Good day, ladies and gentlemen. And welcome to the Unitil First Quarter 2018 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 call is being recorded. I would now like to introduce your host for today's conference, Mr. David Chong. Sir, you may begin.

Good afternoon. And thank you for joining us to discuss Unitil Corporation's first quarter 2018 financial results. With me today are Tom Meissner, Chairman, President and Chief Executive Officer; Mark Collin, Senior Vice President, Chief Financial Officer and Treasurer; and Larry Brock, Chief Accounting Officer and Controller. We will discuss financials and other information about our first quarter results on this call. As we mentioned in the press release announcing the call, we have posted that information, including a presentation, to the Investors section of our Web site at www.unitil.com. We will refer to that information during this call. Before we start, as you can see on Slide 2, the comments made today about future operating results or future events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause our actual results to differ materially from those predicted. Statements made on this call should be considered together with cautionary statements and other information contained in our most recent Annual Report on Form 10-K and other documents we have filed with, or furnished to, the Securities and Exchange Commission. Forward-looking statements speak only as of today, and we assume no duty to update them. With that said, I’ll now turn the call over to Tom.

Thanks, David. And thanks everyone for joining today. Before we begin the presentation, I did want to just take a minute and tell you how honored I am to be succeeding Bob as CEO of Unitil. I plan to pursue many of the same endeavors and strategic goals that enabled us to achieve record financial results and total market returns greater than both the S&P 500 in utility indices over the last five years. We will also carry on the same performance oriented culture that Bob has instilled in the company over the last 20 years. And as we look to the future, I'm very optimistic about where we are as a company. I am going to begin today's presentation on Slide 4 where today we announced net income of $15.6 million or $1.06 per share for the first quarter of 2018. This is an increase of $3.2 million or $0.18 per share over the first quarter of 2017. We're pleased with our first quarter results, which benefited from continued customer growth, colder winter weather and our successful regulatory agenda. Turning to Slide 5, we've highlighted some of our significant recent accomplishments. We're currently generating record earnings, while serving a record number of customers. In addition to strong financial results, we continue to focus on superior operational performance to ensure the safe reliable delivery of electricity and natural gas that our customers expect. We will continue to focus on expanding and upgrading our distribution system to support future growth while delivering exceptional service to our customers. Turning to Slide 6. We remain committed to exceeding our customers' expectations. We're very pleased that 90% of our customers report being satisfied with our services. Customers rate us particularly higher and providing reliable service being responsive to their needs and being a company…

Thanks, Tom. Good afternoon everyone. I will review a few of the financial results for the first quarter. Please turn to Slide 9. Natural gas sales margin was $39.9 million in the three months ended March 31, 2018, resulted in an increase of $1.9 million or 5% compared to the same period 2017. Gas sales margin in the first quarter of 2018 was positively affected by colder weather and customer growth of $1.8 million and higher natural gas distribution rate of $1.6 million, partially offset by lower revenue of $1.5 million to account for the reduction in the corporate income tax rate to 21% under the Tax Cuts and Jobs Act of 2017. Total Therm sales of natural gas increased 9.5% in the three months ended March 31, 2018 compared to the same period in 2017. Based on weather data collected in the Company's natural gas service areas, there were 10% more heating degree days in the first quarter of 2018 compared to the same period in 2017, which contributed a positive $0.05 to EPS. Compared to normal, heating degree days were relatively flat in the first quarter 2018, which had a marginal impact on EPS. Finally, the number of total gas customers served has increased by approximately 1,500 customers in the last 12 months. Next on Slide 10. Electric sales margin was $22.3 million in the three months ended March 31, 2018, resulting in an increase of $0.3 million or 1.4% compared to the same period in 2017. Electric sales margin in the first quarter 2018 was positively affected by higher electric distribution rates of $0.9 million, as well as colder weather and customer growth of $0.2 million. Again, partially offset by lower revenue of $0.8 million to account for the reduction in the corporate income tax rate under…

[Operator Instructions] Our first question comes from Julien Dumoulin-Smith with Bank of America. Your line is now open.

So I suppose first starting with the grid modernization stuff. Can you talk about the impact on CapEx as you see it just in terms of the delay and how you think about the timelines to true that up? But then secondarily you talked about New Hampshire equivalent of the $60 million over 10 years. What's the process there and when do we start to see some of that ultimately flowing into capital?

In Massachusetts, I think we're currently waiting for an order that we expect imminently and likely within the second quarter although, there's no hard deadline for that. Once we get the order, we already have the plan, so we'll begin the process of essentially firming up and going out to bid on the types of investments that we intend to make. In New Hampshire, they're following virtually an identical process to Massachusetts, so we expect sit to be very similar. But we, at this point, are still waiting for a commission order on the report that resulted from the stakeholder process in New Hampshire. As soon as we get the order on that then we'll be putting together our plan in New Hampshire. And it is going to be commensurately larger investments just because of the larger customer base, distribution system and substations.

And perhaps just following up on the results of late here just with respect to Unitil Energy, and the returns on equity seen on a trailing basis. Is that more seasonal here or is there something about 2018 as you think about it, especially given the forthcoming rate increase in what seems like the May timeframe? How does that frame the overall annual expectations for that sub?

We have seen an uptick in the economy and we have seen some improvement in electric sales. It's a division in New Hampshire that's not decoupled, so it does benefit from the sales increases. And I think that as a result of that, we've seen some improvement in performance. As we go forward, one of the important aspects of our tracker systems is it allows us to keep up with the level of capital expenditures we're making. So while we're still going to benefit from a tracker increase, as you said in May of this year, we also are bringing more capital and to rate base more investment, more depreciation, et cetera. So on an overall basis, I think we expect to continue to be able to earn our overall rate of return on Unitil Energy, which is -- that's where we're at and we may have periods of continued over-performance. But overall, I think it will be around our allowed return.

And then can you come back to the Fitchburg side of things. Obviously, there are conversely things on the 8% zip code. What's the timing and expectation for improvement there probably by a rate case?

There is legislation in Massachusetts that requires electric utilities to file every five years, gas utilities every 10 years. Our last test year in Fitchburg was 2014, so arguably five year from a test year perspective would be a 2019 test year just following the legislation. There may be some interpretation there. We're still trying to -- as with all legislation, you can interpret would that be 2019 or 2020. But in any event, sometime in that timeframe is going to be required. If we do it earlier, we'll just be based on evaluation that we felt that that was needed. On the gas side, it's a little longer as I said 10 years and that will be dependent upon the particular earnings of the gas. In both those cases, as you see on the schedule on slide 12, Julian, there is new track or mechanisms that we recently implemented there. And so we do expect that to again help maintain the overall earnings over a longer period of time without the need for rate cases quite as often. And as those trackers come in, our goal is to try to manage expenses and manage other areas to try to bring up those returns without the need for a rate filing. And then last I’ll just mention in Pittsburgh, because we've talked about this before. We do have some lower expected amortization expenses related to our storm cost falling off, which will also help contribute to the returns in that division.

But to be clear here, I mean it's only because the delay in filing out for 2019 would only be because you anticipate an uplift that would be sufficient out of the trackers that are pending here?

Yes, the trackers in both are our own cost management and third as I indicated the annualization of these costs, the storm related amortization that they're no longer going to -- they're going to term out basically. But because they're in base rates the fact they term out there’s no adjustments or rate storm.

Our next question comes from Insoo Kim with RBC Capital Markets. Your line is now open.

In terms of the tax items, could you just elaborate a little bit more on the $0.6 million of book tax items that you mentioned that was a benefit this quarter. And is that more of one-time just for this quarter or could we see some of those items in future quarter this year?

In terms of the EPS impact, this is a quarterly impact of the -- as we've discussed, the $1.8 million of ADIT revaluation that was done that essentially being recognized this year. So the amount being recognized ratably over the year, there might be a little bit into 2019. But you can expect an impact every quarter, albeit in the softer quarters or the lower quarters, it will follow our income. So it will be a less impact in where our income quarters are lower more of an impact but over the whole period that whole $1.8 million would be reflected. We got a pretty good write-up on that on Page 51 of our 10-Q and hopefully, that lays it out pretty clearly. And just staying on that topic Insoo for the year, we expect our -- as I said in my comments is that the effective tax rate will be around 24%, I think for the year, that’s a combined federal and state and next year we’ll probably return more to the 27% range.

And then in terms of your customer growth, what was the year-over-year customer growth in the gas and electric businesses? And was the impact of the benefit from customer growth somewhat higher than historic level this quarter?

No, I think we’ve seen pretty consistently and have been able to grow fairly consistently the gas business in that range of 1,200 and 1,500 customers a year. And the quarterly impact is as we do trailing 12 month basis that’s about what it looks like and we’ve been able to do that. If anything, we’re optimistic that we might see a little more of a uptick. Looking forward on that be on the higher end of that range, if not better because of the improving economy and particularly in the areas we serve and the amount of development that we’re seeing going on in both the commercial and residential sector. And that will tend to follow on electric. Although, we don't expect to see the same robustness for obvious reasons between electric and gas; the gas we have a lot of unserved customer sitting on our pipeline that we’re still attracting. But again, our gas has grown, I think 500 customers in the last trailing period and I think we’ve been as high as 800-900 in certain periods or even little more, and that will fluctuate a little bit. But again, we’re fairly optimistic that looking forward, we expect to see good growth there.

And then finally from me on, Granite State, FERC put out a note, investigating the tax reform impact on rates and whether there are any rates are unjustified or unfair. Based on what you know and the rate side of Granite State. Do you see any potential impact as just minor or could that be a scenario where the impact is a bit more material for you guys?

We were in the middle of a process, much like we have rate cases in northern in both New Hampshire and Maine that helped us address the tax act in a rate case, which if you ideally can do it on, that's clearly the best time to doing it and the best place to do. You can get all the items lined up. Similarly with Granite we were in the middle of settlement discussions, because of our last settlement there and what they call a comeback provision requiring us to file a rate case this year for Granite. And we’re getting ready to do that. But in lieu of that, we've been able to work with the parties to address the tax act, and we don't expect the act itself to have a material impact on much Granite.

[Operator Instructions] I am showing no further questions. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a great day.