Good day, everyone, and welcome to today’s NorthWestern Corporation First Quarter 2018 Financial Results Conference. Just a reminder that today’s call is being recorded. At this time, I would like to turn the conference over to the Investor Relations Officer, Mr. Travis Meyer. Please go ahead, sir.

Thank you, Laura. Good afternoon and thank you for joining NorthWestern Corporation’s financial results conference call and webcast for the quarter ending March 31, 2018. NorthWestern’s results have been released, and the release is available on our website at northwesternenergy.com. We also released our 10-Q, premarket this morning. On the call with us today are Bob Rowe, President and Chief Executive Officer; and Brian Bird, Vice President and Chief Financial Officer. We also have several other members of the management team with us in the room today to address your questions. Before I turn the call over for us to begin, please note that 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 the 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 on our current expectations. 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 or this presentation for any reason. Although our expectations and beliefs are based on reasonable assumptions, actual results may differ materially. The factors that may affect our results are listed in certain of our press releases and disclosed in the Company’s Form 10-K and 10-Q along with other public filings with the SEC. Following our presentation, we will open up the phone lines to allow those dialed into the teleconference to ask questions. The archived replay of today’s webcast will be available beginning at 6:00 p.m. Eastern today and can be found on our website, again at northwesternenergy.com under the Our Company, Investor Relations, Presentations and Webcasts link. To access the audio replay of the call, dial 1800-485-8312, then access code 4517992, again that’s 800-485-8312 access code 4517992. I will now hand the presentation over to our CEO, Bob Rowe.

Thank you, Travis. Good afternoon, everyone. And thank you for joining us. We are calling in from our General Office in Butte, Montana where there is still, looking out of the window, snow on the mountain, but we think it may finally be spring. As we start, I should say here is a throaty growl of a Harley through the window. It is not Brian Bird’s midlife crisis. It’s Travis’s midlife crisis. We had a successful Board meeting yesterday. The Board last night had dinner with our leadership, NorthWestern Class, which is one of our very viable employee development programs, and then had a good annual meeting this morning, and all of the proposals passed overwhelmingly. And we certainly thank you for your sophistication. Very importantly, this was Dr. Linn Draper’s last meeting as Board Chair, and he has guided us since 2004 and has been an extraordinary mentor, leader and friend. Good news is the Board has selected Steve Adik. Many of you know he’s the long serving chair of the audit committee to step up now as Board Chair. And Steve will in his own way continue the focus and the dedication that Linn displayed, and also Steve displayed a very effective an d engaged audit chair. So, we continue to be fortunate with the Board leadership that we enjoy. Turning to first quarter highlights. Operating income decreased $3.3 million as compared to the same period in 2017. However, if you adjust to remove the $7.3 million revenue deferral that was recurred during the quarter related to The Tax Cuts and Jobs Act, operating income would have actually increased by $4 million or 4.6%. Net income for the quarter was up $1.9 million, 3.4% as compared to the same period in 2017. That was primarily due to cold winter weather, an increase in Montana natural gas rates, increased demand for electric transmission and lower operating, general and administrative expenses. As a result of the increased average share count, diluted earnings per share increased less than net income to $1.18 as opposed to $1.17 during the same period in 2017. Adjusted non-GAAP earnings per share were $1.11 as compared to $1.13 during the same period in 2017. And the Board acted yesterday to declare a quarterly dividend of $0.55 per share, payable on June 29th to shareholders of record as June of 15, 2018. And Brian will now begin with the summary financial results.

Thanks, Bob. On page four, summary financials. Net income was $58.5 million which was $1.9 million or 3.4% increase on a year-over-year basis for the quarter. Bob mentioned, diluted earnings per share of $1.18 on a GAAP basis is one penny or nearly 1% better than the prior year period. Moving on to page five, gross margin. Gross margin was $245.4 million, which was down $2.1 million or 0.8% on a year-over-year basis for the quarter. However, that decrease in gross margin, when you look at it from a change in gross margin that actually impacts net income that was actually up $4.1 million or up 1.7%, primarily a result of both our gas electric business performing well during the quarter. The area where we had a change in gross margin that offset within net income was offset elsewhere in the P&L. We had a large deferral $7.3 million of revenue deferral due to the change in income tax law in terms of how work handling getting back our customers the income tax benefit that we’ll be receiving in 2018. Those changes with some other tracker changes that are offset elsewhere in the P&L totaled to a decrease of $6.2 million net. And of those two items, the 4.1 increase and the 6.2 decrease, net 2.1 decrease in consolidated gross margin. Moving on to page six, looking at weather for the first quarter. We were colder in all jurisdictions versus the prior year and versus historic average. We’d point out that -- remind folks that Montana of course is the largest share of the business, greater than 80% of our business and that was slightly colder in ‘17 on a year-over-year basis, and obviously much colder in South Dakota and Nebraska on a year-over-year basis. I would argue that the…

That was a great, Brian. I will touch on few things at a higher level, come back and discuss in several in more detail and anticipate there are improve discussion during the Q&A. First, regulatory items, just following exactly on Brian’s comments. We have the three pending tax reform dockets. We’ve had good discussions with staff at the state level and our focus is on providing a long-term benefit to customers, being able to make some necessary expenditures in the Montana system and keeping investors back really is the bottom-line and ought to be the loadstar in all of these are proceedings. We are continuing to work through these Power Costs and Credit Adjustment Mechanism in Montana. We’re going to hearings [ph] at the end of May and we are preparing a comprehensive electric general rate case to be filed in Montana by the end of September based of course on a 2017 test year. As you look at our capital finance, a heavy focus on transition and distribution, building on a great success of our distribution system infrastructure plan and now moving to more of a whole system approach, similar approach on the natural gas transmission side with PHMSA compliance. And then, grid modernization which actually includes both the gas system as well as the electric system as to metering. We talk frequently about our new stakeholders group, very, very valuable in scoping our DSIP project. Last year, we had successful stakeholder groups in South Dakota within both the electric and gas operations. They provided great guidance. And we think about more open investment in that system. And similarly we have a Montana infrastructure stakeholder group that was really very valuable as we thought about the evolution of our system and our services in Montana. Two big projects in…

[Operator Instructions] And we’ll go first to Michael Weinstein at Credit Suisse.

Hey. On equity issuances, for the ATM, can you elaborate on why no sales in the first quarter? And do you think the remaining sales of $46 million for the remainder of the year will be evenly spread or will it be backend weighted or frontend weighted in some way?

Well, I’ll start on the first part of your question. We’re really crazy about our share price in the first quarter. As you know, tax reform has significant impact on our share pricing. And so, we have noted, we would do the full 46 throughout the year and expectations on a going forward basis, is we’ll probably get down with the program, Michael. And I’ll leave it that.

And if -- you stated that any unfavorable regulatory outcomes might require equity issuances. Do you think that that would just be an expansion of the ATM or block issuances, how are you thinking about that?

That’s a good question. And we’re still thinking through that, Michael. I think one thing that’s beneficial of the ATM program is we’ve been talking about for some time, any growth above and beyond our capital plan may require equity. And so, having an expanded ATM is certainly helpful in that. And that’s one thing that we think about from an equity perspective. There are some things as Bob pointed out on the generation front that we could be investing some capital. And so there may be needs for equity associated with that. But in addition to that, we’re looking at the remainder of the $46 million in the ATM program from credit rating perspective. But, we have continued impact based upon difficult regulatory decisions and it impacts our cash flows such that our debt [ph] were to go below 15%. We may have to look at utilizing additional equity there and how do we that is yet to be determined. Hopefully, it’s not necessary.

Just one last question. On the restated historic calculation methodology for income tax, the income tax docket, what is the exact cause of the $8 million to 10 -- or $8 million to $12 million harm that would be created by that? And also, how are both proposals handling prior period deferred tax revenues in terms of how many years they’re going to be amortized out?

I would say, on the first part of your question, we’ve been experiencing lower tax rates for a number of years, doing a lot of things in the tax front to keep our tax rates down. Our belief in the spirit of the tax reform is whatever your tax rate was this year and after tax reform whatever that tax rate would go to afterwards, we would want to make sure that we would give that benefit to customers, of course grossed up in the revenue line associated with that change. What we are trying to do is make ourselves full from a net income perspective. Having experienced lower tax rates over the years that results in a lower gift back, if you will, to customers. In fact if you go back into previous filings, we may have had higher tax rates in those particular filings. And so, that incremental benefit would be passed on to customers. The problem with that is one of the reasons we haven’t been coming [ph] at rate cases is because we’ve been experiencing these lower tax rates over years, which has offset the increase in costs that we’ve had throughout our businesses, plus we’ve now even asked for a recovery of the capital investment, if you will for the $400 million we’ve invested in DSIP. So the customers have already benefited from these lower tax rates over the year, not only we’re asking them to double dip, if you will by using the historical test years. So, what we are trying to do again, in the spirit of tax reform is only give to our customers what they are deserved to receive based upon the change in our current year tax rates.

We will go next to Julien Dumoulin-Smith from Bank of America Merrill Lynch.

So, just a follow-up on the last point, just to kind of dig that up. Can you elaborate a little bit more on the puts and takes on the CapEx? I suppose the question that I would have on the other side of it is, how do you think about the timeline for approval of AMI and how that -- could that flip here on the Montana piece and could we see some positives and some negatives? Could you kind of walk through a little bit more on that?

Well, I think you saw the total amount on the capital side associated with that. And I think what we are doing right now is relating with those investments in South Dakota early at the end of ‘18 and into ‘19 and then we will start to ramp up for Montana, if you will in the ‘19 and start ‘20 and ‘21 really into those programs. And the timing of course could vary depending how things move to South Dakota. But that’s our plan as we sit today.

And then, how do you think about the capital budget here? I mean, let me ask you this. So, the 15% of the debt and the potential income and equity, I suppose there’s few other points that you brought up on the call with respect to cash flows if you could elaborate. First, could you comment on the potential retroactivity, I suppose back to July of PCCAM? And then, separately, can you comment on the potential -- I supposed you’re putting -- and perhaps I don’t want to read too much into, the potential retroactive piece of tax reform with the 8 million to 12 million of additional pre-tax earnings and cash flow impacts that are presumably a reduction, right? So, I just want to understand the timeline of potential equity in light of those two potential decisions as well as the CapEx?

I think, Julien, it depends a lot there. I think I’ll start with PCCAM. I can’t really gauge how much the impact from a dollar perspective, I could argue the range and PCCAM is pretty large and nebulous at this point. It’s difficult to answer where that will come out, know what the 2017 aspect of that would be. And on tax reform, we pretty much laid out based on those two methods, what the amount would be. I’d put it in the context. We’re going to know within 2018, outcomes on those two cases. And obviously, we’ll also have a rate case the following year with an outcome in 2019. And we’ll have a pretty good idea what our earnings and cash flow will be from that as well. So, we have to look at the short-term impact in 2018, up until the rate case. And also, may have a better understanding what the impact will be from those two filings and the outcomes of those two filings on both our earnings and cash flow and understand how the impact FFO? I don’t know how to explain it other than that, Julien.

The only addition I would make to that is, we’ve talked about the possible retroactive application of a new PCCAM regime as a result of the additional issues later in the case that’s added quite a lot to the overall timeline. The consumer accounts, at a high level you could characterize the same. We do want obviously -- they do have to take a different track or mechanism but also suggest that the changes to the mechanism be on a going forward basis. And again, most important point I think Brian made was that we’ll know the results whenever those results are during the year and then that will inform our decisions.

Got it. If I can read between the lines, you’re not going to know the outcome for the PCCAM piece as well as the tax reform piece for a little bit of time here. So that might delay any further equity needs for a little bit...

I would argue this. We’re not issuing any additional equity at all other than what we have to do in the remainder of our ATM program. You know the outcome is one of the two of these regulatory matters.

Right, yes, exactly. That’s what I’m trying to get at. Another point I wanted to bring up real quickly was on the District Court case recently. Can you comment potentially around any read through your potential applicability? I mean, certainly, one could say that that was a win on your side. Is there anything else we should be thinking about in the context of how that court case and the Colstrip case could be applied elsewhere?

It was significant decision obviously and the court focused on good administrative practice and on due process. We consider and I consider very positive that the Commission has now decided to open proceeding to look due process and how it conducts its proceedings. And we very much welcome it.

Excellent. And sorry, last quick one if I can squeeze in on the QF side of things. Obviously, we saw you a pursue two projects here. I suppose there was the first -- I think there was a 80-megawatt wind project and the separate 8 megawatts. Can you talk about prospects for additional renewables on a rate base context in light of QF out there? And then, also the context under which you would be able to convert the 80-megawatts into a rate base opportunity perhaps down the line?

Any significant resource additions are going to be driven by our plan [indiscernible] are opportunistic. This was an opportunistic acquisition that we were able to take in existing resource that our customers are paying for and lowering the cost to customers while at the same time producing an opportunity for shareholders. We need to get through a FERC process before we get to the state process on that side. The other contract you’re referring to was a more of a straight forward QF; that was good news for customers and the terms were extremely favorable. And although we do focus significantly on the applicability of the Commission’s 15-year contract rule to rate base owned resources, you know that the Commission has made very good decisions about QF pricing and related costs for those customers.

One thing I’d add, Bob, is, the QF of course [indiscernible] is there opportunity as a result of right of first refusals that we build into these contracts. And so as future opportunities arise as a result of that, we evaluate those, how can we make that more cost effective to customers and also help from an rate base perspective. And so things have become -- fall in place to capture these opportunities.

[Operator instructions] And we’ll go next to Jonathan Reeder at Wells Fargo.

I just wanted to get I guess a little bit of background. So, what prompted you to present this kind of restated historic calculation methodology, given back the benefits of tax reform? Is this just like out of an abundance of caution or did the MPSC kind of requested this perspective as well?

No. If we saw in instructions, if you will, a methodology in terms how they would look at this calculation and taking that into consideration, we felt that it was an important for us to not to ignore that calculation from a filing perspective.

Okay. So, they wanted to see it from back to restating from basically the last rate order for each applicable I guess kind of business or asset?

Correct.

Okay. And then, regarding DGGS, if I remember correctly, the third quarter is about right $8 million to $9 million of lowering of revenues than you believe were necessary to fully recover the plan at the time. I know, you have been operating the plant differently than originally contemplated, particularly following addition of those gaps or the hydro assets. So, kind of what’s the shortfall now and what’s your strategy for trying to get the full recovery for DGGS going forward? Is it via the upcoming Montana rate case or perhaps even as part of the FERC case, can you kind of talk the strategy there?

Brian, why don’t you talk about shortfall first.

Yes, I think the shortfall, you are absolutely correct. Our expectation is, we are viewing that plant differently associated with the hydro and the expectation of the gap, if you will, would be smaller. In order to capture that gap of course we have to do fillings in both jurisdictions, both Montana and FERC, and to capture and demonstrate to both commissions how we’re using that plant differently. I think the other thing -- Jonathan, to think about it, a lot of time has passed, also on that asset, it’s been -- I will say significantly depreciated but it’s been depreciated quite a bit since we’ve put in service back in ‘11.

Sorry, go ahead.

No, there is still obviously substantial assets on our books, it’s nowhere near fully depreciated but it is significantly depreciated. Key issues between FERC and state rate cases will be allocation between jurisdiction and that will include studies of the costs of integrating resources relatively between the jurisdictions.

Okay. So, you don’t have to go completely back to Montana to hopefully bridge that gap; there is still some on the federal side?

Sure. Yes. That’s correct.

And we’ll go next to Paul Ridzon at KeyBanc.

Just on historical look at tax reform, I mean, this will be fixing the rate case, right?

Well, it’s an excellent point, Paul. Our view point is if you’re going to do something like that and ask us to go back and do things on historical standpoint, why not wait for the rate case. And the benefit we’re providing here is on the current method as we point out, we’re going to provide the benefit that we’re receiving ‘18, up until customers, up until the time of that rate case. And so, that’s our viewpoint. If you want to go back and historical, let’s just take care of everything in the rate case, but until that time let’s use the method we have displayed.

And then, just on potentially incremental new generation, kind of what’s the potential capital and timeline for seeing that out?

No. I would really want to push back on assigning number. As we highlighted in the presentation, we removed over $120 million from the capital forecast. Now, we’re deep into new plans in South Dakota and Montana, and we’ve talked about some opportunistic activities. But really, the bulk of any investment is going to be driven by the outcome of the plans.

And the plan [ph] is expected to be out by end of this year.

[Operator Instructions] And we’ll go back to Julien Dumoulin-Smith, Bank of America.

I just wanted to follow up and clarify the restated historic impact 8 million to 12 million. Is that upside of 2018 earnings guidance or is that already reflected? I just want to make sure we understand this.

That would be -- what we’re saying in our guidance is we’re utilizing our current method. That $8 million to $12 million of additional pre-tax hit. That’s not including in our guidance. We take into our guidance, utilizing our current year method where net income is stayed whole as a result of tax reform.

There would be downside pressure on our earnings this year.

And gentlemen, no additional questions at this time. I’ll turn the program back over to you.

Okay. Thank you for your support and interest throughout the quarter. We’ll be visiting with you at couple of conferences over the coming months or two and hopefully talking to many of you next quarter. Thank you.

And ladies and gentlemen, once again, that does conclude today’s conference. Again, I’d like to thank everyone for joining us today.