Management Information Circular
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Fortis Place Suite 1100, 5 Springdale Street PO Box 8837 St. John’s, NL Canada A1B 3T2 T: 709.737.2800 F: 709.737.5307 www.fortisinc.com QUICK FACTS 10 UTILITY 9,000 OPERATIONS EMPLOYEES STRONG in Canada, the U.S. and $ BILLION the Caribbean 53 in total assets 1.3 MILLION 2MILLION gas utility customers electric utility customers $ BILLION Based in market cap 46 25 CONSECUTIVE YEARS ST. JOHN’S (as at December 31, 2019) of dividend payment increases Newfoundland and Labrador TSX/NYSE: FTS Message from the Chair of the Board and the President and Chief Executive Officer Dear fellow shareholders, On behalf of the board of directors and management of Fortis Inc., it is our pleasure to invite you to our 2020 annual and special meeting of shareholders on Thursday, May 7, 2020 beginning at 10:30 a.m. (Newfoundland Daylight Time). Please note that this year we are holding a virtual only meeting in an abundance of caution to protect everyone’s health and safety from the coronavirus (COVID-19). The meeting will be held via a live webcast. Shareholders will still have the opportunity to receive the presentation on our results for the year, vote on specific items of business and ask questions. Dividend growth The enclosed management information circular Our 6.1% increase in our quarterly dividend on contains important information about the meeting, December 1, 2019 to $0.4775 per share, or $1.91 on the items of business and how to vote your shares. an annualized basis, marked 46 consecutive years of Details about voting in advance begin on page 7 and annual common share dividend increases. This is one participating in the virtual meeting begin on page 8. of the longest records for annual common share Strong financial performance dividend increases by a Canadian public corporation. Our five-year capital investment plan is expected to Fortis achieved strong financial results in 2019 and drive rate base growth of approximately $10 billion strategically positioned itself to deliver long-term over the period. Based on this plan and our growth to shareholders. In 2019, net earnings confidence in future opportunities, we extended our attributable to common equity shareholders were 6% average annual dividend growth guidance to $1,655 million, or $3.79 per common share, 2024. compared to $1,100 million, or $2.59 per common 1 share, for 2018. We achieved adjusted net earnings Increasing our sustainability focus of $1,115 million, or $2.55 per common share, in 2019, compared to $1,066 million, or $2.51 per At Fortis, sustainability, including reducing our common share, for 2018. carbon footprint, is at the forefront of everything we do. Our business focus is on energy delivery with our We delivered a one-year total shareholder return of assets primarily consisting of electricity poles, wires 22.7% in 2019. Over a 20-year period, Fortis has and natural gas lines. We are in a fortunate position delivered a total shareholder return of 1,363% and because we own a small amount of fossil fuel-based an average annualized total return of 14.3%. In generation, limiting our impact on the environment. comparison, over the same 20-year period the S&P/TSX Composite Index delivered a total return of We remain steadfast in our commitment to reducing 237%, and the S&P/TSX Capped Utilities Index our carbon footprint as we realize the full potential delivered a total return of 729%. Very few other of the clean energy transformation that is taking companies have consistently delivered such strong place. You can read more about our commitment to performance for shareholders. sustainability beginning on page 36 and the board’s oversight role on page 37. 1 Non-US GAAP measure – see page 93. 2020 MESSAGE TO SHAREHOLDERS 1 Strategy and risk management You can read more in the letter from the chair of the human resources committee on page 49 and in the Our board is responsible for the stewardship of compensation discussion and analysis beginning on Fortis and its businesses. You can read more about page 52. how the board oversees our strategy, evaluates our business and financial risks, and monitors our Leadership succession mitigation strategies beginning on page 34. We announced two executive leadership changes in Election of directors the last year. David Hutchens was appointed to the newly created role of Chief Operating Officer This year we are asking you to elect 10 directors to effective January 1, 2020, broadening his current the board. All 10 nominees currently serve as a responsibilities to include operational oversight of member of the Fortis board. The nominees are our 10 utilities. qualified, experienced and together they bring a strong mix of skills and experience to the board. As well, following the planned retirement of Phonse Delaney, Executive Vice President, Chief Information You can read about each nominee beginning on Officer in May 2019, James Laurito assumed page 16. responsibilities for technology matters and was Joseph Welch is not standing for re-election this appointed Executive Vice President, Business year. On behalf of the board, we would like to thank Development and Chief Technology Officer. Joe for his valuable contributions to the Fortis board. You can read more about our leadership succession Joe was the President and Chief Executive Officer of planning on page 34. Fortis subsidiary ITC at the time of its acquisition and has served as chairman of ITC since 2008, providing Positioned for future success strong leadership and vision to a company that became an important part of the Fortis family in We will continue to be a champion of progress, 2016. realizing the full potential of the move to cleaner energy while remaining steadfast in our Remembering Ida Goodreau commitment to deliver safe, reliable and secure energy. We are thinking long term as we drive your We were deeply saddened by the passing of Ida company forward, ensuring a successful Fortis for Goodreau in late 2019. Ida was a member of the years to come. Fortis board since 2009 and served as chair of the governance and nominating committee. She also Please remember to vote your shares – your vote is served as chair of our utilities in British Columbia. important. Ida’s vision and insight were strong on many fronts. We thank you for your continued support and look We are grateful to Ida for being a champion of our forward to hosting you online on May 7, 2020. Women in Leadership initiative and for supporting and encouraging Fortis in our progress towards a Sincerely, cleaner energy future. We miss her immensely. Pay aligned with performance Both the board and the human resources committee work diligently to ensure executive compensation Douglas J. Haughey Barry V. Perry supports the business strategy, links to performance Chair, Board of Directors President and Chief and aligns with shareholder interests. The corporate Executive Officer performance component of incentive compensation was above target in recognition of a successful year. 2 FORTIS INC. What’s inside 4 Notice of our 2020 annual and special meeting 5 2020 Management information circular 6 About the shareholder meeting 7 Voting 11 What the meeting will cover 15 About the nominated directors 26 Additional information about the directors 31 Governance 32 Our governance policies and practices 33 About the Fortis board 48 Executive compensation 49 Message from the chair of the human resources committee 52 Compensation discussion and analysis 52 Compensation strategy 52 Compensation governance 58 Compensation design and decision-making 62 2019 Executive compensation 82 Share performance and cost of management 85 2019 Compensation details 92 Other information 95 Appendices 95 Statement of corporate governance practices 103 Board of directors mandate 107 Advance notice by-law no. 2 About forward-looking information Fortis includes forward-looking information in this circular within the meaning of applicable Canadian securities laws and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (collectively referred to as forward-looking information). Forward-looking information reflects expectations of Fortis management regarding future growth, results of operations, performance, business prospects and opportunities. Wherever possible, words such as anticipates, believes, budgets, could, estimates, expects, forecasts, intends, may, might, plans, projects, schedule, should, target, will, would and the negative of these terms and other similar terminology or expressions have been used to identify the forward-looking information, which includes, without limitation: targeted average annual dividend growth through 2024; forecast rate base growth for the period from 2020 through 2024; TEP’s renewable energy target; and FortisBC’s 2030 GHG emission and gas supply targets, energy efficiency spending and expected benefits. Certain material factors or assumptions have been applied in drawing the conclusions contained in the forward-looking information, including, without limitation: reasonable regulatory decisions by utility regulators and the expectation of regulatory stability; the implementation of the five-year capital expenditure plan; no material capital project and financing cost overruns related to capital projects; sufficient human resources to deliver service and execute the capital expenditure plan; the realization of additional opportunities; the impact of fluctuations in foreign exchange; and the Board exercising its discretion to declare dividends, taking into account the business performance and financial condition of Fortis. Fortis cautions readers that a number of factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking information. These factors should be considered carefully and undue reliance should not be placed on the forward-looking information. For additional information with respect to certain of these risks or factors, refer to the continuous disclosure materials filed from time to time by Fortis with Canadian securities regulatory authorities and the Securities and Exchange Commission (SEC).