Good day, everyone, and welcome to the NorthWestern Corporation Second Quarter 2016 Financial Results Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Mr. Travis Meyer. Please go ahead, sir.

Thank you, Lora. Good afternoon, and thanks for joining NorthWestern Corporation's financial results conference call and webcast for the quarter ended June 30, 2016. 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. On the call with us today are Bob Rowe, President and Chief Executive Officer; Brian Bird, Vice President and Chief Financial Officer and several other members of the Management Team in the room with us 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 often contains 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 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 upon 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 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 PM Eastern Time today, and can be found on our website, again, 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 2437706 that’s access code 2437706. I'll now turn it over to our President and CEO, Bob Rowe.

Good morning, everyone. Thank you, Travis. I'll start with some high level results and then turn it over to Brian for the financial report. Net income for the quarter was $35.6 million or $0.73 per diluted share and that is compared with net income of $31 million and $0.65 per diluted share for the same period last year. This $4.6 million, which was a 14.8% increase in net income is due primarily to improved gross margin and lower income tax expenses. However, these improvements were partially offset by the inclusion of a $20.8 million recovery in environmental related costs in our second quarter of 2015 as a reduction of operating costs. Non-GAAP adjusted earnings per share increased 35.4% to $0.65 as compared with $0.48 for the same period in 2015. On July 12, parties involved in the Colstrip litigation and that includes all of the Colstrip owners plus the Sierra Club and the Montana Environmental Information Centre reached a settlement and lodged a consent decree with the Federal District Court that provides for no shutdown date for Units 3 and 4 and dismisses all claims against all units. I'll come back and talk about that in a little more detail. Also issuance of $60 million of South Dakota first mortgage bonds at a fixed interest rate of 2.8% maturing in 2026 to refinance our 6.05%, $55 million first mortgage bonds, which were due in 2018. At its meeting yesterday the Board approved a quarterly stock dividend of $0.50 per share and that is payable on September 30. Off to you Brain.

Thanks Bob. On Page 5 in the Summary Financial Results for the second quarter we’re pleased with the results. As Bob pointed out, net income improved $4.6 million or 14.8% on a fully diluted earnings per share perspective of $0.08 or 12.3%. Again the details throughout the P&L, but a very high level with a $20.3 million improvement in gross margin, partially offset by a $17.8 million increase in operating expenses for a $2.6 million improvement in operating income. Just below the operating income line we did have an increase in interest expense that was more than offset by an improvement in income taxes, again resulting in a $4.6 million improvement in net income. Regarding gross margin, on Page 6, regarding that $20.3 million improvement, you can see all of that improvement was in our electric segment of our business, that was up 13.3% and the high level items from gross margin, those items impacting net income, the first three shown there the lost revenue adjustment mechanism, effectively those were deferred revenues we've referring over the last three tracker periods. I may recall as a result of a tractor decision several years ago, we started booking lost revenue adjustment mechanism, revenues of about $7.1 million per year. Over that three-year time period, our LRAM revenues were actually higher than that. But the amount over $7.1 million we deferred the most with the final order that we received in the second quarter on the previous tracker periods we determined based upon that final order to release those deferred revenues, resulting in a net improvement $12.6 million for the quarter. Second item is the $10 million improvement in South Dakota electric rate increase of course inclusive of Beethoven improvement and the third item is $6.1 million electric QF adjustment. Effectively we had…

Thank you, Brian. And on Page 19, you see your capital spending forecast out through 2020 and you're familiar with this depiction. Very solid focus on our operating units, you'll see South Dakota Electric and Montana Electric, Montana Gas and South Dakota Gas and then we’ve identified as you know some electric supply needs in both jurisdictions. So the cumulative estimated capital spend over this period is $1.6 billion and this reflects a $187 million increase from the capital plan that was included in our 2015 10-K and about $122 million of this increase is for internal combustion units that were identified in the Montana supply plan and $65 million for peaking facility in South Dakota. And the actual spends on these assets will be subject to development of our plan for clear approach to regulatory recovery. And additional information that is available in our 2015 Montana and 2014 North Dakota Electric resource plan. And then we do anticipate funding our identified capital projects with a combination of cash flows aided by NOLs that are now anticipated to be available into 2020 and then long term debt and then if other opportunities arise that are not in these projections such as natural gas reserve acquisition, new equity funding may be necessary maybe to deal with that. We’ve discussed our 2015 Montana Electric Supply plan in previous calls and we really do like where we are in Montana right now with a very diverse set of assets and the ability to focus on some areas where some of our utilities have been focused for quite a while. We look like much of the rest of the region and our focus on planning to meet peak needs. We look different from our peers and that we have essentially a negative reserve margins.…

[Operator Instructions] And our first question will be from [Scott with Canon].

Hi, thank you. In the past, you guys have done a good job with acquisitions to grow your earnings and I was just wondering in the future, if you’re still considering acquisitions whether they be single assets or entire companies or what type of things you guys would be interested in or looking at?

Our primary focus really is on the plan that’s summarized in the capital slides and we’re actually very excited about that. We obviously don’t comment on transactions in the abstract. I won't say that we have been disciplined about our approach to acquisitions and are focused on assets that do provide value to both our customers and our shareholders and if those kinds of opportunities present themselves, we're certainly going to be focused on them and pursue them to do that in a disciplined way, but again our core focus is on the plan that’s identified.

Okay. Thanks. And I guess some of the power plants looks like you’re building over the next five years. Do those need some kind of approval before you start construction or do you just build them and then get recovery later on or how does that -- how should we think about that?

It’s going to depend on the specific asset. In South Dakota there is a statue, it's actually a broad statue that allows recovery for, but are called major projects and interestingly that statute has been expanded to include infrastructure more generally. In Montana there is a statue that provides the commission I think good tools to evaluate significant projects in advance and make decisions before significant capital is committed. So those are -- that’s a tool that’s available to the commission and to us. It’s something that we would view when we end the commission and clearly it makes sense. For smaller projects that is something that would not necessarily be the case. Before actually go into construction on any project, there is a tremendous amount of work that needs to be done in terms of site selection, project design and various permitted requirements and those are certainly on the soft side of site selection you can be doing in the run-up to determine for making major capital commitments.

Got you. So for the Montana IC Units, I guess we should see something be filed at some point in the future. Do you have any timeline on that?

Not a specific timeline. No, beyond again what’s identified in the supply charts that we included in the material.

Okay. Thank you very much.

Thank you.

We will go next to Paul Ridzon with KeyBanc.

Good morning.

Good morning, Paul.

The cost cuts you had in the quarter, how sustainable is that savings? Is it kind of one time or how much can we carry through for the rest of the year and into next?

I'll start and then hand it off to Brian. First we pride ourselves on running a lean efficient organization. Just a couple of weeks ago, we shared some benchmarking down with the Montana Commission. So we think we posed up very well against our peers and that’s something that we just build into our ongoing operating and it becomes if anything more important this year and into next year. And we start every budget process with a recognition of have to be able to make changes smartly, but quickly as the year goes on. So certainly we want to continue being efficient, but we want to do that while we’re allocating our resources and most importantly and Brian can add some color to that.

Yeah, I think I might add Paul, I think Bob did a nice job of answering the question. I think from our perspective, last two years we've seen unseasonable mild weather that’s impacted our business and we need to plan accordingly that that might not change materially and so I think we’ve just done a nice job. This is throughout the company by the way and I’m very pleased that everyone is stepping up and looking at from a cost perspective trying to manage those things. But be aware that making sure we do those things that are most important on a going forward basis as well. So I think we’ve done a nice job in the quarter. We'll continue to be focused on cost control, but obviously we want to continue to provide great customer service on a going forward basis too.

And then the Dave Gates refund that hit this quarter, that did not flow through the income statement, is that correct?

That’s correct.

And then just constant landscape for incremental gas reserve acquisitions, it’s been kind of a tough market to transact and any changes there?

You're right. It’s a tough market to transact. Our folks are certainly actively looking.

And then any sense of this next court case that was for Dave Gates, is this months, or years, can you just kind of put one booking on it?

Yeah, most likely I would say years.

Thank you very much.

It is the federal court system.

Understood.

[Operator Instructions] We’ll go next to Brian Russo with Ladenburg Thalmann. Please go ahead.

Hi, good morning.

Good morning.

Just to clarify, given that you don’t have ownership or a role in Units 1 or 2, that there is no replacement power needed for Northwestern as a result of the Units 1 and 2 retirement. Is that correct?

That’s correct. A little more color there though, 1 and 2, first of all serve Puget's customers in the State of Washington, but secondly, Talen's ownership has been an important asset on the market in Montana for the industrial sector and as you know, where the electric supply provider for retail customers that was a very significant industrial load in Montana that benefits from the presence of those units in the market and avoids the wheel back from the mid Columbia trading hub as well. So, the eventual shutdown of one and two will have an impact in the State of Montana.

Got it, and was Northwestern a party of the settlement or no?

Yes. And the settlement documents make clear that we do not -- that’s a decision around shutting down 1 and 2 is the decisions for the owners of 1 and 2. We obviously were pleased that the decision clears all of the back litigation and uncertainty for 3 and 4 and our interest in Unit 4 continues to be extremely valuable to our customers and again I think Slide 36 in the appendix is a very graphical illustration of that value.

Okay. So just to clarify, you were not part of the settlement.

We were a part of the settlement.

You were part. Okay. Got it. And then is that -- I might have missed this earlier, but the SMBs that were issued, when did that occur and then when did the refinancing occur?

In the second quarter Brian we developed -- the financings took place.

Okay. So that -- the interest expenses savings is embedded in your guidance reaffirmation.

Yep, that’s correct.

Okay.

We continue to explore further opportunities to reduce our interest cost.

Got it. And then is there any potential financial impact scenario of this hydro compliance filing given the particular outcome can -- would there be a financial impact?

I can describe the range of issues, under the contested case, the focus is on A&G. The commission issued -- raised an additional issue asking whether there should be essentially a pro rata adjustment of A&G based on the amount of generation associated with the Kerr relative to everything else, that would be potentially $2 million. We obviously filed testimony explaining that in fact those -- the A&G costs aren’t diminished at all in that way and then consumer counsel filed testimony that the why you could look at it, two ways. You could look at it essentially the way Northwestern does or if you didn’t want to do some kind of a pro rata reduction, the amount would be about $1.1 million, not $2 million. Now we have indicated that based on adjustments we think are appropriate, about a $600,000 A&G reduction would be profitable. Brian anything to add to that.

I think that’s fine Bob.

Okay. Great. Thank you.

Thank you.

And there are no other questions in queue at this time.

Great, well thank you very much. I feel like you're letting us off easy, but I’ll take that and we look forward to seeing many of you over the coming months and visiting with you next quarter. Thank you.