Good morning, and welcome to the Northwest Natural Gas Company Second Quarter Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nikki Sparley. Please go ahead.

Thank you, Dow. Good morning, everyone, and welcome to our second quarter 2015 earnings call. This is Nikki Sparley, acting IR Director and filling in for Bob Hess who is out on medical leave. Please feel free to contact me going forward on all IR related matters. As a reminder, some of the 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. 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-Q later today. As mentioned, this teleconference is being recorded and will be available on our website following the call. Please note that these conference calls are designed for the financial community. If you are an investor and have questions, please contact me directly at 503-721-2530. Media may contact, Melissa Moore at 503-220-2436. Speaking this morning are Gregg Kantor, Chief Executive Officer and Greg Hazelton, Senior Vice President and Chief Financial Officer. Mr. Kantor and Mr. Hazelton have some opening remarks and then will be available to answer your questions. Also joining us today are other members of our executive team, who are available to help answer any questions you may have. With that, I will turn it over to Mr. Kantor for his opening remarks.

Good morning, everyone and welcome to our second quarter earnings call. Before we begin today, I would like to take a few minutes to discuss some changes to our executive team. First, I’d like to introduce our new Chief Financial Officer, Greg Hazelton. As you know, after a long career with Northwest Natural, Steve Feltz retired in June. But we’re pleased to have Greg join us from Hawaii Electric where he was Treasurer and Controller. Greg started our his career here in Portland working on the electric side with Portland General Electric and then went on to work in the investment banking world for several years. He’s gotten impressive and diverse background and he’s already been a great addition to our team. I’m also pleased to announce David Anderson, who is promoted to President of the Company, effective August 1. Over the past 11 years, David has demonstrated exceptional leadership skills and help build a strong utility that leads the industry in a number of operational areas. David will also retain his role as Chief Operating Officer with responsibility for the bulk of the day-to-day operations and will continue to report directly to me. Now, moving on to the quarter, I’ll begin today with highlights from the period and then turn it over to the other Greg to cover the financial details. I’ll wrap up the call with brief comments about our priorities for the remainder of the year. In the period, we continued to work through our open dockets at the Oregon Public Utility Commission. As you know, in the first quarter, we received the commission’s decision on our environmental cost recovery proceeding and on how an earnings test would be applied to environmental expenditures we had incurred and will continue to incur in the future. As part of…

Thank you Gregg for the introduction, I’m very pleased to be part of the Northwest Natural team and on the earnings call with everyone this morning. Turning to our results, earnings for the second quarter of 2015 were $0.08 per share on net income of $2.2 million as compared to $0.04 per share and $1.1 million for the same period last year. Year-to-date earnings for the first six months of 2015 were $1.12 per share on net income of $30.7 million as compared to $1.43 and $39 million for the same period last year. As highlighted from our call last quarter, we recognized a $15 million pretax or $9.1 million after tax environmental regulatory disallowance in the first quarter. The charge to O&M was associated with the February 2015 OPUC Order on the recovery of past environmental cost deferrals. Excluding this charge, consolidated earnings for the first six months of 2015 were $1.45 per share or $39.8 million, which is slightly up from last year on higher utility earnings offset by lower gas storage results. Regarding our utility, we reported net income of $2.2 million in the second quarter of 2015, an increase of $40,000 from the prior year based on higher utility margins and decrease in interest expense offset by an increase in O&M. For the first six months, utility net income was $30.6 million or a decrease of $7.6 million from last year, mainly due to the $9.1 million environmental charge which was mitigated by improved utility results. Positive drivers included higher utility margins, an increase in other income, and lower interest expense partially offset by an increase in O&M expense. Utility margin for the quarter increased $920,000, driven by customer growth, rate base returns on tracked-in items, and gains from gas costs incentive sharing. Utility margins for…

Thanks, Greg. At this point in the year, our focus is two-fold. First, we will be working hard to advance our growth initiatives and at the same time, we will be continuing our cost control efforts to help reduce the financial impact of a record warm winter. On our growth initiatives in July, we submitted our first carbon solutions program under Oregon’s greenhouse gas reduction legislation. As we've talked about before, Senate Bill 844 allows the OPUC to incent natural gas utilities to undertake projects that will reduce greenhouse gas emissions. Our first proposal is designed to further the use of combined heat and power in Oregon, a goal that the state has had for many years. Under our CHP proposal, industrial and commercial customers in the market could submit CHP projects for consideration. Our program will then provide incentive funding based on the verified carbon savings, making the project more financially feasible from a customer’s perspective. Over the last year, we've been collaborating on this proposal with other regional and state organizations interested in helping CHP gain more traction. In our view, this is an important effort that could provide a very significant carbon reduction benefit for our customers and for Oregon. The OPUC has set a schedule for review of our CHP filing that calls for a decision by the end of the year. In parallel with that effort, we've also been working on an oil to gas furnace replacement program to serve the residential market. We've completed the stakeholder review process and hope to file the program later this fall. As I said before, overall, we've been very pleased with the level of interest and engagement we’re getting from the OPUC staff, customer groups, state agencies, environmental groups across the state and we're proud to be one…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Spencer Joyce at Hilliard Lyons. Please go ahead.

First things first Greg, welcome to the team and welcome back to the mainland here. I know they’ve got a good culture there at Northwest, I’m sure you’ll enjoy it.

Thank you, yeah. It's one I’m familiar with. I started my career in Portland, it feels like coming back home.

Perfect, even better there and then Dave, also congratulations in order there for the incremental promotion there and an additional responsibility, I'm sure that's exciting.

Thank you, Spencer. I appreciate it.

Turning towards the quarter here a little bit, and Greg, you touched on it there towards the end of the call, it looks like the Mist expansion potentially online for the 2018, ‘19 heating season. Just refresh us that is still on par with the initial schedule, correct and then secondarily the $125 million investment, that's also still largely unchanged?

Correct. Nothing has changed at this point. Still on schedule, still approximately $125 million.

Yeah. Perfect, good to hear. Separately, wanted to turn towards the other income line of the income statement. I know there had been a couple of special items here over the last year or so, the deferred environmental expense accrual there and then the insurance item that have caused that to jump up a little bit as far as income is concerned. Can you talk a little bit about how that particular line item might play out over the next year or two, I'm kind of assuming that could trend a little bit lower or we could see a little bit less income there as we kind of model out ‘16, ‘17?

Well, we have a number of things that flow through that line item. Usually, that would include all the interest that we accrue on our deferred balances, so that would be impacted by accruals on the liability, the insurance liability that would be also impacted by equity earnings on regulatory assets as well. We did highlight that we received a fairly large recognition with the recent order in February in the receipt of insurance proceeds against our environmental liabilities, which made that equity income higher than I would expect it to be going forward, absent something similar. So I think if you normalize out that $5.3 million pre-tax number, the run rate may be slightly impacted by higher - by some of the interest costs that we have going through there on the deferred balances.

And Spencer, we've gotten all of the insurance, I should say, there is a small amount that I think is still possible in the million dollar range, but we’ve essentially gotten the insurance proceeds that we’re going to get out of our insurers.

Okay, perfect. So I guess from a modeling standpoint, I mean, we’re not going to totally fall off a cliff here, but I would expect some of those balances that we’re earning or some of those accrued balances that we're earning a bit on to trend a little lower?

That's fair.

[Operator Instructions]

Okay. It doesn't look like we’ve got any other calls. So thanks again for joining us and have a great finish to the summer season everyone. Take care.

Thank you.

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