Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (August 2022)
45 slides from Fortis's investor presentation, August 2022
Slide 1: Investor Presentation August 2022
INVESTOR PRESENTATION August 2022
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: A Premium Energy Delivery Business
A PREMIUM ENERGY DELIVERY BUSINESS 93% Transmission & Distribution Assets HIGH QUALITY PORTFOLIO 10 Regulated Utility Businesses 3.4M Electric & Gas Customers 9,100 Employees 99% Regulated Utility Assets ~$29B Market Capitalization(1) ~13% Average Annual 20-Year Total Shareholder Return(1) $31.1B 20
Slide 4: Driving Sustainable Growth
OUR VISION & STRATEGY A PREMIUM NORTH AMERICAN UTILITY DELIVERING A CLEAN ENERGY FUTURE DRIVING Operational Excellence Financial Strength SUSTAINABLE Diversified Regulated Portfolio GROWTH Substantially Autonomous Business Model Strong Governance 4
Slide 5: Focused on Reliability & Affordability
FOCUSED ON RELIABILITY & AFFORDABILITY AVERAGE ELECTRICITY CUSTOMER MANAGING CONTROLLABLE OUTAGE DURATION (HOURS)(1) OPERATING COSTS BELOW INFLATION 3.9 3.8 3.5 3.3 2.2 2.3 2.1 1.8 1.9 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 Fortis Electricity Canada and U.S. Energy Fortis compound av
Slide 6: Average Annual Total Shareholder Return
AVERAGE ANNUAL TOTAL SHAREHOLDER RETURN 10.9% -0.1% 1-YEAR 8.9% 16.1% 9.9% 8.6% 5-YEAR 12.0% 7.1% 10.1% 8.6% 10-YEAR 9.3% 9.7% 12.8% 8.5% 20-YEAR 9.8% 11.2% Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Fortis Peers Note: TSR as at July 31, 2022. 6
Slide 7: Executing on a Clean Energy Future
EXECUTING ON A CLEAN ENERGY FUTURE 2022 Sustainability Report Highlights: PATHWAY TO 2050 NET-ZERO TARGET 2019 • Over 35 new key performance indicators Achieved 20% GHG Emissions Reduction Since 2019 • Fortis aligned with GRI, TCFD and SASB • Strong board diversity with 54% female 2021 50% GHG Emiss
Slide 8: ESG Leadership
ESG LEADERSHIP ENVIRONMENTAL SOCIAL GOVERNANCE • 93% energy delivery assets • Strong safety culture and commitment to • Independent chair; 12 of 13 directors are employee well-being independent • GHG emissions reduction target of 75% by 2035 compared to 2019 levels and net zero by 2050 • More than $
Slide 9: Highly Executable Capital Plan Supports Low-Risk Rate Base Growth of ~6%
HIGHLY EXECUTABLE CAPITAL PLAN SUPPORTS LOW-RISK RATE BASE GROWTH OF ~6% CAPITAL PLAN RATE BASE $41.6B 30% $31.1B 7% $20B 2022-2026 33% Capital Plan 6% $3.8B 6% Cleaner Energy Investments(1) 4% 5% 9% Distribution Transmission Transmission supporting cleaner energy RNG/LNG Clean Generation Traditiona
Slide 10: Long Capex Runway
LONG CAPEX RUNWAY Responding to stakeholder expectations Business development in existing footprint Connect more renewable generation Prepare grid for additional to the grid electrification Build more renewable generation Invest in technology to ensure security and improve service and efficiency Pro
Slide 11: Update on Opportunities to Expand & Extend Growth
UPDATE ON OPPORTUNITIES TO EXPAND & EXTEND GROWTH MISO LONG-RANGE TRANSMISSION PLAN • In July 2022, the MISO Board approved the first tranche of projects, with total associated transmission investments estimated at ~US$10B • ITC estimates transmission investments of US$1.4-$1.8B through 2030 associa
Slide 12: Dividend Guidance Supported by Long-Term Growth Strategy
DIVIDEND GUIDANCE SUPPORTED BY LONG-TERM GROWTH STRATEGY 6% Average Annual Dividend Growth Guidance through 2025 48 YEARS of Consecutive Dividend Increases 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 12
Slide 13: Regulatory Update
REGULATORY UPDATE NOTICE OF PROPOSED RULEMAKING (NOPR) ON INCENTIVES – In April 2021, FERC issued a supplemental NOPR proposing to eliminate the 50-bps regional transmission organization (RTO) adder for transmission owners that have been RTO members for more than three years; stakeholder comments fi
Slide 14: TEP General Rate Application
TEP GENERAL RATE APPLICATION APPLICATION SUPPORTS TEP’S CLEAN REVENUE REQUIREMENT (US$M) ENERGY TRANSITION AND CONTINUED DELIVERY OF SAFE AND RELIABLE SERVICE Clean Energy Transition Springerville 2019 Rate Case 2022 Rate Case Depreciation San Juan Oso Raptor Retirement Application Decision Applicat
Slide 15: Funding Plan Supports Investment-Grade Credit Ratings
FUNDING PLAN SUPPORTS INVESTMENT-GRADE CREDIT RATINGS FUNDING PLAN CREDIT RATINGS • Capital plan funded primarily with cash from operations and debt at regulated utilities A-(1) • Equity funding mainly through DRIP Baa3 No discrete equity required to fund capital plan • Capital structure expected
Slide 16: Strong Liquidity
STRONG LIQUIDITY Corporation’s $1.3B revolving-term OVER $1.5B IN DEBT RAISED YTD CREDIT FACILITIES credit facility amended in May 2022 to include sustainability-linked targets • ITC • Board diversity US$150M 30-year 2.93% bonds • GHG Emissions US$75M 30-year 3.05% notes • UNS Energy $3.9B US$
Slide 17: Why Invest in Fortis?
WHY INVEST IN FORTIS? Focused on Geographic & 6% DIVIDEND WELL-RUN ENERGY DELIVERY Regulatory DIVERSITY Growth Guidance Local Utilities LOW-RISK Virtually ESG Growth Profile All REGULATED INNOVATIVE Leader 17
Slide 18: Appendix
APPENDIX FORTIS
Slide 19: Table of Contents
TABLE OF CONTENTS ITC HOLDINGS CORP. 20-22 UNS ENERGY 23-26 CENTRAL HUDSON 27-28 FORTISBC 29-30 FORTISALBERTA 31-32 OTHER ELECTRIC UTILITIES 33-35 2021-2026 RATE BASE BY BUSINESS UNIT 36 2022-2026 CAPITAL PLAN BY BUSINESS UNIT 37 MAJOR CAPITAL PROJECTS 38 COMMODITY & SUPPLY CHAIN CONSIDERATIONS 39 I
Slide 20: ITC Holdings Corp.
ITC HOLDINGS CORP. Type of Utility Transmission Regulator FERC Regulatory Model Cost of Service with FERC Formula Rates Current Regulatory Construct 10.77-11.41% ROE on 60% equity Cost-based, forward-looking formula rates Significant Regulatory Features with annual true-up 2022F Rate Base(1) $10.1B
Slide 21: ITC Capital Investment Overview
ITC CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL(1) $3.6B Infrastructure Investments Rebuild, reliability, resiliency, system efficiencies, increased Infrastructure capacity, circuit overloads, pocket load growth Investments $800M New Interconnections Supports economic development, load interconnec
Slide 22: Opportunities Beyond the Plan
OPPORTUNITIES BEYOND THE PLAN NEW TECHNOLOGIES GENERATION SHIFTS ACCESS TO GRID SECURITY REGIONAL MARKETS 13 GW and 16 GW 105 GW and 123 GW Regional transmission Hardening of secure fibre of battery storage in additional renewable necessary to accommodate networks, physical and each of MISO(1) and c
Slide 23: UNS Energy
UNS ENERGY Tucson UNS Electric UNS Gas Electric Gas Type of Utility Electricity Distribution Arizona Corporation Commission Regulator & FERC Cost of service/historical test year & Regulatory Model FERC formula transmission rates 9.15% ROE on 9.50% ROE on 9.75% ROE on Current Regulatory Construct(1)
Slide 24: UNS Capital Investment Overview
UNS CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL(1) $1.5B Distribution Infrastructure Distribution Customer meter infrastructure, grid resiliency, modernization Infrastructure Transmission Infrastructure $900M Transmission Infrastructure $3.9B Vail-to-Tortolita, new substations $1.0B Generation Div
Slide 25: Arizona Focused on Renewables
ARIZONA FOCUSED ON RENEWABLES TEP INTEGRATED RESOURCE PLAN FILED IN 2020 3,400 MW Planned Additions of Coal-free Wind, Solar and Storage 250 MW 100 MW 99 MW generation mix by 2032 Oso Grande Wilmot Solar (1)(2) Borderlands(1) >70% renewable power by 2035 2021 2022-2035 Over 50 million tonnes of CO2
Slide 26: Reliable and Affordable Service During Clean Energy Transition
RELIABLE AND AFFORDABLE SERVICE DURING CLEAN ENERGY TRANSITION TEP’s goal is to transition to a cleaner grid while maintaining affordable rates reliable service for our customers 1,073 MW Planned Coal 3,400 MW of Planned Wind, Retirements by 2032 Steel for Fuel Transition Solar and Storage Resources
Slide 27: Central Hudson
CENTRAL HUDSON Type of Utility Electric and Gas Transmission & Distribution Regulator New York State Public Service Commission Regulatory Model Cost of service on future test year Current Regulatory Construct(1) 9.0% ROE on 49% equity Significant Regulatory Features Revenue decoupling 2022F Rate Bas
Slide 28: Central Hudson Capital Investment Overview
CENTRAL HUDSON CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL(1) $1.0B Distribution Infrastructure Distribution Distribution automation and modernization Infrastructure $200M Transmission Infrastructure $1.7B Replacement of aging infrastructure $500M IT, General and Other Modernization Transmission B
Slide 29: FortisBC
FORTISBC FortisBC Gas FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service with incentive mechanisms Current Regulatory Construct 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity Multi-year rates with reven
Slide 30: FortisBC Capital Investment Overview
FORTISBC CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL $2.1B Sustainment & Customer Growth Ongoing maintenance requires significant capital investment Sustainment Includes customer growth and general plant investment & Customer Growth $1.1B Major Integrity Projects Inland Gas Upgrades Project Transm
Slide 31: FortisAlberta
FORTISALBERTA Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR Current Regulatory Construct 8.5% ROE on 37% equity ~85% of revenue derived from fixed-billing Significant Regulatory Features determinants 2022F Rate Base $4.0B 5-Year Rate Base CAGR (
Slide 32: FortisAlberta Capital Investment Overview
FORTISALBERTA CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL $2.1B Distribution Infrastructure Distribution Safety & reliability of distribution assets, meter Infrastructure upgrades, pole management program, modernization $400M IT, General and Other $2.5B IT, General and Other 32
Slide 33: Other Electric Utilities
OTHER ELECTRIC UTILITIES (1) Type of Utility Electricity Newfoundland and Labrador Board of Regulator Island Regulatory and Appeals Commission Ontario Energy Board Commissioners of Public Utilities Regulatory Model Cost of service on future test year Cost of service on future test year Cost of servi
Slide 34: 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 2021 Achieved ROE 10.2% 8.5% 2022F Rate Base(2) $0.8B $0.5B 5-Year Rate Base CAGR (2022
Slide 35: Other Electric Capital Investment Overview
OTHER ELECTRIC CAPITAL INVESTMENT OVERVIEW 2022-2026 CAPITAL(1) $900M Distribution Infrastructure Distribution Newfoundland Power and Caribbean Utilities Infrastructure $750M Generation Diversification Caribbean Utilities shift to cleaner energy IT, General $2.3B Generation and Other Diversification
Slide 36: 2021-2026 Rate Base by Business Unit
2021-2026 RATE BASE BY BUSINESS UNIT (1) RATE BASE 5-YEAR CAGR to ($BILLIONS, EXCEPT FOR CAGR) 2021A 2022F 2023F 2024F 2025F 2026F 2026 Regulated - Independent Electric Transmission ITC(2) 9.5 10.1 11.0 11.6 12.1 12.6 5.9% Regulated – U.S. Electric & Gas UNS Energy 5.8 6.5 6.7 6.9 7.4 8.0 6.4% Centr
Slide 37: 2022-2026 Capital Plan by Business Unit
2022-2026 CAPITAL PLAN BY BUSINESS UNIT (1) CAPITAL PLAN 2022-2026 ($MILLIONS) 2022F 2023F 2024F 2025F 2026F TOTAL Regulated - Independent Electric Transmission ITC 998 999 1,010 998 1,000 5,005 Regulated – U.S. Electric & Gas UNS Energy 704 810 924 729 725 3,892 Central Hudson 344 335 311 331 349 1
Slide 38: Major Capital Projects
MAJOR CAPITAL PROJECTS TOTAL INCURRED ESTIMATED 2022-2026 TO THE END OF COMPLETION PLAN(1) ($ MILLIONS) 2021 DATE ITC Multi-Value Regional Transmission Projects 710(2) 154 2023 ITC 34.5 to 69kV Transmission Conversion Project 482 145 Post-2026 Major UNS Vail-to-Tortolita Project 21 240 2025 Capital
Slide 39: Commodity & Supply Chain Considerations
COMMODITY & SUPPLY CHAIN CONSIDERATIONS HIGHER NATURAL GAS PRICES • Impacts fuel and power costs at electric utilities and gas supply costs for gas utilities • Recovered from customers through regulatory mechanisms • Causes upward bill pressure MITIGATING CUSTOMER IMPACTS • Promoting energy efficien
Slide 40: 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 Subsidiaries A A1 n/a TEP A- A3 n/a Central Hudson A- Baa1 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
Slide 41: Q2 Sales Trends
Q2 SALES TRENDS RETAIL ELECTRIC Q2 2022 vs. Q2 2021 SALES SALES TRENDS N/A • Peak load up 7% mainly due to favourable weather impacts • Decrease primarily due to lower cooling load due to cooler -1%(1) temperatures; Excluding weather impacts, retail sales up 1% • Residential sales up 15% and C&I up
Slide 42: Foreign Exchange Exposure
FOREIGN EXCHANGE EXPOSURE EARNINGS AND CAPITAL PLAN • ~65% of operating earnings(1) in U.S. and Caribbean • ~55% of $20.0B five-year capital plan from U.S. and Caribbean • Five-year plan translated at a forecast USD:CAD FX rate of 1.25 HEDGING ACTIVITIES • U.S. dollar-denominated debt at corporate l
Slide 43: Limited Pension Exposure
LIMITED PENSION EXPOSURE DEFINED BENEFIT PENSION PLANS • 95% of $3.9B pension benefit obligation funded at December 31, 2021 • Allocation of plan assets at December 31, 2021 Equities – 48% Fixed income – 45% Other – 7% • ~80% of pension assets subject to regulatory mechanisms UNS pension pla
Slide 44: Debt Maturities
DEBT MATURITIES 10-YEAR AVERAGE: $1.0B $2.5 $2.0 $1.5 billions $1.0 $0.5 $- 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F (1) Non-Regulated Regulated Note: Debt as at June 30, 2022 and excludes any new debt issuances during the forecast period. Excludes repayments of finance leases alo
Slide 45: Strong Leadership Team
STRONG LEADERSHIP TEAM David Hutchens Jocelyn Perry Jim Reid Gary Smith President & CEO EVP, CFO EVP, Sustainability & CLO EVP, Operations & Innovation Fortis Inc. Exec. Stuart Lochray Stephanie Amaimo Julie Avery Karen Gosse Ron Hinsley Karen McCarthy Regan O’Dea Kevin Woodbury Sr. VP Capital Marke