Fortis Inc. · TSX:FTS
Fortis — Q4 2019 Earnings Presentation
28 slides from Fortis's earnings presentation, Feb 13, 2020
Slide 1: Working Together Powering Growth
WORKING TOGETHER POWERING GROWTH Fourth Quarter 2019 Earnings Conference Call February 13, 2020
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: Barry Perry, President & CEO
S~ 5% FORTIS.. BARRY PERRY PRESIDENT & CEO
Slide 4: 2019 Highlights
2019 HIGHLIGHTS ANOTHER YEAR OF ADVANCING THE GROWTH STRATEGY (1) Delivered Adjusted EPS Completed of $2.55 $1.0B Sale of Waneta in Q2 MSCI ESG Rating Upgrade AA BB Increased Q4 Dividends '15 '16 '17 '18 '19 Improved by 6.1% Sustainability Issued $1.2B Invested ~$4B Equity in Q4 in Our Systems 4 (1)
Slide 5: Strong Operational Performance
STRONG OPERATIONAL PERFORMANCE All Injury Frequency Rate(1) 2.0 1.78 1.59 SAFETY 1.0 0.0 2015 2016 2017 2018 2019 Fortis USA Bureau of Labor Statistics Average (2015-2018) Canadian Electricity Association Average (2015-2018) Electricity Customer Average Outage Duration(2) 5.0 (Hours) 4.0 RELIABILITY
Slide 6: Superior 20-Year Total Shareholder Return
SUPERIOR 20-YEAR TOTAL SHAREHOLDER RETURN 1,600 FTS 1,400 S&P/TSX Capped Utilities Index 1,363% FTS Total Shareholder Returns 1,200 S&P/TSX Composite Index (Average Annual) 1,000 1-Year 22.7% % 800 5-Year 10.8% 729% 10-Year 10.6% 600 20-Year 14.3% 400 200 237% 0 (200) 2000 2005 2010 2015 2020 Note:
Slide 7: Five-Year Capital Plan
FIVE-YEAR CAPITAL PLAN $18.8B Capital Plan(1) Capital Revised to Account for $500M Shifted $4.3 from 2019 to 2020 & 2021 $0.3 $3.8 $3.8 $3.7 $0.2 $3.2 Primarily Driven by Timing of Oso Grande Wind Project Billions Payment of~$300M $4.0 $3.6 Capital Invested in January 2020 2020F 2021F 2022F 2023F 20
Slide 8: 2020-2024 Rate Base
2020-2024 RATE BASE (1) $38.4 $36.8 $34.5 $32.5 $30.7 Rate base grows over $10B $28.0 to $38.4B during 5-year period 2019A 2020F 2021F 2022F 2023F 2024F Regulated - Canadian & Caribbean Electric & Gas Regulated - U.S. Electric & Gas Regulated - Independent Electric Transmission (ITC) (1) US dollar-d
Slide 9: 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 72 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 Payme
Slide 10: Jocelyn Perry, EVP, CFO
JOCELYN PERRY EXECUTIVE VICE PRESIDENT, CFO
Slide 11: 2019 Results
2019 RESULTS Reported EPS $3.79 $2.59 2019 Reported EPS Includes: $0.77 • $484M Net Gain on Waneta Asset Sale in Q2 $0.61 • $63M net favorable impact of FERC Order in Q4 Q4 2018 Q4 2019 2018 2019 2019 Adjusted EPS Impacted by: Adjusted EPS(1) Rate Base Growth $2.55 Lower ROE at ITC $2.51 $0.62 Weath
Slide 12: EPS Drivers: Fourth Quarter
EPS DRIVERS: FOURTH QUARTER Includes Impact of FERC Order of ($0.04) $0.01 ($0.01) ($0.01) Increase Mainly Driven by $0.03 $0.04 Rate Base Growth and Lower $0.62 Operating Costs $0.56 Earnings Tempered by • 2019 FERC ROE Order at ITC • Lower Rainfall in Belize Q4 2018 Western UNS Central U.S. Energy
Slide 13: EPS Drivers: Annual 2019
EPS DRIVERS: ANNUAL 2019 Includes Weather- Related Impacts of Includes Impact of FERC ($0.08) Order of ($0.04) $0.02 ($0.06) $0.04 $0.04 ($0.02) $0.05 ($0.03) $2.55 $2.51 Annual 2019 Adjusted EPS Increased ~6% Absent FERC ROE at ITC and Weather Impacts Annual 2018 Western Canadian US Foreign Central
Slide 14: Current Regulatory Outlook
CURRENT REGULATORY OUTLOOK • Order received from FERC in November 2019 adopting a new MISO base • TEP rate case filed with the ACC in April 2019 using a ROE of 9.88%, equating to an all-in ROE of 10.63%(1) for ITC’s MISO December 31, 2018 test year companies. MISO transmission owners, including ITC,
Slide 15: $1.2B of Equity Issued in Fourth Quarter
$1.2B OF EQUITY ISSUED IN FOURTH QUARTER DEAL OVERVIEW: • $700M Bought Deal • $500M Private Placement • Issued at $52.15 or 1% Discount OUTCOME: • Terminated ATM Program • 2% DRIP discount terminated • Acceleration of equity funding needs • Redemption of US$500M notes • Repayment of credit facilitie
Slide 16: Stronger Credit Metrics
STRONGER CREDIT METRICS CREDIT RATINGS A-(1) 2018 2019 (2) CFO/Debt ~10.5% ~12% BBB (high) (2) Holdco Debt/Total Debt ~39% ~34% Baa3 (1) S&P rating reflects the issuer credit rating. Fortis’ unsecured debt rating is BBB+. (2) Based on Moody’s methodology: (i) cash from operations (“CFO”) is before c
Slide 17: Why Invest in Fortis?
WHY INVEST IN FORTIS? WELL-RUN SUSTAINABILITY HIGHLY FOCUSED ON STRONG VIRTUALLY 6% INNOVATIVE BUSINESSES LEADER DIVERSIFIED ENERGY GROWTH ALL DIVIDEND DELIVERY PROFILE REGULATED GUIDANCE 17
Slide 18: Expected Upcoming Events
EXPECTED UPCOMING EVENTS Expected Earnings Release Dates Q1 2020 May 6, 2020 Q2 2020 July 30, 2020 18
Slide 19: Working Together Powering Growth
WORKING TOGETHER POWERING GROWTH Fourth Quarter 2019 Earnings Conference Call February 13, 2020
Slide 20: Appendix
WORKING TOGETHER POWERING GROWTH Appendix
Slide 21: Q4 2019 Results by Segment
Q4 2019 RESULTS BY SEGMENT Fourth Quarter Variance Analysis by Segment ($millions, excluding weighted Adjusted Adjusted Adjusted Q4 2019 Adjustment (1) Q4 2018 Adjustment (1) average shares and EPS) Q4 2019 Q4 2018 Q4 Variance Regulated – Independent Electric Transmission ITC 171 (83) 88 92 - 92 (4)
Slide 22: Annual 2019 Results by Segment
ANNUAL 2019 RESULTS BY SEGMENT Annual 2019 Variance Analysis by Segment ($millions, excluding weighted Adjusted Adjusted Adjusted 2019 Adjustment (1) 2018 Adjustment (1) average shares and EPS) 2019 2018 Variance Regulated – Independent Electric Transmission ITC 471 (83) 388 361 - 361 27 Regulated –
Slide 23: Adjusted Earnings Reconciliation
ADJUSTED EARNINGS RECONCILIATION Non-US GAAP Reconciliation ($millions, except for common share data) Q4 2019 Q4 2018 Variance 2019 2018 Variance Net Earnings Attributable to Common Equity Shareholders 346 261 85 1,655 1,100 555 Adjusting Items: Gain on disposition(1) - - - (484) - (484) November 20
Slide 24: 2019-2024 Rate Base by Segment
2019-2024 RATE BASE BY SEGMENT (1) Rate Base 3-Year CAGR 5-Year CAGR ($billions) 2019A 2020F 2021F 2022F 2023F 2024F to 2022 to 2024 Regulated - Independent Electric Transmission ITC(2) 8.8 9.5 10.2 10.8 11.4 12.0 7.2% 6.4% Regulated - US Electric & Gas UNS Energy 5.0 5.8 6.1 6.4 6.8 6.9 8.6% 6.5% C
Slide 25: 2020-2024 Capital Plan by Segment
2020-2024 CAPITAL PLAN BY SEGMENT (1) Capital Forecast 2020-2024 ($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 1,390 828 710 575 371 3,874 Central Hudson 292 309 359 306 292 1,5
Slide 26: Major Capital Projects
MAJOR CAPITAL PROJECTS(1) Total Incurred to Total 2020- Expected Year of ($Millions) the End of 2019 2024 Plan Completion ITC Multi-Value Regional Transmission Projects 625(2) 276 2023 ITC 34.5 to 69 kV Transmission Conversion Project 352(2) 268 Post-2024 UNS Southline Transmission Project - 392 Pos
Slide 27: Investment-Grade Credit Ratings
INVESTMENT-GRADE CREDIT RATINGS Company Fortis Inc. A-(1) Baa3 BBB (High) ITC Holdings Corp. A-(1) Baa2 n/a 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
Slide 28: Executive Team
EXECUTIVE TEAM Barry Perry President & CEO Jocelyn Perry Jim Reid David Hutchens Nora Duke James Laurito EVP, CFO EVP, CLO & Chief Operating Officer, EVP, Sustainability & EVP, Business Development & Corporate Secretary CEO UNS Energy CHRO CTO Linda Apsey Charles Freni Gary Smith Michael Mosher Roge