Good day. Welcome to the NorthWestern Corporation First Quarter 2017 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Travis Meyer, Director of Investor Relations. Please go ahead, sir.

Thank you, Tracy. Good afternoon and thank you for joining NorthWestern Corporation's financial results conference call and webcast for the quarter-ended March 31, 2017. NorthWestern's results have been released and the release is available on our website at northwesternenergy.com. We also released our 10-Q pre-market this morning. On the call with us today are Bob Rowe, President and Chief Executive Officer; Brian Bird, Vice President and Chief Financial Officer; along with several other members of our management team in the room with us today to address your questions. Before I turn the call over for us to begin, please note that the Company's press release, this presentation, comments by presenters and responses to your questions may contain forward-looking statements. As such, I will remind you of our Safe Harbor language. During the course of this presentation, there will be forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often address our expected future business and financial performance and often contain words such as expects, anticipates, intends, plans, believes, seeks or will. The information in this presentation is based upon our current expectations of the date hereof and unless otherwise noted. Our actual future business and financial performance may differ materially and adversely from our expectations expressed in any forward-looking statements. We undertake no obligation to revise or publicly update our forward-looking statements in this presentation for any reason. Although our expectations and beliefs are based upon reasonable assumptions, actual results may differ materially. The factors that may affect our results are listed in certain of our press releases and disclosed on the Company's Form 10-K and 10-Q along with other public filings with the SEC. Following our presentation today, those who are joining us by teleconference will be able to ask questions. The archived replay of replay of today's webcast will be available beginning at 6:00 PM Eastern time and can be found on our website again at NorthWesternEnergy.com, under the Our Company, Investor Relations, Presentations and Webcast link. To access the audio replay of the call, please dial 888-203-1112, then access code 9482947. Again, that is 888-203-1112, access code, 9482947. I will now hand the presentation over to our CEO, Bob Rowe.

Thank you very much, and thank you all for joining us. I'll touch on just a couple of the highlights, then we'll come back and go onto several of these in more detail. First, net income for the quarter was $56.6 million or $1.17 per diluted share, that's as compared with income of $39.9 million, $0.82 per diluted share for the same period last year. Non-GAAP adjusted diluted earnings per share was $1.13 as compared with $1.04 for the same period last year. In March 2017 Moody's downgraded our senior secured first mortgage bonds rating to a two from a one, and our unsecured rating to BAA one from A3 while maintaining a negative outlook. Moody's decided weak financial metrics and a heightened degree of regulatory uncertainty in Montana as reasons for the ratings action. The board approved a quarterly stock dividend of $0.525 per share payable June 30, 2017. A couple of words on what we've been doing this week; we're at our office here on South Dakota, had our annual meeting earlier today, we're joined by our leadership NorthWestern class as is the case every year and these are employees from across the company who are really very engaged in learning about the company and who - whether they are in the field, in the office or very strong leaders and contributors to the company, it's a great opportunity for them to learn more about the company, spend time with senior leadership, spend time with Board of Directors. I had a great community event as we always do two nights ago and Sheriff Egan [ph] from the South Dakota Commission drove several hours to get here and join us at that, had a good employee breakfast this morning with the board. And if you looked at our board, you know that we're in a very important period of renewal at the board level. We brought onto several months ago Tony Clark, former first commissioner and former state commissioner from North Dakota, he is already adding a lot to the great work we already have in place. Dorothy Bradley, who has been a great source of wisdom and passion for our employees is retiring after over eight years of service; and this morning two outstanding new directors were elected and I'd encourage you to take a look at their qualifications. Brit [ph], an engineer and an attorney lives in Montana, very active and experienced on the energy sector; Linda Sullivan, currently the CFO at American Water, but also significantly former CFO with the Edison Companies in Southern California. So the two people bring great experience and dedication and we've all, board and management team looks forward very much to working with all of them. So with that I'll pass to Brian Bird.

Thanks Bob. On page 5 we have the summary financial results for the first quarter. As Bob pointed out, net income $56.6 million which is a $16.7 million or nearly a 42% increase on a year-over-year basis for the first quarter, fully diluted to share basis $1.17 which is a $0.35 improvement or again, approximately 42% increase on a year-over-year basis. Drilling down at individual components on page 6 of the gross margin; for the first quarter gross margin was $247.5 million, a $30.4 million or 14% increase on a year-over-year basis, that entries was spread pretty well between the electric and natural gas businesses at 14.6% and 12.3% respectively. The three primary areas of increase in gross margin that actually impacts net income; in the first quarter 2016 we had the MPSE disallowance, not having that disallowance, of course in 2017 that was a $10.3 million improvement on a year-over-year basis. The other two major improvements $8.6 million improvement in electric retail volumes and $6 million natural gas retail volumes improvement; obviously from weather and we'll talk about that a minute but also good customer growth and we've seen a bit of a rebound in both, customer and industrial load as well. Those three changes primarily made the change of $27.3 million in change in gross margin impacting net income. One other item to point out; we did have an increase of $3.1 million in margin associated with property tax as recovered in trackers, of course that's offset in property tax expenses as well. So net-net, $30.4 million increase from consolidated gross margin. Moving onto weather on page 7. At top right we show the first quarter 2017 as compared with both, 2016 and historical average as we see normal versus 2016 as you can see a we were…

Thank you, Brian. I'll touch on some of the regulatory activity and run some operational highlights. First going in the way back machine to April of 2014, we recall the FERC issued an adverse cost allocation order concerning Dave Gates Generating Station adverse between retail and wholesale customers. FERC denied our request for rehearing and it required us to make refunds; of course we did in June of last year, we filed a petition for review with the U.S. Circuit Court of Appeals for the District of Columbia, that was in June. We do not expect a decision there until the fourth quarter of 2017 at the earliest. Next to coal strip, as you know in May of 2016 the Montana commission issued an order disallowing recovery of certain costs that have been included in the electric supply tracker and that was related to a 2013 outage at coal strip unit; there are related appeals now filed into Montana District Courts regarding elements of the disallowance and we believe we're likely to receive orders from the courts in these matters either by the end of 2017 or into early 2018. The Hydro compliance filing - and you know what an incredible undertaking everything associated with the hydro project was including ultimately a compliance filing essentially after the dust has settled and particularly after we had transferred the core down assets to the Confederate sailors and could make tribes. In that order the compliance order we were allowed to - the amount - we were allowed to recover and hydro generation rates was reduced by approximately $1.2 million and on a going forward basis notably we were required to indicate our intentions whether or not to file a Montana Electric rate case with a 2016 test year and that indication is…

[Operator Instructions] And we'll go first to Michael Weinstein with Credit Suisse.

So I wanted to ask a question about the filing - the annual report filing. If I see that the ROE that you are talking about the 9.76 and the 9.38, that's based on the last rate case authorized cap structure which 48%. Currently I guess in this presentation here you're showing a 46% equity ratio as of March. Is that where you expect to be when you file for 2017 test year?

Brian?

Yes, that's a good question Mike. I can't say explicitly where we would be, it kind of depends on continued capital spending into the remainder of this year and I haven't calculated where that - what that number would be at the end of '17 but we have been trying to keep our capital structure relatively static.

Okay. And on a separate issue; maybe you could talk a little bit more about what you think is going to happen with specifically the power cost budget session that's out there, is that signed by the Governor at this point? Is there a chance that he won't sign it or what's the outlook for that look like?

It is not as of first of this week, it had not been transmitted or obviously been signed. We are assuming that it will become law and we'll plan accordingly.

Will that law present some opportunities for you to earn additional amount of the - you know, the 10% that you can earn on?

It's really too early to answer that and we'll be paying attention to how the commission decides to implement and obviously working with them.

Okay. And just heading into the next rate case; maybe you could talk a little bit more about electric distribution infrastructure upgrades, the program for that, as well as the gas distribution - you know, future upgrades for that and the programs that you have under trackers?

Yes. Just starting with the electric and gas distribution side; as you know, we are now in the final stages of what has been a very successful distribution system infrastructure project. And we've tackled an awful lot of basics in the system and done a lot to really make the system ready for progress of deployment of technology as that makes sense. At the same time over the last year we have been refining plans, actually using some interesting scenario planning approaches for transmission and distribution and all the sub-elements, doing that both in Montana and South Dakota. And we've been working actually in both states with very engaged stakeholder groups to really discuss scenarios that for example, in one case would maximize low cost in some cases by using technology to push some more traditional investments further out; another scenario that would maximize reliability also being aware of cost. And then a scenario that would really focus on grid modernization in the sense of pushing an awful lot of technology out closer to the grid edge and setting the foundation for a fairly robust technology platform. There are some similarities - many similarities of course between our South Dakota and Montana operations but there are a few differences as well; so for example, in South Dakota it's relatively more automation already in the distribution system and we do plan to move to an AMI deployment in South Dakota really focusing at this point in 2018. We're not quite there in Montana because there is still value in the existing AMR System. But what we're saying is substantial investment but with prudent investment in natural gas transmission as well as distribution. And the transmission side driven by some real capacity needs and both, distribution and transmission driven by some significant upcoming compliance phase. On the electric side, again kind of a soup-to-nuts approach to a whole range of identified needs. What I'd say we're doing with some other companies are - which is really an awful lot of engagement with our customers, large and small, about how they believe our network should continue to evolve to best meet their needs. Just worried about the South Dakota, while this network of South Dakota really engaged through, meet for an entire year essentially, gave us good feedback on our deployment of commission staff who participated in that group kind of sum thing's up that you're a good company, you provide good service, your rates are fair, stay focused on that and if we would take that as good advice.

Thank you very much.

And we'll go next to Brian Russo with Ladenburg Thalmann.

Good afternoon. Just in the upcoming Montana electric rate case; obviously ROE will be a focus just like any other rate case but the - the sum of your generation assets like coast to poor and TGGS and Spy & Cop [ph], you know those ROEs were set outside of the general rate case process; are those ROEs up for review and potential adjustment as well or just the base - rate base outside of those generation assets?

We expect this would be a consolidated filing.

Okay. So those ROEs would be up for review as well.

The asterisk [ph] there is that as a commitment to the Montana Commission at that, the culture for it was put a rate base. We made a commitment to a fixed ROE for the life of the plant and at that time that was made as a concession because we had very limited authority under the agreement we'd entered into to actually sell the plan to a limited authority. To diverge from that agreement we believe it was a valuable asset for our customer, so at that time 2009 we made a specific ROE commitment there. And again, we're some time out from a rate filing and we have a lot of work to be done between now and then; just if you haven't had a chance to look at the letter that we filed at [indiscernible]. Our Vice President for Government Regulatory Affairs described in detail what the Montana filing would require, what the parallel filing would require, and then listed some pretty significant lifts that really need to be done as inputs into a filing. Obviously the cost allocation study, resource allocation study including its generating station, study of renewable integration and load variability and important study concerning net energy metering costs and benefits, this is actually pursuant to what we felt was a very positive legislation just passed in Montana, potential for an electric decoupling study to support any filing there. And then we continue to be engaged in a whole range of possible scenarios concerning a future energy imbalance market. And depending on what direction that leads there will be related costs and cost recovery as well; so we tried - in our filing we tried to be quite specific in the work that we need to do and how much of this is work we need to do and very cooperatively with the commissioned staff and with other parties.

Okay, great. And will be unallocated work portion of the DGGS? Will that included in retail rate base or do you want to see how it plays out in the courts first?

We want to see how it plays out but the important thing about Dave Gates is that as a result of the hydro acquisition coupled with the study work that's reflected and summarized in the last Montana Electric Plant, Dave Gates is now providing a whole series of services that it simply wasn't even available to provide previously.

Okay, got it. And then - what's the NOL position as of March 17?

Actually I have to look at up Brian.

Thanks for lauding one over to Brian by the way.

I was relaxing here Brian, like waiting for your questions.

Okay. And then I might as well ask another question. This House Bill 193, I mean how is it going to be implemented? I mean I read the bill and it's very vague, is it really just up to the Montana Commission to set the guidelines? And it doesn't have to be 90-10, it could be an actual dollar amount above or below it that band and possibly asymmetric favoring customers.

Honestly, we don't know. What we know is really primarily the testimony that commission offered in the session and then looking at how MD U.S. treated.

Brian, Federal NOLs at the end of '16, $365 million; and for Montana NOL is about $275 million.

Got it, okay. And then just a clarification on the guidance range. I would understand it's an adjusted guidance and you exclude weather. Is the high-end with the low-end subject to weather and the midpoint is normal weather? Just a little insight in for that.

When we put together our budget, it assumes normal weather and we put together our thoughts in terms of our guidance and it seems normal weather, so I can't give you a gauge where that number is in the range but based upon where we said after the first quarter we feel very comfortable with our guidance.

Right. So in figure you can get to the higher end of your guidance exclude - with normal weather?

Yes, but I'd argue Brian that that's true but there are a lot of other moving parts on the P&L of course.

Okay, got it. Thank you very much.

And we will go next to Chris Ellinghaus with Williams Capital.

Good afternoon. What was the usage looked like in the first quarter?

Usage in terms of volumes?

Yes.

I'll just put it this way, customer growth or start there; you know, primarily just focused on residential customers. You know, up 1.3% on electric side and 1.2% on the gas side. But on the volumetric we saw very good loads, in both electric and gas, residential megawatt hours were up 12.3%. For residential total retail as a 7%, and Decatherms from a gas side of the business 16.1% and in total of nearly 16%; and for total retailers - just even use for customer and again weather impacts this as well, at least for customers up as a whole 10.9% of residential side and like 14.7% on gas.

Okay. Other than the power supply cost, Bill is there anything else remaining floating around the legislature?

They should be on their way home. I think things are pretty well sort it out of this point.

Okay. And as far as you know, your shorter than probably anybody in the country but the commission doesn't seem to feel that super imperative? What sort of the year thinking on the timeline for addressing generation need to this point?

First of all I think it's important to be aware that after the commission issued its comments on the plan and John Heinz, our Supply Vice President his team went in and spent half a day with the commission and staff answering questions about the plan that that was very constructive. We have issued an RFP with the help of a third-party to manage that process to begin to take down the first piece of our need to address what is obviously a pretty significant need. And I hope the commission has an important oversight role there; separately I know they will be doing some work to understand the relationship between our needs and experience in the rest of the region but your starting point is correct, we have - we are unique among Western companies in having a negative reserve merchant. So we're pretty bare naked.

Okay, I think that's it. Thanks for the details guys.

And we'll take a follow-up question from Michael Weinstein with Credit Suisse.

Brian, I was just wondering what is the average interest rate that you're paying now on debt at the company versus the interest rate that was approved in the last rate case? You know, as you head into this next rate filing. I think in terms of what we - I mean are you saying what we can achieve today or you're saying which is most recent rate case? I guess what I'm wondering right now is how much you actually paying at interest right now versus what is being recovered in rates versus from the last rate case.

Hang on a second, take a look at that Michael.

Yes, if I'm looking at the thing right now, so 5.78% is the average cost in the 2016 filing, under 2016 annual report. And what was the authorized?

I'm working that out. I have an overall rate of return. I don't necessarily have the interest cost.

We can get back to you. I'm just trying to just get a handle on what other metrics might be affecting - might be changing as we come out of this next rate case.

Mike, I'll be happy to follow up with you on that one and a get you what you need on that.

Alright, thank you very much.

We'll take our next question from Jonathan Reeder with Wells Fargo.

Good afternoon, gentlemen. Bob, you indicated that Montana Electric is showing 976, actual 938 normalized for 2016. What's the number that the regulators care about the most? Is it the normalized that accounts for the various commission rate making adjustments?

That should be the case, yes.

Okay. So like when your rates are set they're designed to allow you to earn the ROE on a normalized basis?

Right. The outliers are adjusted out, not unlike the way we report happen GAAP and non-GAAP really.

And matter of fact when we actually have to do a rate filing, we have to normalize and texture from weather and those types of things that are similar in methodology.

Okay. And then could you just walk us through like what would be the timing of filings if you know one PSU requires the additional filing and then to if you call Montana Electric in for rate case based on the 2016 test year; how would that work from a timing perspective?

To do a full blown rate case and do it properly I think honestly we've laid out about the best schedule one could. Get the commission as indicated, it can inquire further about our annual report that the schedule 27 and we understand that; but in terms of actually doing a rate case and if we - we work truly very hard to make a detailed filing and roadmap for getting to the rate case that they want. From a customer perspective I think it's notable that we will be able to stay out of an electric rate case for an additional year, most people would say that's good news. In any past year key date is that the test year data essentially becomes stale on September 30; so typically we look for a filing right about then in the third quarter.

Okay. So in order to - I guess do a 2016 filing, you would think that you would need to at least have it made by the end of the third quarter?

Yes.

Okay. And then I don't know if you could just kind of elaborate a little more like what are the range of impacts if the - you know, MPSE establishes minimum filing requirements for the property tax trackers, like how does that necessarily I guess impact the recovery of that 60%?

That is probably an invitation to get in trouble speculating until we actually see what the final rules looks like.

But would you anticipate having any modification to that current 60% or it's just kind of the method to which you can actually implement the tracker change?

The 60% figure is specified in law. And the - I think the commission's focus in the proposed rules has been out of documentation and really ensuring that they are fine with 60% appropriately but they are very concerned with documentation. And I will say the commission and we are very much united in our concern about the impact that sinfully assess property taxes have on our customers and the commission has worked hard to address that, they require us to disclose property taxes specifically on customer bills. And then for part, we completely recognize how important the taxes are that we pay to the local services in particular but we're extremely concerned by the dependence of Montana on centrally assessed utility taxes which means on us. So again, one of the highlights of the Montana legislative session for us where there is a bill passed to study the centrally assessed taxation system, it gets very important while we're putting a lot of work into that over the next two years.

Yes, I thought if I could - Michael asked the question earlier in terms of debt; I think to answer your question Mike - and I apologize, Jonathan, it's about your question; but this is something that deals with Michael's earlier question, you know all electric last time is that a 5.3% interest rate in the gas filling we did and remind [indiscernible] which was all Montana debt was 4.67%, if that gives you any help. Now again in 2017 test year, with can guarantee that that would still be 4.67%.

Hopefully mine.

[Operator Instructions] And we'll take a follow-up now from Chris Ellinghaus with Williams Capital.

I remembered the question I wanted to ask you. The compliance element of the tracker legislation - typically, you know, a lot of commissions want to see sort of annual compliance or ROE filings to allow trackers but you already have an annual report that seems to meet that standard. Are they just looking for more details on property taxes themselves to add to say the annual report filing?

No, they are looking. It's specifically a request to see much greater detail around tax filing information; what the tax is assessed against. I'm not sure if that's helpful.

Okay. And the other thing that's a little bit confusing is the commission sort of - I guess it was in the press release which I think was at the beginning of the year where they sort of attacked the MDU property tax tracker but that seems to be the direction at least as far as the technical structure is of what they would prefer in a tracker. I'm not sure really what the question is here but it seems odd that they sort of picked out MDU as their preferred path considering that they were so vehemently against it at the beginning of the year. What sort of up with that?

Well, I don't want to speak for the commission at all. Again, I personally respect their frustration with the way that the current system is set up and ultimately our - both our shareholders and our customers pay a disproportionate share of the Montana property tax. So we fully agree with that.

Sure. Is there any effort under way in Montana to - I mean, I don't remember what the number is but I think your property taxes were up something like 12% in the quarter. Is there any effort underway in Montana to try to address who is bearing the burden of property taxes in the state?

And that really does get to the underlying structural question and there has been a substantial amount of reform in the overall Montana property tax system. And to some extent there are certain categories, essentially assessed property that have not been addressed and again that's why we're very pleased that the legislature did initiate the study. I think that's extremely important. And just as a percent of bill or Montana Electric & Gas customers pay much more in centrally assessed taxes than as the case for customers in Nebraska or South Dakota. There are lots of people in positions where they have some responsibility for carrying out the structure that's currently set up who will recognize the burden and who have some real frustrations as well. So ideally, certainly a goal would be to work over the next two years to identify some solutions and get those in place. In the meantime, as we do every year, we have to work with the Department of Revenue to manage that impact as much as possible.

Thanks Bob.

Thank you.

It appears there are no further questions at this time. Mr. Bob Rowe, I'd like to turn the conference back to you for any additional or closing remarks.

Just as always, thanks for your interest. You know where to find Mr. Meyer and we will be seeing many of you over the coming months. Take care. Thanks, Tracy.

This does conclude today's conference. Thank you for your participation. You may now disconnect.