EPCOR Utilities Inc. Investor Presentation February 2019 Tony - PowerPoint PPT Presentation

EPCOR Utilities Inc. Investor Presentation February 2019 Tony Scozzafava Senior Vice President & Chief Financial Officer Pamela Zrobek Treasurer 1

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) 2018 capital investment forecast; (ii) developing new operating hubs; (iii) the solar farm at E.L. Smith Water Treatment Plant; (iv) the bio gas opportunities at Gold Bar Wastewater Treatment Plant; (v) the Riverview Substation facility capital cost and in service date; (vi) completion of the Southern Bruce (Kincardine) greenfield natural gas distribution system; (vii) the acquisition of Rio Verde Utilities Inc.; (viii) the procurement of energy under the new EPSP; (ix) the commitment to maintaining credit ratings; (x) EPCOR’s disciplined approach to growth; (xi) expectations of financing capital growth; (xii) expectations of earnings from rate regulated businesses; and (xiii) expectations of accessing debt capital markets. 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 information is contained in the most recent interim and annual Management Discussion and Analysis filed on SEDAR (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

Strategy & Overview 3

EPCOR Corporate Snapshot  Owned by the City of Edmonton.  Governed by independent Board of Directors; shareholder not involved in decision making except for material dispositions.  Predominantly rate regulated business with limited commercial exposure carried out under long-term contracts with investment grade counterparties.  Long-life, high quality, infrastructure assets in North America.  Committed to maintaining strong credit rating. S&P: A-; stable outlook  (confirmed Sept. 20, 2018)  DBRS: A (low); stable outlook (confirmed Sept. 21, 2018) 4

EPCOR Organizational Structure City of Edmonton EPCOR Utilities Inc. Water Distribution & Energy U.S. Services Transmission Services Operations Western Alberta Alberta U.S. Canada Southwest • Treatment, transmission, • Electricity distribution • RRO electricity service • Regulated water, distribution and sale of and transmission to residential and small wastewater and natural water commercial customers gas utility services • Transportation electrical • Collection and conveyance infrastructure (ie: street • Retail sale of electricity of wastewater and lighting, traffic signals and natural gas though stormwater and light rail transit) Encor brand • Treatment of wastewater • Billing, collection and contact centre services 5

EPCOR Operations 6

2018 Q3 LTM – Segment Overview Consolidated Operating Income - $384 Million 1% 22% 42% 7% 28% All amounts in millions of CDN dollars, as of the quarter ending September 30, 2018 Last twelve months (“LTM”) 7

Strategic Direction Conservative Growth Profile  Disciplined approach to placement of capital with a focus on markets where we have a competitive advantage.  Investments heavily weighted towards rate regulated utility infrastructure.  Over 80% of capital investment is in regulated businesses.  2018 capital investment estimated to be between $625M - $725M.  Developing new operating hubs in Ontario and Texas.  M&A opportunities considered if a strategic fit and meet investment criteria. Market Reputation  Continue to build reputation as a trusted developer and operator of utility assets.  Zero injury culture.  Service reliability.  Environmental responsibility. 8

Segment Highlights 9

Water Services Highlights Key Developments  Drainage Services was transitioned from City of Edmonton to EPCOR effective September 1, 2017. Under the EPCOR Drainage Services Bylaw, rate increases are held at 3% per year until March 31, 2022. Continue to evaluate opportunities for synergies and process improvement to drive results.  EPCOR Water is planning to build a 12 MW solar farm at the E.L. Smith Water Treatment Plant to replace a large portion of all purchased power for the plant with green power. The project requires regulatory approvals from both Alberta Utilities Commission (AUC) and City of Edmonton. If approved, the solar farm is expected to be in service by the end of 2019 and the reduction in greenhouse gas emissions will be comparable to taking over 2,500 vehicles off the road each year. Operating Income  Received approval for $12.6 million in $ Million government grant funding to construct 180 and operate a 6 MW Battery Energy 160 140 Storage System (BESS) in conjunction 120 with the solar project. 100 80  Continue to pursue bio gas opportunities at 60 the Gold Bar Wastewater Treatment Plant. 40 20 0  Increase in 2018 Q3 LTM operating income 2014 2015 2016 2017 2018 Q3 reflects a full twelve months of Drainage LTM operations as well as increased customer growth. 10

Distribution & Transmission (D&T) Highlights Key Developments AUC Generic Cost of Capital 2018-2020 Decision maintained a return on equity rate of 8.5%,  based on a capital structure of 37% equity and 63% debt.  Distribution 2018-2022 Next Generation PBR (PBR rebasing).  Capital funding level equal to the average of 2013-2016 capital additions, approximately $150 million per year.  2018-2019 Transmission Facility Owner (TFO) Application Decision received in October 2018. Approved Revenue Requirement in-line with EDTI expectations. Operating Income $ Million 140  Riverview Substation facility application 120 approved by the Commission with anticipated in 100 service date in Q4 2019. Capital cost, with 80 associated feeders, estimated to be 60 approximately $66 million. 40 20 Operating income has declined primarily as a  0 result of lower transmission access services 2014 2015 2016 2017 2018 Q3 charge net collections. Transmission system LTM access service charge net collections are timing differences. 11

Ontario Hub Development  NRG (Aylmer) acquisition completed on November 1, 2017. EPCOR’s Southern Ontario Locations  Rate Regulated by OEB.  ~8,700 natural gas customers.  Cash consideration of $22 million.  Collus PowerStream (Collingwood) acquisition completed October 1, 2018.  100% interest in electric distribution company in Collingwood, Ontario.  Over 17,000 customers.  Cash consideration of $28 million and assumption of $16 million in third party debt.  Southern Bruce (Kincardine) greenfield natural gas distribution system.  Selected proponent by OEB; announced April 2018.  Awaiting confirmation of the availability of funding from the Province of Ontario. Expect to break ground in 2019 with system completed in 2021.  12