Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (October 2019)
55 slides from Fortis's investor presentation, October 2019
Slide 1: Working Together, Powering Growth
WORKING TOGETHER POWERING GROWTH INVESTOR PRESENTATION October 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 Private Securities Litigation Reform Act of 1995 (collectively referred to as "forward-looki
Slide 3: Focused Strategy
FOCUSED STRATEGY STRATEGY Leverage the operating model, 6% footprint of our businesses, operating expertise, reputation Average Annual Dividend and financial strength to execute Focused on Growth Target through 2024 on growth opportunities Growth AREAS OF FOCUS: Capital Customer & Sustainability & S
Slide 4: A Geographically Diverse Energy Delivery Business
A Geographically Diverse Energy Delivery Business 4
Slide 5: High Quality Portfolio Operations
HIGH QUALITY PORTFOLIO 10 OPERATIONS Canada, U.S. & Caribbean 3.3M CUSTOMERS 2.0M Electric & 1.3M Gas ~99% REGULATED UTILITY ASSETS ~93% TRANSMISSION & DISTRIBUTION $28B 2019F RATE BASE ~66% EARNINGS FROM THE U.S. Note: All information as at June 30, 2019 5
Slide 6: Superior Average Annualized Total Shareholder Returns
SUPERIOR AVERAGE ANNUALIZED TOTAL SHAREHOLDER RETURNS 1-Year 5-Year 10-Year 20-Year 38.5% 14.3% 12.5% 14.1% 32.9% 10.4% 9.9% 10.1% 7.0% 5.3% 7.0% 7.1% Fortis S&P/TSX Capped Utilities Index S&P/TSX Composite Index Note: As at September 30, 2019 6
Slide 7: Sustainability: Primarily an Energy Delivery Business
SUSTAINABILITY: PRIMARILY AN ENERGY DELIVERY BUSINESS 93% of our assets relate to electricity poles, wires and natural gas lines that enable a cleaner energy future 7
Slide 8: 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 • FortisBC GHG emission goal set to reduce • 60% of Head Office customer‘s energy use by 30% by 2030 • 42% of Board • TEP will reach 28% renewable power by 2021
Slide 9: Path to Cleaner Energy
PATH TO CLEANER ENERGY Generation Shifting from Fossil Fuel to Solar and Wind Projects Capital Investment in a Electric Vehicle Penetration Green and Resilient Grid Renewable Gas at Energy Efficiency FortisBC CLEANER ENERGY 9
Slide 10: Path to Cleaner Energy: Provincial and State Goals
PATH TO CLEANER ENERGY: PROVINCIAL AND STATE GOALS BC: 80% Greenhouse Gas Reduction by 2050 CLEANBC: 15% Renewable Gas by 2030 NY: 70% Renewables by 2030 NY: 100% Carbon Free by 2040 IL: 25% Renewables by 2026 MI: 15% Renewables by 2021 AZ: 15% Renewables by 2025 MN: 26.5% Renewables by 2025 KS: 20%
Slide 11: Path to Cleaner Energy: ITC Building the Grid of the Future
PATH TO CLEANER ENERGY: ITC BUILDING THE GRID OF THE FUTURE ~16,000 OPPORTUNITIES BEYOND THE PLAN Miles of Transmission & 560 New 3GW and 7GW of battery storage in MISO Access to MISO multi-value projects at capacity upon completion Substations Technologies Regional and SPP queues Markets ~6,600MW G
Slide 12: Path to Cleaner Energy: Arizona Focused on Renewables
PATH TO CLEANER ENERGY: ARIZONA FOCUSED ON RENEWABLES TEP’s RESOURCE TRANSITION Renewable Energy % Renewable Energy Production of 28% by 2021 TEP Target of 30% Renewables by 2030 (1) Projects developed through purchase power agreements 12
Slide 13: Path to Cleaner Energy: TEP Collaborating with Local University
PATH TO CLEANER ENERGY: TEP COLLABORATING WITH LOCAL UNIVERSITY TO CREATE NEW GOALS TEP’s TEP’s Renewable Current Energy Mix Target Developing New Carbon 28% 30% Emission Goals With 13% University of Arizona’s Institute of the Environment 2018 2021 2030 13
Slide 14: Path to Cleaner Energy: Leading Innovation at FortisBC
PATH TO CLEANER ENERGY: LEADING INNOVATION AT FORTISBC Renewable Gas Natural Gas for Road and Electric Vehicles Energy Energy Conservation Conservation && Marine Transportation Efficiency Incentive Program 14
Slide 15: Our New Five-Year Plan
OUR NEW FIVE-YEAR PLAN $18.3B ~7% ~6% CAPITAL RATE BASE DIVIDEND PLAN GROWTH GROWTH GUIDANCE 15
Slide 16: 2020-2024 Capital Plan
2020-2024 CAPITAL PLAN 43% 32% $18.3B Capital Plan(1) TRANSMISSION DISTRIBUTION $4.3 $4.0 $3.6 $3.7 $3.7 $3.2 $3.3 $3.0 Billions 18% 7% OTHER(2) GENERATION 2017A 2018A 2019F 2020F 2021F 2022F 2023F 2024F (1) Capital expenditures are translated at a forecast USD/CAD foreign exchange rate of $1.32. (2
Slide 17: The Shift to Cleaner Energy Driving Incremental Investments
THE SHIFT TO CLEANER ENERGY DRIVING INCREMENTAL INVESTMENTS 5-YEAR CAPITAL PLAN(1) +$300M $1.0B $18.3B +$300M $17.3B +$200M 2019-2023 2020-2024 +$200M FOREIGN EXCHANGE(1) Capital Plan Capital Plan (1) Capital expenditures for 2020-2024 are translated at a forecast USD/CAD foreign exchange rate of $1
Slide 18: 5-Year Capital Plan
5-YEAR CAPITAL PLAN(1) (billions) Regulated 99% ITC $ 4.9 FortisBC 3.8 UNS Energy 3.4 Other Utilities 2.3 FortisAlberta 2.2 $12.9B Central Hudson 1.6 Non-Regulated $1.6B 0.1 Total 2020-2024 Capital Plan $ 18.3 Non-Regulated 1% (1) Capital expenditures are translated at a forecast USD/CAD foreign exc
Slide 19: Low Risk, Highly Executable $18.3B Capital Plan
LOW RISK, HIGHLY EXECUTABLE $18.3B CAPITAL PLAN Sustaining(1) 59% Growth(2) 27% U.S. 54% Canada 41% Smaller Projects 80% Other(3) 14% Caribbean 5% Major Projects(4) 20% (1) Capital expenditures required to ensure continued and enhanced performance, reliability and safety. (2) Capital expenditures re
Slide 20: 2020-2024 Rate Base
2020-2024 RATE BASE(1) $38.4 $36.8 Rate base grows over $34.5 $10B $32.5 $30.7 $28.0 to $38.4B during 5-year period Rate base CAGR of ~7% 2019F 2020F 2021F 2022F 2023F 2024F Regulated - Canadian & Caribbean Electric & Gas Regulated - U.S. Electric & Gas Regulated - Independent Electric Transmission
Slide 21: Strong Rate Base Growth Across Portfolio of Utilities
STRONG RATE BASE GROWTH ACROSS PORTFOLIO OF UTILITIES(1) $2.2B 5-YEAR RATE BASE CAGR OF ~7% RATE BASE $38.4B 8.2% Central Hudson 6.8% FortisBC(2) 6.5% UNS Energy $28.0B 6.4% ITC 5.9% Other Regulated Utilities(3) 2019F 2024F (1) Rate base is translated at a forecast USD/CAD foreign exchange rate of $
Slide 22: Dividend Guidance Supported by Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY GROWTH STRATEGY $2.5 6% 46 YEARS $2.0 AVERAGE ANNUAL OF CONSECUTIVE $1.5 DIVIDEND DIVIDEND INCREASES GROWTH GUIDANCE $1.0 EXTENDED TO 2024 $0.5 7273 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20F 22F 24F Dividend payments Forecast Dividend Pay
Slide 23: Growth Expected to Extend Beyond 2024
GROWTH EXPECTED TO EXTEND BEYOND 2024 FortisOntario: Municipal Utility FortisBC: Consolidation Renewable Gas, Tilbury LNG & Gas Maritime Electric, Infrastructure Central Hudson & Newfoundland Power: Grid Modernization ITC: Lake Erie Connector, Connecting Renewables & Grid Modernization UNS Energy: R
Slide 24: Growth Expected Beyond 2024: Three Largest Utilities
GROWTH EXPECTED BEYOND 2024: THREE LARGEST UTILITIES ACCOUNT FOR 2/3 OF CAPITAL PLAN TODAY’S 5-YEAR $4.9B $3.8B $3.4B CAPITAL PLAN • Generation shift to renewables: • Resiliency: • TEP target of 30% renewables 9 years • Tilbury LNG storage ahead of schedule • Significant renewable capacity and FUTUR
Slide 25: Outperforming Historical Capital Plans
OUTPERFORMING HISTORICAL CAPITAL PLANS 2016 INVESTOR DAY(1) 2017 INVESTOR DAY 2018 INVESTOR DAY $19.3B $18.8B $17.3B $18.2B $14.5B $12.9B 2017-2021 CAPITAL PLAN 2018-2022 CAPITAL PLAN 2019-2023 CAPITAL PLAN ORIGINAL PLAN ACTUAL/CURRENT FORECAST (1) Released in conjunction with Q3 2016 earnings 25
Slide 26: Current Regulatory Outlook
CURRENT REGULATORY OUTLOOK • Final decision pending from FERC on • TEP rate case filed with the ACC • 2020-2024 Multi-Year Rate Plan MISO Base ROE on April 1, 2019 using a filed in March 2019 December 31, 2018 test year • Notice of Inquiries issued by FERC in 2019 on incentive policies for transmiss
Slide 27: 2020-2024 Funding Plan
2020-2024 FUNDING PLAN Cash From Operations(1) 73% Debt Primarily at Operating Utilities 5-Year Subsidiary Balance Sheets Reflects Approved Levels Capital Plan of Improved Credit Metrics $18.3B Maintaining Investment-Grade Credit Ratings Ample Liquidity Debt(2) 24% ATM(3) 3% (1) Cash from operations
Slide 28: Regulated Utilities Have Strong Investment-Grade Credit Ratings
REGULATED UTILITIES HAVE STRONG INVESTMENT-GRADE CREDIT RATINGS Company 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 28
Slide 29: Strengthening Credit Metrics
STRENGTHENING CREDIT METRICS CREDIT RATINGS RECOVERING FROM U.S. TAX REFORM 2018 2019F A- / BBB+ CFO/Debt(1) ~10.5% ~11% Holdco Debt/Total Debt (1) ~39% ~36% BBB (high) Baa3 “Fortis has a very strong business risk profile, which is a key credit 2020-2024 Business Plan strength. More than 95% of its
Slide 30: Five-Year Plan Highlights
FIVE-YEAR PLAN HIGHLIGHTS 5-year 5-year rate base CFO/ Debt capital plan of CAGR of Improves $18.3B ~7% Average ~200 up $1B Annual Dividend Guidance basis points(1) from prior plan of 6% Average annual Rate base extended Holdco Debt/ Total Debt capital expenditure increases to 2024 Improves ~700 of
Slide 31: Why Invest in Fortis?
WHY INVEST IN FORTIS? WELL-RUN HIGHLY FOCUSED ON STRONG VIRTUALLY ESG 6% INNOVATIVE BUSINESSES DIVERSIFIED ENERGY GROWTH ALL LEADER DIVIDEND DELIVERY PROFILE REGULATED GUIDANCE 31
Slide 32: Appendix
FORTIS... APPENDIX
Slide 33: Table of Contents
TABLE OF CONTENTS UTILITY OVERVIEW OTHER ITC Holdings Corp. 34 – 36 2019-2024 Rate Base by Segment 50 UNS Energy 37 – 38 2020-2024 Capital Plan by Segment 51 Central Hudson 39 – 40 Major Capital Projects 52 FortisBC 41 – 43 Manageable Debt Maturities and Ample Liquidity 53 FortisAlberta 44 – 45 Sens
Slide 34: ITC Holdings Corp.
ITC HOLDINGS CORP. Type of Utility Transmission Regulator FERC Regulatory Model Independent Transmission Company 2019 Regulatory Compact 11.07-12.16% ROE on 60% equity 2019F Rate Base(1) $8.8B 5-Year Rate Base CAGR(1) 6.4% 2018 Assets % of Total Consolidated 38% Regulated Assets(2) Multi-Value Regio
Slide 35: Wind Interconnections Driving Growth at ITC
WIND INTERCONNECTIONS DRIVING GROWTH AT ITC Incremental growth driven by : +9% • +$200M to interconnect customers and cleaner energy 9% $4.9B resources to the grid. Five-year plan includes: Wind Interconnections $4.5B • ITC Michigan: 1,500MW • ITC Midwest: 400MW Solar Interconnections • ITC Michigan
Slide 36: ITC's 5-Year Capital Plan
ITC’s 5-YEAR CAPITAL PLAN 2020-2024 CAPITAL(1) $3.3B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, increased Infrastructure capacity, circuit overloads, pocket load growth Investments $600M Major Capital Projects Multi-Value Regional Transmission Projects & 34.5kV
Slide 37: UNS Energy
UNS ENERGY 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 Regulatory Compact 50% equity 52.8% equity 50.8% equity 2019F Rate Ba
Slide 38: UNS Capital Plan
UNS CAPITAL PLAN 2020-2024 CAPITAL(1) Distribution Infrastructure $1.1B Distribution Infrastructure Generation Customer meter infrastructure, grid resiliency, Diversification modernization $3.4B $700M Generation Diversification Reciprocating engines, 250MW Wind $900M Transmission Infrastructure Dire
Slide 39: Central Hudson
CENTRAL HUDSON Type of Utility Gas and Electricity New York State Public Service Regulator Commission Regulatory Model Cost of service on future test year 2019 Regulatory Compact(1) 8.8% ROE on 49% equity(1) 2019F Rate Base(2) $1.9B 5-Year Rate Base CAGR(2) 8.2% 2018 Assets % of Total Consolidated R
Slide 40: Central Hudson Capital Plan
CENTRAL HUDSON CAPITAL PLAN 2020-2024 CAPITAL(1) Distribution Infrastructure $900M Distribution Infrastructure Distribution Automation and Modernization $250M Transmission Infrastructure $1.6B Replacement of Aging Infrastructure $450M IT, General and Other IT, General and Other Transmission Infrastr
Slide 41: FortisBC
FORTISBC FortisBC Gas FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service + PBR 2019 Regulatory Compact 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity 2019F Rate Base $4.5B $1.3B 5-Year Rate Base CAGR 7.
Slide 42: LNG Driving Growth at FortisBC
LNG DRIVING GROWTH AT FORTISBC $3.8B Incremental capital driven by addition of regulated Tilbury 1B +9% • Further expansion driven by developing marine bunkering market $3.5B • Order-in-Council received from the BC Government • Project includes additional liquefaction and piping to a marine jetty •
Slide 43: FortisBC Capital Plan
FORTISBC CAPITAL PLAN 2020-2024 CAPITAL $1.9B Sustainment & Customer Growth Sustainment & Ongoing maintenance requires significant capital investment Customer Growth Includes customer growth and general plant investment $1.1B Major Integrity Projects Inland Gas Upgrades Project Transmission Integrit
Slide 44: FortisAlberta
FORTISALBERTA Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR 2019 Regulatory Compact 8.5% ROE on 37% equity 2019F Rate Base $3.5B 5-Year Rate Base CAGR 4.1% 2018 Assets % of Total Consolidated 9% Regulated Assets(1) (1) Includes goodwill 44
Slide 45: FortisAlberta Capital Plan
FORTISALBERTA CAPITAL PLAN 2020-2024 CAPITAL Distribution Infrastructure $1.9B Distribution Infrastructure Safety & Reliability of Distribution Assets, Meter $2.2B Upgrades, Pole Management Program, Modernization IT, General $300M IT, General and Other and Other 45
Slide 46: Other Electric Utilities
OTHER ELECTRIC UTILITIES (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 test year Cost of service o
Slide 47: Other Electric Utilities (Continued)
OTHER ELECTRIC UTILITIES (CONTINUED) (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(2) $0.7B $0.4B 5-Year Rate Base CAGR(2)
Slide 48: Shift to Cleaner Energy Driving Growth at CUC
SHIFT TO CLEANER ENERGY DRIVING GROWTH AT CUC $600M Incremental capital of $200M driven by grid +50% enhancements, alternative energy projects and utility scale solar projects outlined in Integrated Resource Plan (IRP) $400M • IRP accepted by regulator in early 2019 • Calls for 100MW of renewable en
Slide 49: Other Electric Capital Plan
OTHER ELECTRIC CAPITAL PLAN 2020-2024 CAPITAL Distribution Infrastructure $900M Distribution Infrastructure Newfoundland Power and Caribbean Utilities $600M Generation Diversification IT, General $2.3B Caribbean Utilities Shift to Cleaner Energy and Other $600M Transmission Infrastructure Generation
Slide 50: 2019-2024 Rate Base by Segment
2019-2024 RATE BASE BY SEGMENT (1) Rate Base 3-Year CAGR 5-Year CAGR ($billions) 2019F 2020F 2021F 2022F 2023F 2024F to 2022 to 2024 Regulated - Independent Electric Transmission (2) ITC 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% 6.5%
Slide 51: 2020-2024 Capital Plan by Segment
2020-2024 CAPITAL PLAN BY SEGMENT Capital Forecast(1) 2020-2024 ($millions) 2020F 2021F 2022F 2023F 2024F TOTAL Regulated - Independent Electric Transmission ITC 976 987 1,043 1,018 922 4,946 Regulated - US Electric & Gas UNS Energy 1,160 677 575 526 441 3,379 Central Hudson 292 309 359 306 292 1,55
Slide 52: Major Capital Projects
MAJOR CAPITAL PROJECTS(1) Expected to be Total 2020- Expected Year of ($Millions) Incurred to the 2024 Plan Completion End of 2019 ITC Multi-Value Regional Transmission Projects 646(2) 276 2023 ITC 34.5 kV to 69 kV Transmission Conversion Project 345(2) 268 Post-2024 UNS Southline Transmission Proje
Slide 53: Manageable Debt Maturities and Ample Liquidity
MANAGEABLE DEBT MATURITIES AND AMPLE LIQUIDITY CONSOLIDATED FIXED-TERM DEBT MATURITIES(1) CONSOLIDATED CREDIT FACILITIES 5-year average ~$1.0B $2.0 $4.1 $1.5 $1.0 Billions Billions $0.5 2020F 2021F 2022F 2023F 2024F $1.2 ($millions) 2020F 2021F 2022F 2023F 2024F Total As at June 30, 2019 Canadian an
Slide 54: Sensitivity Exposure
SENSITIVITY EXPOSURE FOREIGN EXCHANGE 2020 EPS Impact For every 5 cent change in the 25 basis point change in ROE at ITC ~$0.03 USD:CAD exchange rate 25 basis point change in ROE at UNS Energy ~$0.02 = 6 cent impact on 2020 EPS 5-Year Rate Base CAGR Additional $1B in Capital Expenditures ~30 BPS 54
Slide 55: Executive Team
EXECUTIVE TEAM Barry Perry President & CEO Jocelyn Perry Jim Reid Nora Duke James Laurito Gary Smith David Hutchens EVP, CFO EVP, CLO & EVP, Sustainability & EVP, Business Development & EVP, Eastern Canadian & EVP, Western Utility Operations, Corporate Secretary CHRO CTO Caribbean Operations Preside