EPCOR INVESTOR PRESENTATION Tony Scozzafava Senior Vice President & Chief Financial Officer Matt Lemay Senior Manager, Treasury EPCOR.COM
FORWARD-LOOKING INFORMATION Certain information in this presentation is forward looking within the meaning of Canadian securities laws as it relates to anticipated financial performance, events or strategies. When used in this context, words such as “will”, “anticipate”, “believe”, “plan”, “intend”, “target”, “could” and “expect” or similar words suggest future outcomes. Forward looking information in this presentation includes, or is related to, but is not limited to: (i) capital investment forecast and timing; (ii) developing new operating hubs; (iii) the solar farm at E.L. Smith Water Treatment Plant; (iv) the renewable natural gas opportunities at Gold Bar Wastewater Treatment Plant; (v) the Riverview Substation facility capital cost and in service date; (vi) commencing operations of the Vista Ridge water supply pipeline; completion of the Southern Bruce (Kincardine) greenfield natural gas distribution system; undertaking work on electrical assets related to TransMountain; (vii) the procurement of energy under the new EPSP; (viii) the commitment to maintaining credit ratings; (ix) EPCOR’s disciplined approach to growth; (x) expectations of financing capital growth; (xi) expectations of earnings from rate regulated businesses; and (xii) expectations of accessing debt capital markets; (xiii) expectations to improve safety, modernize assets and use of renewable energy; (xiv) expectations regarding lead mitigation and SIRP; and (xv) expectations regarding growth of ENCOR. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks which could cause actual results to vary and in some instances to differ materially from those anticipated by EPCOR. Forward- looking information is based on the estimates and opinions of management at the time the information is presented. Actual results could differ materially from conclusions, forecasts or projections in the forward-looking information, and certain material factors or assumptions were applied in drawing conclusions or making forecasts or projections as reflected in the forward- looking information. Additional information about the material factors and risks that could cause actual results to differ materially from the conclusions, forecasts or projections in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking CONSTRUCTION COMPANY information is contained in the most recent interim and annual Management Discussion and Analysis filed on SEDAR PRESENTATION (www.sedar.com) and EPCOR’s website (www.epcor.com). The purpose of forward looking information is to provide readers with management’s assessment of future plans and possible outcomes and may not be appropriate for other purposes. Readers are cautioned not to place undue reliance on forward- looking statements as actual results could differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements. Except as required by law, EPCOR assumes no obligation to update any forward-looking information, should circumstances or management’s estimates or opinions change, or any other reason. All forward looking information in this presentation is expressly qualified by this cautionary statement. 2 EPCOR INVESTOR PRESENTATION
CANADA | U.S. UTILITY OPERATIONS Infrastructure builder and provider of life essentials – power, water and natural gas. Power, water | wastewater | drainage, natural gas services 2 million customers in North America Largest regulated private water utility in U.S. Southwest Headquartered in Edmonton, Alberta 3,500 employees, including 300 located in the U.S. 3 EPCOR INVESTOR PRESENTATION
Governed by an Independent NATIONALLY Board of Directors composed Founded in 1891, Edmonton’s power and water utilities were united in 1996 into EPCOR, a of business and community RECOGNIZED municipally-owned utility with a mandate to leaders. grow beyond Edmonton CORPORATE As owner and shareholder, Strong stand alone credit rating (S&P: A-) and disciplined approach to capital placement the City is not involved in GOVERNANCE decision-making except for material dispositions. 4 EPCOR INVESTOR PRESENTATION
ELECTRICITY Distribution & transmission; OPERATIONS transportation electrical infrastructure, i.e. street lighting, traffic signals, light rail transit SNAPSHOT WATER , WASTEWATER & DRAINAGE We’ve kept up on our commitment to safe and Treatment, transmission, distribution reliable operations for more than 125 years. and sale of water; collection and conveyance of wastewater and stormwater; drainage and Predominately rate regulated business with limited wastewater treatment commercial exposure carried out under long-term contracts NATURAL GAS with investment grade counterparties. Natural gas delivery to more than 30 Long-life, high quality infrastructure assets in North America communities in Canada and U.S.; – Western Canada, Ontario, U.S. Southwest. constructing gas pipeline in rural Ontario Assets: $11.3 billion, Revenues: $1.9 billion (2019 Q3 LTM) ENERGY SERVICES In Alberta, rate regulated electricity service to residential and small Note: - All amounts in Canadian dollars unless specified otherwise. commercial customers; competitive - Last twelve months (“LTM”) electricity and natural gas through Encor brand; billing, collection and contact centre services 5 EPCOR INVESTOR PRESENTATION
A disciplined approach OUR STRATEGY to placing capital in markets where we have an advantage. Conservative Growth Profile. RATE REGULATED NEW HUBS IN ONTARIO MERGERS & INFRASTRUCTURE & TEXAS ACQUISTIONS Over 80% of capital investment Continued development of M&A opportunities assessed is in regulated businesses. Between operating hubs in Ontario & Texas. based on strategic fit and $750 M and $950 M spent in 2019. investment criteria. 6 EPCOR INVESTOR PRESENTATION
Continue to build on our OUR STRATEGY reputation as a trusted developer and operator of utility assets. Market Reputation. PEOPLE & TALENT ZERO INJURY SERVICE ENVIRONMENTAL CULTURE RELIABILITY RESPONSIBILITY Attract and retain the best Continue to drive down safety Modernizing our water, Target industry-leading employees. incidents through a mix of environmental performance drainage and electricity leading and lagging indicators. and use renewable energy to networks to reduce outages. . reduce our carbon footprint. 7 EPCOR INVESTOR PRESENTATION
EXCELLENT BUSINESS STRONG FINANCIAL RISK PROFILE RISK PROFILE FINANCIAL Over 95% of EBITDA from Strong balance sheet, rate regulated businesses, solid operating cash flow PROFILE sector and geographic and liquidity metrics, diversity, strong competitive access to competitive position. capital markets, disciplined growth strategy. Our proactive, methodical approach to risk positions us well for continued growth and competition. 2% EARNINGS MIX Regulated Non-Rate 98% Regulated/Contracted 8 EPCOR INVESTOR PRESENTATION
2019 Q3 LTM OVERVIEW OF FINANCIAL RESULTS ($ millions) 2016 2017 2018 Q3 2019 (LTM) Net Income 309 256 295 279 Operating Income 379 356 384 405 Funds From Operations 412 478 573 640 Total Debt 1,920 2,866 2,700 3,081 Gross Assets 6,161 10,344 10,656 11,291 Debt to Capitalization 42% 45% 42% 45% FFO/Debt 22% 17% 21% 21% • 2016 net income higher primarily due to gains from the sale of Capital Power shares and dividend income from Capital Power. • Drop in 2017 FFO/Debt caused by full debt burden of the drainage transfer but only four months of drainage FFO. 9 EPCOR INVESTOR PRESENTATION
2019 Q3 LTM SEGMENT OVERVIEW Consolidated Operating Income 11% ENERGY SERVICES 20% U.S. OPERATIONS DISTRIBUTION AND TRANSMISSION 33% 36% WATER SERVICES All amounts in millions of CAD dollars, as of the quarter ending September 30, 2019 10 EPCOR INVESTOR PRESENTATION
NET ASSET GROWTH $7.6 B WATER SERVICES 7% 15% $4.4 B 3% DISTRIBUTION & TRANSMISSION ENERGY SERVICES 9% 30% 31% U.S. OPERATIONS 6% 45% CAPITAL POWER 24% 30% OTHER 2011 2019 Q3 Note: assets net of contributions 11 EPCOR INVESTOR PRESENTATION
Maintaining strong “A” credit rating with FINANCIAL significant financial flexibility STRENGTH Strengthening cash flow and earnings driven by strong business unit performance FFO to Debt Debt to Capitalization FFO ($M) $640 50% 40% $700 $573 35% $600 45% $478 30% $435 $500 $412 40% 25% $400 20% 35% $300 46% 45% 45% 15% 42% 42% 30% $200 22% 21% 21% 21% 10% 17% 25% $100 5% 0% $0 20% 2015 2016 2017 2018 2019 Q3 2015 2016 2017 2018 2019 Q3 LTM LTM 12 EPCOR INVESTOR PRESENTATION
FINANCING & LIQUIDITY GOOD ACCESS TO CAPITAL AND SHORT-TERM LIQUIDITY Committed syndicated credit facility of $600M maturing Nov. 2024 Five $40 million bilateral demand facilities Capital growth will be financed with a combination of cash flow and debt issuances Will continue to fund US growth with USD debt DEBT ISSUANCE $350 million, 30-year MTN, issued in July 2019 with coupon rate of 3.106% $100 million, 3-year MTN, issued in July 2019 with coupon rate of 1.949% 13 EPCOR INVESTOR PRESENTATION
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