Fortis Inc. · TSX:FTS
Fortis — Q1 2021 Earnings Presentation
29 slides from Fortis's earnings presentation, May 5, 2021
Slide 1: Q1 2021 Earnings Conference Call
Q1 2021 EARNINGS CONFERENCE CALL MAY 5, 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: David Hutchens, President and CEO
DAVID HUTCHENS PRESIDENT AND CEO
Slide 4: Business Update
BUSINESS UPDATE Q1 Highlights: Strong EPS growth with capital investments of $900 million Provided safe and reliable service during the pandemic Advanced ESG initiatives; gender parity expected for Fortis Board Credit ratings affirmed by S&P and upgraded by DBRS Morningstar FERC issues supplemental
Slide 5: 2021 Capital Plan on Track
2021 CAPITAL PLAN ON TRACK • Committed to 2021 $3.8B capital plan $3.8B • Higher forecast capital expenditures expected to offset a lower foreign exchange rate $0.9B • Oso Grande Wind Project completed Q1 2021A 2021F • Construction of Wataynikaneyap Transmission Power Project continues 5
Slide 6: Balanced Capital Plan Supports Low-Risk Growth
BALANCED CAPITAL PLAN SUPPORTS LOW-RISK GROWTH Rate Base 5% 3% 6% 6% 6% $40.3B 8% $30.5B 2021-2025 Capital Plan $19.6 Billion 36% 30% Distribution Transmission 2020A 2025F Transmission supporting clean energy RNG/LNG Clean Generation Traditional Generation (1) Information Technology Other Note: Rate
Slide 7: Update on Opportunities to Expand & Extend Growth
UPDATE ON OPPORTUNITIES TO EXPAND & EXTEND GROWTH • In March, MISO outlined a long-range transmission planning (LRTP) roadmap with a focus on system constraints and configuration options • Potential new, regional projects • Visibility on initial projects could be as early as this year 7
Slide 8: Update on Opportunities to Expand & Extend Growth
UPDATE ON OPPORTUNITIES TO EXPAND & EXTEND GROWTH • In April, the Canada Infrastructure Bank announced that it would fund up to 40% of the ~$1.7B project cost • Project expected to: • Provide ~$100M of annual savings to customers • Up to 2 to 3 million tons of CO2 reductions annually • Project is no
Slide 9: 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 9
Slide 10: Jocelyn Perry, Executive Vice President and CFO
JOCELYN PERRY EXECUTIVE VICE PRESIDENT AND CFO
Slide 11: Q1 Adjusted Results
Q1 ADJUSTED RESULTS Adjusted Earnings Adjusted EPS EPS Mainly Impacted by: Rate base growth $360M $0.77 $0.68 New rates at TEP $315M Impact of losses on retirement investments and FX contracts recognized in March 2020 Foreign exchange Q1 2020 Q1 2021 Q1 2020 Q1 2021 Note: Adjusted Earnings and EPS a
Slide 12: Q1 EPS Drivers
Q1 EPS DRIVERS $0.01 $0.01 ($0.02) $0.02 $0.02 $0.05 $0.77 $0.68 Q1 2020 U.S. U.S. Western Energy Corporate & Foreign Q1 2021 (2) (3) Adjusted Electric & Transmission Canadian Infrastructure Other Exchange Adjusted (1) EPS Gas (ITC) Electric & Gas EPS (1) (1) Non-US GAAP measure (2) Includes higher
Slide 13: Credit Ratings and Liquidity
CREDIT RATINGS AND LIQUIDITY Credit Ratings Credit Facilities ($B) (1) A- 4.0 4.3 A (low) 1.5 1.3 Baa3 Mar. 31, 2021 Dec. 31, 2020 Remaining Capacity Utilized (1)S&P rating reflects the issuer credit rating. Fortis’ unsecured debt rating is BBB+. Ratings were affirmed in April 2021 and outlook revis
Slide 14: Update on Regulatory Proceedings
UPDATE ON REGULATORY PROCEEDINGS • Notice of Proposed Rulemaking (NOPR) on Incentives – In April 2021, FERC issued a supplemental NOPR proposing to eliminate the 50 bps RTO adder for transmission owners that have been RTO members for more than three years; stakeholder comments due in May 2021; initi
Slide 15: Proposed Tax & Infrastructure Plan
PROPOSED TAX & INFRASTRUCTURE PLAN Made in America Tax Plan American Jobs Plan Proposal aims to Increase corporate tax rate to 28% from 21% • Build a resilient grid • Expected to be EPS and cash flow positive • Lower energy bills for Americans • EPS impacts driven by higher tax rate on • Create good
Slide 16: 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 16
Slide 17: Upcoming Events and Expected Earnings Release Dates
Upcoming Events 2021 Annual Meeting May 6, 2021 Expected Earnings Release Dates Q2 2021 July 29, 2021 Q3 2021 October 29, 2021 17
Slide 18: Q1 2021 Earnings Conference Call
Q1 2021 EARNINGS CONFERENCE CALL MAY 5, 2021
Slide 19: Q1 2021 Results by Segment
Q1 2021 RESULTS BY SEGMENT First Quarter Variance Analysis by Segment Adjusted Adjusted Adjusted ($millions, except weighted average shares and EPS) Q1 2021 Adjustment (1) Q1 2020 Adjustment (1) Q1 Q1 2021 Q1 2020 Variance Regulated – Independent Electric Transmission ITC 103 - 103 101 - 101 2 Regul
Slide 20: Q1 Adjusted Earnings Reconciliation
Q1 ADJUSTED EARNINGS RECONCILIATION Non-US GAAP Reconciliation ($millions, except EPS) Q1 2021 Q1 2020 Variance Common Equity Earnings 355 312 43 Adjusting Items: Unrealized loss on mark-to-market of derivatives(1) 5 3 2 Adjusted Common Equity Earnings 360 315 45 Adjusted Basic EPS $0.77 $0.68 $0.09
Slide 21: Q1 Sales and Load Trends
Q1 SALES AND LOAD TRENDS Regulatory Mechanisms 83% 2020 Revenues Protecting Changes in Sales Q1 2021 vs. Q1 2020 Sales Trends From Residential Sales • Peak load flat; decrease in January peak load offset by or Protected by increase in March peak load due to easing of pandemic Regulatory Mechanisms ✓
Slide 22: 2020-2025 Rate Base by Segment
2020-2025 RATE BASE BY SEGMENT (1) Rate Base 5-Year CAGR to ($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 23: 2021-2025 Capital Plan by Segment
2021-2025 CAPITAL PLAN BY SEGMENT (1) Capital Plan 2021-2025 ($millions) 2021F 2022F 2023F 2024F 2025F TOTAL Regulated - Independent Electric Transmission ITC 1,000 1,007 993 1,107 993 5,100 Regulated - US Electric & Gas UNS Energy 749 781 840 853 547 3,770 Central Hudson 306 416 409 346 310 1,787 T
Slide 24: Major Capital Projects
MAJOR CAPITAL PROJECTS Total Incurred to Expected the End of 2021-2025 Year of ($ Millions) 2020 Plan(1) Completion Major Capital Projects ITC Multi-Value Regional Transmission Projects 642(2) 261 2023 15% ITC 34.5 kV to 69 kV Transmission Conversion Project 445 148 Post-2025 UNS Vail-to-Tortolita P
Slide 25: Opportunities to Expand & Extend Growth
OPPORTUNITIES TO EXPAND & EXTEND GROWTH Other Electric ➢ Lake Erie Connector Project ➢ 2020 Integrated Resource Plan ➢ Further develop Tilbury to ➢ Caribbean Utilities: Achieve (~$1.7B) (IRP) outlined TEP’s ambitious position BC as a marine National Energy Policy goal of and realistic sustainability
Slide 26: 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 27: ESG Leadership
ESG LEADERSHIP Continued focus on Carbon emissions reduction Energy target of75% by 2035 Delivery using a 2019 base year Industry leader in Industry recognition for Safety Strong Governance and Reliability grounded in local leadership & independence Focused on More than Gender Diversity $15 million
Slide 28: 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 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 (1
Slide 29: 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 March 31, 2021 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases along with the current portion