Good morning. My name is Brent and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2016 Year-End Results and 2017 Guidance Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. This call will be available for replay beginning at 1:00 p.m. Eastern today through 11:59 p.m. Eastern on February 16. The conference ID number for the replay is 33818055. Again, the conference ID number for the replay is 33818055. The number to dial for the replay is 1-855-859-2056 or 1-404-537-3406. I would now like to turn the conference over to Doran Schwartz, Vice President and Chief Financial Officer of MDU Resources Group. Thank you. Mr. Schwartz, you may begin your conference.

Thank you, Brent, and welcome to our earnings release conference call. This call is being broadcast live to the public over the Internet and slides will accompany our remarks. If you would like to view the slides, please go to our website at www.mdu.com and follow the link to the conference call. Our earnings release is also available on our website. During the course of this presentation, we will make certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations and beliefs are based on reasonable assumptions, actual results may differ materially. For a discussion of factors that may cause actual results to differ, refer to Item 1A, Risk Factors, in our most recent Form 10-K and Form 10-Q. Our format today will include formal remarks from Dave Goodin, President and CEO of MDU Resources, followed by a Q&A session. Other members of our management team who are available to answer questions during the Q&A portion of the call today are: Dave Barney, President and CEO of Knife River Corporation; Jeff Thiede, President and CEO of MDU Construction Services Group; Nicole Kivisto, President and CEO of Montana-Dakota Utilities, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas; Martin Fritz, President and CEO of WBI Energy; and Jason Vollmer, Vice President and Chief Accounting Officer and Treasurer of MDU Resources. And with that, I'll turn the presentation over to Dave for his formal remarks. Dave?

Well, thank you, Doran, and good morning, everyone. We appreciate you joining us today to discuss our 2016 year-end results and our 2017 earnings guidance. I am pleased with our company's performance in 2016. We successfully completed several strategic moves including fully exiting from our exploration and production business, the sale of our interest in the refining business and more recently, the sale of our interest in the Pronghorn natural gas processing plant. These actions have lowered our business risk by reducing our exposure to commodity prices that are difficult to predict, and have positioned us for future growth in our two primary continuing lines of business, these being Construction Materials & Services and Regulated Energy Delivery. Both business lines performed well and executed their business plans leading to a 32% growth in earnings per share from continuing operations. In 2016, these business lines generated $232.4 million or $1.19 per share compared to $175.7 million or $0.90 per share in 2015. Including the discontinued operations of the exploration and production and refining businesses, we had earnings of $63.7 million, or $0.33 per share, compared to a loss of $623.1 million, or $3.20 per share in 2015. Now turning toward our individual business units, starting with our Construction Materials & Service companies. On a combined basis, the Construction earnings for the year were $136.6 million, a 21% increase over 2015. And this also exceeds our previous peak annual earnings from the pre-recession year of 2007, when these businesses earned a total of $120.8 million. Knife River, a Construction Materials business, had record earnings of $102.7 million, breaking the previous record of $89.1 million, set just last year. The 15% increase in earnings was driven by higher Construction margins and demand in all regions except the north-central region where activity was down,…

Your first question comes from the line of Chris Ellinghaus with Williams Capital. Please go ahead.

Good morning everybody, how are you?

Good morning, Chris, how are you doing?

Good. Mr. Barney, can you talk about the sort of flattish looking revenue in the guidance?

Just a second, Chris, we're going to get Dave's mic turned on.

Good morning, Chris. Yes, we're expecting flat volumes, but we are expecting increased volumes in our aggregates, ready mix and asphalt. We're looking to get price increases on almost all our product lines, but we are expecting flat revenue next year.

Okay. Dave, the guidance overall doesn't suggest much growth. Can you give us a little more color in what you're expecting to sort of lead to that result for 2017?

Yes. I appreciate the question, Chris. I somewhat anticipated that question. Certainly, it's early. And when we think about changes, I did mention in my earlier comments that we had exited – made the Pronghorn sale here at the first of the year, so there's some effect from a year-over-year when we think of current assets. Also, very critical to our both Construction businesses is really the first quarter of bidding environment, the first quarter of the year. Now while we appreciate having $1 billion in backlog between both Materials and Services, and we're at a record pace at the Materials up 10% over last year's record, really critical in both those businesses is how well we do in this first quarter. So that, we want to see how that shapes up as we think longer over the course of the year. Again, we're at a nice starting point, but critical would be that first quarter bidding environment. Also, important in the business, particularly in Materials, is the construction start and the stop to the season. And some years we enjoy an earlier start, some years we get to go later in the fall. But there's a variable there depending on how favorable the weather can be. So that's a variable there that we can't control. And then when I think about from the utility perspective, we really, I'll say, forecast normal temperatures, normal weather. We do like that through the first 32 days, 33 days of the year we've had some real winter for a change in the Upper Midwest. Yet we do expect normal weather throughout the year. And so it's early in the year. While there's some weather impacts there, I'll say bidding environment in the Construction groups are really important in the first quarter. And then probably the last element I would say there is we certainly are appreciative. And I'll say there's certainly some optimism based on current conversations going on from the administration relating to regulatory reform, taxation policies, as we think about infrastructure spending or investment. I think those all can be very positive to our business in various aspects. Yet until we see those more enacted and actually put into place, we're not going to bake anything in based on some assumptions there. And so I know I covered the water front, Chris, but I think your question really wanted to know how are you thinking about your guidance and the range and I just thought go more line by line.

Okay. That's great. And one more thing for anybody, can you give us some thoughts on what you're hearing about what President Trump's infrastructure plan is sort of sounding like?

I'm going to see if Dave Barney has got some thoughts on it. I think there's probably a variety of opinions on this, but I'll have Dave take a first shot at it.

Yes, Chris. We're definitely excited about the talk on the new administration infrastructure, what they're talking about and the $1 trillion. But until we see really what's coming out, we can't get a feel for how that's going to affect the markets we're in. But we're excited about it. But we really don't anticipate anything from those infrastructure plans until 2018.

Great. Thanks for the color, guys.

Yes. Thank you, Chris.

Your next question comes from the line of Sarah Akers with Wells Fargo. Please go ahead.

Good morning.

Hi. Good morning, Sarah. How are you?

Doing well. Sort of question at the utility. With all the rate activity you had, can you give us a sense of the earned regulatory ROE across the platform, and then the magnitude of the opportunity to reduce regulatory lag from here?

Yes. Sarah. Thanks for the question. This is Nicole. When you look at our earned returns by jurisdiction, we continue to monitor those on a month-over-month basis and evaluate what the right opportunity and timing is for a rate case. We do not disclose those. But what I will tell you on an allowed basis, when you look at what we've been allowed, historically those have been coming down, trending in that 9.5% range. As we look ahead with interest rate environment and the projection of an increase there, we do anticipate some increases in the allowed ROEs going forward. We have an ask in the State of North Dakota right now at 10% and the State of Idaho at 9.9%. So that gives you a little flavor on ROE. As we look ahead in terms of reducing regulatory lag, certainly that continues to be a focus of ours. We do have pending cases that are disclosed in the news release. And as we look to 2017, we do anticipate more activity on the gas side.

Got it. Thanks. And then when you guys talk about strategic acquisitions, does that include regulated utility acquisitions? And what are your thoughts on current take-out multiples?

I'll take that question, Sarah. I'll answer it more in a broader sense. You're talking about the $150 million in 2017 and 2018 for growth opportunities. Is that what you're referring to? Or are you thinking more just broadly than that?

Well, more broadly.

Okay. Well certainly, I'll say getting back to the growth capital that we've allocated this year, that wouldn't touch anything so far as utility is concerned from a major assets. But that is development capital available for each of the business development teams with their individual companies to look at opportunities to grow. I'll say maybe in particular, but not exclusively, Construction businesses, but it could be incremental like Thunder Spirit project when we think about that growth opportunity. I think, going back to you question and on the current M&A space in the utility sector we continue to see very strong prices, very strong multiples being announced anyway in deals and largely those are – we have a hard time making the math work on some of those as we look at those. We're not saying we're taking it off the table, but at the same time, I think, being very realistic in saying there's some very strong multiples being paid and today's environment maybe is a little bit heated.

Got it. And then last question, just on the various tax plans that are out there, have you run any initial sensitivity and are you able to share the potential impact there?

Yes, Sarah, this is Doran. So we're following that. We're taking a look to your right, there are a variety of different plans out there. I think that all of those plans that are being discussed right now would be a net benefit to the company to various degrees, regulated versus non-regulated. But what I would say is I think this is a topic – it's really early at this point in terms of what direction they're going to take. There's a lot of potential moving parts within each of these plans about deductibility of interest or even your capital plan. All those have significant impacts on our businesses and we don't really have answers to those at this point. So I think how I would frame that up, it's – we're following it. We'll have more clarity as this takes shape as we go through 2017. And I think once we have a firmer direction of where they want to take tax reform and the timing of when they want to take it, whether it's 2017, 2018, or what have you, we'll update you then with a more concrete idea of what you can expect in terms of impact.

Got it. Thank you.

Thank you, Sarah.

This one's the last call for questions. This call will be available for replay beginning at 1:00 PM Eastern today till 11:59 PM Eastern on February 16. The conference ID number for the replay is 33818055. Again, the conference ID number for the replay is 33818055. Your next question is a follow-up from the line of Chris Ellinghaus with Williams Capital. Please go ahead.

Hey. Dave Barney, would you give a little color on – you weren't expecting Construction Services to really have much margin impact in 2016, but you ended up for the year. Can you give us a little thought on that?

Chris, this is Dave. Just – did you ask about Construction Services or Construction Materials?

Yes. Services because your guidance for last year was for Construction Materials to be up, but the big surprise from the Construction groups was Construction Services the margin was up. So wanted to get a little color on that.

Okay. I'll turn that over to Jeff Thiede, who heads up Services.

Thanks for the question, Chris. So we had a good year and we had increases in our margin. We saw in our inside businesses a lift on our margin. And that was attributed to the operational excellence and initiatives that we put in place several years ago. Some of our lawn backlog-type higher margin work we saw slower volumes. So this offset each other. But I think going forward with our strong backlog level and the projects that we have under pre-construction, we see confidence going forward and should be another good year.

Great. Thanks.

Thank you, Chris.

And at this time, there are no further questions. I would now like to turn the conference back over to management for closing remarks.

Well, again, I would like to thank everyone for tuning in to this year-end earnings call. As noted earlier, our continuing operations delivered, I'll say, very strong results in 2016, increasing earnings 32% year-over-year. We are committed to building a strong America and are optimistic about our opportunities in 2017 and beyond. And, again, we appreciate everybody participating on the call today. Thank you for your continued interest in MDU Resources.

This concludes today's MDU Resources Group conference call. Thank you for your participation. You may now disconnect.