Hello and welcome to the Northwest Natural's 2008 Fourth Quarter and Full Year Conference Call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions). Please note this conference is being recorded. Now I would like to turn the conference over to Bob Hess, Head of Investor Relations. Mr. Hess?

Thank you, Amy. Good morning and welcome to the 2008 fourth quarter and full year earnings call for Northwest Natural Gas. As a reminder, some of things that will be said this morning contain forward-looking statements. They are based on management's assumptions, which may or may not come true and you should refer to the language at the end of our press release for the appropriate cautionary statements and also our SEC filings for additional information. We expect to file our 10-K at the end of the month. This teleconference is being recorded and will be available on our website following the call. Speaking this morning are Gregg Kantor, President, Chief Executive Officer of Northwest Natural and David Anderson, Chief Financial Officer. Gregg and David have some opening remarks and then we'll be available to answer your questions. Also joining us today are other members of our executive team. With that, let me turn you over to Gregg.

Thank you, Bob. Good morning everyone and welcome. Thank you for joining us for our 2008 fourth quarter and year-end review. Let me start my saying it is an honor to be here speaking to you today as Northwest Natural's CEO. As you're going to hear this morning, 2008 was a notable year for our company in many ways. Certainly, our leadership transition was one of the important events of last year, one I'd like to touch on in a few minutes. For now, I just want to say that Northwest Natural's owes a great deal to Mark Dodson for his leadership over the last six years. And we are grateful that he will continue to provide company his counsel and insight as a member of our Board of Directors. Northwest Natural's performance in 2008 is a testament to the talent and the business strategies Mark put in place during his 10 years as CEO. Despite a year of many significant challenges, declining customer growth, reduced industrial margins and our $5.5 million gas cost sharing expense, the company delivered $2.61 per share. It was a solid performance. I will also say that the earnings per share number by itself doesn't tell the full story of 2008. It was also a very strong year for our interstate storage operations. We sold the airplane, our last remaining non-core asset and we made a great deal of progress in the regulatory arena. We also achieved national recognition for the quality of our customer service. I'd like to take a moment to highlight some of the key regulatory accomplishments. First, last year we worked with Oregon regulators to revise 20-year old gas cost sharing mechanism. The new mechanism provides the company a choice of either a 90/10 or 80/20 sharing split that takes effect…

Thank you, Gregg and good morning everybody. Today, I will review results for the fourth quarter of 2008 as well as the results for we thought was an exceptional year, particularly, given some of the challenges Gregg just talked about. I will then discuss 2009 earnings guidance that we released today. Earnings for the fourth quarter were 12% higher than last year, with net income of $33 million or $1.25 per share compared to approximately $30 million or $1.11 per share for 2007. Earnings per share were 13% higher. The higher results were led by colder than normal weather in the quarter, commodity cost sharing benefits, strong gas storage results and lower O&M expenses. Utility Operations, our largest segment, generated net income of approximately $31 million or $1.18 per share in the quarter. That compares to $27.6 million or $1.03 per share in 2007. Total gas deliveries in the fourth quarter excluding gas storage were 364 million therms, which is 5% lower than those announced in 2007. Sales to residential and commercial customers in the fourth quarter of 2008 were 219 million therms and that compares to 213 million therms or 5% decrease in usage. Utility margin was $114 million, that's up 1% from 2007. The difference was mainly due to higher commodity cost sharing benefits late in the quarter, cold weather and curtailment charges incurred by a small number of industrial customers during December. Our weather and decoupling mechanisms in Oregon increased margin by approximately $4.4 million in the quarter compared to a net $0.8 million margin increase in 2007's fourth quarter. Gas deliveries to industrial sales and transportation customers in the quarter were 144 million therms. That compares to 153 million therms in 2007 fourth quarter. Margin was down $600,000, due to lower volumes driven by mainly weaker…

Thanks, David. For those of you who don't know, Northwest Natural celebrates its 150th anniversary this year, a remarkable milestone. And as we celebrate the successes of our past, I can tell you our company doesn't take its future for granted. You don't survive for 150 years without facing some difficult challenges and learning that very little happens by accident, success comes from shaping your own future. Last year, we stayed focused and delivered solid utility results, strong earnings from our gas storage business and we made progress with our new gas infrastructure projects, projects that will help to grow our business. As a reminder, in July, we filed our application with the California Public Utility Commission to develop Gill Ranch, a 20 Bcf underground storage facility near Fresno, California. As you know, it's a joint development with PG&NE. Permit also included construction of about 25 miles of pipeline from the storage site to PG&E's gas transmission system. In December, the California Public Utility Commission deemed filing complete, and allowed the project to follow a condensed environmental permitting track. We intend to have all necessary permits in place by the end of 2009 and to begin storage operations by the end of 2010. In our view, nothing has changed in the long-term value of storage at Gill Ranch, although California is one of the world's largest energy users, it lags in development of underground storage. California's new laws limiting carbon emissions are expected to drive more gas fired electric generation in the years ahead and we expect demand for storage to grow in step with demand for natural gas, making Gill Ranch an important project for the region. In December of last year, Palomar Gas Transmission also filed a permit application with the Federal Energy Regulatory Commission to build and…

(Operator Instructions). Our first question comes from Dan Fidell from Brean Murray Carret. Daniel Fidell - Brean Murray Carret & Company: Good morning, gentleman. Thanks for the call, as always a nice finish to the year.

Good morning, Dan.

Good morning Dan. Daniel Fidell - Brean Murray Carret & Company: Just a couple of quick questions. First, can you quantify for us the fourth quarter impact on a per share basis from the gas cost sharing? I saw that you gave the annual number. Do you have this for the quarter?

It ended up being around $0.04, actually almost $0.05 per share, Dan. Daniel Fidell - Brean Murray Carret & Company: Okay, great. And then just quickly in terms of your proposed CapEx tracker in Oregon, can you talk a little bit about that and when it could potentially be in effect from a timing standpoint? And then I guess as a follow-on question, sort it goes to the potential for this energy efficiency program. Would you expect it to sort of operate like the tracker and like others across the country with timely cost recovery and sort of talk about that a little bit, if you would, and then the timing for that as well?

Well Dan, this is David. Let me start off on the CapEx tracker what you've referred to. That is a program that what used to be called pipeline integrity. It's now called the system integrity program, excuse me, I just have a hard time with the acronym there. And we are right now on consent agenda for the Oregon PUC later this month, I think it is the 24th or something like that. Assume they approve it and it's on the consent agenda. What that will cover is continued pipeline integrity cost, bare steel replacement, and geo-hazard type expenditures which is important for this part of the country. And so the program will cover around $12 million per year, $3 million of that will be deferred every year for future rate case. So it will ensure full recovery over a period of time. So it's a very good program, it's an expansion of the program we've had for quite a few years here. And then also it covers which is the rules are still coming out, what's called the DIMP rule, the Distribution Integrity Management program that is coming out on the federal level and when those rules come out, we know what we have do for the distribution program. Those dollars will be rolled into that overall recovery also.

Dan, Gregg here. On decoupling and in Washington, we are actually going to prepare some new programs, energy efficiency programs or we're going to bring up the ETO, the Energy Trust of Oregon to actually perform those programs for us in Washington. So, we're going to beginning those designed and planned out. We expect to be able to re-file later this spring, early summer for decoupling again. What they told us in the rate case is that we don't have to come back in for a rate case to apply for a decoupling, come in at any time. And so, our goal is to get that decoupling mechanism to coincide with our new programs out there. And we will propose a mechanism very similar the way it works in Oregon, whether they'll approve it or not, I don't know. But we're going to start again at that point. Daniel Fidell - Brean Murray Carret & Company: Right, thank you, very helpful on that. Maybe one final question I'll let someone else ask the question. Just in terms of the timing on Palomar east, you talked about you'll keep us updated as on that goes on and I know you guys will. But any sort of specifics in terms of when we should be looking for some kind of official filing, the next sort of thing we should be watching for on Palomar east in 2009?

Yeah, and we're actually permitting both Palomar East and Palomar West at the same time. Daniel Fidell - Brean Murray Carret & Company: Right.

Forecast both sides of it. We expect to see in April a draft environmental impact report and that will be the sort of next major milestone. I will tell you, it is not an easy endeavor. Crossing the Cascades in Oregon is going to be an environmentally sensitive project and there will be a lot of attention on it. I think we can do it though. I believe that the environmental community, particularly, those who are focused on wind know that it needs to be backed up and I will tell you that the elected leadership in the state understands the need for bringing in a second pipeline into the Willamette Valley and additional sources up from the Rockies. So I am very optimistic about our ability to do it, to get it done. Daniel Fidell - Brean Murray Carret & Company: Great. And then just very quickly, last question. Your guidance range, I know it excludes any potential for gas cost sharing. It also excludes the any potential benefits from the increase in the CapEx tracker that you just talked about and also it excludes the possibility of decoupling later this year in Washington?

Well, the guidance does include the CapEx tracker that you are referring to in terms of those dollars going delayed. Daniel Fidell - Brean Murray Carret & Company: Okay.

There is nothing in there for the decoupling program in Washington. Daniel Fidell - Brean Murray Carret & Company: Great, thanks very much guys.

Thanks, Dan.

Bye, Dan.

Our next question comes from Greg McGowan at Sidoti & Co. Gregory McGowan - Sidoti & Co.: Hello, good morning. My first question will be looking at operating and maintenance expense, there is a significant decline in O&M in the second quarter as well as the fourth quarter and just trying to figure out if these lower levels of spending are sustainable going forward in 2009 and do you expect a pull down O&M even further on a full year basis in 2009 versus 2008?

Hey, Greg, this is David, good morning. If you recall, in 2007, we had approximately $4.5 million to $5 million of incremental expenditures or what we call strategic investments as we have such large gains from our gas cost sharing mechanism. Those are one-time in nature in terms of replacing guard post and build overs some other unique items. So that was not repeatable. So if you exclude that from 2007, if you normalize it, you'll see overall for the year, quarter-to-quarter, things kind of fluctuate. So it's a little difficult to kind of to get into a quarter-to-quarter analysis, which you'll see year-on-year we're about flat on a normalized O&M basis and our plan has always been in place as we talk to you guys about in the past is to try to keep O&M growth in the 1% to 2% range overall, trying to keep it slower than customer growth. And so, some of that assumption is also built into our guidance for 2009 that we will be able to control expenses overall. I would not assume that we are on a declining rate for O&M on a go forward basis. Gregory McGowan - Sidoti & Co.: Got it. And looking at the outlook for capital spending in 2009, if you can share that number with us and also if you can break out the utility versus how much you intent to spend on Gill Ranch as well as contribute to the Palomar JV; that would be helpful.

Sure. On the utility level, it's around $100 million. I mean we always typically are in the $90 million to $100 million range for the utility. Obviously that will be somewhat impacted by where growth comes in, growth being higher, it will be a little bit more, growth being lower, it'd be a little bit less as we are not serving... we are not hooking up new customers. In terms of Gill Ranch, what we're looking at is around $60 million, if all goes forward in terms of schedule and permitting and things like that. So the majority of those expenditures will be incurred in the second, third quarter, little bit in the fourth quarter overall, by more like third and fourth quarter month now that I think about it. Palomar has got very minimal expenditures it, at least less than $10 million for the year and again that's real dependent on how what Gregg just mentioned a minute ago, in terms of the permitting process and where that goes. But that's fairly minimal expenditures for that overall. The one item that we're still looking at right now is what Gregg had in his follow-up comment or his concluding comments was about the next Mist expansion, what we call the Adam's Reservoir and we just literally this week agreed to start shooting 3-D seismic up there for the next 3 Bcf to 4 Bcf of expansion. So I am anticipating that will be $3 million to $5 million of additional capital expenditures this year. So, I went through a lot of numbers there, but roughly $100 million on utilities, $60 million on Gill Ranch and $10 million on Palomar and may be a little bit additional for Mist storage. Gregory McGowan - Sidoti & Co.: Got it, okay. And very briefly, is there an update for the timeline for when you believe the Palomar pipeline, if it's just the east zone, when that construction would probably begin? Is that still looking like the 2012 timeframe or is it probably going be a little bit earlier now?

We haven't changed the timeline on it, 2011-2012 timeframe. I mean, whatever you have... whenever the in-service date is Greg, it's usually about 18 months in advance of that that you start breaking ground, hence spending the majority of the dollars. So just to kind of, if it's a 2012 that's how you kind of back up in terms of when the major cash flows are occurring. Gregory McGowan - Sidoti & Co.: Okay, great thank you very much.

Bye, Greg.

Thanks Greg. Operator: (Operator Instructions). And our next question comes from Jim Lykins of Hilliard Lyons.

Good morning everyone and congrats on the quarter.

Thanks, Jim.

Good morning, Jim.

Good morning. First, I was wondering if you might be able to talk a little bit about some of the assumptions that were in guidance that David has already mentioned and specifically I am wondering if there is any regulatory refund or surcharge related to income taxes in there.

In general, our assumptions are customer growth probably around 1.5%. On the income taxes, what you are referring to is Senate Bill 408. There is really not... there is not much in the plan right now, either from a surcharge or a refund perspective in the numbers.

Okay. What about Mist? I believe you said 2010 for that to come online. Can you drill down any further and give us any idea when you expect that to be operational?

Yeah. The next expansion at Mist; yeah, that would be 2010.

But you don't know when in 2010?

We are just now shooting the 3-D seismic, so I think that will be the process to determine, will confirm our belief that 3 to 4 Bcf is there and that we can expand into it and it also gives us some time to work through takeaway issues and think like that, with pipeline capacity and things like that. I think for your purposes, I would assume late 2010.

Okay, that's what I wanted to hear. And also what was bad debt for the quarter and could you give us a feel for how that's trending right now?

It ended up being about 0.3% of revenue, which was basically flat period-to-period, Are you looking for an expense number?

If you've got it.

But, yeah for the quarter, it was about 3 million total for the year. About $3 million of total expense for the year. I don't have the quarter in my fingertips, Jim.

Okay. All right, that's all I got for now. Thank you, gentlemen.

Bye, Jim.

At this time, there are no further questions. I would like to turn the conference back over to management for any closing remarks.

Thank you all again for spending some time with us this morning and I look forward to talking with all of you in the years ahead. Thanks.

Thank you, guys. Thanks, Amy.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.