Ladies and gentlemen, thank you for standing by. My name is Dan, and I will be your conference operator today. Welcome to the Fortis Q1, 2018 Conference Call and Webcast. During the call all participants will be in a listen-only mode. There will be a question-and-answer session following the presentation. [Operator Instructions] At this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Ms. Amaimo.

Thanks Dan, and good morning, everyone, and welcome to Fortis’s first quarter results conference call. I’m joined by Barry Perry, President and CEO; and Karl Smith, Executive VP and CFO, other members of the senior management team as well as CEOs from certain subsidiaries. Before we begin today’s call, I want to remind you that the discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slide show. All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U.S. GAAP financial measures in our 2018 first quarter MD&A. Also, unless otherwise specified, all financial information referenced is in Canadian dollars. With that, I will turn the call over to Barry.

Thank you, Stephanie, and good morning, everyone. Before starting on the quarterly results, we wanted to briefly comment on the recently announced retirement of Karl Smith, our Executive Vice President and Chief Financial Officer. After more than three decades with Fortis’, Karl announced that he will be retiring on June 1. Over the years, he has more than many hands at Fortis and learned them well, including President and CEO of both FortisAlberta and Newfoundland Power. His operational utility experience coupled with his financial acumen, provided Fortis with an incredible CFO over the last few years. Most notably, he successfully led our financial team and met our capital market needs during that time, in which the Company doubled in size following our strategic position into the United States. Karl, we are grateful for your dedication to Fortis and wish you all the best in life in your retirement. Thank you. Succeeding Karl as Executive Vice President and Chief Financial Officer at Fortis Inc. will be Jocelyn Perry, effective June 1. Jocelyn is the current President and CEO of Newfoundland Power. Previous to experience in Newfoundland Power, Jocelyn led the Financial Reporting team at Fortis Inc. She brings her enthusiasm, strong work ethic, and close to 20 years of experience with the Fortis Group. Jocelyn, we are excited about your appointment and welcome your leadership to our executive table. And for the record, Jocelyn and I are not related, congratulation Jocelyn. Now let’s start on Slide 4 with our first quarter results. We are off to a good start in 2018 with operational and financial performance aligned with our expectations during the first quarter. Reported net earnings of $323 million for the first quarter 2018 increased nearly $30 million over the same period in 2017 largely due to a positive U.S.…

Thanks Barry. Good morning, everybody. Adjusted earnings for the quarter were $293 million compared to $287 million for the same quarter last year. Adjusted earnings per share were $0.69 for the quarter down $0.02 compared to the same quarter last year. Cash flow from operations of approximately $600 million in the first quarter represents a 9% increase compared to the first quarter in 2017. The increase reflects the fact that our ITC made a large payment in the first quarter last year related to the initial MISO base ROE complaints. As noted on the previous slide, adjusted earnings per share degrees by $0.02 compared to the first quarter of 2017 and there were a number of puts and takes affecting our comparative earnings per share. UNS has a strong performance this quarter, improving our earnings per share by $0.04, largely due to the impact of a full first quarter of new rates at Tucson Electric Power in 2018. The Corporate and Other segment contributed a $0.01 increase in the quarter compared to the prior period. The decrease in corporate costs was a result of lower finance charges related to lower credit facility borrowings and favorable foreign exchange and U.S. dollar domicile interest expense. Income tax recovery was comparable to the prior period. The negative impact of U.S. tax reform related to a lower tax shield for holding company interest expense was offset by timing differences associated with the application of a lower annual consolidated effective tax rate. Despite better operating performance in our Energy Infrastructure segment, mark-to-market accounting for natural gas hedges at Aitken Creek negatively impacted our first quarter results. During the first quarter, there were $4 million of unrealized losses compared to unrealized gains of $6 million for the same period in 2017. As a reminder, these mark-to-market…

Thank you, Karl. Overall, we are off to a good start in 2018. Looking ahead, we are very confident in our ability to execute our strategy of delivering 6% average annual dividend growth through 2022, with the goal amount of providing sustainable growth to the benefit of our customers and shareholders over the long-term. And I’ll turn the call back to Stephanie.

Thank you, Barry. This concludes the presentation. At this time, we’d like to open the call to address questions from the investment community.

Ladies and gentlemen, we will now conduct the question-and-answer period. [Operator Instructions] Our first question comes from the line of Robert Kwan with RBC Capital Markets. Please go ahead.

Good morning.

Good morning, Robert.

If I can maybe start just on the funding side in your rating agency discussions, can you talk about what you put in front of them on the equity side, obviously you’ve got the drip on. Can you just talk about how you might or might not be using the ATM as part of showing up that cash flow? And then if there's any comments around discrete equity?

Just a comment before Karl leads in, Robert. Clearly we said when we launched the ATM program that was there to support incremental growth opportunities. And depending on the outcome of the discussions with the rating agencies, it could provide flexibility to support any issues there, but we've come through this process with our rating agencies in a reasonable place. So really that ATM program is available now to support incremental growth opportunities.

And Robert, just to answer that briefly, in terms of equity similar to our presentation around Investor Day last year and our ongoing conversations with the investment community around the capital program and so on. The only equity that’s included and this would have been prior to the conversation with the rating agencies was the ongoing contributions from the dividend reinvestment plan. We don't have any anticipated need currently for discrete equity to fund that plan. So back to Barry’s comment, the only contemplation for additional discrete equity would be to fund any additional growth projects.

Perfect. So just to be completely clear, although, the ATM have that potential flexibility around tax reform with everything kind of plays out the way you think it will and what you put in front of the rating agency is the ATM really should be thought about completely to fund any new growth that pops up?

That’s correct.

Perfect. And then if I can just finish on the five-year CapEx plan that you're working on, obviously without getting too granular given you roll it out in the fall. Just wondering is the initial cut looking like it's really just filling out the out years like you've always done or are you seeing some opportunities for something call it in the next couple of years that can really lift the front-end growth rate as well?

I think it's mostly in those outer years, Robert, but there are some things in the early years as well that were focused on. Clearly we're still a bit early on this. Our businesses are all bringing in together their business plans over the summer and that sort of culminated in the Fortis Inc. sort of the consolidated plan in the fall. So before our Investor Day, there's a little early, but we are seeing some opportunities as well in the front-end and filling in those outer years.

That's great. Thanks so much and Karl all the best in retirement.

Thanks Robert.

Your next question comes from the line of Rob Robert Hope with Scotiabank. Please proceed with your question.

Good morning, everyone and congrats Karl, all the best on retirement.

Thanks Rob.

And maybe just the first question on the ITC adder complaint, thank you for the color in your prepared remarks. Just hoping you could flush out some of your additional point on your defense and why you believe the independents outer still valid as well as a possible timeline for resolution there?

So Robert, I'm not going to argue our case on the call here. But I will allow Linda to give you a brief sort of overview of – I know we did a bit of a public response on Friday. Linda, do you want to just chip in?

Sure, absolutely. Thanks Barry. Yes, as Barry indicated, obviously we are going to vigorously contest the allegations in the complaint. I would just sort of remind everyone that obviously I mean ITC is a standalone independent electric transmission company and that certainly did that change as a result of the acquisition by Fortis and GIC. What I would remind everyone is even if their work to be a conclusion, which obviously we will [indiscernible] opposing contest that we were in a longer independent. I think it's important to remember that FERC wants to move away from its [past policy and precedent] and make such a change. We would expect to be treated no worse than any other standalone transmission company such as NextEra that recently received a decision from FERC approximately a month ago that granted them an additional 50 basis points for having a Transco in New York. I think it is important to remember that there are other incentives available and I think that would essentially mitigate. But more importantly we are an independent standalone transmission company and we will vigorously contest the allegations in the complaint as we believe they take a step well beyond past precedent and how FERC has defined market participant status.

Thank you. I appreciate the color. Moving over to UNS, so there is a very strong quarter there. Going back to your 2017 Investor Day, you had to try that kind of outlined illustrative earnings for UNS with 2018 being flat to down given the historical test in nature, test your nature of the rates there. Is that's still the case given the strength in Q1 as well the FASB that rates were not effective until late February 2017?

So Rob, I’ll chip in and Mr. Hutchins is here as well, who can say a few words about this. But you will recall one of the things within the historical test here that the only real good time is when the economy is really improving and we are seeing a pickup in economic activity in Tucson. So we're getting more confident that that business will perform better than we had anticipated this time last year frankly. So David, maybe you can chip in.

Yes, I would agree with that Barry obviously, on a year-over-year basis and the quarter Rob is really just due to that two extra months of additional rate impact for TEP. So that was slightly offset by increase D&A, but that's the main story for Q1 year-over-year.

Thank you. I’ll jump back in the queue.

Thank you.

Your next question will come from the line of Linda Ezergailis with TD Securities. Please proceed with your question.

Thank you. Congratulations to Karl and your retirement and Jocelyn for your promotion.

Thanks Linda.

With respect to U.S. tax reform now that you're filing a consolidated return. Can you give us an update on how we might think of the effects of U.S. tax reform on your cash flows? I know you're collecting less taxes. You're eliminating bonus depreciation and I'm also wondering how you're thinking about how long we would amortize your deferred tax liability as an example and if there's any other effects we should be mindful of?

Yes, that's a pretty broad question, Linda. So I'm going to get up to the highest level I possibly can I mean the way we talk about the impact of U.S. tax reform in the 3% degradation earnings per share still stands in terms of earnings. Cash flow I don't think we have provided any specific numbers, but the impact is fairly significant. That's why we wanted to point out the anomaly in the first quarter compared to the first quarter last year. First quarter last year having that payment related to the first decision on the MISO ROE Complaints. So going forward it will become more evident and more clear as to what the impact on cash flows would be. And in terms of the amortization I mean most of the differed liability I was created is really tied into the to the plant assets. So pick an average lead for plant assets very, very long 20 years, 30 years somewhere in that range Linda.

Yes, I would take too, Linda, to take comfort and we went to a pretty detailed process with the rating agencies in the first quarter to review all of this and frankly came through a well and I think it points to the strength of the overall regulated business of Fortis with the capital that we're putting in the ground at $3 billion a year essentially of regulated capital. We quickly recover from the degradation on cash flow that that was put in place because of U.S. tax reform. So we're very pleased with the outcome of those processes. I know as we travel around talk into our larger shareholders in the first quarter that was a concern about what the rating agencies would do and we come through that in a very good fashion and discipline.

Okay. Thank you. And maybe just if you give us a sense of how the rating agencies think about your foreign exchange exposure was a bit of a headwind in Q1 and I know that at times it could be a tailwind, but now with a significant portion of your business in the U.S. At what point would you consider and converting your reporting currency to U.S. dollars and what would be the factors in considering that?

That’s two very different questions Linda. So the first one it doesn't really come up material way in our conversations with the rating agencies because as you know the earnings impact is not that sensitive to fluctuations in the exchange rate. And the second part of the question with that comes up I wouldn’t say often but it does come up from time-to-time with discusses with our investors and so on. It's a big strategic question and one that will definitely not rush into we don't feel any pressure currently to do that remember that most of our shareholder base is still Canadian. Overall, only about 25% of our Investor Days in shareholder basis U.S., although is going. Until we get to a more significant number on that and I don't think will be turning our attention to that issue.

That's helpful contacts. Thank you.

Thanks Linda.

Your next question comes from the line of Robert Catellier with CIBC Capital Markets. Please proceed with your question.

Just a follow-up on ITC, can you look tell us how much is in dispute in terms of earnings under the complaint and expected time line for resolution?

Linda, I know that the complainers have identified certain amount I think in their complaint if I'm not correctly. Am I correct on that?

They have however they obviously identify sort of the entire value of sort of all of the incentive adders which is really not a question in the complaint. I would just sort of remind everyone that obviously in ITC Midwest. We're authorized to collect 50 basis points for the independence adder there and the two Michigan operating companies we’re authorized to collect up to 100 basis points. We're only collecting 53 basis points because we are kept at the high end of the zone of reasonableness under sort of the recent MISO complaint number one decision last year. And so really as you think about it in sort of leveraging off from my prior comments really FERC obviously have a history of grating you know other types of insensitive, which clearly we feel we would be eligible for in the event the FERC sort of granted the complaints, the complainers request. But as I mentioned, we still are fundamentally a standalone independent transmission company and have no obviously affiliation with market participants within our MISO region, and so we still feel very confident that FERC will continue to sort of view the complaint based on their past precedent.

And Rob just a little metric, for every 10 basis points of ROE at ITC works out to about a $0.01 a share for Fortis.

Okay. That’s helpful quantification. I was hoping you could elaborate on the southwestern storage opportunity; maybe you could speak specifically to the potential investment or a three to five-year horizon, and also how much you might be investing in development costs in 2018 and 2019?

So Rob, this is a fairly big project that we're thinking about. Pump storage project in Arizona, that region obviously a very big focus on increasing the amount of renewable power especially solar that comes onto the grid in that southwest area. And this project would really facilitate a lot more renewable energy to come onto the grid. So it’s early days, we have allocated about $10 million this year at ITC to explore that project to move it along frankly. I will tell you that the project to go forward will have to be done with partners. We clearly have our own business in Arizona. Tucson Electric Power especially, that would be a likely participant in that project. There will need to be other utility businesses in the region as well, but you do need to bring a project a certain distance before you can really have fruitful discussions with these parties. I think it’s about 2,000 megawatt project and we are refining some of the estimates at this point, so I wouldn't give a number at this point.

Right, but in any event 2,000 megawatts is a significant investment just given the nature of the project.

Yes. For sure and it just aligns with a lot of the things that are going on, especially in Arizona we do have one other commissioners were very highly supported. David, I don't know if you want to comment because you obviously are living and breathing Arizona situation.

Yes. We’ve received quite a bit of support from particular commissioners and the commission in general related to the storage because it is such a big deal to be able to integrate more renewables into the Arizona grid, so we're getting some pretty good traction and some pretty good publicity around it already.

Linda, I know ITC is leading this project, so Linda maybe you can offer some of your thoughts as well.

I think like you indicated Barry, I mean, obviously we're very excited, very encouraged about the project. Certainly we've gone through some initial feasibility studies, now we move into the actual feasibility study that obviously is required for us to continue to advance the project. I would say our dialogue not just with sort of the policy makers, it’s constructive, but certainly our dialogue with other potential parties whether they be potential parties that we would contract with or equity partners there's all constructive and positive. And we're just indicating highlight. I think we are feeling confident about the traction that we've been getting so far and really is reflective of a solution that addresses the fundamental problem in the southwest. And again, sort of really trying to address that, sort of if you will that California duck curve problem and this is really a solution as well as provides other benefits to the southwest. So we're very encouraged and excited about continuing to push this project.

Some times we get questions about how does Fortis actually work in our substantially autonomous business units, and this is a great example of how it actually works. We have ITC with their expertise in transmission. We have Fortis with our expertise in hydroelectric generation, and David Hutchins and his team in Arizona were beyond the ground, regulatory experience with renewable power all coming together now to put forward a very exciting opportunity in Arizona. So really – hopefully, we can move this one along. As I said, we have to spend a little money here to see if it's a viable opportunity and that's where we're intending to do.

Okay, that’s very good color. If I could just ask one quick follow-up here, you did mention the California duck curve, which is obviously an important issue for the industry. But California is bit of a fickle jurisdiction at times. So does the project really – you just doing feasibilities studies. So might be early to really address this, but there's the project rely on California or it kind of be can move forward just with Arizona or other jurisdictions?

It would be nice to have the participants from California. I'm not sure if the only scenario though and it’s a little early to say that. So I would say that that overall we'd like to have participants from the entire region frankly. But it’s not necessary, I don't think – on a certain circumstances just that we not go forward if there were no Californian and participants.

Okay, that's helpful. And just I want to congratulate Karl’s retirement.

Thanks Rob.

[Operator Instructions] Your next question comes from the line of Christopher Turnure with JPMorgan. Please proceed with your question.

Good morning, Barry and Karl. I want to get a sense as to the full – I would say 2019 run rate of the cash flow shortfall from tax reform alone now that you have a color on the ITC footprint and New York footprint, and the Arizona footprint from regulators?

Chris, we haven't disclosed that number specifically and I bump on it doing it here today. But what I will say and as I mentioned earlier, once we get into our second quarter results, I think it will be much clearer results that our results then to give you a better indication of what you can model going forward.

Okay, and then to follow-up on an earlier question on equity needs. Can you give us a sense as to how much total equity would be required through the end of next year to meet your objectives either S&P or yesterday's comment from Moody's that you need to get to [11%] FFO to debt by next year to avoid I guess going back on watch?

Well, I’ll answer at this way Chris. There are equity needs haven't changed as a consequence of our discussions with the rating agencies around U.S. tax reform. So the information that we provided around the equity supporting the capital program is consistent with the numbers we use last fall, which equates to about $250 million a year raise through the dividend reinvestment program.

So that’s all we can expect $250 million…?

Chris, just addressed this year, and just to address next year.

Okay, so $250 million in 2018, $250 in 2019, excluding any future CapEx growth opportunities that are not in your plan right now that’s the entirety of the equity we should expect?

Yes.

Okay, great. Thank you.

Thank you.

Your next question comes from the line of Andrew Kuske with Credit Suisse. Please proceed with your question.

Thank you. Good morning. Just a question about power politics in Ontario and obviously you managed to bed down the Watay project and you've got some small LDC exposure here. Your presentation again highlights municipal utility consolidation. Just how do you think about this market – the Ontario market for capital allocation given really what's happening in the run up to the election in June?

Yes, we played a long game Andrew. We like to expand our business in Ontario, obviously there is an election underway there and there's a lot of discussion about the sector involved with that. But we've been in Ontario for a long time. We've always did reasonably well in the province. We have strong support from the province currently for the Watay project. So I think longer-term we do believe there will still the opportunities to do some streamlining of the sector there. But we'll have to watch out for that. So it's really elections happen every four years and you go through things and – but we think longer than that so.

Okay, helpful. And then just maybe shifting geographies, and question really for David on your Navajo. Is there any color you can give on the process – the sales process at Navajo obviously TP is a small owner of the facility. And then how do you think about power availability and costs for your customers in Arizona if Navajo goes off the grid.

Yes, Andrew, so Navajo’s state doesn't change from the 2019 that we currently think it's going to shut down. As part of replacement power we already have a yellow plant that we're in the process of purchasing and that will be the replacement power in Arizona and we don't see that really affecting the market much.

Okay. That's great. Thank you.

Thank you, Andrew. End of Q&A

Thank you. As there are no further questions, I would like to turn the call back to Mr. Barry for any closing remarks.

Since that to conclude we are off to a good start this year and we are focused on updating our capital numbers which will come forward later in the call. We're optimistic that our capital program will support our giving guidance that we provided out to 2022 which is that 6% average annual increase in our dividends. Thank you very much.

Thank you for participating. Ladies and gentlemen, this concludes today’s conference. You may now disconnect.