Good day, ladies and gentlemen, and welcome to the Unitil Corporation Q3 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. David Chong, Director of Finance. Sir, you may begin.

Good afternoon and thank you for joining us to discuss Unitil Corporation's third quarter 2016 financial results. With me today are Bob Schoenberger, Chairman, President and Chief Executive Officer; Mark Collin, Senior Vice President, Chief Financial Officer and Treasurer; Tom Meissner, Senior Vice President and Chief Operating Officer; and Larry Brock, Chief Accounting Officer and Controller. We will discuss financial and other information about our third quarter on this call. As we mentioned in the press release announcing the call, we have posted that information, including a presentation, to the investor section of our website at www.unitil.com. We will refer to that information during this call. Before we start, please note that comments made on this conference call may contain statements that are commonly referred to as forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding the company's financial condition, results of operations, capital expenditures and other expenses, regulatory environment and strategy, market opportunities and other plans and objectives. In some cases, forward-looking statements can be identified by terminology such as may, will, should, estimate, expect, or believe, the negative of such terms or other comparable terminology. These forward-looking statements are neither promises nor guarantees, but involve risks and uncertainties. The company's actual results could differ materially. Those risks and uncertainties include those listed or referred to on Slide 2 of the presentation and those detailed in the company's filings with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 31, 2015. Forward-looking statements speak only as the date they are made except as maybe required by law, the company undertakes no obligation to undertake -- to update any forward-looking statements. With that said, I will now turn the call over to Bob.

Thanks, David. Thank you everyone for joining us today. I will begin by discussing the highlights of our past quarter. Beginning on Slide 5 of the presentation, today we announced net income of $3.5 million or $0.25 per share for the third quarter of 2016, an increase of $1.8 million or $0.13 per share over the third quarter of 2015. This increase in earnings was driven by higher electric sales margins reflecting increased electric sales, new distribution rates and lower operation and maintenance expenses. For the first nine months of this year, we reported net income of $16.9 million or $1.21 per share, a decrease of $0.1 million or $0.01 per share compared to the prior year. The slight decrease in earnings for the first nine months of 2016 primarily reflects lower natural gas sales and margins driven by significantly warmer winter weather in 2016 compared to 2015. Turning to Slide 6, we are focused on actively managing our operating costs. This year we have been able to achieve some cost reductions throughout the entire company to help offset the effects of warmer winter weather in the start of the year. This has led to significant decreases in O&M costs in 2016 compared to 2015. In fact, according to our benchmarking studies, our O&M costs are in the low third of our New England utility peer group. Next on Slide 7, we highlight the growth that we had at our gas division driven by our commitment to investing in our service areas. Since 2008, our gas utility rate base has doubled and we increased our customer count nearly 15%. Looking forward, we believe we're in a great position to commit – to continue to add a steady stream of new customers, given the relatively low penetration rate in our service areas.

I'm going to turn to Slide 8 now. It provides a look at some of our growth opportunities. Our customer acquisition strategy is multifaceted. First, we concentrate on adding customers on or near existing mains. Our customer penetration rate is only 60% leaving significant potential to add new customers on our existing mains alone. In addition, we pursue cost effective system expansion projects which entails main and service expansions of new larger anchor customers or to groups of customers in areas that we have identified as attractive for investment and growth. In the last five years, we have extended our distribution system by over 20 miles to reach and serve new customers. In addition, this year we implemented an innovative targeted area build out program which allows us to economically blanket our target area with new mains and services. We're in the first year of the pilot program in Saco, Maine, and are very pleased with the progress we have made to meet our growth targets for this project. Overall, we believe that our multifaceted customer acquisition strategy will continue to allow us to reach new service areas beyond the current reach of our distribution in Maine and New Hampshire adding thousands of new customers in a cost effective and efficient manner. Lastly, as a reminder, we have extensive cast iron replacement programs throughout our service areas. These replacement programs provide significant rate base growth and we have cost trackers in place that allow for revenue recovery for majority of the spending. Moving to Slide 9, we have continued to make investments in the electric division as well. We have significantly improved electric system reliability over the last two years as a result of our investments including spending on vegetation management programs across our electric operations. We have met or…

Good afternoon. It's actually, Shelby here. Just quick question --

Hey, Shelby.

Hey guys. Quick, got a few questions, one on the solar generation facility that you applied for. What is the rate making structure, how is it the cost being recovered?

It's essentially a reconciling rate mechanism where the full cost of the facility is passed through a separate rate mechanism from distribution rates and recovered and those costs are netted against any revenues that we received so that our customers are only essentially pay for the net difference between the cost and the revenue.

Got it. And then the -- is this a case or filing that is almost like a test filing and depending on how it goes, you have other types of projects like this to pursue or is it more of a one-off?

Well currently it's more of a one-off but it obviously it's our first foray into development of a solar generation project in Massachusetts, Shelby, they have – they passed recent legislation that allowed for utilities to construct and own solar generation. And the approval had to be obtained before the end of 2016 in order to qualify for the treatment under that legislation. So this project we will get in and we're hoping to obtain the full approval of the commission before the end of this year and then it has to be constructed before the end of 2017. So we will construct it next year and have it in operation before the end of the year. Whether or not, the Commonwealth then extends this opportunity to allow utilities to build additional stations or not is unknown at this time and whether or not we would develop a plan that would allow us to do more of that is still -- well, it's still something that we would be looking at depending on where the legislation and the regulations go.

Got it. And then just going back to the first question about the ratemaking, so I should be thinking about the $2.5 million and then thinking of a recovery typical to utilities 50:50 equity-debt and an ROE on that?

Yes, it is about $3.5 million, just to correct you, Shelby, you said $2.5 million, a $3.5 million investment and you could treat it much like a rate-based investment where we would earn our cost of capital on that at our existing weighted cost rates and capital structure.

Got it. And then the second broader question is on the targeted area build-out program. Are there specific criteria that need to be triggered in order to be eligible for TAB program?

Yes, there are. I mean we don’t do the TAB program just anywhere so to speak with what we do look for is higher density areas that are relatively near our existing mains that can be reached and that we can get good cooperation from the towns or the localities to allow us to go in and expand and rapidly expand out the gas system to meet to be able to market to customers and get customers online. So we have identified various communities throughout our territories they provide -- are the most attractive and then we go through the process of working with the locals, local officials and such and doing the economic analysis and actually digging down into details before we selected TAB, a TAB customer.

Shelby, we have gotten really good local cooperation.

Okay. And then when I look at the current pilot you have is that the magnitude that you would be -- is that more of a typical magnitude of 1,000 customers a $1 million in revenues or the feature TAB-ups going to be different?

No, I think that is typically, Saco is a good model town if you will and there are others that we're looking at are similar in size and nature. Yes.

Got it. And then the last question on TAB, the magnitude of this, is it something that will be rolled out slowly over time or can you scale it up quite substantially?

In terms of taking the TAB to other communities and towns?

Yes, not only in terms of bringing it around, but can you also concentrate maybe having 20 different regions at the same time or is it something more measured?

I think it's more measured than that, there are again our criteria in terms of the nature of the towns the relative proximity to our line, the density, the gas load in those locations does have a screening effect. And so there are more like a handful of towns that provide the greatest opportunity initially. Now, as we get down this and continue to expand, there may be opportunities to continue to grow the system further and further out, and that's how we go about the expansion of the system, we start from where we have pipe and then continue to reach out. But I will just point out, we complement the TAB; TAB is a program that we're piloting now that allows us to go in to these areas but we're complementing that with continued main expansion where appropriate in closer proximity where we may go after just a fewer number of customers. We also have continued aggressive on-the-main program, as I said earlier, only about 60% penetrated. So we still have a lot of might arguably say low hanging fruit on the systems to continue to expand as well.

Yes, Shelby, I think the answer is that we will continue to evaluate this program, this is a new program and if we see the opportunity to increase the size of the program in a rational way then we will do that.

Thank you. [Operator Instructions]. And I'm showing no additional questions from our phone lines. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.