Fortis Inc. · TSX:FTS
Fortis — Barclays Capital 2016 CEO Energy-Power Conference
29 slides from Fortis's conference presentation, September 2016
Slide 1: Barclays Capital 2016 CEO Energy-Power Conference
Barclays Capital 2016 CEO Energy-Power Conference September 2016
Slide 2: Forward-looking statement
Forward-looking statement This presentation includes forward-looking statements of Fortis Inc. (“Fortis” or the “Corporation”) and ITC Holdings Corp. (“ITC”) within the meaning of applicable securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements i
Slide 3: A leader in North American utility operations
A leader in North American utility operations Based in St. John’s, NL Operations Transmission and 9 Utility Distribution Company BC AB Operations ON PEI NL 2.0 million 1.2 million NY Electric Gas AZ Utility Customers Utility Customers Turks and Caicos Islands $6.7 billion $17.3 billion(1) Belize Gra
Slide 4: Our strategic focus delivers results
Our strategic focus delivers results Strategy Leverage the operating model, footprint of our utilities, operating expertise, reputation and financial strength to develop growth opportunities Dividend Growth Target: 6% Average Annual Investment-Grade Growth Through 2020 Credit Ratings Strategic Initi
Slide 5: Predictable returns from highly regulated asset base
Predictable returns from highly regulated asset base PBR through 2019 Allowed/Achieved 2015 ROE (%): 8.75/9.19 (gas) 9.15/9.26 (electric) Allowed 2016 ROE (%): 8.75-9.15 Allowed Equity in Capital (%): 38.5-40 94% Regulated Assets Historic Test Year As at June 30, 2016 Allowed/Achieved 2015 ROE (%):
Slide 6: Economic, geographic and regulatory diversification contributes to Fortis' strength
Economic, geographic and regulatory diversification contributes to Fortis’ strength Diversity in Operating Earnings(1) TTM Q2 2016 Regulated Regulated Electric & Gas Electric Canada U.S. 32% 36% Regulated Regulated Gas Electric Canada Caribbean 20% 5% Non-Regulated Energy Infrastructure 7% (1) Adjus
Slide 7: 2015: Transformative year
2015: Transformative year • Focus on core utility business with sale of non-core assets • Successful integration of UNS Energy $ 589M 50% Adjusted earnings(1) • Introduction of dividend guidance and two dividend increases • Successful execution of $2.2 billion capital $2.11 21% plan; largest annual
Slide 8: Strong first half 2016 results
Strong first half 2016 results $ 321M 6% YTD Adjusted Earnings(1) $ 1.13 4% YTD Adjusted EPS(2) • On track to invest $1.9 billion of capital in 2016 • Continued focus on 2016 regulatory proceedings (1) Earnings adjusted for non-recurring and non-operating items. (2) Basic earnings per common share a
Slide 9: Focus on constructive regulatory relationships
Focus on constructive regulatory relationships Significant Filings and Applications Regulated Utility Application / Proceeding Filing Date Details Reached a settlement agreement regarding revenue requirement in Q3 TEP 2017 General Rate Application November 2015 2016. Rate case expected to be finaliz
Slide 10: Delivered 5% EPS CAGR over the past 10 years
Delivered 5% EPS CAGR over the past 10 years Strong financial metrics EPS growth drivers Historical EPS Growth $2.11 • Expanded North American footprint • Invested $11.8 billion in capital expenditures $1.35 • Total assets increased from $5 billion in 2005 to $29 billion in 2015 • Recent US acquisit
Slide 11: 42 consecutive years of annual dividend increases
42 consecutive years of annual dividend increases Consistent dividend growth $1.40 $1.24 $1.28 $1.20 $1.12 $1.16 $1.04 $1.00 $0.82 Average annual dividend growth $0.67 through 2020 targeted at 6% $0.59 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dividend paid per
Slide 12: Delivering superior shareholder returns
Delivering superior shareholder returns (1) Average annualized total shareholder return over last 10 years Fortis 8.26% S&P 500 Utility Sector 7.41% S&P/TSX Composite Index 4.38% S&P/TSX Utilities Index 4.78% (1) For the 10-year period ending December 31, 2015. 12
Slide 13: Investment-grade credit ratings and ample liquidity
Investment-grade credit ratings and ample liquidity Strong financial metrics Investment-Grade Credit Ratings (1) Consolidated Credit Facilities (2) 4.0 Fortis Inc. S&P(1) A- / BBB+ 3.0 DBRS(1) A(low) 2.4 2.1 ($ billions) 2.0 Capital Structure (3) June 30, 2016 % 1.0 Debt 58 1.2 1.4 Equity 42 0.0 Tot
Slide 14: Base capital program drives rate base growth
Base capital program drives rate base growth Highly executable plan delivers low risk growth Capital Expenditures Midyear Rate Base Growth $9.3B Five-Year Capital Plan $19.8 $20.3 $18.9 $18.1 $17.3 $2.0 $16.4 $1.9 $2.0 $1.7 $1.7 (billions) (1) (billions) (1) 2016F 2017F 2018F 2019F 2020F 2015A 2016F
Slide 15: Opportunities beyond base capital plan
Opportunities beyond base capital plan Focus on energy infrastructure in franchise areas FortisAlberta: Rural Electrification Associations Alberta Prince Newfoundland British Columbia Edward Island FortisOntario: Wataynikaneyap Project & Ontario Municipal Utility Consolidation FortisBC: Tilbury, Woo
Slide 16: Aitken Creek an example of our strategy in action
Aitken Creek an example of our strategy in action Premier gas storage asset • Acquisition completed April 1, 2016 • Purchased for US$266 million • Only underground gas storage facility in British Columbia and is an integral part of Western Canada’s natural gas transmission network • FortisBC leases
Slide 17: Renewable generation and electrical transmission opportunities
Renewable generation and electrical transmission opportunities Cleaner energy trend creates opportunities Renewable Generation at UNS Energy Wataynikaneyap Project at FortisOntario • Traditional “Build-own-operate” facilities • Connection of First Nations communities in Northern • Corporation provid
Slide 18: LNG can deliver significant upside
LNG can deliver significant upside FortisBC’s large gas infrastructure footprint presents opportunities • Favourable alignment with provincial goals • Tilbury 1A • $440 million storage and liquefaction • In service expected in Q1 2017 • Further Tilbury Expansion • HECO agreement cancelled as a resul
Slide 19: Proven acquisition track record
Proven acquisition track record Accelerating growth through strategic utility acquisitions (1) Networks Canada Fortis $/share $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 (1) Indi
Slide 20: ITC acquisition strategic rationale
ITC acquisition strategic rationale Accelerating growth through strategic utility acquisitions Increases Premier Electric Accretive to EPS Diversification Transmission Utility Accretive in First Full Year Following Pro Forma, more than Fully Regulated Close(1) one-third FERC- Regulated Earnings Supp
Slide 21: ITC Holdings Corp. overview
ITC Holdings Corp. overview Largest US independent transmission company • ITC’s business model creates a unique, structurally advantaged infrastructure portfolio • Rate construct supports efficient capitalization of needed investment and timely return of capital − Forward-looking rates − Supportive
Slide 22: Long-term rate base growth prospects
Long-term rate base growth prospects Accelerating growth through strategic utility acquisitions In Infancy of Multi-Decade Investment Cycle – Projected System Needs Require US$120 - US$160 billion of Investment per Decade Through 2030(1) Changing RPS Mandates & Power Market Reliability Historical Ge
Slide 23: Acquisition delivers increased US presence and FERC regulated returns
Acquisition delivers increased US presence and FERC regulated returns Accelerating growth through strategic utility acquisitions Singular opportunity for Fortis to increase its economic, geographic and regulatory diversification Pro Forma Regulated Operating Fortis Pro Forma 2017 Earnings (1) Midyea
Slide 24: Lake Erie Connector at ITC Holdings Corp.
Lake Erie Connector at ITC Holdings Corp. Accelerating growth through strategic utility acquisitions • First direct link between the PJM and IESO The Nanticoke markets substation contains several 500kV and • 1,000 MW, bi-directional high-voltage direct 230kV circuits current (HVDC) transmission line
Slide 25: ITC acquisition financing plan
ITC acquisition financing plan Accelerating growth through strategic utility acquisitions Issue ~US$3.7B in Fortis shares (1) ~US$11.3B Assume ~US$4.4B in ITC debt Transaction Incur ~US$2.0B in new debt Funded through Raise US$1.228B through minority investment Fortis to maintain investment-grade cr
Slide 26: Acquisition still on track for targeted late 2016 transaction close
Acquisition still on track for targeted late 2016 transaction close Accelerating growth through strategic utility acquisitions Secured minority investor. GIC Private Limited to acquire a 19.9% equity interest in ITC for US$1.228 billion. The process was completed in April 2016 in 71 days. Received F
Slide 27: Achieves scale and EPS accretion
Achieves scale and EPS accretion Accelerating growth through strategic utility acquisitions Following the acquisition, Fortis will be among the top 15 North American investor-owned utilities ranked by enterprise value(1) $160 $140 $134 $122 $120 $120 $102 $100 $91 (C$ Billions) (2) $80 $72 $66 $58 $
Slide 28: Superior risk adjusted returns
Superior risk adjusted returns • Consistent and predictable returns Strong Financial • Adjusted EPS grew at a CAGR of ~5% over past 10 years Metrics • Investment-grade credit ratings and strong liquidity • 42 consecutive years of annual dividend increases Consistent Dividend Growth • Commenced divid
Slide 29: Barclays Capital 2016 CEO Energy-Power Conference
Barclays Capital 2016 CEO Energy-Power Conference September 2016
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