Good morning, and welcome to the Northwest Natural Gas Fourth Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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, Anita. Good morning everyone, and welcome to our fourth quarter and year-end 2016 earnings call. 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 occur. In addition, some of our comments today reference non-GAAP measures. For a complete reconciliation of these measures and other cautionary statements, you should refer to the language at the end of our press release 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 these conference calls are designed for the financial community. If you are an investor and have questions after the call, please contact me directly at 503-721-2530. Media may contact, Melissa Moore at 503-220-2436. Speaking this morning are David Anderson, President and Chief Executive Officer; and Brody Wilson, CFO and Treasurer. David and Brody have some prepared 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 David for his opening remarks.

Thanks Nikki, and good morning, everyone, and welcome to our year-end earnings call. I’ll start-off today with some highlights from the year and then turn it over to Brody to cover our financial performance and then I’ll come back and wrap things up with the call - with the look forward and then open it up for your Q&A. Overall, I’m really proud of all we have accomplished in 2016. We not only achieved our critical operating goals, which is the safe and reliable natural gas distribution with excellent customer service, but also made significant progress on several key initiatives, including our North Mist Gas Storage Expansion Project. For the fourth quarter, earnings were $1 per share or a decrease of $0.08 over last year. For the full year, earnings were $2.12 per share or any increase of $0.16 over last year. As previously disclosed, both years were affected by the non-cash charges from the Oregon environmental docket. Setting aside these impacts, our core utility performed well last year with the addition of over 10,000 new customers and utility margin increasing over $5 million. Our solid utility performance stems from the strength of our region's economy. You can see that strength in a number of trends, including employment and housing growth. For example, employment growth in Oregon continued to outpace the nation. At 3.3%, Oregon had the highest rate of employment growth of all 50 states. This was more than double the national growth rate of about 1.5%. Average unemployment numbers across the state of Oregon have remained low at 4.9% over the last 12 months with the major population areas of Portland and Vancouver coming in slightly lower at 4.7% over the same time period. Residential single family building permits rose over the last 12 months with an 8%…

Thank you, David, and good morning everyone. I’ll start this morning with consolidated results then take you through segment results and wrap up with a brief review of cash flows and 2017 guidance. For the fourth quarter of 2016, we reported consolidated earnings of $1 per share or $28.3 million, compared to a $1.08 per share or $29.7 million for the same period last year. As David mentioned, this quarter's results were driven by an increase in O&M expense offset by strong utility customer growth and lower interest expense. For the annual 2016 period, we reported consolidated net income of $2.12 per share or $58.9 million, compared to $1.96 per share or $53.7 million for the same period last year. Annual results were largely driven by the non-cash regulatory environmental charges we incurred in both years. We worked through our environmental docket in 2015 and early 2016, which resulted in a mechanism that allows us to recover prudently incurred environmental cleanup cost allocated to Oregon for our legacy manufactured gas plant. The Commission disallowed $9.1 million of after-tax deferred environmental cost in 2015 and an additional $2 million of after-tax cost in the first quarter of 2016, primarily related to accrued interest on the original disallowance. Excluding these charges on a non-GAAP basis, net income was $2.19 per share or $60.9 million for 2016, compared to $2.29 per share or $62.8 million for 2015. Under this non-GAAP calculation, net income decreased $0.10, primarily reflecting the impacted of two items in 2015. First, we recognized the equity component of interest deferred on environmental regulatory balances last year, as part of the environmental order; and second, in response to record warm weather and the disallowance management instituted temporary O&M cost savings initiatives last year, which did not recur in 2016. Setting aside…

Thanks Brody, and as we look forward this year, we remain focused on completing our utility system improvement projects growing our utility customer base and constructing our North Mist gas storage expansion project, and 2017 will continue to leverage the strong preference for natural gas and the strength of our local economy to enable customer growth. Portland continues to experience robust in-migration and greater urban density elevating new construction activity overall; and in particular the number of multi-family developments. Traditionally, apartment projects have not been a big driver in our market or a big focus for us, but that’s changing. We are in the early days of launching a comprehensive effort to make inroads in the apartment market with a focus on making it easier for developers to build with Natural Gas. We were able to serve additional apartment projects in our service territory last year, most of which are buildings with a combination of commercial and residential tenants. We will continue to focus on growing our market share in this segment. This year, we are also focused on the construction of one of the most significant projects in our history, the North Mist Gas Storage Expansion Project. In September 2016, we reached an important project milestone when our customer, Portland General Electric, gave us the approval to begin construction. As Oregon moves toward more renewable electricity, North Mist will support the reliability of the grid by supplying an innovative mp notice storage services that can be drawn on anytime to balance the variability of additional renewable power on the grid. Our expansion includes a new reservoir, providing up to 2.5 billion cubic feet of available storage, an additional compressor station, and a new dedicated 13-mile pipeline. As we’ve discussed before, the estimated cost of the North Mist project is around $128 million. In the fourth quarter of 2016, we drove the first well and began constructing the main well pad. This year, we anticipate substantially completing the wells, constructing the compressor station, and the pipeline. Finally, in 2018, we expect to inject base gas and test the facility. With plans for to be in service for the winter of 2018. When the expansion is placed in the service, the investment will immediately be rate-based under an established tariff schedule already approved by the Oregon PUC. Overall, we made important advancements on key initiatives in 2016. In the year ahead, we will remain focused on providing safe, reliable service to customers, and continuing our legacy of creating a stable and solid value for our investors. Thanks again for taking time to join us this morning, and with that Anita, we’ll open it up for questions.

[Operator Instructions] The first question comes from Tate Sullivan with Sidoti. Please go ahead.

Hi, thank you. Good morning. On Mist, if we can start there, can you give - currently it’s - you called it an innovative no notice service agreement that you will start in winter of 2018, how does it work currently if Portland General Electric for instance wants to draw on that facility on your existing storage assets?

Yes, the Mist facility is 16 billion cubic feet facility Tate and about 5 billion of it is dedicated to the interstate storage services, which is where Portland actually has an account now, but it is not the kind of storage services that we’re building going forward, it will be a slower withdrawal, slower injection then it is or what it is today versus what we will be doing going forward. So, the project going forward is real time storage that’s why it has a dedicated 13-mile pipeline, compressor station. So, if you will, Portland General Electric will be able to follow the wind load or the hydro load up here, much quicker than they typically have been. So, it will operate almost exactly like a pipeline if you will with no delay and no withdrawal or no injection delays whatsoever. So it’s going to be very far storage service.

Does POR currently sign asset management agreements for that facility and just takes longer for them to get the gas that’s not as effective as the pipeline as he said, is that correct?

I mean, right now it is, so these are depleted gas reservoirs and so the current, the current storage facility operates like others store storage facilities, you have certain withdrawal rate, you have a certain injection rate, typically you don't have those storage facilities being used multiple times in a period, usually you inject it and then you withdraw it during when you need the process. What’s going to be different with this facility and it’s going to be a segregated separate facility, including the 2.5 BCF reservoir is that they can inject and withdraw multiple times versus today. So, asset management services are run by us on our current storage that has nothing to do with Portland General Electric, they are literally just a customer of the storage services.

Okay. And then you gave quite a detail on the North Mist storage expansion project, the process and - what takes the longest? I mean, if you are going to start getting paid for that new type of facility in winter of 2018, potentially, is it the testing, is it injecting the gas, what takes longest?

Let me get Dave Weber to kind of - and Dave what I think, maybe you should lay out as what we expect to accomplish in 2017 and then 2018, so it’s the construction all the way through the testing, just give an idea what we need to do.

Yes, so there is a construction season, it is a very wet up at Mist and wet in Oregon in general, so there is a season when we can work in and around water bodies and working the stream. So, construction will take place in 2017 where starting more well drilling activity in April, and we will be working through construction up into the fall, constructing in the compressor station involving the pipeline, and we are doing horizontal directional drilling directional drilling down on the floodplain. So once again there is certain work times when we can work in the dry season down in the floodplain area to put the pipeline into place. So, then we began injecting base gas early in 2018, and we want to put the base gas in fairly slowly. So, it’s the talks up which is the slower process, taking time to inject base gas, and test the facility or constructing the physical facilities at the compressor station and the pipeline, each one of them is about a five-month period of time in the season.

Okay, great. Thank you very much for that.

Thanks Tate.

Our next question comes from Sarah Ackers with Wells Fargo. Please go ahead.

Hi, good morning.

Good morning Sarah.

First on the storage side, can you just give us a better idea of what drove the increase in asset management revenues at Mist and whether you expect those opportunities to continue at similar levels into 2017?

Yeah, thanks Sarah, this is Brody. So, the majority of the increase we saw at Mist this year and it’s hard to predict what opportunities are going to present themselves each year, but again this is our optimizer taking advantage of both storage and pipeline capacity that’s made available to them and making money on that. So, again it’s really hard to predict what we will see going forward with respect to that. We also as we mentioned in the storage business, we say a reduction in interest expense as well, which is a large contributor that we will see continuing going forward on the improvement in the overall storage business.

Got it. And then on the utility side if you strip out the regulatory disallowance piece, would you consider to be year or normal O&M growth trend into 2017 and beyond?

Just year-over-year if you strip out the environmental, we saw about 5% increase year-over-year. Again, that was off of a pretty low O&M number last year with the $5 million of one-time savings that we initiated last year, but we expect to see probably more in the range of about 3% O&M growth going forward.

Got it. And then last one on financing, how do you expect to finance the five-year CapEx plan and I guess specifically do you see additional equity needs beyond the recent issuance?

Yes, good question. So, I think we went 12 years between equity financings last time and we’ve been able to really use our other programs, such as our debt [ph] programs to get equity out as we needed. So, I don't have forecast or foresee an equity issuance currently in our forecast, however that will depend on how we move forward, how much CapEx, and then we will continue to finance the debt portion as needed as we move forward.

Got it, thanks a lot.

[Operator Instructions] Our next question comes from Spencer Joyce with Hilliard Lyons. Please go ahead.

Brody, Dave, Nikki good morning.

Good morning.

Good morning, Spencer.

Hopefully, just a couple of quick ones from me. First, Brody the $0.16 of earnings from stores this year, just to be clear, that’s a clean kind of an adjusted number there versus the penny from last year.

Yes, that’s correct Spencer. There is no adjustments there. Again, I would point you to the improvements in interest expense that we saw when the Gill Ranch note went away in late 2015, that was the large driver for the improvement this year, as well as we did see a small pick-up from pricing at Gill and then a bigger improvement as a result of the asset management revenues at Mist facility this year.

And then looking at guidance, obviously that would be an adjusted number, kind of, if needed, but there is nothing that we’re expecting right now, as far as adjustments in 2017, is that correct most of those should be kind of behind us, that stuff we had to clean up from the last rate case in those dockets?

Yes, that’s correct Spencer. I don't have any forecasted adjustments for next year.

Oh, perfect. A couple of other ones, Dave, perhaps can you refresh us on what an ideal timeline for an Oregon rate case looks like? I know a few years ago it was a bit out of the ordinary, so just what should we kind of be thinking about if we see a filing, within the next year or so when would perhaps that be concluded, and start to see some of those margin gains?

Sure, Spencer that would be great. I mean obviously when we’re looking forward, I mean the good news is, we're putting in a lot of capital in right now, and of course that has a lag effect and so as we look forward, we try to take that into account to make sure that the timing is appropriate not only for us, but also taking into account the customer's needs and issues overall, but and then also we obviously watch the interest rate environment very, very closely, not only in terms of financings, but what it means from ROEs. With all that being said though, in Oregon it’s a 10-month process by statue that they have, that we have and they have to work through a rate case and that’s a fully litigated rate case you can always settle things in advance, so that if you can do so. And so if that’s the case, I think one in a perfect world would always like to try to get that done in the early part of the year. We tend to adjust rates in Oregon every November 1 for gas cost, updates, what we call are purchased gas adjustments. So, on a perfect world you would like to have those two aligned. It doesn't always work out like that Spencer, so no guarantees, but I think once we will announce this, everybody should be looking at a 10-month process or quicker.

Okay. Should we see extensions, you will have the ability to put in interim rate subject to refund, is that correct or do you have to wait?

Yes, if you file a rate case, you can't do that. Obviously, we can't adjust rates without going through the rate setting process.

Awesome. Finally, just to tie up here, can you give us just a little kind of high level update on where we may stand with dropping the interim title from Mr. Wilson's current position and/or where we stand there in the broader CFO search?

Yes, I appreciate that Spencer. We are actively doing a search as we speak, and Brody is part of that search. And I would hope that we would be able to make an announcement soon, as we have been doing the search since, since of previous CFO went back onto Hawaii, which was back in the summertime.

Okay. Thanks. We’ll talk soon. That's all I had.

Thank you, Spencer.

Our next question is a follow-up from Tate Sullivan. Please go ahead.

Hi, thanks for taking my follow-up. Brody, you mentioned, I think you’re earlier - the O&M growth trend in 2017 of 5%, so I think that’s exclusive of what you booked in an environmental remediation cost to, is there a great growth trend in that line item that you started to break out this year to, I think the total has been in 2016, 13.3 million.

Yes, this is Brody. So, real quick, the environmental remediation line you see in the operating expenses is the, sort of recognition or amortization of environmental as we collect it. So, what we do, from an accounting perspective, you’re required to gross up your income statement, so when we collect from customers now through our SRM those show up, those collections show up as revenues and the operating revenue line item and then we then amortize out the deferred balances, and you will see that in the operating expenses. So there is an equal and offsetting amount in operating revenues right now. So that’s why when we talk about O&M growth, we look at just the operation and maintenance line item.

Okay. So, if you are just looking at that line item, you are referring now 5% growth of from approximately 150 million in 2016? Did I get that number right?

We saw 5% growth from 2015 to 2016, I’m not sure I would say we are expecting that going forward. I think we’re probably expecting more in the range of 3%.

3%. Okay. And then one more if I, I mean if you have, David if you eventually have, I think you've talked before the potential for eventual customer growth front if you do get the multi-family effort paying off for you, and then if you once north Mist just completed and you start getting paid for your expansion effort, I mean what could you see your customer growth rate and EPS do, if you can frame it that way?

It’s a good question Tate, I'm not going to - I can’t frame the EPS for you overall, but I think all of that bodes very well for an increased customer growth rate and an increased margin level overall. A lot of these buildings that we are seeing have commercial in the first floor. There’s another multi-tenant if you will building, which is very good, commercial is a very good load for us. So it’s kind of hard to put it in customer growth numbers Tate, whether it is one meter on the building or it is 100 meters on the building that can drive the difference. Either way, it’s additional margin, as we look forward and it’s additional growth in the margin, which is not only beneficial to the bottom line, but it’s also beneficial from a customer perspective as it doesn't require rate cases to adjust rates all the time. So, little hard for me to kind of articulate an EPS number for you, but I think when you hear Brody talk about 12% or 15% margin growth that’s all coming from customer growth. So, what we’re trying to do is do all we can to increase that level overall.

Okay. Thank you very much. Have a good day.

Thanks Tate.

This concludes our question-and-answer session. I would like to turn the conference back over to David Anderson for any closing remarks.

Well Anita thank you and thank you everybody for joining us this Monday morning. Have a great day. And we’ll talk to you soon.