Ladies and gentlemen, thank you for standing by. My name is Ruth and I will be your conference operator today. Welcome to the Fortis Q4, 2017 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. [Operator Instructions]. At this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Ms. Amaimo.

Thanks Ruth, and good morning everyone and welcome to Fortis’s 2017 fourth quarter and annual results conference call. I’m joined by Barry Perry, President and CEO; and Karl Smith, 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 this discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide show. All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U.S. GAAP financial measures in our 2017 annual MD&A. Also, unless otherwise specified, all financial information referenced is in Canadian dollars. With that, I will turn the call over to Barry.

Thank you Stephanie and good morning everyone. Before providing details on our quality results, I would like to take a moment to note that we were deeply saddened by the passing of Michael Mulcahy, CEO of FortisBC during the fourth quarter. Michael is a long time leader with Fortis and will be greatly missed. Roger Dall'Antonia was subsequently appointed CEO of BC operations and we welcome him on the earnings call today. 2017 marked the culmination of a successful five year period, in which Fortis more than doubled its size with the completion of three successful utility acquisitions in the United States. The integration of ITC, which was accretive to earnings per common share, the constructive rate case settlement in Arizona and strong execution of our capital investment program underscore our financial performance for the year, reinforcing the strength of Fortis as a North American utility leader. 2017 also brought some challenges. In early September our utility on the Turks and Caicos Islands suffered significant damage to its transmission and distribution network, following Hurricane Irma’s path of destruction. Although devastating, we were able to restore electricity to all customers that had the capability to be reconnected in less than 60 days. This quick and safe response is a testament to our strength, culture and expertise. This marks one of our proudest achievements of 2017. All in all we executed very well in 2017, including reaching over $1 billion in adjusted net earnings for the year, a first for Fortis. We continue to invest capital in our business to enhance service to our customers in a safe, reliable and affordable manner. In 2017 we invested $3 billion capital and reached over $25 billion in rate base. These investments support our earnings growth and the 6.25% increase in the fourth quarter dividend…

Thanks Barry. Good morning everyone. Our fourth quarter and annual 2017 financial results were again quite good. Adjusted earnings for the quarter were $259 million, compared to $243 million for the same quarter last year. Adjusted earnings per share was $0.62 for the quarter, down $0.01 compared to the same quarter last year. For the full year adjusted earnings exceeded the $1 billion milestone, which was higher by $338 million compared to the previous year. Adjusted earnings per share were higher by 10% of $0.22 reaching $2.53. Cash flow from operation of $2.8 billion in 2017 represents an increase of 46% compared to 2016. The increase was driven by contributions from ITC and higher earnings from UNS. As noted on the previous slide, adjusted earnings per share decreased by $0.01 compared to the fourth quarter of 2016. There were a number of puts and takes affecting our comparative earnings per share. A $0.02 increase was driven by a result of Aitken Creek and largely relates to mark-to-market accounting for natural gas hedges. During the fourth quarter there were $14 million of unrealized gains recognized compared to an unrealized loss of $3 million for the same period in 2016? This was partially offset by tax adjustments associated with the increased tax rate in British Colombia. UNS contributed $0.01 to adjusted earnings per share quarter-over-quarter. The main driver was new rates effective February 2017 at Tucson Electric Power. Changes in foreign exchange rates resulted in a $0.02 decrease in the fourth quarter earnings per share over the same period in 2016. The average U.S. dollar to a Canadian dollar foreign exchange rate was $1.27 this quarter down from a $1.33 in the fourth quarter last year. Strong uptick in our dividend reinvestment plan and the resulting increase in common shares outstanding lowered…

Thank you, Karl. To wrap up, we are very pleased with our ability to deliver strong results in 2017. We remain well position to execute on our organic growth strategy and to continue to deliver on our 6% dividend growth guidance to 2022. We remain focused on delivering cleaner energy and are also taking steps to improve our disclosure and reporting on environmental and sustainability performance and programs. Our goal is to deliver sustainable growth to the benefit of our customs and shareholders over the long term. And now I’ll turn the call back over to Stephanie.

Thank you, Barry. This concludes the presentation. At this time we’d like to open the call to address questions from the investment community.

Thank you. [Operator Instructions]. Your first question comes from the line of Robert Kwan with RBC Capital Markets. Please go ahead.

Good morning. I’m just wondering, starting with the ATM, how really should we think about this? Is this really the response on tax reform to kind of fill in the lost cash flow in the near term and address the directional weakening of the credit metrics, or is this a sign of your confidence or incremental confidence in the larger new growth initiatives coming onto the books this year?

I would say it’s the latter Rob. You know we clearly were really progressing some of these development projects that we have and I’m looking forward to updating our five year capital program later this year. And I would also say though, like a drip program you know which would have the 2% discount, the cost of an ATM program is about that level. Large companies like Fortis in North America now, this is just another tool in our sort of toolbox basically to raise equity in a very cost efficient manner when we need to, and clearly if something, you know as we go through our ratings processes, if something did come out of that process, I don’t expect it to, we have the flexibility then to use this is as well. So I think it’s just the right thing to do for us for a lot of reasons at this point in time.

Got it and I guess then just on the tax reform and the near term headwinds on cash flow. Can you quantify roughly what you see that near term cash flow loss to be and how do you expect to kind of just bridge that gap or do you think you have room within the credit metrics just to absorb that?

Well Rob, we are not going to give you a dollar number, but I will tell you we are running nicely ahead of the sort of threshold metric, and so now we’ve taken a little bit of a smack I would call it from U.S. tax reform. But we are going to come back above that fairly quickly into next year. So pretty minor hit overall I think. If you look at what Moody's is talking about in the markets about certain ranges, we are actually – we are outside the lower end of that range to give you a sense of size, so.

Got it, and maybe just to finish on the cross boarder tax structure, Karl you mentioned that you expect it to be in place. Can you just give us some extra color on that, particularly with the pretty broad language in tax reform with respect to non-deductibility of cash flows that have a deduction in the U.S. but change their characteristics as they enter the home country?

Yeah, I mean there is still a little bit of gray in all this Robert as you alluded to, and we’ve a done a lot of scenario analysis here and first of all the value of that tax structure, just in case some people are wondering about the value of the tax structure, change in the value of the tax structure as it plays out with the deductions we are getting in Canada for income tax purposes. So the value really doesn’t change as long as you assume that it doesn’t get hampered by the international tax components of the new tax legislation. Our reading of that suggest that it doesn’t affect us that way and even if we do some stress testing on it, if there was to be an impact, it would be very small.

Got it, that’s great. Thank you very much.

Our next question comes from the line of Bob Hope with Scotiabank. Please proceed with your question.

Good morning everyone. A couple more tax questions unfortunately. The 3% headwind to EPS that you mentioned, is that a 2018 estimate and then wouldn’t it be reasonable to assume that that gets ground down as the rate base increases?

Yeah, your right on there Rob, but I’m referring to the impact in 2018 and then it gets ground down fairly quickly after that and we get back to where we would have been otherwise.

Alright, that’s helpful. And then we’ve seen kind of initial positions by a number of your regulators on U.S. tax reform, but has there been any initial position on how FERC could create tax reform for ITC, as well as you know when those changes would come into effect for rates?

We don’t have any specific indication yet Rob and I mean FERC, there will be a refilling that’s required out of ITC with respect to FERC. Its less clear as to the impact they are doing as per the FERC regulators, the assets they are doing are quite small. So we suspect that they are down the list in terms of priority. So we have to wait till we see the refilling at ITC, but things got adjusted really quickly on the FERC regulation as you know and they are trued up anyway. So I mean the rates are current, except for this one impact and it should be relatively straight forward to think to make the adjustment for that.

I would add too Rob that the – we are expecting that both obviously the lion’s share of the tax benefit under the FERC regulation will go to customers and we’ll see actually fairly significant decreases in transmission rates. You know we are hopeful obviously that will allow more opportunities to invest further in some of those service territories. There’s still lots of work that needs to be done and you know when customers bills go down, you know it does help that sort of discussion on further capital investment, so.

Alright, that’s very helpful. Thank you for the color.

Our next question comes from Ben Pham with BMO. Please proceed with your question.

Okay thanks, good morning. I wanted to clarify on the new rate based figures you provided. Is that mainly taking away the bonus depreciation you have assuming investment acceleration or any sort of changes in amortization differed liability.

The only adjustment we made Ben was to incorporate the cessation upon its appreciation. So it’s just adjusting the math. We are not assuming every other added investment, which we think there will be, but we’re not adding anything in right now.

Okay, so there could be some more room for upside.

Yes.

And can I ask you also, just at risk of annoying you Barry on your views on organic growth versus acquisitions and if your tone is going to change there and…

I’m over that you know. I apologize for snapping at someone in New York I think it was, but I’ll tell you that I am really excited about the company’s prospects with the base business that we have. You know we’ve been really focused on making sure we’re spending the right amount of capital in all of our utilities and that work is ongoing. Last year we raised our capital plan, the five year plan by $1.5 billion. We now have some really exciting projects that we’re working on, but I would also say, we are working with every one of our utility businesses to make sure we are doing the right things for our customers and I am really expecting we’re going to see further growth in that capital plan going forward. That’s where my gut is at this point in time as we think about rolling out that this year. So that’s where I think most value lies for Fortis and that’s where our focus is right now.

Okay. Alright, thanks everybody.

Our next question comes from Linda Ezergailis with TD Securities. Please proceed with your question.

Thank you. Maybe I can just get an update on your sense of the relative attractiveness of various financing options given the growth that you see in front of you. You’ve introduced ATM to the mix. I’m wondering if you can comment on how that stacks out versus other options, including perhaps selling less core assets or a partial interest in utilities, preferred shares, when you might consider turning off the drip at this point going forward if at all, etcetera.

I’ll make a general comment. Maybe Karl can weight in a little bit Linda, but you know we’ve never sold the utility business that we bought, so that’s a bit of a story of Fortis I think and you know the fact is just about all the business is regulated at this point in time, so – but we had a – you know like we did historically, hotels and real estate, listen we’ll be getting out of that stuff, but really everything we got is regulated. Yeah, we have some Caribbean investments, we have some smaller utilities, but you know they are managed well and they are contributing. So I don’t see that happening, at least in the near term. So you know in terms of types of capital, you know when you can raise equity capital as 2% discount to the market, that’s pretty good I think you know compared to historically as we grew our business doing bought deals in Canada you know with the banks that you know obviously were probably in most cases costing triple that I would think. So I think this is a really cost effective way of raising equity capital. In terms of press market, maybe Karl you can comment, but I don’t think it’s all very attractive right now, so.

Yeah, it depends on the point in time always Linda as you know, but I would say generally speaking, our philosophy or strategy around financing really hasn’t changed, our thinking around it hasn’t changed you know and specifically looking at that ATM program, I’d view that as just a normal evolution of our financing tactics you know. It’s mainly processed by us being listed in the New York Stock Exchange now. It’s a very popular tool used by utilities in the U.S., so it’s just – we’re just evolving as we are continuing to grow and change. But specifically in preferred markets it’s getting a little bit better, but you know our current approach is we continue to raise equity through our drip. It’s sufficient for our needs and our current plan. The ATM is in place to give us flexibility and you know we’re just working on keeping the balance sheet looking proportionately similar to the way it is today.

Okay, that’s helpful context and I don’t know what’s happening to the credit metrics at your U.S. utility OpCo level, but would there be a case potentially to go to the regulators and ask for some kind of credit friendly release in the form of potentially even thicker equity even though you guys enjoy pretty good thickness of equity, especially compared to the Canadian space or even higher ROE or do you think that wouldn’t be an option.

I wouldn’t look at it as cut and dry as that. I mean you got to resist the tendency to get too focused on the U.S. tax reform specifics. I mean this is always an ongoing discussion and with regulators as to you know the metrics, the national metrics that are appropriate in the jurisdiction, given then where rates are and everything else, so. I think it’s just another thing that gets added into the [inaudible] of determining what the conversation of the regulator is, so. On our U.S. utilities specifically, there is a fair amount of headroom in their credit metrics and you would have noticed if you read the Moody’s report that none of those were mentioned in that particular report and that’s the reason why there is a fair amount of flexibility and headroom with our U.S. based utilities.

I think one of the things that will probably be missed a bit by all this chatter about U.S. tax reform is, you know bonus depreciation is going away. The sector never really wanted it and we had it and now it’s going away and it’s you know – and it’s going to allow every dollar of investment to help rate base grow on a quicker rate. So when I look at the tax reform that’s been helpful to the economy. It’s supporting our investment, allowing us to grow faster. That’s the big picture for me and you know I’m pretty upbeat about where things are in the U.S. at this point in time.

Thank you. And just a very quick final question on the Lake Erie Connector. Can you confirm that it won’t be subject to any sort of major project review as contemplated with recent changes by the federal government? Are they grandfathered or what’s going on there?

Linda, I haven’t caught up with that, but I don’t expect this is a fully permitted project on both sides of the board and we have the national energy board approval and the presidential permit, so those permits are still in effect and you know they like give it a fair amount of time to actually complete this project, but I am not 100% of that. Linda, I don’t know if you can offer anything on that?

Yeah, hi Barry. No, there is nothing that we are aware of that would change the course of that project as you indicated. You know we have secured the permits on both sides and we are proceeding. There is nothing that would suggest anything has changed in that regard.

Thank you.

Our next question comes from Andrew Kuske with Credit Suisse. Please proceed with your question.

Thank you. Good morning. I guess Karl, when you were the CFO back in the early 2000’s and then Barry you took over that role, the payout ratio was you know a lot lower and then it drifted upwards and now it’s been in the process, drifting downwards for the last few years. Just where do you think the normalized payout ratio should be at this stage in time?

So Andrew, I’m really happy that we’re at 64% right and that we’re not higher. I sleep well at night. I’m sure Karl does as well. So you know I would say that where we really target our peer group is predominantly U.S. utilities. I would say most of those utilities are in that 65 to 70 range and although we don’t publish the target in this area, if you look at the last few years, you know this is where we expect the business to be, is in that 65 to low 70’s over time, depending on you know what happens in any given year from a regulatory perspective. So I’m really, really feeling comfortable with where we are and you know when I look at our five year dividend guidance, I’m pretty confident we are going to execute on that, so.

And then with that level, just an extension of the first question, do you feel very comfortable effective with your capital retention and then just from a balance sheet positioning?

Absolutely, we do. You know I’m not – I know the agencies know we’re pretty committed to our dividend, so that goes into all their assessments of the company. I think they understand that management is, that’s part of the Fortis story of you know this long term growth in the dividend, but also making sure we maintain investment grade credit ratings. They are balanced and they have been very supportive of our approach on that. You know we’re not going to be the company that goes and racks up our dividend growth rate through 8% or 9% or 10%. We’re just the sort of company that we’re going to keep growing our dividend around that 6% level and with our earnings growth we think that’s a pretty powerful total return sort of combination.

That’s helpful. And then maybe if I could just touch upon the taxes just briefly, but just want to understand your assumptions behind the greater rate based growth, with the tax reform in place. Just what were the assumptions that you put in to come up with the 50 bps?

The only thing we really adjusted Andrew was the cessation bonus depreciation. That alone translates into – I mean there is a smaller number that gets caught up in the differed tax line or the regulatory liabilities, because to amortize, that’s just a long period of time. But that amount is really, really minimal. So think about it primarily and almost entirely to be just an adjustment for the depreciation going forward.

So in a pretty typical fashion you guys are just being very conservative on any kind of future impacts that happen from economic growth?

When we update our capital plan later on this year, we’ll probably have something to say further with respect to that then, but as of right now we’re just keeping it very simple, adjust for bonus depreciation and just let the math follow through.

Okay, that’s great. Thank you.

Thank you, Andrew.

Our next question comes from David Quezada with Raymond James. Please proceed with your question.

Thanks. Good morning guys. Maybe just a longer term question; the U.S. utilities. I’m wondering, just given the potential for accelerated CapEx, given tax reform, do you have any sense of the nature of the opportunities that you might see at those utilities and what kind of timeline you’ll be looking at to start moving forward with that?

We’re working on all of that right now. Every one of our business is as focused on making sure that they have the right capital plans for their business and there’s all kinds of areas. Now so much technology that’s coming into the sector, trying to optimize the grid; you know there’s lots of opportunities to be able to transmit more power, maybe eliminate the need for additional generation at some of the other utilities you know that. So I know if you look at ITC, it’s an independent transmission company. They are trying to make sure that their grid is optimized to the best of its ability and I can tell you, there’s still room both there and also in terms of upgrading the liability in the Midwest, so we’re optimistic. In Arizona, clearly you know facilitating additional renewable energy to come onto the grid, that’s a big area. David Hutchen and his team down there are working on that and we also have another exciting project in Arizona that we are pursuing is storage. A large pump storage facility and I know the commission in Arizona, one of the commissioners just came out with a new plan to have 3,000 megawatts of storage in Arizona by a certain date and you know our project could be included in that and that would facilitate a major amount of renewable to come onto the grid. So we’re pretty excited about all those opportunities, and are not in our base plan at this point in time. But we are working on some really exciting big opportunities that can move the dollar for Fortis.

That’s great. Thank you, I appreciate that. My only other question just on Eagle Mountain Woodfibre opportunity; have you had any other discussions or any update on the timing of the go ahead decision on the Woodfibre LNG facility?

No, it’s in their hands. We are waiting for them to give the green lights. I guess the final notice to proceed I think is what they are referring to it as it now. We are thinking that could happen this year sometime, late this year probably, but we’ll be ready to go when they are ready to go. But you know you look at that project, they are essentially a customer that we are going to build a gas line to their plant and so we are really waiting for them to give us the go and when that happens, we will be ready.

Great, thank you very much. I’ll get back in the queue.

Our next question comes from Robert Catellier with CIBC Capital Markets. Please proceed with your question.

Hi, good morning everyone. I just wanted to address the U.S. tax reform again, but I think all I need to hear is a clarification of what I’ve heard. So my understanding is that, and your assumptions for lower funds from operations, you are assuming that a rebate of excess differed taxes, for all your utilities including for regulated assets and the only offsets you are expecting are really through bonus depreciation, so no additional projects.

That is correct Robert.

Right, and so I think I also heard that you expect this will be for a short period and you will have a recovery by the end of 2019. What factors are driving such a quick recovery? It seems a little bit aggressive. Is this just operating impacts from growth and everything else that’s going on at the company or are there other mitigating tax or regularity strategies that get you back to even by the end of 2019?

No, it’s simply just the continuing growth in our business. We are anticipating significant growth. In 2017 we get a change to look at the numbers. You will see the increase in cash flow as a consequence of our growth in the last couple of years and it’s just more of that. We are not assuming anything extra. We are just factoring in our projections for cash flow that would have been in the base line to begin with.

If you think about it Robert, we are spending more than $3 billion a year in our regulated capital at this point. That’s generating a fair bit of growth.

Okay, so then if I look at your comments and boil them down, it looks to me like you will have, you will be very close to your 11% funds from operations to debt and you will call it a drive by and it won’t be for very long. So there is no need for mitigating action in order to defend your credit ratings, especially if the market program is approved.

Yes, it’s not a bad summary Robert, but I will tell you that every company in our sector is going to go talk to the rating agencies over the coming months here and we haven’t had those conversations with them and I don’t want to sort of prejudge where they are going to come from, but that will be a wise thing for me to say. I’m just optimistic in our business plan, the low risk nature of assets and you know I think prior conversations we’ve had with the agencies, now they look at that. You know Moody talked about on a sustained basis. You have to fall below metrics on a sustain basis. That’s not what we are dealing with here. So we are pretty comfortable that we are going to come through this nicely and we have structured the business now with the flexibility needed to deal with anything that comes out of that process and reiterate that we are committed to our ratings. So that’s an important to us as part of the recipe obviously and we are looking forward to the conversations with the agencies in a few weeks though.

Robert, we are feeling pretty comfortable where we are positioned with respect to all this.

Yeah, that color is actually helpful context. So my last question then is on Watay and what’s required to proceed with that project. Is it really just a question of political will at this point?

There is lots of political will Robert. We are very excited about where we are on that project. I would say to you that the funding structure is very important, and that’s really the big next step and we’ve been having really fruitful discussions with the province of Ontario and the federal government on those matters. Assuming we get that straightened out, there will be a process we go through then this year, where we would obviously go out for an hour fee for construction for building the line. It’s a big project; 1800 kilometers of transmission and we get – we lock down the cost late in the year, we’ll probably file our lead to construct with the regulator and I would expect late in the year or early next year the project would get the green light to go. So that’s sort of the big things we would have to do in the next sort of I would say nine to 12 months and we are making really, really good progress.

Right, perhaps political will was not the right choice of worlds; maybe just agreement amongst the parties. Okay, thanks for your comments.

Thank you.

[Operator Instructions]. Our next question comes from Christopher Turnure with JP Morgan. Please proceed with your question.

Good morning Barry and Karl. There was a comment in your disclosures today that said your confident that interest deductibility will apply and you will be okay on that front with tax reform. But then you also said that if it doesn’t, you’re confident that your U.S. Holding company debt will be under the 30% EBITDA cap. I’m wondering how that would be the case if you have zero EBITDA at the U.S. Holding Companies.

Chris, your taking the view onto that scenario that the EBITDA at the regulative businesses would not be included. We don’t think we’ll every get to that sort of decision, but if we did and you took that sort of position, that would be a very draconian view of the legislation and I think would – it’s not what we are. We believe if we you get to have to use the cap approach you get to count all your EBITDA. And but we don’t even think we need to go there because we believe that our U.S. Utility business interest all qualifies for the exemption.

And the underlying principal that we apply to that Chris is you know the taxes in the U.S. are filed on a consolidated basis. So from a tax payer perspective, we are one unit and obviously under that concept there is EBITDA from a regulated utilities that are part of that calculation.

And there is nothing else in that unit other than our regulated business.

Okay, but that means technically if interest deductibility did not apply to those pieces of the business, you would be over the 30% cap.

Of course we would. You know but the risk of that is, we are not thinking about that, so.

Okay, and then just a bit of a modeling and segmentation question. When we look at your breakout for ITC, the rest of the businesses, the Fortis Holding company, how much debt and interest expense at the ITC breakout segment is attributable to re-payers and the re-payers there and the holding company at ITC or is it zero and everything is at the parent level.

No, each utility has its own debt. There is holdco debt. I think we are in the range of $6 billion of holding company debt when you include what Fortis has and what ITC has.

Okay, but is there essentially the former ITC holding company leverage still housed at the ITC segment now.

It is.

As you guys break out.

Absolutely, and that will continue.

Okay, so then there is holding company debt there and then there is also the $6 billion of holding company debt at the Fortis.

$6 billion is total all of it. ITC Holding company debt, plus Fortis Holding Company debt; it’s all in the $6 billion.

Okay and that is all…

And that’s Canadian dollars Chris.

Got you, and in terms of your segmentation that $6 billion is all housed at the holding company as you report your segments right now.

No, no. The ITC specific debt would be in the segment, the ITC segment. The debt issued by Fortis Inc. would be in the Holding Company Corporate Segment.

Chris, we can give you the details on that offline if you want, so after the call.

Okay, no that makes sense. You guys did answer my question. Thank you very much.

Thanks Chris.

As there are no further question, I would like to turn the call back to Mr. Barry for any closing remarks.

Thanks everyone, and just to reiterate we are really excited about our results in 2017 and looking forward to strong 2018. Thank you.