and Labrador Board Regulator Ontario Energy Board Commission of Commissioners of Public Utilities Regulatory model Cost of service with incentives Cost of service on future test y
Slide 28: Caribbean Regulated Electric Utilities
Caribbean Regulated Electric Utilities (1) Type of utility Electricity Electricity Government of the Turks and Caicos Regulator Electricity Regulatory Authority Islands Regulatory model Cost of service with historical test year Cost of service with historical test year 2018 Formula 6.75-8.75% Return
Slide 29: Fortis Delivers Strong Results in 2017
Fortis Delivers Strong Results in 2017 Adjusted Earnings Adjusted EPS 1300 300 0.70 2.60 1100 $1,053 $2.53 0.65 $0.63 900 $0.62 2.50 ($ millions) $259 $715 700 0.60 ($) 250 $243 2.40 500 0.55 $2.31 300 2.30 0.50 200 100 0.45 2.20 2016 2017 2016 2017 2016 2017 2016 2017 Q4 Annual Q4 Annual 2017 INVES
Slide 30: Q4 2017 Results by Segment
Q4 2017 Results by Segment Fourth Quarter Variance Analysis by Segment Q4 2017 Q4 2016 Q4 (Adjusted) ($ in millions, excluding EPS) Q4 2017 Adjustment Q4 2016 Adjustment (Adjusted) (Adjusted) Variance Regulated – Independent Electric Transmission ITC Holdings Corp. (1) 91 90 59 22 81 9 Regulated – U
Slide 31: Annual 2017 Results by Segment
Annual 2017 Results by Segment Annual Variance Analysis by Segment Annual Annual Annual 2017 Annual Annual 2016 ($ in millions, excluding EPS) Adjustment Adjustment (Adjusted) 2017 (Adjusted) 2016 (Adjusted) Variance Regulated – Independent Electric Transmission ITC Holdings Corp. 272 91 363 59 22 8
Slide 32: Manageable Debt Maturities
Manageable Debt Maturities(1) Average annual long-term debt maturities 3,000 2,500 2,000 ($millions) 1,500 1,000 500 - Subsidiary Corporate Average annual long-term debt maturities ($millions) 2018 2019 2020 2021 2022 Total Canadian Regulated Electric 136 7 36 31 34 244 U.S. Regulated 334 144 448 37
Slide 33: 2018-2022 Capital Forecast by Segment
2018-2022 Capital Forecast by Segment Fortis 2018F 2018 Capital Forecast (1) ($ millions) Rate Base(1) Regulated–Independent Transmission (ITC) ~$26.8 Billion ITC 863 Regulated-U.S. Electric & Gas UNS Energy 686 Regulated- Central Hudson 275 Regulated- Independent Regulated-Canadian & Caribbean Elec
Slide 34: Capital Expenditures Exceeding Expectations
Capital Expenditures Exceeding Expectations 2013-2017 Business Plan Capex 2014-2018 Business Plan Capex 2015-2019 Business Plan Capex $ Millions $ Millions $ Millions 3,300 3,300 3,300 3,000 3,000 3,000 2,700 2,700 2,700 2,400 2,400 2,400 2,100 2,100 2,100 1,800 1,800 1,800 1,500 1,500 1,500 1,200 1
Slide 35: Utility Debt Credit Ratings
Utility Debt Credit Ratings Company S&P DBRS Moody’s ITCTransmission A n/a A1 Michigan Electric Transmission A n/a A1 Company (METC) ITC Midwest A n/a A1 ITC Great Plains A n/a A1 ITC Holdings Corp. A- n/a Baa2 Tucson Electric Power A- n/a A3 Central Hudson A- n/a A2 FortisBC Gas n/a A A3 FortisBC E
Slide 36: Focused on Sustainability and Delivering Cleaner Energy to Customers
Focused on Sustainability and Delivering Cleaner Energy to Customers 92% T&D Assets • Focused on transmission and distribution Fossil-Fuel • Shift to lower carbon and renewables with 5% Generation, focus on providing safe, reliable and 8% primarily at TEP affordable energy to customers Generation •
Slide 37: Expected Upcoming Events
Expected Upcoming Events Expected Upcoming Earnings Release Dates Q1 – 2018 May 1, 2018 Q2 – 2018 July 31, 2018 Q3 – 2018 November 2, 2018 Q4 – 2018 February 14, 2019 Save the Date – 2018 Investor Days Toronto October 15, 2018 New York October 16, 2018 2017 INVESTOR DAY 37
Slide 38: Executive Team
Barry Perry President & CEO Karl Smith Jim Reid Phonse Delaney Nora Duke James Laurito Gary Smith David Hutchens EVP, CFO EVP, Chief Legal EVP, Chief EVP, Sustainability EVP, Business EVP, Eastern EVP, Western Officer & Corporate Information & CHRO Development Canadian Utility Operations, Secretary