Edgar Filing: ITC Holdings Corp.

425

ITC Holdings Corp.

Second Quarter 2012 Investor Call

August 1, 2012

Filed by ITC Holdings Corp.

Pursuant to Rule 425 under the

Securities Act of 1933 and deemed

filed pursuant to Rule 14a–12

under the Securities Exchange

Act of 1934

Subject Company: ITC Holdings Corp.

Commission File No. 001–32576

Safe Harbor Language & Legal Disclosure

This presentation contains certain statements that describe ITC Holdings Corp. (“ITC”) management’s beliefs concerning future business

conditions and prospects, growth opportunities and the outlook for ITC’s business, including ITC’s business and the electric transmission industry

based upon information currently available. Such statements are “forward-looking” statements within the meaning of the Private Securities

Litigation Reform Act of 1995. Wherever possible, ITC has 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 ITC

management believes are reasonable. Such forward-looking statements are subject to risks and uncertainties which could cause ITC’s actual

results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among other

things, (a) the risks and uncertainties disclosed in ITC’s annual report on Form 10-K and ITC’s quarterly reports on Form 10-Q filed with the

Securities and Exchange Commission (the “SEC”) from time to time and (b) the following transactional factors (in addition to others described

elsewhere in this document and in subsequent filings with the SEC): (i) risks inherent in the contemplated transaction, including: (A) failure to

obtain approval by the Company’s shareholders; (B) failure to obtain regulatory approvals necessary to consummate the transaction or to obtain

regulatory approvals on favorable terms; (C) the ability to obtain the required financings; (D) delays in consummating the transaction or the

failure to consummate the transactions; and (E) exceeding the expected costs of the transactions; (ii) legislative and regulatory actions, and (iii)

conditions of the capital markets during the periods covered by the forward-looking statements.

Because ITC’s forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and

competitive uncertainties, many of which are beyond ITC’s control or are subject to change, actual results could be materially different and any

or all of ITC’s forward-looking statements may turn out to be wrong. They speak only as of the date made and can be affected by assumptions

ITC might make or by known or unknown risks and uncertainties. Many factors mentioned in this document and the exhibits hereto and in ITC’s

annual and quarterly reports will be important in determining future results. Consequently, ITC cannot assure you that ITC’s expectations or

forecasts expressed in such forward-looking statements will be achieved. Actual future results may vary materially. Except as required by law,

ITC undertakes no obligation to publicly update any of ITC’s forward-looking or other statements, whether as a result of new information, future

events, or otherwise.

The transaction is subject to certain conditions precedent, including regulatory approvals, approval of ITC’s shareholders and the availability of

financing. ITC cannot provide any assurance that the proposed transactions related thereto will be completed, nor can it give assurances as to

the terms on which such transactions will be consummated.

Safe Harbor Language & Legal Disclosure

ITC and Mid South TransCo LLC (“TransCo”) will file registration statements with the SEC registering shares of ITC common stock and TransCo

common units to be issued to Entergy Corporation (“Entergy”) shareholders in connection with the proposed transactions. ITC will also file a

proxy statement with the SEC that will be sent to the shareholders of ITC. Entergy shareholders are urged to read the prospectus and/or

information statement that will be included in the registration statements and any other relevant documents, because they contain important

information about ITC, TransCo and the proposed transactions. ITC’s shareholders are urged to read the proxy statement and any other relevant

documents because they contain important information about ITC, TransCo and the proposed transactions. The proxy statement, prospectus

and/or information statement, and other documents relating to the proposed transactions (when they are available) can be obtained free of

charge from the SEC’s website at www.sec.gov. The documents, when available, can also be obtained free of charge from Entergy upon written

request to Entergy Corporation, Investor Relations, P.O. Box 61000 New Orleans, LA 70161 or by calling Entergy’s Investor Relations information

line at 1-888-ENTERGY (368-3749), or from ITC upon written request to ITC Holdings Corp., Investor Relations, 27175 Energy Way, Novi, MI

48377 or by calling 248-946-3000

This presentation is not a solicitation of a proxy from any security holder of ITC. However, Entergy, ITC and certain of their respective directors

and executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of

proxies from shareholders of ITC in connection with the proposed transaction under the rules of the SEC. Information about the directors and

executive officers of Entergy may be found in its Annual Report on Form 10-K filed with the SEC, and its definitive proxy statement relating to its

Annual Meeting of Shareholders filed with the SEC. Information about the directors and executive officers of ITC may be found in its Annual

Report on Form 10-K filed with the SEC, and its definitive proxy statement relating to its Annual Meeting of Shareholders filed with the SEC.

Second Quarter 2012

STAND-ALONE OPERATING PLAN UPDATES

•

Strong performance on all fronts: operational, financial and strategic

–

Continue to execute stand-alone plans while also advancing the Entergy transaction

•

Execution of stand-alone plans on track

–

Investments in base systems support improved system performance

–

Development

efforts

continue

advance:

partnerships

SPP,

MVP

projects

and

ongoing

evolution

portfolio

Hugo to Valliant line and the first phase of the KETA projects energized in June

•

Regulatory policy developments

–

Order 1000 implementation activities continue with compliance filings expected this Fall

–

FERC initiated complaint against MISO formula rate protocols

Protocols establish process for implementing formula rates

Complaint is not related to rate elements approved by FERC (e.g., ROE)

ITC response highlights our more transparent protocols and business practices

•

Solid system and operational performance

–

Sustained periods of heat in the Midwest continues to fuel strong electricity demand

New peak load reached on METC and ITC Midwest in July

–

ITC systems have performed extremely well, with no operational problems experienced

Contributed

work

forces

assist

with

storm

restoration

efforts

along

East

coast

and

Michigan

(distribution system restoration)

•

Continue with extensive stakeholder

outreach program

Process informative and expected to

facilitate more efficient regulatory

process

•

Plan to begin formal process of seeking

regulatory approvals soon with a filing with

the Louisiana Public Service Commission

Joint application will highlight key

quantitative and qualitative benefits of

transaction

•

Remaining retail jurisdictional filings and

FERC filings will be sequenced after initial

filing with Louisiana Public Service

Commission

•

Remain on track to achieve closing in 2013

Entergy Transaction Update

STATUS

UPDATE

•

Key operating earnings drivers

–

Higher operating earnings due to higher rate base and AFUDC at our operating companies

and slightly lower effective tax rates for the quarter and the year-to-date period

–

Slightly offset by slightly lower revenues due to the full amortization of the ITCTransmission

revenue deferral regulatory asset in May 2011

Second Quarter & Year-To-Date Financial Results

EARNINGS & DRIVERS

Reported Diluted EPS

$ 0.81 $ 0.83

($ 0.02)

($ in Millions except per Share Data)

THREE MONTHS ENDED

JUNE 30,

2012

2011

SIX MONTHS ENDED

JUNE 30,

2012

2011

$ 1.70 $ 1.64

$ 0.06

Operating Diluted EPS

$ 1.05 $ 0.83

$ 0.22

$ 1.98 $ 1.64

$ 0.34

Pre-Tax Entergy Transaction Expenses $ 0.12

N/A

$ 0.12

FERC Audit Related Refunds

$ 0.25 N/A

$ 0.25

$ 0.25 N/A

$ 0.25

$ 0.19 N/A

$ 0.19

Income Taxes on Adjustments

($ 0.13) N/A

($ 0.13)

($ 0.16) N/A

($ 0.16)

Increase /

(Decrease)

Increase /

(Decrease)

Note: Reported net income and operating earnings reconciliation can be found in Appendix

CAPITAL

INVESTMENTS

–

THROUGH

JUNE

30,

2012

ITCTransmission

$ 104.9

METC

84.6

ITC Midwest

182.2

ITC Great Plains

57.5

TOTAL

429.2

•

Strong financial performance driven

by successful execution of our capital

investment plans

•

Invested $429.2 million in capital

projects at our operating companies

in the six month period ended June

30, 2012

•

2012 plans included further ramp up

in investment levels and multiple,

large-scale projects

Financial Results

CAPITAL INVESTMENTS

($ in Millions)

Financial Results

2012 GUIDANCE

ITCTransmission

$ 195 -

$ 215

METC

145 -

160

ITC Midwest

315 -

335

ITC Great Plains

95 -

110

TOTAL

750 -

$ 820

2012 GUIDANCE -

CAPITAL INVESTMENTS

•

As a result of performance in first six months of 2012

–

Updating 2012 operating EPS guidance to $3.95 to $4.05

–

Updating 2012 capital investment guidance to $750 to $820 million

($ in Millions)

Total

Revolver

Capacity

Revolver

Capacity

Outstanding

Undrawn

Revolver

Capacity

$ in Millions

ITC Holdings

$ 200.0

$155.6

$ 44.4

ITCTransmission

100.0

44.8

55.2

METC

100.0

71.4

28.6

ITC Midwest

175.0 66.9

108.1

ITC Great Plains

150.0

80.4

69.6

TOTAL

$ 725.0

$ 419.1

$ 305.9

Cash on Hand

38.5

TOTAL LIQUIDITY

$ 344.4

•

2012 financing activities

–

New $175 million ITC Midwest five-year

revolver executed in May 2012

–

Remaining 2012 financing calendar

Additional fixed debt at ITC Holdings

and METC in the second half of 2012

•

Liquidity position remains robust

–

Increased revolver capacity at ITC Midwest

brings total capacity to $725 million

–

Well positioned to continue to execute on

strategic plans going forward

Financial Results

CAPITALIZATION & LIQUIDITY

Stand-Alone Five-Year Capital Plan

2012 -

2016

Note: Five-year EPS CAGR based on 2011 through 2016 EPS

•

Stand-alone plan positions the company well to

create shareholder value while continuing to make

needed investment in transmission for benefit of

customers

•

Stand-alone $4.2 billion five-year capital plan

expected to generate EPS CAGR of 15 to 17%

–

Coupled with ongoing dividend policy provides

attractive value creation opportunity for

shareholders

–

Reflects ITC stand-alone plan and does not reflect

expectations of proposed Entergy transaction

•

Focus in 2012 remains on executing against our

existing strategy and plans while also advancing

Entergy transaction towards close

Looking Ahead

Appendix

Reported Net Income

$ 42,386 $ 42,996

($ 610)

($ in Millions except per Share Data)

THREE MONTHS ENDED

JUNE 30,

2012

2011

Increase /

(Decrease)

SIX MONTHS ENDED

JUNE 30,

2012

2011

$ 88,437 $ 84,998 $ 3,439

Operating Earnings

$ 54,795 $ 42,996 $ 11,799

$ 103,375 $ 84,998 $ 18,377

10,001 N/A

10,001

Income Taxes on Adjustments

(6,723) N/A

(6,723)

12,993 N/A

12,993

Non-GAAP Measures

NET INCOME RECONCILIATION

Increase /

(Decrease)

Acquisition Accounting Adjustment

12,993 N/A

12,993

(8,056) N/A

(8,056)

Entergy Transaction Expenses

6,139

N/A

* Approvals

may

required

Missouri

due

limited

assets

those

territories.

Approval

may

required

Oklahoma

for

ITC.

Entergy Transaction Update

TIMELINE

Authority

Requirement

Target Timing

Mid-Summer

Initiated process for

approval, expected to

advance in Q3 / Q4

Entergy Retail Regulators

(APSC, LPSC, MPSC, PUCT,

CCNO)

•

Change of control of transmission assets

•

Affiliate transaction-related steps in the RMT

•

Authorization to incur debt in some jurisdictions

FERC

•

Change of control of transmission assets (203 filing)

•

Acceptance of jurisdictional agreements (205 filing)

•

Authorization to assume debt / issue securities (204 filings)

•

Changes to System Agreement to remove provisions related to transmission

planning and equalization

•

New ITC rate tariffs to be established for the ITC operating companies (205 filing)

Hart-Scott-Rodino Act

(DOJ

FTC)

•

Pre-merger notification to review potential antitrust and competition

issues

IRS Private Letter Ruling

•

Private letter ruling substantially to the effect that certain requirements

for the tax-free treatment of the distribution of Transco Holdco are met

ITC

Shareholders

•

Merger

•

Issuance of shares to Entergy shareholders

•

Amendment to ITC articles to increase authorized number of shares

Filed late July

Initiated process for

approval, expect to

advance Q3 / Q4