Good day, and welcome to the Northwest Natural Holding Company Third Quarter 2018 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instruction] Please note this event is being recorded. I would now like to turn the conference over to Nikki Sparley, Director of Investor Relations. Please go ahead.

Thank you, Brandon. Good morning, and welcome to our third quarter 2018 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. For a complete list of cautionary statements, 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 additional questions after the call, please contact me directly at 503-721-2530. News Media may contact Stefanie Week at 503-226-4211, extension 5741. Speaking this morning are David Anderson, President and Chief Executive Officer; and Frank Burkhartsmeyer, Senior Vice President and Chief Financial Officer. David and Frank have some prepared remarks and then will be available along with other members of our executive team to answer your questions. With that, I'll turn it over to David.

Thanks, Nikki, and good morning, everybody. I'll begin today with highlights from the period and then Frank will cover the financial details, and then I'll wrap up with an update on our key strategic initiatives that we've been discussing all year long. This was a significant quarter for us as we continue to execute on our long-term strategy. Maximizing returns from our strong and stable and growing regulated natural gas utility and diversifying our business with investments in the water sector. Also, we completed our reorganization to a holding company structure on October 1. This well known corporate structure gives us a more agile and efficient platform to pursue new growth opportunities in the water business. A lot of hard work ensured a seamless transition they won here, which I'm very thankful for. Overall, financial results for the year continue to be driven by warm weather in 2018 compared to extremely cold weather in 2017, and some higher operations and maintenance costs. Our natural gas utility continues to grow and that coincides with the momentum in the local job market and housing sector. The statewide unemployment rate maintained a record low 3.8% for the last two months and median wages for Oregonian's grew 4.6% over the last year. Housing permits in the Portland Metro area were up slightly in September versus the same period last year. These factors translated into us connecting more than 12,500 new customers to our system over the last year resulted in a growth rate of 1.7%. On the regulatory front, I'm pleased to report after 10 months of review with stakeholders, an order was issued in Northwest Natural's Oregon general rate case resolve in a majority of the items, the case addressed. The order provides an overall $23.4 million revenue requirement increase from previous rates.…

Thank you, David, and good morning, everyone. Before turning to our detailed numbers, I will first highlight reporting changes resulting from our holding company reorganization, which occurred on October 1st, and provide an update on the impact of tax reform, then I will turn to the financial results of the rate case and our guidance for the year. From a financial statement perspective, the third quarter is a transitional period, this is the last quarter in which Northwest Natural Gas Company financials will reflect consolidated results. Beginning with the fourth quarter, Northwest Natural Holding Company will be the parent and their financial statements will reflect consolidated results. Regarding tax reform, our 2018 quarterly results have reflected timing differences between the customer revenue deferral associated with tax reform, and the tax expense benefit from the lower federal tax rate. First quarter results benefited from this timing difference as the tax savings were greater than the revenue deferral. This benefit partially reversed in the second quarter and as anticipated fully reversed in the third quarter, bringing us to a neutral position for the year. With the order from the Oregon rate case, we were able to reset customers rates and complete the interim deferral period for Oregon. We finalized our deferral estimate and consequently recorded an after-tax benefit of $1.6 million in utility margin. We do not anticipate significant timing variances going forward. However, the distribution of earnings across the quarters is permanently affected due to tax reform. With our seasonal earnings profile, the impact of the lower tax rate will be positive in the first and fourth quarters, when earnings are higher and vice versa in the second and third quarters. Turning now to our financial results. Please note that I'll describe individual earnings drivers on an after-tax basis using the…

Thanks, Frank. First, let me give you an update on the North Mist expansion project. As you may remember, we've been operating our storage facility in Mist, Oregon for nearly 30 years. The Mist storage facility is uniquely situated with just a single pipeline serving the region, storage is essential to support reliable service and that is extremely valuable. The value of our Mist properties was proven once again in October, when a major pipeline incident in Canada disrupt the natural gas service to the Pacific Northwest. Mist was a crucial resource that supported our customers as well as local utilities and marketers. As you may recall, Northwest Natural is developing a new 2.5 billion cubic feet reservoir, a compressor station and a 13-mile pipeline, which will supply non-notice storage service to Portland General Electric's Port Westward Power Plant, so that they can balance renewable power on the grid. We have now completed base gas injections, and are currently constructing the compressor station, unfortunately the contractor has experienced delays. We are working closely with the contractor to finish the project, and now expect the expansion to be in service by the end of March 2019, with an estimated cost of around a $144 million. As a reminder, when the expansion is placed into service, the investment will immediately be rate based and an established tariff schedule already approved by the Oregon Public Utility Commission. The facility has contracted for initial, an initial 30-year period to Portland General with renewal options up to 50 years beyond that. Another area of focus for us is proactively helping reduce greenhouse gas emissions in the communities that we serve. Each year, Northwest Natural delivers more energy in Oregon than any other utility. Yet natural gas sales to our customer's homes and businesses accounts for…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Aga Zmigrodzka with UBS. Please go ahead.

I would like to follow-up on your comment on the water strategy and roughly $67 million of investments. How should we think about your returns and growth from this part of the business going forward?

You know what -- I think it's -- we're in the early stages of this, I mean, the good news is, there are a lot of private water companies out there. In fact, if you look at the Northwest three states, there's probably about 500,000 connections that are in the private side of the equation. So there's a good target opportunity for us as we look to roll these up. At this juncture, it's a little difficult for us to provide future guidance on the level of materiality that it can provide at this juncture. Frankly, to achieve what we've achieved in the year period, I'm very pleased with. So, we'll keep etching away at this, and hopefully continue to add these acquisitions, and of course, once the acquisitions get into the portfolio, it provides us greater opportunity for investments in each one of those, so I think you'll continue to see the segment grow. At this juncture, though, we're not really providing guidance in terms of how large we believe this could become, because it's just in the early stages at this front.

My second question is related to the North Mist expansion and revision to cost, is there any risk that there could be further delay in that project?

Yes. It's a very good question. When you develop gas storage properties, they are very difficult assets to construct. I mean, one, you're dealing with mother nature and the reservoir underneath the ground. We've proven overtime whether it's our expansion at Mist or even the way we developed Gill Ranch, that we've done a good job there. The above ground materials, it's just -- it's a very complicated plant, it's the best way to think about this. And as a result, sometimes you do have delays and complications that happen. We are coming to the end, though, I mean, once you start, the gas is in the ground right now, the pipeline is done, this is now about building out the compressor station and the other components. So, we believe that the March 2019 is a very achievable date. Could you have further delays? Well, you could, I mean if it rained, which does happen in this part of the country, it affects schedule in terms of snows and stuff like that, you can have weather delays and other delays. But we are coming close to the end, so even if it is delayed, I think we're very close to that in the March period at this juncture.

Our next question comes from Dennis Coleman with Bank of America Merrill Lynch. Please go ahead.

I wonder just on the North Mist, can you -- what happened, what caused the delays, can you be a little more specific?

It's normal construction activities, Dennis. It's the above ground materials, I might turn to Dave Weber to give a little bit of additional guidance, but it's a combination of things. Dave, do you want to kind of talk a little bit about this?

The summer was hot and dry and we have restrictions that are created by the forest service, when you can work in the forest or constructing up in the forest. So their soil conditions and environmental conditions that affect how the contractor in the project can proceed that have to be dealt with, and they're just taking longer than we're anticipated to work through.

So, maybe in this case you needed more rain?

Well. Yes. I mean, it's interesting, again -- there's so many little moving parts here, and again, what's important during this period of time ATDC continues to accrue, but we want to get it online as soon as possible, obviously, because the asset needs to be in operation. We need to start going through the testing process, so that it's fully operational for PGE, specifically when it comes into the winter months, so we -- and that also begins the cash flows that we would start getting as a company. So, we're anxious to get it online as soon as possible, but it's a very complicated asset that you just want to make sure you're getting right, so that you don't find yourself in a situation where you do major damage to it when you're starting it up.

Also doubling back on the water strategy, you say you've now closed the first four deals and clearly the regulatory process here is one of the pinch points where you have to go through even for small assets, any learning's there that might help you accelerate the growth of the business as you've completed the first four?

Yes. We've actually made filings in three jurisdictions, Idaho, Washington and Oregon. And I will tell you from my perspective, they all went pretty quick. Number one, it helps when the parent company is a holding company, right. So, we're not asking for a utility to be acquiring another utility, so the holding company structure ultimately will even speed this up quicker. But each jurisdiction, as they go through their standard processes what we found in general from the commission is that they are supportive of these water acquisitions. They believe roll-up is a good thing, I also, Dennis, believe it doesn't hurt when you have a 160-year old company like Northwest Natural that's been providing service like this for a long period of time with really good customer satisfaction results that they're not worried about the entity that's buying the facility, in fact, I think there's someone encouraged that we'll operate it differently going forward, because we're in this for the long-term versus the small mom and pop companies. So, in general, I think it's gone very, very quick, and things don't usually go quicker regulatory process by definition. But to consider that we have all four of these closed, and I would suggest the Sunriver will be hopefully done in the middle part of the next year, that's a pretty quick regulatory process. And when you say lessons learned, I'm not sure there really is any lessons learned at this point. I think it's the standard process are going through, making sure they understand the dynamics of transaction, and then understanding the operational plan that we have before them in terms of how we're going to operate these assets.

And then finally, largely through the Oregon rate case, I realize there are some big items to address there, but any update on the Washington rate case now looking forward?

Yes. I'd love to have been done with the Oregon rate case at this point, so we got a couple of open items that we need to work through, but we continue to believe, Dennis, there's a high probability that we'll file our Washington rate case either late this year or early next year.

[Operator Instructions] At this time there are no further questions, I would like to turn the conference back over to Mr. David Anderson for any closing remarks.

Great, Brandon, thank you for doing that, and everybody, thank you for joining us. As usual, if you have further questions reach out to Nikki. She'll be happy to walk you through various things, and we do appreciate your support. Have a great day.

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