Fortis Inc.

Ladies and gentlemen, thank you for standing by. My name is Michelle, and I will be your conference operator today. Welcome to the Fortis QQ 2020 conference call and webcast. During the call, all participants will be in a listen-only mode. There will be a question and answer session following the presentation. At that time, those questions should push star followed by the number one on your telephone keypad. If at any time during the conference you need to reach an operator, please press star zero. At this time, I would like to turn the conference over to Stephanie Anmaimo. Please go ahead, Ms. Anmaimo.

Thanks, Michelle, and good morning, everyone, and welcome to Fortis' second quarter 2020 results conference call. I'm joined by Barry Perry, President and CEO, and Jocelyn Perry, Executive VP and CFO. other members of the senior management team, as well as CEOs from certain subsidiaries. Before we begin today's call, I want to remind you that the discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slideshow. Actual results can differ materially from the forecast projections included in the forward-looking information presented today. All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U.S. GAAP financial measures in our second quarter 2020 MD&A. Also, unless otherwise specified, all financial information references in Canadian dollars. With that, I will turn the call over to Barry.

Thank you, Stephanie, and good morning, everyone. When we spoke last quarter, we were just starting to understand the challenging impacts of the COVID-19 pandemic on North America and the world. Three months later, we continue to see the effects of the virus on our people and the communities we serve. At Fortis, we have lived with spikes in COVID-19 cases in some of our jurisdictions like New York and Michigan. Currently, the people of Arizona, our UNS employees, and their families are facing the consequences of the spread of the disease. Our hearts go out to everyone affected. Our utilities remain vigilant during these uncertain times. We are focused on ensuring our employees, customers, and communities are safe. Nothing is more important to us. We also know the responsibility we hold as an essential service provider. I am heartened to see the commitment of our employees at home and in the field as they keep the lights on and the natural gas flowing. Thank you to each and every one of you. From a financial perspective, the pandemic impacts have been manageable to date and relate primarily to reduced sales in the Caribbean, as well as higher direct costs and credit losses. Together, these represented about $0.03 of EPS during the quarter. Last quarter, we disclosed that 82% of our annual revenues are either protected by regulatory mechanisms or are from residential sales, which were expected to increase during the pandemic. As expected, we did see higher residential sales and lower commercial and industrial sales. We recognize that the pandemic is ongoing, and we intend to continue to take the necessary measures to protect our employees, customers, and communities, all while delivering safe, reliable, and affordable service. Now I'd like to update you on the progress made on several fronts in our business in the second quarter. First, on the regulatory front, FERC issued an order on the MISO-based ROE matter at ITC. In British Columbia, FortisBC received a final order on its multi-year rate plan for 2020 to 2024, and TEP continued to progress the rate case in Arizona. Jocelyn will walk through these developments in more detail in her remarks. During the quarter, we advanced our commitment to delivering cleaner energy to customers and creating a more sustainable future. In June, Tucson Electric Power followed its integrated resource plan with the Arizona Corporation Commission, outlining an ambitious target to reduce carbon emissions by 80% by 2035, compared to 2005 levels. More recently, we released our 2020 sustainability report and signed on to the Black North Initiative, which is committed to removal of systemic barriers negatively affecting the black community. Also, we invested $2 billion of capital into our systems during the first half of the year, supporting adjusted earnings per common share of 56 cents for the second quarter and $1.23 year-to-date. Overall, our team continues to maintain operational and financial performance amidst the pandemic. Turning to slide five, here we have provided an updated look at the year-over-year sales trends in our local jurisdictions during the second quarter. Generally speaking, our utilities continue to see an increase in residential sales and a decline in commercial and industrial sales as businesses continue to operate at a reduced level. As you might recall, last quarter we identified UNS Energy and our other electric segment as having exposure to changes in sales. In fact, during the quarter, we saw total sales at those segments increase by 3%. Higher residential sales, mainly due to warmer weather in Arizona, was the main driver, partially tempered by lower commercial sales due to travel restrictions halting tourism in the Caribbean. Overall, retail sales in Arizona were up 9%, while other electric sales were down 3%. And excluding weather impacts in Arizona, sales at UNF Energy were up 2% over 2019 levels, mainly due to higher residential sales. Speaking of Arizona, we are very excited about TEP's new target to reduce carbon emissions 80% by 2035. To achieve this goal, TEP will require over 2,400 megawatts of new wind and solar power systems, including approximately 450 megawatts that will be coming online over the next year. In addition, TEP expects to add 1,400 megawatts of new energy storage systems. Once completed, TEP will have more than 70% of its power sourced from renewable generation. The Integrated Resource Plan also calls for TEP to ramp down and ultimately retire two units at the coal-fired Springville Generating Station in 2027 and 2032. Upon retirement of Unit 2 in 2032, Fortis expects to have a coal-free generation mix. These changes will result in TEP avoiding more than 50 million tons of CO2 emissions over the next 15 years, equivalent to taking approximately 700,000 passenger vehicles off the road on an annual basis. I want to congratulate Dave Hutchins and the team in Arizona for bringing forth this impressive plan, which continues our progress on a clean energy future for customers in Arizona. As we continue to focus on our core business of regulated energy delivery, sustainability is front and center in all that we do. Beyond TEP's new carbon emission targets, our newly released sustainability report highlights some of our other initiatives, including FortisBC's 30 by 30 goal, which aims to reduce greenhouse gas emissions associated with customer energy use by 30% by 2030. This target at FortisBC which is primarily a natural gas distribution company, is one of the most ambitious reduction targets among Canadian utilities. The report also showcases our investments dedicated to asset resiliency, modernization, and cleaner energy initiatives. In total, these investments represent about 70% of our $4.3 billion 2020 capital plan. In addition, the report highlights some of our recent disclosure enhancements, including our alignment with the recommendations of the Task Force on Climate-Related Financial Disclosures and expansion of various metrics. The report also emphasizes our new inclusion and diversity framework, which solidifies our commitment to take an active role on this front. Today, 40% of our Fortis, Inc. directors, three of our 10 utility presidents, and 60% of employees at our corporate head office are female. Lastly, the report outlines how our local leaders are supporting their communities. In 2019, more than $12 million in community investment was made by the Fortis Group of Companies. As mentioned, during the first half of 2020, we invested $2 billion in our energy systems, or 47% of our annual capital plan, and remain committed to our $4.3 billion capital expenditure plan in 2020. Major capital projects are progressing as planned. ITC received a key regulatory approval from the Iowa Utilities Board to proceed with the Multi-Value Project 5. The 345 kilovolt transmission line will help expand system capacity and respond to consumer demands for more cost-effective renewable energy sources in the region. And in Northern Ontario, We recently raised the first tower in the 1,800-kilometer Watay-Nakitiap Transmission Power Project, a milestone we are very proud of. Finally, the 250-megawatt Osogran Wind Project at TEP is progressing as planned. In fact, all 62 towers and turbines were installed during the first half of 2020, and TEP is in the process of installing the final remaining turbine blades. Turning to slide nine, the five-year capital plan of $18.8 billion remains unchanged. As you will recall, the capital plan is focused on our regulated businesses and consists of a diverse mix of highly executable, low-risk projects needed to maintain and upgrade our existing infrastructure. In 2019, mid-year rate base was $28 billion and is projected to grow to $34.5 billion by 2022, and $38.4 billion by 2024. This yields three-year and five-year compound annual growth rates of approximately 7%, which is consistent with our prior rate-based growth guidance. For 46 consecutive years, we have increased our dividend. This track record positions us as a leader in dividend growth. Our low-risk energy delivery business gives us confidence to continue this record. I'll now turn the call over to Jocelyn for an update on our second quarter results.