Fortis Inc. · TSX:FTS
Fortis — Investor Presentation (March 2019)
39 slides from Fortis's investor presentation, Mar 15, 2019
Slide 1: Loy
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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 U.S. Private Securities Litigation Reform Act of 1995, collectively referred to as "forw
Slide 3: Our Strategy
Our Strategy S T R AT E G Y 6% Leverage the operating model, footprint of our utilities, operating expertise, reputation and financial Average Annual Dividend Focus on strength to develop growth Growth Target through Growth opportunities 2023 AREAS OF FOCUS: Utility Capital Investment System Sustain
Slide 4: High Quality & Diverse Utility Portfolio
High Quality & Diverse Utility Portfolio ~99% REGULATED UTILITY ASSETS(1) 10 UTILITY OPERATIONS Canada, U.S. & Caribbean $ 26.1 BILLION IN MIDYEAR RATE BASE IN 2018 ~65% EARNINGS FROM THE U.S. ~93% TRANSMISSION & DISTRIBUTION(1) 3.3 MILLION UTILITY CUSTOMERS 2.0M Electric & 1.3M Gas (1) Excludes the
Slide 5: Our Unique Business Model
Our Unique Business Model 10 Locally Operated Utilities = 1 Strong North Regulated Electric American Regulated Gas Company FERC-Regulated Electric Transmission Long-Term Contracted Hydro Generation(1) Natural Gas Storage Facility ITC UNS Energy FortisBC FortisAlberta Newfoundland Power Central Hudso
Slide 6: ESG Commitment
ESG Commitment Sustainability: It’s How We Do Everything Strong Governance Focused on Delivering Commitment Cleaner Energy • 58% Men • Carbon Intensity • 42% Women Decreased 63% since 2015 93% of our assets are(1) electricity poles, wires and natural gas lines Outperformed Industry ~$13M Averages in
Slide 7: Fortis Timeline
Fortis Timeline 1885-2012 2013-2016 2017-Current Focused on Canada U.S. Acquisition Strategy Focused on Growth in North America 7
Slide 8: Strong Financial Track Record
Strong Financial Track Record Adjusted EPS and Dividend Payout Ratio 2018 Key Statistics $2.51 8,800 Employees $2.47 $2.33 $2.11 $8.4B Revenues $1.75 69% $1.1B Net Earnings 73% 66% 65% 66% Strong Rate Base Growth 2014 2015 2016 2017 2018 6% 2018 Rate Base Growth Adjusted EPS(2) Dividend Payout Ratio
Slide 9: Consistently Delivering Superior Total Shareholder Returns
Consistently Delivering Superior Total Shareholder Returns 1-Year 5-Year 10-Year 20-Year 12.3% 13.1% 10.9% 12.7% 0.5% 5.6% 9.1% 6.9% 2.6% 6.6% 8.1% 8.3% Fortis S&P/TSX Composite Index S&P/TSX Capped Utilities Index Note: For the period ending January 31, 2019. 9
Slide 10: 2019-2023 Business Plan Highlights
2019-2023 Business Plan Highlights $17.3B 6-7% 6% 5-Year Rate Base Average Annual Capital Plan Growth Dividend Growth Target to 2023 10
Slide 11: Increase in Capital Plan Driven by Proven Growth Strategy
Increase in Capital Plan Driven by Proven Growth Strategy $17.3 + $0.6B $14.5 + $0.9B Billions + $0.6B 2017 Investor Day 2018 Investor Day + $0.6B 11
Slide 12: $17.3B 5-Year Capital Plan
$3.5B Average Annual Capital Expenditures (1) $17.3B 5-Year Capital Plan $3.7 $3.5 $3.6 $3.2 $3.3 Billions 2019F 2020F 2021F 2022F 2023F (1) Capital expenditures are translated at a forecast USD/CAD foreign exchange rate of $1.28. 12
Slide 13: Low Risk, Highly Executable Capital Plan
Low Risk, Highly Executable Capital Plan Regulated 99% Smaller Projects 77% U.S. 55% Canada 42% Non-Regulated 1% Major Capital Projects 23% Caribbean 3% 13
Slide 14: Rate Base to Reach $35.5 Billion in 2023
Rate Base to Reach $35.5 Billion in 2023 Rate Base(1) $35.5 $32.0 $33.4 $30.1 $27.9 $26.1 Canadian & Caribbean Billions U.S. 2018A 2019F 2020F 2021F 2022F 2023F (1) US dollar-denominated rate base for 2018 is based on the actual average USD/CAD foreign exchange rate of $1.30 and forecast rate base f
Slide 15: Strong 5-Year Rate Base Growth
Strong 5-Year Rate Base Growth Rate Base Grows 8.5% Central Hudson $9.4B to $35.5B 6.9% UNS 5-Year CAGR Increases from 6.8% ITC Rate Base Growth $8.4 4.5% to 6.3% 5-Year $6.5 6.3% $9.8 6.0% FortisBC Energy $7.7 Growth Mainly $7.7 5.5% Other Canadian & Caribbean Driven by U.S. Utility Investments Not
Slide 16: 45 Years of Dividend Growth
45 Years of Dividend Growth (1) 6% guidance generates annual dividend payment of $2.27 in 2023 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19F 21F 23F Actual dividend paid Forecasted dividend payments (1) Based on an annualized dividend of $1.70 in 2018. 16
Slide 17: Additional Energy Infrastructure Opportunities
Additional Energy Infrastructure Opportunities FortisBC: Tilbury, LNG & Gas Infrastructure FortisOntario: Municipal Utility Consolidation Maritime Electric & Newfoundland Power: Grid Modernization ITC: Lake Erie Connector & Grid Modernization UNS Energy: Renewables, Storage & Electric Transmission C
Slide 18: Regulatory Outlook
Regulatory Outlook Recent Decisions: MISO Independence Incentive Adder Complaint • Adder reduced to 0.25% effective April 20, 2018 • ITC filed a request for rehearing MISO Base ROE Complaints • FERC established new methodology and requested briefs from utilities in first half of 2019 on proposed ado
Slide 19: Effective Funding Plan For 5-Year Capital Program
Effective Funding Plan For 5-Year Capital Program Cash From Operations(1) 68% $17.3B DRIP is Only Equity Required to Fund $17.3B 5-Year Capital Plan 5-Year Capital Plan Waneta Expansion Regulated Debt Sale Completes Asset 24% Sale Funding Other(2) Asset Sales Requirement 2% 6% (1) Cash from operatin
Slide 20: Strengthening Our Credit Profile
Strengthening Our Credit Profile Improved Improving Credit Holdco Debt / Total Debt Metrics Over The 5-Year Plan 38% CFO / Debt 33% Expected to be > 11% in 2019 ATM Program Provides Financial Flexibility 2018A 2019F 2020F 2021F 2022F 2023F 20
Slide 21: Why Invest In Fortis?
Why Invest In Fortis? Well-Run Utilities Virtually All Regulated Highly Diversified Strong Growth Profile 6% Dividend Guidance Opportunities Beyond Capital Plan 21
Slide 22: Loy
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Slide 23: Table of Contents
Table of Contents APPENDIX Utility Overview Other ITC Holdings 24 2019-2023 Capital Forecast by Segment 31 UNS Energy 25 2018-2023 Rate Base Forecast by Segment 32 Central Hudson 26 Major Capital Projects 33 FortisBC 27 Opportunities and Risks 34 FortisAlberta 28 Investment-Grade Credit Ratings 35 O
Slide 24: ITC Holdings
ITC Holdings A Fortis Company APPENDIX Type of Utility Transmission Regulator FERC Regulatory Model Independent Transmission Company 2019 Formula 11.07-12.16% ROE on 60% equity 2019F Rate Base $8.5B 5-Year CAGR on Rate Base(1) 6.8% 2018 Assets % of Total Consolidated 38% Regulated Assets(2) 2018 Ear
Slide 25: UNS Energy
UNS Energy A Fortis Company APPENDIX 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 Formula 50% equity 52.83% equity 50.8% equi
Slide 26: Central Hudson
Central Hudson A Fortis Company APPENDIX Type of Utility Gas and Electricity Regulator New York State Public Service Commission Regulatory Model Cost of service on future test year 2019 Formula(1) 8.8% ROE on 48% equity 2019F Rate Base $1.8B 5-Year CAGR on Rate Base(2) 8.5% 2018 Assets % of Total Co
Slide 27: FortisBC
FortisBC A Fortis Company APPENDIX FortisBC Gas FortisBC Electric Type of Utility Gas distribution Electricity Regulator British Columbia Utilities Commission Regulatory Model Cost of service + PBR 2019 Formula 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity 2019F Rate Base $4.5B $1.3B 5-Year CA
Slide 28: FortisAlberta
FortisAlberta A Fortis Company APPENDIX Type of Utility Electricity distribution Regulator Alberta Utilities Commission Regulatory Model PBR 2019 Formula 8.5% ROE on 37% equity 2019F Rate Base $3.6B 5-Year CAGR on Rate Base(1) 5.1% 2018 Assets % of Total Consolidated Regulated 9% Assets(2) 2018 Earn
Slide 29: Other Electric Utilities
Other Electric Utilities Fortis Companies APPENDIX (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 t
Slide 30: Other Electric Utilities (Continued)
Other Electric Utilities (Continued) Fortis Companies APPENDIX (1) Type of Utility Electricity Regulator Utility Regulation and Competition Office Government of the Turks and Caicos Islands Regulatory Model Cost of service 2018 Achieved ROE 11.62% 8.95% 2019F Rate Base $0.7B $0.4B 5-Year CAGR on Rat
Slide 31: 2019-2023 Capital Forecast by Segment
2019-2023 Capital Forecast by Segment APPENDIX Capital Forecast(1) 2019-2023 ($millions) 2019 2020 2021 2022 2023 Total Regulated - Independent Electric Transmission ITC 865 878 951 943 861 4,498 Regulated - US Electric & Gas UNS Energy 1,076 875 624 476 476 3,527 Central Hudson 280 268 276 291 274
Slide 32: 2018-2023 Rate Base by Segment
2018-2023 Rate Base by Segment APPENDIX (1) Rate Base 3-Year CAGR 5-Year CAGR ($billions) 2018A 2019F 2020F 2021F 2022F 2023F to 2021 to 2023 Regulated - Independent Electric Transmission ITC 7.8 8.5 9.1 9.7 10.3 10.8 7.7% 6.8% Regulated - US Electric & Gas UNS Energy 4.7 5.3 6.0 6.3 6.4 6.6 10.1% 6
Slide 33: Major Capital Projects
Major Capital Projects AAPPPPEENNDDIIXX Total Expected Year 2019 Significant Capital Projects ($millions) 2019-2023 of Forecast Plan Completion Capital Plan By Project Type ITC Multi-Value Regional Transmission Projects 88 332 2023 ITC 34.5 kV to 69 kV Transmission Conversion Project 87 348 Post-202
Slide 34: Opportunities and Risks
4 Opportunities and Risks APPENDIX Opportunities • Additional Capital Opportunities • Improving Economic Growth Sensitivities • Rising Interest Rates – Higher ROE 2019 EPS Impact • Low Natural Gas Prices 50 Basis Point Change in $0.05 • Renewable Energy Allowed ROE at ITC • New Technology CAD/USD do
Slide 35: Investment-Grade Credit Ratings
Investment-Grade Credit Ratings APPENDIX Credit Ratings 2 0 1 9 - 2023 P l a n S u ppo r t s (1) Baa3 CFO/Debt > 11% (2) A- / BBB+ Improved Holdco Debt / Total Debt BBB (high) Commitment to Investment-Grade Credit Ratings (1) In April 2018, Moody’s issued a credit opinion with no change to the Corpo
Slide 36: Utility Debt Credit Ratings
6 Utility Debt Credit Ratings APPENDIX Company ITCTransmission A n/a A1 Michigan Electric Transmission Company (METC) A n/a A1 ITC Midwest A n/a A1 ITC Great Plains A n/a A1 ITC Holdings A-(1) n/a Baa2 Tucson Electric Power A-(1) n/a A3 Central Hudson A- n/a A2(2) FortisBC Energy n/a A A3 FortisBC E
Slide 37: Manageable Debt Maturities and Ample Liquidity
Manageable Debt Maturities and Ample Liquidity APPENDIX Fixed-Term Debt Maturities(1) Consolidated Credit Facilities $3.0 $2.5 $3.9 $3.7B 5-Year average fixed-term debt maturities ~$940 million $2.0 Billions $1.5 $1.0 $0.5 $1.3B 2019 2020 2021 2022 2023 Avg. 2019-2023 Fortis Fortis Subsidiaries Util
Slide 38: Expected Upcoming Events
Expected Upcoming Events Save the Date Investor Day at ITC September 10, 2019 Expected Upcoming Earnings Release Dates Q1 – 2019 May 1, 2019 Q2 – 2019 August 2, 2019 38
Slide 39: Executive Team
Executive Team Barry Perry President & CEO APPENDIX Jocelyn Perry Jim Reid Phonse Delaney Nora Duke James Laurito Gary Smith David Hutchens EVP, CFO EVP, Chief Legal EVP, Chief EVP, Sustainability EVP, Business EVP, Eastern Canadian EVP, Western Utility Officer & Corporate Information Officer & CHRO