Ladies and gentlemen, thank you for standing by. My name is Jessica, and I will be your conference operator today. Welcome to the Fortis Second Quarter 2018 Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Ms. Amaimo.

Thanks Jessica, and good morning, everyone, and welcome to Fortis's second quarter results conference call. I’m joined by Barry Perry, President and CEO; and Jocelyn Perry, Executive VP and CFO, other members of the senior management team as well as Executives 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 second quarter MD&A. Also, unless otherwise specified, all information is referenced in Canadian dollars. With that, I will now turn the call over to Barry.

Thank you, Stephanie, and good morning, everyone. Before we get into the details of the quarter, I want to acknowledge Karl Smith's retirement at the end of May. Our new CFO, Jocelyn Perry is with us today and I can tell you she is off to a great start. Performance in the first half of 2018 has positioned us well for the remainder of the year. In terms of capital expenditures, we've invested $1.5 billion in our systems through June, and we remain on-track to invest $3.2 billion in 2018 as part of our five-year capital plan. On the regulatory front, we continue to work with our regulators in a constructive and respectful manner. This was demonstrated at Central Hudson with its rate case settlement in June reflecting all of the key elements of the joint proposal filed in April. This three-year rate plan was commenced on July 1, 2018 includes capital expenditures which total approximately US$650 million and represents a balanced outcome for customers and stakeholders. As a whole, we expect our regulated and non-regulated businesses to grow nicely in 2018. However, there are number of factors tampering earnings growth in 2018, they're not reflective of our ongoing business. These include mark-to-market losses, our natural gas derivatives associated with Aitken Creek storage facility and the U.S. tax reform impacts. Overall we are focused on growing our base regulated businesses in fact we are building. The remainder of the year we will continue to focus on ways to grow our base business beyond our current plans, all while meeting the needs of our customers and maintaining constructive regulatory relationships. Turning to Slide 5, our five-year capital plan of $15.1 billion through 2022 is designed to meet the energy infrastructure needs of our customers, while modernizing our energy networks to address…

Thank you, Barry and good morning everyone. Before getting started, I wanted to say it's great to be back with the Fortis team and my new role as CFO. My first official task is to walk through the second quarter financial results for 2018. As shown on Slide 10, adjusted earnings per common share were $0.57 for the quarter down $0.04 compared to last year. Adjusted earnings for the quarter were $240 million compared to $253 million for the same quarter last year. On a year-to-date basis, adjusted earnings of $533 million was down slightly from the previous year and adjusted earnings per common share of a $1.26 was $0.05 lower than the first half of 2017. As Barry mentioned, mark-to-market adjustments at Aitken Creek and U.S. tax reform tampered our earnings during the quarter. Ignoring these two factors, the growth in our base businesses increased earnings per common share both in the second quarter and in the first half of 2018. As noted on the previous slide, adjusted earnings per common share decreased by $0.04 compared to the second quarter of 2017. Two key drivers impacting the quarter were unrealized net mark-to-market losses on derivatives at the Aitken Creek natural gas storage facility and U.S. tax reform. As a reminder, the Aitken Creek business hedges it's physical gas inventory with forward financial instruments. U.S. GAAP requires these financial instruments to be valued at the current spot rate on each reporting date, and this creates unrealized gains and losses. These accounting adjustments are purely timing. Unrealized losses for the second quarter reduced earnings per common share by $0.03. U.S. tax reform also negatively impacted earnings per common share by $0.03. As noted in the past, we still expect U.S. tax reform to impact consolidated earnings per share by approximately 3%…

Thank you, Jocelyn. Our utilities are at the forefront of changes occurring in our industry driven by increased customer expectations, focused on delivering cleaner energy, grid resiliency, and reducing greenhouse gas emissions. With over $50 billion in total assets and 10 utility operations across North America, Fortis is poised to grow through investing in its existing utility portfolio. We remain confident in our strategy to provide 6% average annual dividend growth through 2022. And now I will turn the call back over 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.

[Operator Instructions] Your first question comes from the line of Robert Kwan from RBC Capital Markets. Please go ahead.

Barry, I was just wondering if you could give an update on the Woodfibre pipe side of things just generally around the project and if there is some specifics around the nature of the work that you're actually doing at this point in time on it?

Robert, thanks for the question. Woodfibre, yes, we're really hoping obviously that this is the year that they made their final investment decision, proceed with the project. We are doing a fair bit of work for them at this point in time and sort of focused on the pipeline construction cost, to bring gas to their site. We've reactivated all of that work at this point in time. So, we're focused on that. There's a fair bit of work to do there. So, we're spending a fair bit of resources on that at this point. So, hopefully by the fall here, we'll hear something from them. I know that the promise of BC is really trying to see if there can be some of these decisions made, not just Woodfibre but with LNG Canada I think, before the end of this year. So, we're hoping that we'll get that call and that they'll be proceeding with the project.

I guess, so turning to capital plan, as you kind of get through that, let's just say the capital plan produces rate base growth similar to what you've got or even better. I guess just thinking about the dividends, are you comfortable with the 6% growth. Would you - do you think that you're getting appropriate value in your share price. And so if you have the same underlying growth, would you consider kind of scaling back to increase your cash flow or if the rate base growth proves to be higher would you consider going higher with the dividend growth rate.

I don’t think we’ll be considering going higher with the dividend growth rate I’ll answer that question first Robert. What we want to be certain off is that we can deliver on our dividend guidance. And I feel comfortable with that at this point the 6% dividend growth guidance that we have. We are - as a company when I look at our peers you know I still believe we are growing nicely, but we still have some room to increase our growth rate focused on areas in our industry that you know that present some opportunities. They'd be - being really investing more in our transmission networks, really moving more to cleaner energy and cyber and increasing the integrity of our pipeline network on a gas business. All these areas of presenting opportunities for us to increase our growth rate and so that’s - our goal is to refresh all of that this fall and so I don't see us increasing our dividend guidance, I think what you’ll find is that, that increased growth rate in the underlying business will give the market the confidence that Fortis will able to deliver on its 6% dividend growth guidance going forward. And hopefully that gets reflected in our stock as I think when I compare Fortis to our U.S. peer group especially we’re doing well compared to our Canadian peer group compared to the U.S. peer group. We are still trading at a fairly significant discount to that peer group and I'm not satisfied with that frankly. And I think we are - our business model the lowest nature of the diversified group of utility that we have, I’m hoping that I can convince shareholders that we can nail that gap on as we compare ourselves to the U.S. peer group.

Maybe if I can finish here with Aitken Creek. Presumably you've had spreads over several quarters. So I'm just wondering if there is some directional guidance as to when we might expect those accruals to reverse. Or put differently there was a statement earlier in the call of these marks being headwinds to 2018. So I’m presuming that the accruals will not at least or reverse in 2018 and will kind of carry over into 2019?

Robert, this is Jocelyn. Yes, with respect to the unrealized losses theoretically they should reverse in a following year. And we did have 26 million of gains in the previous year of which 15 of the losses have been recognized this year. Really hard to predict out to the end of the year because it will obviously depend at the price at December 31 and what volumes we're holding at that time. So it’s difficult to predict but theoretically yes the losses are - the gains from previous year should be reversed in the current year.

Your next question comes from the line of Rob Hope from Scotiabank. Please go ahead.

Just wanted to follow up on Robert's first question regarding the growth outlook. Barry in your prepared remarks you did speak to the potential for growth in excess of your secured plan. Some of these would be more near-term in nature like cyber and gas integrity and I guess that would be more longer term in nature such as your larger projects. When you look out to the fall it would appear that you’re pointing to a higher kind of overall capital plan but is this more front loaded or is this more filling out the tail-end of the plan?

I would say it’s across the curve Robert it’s a - you know not all like in years four and five. So it’s interesting that we’re seeing some lifts in the early years as well. And obviously we haven’t locked all these details down, we’re working feverishly at this point as we get ready for our Analyst Day, but it's definitely you're going to like how it affects our five-year CapEx program.

Moving side of the border, UNS so after a strong Q1, Q2 was a bit more normal. Can you speak to the impact of the plan generation outage in the quarter and I guess moving forward how economic activity is turning in the region and whether and how they should play for the rest of the year?

While David on the call - let David chip in a second, but this is just a normal stuff happening in the quarter on generation outages Rob so, nothing there. I will tell you that I am very optimistic about where we are in Arizona there's lots of opportunities to grow the business there. The economy is picking up. David heads-up the local Economic Development Association and I think got some quarter there. And they’ve landed a couple large new investments in the Tucson area that’s creating lots of new jobs and I'm sure they are working on others. And we are not able to disclose at the point in time but there is real optimism in the region at this point. And I am very excited about our investment in Arizona. David, you want to add to that?

Yes, thanks Barry. I would just add that we are seeing some very good growth momentums in some nice green shoots for growth opportunities down here in Southern Arizona. We see that picking up this year we see it good pipeline of additional projects going forward. The outages are just kind of a year-to-year variance, there is nothing really to see or anything all that interesting about those quarter-to-quarter variances. And Rob I can guarantee it will be hot here, I just can't guarantee that it will be hotter than normal.

That’s fair. Thank you for the color.

It’s cool down there today it’s a 100 so.

Your next question comes from the line of Ben Pham from BMO. Please go ahead.

I was wondering - your Investor Day and listening to your comments, it seems like the plan is to keep with the 5-year forecast and CapEx rate base, dividend expectations. But as you think longer-term though and just seeing what's going on with maybe some of your peers North America moving towards a shorter forecasting period. Do you guys see really a benefit of keeping a 5-year forecast when you look at the pros and cons? And maybe even a step further even do you even really need a dividend growth expectation when you have some good visibility and rate base?

Once you’re out there on these things, it’s hard to roll them back obviously. I am sitting here today and we were announcing guidance for the first time. I'd probably be talking about three years rather than five. But we told the company to focus on the five year growth rates and I’m comfortable that where we are it’s not our plan at this point to roll them back to three years. The interesting conversation revolves around dividend - sorry earnings guidance some of our U.S. shareholders would like us to provide earnings guidance. And maybe I’m not as concerned about dividend guidance as such. At this point in time, we’re still thinking we will stick with the dividend guidance. They are obviously closely related because your payout ratio is the governor and all of that. So, I don’t think we’re going to be changing where we are at this point. I will tell you that it’s my goal to remove every impediment in our business that could be seen as a reason why we trade at a discount to our typical U.S. utility. As a management team, we’re focused on that. We’re obviously running good utilities, have good regulatory relations across all of our North America, but we need to remove any impediments that point to our reasons why our stock trades at a couple term multiple to the typical U.S. regulated utility. And we're going to knock these things off over time so.

And second question on the MISO ROE, you're expecting a decision this year and your plan and maybe you can remind me and folks what seeing to incentive that or what was close driving that initially?

The decision in terms of MISO complaints it's hard to predict. As you now know I guess there is a FERC Commissioner that’s leaving in mid-August that may cause some changes to scheduling for decision around the stuff. So it’s hard to predict if we will get a decision in the second half, so I think your judgment and information of that is may be as good as ours frankly at this point in time. In terms of this incentive adders I would tell you that, where that comes from is the owners of the utilities that in the regions that we operate in are always trying to find ways to reduce cost for their own customers and transmission cost is a part of their bill and I suppose they see as their job to continue the challenge those costs overtime, and we feel very confident that the incentive adders are appropriate and that FERC will see that to be the case since they are mandated essentially to promote investment in transmission. So, we are optimistic that the risk there is low, but we'll always face these kinds of complaints because it's just part of what the state regulated businesses are essentially required to do.

Your next question comes from the line of Robert Catellier from CIBC Capital Markets. Please go ahead.

I think, I will follow the line of questioning that Ben had here on the FERC. He gave you a sort of view that it's hard to predict timing given that there is a commissioner leaving, but that also make it more difficult to just to get decisions now that there will be a period where it will be split along party lines?

It's possible but I'd kick my hats to FERC on this, I think FERC is a big organization they need to function and these things happen. So I'd expect that decisions would continue to flow from FERC. There has been consensus on certain topics between both parties, so I think that is possible. So I'm not going to sit here and think that you were going to a shut down mode at FERC at this point in time. So I'm hopeful that, that we will move forward on some of these matters at FERC and we won't lose ground, but I compose the other side of it maybe that's possible. So, it is hard to call it at this point in time.

There is comment in the MD&A about taping a rate reduction proposed for the FERC. Can you quantify that impact and it is not basically within the keeping of your guidance?

Sorry, Robert can you repeat. I sort of locked.

TP proposed a rate reduction to FERC.

Yes, this is related to tax reform - you go ahead.

So the question is, if you can quantify whether it is contained within your previous guidance?

Guidance on our dividend guidance or?

No, just earnings and cash flow.

Yes. It is. The 3% EPS impact that would include that as well.

And then finally from me, owner is there any substantive updates you can give on Lake Erie given recent change in government?

No, there isn't really. There has been a lot of activity obviously in the province since Premier Ford was elected, it has been focused on I think other things and so I'd says the project is still there. We have all the permits and we are ready to move forward, but it will take some time for us to get in front of the Premier and really - obviously bring forward the benefits as a project in the new administration. So, we are fortunate that the permitting is good for some period of time and we are not spending any large amount of money on that project right now. So, we are in a reasonable spot to deal with this transition that's occurring in the problem.

It's understandable that it takes some time to get in front of them given there is got urgent proprieties but do you have a sense of when - how long would it take for you get an audience and get the momentum going again?

We don’t really. I'd hope it happens this year. Robert, what you have that sort of stand on is the benefits of this project. It connects Ontario to the largest wholesale market in the world I believe it is and especially the U.S. with a direct line for the first time. The NAB has estimated the benefits of $250 million a year to have this line in place. So we are hopeful that the commercial side of this will convince the province that it's a viable option and we need to have those conversations and we will hopefully have them before the end of this year.

Your next question comes from the line of Andrew Kuske from Credit Suisse. Please go ahead.

Barry, you mentioned this couple of times on the call already just on the evaluation discount that Fortis suffers from at this point in time versus the peers in the U.S. So, maybe let's just go to the heart of it. What do you think the big issue is for just investors stateside? Is it really misconceptions or misperceptions of the balance sheet at this stage or just not understanding the Canadian model and how you approach things?

It’s probably all of the above. One of the fundamental thoughts Andrew is the sort of Canadian regulatory landscape right. We got 10 billion rate base in Canada that is - if it was in the U.S. would generate about 150 million more of earnings under if you assume the average ROE in the U.S. and equity thickness in the U.S. So that Canadian business albeit a very strong business and we’re very much you know a believer in the Canadian business. It does generate less returns for shareholders compared to a typical U.S. investment. So we have to over time find ways to improve that regulatory compact in Canada and we’ll continue to work on that. It will take I think some time to fundamentally change some of that, but we do have to work on that.

And then maybe just as an extension on that regulatory compact. When you look at the comparative jurisdictions, you tend to have a lot less regulatory volatility in Canada then you’d see in the U.S. I mean you have best-in-class utilities in the U.S. and so maybe you have less some other peers in the U.S. But do you think you get credit for having lower vol in Canada versus the U.S.?

Well, obviously - you and I could debate some of this stuff for a little while Andrew, but I'm not seeing what you're suggesting in the U.S. in terms of volatility. The U.S. regulatory compact has dramatically improved over the last 10 to 15 years so many U.S. utilities I have worked with the regulators to remove some of the issues around that volatility whether it'd be putting in four test years or pass-through mechanisms, they have really improved their situation. And at best I think the Canadian regulatory compact has stayed the same. So that’s the problem and we need to work on that. So, now listen I'm committed to our Canadian business. It is a really good business and all of that but increasingly it becomes pretty stark the comparison between outcomes in Canada versus outcomes in the U.S.

[Operator Instructions] Your next question comes from the line of David Quezada from Raymond James. Please go ahead.

Just one question from me, just related to the Arizona pump storage project, I know there was some commentary last quarter there was some good momentum there. Wondering what kind of timeline if you have one for to be included in any kind of formal capital plan and what kind of milestones we should be looking for there?

We’re just at the early stages, this is a really large project we would have to bring in utility partners I would expect to be involved in it. This is an ITC driven project so already our Arizona utility is getting involved in it, but we need much more broader participation. We’ve had some open houses in Northern Arizona, clearly the big issue there is water resources. And we have to obviously lay any real concerns around those issues for local stakeholders. So I would say we’re some ways away from building this one into our capital plan at this point in time. We have allocated $10 million at ITC for this year to progress the project to a point where we have to decide do we allocate more capital in the upfront development of the project. This is a kind of project you may have to spend $100 million to $150 million on before you would know if it was going to go or not. And so we’re exploring all the issues around that and what’s the support in the state for it. We know it’s what the Southwest system requires. This project is going to allow substantial more renewables to come on to the grid. And if you’re going to build solar and wind and all that and Southwest is a good place for it. So this is a kind of project that supports all of that, but it is a large project. And we’ll see where we are at the end of the year once we do some more work on the development side.

Your next question comes from the line of Jeremy Rosenfield from Industrial Alliance. Please go ahead.

Just following on some of your earlier comments Barry around - the return opportunities, the return levels in the U.S. versus Canada. Does it make sense to try to right-size some of the business a little bit and repurpose capital from some of the Canadian utilities and maybe by selling some of the smaller components and put that capital to work with higher return opportunities in the U.S.?

Well, As stewards of the business, we always got to look at opportunities right. If someone was prepared to pay us a lot of money for any part of our business, we’d have to look at it. We’re not actively marketing any of our businesses. Our goal really is to work with our regulators to improve our situation that’s our goal. And I think that's where most of the value lies. That being said as our business continues to grow faster, we will have to look at funding opportunities for that business. And it doesn't necessarily mean we always have to go and issue equity for example - we have to be smart about that and we will be smart about it going forward.

And then just thinking about also opportunities, are there more opportunities on the sort of contracted renewable side of things also following on comments that you made earlier versus were you thinking contract renewables or we’re thinking rate base renewables when you talked about renewable opportunities?

I like to do rate base renewables preferably but I know David and his team have led a mix appropriately so in Arizona always making sure we’re doing the right thing from a customer perspective. But as renewables have become pretty cheap here and solar and wind are getting down to $0.02 and $0.03 a kilowatt hour, it’s becoming I think more acceptable to have those move in the rate base and some regulatory jurisdictions in the U.S. have approved fairly large chunks of renewables to be included in regulated rate base for certain utilities. And we are hopeful over time we might be able to achieve some of those outcomes in our Arizona business. David anything you can add there.

Yes, I would just say that's one of our big focus is going forward is making sure that as we build out our renewable portfolio that we get a better balance of owned in PPA assets. Right now it’s tipped very heavily towards the PPA so you shouldn't be surprised to see most of our projects on a going forward basis coming into rate base.

And how long do you think that - David following on that, how long do you think that it takes to sort of shift those PPAs largely into rate base?

It’s not necessarily shifting the existing ones into rate base, it would be the new projects that we’ll be building. We've got 600 to 800 megawatts of renewables solars and wind that we’ll be looking at adding between now and 2030. So, most of that I would see going in as rate base owned investments.

Your next question comes from the line of Patrick Kenny from National Bank Financial. Please go ahead.

Just in Alberta looks like the business is holding its own under PBR 2 - but may be you can give us a quick update on your outlook in the province both with respect to cost savings initiatives and also on the growth front here after not seeing the results of the final CMB and whatnot?

So Patrick obviously Alberta is still very big part of our overall business and we did have a pretty reasonable quarter there. But every iteration of PBR gets more difficult right that’s the nature of PBR. I'm sure there are some opportunities and I’m going to let Janine, Janine you're there. Janine is our CFO of our Alberta business. Janine, do you want to comment on Patrick's question.

Sure yes so obviously we received the decision in the first half - first quarter actually of this year. And if I had some time now to digest this, I mean any of these PBR proceedings are very long in terms of they go on for quite some time. So we’ve had some time now to work through the implications and understand it and kind of get our heads wrapped around it. And we have been able to respond much like you refer to cost savings. Really doing what PBR wants us to do revaluating how we run our day-to-day business, and making sure we're doing as efficiently as possible for customers. And in that respect, PBR is working and we're finding ways to respond. And so our results were fairly strong for the quarter. I mean, we did have recently appointments now finally, with the commission. So we now know who the ongoing chair will be. And that we think will offer some stability and allow us to get a bit of a longer term view of regulation in Alberta for the next five years.

And then Barry, just to follow-up on the recent conversation with respect to the discounts, Canada versus U.S. When we look at the Canadian utilities here, BC of course, you're waiting on LNG, Ontario, you've got the upside there with Lake Erie and what not. I'm just curious and maybe you'll have more comments in the fall at the Analyst Day. But when you look at potential dispositions across the portfolio, and I know you'll be waiting for the GCOC decision in a week or so in Alberta. But would Alberta fall into the camp of more of a disposition candidate longer term?

Absolutely not. Listen, our Canadian business is core to the Company. And I made the point about trying to understand why there is this discount, right. And when you really look up to the underlying business, you start to see these differences. It's a management challenge really over time to find ways to convince our stakeholders, the benefits of having stronger utility businesses in Canada and how that really benefits our customers. That's our goal, and I think we'll have some success over the next two or three rate cycles. This is not going to happen overnight. This is something that has to take some time to achieve. So, don't be expecting us to be announcing sales of our pieces of our business. I make the point in that, as a management team we have to be wary of why there is a discount. Again, we're doing better than most of our Canadian peers. But when you look at our peer group, we're using 23 American investor owned utilities and gets two Canadians as our peer group. So, we're focused on that high-performing U.S. peer group at this point in time. And we got to close that discount.

Thank you. There are no further questions. I would like to turn the call back over to Ms. Amaimo, for closing remarks.

Thank you, Jessica. We have nothing further at this time. Thank you for participating in our second quarter 2018 results call. Please don't hesitate to contact Investor Relations, should you need anything further. Thank you for your time, and have a great day.