ITC Holdings Corp. Fourth Quarter & Year End 2013 Investor Call February 27, 2014

Transcription

1 ITC Holdings Corp. Fourth Quarter & Year End 2013 Investor Call February 27, 2014

2 Safe Harbor Language & Legal Disclosure This presentation contains certain statements that describe our management s beliefs concerning future business conditions and prospects, growth opportunities and the outlook for our business and the electricity transmission industry based upon information currently available. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Wherever possible, we have identified these forward-looking statements by words such as anticipates, believes, intends, estimates, expects, projects and similar phrases. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forwardlooking statements are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among other things, the risks and uncertainties disclosed in our annual report on Form 10-K and our quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong. They speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this presentation and in our annual and quarterly reports will be important in determining future results. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Actual future results may vary materially. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events, or otherwise. 2

3 2013 Overview Achieved operational and financial objectives for 2013 Successfully completed capital plan; invested ~$845 million after some initial delays in early 2013 Increased efficiencies and preventive maintenance efforts supported lower O&M expenses Improved safety performance with a reduction in recordable injuries Advanced a number of key initiatives in 2013, including Current regional infrastructure projects; all remain on track Preparing for the new Order 1000 paradigm and positioning for competition 3

4 2013 Regulatory Developments MISO Complaint 206 complaint filed against MISO transmission owners in November 2013, including request to lower base ROE, limit capital structures employed by MISO transmission owners (TOs) and eliminate certain ROE incentives granted to some MISO TOs Both MISO TOs and ITC responded and complaint awaits FERC action MISO TOs response demonstrated current base ROE to be just and reasonable, asked FERC to dismiss request to implement a single capital structure and requested FERC to reaffirm MISO TOs eligibility for RTO adder ITC response primarily argued for dismissal of complaint s attack on ROE incentives available to ITC s MISO subsidiaries Attachment FF FERC Order directed MISO, on behalf of ITC Midwest, to revise Attachment FF of the MISO Tariff to conform to MISO s policy for reimbursing generator interconnection customers for network upgrade costs in the ITC Midwest zone ITC rehearing request denied in February 2014; continue to disagree with outcome and assessing options In the interim, intend to avail ourselves of our option under the terms of the standard MISO Generator Interconnection Agreements to have ITC Midwest self fund transmission system network upgrades as a result of new generation 4

5 Q4 & YTD Financial Results EARNINGS & DRIVERS THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, Increase / Increase / (Decrease) (Decrease) Increase / Increase / Reported Diluted EPS (1) $ 1.45 $ 0.92 (Decrease) $ 0.53 $ 4.42 $ 3.60 (Decrease) $ 0.82 Pre Tax Entergy Transaction Expenses FERC Audit Related Refunds (0.24) Income Taxes on Adjustments (0.34) (0.34) (0.56) ( 0.22) (0.34) Operating Diluted EPS $ 1.32 $ 1.09 $ 0.23 $ 4.90 $ 4.15 $ 0.75 Key operating earnings drivers Higher operating earnings for quarter due to higher rate base; full year increase in operating earnings due to higher rate base and AFUDC at our operating companies Fourth quarter 2013 reported results reflects reduction in income tax provision and corresponding increase in net income related to tax effects of Entergy transaction expenses Due to termination of the transaction, expenses previously considered non deductible are now deductible; includes impact from prior year expenses (1) Amounts are reported on a pre stock split basis; reported net income and operating earnings reconciliation can be found in Appendix. 5

6 Financial Results CAPITAL INVESTMENTS Despite weather related challenges in early 2013, met overall capital investment objectives for the year Aggregate capital investments of $844.5 million at our operating companies for the full year ($ in Millions) 2013 CAPITAL INVESTMENTS ($ in Millions) ITCTransmission $ METC ITC Midwest ITC Great Plains TOTAL $

7 Financial Results FINANCING ACTIVITIES Raised ~$1.7 billion of debt in 2013; represented the largest financing plan in ITC s history Solid Investment Grade Credit Ratings Concluded year with $200 million ~3 year term loan at ITC Holdings, priced at LIBOR plus basis points ITCT (A1/A) METC (A1/A) ITC Holdings (Baa2/BBB+) ITC MW (A1/A) ITC GP (Baa1/A ) *Ratings for ITC Holdings and ITC Great Plains are senior unsecured ratings, ratings for ITCTransmission, METC and ITC Midwest are for secured ratings financing plan is relatively modest; expect to remain opportunistic Completed first tranche of plan in January with $50 million >1 year term loan at METC, priced at LIBOR plus 100 basis points In late 2013 and early 2014, both S&P and Moody s reviewed ratings for ITC Holdings and its operating companies S&P upgraded corporate and senior unsecured ratings of ITC Holdings and operating companies one notch Moody s reaffirmed its investment grade credit ratings for ITC Holdings and operating companies 7

8 Financial Results LIQUIDITY POSITION $ in Millions Total Revolver Capacity Revolver Capacity Outstanding Undrawn Revolver Capacity ITC Holdings Amounts $ in $MM $ $ ITCTransmission METC ITC Midwest ITC Great Plains TOTAL $ $ $ Cash on Hand 34.3 TOTAL LIQUIDITY $ Liquidity position remains healthy with total liquidity of ~$488 million Total capacity available under our revolving credit facilities is currently $725 million Reported operating cash flows of ~$449 million for twelve months ended December 31, 2013 Increase largely attributable to an increase in operating revenues and lower cash taxes 8

9 2014 Guidance Reaffirming 2014 guidance Operating EPS guidance of $5.50 to $5.70 on a pre stock split basis (or $1.83 to $1.90 per share on a split adusted basis) Capital investment guidance of $730 to $840 million 2014 GUIDANCE CAPITAL INVESTMENTS ($ in Millions) ITCTransmission $ 250 $ 285 METC ITC Midwest ITC Great Plains TOTAL $ 730 $ 840 9

10 Key Strategic Projects Update Two thirds of Thumb Loop in service; remaining portion on track to be in service in 2015, as scheduled, and on budget Regional Infrastructure Projects MVP s Full in service date for Kansas V Plan of December 2014; project remains on budget ITC Midwest began the siting process for its portions of MVP projects 3 and 4 while also working to be ready to undertake its portions of projects 5 and 7 Projects 3: In siting processes or franchise processes in Minnesota and Iowa; entire project targeted to be in service 2017 Project 4: In franchise process in Iowa and working towards in service dates for segments between 2015 and 2018 Project 5: In pre siting phase with ITC applying for necessary applications within Wisconsin; target in service date of timeframe Project 7: Finalizing ownership structure; target in service date of

11 SAVE THE DATE: Investor Day Tuesday, April 15, 2014 ITC Holdings Corp. Headquarters Novi, Michigan 11

12 Appendix

13 Q4 & YTD Financial Results NET INCOME RECONCILIATION THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, Increase / DECEMBER 31, Increase / (Decrease) Increase / (Decrease) Increase / ($ in Thousands) (Decrease) (Decrease) Reported Net Income $ 76,937 $ 48,256 $ 28,681 $ 233,506 $ 187,876 $ 45,630 Entergy Transaction Expenses 10,813 9,243 1,570 54,190 26,910 27,280 Acquisition Accounting Adjustment ,150 (12,734) Income Taxes on Adjustments (17,897) (606) (17,291) (29,510) (11,420) (18,090) Operating Earnings $ 69,958 $ 56,995 $ 12,963 $ 258,602 $ 216,516 $ 42,086 13