Good day, and welcome to the NorthWestern Corporation Third Quarter 2015 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Travis Meyer. Please go ahead, sir.

Thanks, Jennifer. Good afternoon and thank you for joining NorthWestern Corporation’s financial results conference call and webcast for the quarter ended September 30, 2015. NorthWestern’s results have been released and the release is available on our website at northwesternenergy.com. We also released our 10-Q pre-market this morning. Presenting today are Bob Rowe, President and Chief Executive Officer and Brian Bird, our Vice President and Chief Financial Officer. We also have several other members of the management team with us in the room today to address your questions. Before I turn the call over for us to begin, please note that the company’s press release, this presentation, comments by presenters and responses to your questions may contain forward-looking statements. As such, I will remind you of our Safe Harbor language. During the course of this presentation, there will be forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often address our expected future business and financial performance and may contain words such as expects, anticipates, intends, plans, believes, seeks, or will. The information in this presentation is based upon our current expectations of the date hereof, unless otherwise noted. Our actual future business and financial performance may differ materially and adversely from our expectations expressed in any forward-looking statements. We undertake no obligation to revise or publicly update our forward-looking statements or this presentation for any reason. Although our expectations and beliefs are based on the reasonable assumptions, actual results may differ materially. The factors that may affect our results are listed in certain of our press releases and disclosed in the company’s 10-K and 10-Q, along with other public filings with the SEC. Following the presentation today, those who are joining us by teleconference will be asked – will be allowed to ask questions. The archived replay of today’s webcast will be available beginning at 6:00 p.m. Eastern and can be found on our website at northwesternenergy.com under the Our Company, Investor Relations, Presentations and Webcasts link. To access the audio replay of the call, dial 888-389-5988 then access code 4283628. I will now turn it over to President and CEO, Bob Rowe.

Good afternoon and thanks for joining us. Today, we are at our division operations in Missoula, Montana. Missoula is the home of the University of Montana and is a driving and really very dynamic community. I will start with some of the highlights. We have net income of $23.8 million reported in the third quarter of this year and that’s compared with $30.2 million for the same quarter last year, and the decrease was primarily the result of $16.9 million tax benefit recognized in the third quarter last year that was partially offset by the income from the November 2014 hydro acquisition. We have diluted EPS of $0.51 as compared to $0.77 in the third quarter last year. Adjusted non-GAAP diluted EPS of $0.51 as compared to $0.38 in the third quarter last year. We reached a settlement agreement in our South Dakota General Electric Rates Filing with both the South Dakota PUC staff and with interveners. If approved by the commission, the settlement will provide an increase in base rates of $22.2 million. In addition to that, $9 million related to the acquisition of the 80 megawatt Beethoven wind project. On September 25, we completed the Beethoven acquisition for approximately $143 million. As compared to the 20-year of qualifying facilities contracts that were previously in place for Beethoven, the acquisition and ownership by NorthWestern is projected to benefit our South Dakota customers by in excess of $44 million over the same period of time. The acquisition was financed with the issuance of $70 million of 25-year first mortgage bonds, with a coupon of 4.26% that occurred in September of this year, by $57 million of equity or 1.1 million shares in October of this year, and with the remainder funded that was available cash and short-term borrowings. We have narrowed our full year 2015 adjusted guidance to a range of $3.10 to $3.25 per diluted share. Our previously announced guidance was $3.10 to $3.30 per share. And the Board of Directors approved a $0.48 per share dividend payable on December 31 of this year. And with, I will turn it over to Brian Bird.

Alright. Thanks Bob. Summary of financial results on Page 5 for the third quarter, I will focus on income before taxes I will get into individual components of the P&L shortly, but income before tax as you see for the quarter, we had $30.2 million, which is an $18.4 million, or a 156% increase over the prior quarter. That was offset with, however, on the tax line, we had a significant tax benefit, as Bob just discussed last year, which resulted in a $24.8 million negative variance on the income tax line for the quarter, netting us to net income of $23.8 million or $6.4 million reduction versus the prior year. As you move forward to gross margin on Page 6, the increase in gross margin in the electric side and primarily driven by two items: first and foremost, the hydro operations, $40.4 million and the South Dakota Electric interim rate increase of $1.8 million. There are several items that certainly below that that effectively net out. I would point out that the electric retail volumes were up $1.1 million. We did see some benefit, slight benefit from weather there, but which was offset by some slight negative weather that impacted the gasses – of the natural gas retail volumes. Taking all things into consideration, we deemed that weather was immaterial for the quarter. Moving forward to Page 7 regarding whether to demonstrate that, as you take a look at the 2015 weather compared with 2014, we were slightly cooler in Montana regarding cooling degree days, but quite a bit warmer in South Dakota. Again, those two things primarily offset one another. And certainly, on a cooling degree day versus our historic average is how we look at and as we forecast our earnings, in a going forward basis, we…

Thank you, Brian. I will start with a bit more detailed update on the South Dakota general rate case, as you know we have filed our first electric rate case in South Dakota in 34 years. Our request – our initial request was $26.5 million increase, driven really overwhelmingly by our investments, particularly at Big Stone and Neal as well as the Aberdeen Peaker and the Yankton substation, went through overall a very constructive process of negotiating with the South Dakota Commission staff and ultimately with other intervenors. And we did reach a broad settlement, allowing them increase some base rates of about $20.2 million at an overall rate of return of 7.24%. And in addition to that, we would bring the Beethoven project into rate base for an additional $9 million annually. The PUC is scheduled to hearing, it’s actually next week, October 29 and we hope that they will be able to make the final decision in the case by the end of the year. We have been collecting interim rates since July 1 that was based on our original filing and we are recognizing revenue consistent with the settlement and we will refund any amounts determined to be over collected by March 31 of next year. A little more detail on the Beethoven wind acquisition. In September we did complete the purchase of the 80-megawatt Beethoven wind project near Tripp in South Dakota for about $143 million subject to the usual post-closing adjustments. Prior to the acquisition, the energy and the renewable energy credits or RECs associated with this 80 million – 80-megawatt project, were included in our electric supply portfolio under a qualifying facility or QF power purchase agreement. And the QF PPA terminated upon closing and we have requested the project to be placed in…

Thank you. [Operator Instructions] And we will go first to Dan Eggers with Credit Suisse.

Hi, good afternoon guys. First question I guess is just kind of on the tax rate moving to the higher end of the range this year. How should we be thinking about the tax rate for next year? And then how much of reduction in tax expense are we going to see because the PTCs generate out of the Beethoven?

Yes, that’s a great question, Dan. We historically had stated that we expected our tax rate to get up to around 20% by 2017. As a result of the Beethoven transaction and the big benefit, if you will, is the PTC is associated with that transaction, that will drive our tax rate down considerably and our expectation is that we wouldn’t see that tax rate certainly that high. We expect now as it would get up into maybe the low to mid-teens by 2017.

What utilization ratio should we be using? I mean, because obviously, this is very volumetric to affect utility earnings, but what utilization rate should we assume on Beethoven just trying to warm our way into a tax benefit?

I would say we would probably be in the, I don’t know that number at the top of my head. I’d have to get back to you with that, Dan.

Okay, got it. And then just on the gas reserves and rate base, is there anything new of substance to add either advancing on getting the next $100 million spent toward you haven’t got any interested people willing to sell reserves as gas prices continue to languish?

No. Again, we have looked at various opportunities, but have not found the combination of the right set of assets at the right price with the willing however, we are certainly actively looking.

Dan, answer your – I am sorry Dan, just to answer your earlier questions, we would be around 45% for utilization rate.

45% utilization. Okay, very good. Thank you. Bob, just on the – not found the right set of assets, is there – is the opportunity set getting larger or smaller at this point?

Well, I am not sure it’s either expanding or contracting.

Okay, very good. Thank you, guys.

Thank you. And we will go next to Paul Ridzon from KeyBanc.

Just a follow-on on Beethoven the benefits of the PTCs accrued rate payers, I assume?

Rob, actually we are allowed to capture what we would expect to get from earnings in an asset like that, but ultimately the benefit of PTC is also accretive to customers.

And if there is variability in wind, does that sold to the fuel cost or is there an assumed wind resource and there could be some earnings variability around that?

It does flow through.

Okay, great. And then any sense kind of what FERC’s thinking is with regards to Dave Gates, I mean, where is it in their stack of work?

We don’t know and I am not sure that there is any real FERC thinking on that issue. That is not intent to be critical. I don’t have the sense if it’s a very visible manner.

And then do you have any recourse on the LRAM, can you appeal that and if not, how much of that do you think you can offset?

I would say we are looking at the decision and we will make an appropriate decision about what recourse we have. Beyond that, the reality is that regulatory decisions federal or state affect our ability to invest in serving our customers and that’s just a function of being a regulated utility. So, we have to ultimately deal with decisions, such as eliminating the LRAM by managing our budget. And it does have an effect on our ability to invest in operations. Now, that said again at some point, when a rate case is filed, that essentially resets the base. But regulatory decisions of any kind are very powerful in driving our ability to invest in serving our customers.

And what’s your latest thought about when the next Montana case to be filed?

Well, again, as I say we will be looking at all of our jurisdictions in the spring, typically in April and we will make decisions after that.

Thank you very much.

Thank you.

Thank you. And we will go next to Jonathan Reeder from Wells Fargo Securities.

Hey, actually most of my questions have been answered already, but I did want to follow-up on the LRAM, so what’s in guidance right now? It’s the loss of the $7.1 million adjust pro rata for essentially Q4 for 2015, is that right?

Yes, that’s right. The order doesn’t go in effect until December 1. We have taken that all into consideration.

The order doesn’t go in effect until December 1. Okay. And then as we look to 2016, we would expect, I guess sort of the full year impact until essentially your next rate case where then you can hopefully get that encompassed under your base rates?

Yes. That’s correct.

Is that the right way to think about it?

That’s correct.

Okay. And then if you could Brian, could you also expand a little bit on that gas tracker decision you alluded to?

Yes. What effectively has happened there we have been putting our gas assets – gas production assets into the tracker, as you – with the intent, ultimately of those assets going into rate base for either a standalone filling or through a full natural gas rate case, costs in those particular items do change. And as a result of that, some of those costs were not allowed in the tracker.

Okay. And what was the extent, I mean was it a material portion or...?

Well, $1.6 million.

$1.6 million. Okay, alright. Thank you very much.

Thanks Jonathan.

[Operator Instructions] And we will go next to Doug Christopher from Crowell, Weedon.

Hi. Thank you very much. I wanted to go back to the comment that you made on taxes and that was that in the press release, you currently expect your tax rate to range between 17% and 19% for 2015, but then indicating that by 2017 actually you would be at the low to mid-teens rate?

Yes. I think to think about what Beethoven is going to do, ultimately Beethoven on a standalone basis is going to have a detriment from a pretax perspective, but the benefits from the PTC is ultimately going to improve net income. And so think about that improvement to the tax rates ultimately reducing our tax rate. So that will put us down. And we haven’t talked about our range for 2016 yet, from a tax rate perspective. As I pointed out, we do expect to be in that low to mid-teens by 2017.

Okay, thank you. And then on the natural gas, the goal of increasing the natural gas assets, since company has been discussing this and it’s been an objective, natural gas prices have deteriorated further, does that mean for the $100 million potential you will be able to get more reserves than you could a year ago?

Certainly, yes and again it’s a great time from a customer perspective to be doing these kinds of transactions. The challenge we have is just identifying projects where we can transact, but it’s – if we can get that done it’s a huge win for customers.

Thank you.

Thank you. And we will go next to Paul Patterson from Glenrock Associates.

Good afternoon. It’s Paul Patterson.

Hi, Paul.

Hi, Paul.

Hi. Just a couple of quick ones, on the LRAM, it was a unanimous decision I think, right. And I mean it seems like it was quite a reversal, any thoughts as to what sort of philosophically is now occurring at the commission with respect to this issue and so there – there is sort of [indiscernible] action to it?

I am going to let the commission speak for itself. You are right. This was a unanimous decision and it takes Montana Commission in a bit of a different direction from many states around the country, which have adopted more true decoupling mechanisms. As a company, we are committed to providing our customers the best diversified cost effective portfolio of resources possible, including energy efficiency. But as a result of the fact that prices for electricity and natural gas as opposed to for example, home services are volumetric, you have to have a strategy to be able to cover your costs and earn a return. And I am concerned that when a world where energy efficiency and in a country where energy efficiency is an increasing priority, we just haven’t got that figured out. But again, I acknowledge the commissioner’s sincere concern to ensure that customers are treated fairly and hope we can work with them on an alternative mechanism that was notable that there were some interest in revisiting was subject to the decoupling mechanism and actually Montana did have decoupling in the 1990s, prior to supply deregulation, so there may be an opportunity to take another look at that.

Okay. And then you mentioned there will be reset and I apologize if I missed this, but you mentioned that you would have reset it within the next rate case, and I am just wondering if you could give us a little more of a feeling as to – and I might have missed this so apologize because I got distracted, but if there is any timing that you guys could give us in terms of when you guys plan on having the next rate case?

No, I think my comment to that question was we look at each jurisdiction and each sector in spring, typically in April. So we would make a decision for Montana gas and electric for example, at that time.

Okay. Can you tell us what the earned ROE for the last 12 months is and the last surveillance reporting date was for your jurisdiction?

No. I don’t have that information with me Paul, at this time. We do file in Montana, what’s called an annual report that shows what that return is. And that would – the last one we filed would have been for ‘14. My recollection is for ‘14, our electric was approximately 11% and our gas was approximately 9%.

Has that changed a lot since then?

Difficult to say, obviously we have got to run our numbers here through the end of the year to be able to update those numbers in the February timetable.

Okay. In terms of Big Stone station, what happens when it actually gets into – when it actually is completed just accounting wise, do you start to depreciate it, is there any sort of regulatory treatment for it just if you can remind us how – when that facility is in rate base sort of – or excuse me when it’s completed, what happens then accounting-wise, do you follow me?

Yes, up until it’s actually put into rate base. We have been able to earn AFUDC on the investment. And our expectation is near to the end of the year when ultimately that asset is going to go into a rate base, AFUDC of course will stop, but we will also then start getting the revenue requirement associated with that investment as it is a rate base – as an asset in rate base at that time.

So you guys will get revenue for it, does that happen automatically or does have to be a rate base, I guess is what I am…?

That is part of the settlement that we have with the staff at this point in time that will be ultimately rules on, on October 29.

Alight. So, it will be presented on October 29.

Thank you. Presented. Thank you, Bob.

And then Dave Gates, just on terms we have been hearing I mean I have noticed with some FERC cases, that it can be several years for these guys to actually address rehearing, I just noticed that in the last couple of meetings, that they were sort of cleaning…

[Indiscernible]

Right. So I mean I guess is there any like I mean timeframe here that where there is no actual number you are hearing that you have to I mean you can’t ask – you can’t go to court until there is a final ruling on rehearing, if I am correct. Is – would there be any potential impairment that could happen if in fact this drags on and we don’t have anything coming out of FERC?

We are evaluating on a regular basis, whether or not there is any potential for an impairment and at this point we don’t think so. Your other comment is correct that the decision on rehearing is necessary both for judicial appeal.

Okay. And then just finally with the repairs tax impact that you guys are benefiting from, does that have any impact in a future rate case in terms of impacting rate base and what have you, how should we think about that if you were to go into a rate case, how the benefit associated with repairs deduction might – may or may not impact a rate case in the future?

So ultimately those benefits will accrue to customers in the next rate case is what happens is it ultimately reduces your effective tax rate. And that the new lower effective tax rate would be the tax rate that you would be able to earn on in the next rate case.

Okay. But what you have taken so far that wouldn’t impact rate base or anything like that, correct?

No.

Okay. And I think that is all my questions. Thanks so much.

Thank you, Paul.

Thank you. And we will go next to Paul Ridzon with KeyBanc.

Just a quick follow-up, when do you expect to burn to your tax shield?

Thanks Paul for that question. The answer again, we are assuming there is not another bonus extension, but obviously we don’t know the answer of that right now, but we are still holding true to the fact that we believe that into 2017 we will still be utilizing NOLs.

And do you have any read on prospects of bonus being extended?

Well, we certainly having people kind of look into that, but they don’t have the answers yet themselves.

Okay. Thanks again.

Thank you. And we will go next to from Joe Zhou from Avon Capital Advisors.

Hi, it’s Andrew Levi. How are doing?

Hi Andy.

Just two questions, just to follow-up on Paul’s question on the repair tax, why would that not be an adjustment to rate base?

Ultimately, like anything that adjusts on effective tax rate, effective tax rate ultimately is a pass to customers in the next rate case.

That’s a dollar amount, so I am just trying on this, because in other states I believe, if I am not mistaken, that there generally is an adjustment to rate base, so I am just curious…?

Andy, it’s a function of the flow-through state in Montana.

Got it, flow through state. Okay. And then the second question I had was just on natural gas acquisitions, I understand that you quoted dollar amount always, but is there a way to determine or have you talked about maybe I just don’t have it, the amount of actual gas your are looking to buy before the customer, that would – so because $100 million, but then, because as you said, the assets have – the price of the assets have changed, it’s kind of hard to determine how much gas you are looking to, I think in the past you have put a percent of your total load or something like that or…?

Yes. Sort of the rule of thumb and it really is just the rule of thumb is that we would like to have about 50% of our requirements, both for retail gas and for our electric generation needs and we could get that done through our market prices for about $100 million.

Okay. And how much do you have currently of that 50%?

We have 6 Bcf of gas and we would like to get another 6 Bcf. So obviously, if price continues to stay low, we could do something less than $100 million as well.

Okay. 6 Bcf, that’s what I was looking for, great. Thank you very much.

And we will go next to Doug Christopher from Crowell, Weedon.

Hi. Thank you for taking my follow-up call. It’s Crowell, Weedon and D.A. Davidson. It sounds like you have been great stewards, you have been adding renewable. And not only that you have been buying at attractive prices, as you indicated with the hydro comparison than enhancing the reliability of the assets as well, is there any sense in the discussions I guess the commissioners, the regulators that this has been at least positive in your relationship or getting your requests through?

I think generally that well, more generally, the acquisitions of the hydro system has been recognized as a true long-term positive for our customers. And the commission obviously did strongly support that.

And have you looked at this, I can’t recall. Does this make you the most kind of renewable utility or at least one of them, right?

We are definitely one of the most renewable utilities and certainly there are companies that might have more hydro capacity than we do in some regions. And there are utilities obviously that have lots of nuclear as well. So we are very proud of having in Montana a hydro based system with each of the resources contributing a tremendous amount of value to the diversity, was frustrating to us. One of the things that had concern is that if you look at pounds of carbon per megawatt hour of generation, our Montana fleet is actually already right now, lower than the EPA’s target for Montana in 2030 and that’s to me kind of amazing. But under the EPA formula, we don’t get credit for any of that. So there is something fundamentally flawed. We and our customers have already made investments and that we are transformational from an environmental perspective and how we generate power and what we get for it is focus.

Well, you’re being good stewards, keep up the good work. Thank you.

Thank you very much. And the stewardship role that we play is one that we are extremely proud of.

[Operator Instructions] There are no further questions in the queue at this time.

Great. Well, thank you all very much for your interest and a good discussion. I know we will see you – many of you at the financial conference coming up. Otherwise, we will talk to you next quarter. Take care.

That does conclude today’s conference. Thank you for your participation.