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

Thank you, Jessica. Good afternoon and thank you for joining NorthWestern Corporation’s financial results conference call and webcast for the year ended December 31, 2015. NorthWestern’s results have been released and the release is available on our website at northwesternenergy.com. We also released our 10-K pre-market this morning. On the call with us today are Bob Rowe, President and Chief Executive Officer and Brian Bird, Vice President and Chief Financial Officer. We also have several other members of the management team with us in the room to address your questions today if necessary. 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 often 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 reasonable assumptions, actual results may differ materially. Factors that may affect our results are listed in certain of our press releases and disclosed in the company’s Form 10-K and 10-Q, along with other public filings with the SEC. Following our presentation, those who are joining us by teleconference will be able to ask questions. The archived replay of today’s webcast will be available beginning at 6:00 p.m. Eastern Time today 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 888-203-1112, then access code 3918049. Again, that is 888-203-1112, access code 3918049. I’ll now turn it over to President and CEO, Bob Rowe.

Thank you, Travis. Up until the call started, Travis was referring to Brian and me as his minions, so you can ask him later what that was all about. I'll start with just a quick summary of some activities, hand it off to Brian for the in-depth financial report and then come back and provide some more color on other things going on. So some highlights, first of all, 2015 net income improved by 30.5 million, compared to 2014. That improvement was due primarily to a full year of hydro operations and an insurance recovery received in 2015. But this was partially offset by the inclusion of an income tax benefit in our 2014 results due to the release of what had been previously unrecognized tax benefits and warm weather, which produced our margins in 2015. We had $3.17 in diluted EPS in 2015, that’s compared to $2.99 in 2014 or a 6% improvement. Meanwhile, non-GAAP adjusted EPS of $3.15 was a 17.5% improvement over 2014 non-GAAP adjusted EPS of $2.68 and within the 2015 EPS, therefore within the 2015 EPS guidance range of $3.10 to $3.25. In October, the South Dakota Public Utilities Commission approved the settlement that we had reached with the PUC staff and interveners providing for an increase in base rates of approximately $20.2 million. That was based on our overall rate of return of 7.24%. And in addition, the settlement allows us to collect approximately $9 million annually related to the Beethoven wind project, which we acquired in September of 2015. At our just concluded meeting, the board approved a 4.2% increase in our quarterly stock dividend, $0.50 per share is payable on March 31 of 2016. Brian, off to you.

Thanks, Bob. On page 5, summary financial results. First and foremost, as Bob pointed out earlier, net income was 151.2 million versus 120.7 million in 2014. That's a $30.5 million increase or a 25% increase on diluted EPS $3.17 versus $2.99 or an $0.18 improvement and 6% improvement as well. That's at a very high level. Moving on to gross margin on page 6, basically, two different stories. Our electric business did extremely well and offset by a warmer weather impact at our gas business, but at a high level, gross margin was up 119.1 million or 16.5%. On the electric side, margin was up 133.7 or approximately 25% and on the electric side that was primarily driven by Hydro operation, 135 million of improved margin there. In addition to that, we had South Dakota electric rate increase that was offset to a degree by electric QF adjustments and lower electric retail volumes during the year. On the gas side, as I mentioned, gas was actually -- margin was down 14.6 million or 7.6%. That was primarily driven by natural gas retail volumes being down substantially about 10.8 million there and also our gas production rates and deferral were impacted as well. Moving forward, thinking -- regarding weather, 2015 weather, just asking about that as a whole, I think people know that our business, we have variability if you will in our earnings, primarily in the first and fourth quarter, that’s driven a lot by our gas business and what happens with heating degree days, and on this chart, you can see from a heating degree day perspective, we were quite a bit warmer versus ‘14 and also quite a bit warmer versus historic average. As you may know that we impact move from GAAP earnings to non-GAAP earnings, making…

Thank you very much Brian. I’ll start with a little discussion of the hydro system as you know 2015 was the first full year of operation of the hydro system and despite some pretty dry weather we hit right at our targeted production based on the five-year historical average and that really was an indication of the benefit of the diversity of our system. One of the presentation’s to the Board of Directors actually was from one of our senior project engineers in hydro and among other things he was explaining and discussing the way operation [00:18:08] if you have the MAPP in front of you which is the first dam on the Madison and Missouri system really produces benefits all the way up the other Madison and Missouri dam. So it’s a resource that is renewable but it is also recyclable from one facility to the other and again showing the benefits of the integrated system. We’ve talked before our supply department will be releasing the next Montana electric supply plan by the end of the quarter. One of the important parts of that will be an asset optimization study focusing on hydro integration but then more broadly concerning optimization of the entire Montana generation fleet. As you know, we had an awful lot of skin in the game in terms of operating the Kerr Dam which was part of the conveyance from PPL Montana Talen with the understanding that under prior FERC decision it would be transferred to the Confederated Salish and Kootenai Tribes. I didn’t know the exact date but ultimately that transfer did occur on September 5. The Montana commission had been very clear in its order approving hydro transaction. First of all, quite honestly there would be no shareholder benefit in terms of either depreciation…

I may be looking for a job soon.

Not at all. Travis does a fantastic job as you all know.

Jessica, we can open it up for questions.

Thank you. [Operator Instructions] And we will now take a question from Dan Eggers with Credit Suisse.

Hi, good afternoon guys. You covered most everything, but just a couple of follow-ons. One on the 2016 guidance, you guys use normal weather, it’s been obviously very mild in the northeast. How are you guys shaping up on weather, obviously month end but is that anything we should be keep in mind already?

Yeah, I would just say that January wasn’t as good as we would like. You can follow up on in a few days there. And we’ve already taken that into consideration in our filing for 2016.

Okay. Question number two, I guess, Beethoven was one of those nice surprises that came though last year with the tax extensions for solar and for wind. Are you guys seeing any need or any opportunity maybe to tad some more renewables this year and next year.

Honestly, no, and that’s something on the Montana side we will certainly address in our plan. There are opportunities too, in any way produce cost to customers as we did at Beethoven. We are certainly going to look at that. Our plan is going to focus on the capacity needs - in Montana, we are part of the Pacific Northwest. One of the interesting things there is the Northwest Power and Conservation Council is taking comments in its most recent regional plan and we looked a lot like the Pacific Northwest in focusing on strategies to meet those capacity needs.

So does that belong to the lines of maybe some gas generation or some peak just for diversity in some responsiveness or what are you thinking?

Dan, I would say this. I mean, I think we’ve talked about having peaking needs in South Dakota and Montana on a going forward basis. I think we will get into more details on that when our plan is released at the end of the first quarter and we will certainly put more clarity around that.

What you will see in the plan is it’s a comprehensive and very robust document, supply department runs multiple scenarios and again the point is to meet our customer’s needs in the most reliable way and cost effectively.

And just to clarify, that is or is not included in the CapEx numbers in slides today?

Yeah, it is not included. Once we identify the timing, the dollar amounts associated with projects like that we put that in our CapEx and certainly in our 10-K if we don’t know the timing and amounts we don’t include those in plans and we note that in our 10-K, those types of things aren’t included certainly in our investor materials as well.

Okay, thank you guys.

Our next question will come from Chris Elinghouse with William Capital.

Hey, guys, how are you.

Hey, Chris.

Bob, you were talking about hyrdo and the drought conditions, have you guys given any thought to – what kind of upside to hydro operations you might see, however, you might want to define it, gross margin or whatever under more normal hydro conditions?

Sure, we’ve planned based on five years of actual performance and we’ve seen for the last year that really pretty well nailed it. We don’t know what likely performance will be during the year, until later in the spring. For example, in Montana quite often there will be light snow and spring rains. There certainly is some upside in how we operate the system, but also it’s significant and this will be discussed in the plan. There is unutilized capacity at a number of the dams, where if it made sense, if it were cost effective, we could add generation to existing dams.

Okay. Brian, this question is for you. On page six on the reconciliation for the year, I am a little bit confused on the hydro transaction costs that you specify $9.5 million pre-tax $5.8 million after tax. Are you trying to tell us there that there were some lingering transaction costs in 2015?

No, those are - what we are saying on a year-over-year basis, we had no cost in 2015, those were costs in 2014. That’s the favorable variants in 2015.

That’s where I am getting confused, because I thought the after-tax hydro transaction cost and whatnot from 2014 were like $9.5 million after tax.

No, they are pre-tax.

Okay, thanks. And lastly, can you give us any color on your efforts for pursuing optimization of DGGF?

That’s something that again will be addressed as part of the plan, so stay tuned there.

Okay, so that will get addressed in IRB?

Yes.

Okay.

Although we don’t refer to it as formal IRB, it’s the Montana Electric Supply Plan.

Right, okay. Thanks a bunch.

Hey, Chris, just one item. On the $9.5 million, one thing you might be thinking about this is the operating expense. We also did have last year bridge fees which we were down in interest expense associated with hydro transaction. You might be looking at two of those together on an after tax basis is probably around the $9.5 million.

Okay, got it.

That’s why Brian and I are minions.

And we will take a question from Paul Ridzon with KeyBanc.

Good afternoon.

Hey, Paul.

Brian, one of the things you mentioned in the call was I think a headwind from gas deferral at the reserves, can you give some more flavor what that is?

One thing Paul is we’ve had these gas production assets for some time they have been flowing through a track, right, and those assets haven’t been put into rate base. As we’ve gone through the gas tracker hearings and an agreement that ultimately those costs we would reduce what we receive on the cost to actual cost levels and so that was what we deferred down to our actual cost levels on gas production assets.

How much was that?

1.9 million.

And then I guess in the last six months we’ve seen an equal number of M&A deals, just wondering how you are thinking about scale and synergy opportunities against the backdrop of very cheap financing available.

I think you know our usual answer which is we don’t comment on M&A. We’ve got plenty there to keep us busy and when we do pursue opportunities, as we were a hydro, we try to be pretty disciplined.

Okay, thank you.

Thank you.

We will now take a question from Brian Russo with Ladenburg Thalmann.

Hi, good afternoon. Can you just add a little bit more color on bonus depreciation and the fact that you guys use flow through accounting, is there any adjustment to your rate base or it just kind of flow through the effective tax rate?

Hey, Brian, it’s a difficult concept to explain, but as you know those utilities that are cash taxpaying utilities, they have ultimately have the benefit of - they have this incremental cash they could continue to invest, but they are also have deferred tax liability that builds and there is an offset to rate base. In our case, because of the flow through nature of our business and the fact that we are a non-cash cash taxpaying entity, we still create a deferred tax liability, but because we are non-cash taxpaying entity, we have an offsetting deferred tax asset and it’s not necessarily offsetting dollar per dollar, but relatively close, and as a result, we don’t have as much impact on a rate basis as our peers would have.

Got it. Okay. And just to be clear, the transmission project expansion on slide 23, is that in your CapEx or is that incremental because it’s things you are working on?

That is in.

It’s in the CapEx. Okay. And then just lastly, can you share with us what your earned ROE was in 2015?

Yes, Brian, I think we even gave that maybe on the last call, I think for our electric business, we provide for our Montana business, in our Montana, we reported for the electric business it was 11%, and for our gas business it was approximately 8%. And so our South Dakota business, we don’t share that and certainly you guys can calculate our actual ROEs in overall company. So hopefully that’s helpful.

Hey, Brian, I don’t know, were you asking for 2015 though? I thought I heard you asking 2015, not ’14.

It was actually for 2015.

That answer for 2014. We won’t know 2015 until we actually calculate our Montana annual report and that will – we will have that out here shortly. So in the first quarter call, we will be able to get that. Thanks, Brian.

Okay. And 11% on Montana electric in ’14, that was helped by favorable weather, right?

Items in there that adjusted higher than our authorized rate of return, it wasn’t necessarily weather. There were some adjustments in there that did actually have it higher than what we’re allowed to earn.

Then biggest item in there was the Safe Harbor election repairs tax benefit that we had a multi-year benefit and that was probably the biggest item benefiting that last year.

But again, ‘15’s results won’t be available till the end of the first quarter.

Okay. And any thoughts on what ROE ranges are contemplated in your ’16 guidance?

We don’t share that in our ’16 guidance. You can come up with an estimate based upon our range, estimated all-in ROE, I presume, but we don’t share what our estimated ROEs are going to be.

Okay. Understood. And then is the – loss of the LRAM revenues, is that contemplated and assumed in your 2016 guidance?

Yes, it’s good question, and it is. We do not have any LRAM revenues. And if you might recall, Brian, I even mentioned that, but I talked about those things that would have had been additive to gross margin and those things that would reduce gross margins on year-over-year basis, LRAM was one of them.

All right. Great. Thank you very much.

No LRAM in 2016.

Thank you.

We will now go to Brian Shin with Bank of America Merrill Lynch.

Hi, good afternoon. I know you mentioned it briefly in the prepared remarks, but could you go give a little bit more color on the repair tax deduction adjustments and how we should be thinking about that for ’16 and going forward?

I don’t think I could give a tremendous amount of details there, but it does have an impact on our effective tax rate, and it’s an impact in terms of the benefit that we show in our earnings in our bridge, but I don’t give a tremendous of detail in terms of what we expect repairs tax to be on a year-over-year basis.

Is there a sense when repair tax deduction impact begins to fall off, can you give us some like general color with regards to the timeframe?

That’s a very good question and we haven’t provided that in the past, and I am not sure, we are ready to prepare that – provide that at this time.

Maybe a thought that we can add – the color we can add Brian is we’ve talked about our effective tax rate being into the mid-to-low teens into 2017 and that maybe will help you a little bit on repairs tax deductions.

Okay. That’s helpful.

I think what we probably should be able to do Brian as well, and we will endeavor to do this is, we certainly have given you thoughts on how long will be a non-cash tax period through 2020. We will endeavor to provide you ETR ranges out through 2020 as well.

Right, got you. Okay. That’s helpful. And then I apologize if I may have missed this in your comments earlier, but I thought I saw the CapEx numbers had ticked up in 18 and 19. Did you actually specify what caused that increase in CapEx outlook, and if you did, I will just go back and look at the transcript?

No, we don’t and we effectively just laid out through the five-year period, so we don’t give as much specificity in terms of what those items are. Part of our infrastructure plan is driving some of that of course, but three are also lumpy transmission projects that are in there as well. And as we pointed out earlier in the call, certainly it doesn’t include any peaking projects on the gas reserves and anything like that. It’s really investment in our existing T&D and supply – and existing supply business.

Got you. Thank you very much.

We will now take a question from Jonathan Reeder with Wells Fargo.

Good afternoon. Following up a little bit on Brian, the CapEx budget, I know you said on the call, later in the period, it typically falls off, because you’re not as certain about something, should we expect a fall off though in my 2020 just from conclusion of the DSIP and TSIP plans, or is there likely more spend along those lines to keep that portion from falling off?

The reason the plan falls off is because we are very clear to include tangible projects that we are committed to and then if you took any five-year cherries and compare that one year to the next, you typically would see additional capital. But what we are driven by here is what the needs are in our system to serve our customers, and what we don’t include are the additional opportunities that at any given point are just that opportunities.

I would add to that too, and this may relate back to the Brian Shin’s question, you know, capital spending forecast you would have seen a year ago, would have had less capital spend in ’18 and ’19 than we are showing bow. And to Bob’s point, as we did more specificity around what we’re doing from an infrastructure standpoint, these numbers get updated every year and I think every one of these forecasted you have seen over the last ten years, they do taper out in the back end, because we are just not sure what projects we have less specificity on those five years. My expectation is though when we come out with our resource pan, some of this fill in certainly in the back-end, if not even in some of the front-end of this schedule in terms of Capital spend, but you will have to the wait till the first quarter to see that.

Okay. So is it fair to say the portion kind of right now is earmarked for DCIP and TSIP, you would think could be replaced by either similar type spend or other kind of spend where the $300 million annually is kind of a good run rate?

Yes, I think that’s a good way to look at it. If in fact from an infrastructure standpoint, we find that there is a need for us to increase our spend in this, we are going to likely try and spread this plan over future years. I think you make a good point, and we obviously see it in our forecast plan. We have a certain level of spend that we feel that we can take into consideration our cash flow, our dividend and everything else and taking those. So I – in long story to answer your answer your question, but effectively that’s a pretty good level of spend for us and we will try and fit within that level of spend. And things would get lumpy with acquisition and other projects as you know, but on a going forward basis, it just look like a good level of spend for us.

Okay. And then Brian, directionally if you can kind of give us some ideas where you see kind of your operating cash flow coming in for 2016 compared to, I think where we were in ’15?

I expect it to be slightly higher, but I – we don’t share our budget from our cash flow perspective and you can argue that, in light of our earnings growth that’s certainly going to be a driver, but other movements in the non-cash items could occur as well.

Okay. So the main driver would just be the increase kind of net income depreciation, the way you see it?

That’s how I see it, but that’s the specificity you will get out of me today.

And then last question, is it fair to say that you’re more bearish today than you were say on the last call in regards to doing natural gas reserves acquisition in the near-term? I mean, you’re always – you’re kind of talking about the pressures, but it just seem you’re less optimistic today.

I wouldn’t say bearish, because the value is just so clearly there for customers, I will say personally, I am frustrated, we have not been able to capture those opportunities, because it just – it makes so much long-term sense for customers, but not bearish and we’re still actively looking for any opportunities. The other thing we have growing on in the gas production that we control right now is just trying to really capture the full value of those assets for our customers as well. So it’s actually a lot of activity going on there.

Great, thanks. I appreciate the time. John Hines, our Vice President for Supply, do you want to add some color to that?

Then only thing I would add is that there is a lot of research, lot of looking going on, but the prices that that we’re seeing right now we’re fundamentally not seeing a lot of individual, their entities willing to sell at these prices.

[Operator Instructions] We will take our next question from Doug Christopher, D.A, Davidson.

Hi, thank you very much. Just have a question regarding the strength of the service territory, can you provide a little bit more color regarding some economic observation, in Montana and South Dakota area?

Yes, and this is actually a good time for that. First of all, South Dakota, very strong, very steady, not rapid growth, but the story has been a consistent one for a number of years. There are good opportunities at our South Dakota service territory. We work with all of the South Dakota communities through a program we sponsor called Advantage South Dakota. A big focus of theirs is actually work force recruitment as opposed to the job recruitment. There are a plenty of job. So low growth, not dramatic, but it’s strong. On the Montana side, we actually just got off the road every January and February, we go out with the University of Montana Bureau of Business and Economic Research, which sponsors community economic seminars in every one of the -- what we call major cities. And what was interesting this year was that in every city, even Billings, which is seeing some relative slow down as a result of decline in the Bakken that still has a very diversified economy, the number one subject with the exception of Indian country, the number one subject is workforce development and worker recruitment. So generally, not fast growth, but we are seeing new connections on the electric and gas side and it’s solid and sustainable growth. The area where we are seeing dramatic growth, really almost back to the pre-recession levels is Bozeman. We talked about the project work we have going on down in the Big Sky area, but just generally in Bozeman, it’s a very dynamic part of our service territory. So I would characterize overall, overall our service territory is healthy and strong with some areas of pretty significant growth.

I would add to that just, Doug, we – you will see in our materials, we have customer counts for both electric and gas and you can see Montana has been a bit stronger and I think of a new connected customer reports that we get and Montana certainly showing stronger than South Dakota and Nebraska and you can see that all, but the relative customer increases we are seeing on the residential side 1.4% growth in Montana, on the electric side, 1.3% on the gas side. So pretty decent customer growth and as Bob, some of these new connections are back to the kind of 2007, so we are – we see that’s intriguing. We are waiting to see how that translates into better volumetric growth on a going forward basis.

Thank you very much.

And it does appear that there are no further questions at this time. Mr. Meyer. I would like to turn the conference back to you for any additional or closing remarks?

Thank you, Jessica. I will pass back to Bob.

Thank you for your interest and support over the last year. It was an exciting year for all of us at Northwestern and I think for our customers as well. Look forward to seeing many of you over the coming months and to talking to all of you after we report on the first quarter. Thank you.

This concludes today’s conference. Thank you for your participation.