ITC Holdings Corp. Investor Meetings. March 2015

Transcription

1 ITC Holdings Corp. Investor Meetings March 2015

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 forward-looking 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 forwardlooking or other statements, whether as a result of new information, future events, or otherwise. 2

3 Overview of ITC 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 rate structure Actively developing electrical infrastructure required for increasing system demands through: Investing in Existing Systems Regional Projects Development Statistics reflect December 31, Assets ~$7.0 billion Annual Capital Investments: ~$800 million Line Miles ~15,600 Stations / Substations: ~560 States: Seven 3

4 Consistent and Supportive Regulatory Policy 1992 Energy Policy Act of 1992 mandated open access transmission tariffs 1999 Order 2000 provided for voluntary RTO formation and regional wholesale energy markets 2003 FERC adoption of independence incentives 2005 Energy Policy Act directed FERC to provide financial incentives for transmission 2006 Order 679 established incentives for transmission investment 2007 Order 890 expanded regional planning mandate and subsumed Order 888 that established regional planning and open transmission access 2011 Order 1000 required improvements to regional planning and cost allocation, will facilitate inter-regional project development, and introduce competition 2012 Policy Statement on Promoting Transmission Investment Through Pricing Reform 2014 Opinion 531 Modified methodology for calculating transmission returns to support continued investment Annual Transmission Investment sourced from The Brattle Group, Trends and Benefits of Transmission Investments: Identifying and Analyzing Value, January

5 Significant Future System Requirements In Infancy of Multi-Decade Investment Cycle Projected System Needs Require $120 - $160 billion of Investment per Decade Through 2030 Historical Underinvestment Regional Infrastructure Reliability Changing Generation Fleet Aged infrastructure remains prevalent Intra and interregional connectivity NERC requirements, FERC enforcement activities and storm hardening EPA and coal plant implications, nuclear closures and plant outages RPS Mandates & Intermittent Resource Integration Individual state needs Transmission investment needs sourced from The Brattle Group, Trends and Benefits of Transmission Investments: Identifying and Analyzing Value, January

6 ITC s Approach to Development Development opportunities remain a key driver of future growth More predictable and cost-effective than M&A Expanded development efforts to a national presence from existing regional focus Broadens investment landscape and prospective partner opportunities Development portfolio is large yet focused, diversified and economically-attractive Premised on Order 1000 and nontraditional transmission opportunities Historical development successes primarily greenfield-oriented. Road ahead entails thinking unconventionally about new opportunities 2006 Formed ITC Grid Development & ITC Great Plains 2008 Authorized to build KETA Project & awarded portion of Kansas V-Plan Project 2009 Launched concept of Green Power Express & awarded Hugo to Valliant Project 2011 Received MISO approval of MVP Projects 2013 Received SPP approval of Elm Creek to Summit Project 2014 Transmission facilities connecting New Covert plant to 6 PJM

7 Expanding & Diversifying Development Portfolio Given robust transmission landscape and Order 1000 evolution, 2014 activities were focused on expanding and diversifying overall opportunity space Regulated Grid Development Order 1000 Opportunities International and Merchant Development Lake Erie Connector North Continued to advance project through various regulatory and operational requirements If key milestones are met, expected inservice date in late 2018 / early 2019 New Covert Project Participated in select PJM bidding windows in 2014; evaluating opportunities in window that opened in November 2014 Continue to monitor MISO, SPP and CAISO regions, among others, for potential opportunities On track to be placed into service in June of 2016 Project provides a good framework and foundation for securing similar opportunities in the future 7

8 Five-Year Plan Highlights Financial Highlights Robust Capital Investment Plan $4.5 billion of capital investments; ~75% from base capital and approved regional projects $7.6 billion of rate base plus CWIP in 2018 from $4.5 billion in 2013 EPS CAGR of 11% Industry Leading Growth Substantial Cash Flow Generation Strong Balance Sheet - 13% with potential upside Rate base and CWIP balances increase ~70% Cash from operations (CFO) CAGR of ~10% Dividend growth of 10% - 15% per annum Average CFO of ~$650 million per annum ~$3.3 billion in aggregate CFO, funds ~55% of cash requirements A- rated balance sheets for all debt issuing entities* Stable to improving credit metrics over the plan period Evolution of ITC and historical investment trajectory have created substantial levels of financial flexibility *Corporate credit rating. 8

9 Long-Term EPS Growth Drivers Base Capital and Regional Infrastructure Investments Drive Significant Share of EPS Growth $4.5 billion of Capital Investments Highly Probable Capital Investments ~$3.4 billion Base Capital $2.2 billion Regional Infrastructure $1.2 billion Development $1.1 billion 11-13% EPS CAGR ~2% ~2% ~8% 2013 EPS 2018 EPS 9

10 Improving Credit Metrics Over Plan Strong cash flow generation over plan leads to stable and improving credit metrics which are well within our historical targets Strong CFO Generation Debt/Capitalization 70% $3.3 billion in aggregate ~69% ~$770 ~63% ~$710 ~$660 ~$ E A V E R A G E ~$500 FFO/Debt ~14% ~12% 10% E 2015E 2016E 2017E 2018E Based on $4.5 billion of capital investments for CFO CAGR based on five-year CAGR off 2013 CFO. Excludes impact of share repurchase announced June 20, E A V E R A G E Management Guidelines 10

11 Excess Funding Capacity An estimated ~$1 billion of excess funding capacity will be allocated based on our capital allocation strategy Development spending is negatively correlated with amount of excess funding capacity in the near-term $4.5 billion $1.1 billion of Development Projects Every ~$275M of deferred development provides ~$75M of incremental capacity $3.3 billion in Aggregate CFO + Improving Credit Metrics $3.4 billion Base/Regional ~$1 billion of Excess Funding Capacity * (Base Case) Capital Plan (Base Case) Potential Uses of Excess Funding Capacity Organic Growth/Development Balance Sheet Management M&A Value Return *Excludes impact of share repurchase announced June 20,

12 Five-Year Plan Status Update Strong start to the plan Capital Investments Operating EPS Capital investments of $794.0 million for the twelve months ended December 31, 2014 were within guidance range Reaffirmed 2015 capital investment guidance range of $710 million to $810 million* Operating EPS for twelve months ended December 31, 2014 was within guidance range at $1.85 per share and reflects ~14% increase over 2013** Reaffirmed 2015 operating EPS guidance range of $2.00 to $2.15* Credit Quality Value Return Operating cash flow of ~$502 million for the twelve months ended December 31, 2014 with total liquidity position of ~$715 million ITC Great Plains received credit ratings of A1 and A from Moody s and S&P, respectively Increased dividend ~14% in August 2014, consistent with dividend policy of 10 to 15% annual increases projected over plan period Completed accelerated share repurchase of $130 million in 2014; 3.6 million shares repurchased through December 31, 2014 * Guidance was reaffirmed on February 26, **Reconciliation from Reported EPS to Operating EPS is in the Appendix. 12

13 2015 Guidance 2015 guidance* builds on strong start to five-year plan Operating EPS guidance of $2.00 to $2.15 Capital investment guidance of $710 million to $810 million $ s in millions Capital Investments 2015 ITCTransmission $170 $200 METC ITC Midwest ITC Great Plains Development Total Capital Investments $710 $810 *Guidance was reaffirmed on February 26,

14 Appendix 14

15 Reconciliation from Reported EPS to Operating EPS Twelve Months Ended December 31, Increase / (Decrease) $ 1.54 $ 1.47 $ (0.15) After-tax liability for audit related refunds After-tax debt extinguishment & consent solicitation fees After-tax MISO regional base ROE rate refund liability $ 1.63 $ 0.22 Reported Diluted EPS (GAAP) After-tax Entergy transaction related expenses Operating Diluted EPS (non-gaap) $

16 ITC Investor Relations Contacts Gretchen Holloway Vice President, Finance Office: Stephanie Amaimo Director, Investor Relations Office: Rachelle Richards Senior Analyst, Investor Relations Office: