Lauren Pendergraft – Investor Relations Scott Morris – Chairman and Chief Executive Officer Mark Thies – Senior Vice President and Chief Financial Officer

Paul Ridzon – KeyBanc

Thank you, Adrianne. Good morning, everyone, and welcome to Avista’s second quarter 2018 earnings conference call.

Our earnings and our second quarter 10-Q were released premarket this morning, and they are both available on our website at avistacorp.com. Joining me this morning are Avista Corp.

Chairman of the Board and CEO, Scott Morris; hockey-loving Senior Vice President and CFO, Mark Thies; Avista Corp. President, Dennis Vermillion; Vice President, and Chief Customer Officer, Kevin Christie; and Vice President and Controller, Ryan Krasselt.

I would like to remind everyone that some of the statements that will be made today are forward-looking statements that involve assumptions, risks and uncertainties, which are subject to change. For reference to the various factors which could cause actual results to differ materially from those discussed in today’s call, please refer to our 10-K for 2017, and 10-Q for the second quarter of 2018, which are available on our website.

To begin this presentation, I would like to recap the financial results presented in today’s press release. Our consolidated earnings for the second quarter of 2018 were $0.39 per diluted share compared to $0.34 for the second quarter of 2017.

For the year-to-date, consolidated earnings were $1.22 per diluted share for 2018 compared to a $1.30 last year. Now I’ll turn the discussion over to Scott.

Thank you, Lauren, and good morning. To start off, I would like to provide an update on the Hydro One transaction.

On July 11, 2018, Hydro One announced that they entered into an agreement with the Province of Ontario for the purpose of the orderly replacement of the Board of Directors of Hydro One and Hydro One Inc. and the retirement of Hydro One’s Chief Executive Officer effective July 11, 2018.

Hydro One has committed to completing the transition process to a new Board of Directors by August 15, 2018. The new Board of Directors will then be responsible for appointing a new chief executive officer.

As a result of the leadership changes at Hydro One, the Washington and Oregon commissions have requested additional regulatory process in the merger proceedings. This has extended the time lines for decision in their respective proceedings to mid-December 2018.

The Idaho Commission postponed a technical hearing in its merger proceeding, pending further information regarding the status of the Hydro One leadership team. We have made significant progress in the Hydro One transaction, and we’re continuing to work through the approval processes.

Hydro One and Avista Corp. are fully committed to working with the commissions, their staff and other parties to receive the required approvals, and we anticipate the transaction closing during the fourth quarter of 2018.

With regards to earnings for the first half of 2018, we had consolidated earnings above our expectations, primarily from Avista Utilities. Avista Utilities’ earnings benefited from lower-than-expected resource cost and higher customer growth.

AEL&P continue to have a good year, with second quarter earnings that were slightly above our expectations. And we are confirming our 2018 earnings guidance with consolidated range of $1.90 to $2.10 per diluted share, excluding acquisition and regulatory commitment costs associated with the acquisition.

Mark will provide further details during his commentary, and I’ll turn it over to Mark right now.

Thank you, Scott. Good morning everyone.

Like Lauren said, I am hockey loving, and I did – the schedule just came out little over two months, the puck drops for the regular season and the first home game for my beloved Blackhawks is the Toronto Maple Leafs. Interestingly enough, so if any one of my new friends from Toronto want to come down to watch a game, they should give me a call.

For the second quarter of 2018, Avista Utilities contributed $0.37 per diluted share compare to $0.34 in 2017. On a year-to-date basis, Avista Utilities contributed $1.21, a slight decrease from a $1.24 last year.

The increase for – in earnings for the second quarter was primarily due to general rate increases, higher customer growth and lower-than-anticipated rate refunds related to tax reform, partially offset by increased operating and maintenance expense, interest expense and depreciation expense. The decrease in earnings for the year was primarily due to increased operating and maintenance expense, interest expense and depreciation, partially offset by general rate increases and, again, higher customer growth.

We continue to be committed to investing the necessary capital on our utility infrastructure, and we expect Avista Utilities’ capital expenditures to total about $405 million in 2018. With respect to liquidity.

During the second quarter, we issued $375 million of first mortgage bonds, and the total proceeds were used to repay a maturing long-term debt, repay the outstanding balance under our committed line of credit and for other general corporate purposes. We don’t expect any further long-term debt issuances in 2018.

We do expect to issue up to $110 million of equity in 2018, in order to fund planned capital expenditures, maintain an appropriate capital structure and for other general purposes. The $110 million of equity may come through the sale of shares through our sale agency agreements or an equity contribution from Hydro One after the consummation of the transaction or from a combination of those sources.

Our equity estimate has increased from the $85 million last quarter, and that’s primarily due to the change in the procedural schedule that Scott mentioned with respect to the Hydro One transaction. Due to the extended timeline, a fourth quarter common stock dividend could be declared by the Avista Board of Directors, which would necessitate additional funding.

As Scott mentioned earlier, we’re confirming our 2018 guidance for consolidated earnings to be in the range of $1.90 to $2.10 per diluted share, excluding acquisition costs. We expect the acquisition costs to be in the range of $1.50 to $1.60 per diluted share, that’s an increase from our previous estimate of $0.80 to $0.85 last quarter, primarily due to the new commitments from the regulatory merger settlement agreements that we had not included in our last guidance.

We expect Avista Utilities to contribute in the range of $1.89 to $2.03 per diluted share, excluding acquisition costs. And the midpoint of our guidance does not include any expense or benefit under the ERM.

Our current expectation for the ERM is to be in the benefit position in the 90% customer/10% company sharing band, which is expected to add approximately $0.07 per diluted share. Our outlook for Avista Utilities assumes, among other variables, normal precipitation, temperature and generation – hydroelectric generation for the remainder of the year.

For AEL&P, we continue to expect them to contribute in the range of $0.10 to $0.14 per share. And their outlook also assumes, among other variables, normal precipitation and hydroelectric generation for the remainder of the year.

And we expect our other businesses to be between a loss of $0.09 and $0.07 per diluted share, which includes costs associated with exploring to our strategic opportunities. Our guidance generally includes only normal operating conditions and does not include unusual items, such as settlement transactions or acquisitions or dispositions until their effects are known.

I’ll now turn the call back over to Lauren.

Thanks, Mark. Adrianne, can we open up the call for questions now?

Good morning, guys. How are you?

Hi, Paul.

Good morning, Paul.

One thing struck out in your earnings walk. Is it $0.09 from lower taxes?

And then you mentioned that the refund was less than anticipated. Could you just give some more flavor on that?

Well, from the perspective, we had filed with the commissions a rate refund. And then in their final order, they ordered an amount that we had to refund, and it was less than what we had anticipated.

So, we did pick up some additional earnings with respect to that. The $0.09 also includes the change.

And tax reform in of itself, it’s different. Up in gross margin, we have a negative, and that’s largely due to the impacts of tax reform on revenues as included up there and then the offset is down in the tax line.

So, those numbers actually offset within the tax line and gross margin. So what we do have is a slight increase in gross margin and some of that’s due to lower refunds to customers based on the orders from our commissions in Washington and Idaho.

Can you quantify how much that is?

It was about $0.04 a share.

And going forward, that will not recur?

No. That will not recur.

Well, the tax reform impacts between gross margin and the revenue line will continue to recur this year. But the impact of the change, which was a benefit to earnings, will not recur.

It was $4 million, not $0.04, I’m sorry Paul, but will not recur primarily due to – it was just a one-time we got our orders. We had an estimate.

We corrected that estimate based on those orders. So, that’s not going to recur.

Tax reform, the impact between revenue and gross margin and down below in the tax line will continue for the year, but that offsets.

So, next year, we should look for that $0.04 benefit to drop off?

Correct.

Got it, okay.

$4 million.

I’m sorry?

$4 million.

Yes, yes. Understood.

Thank you very much.

Thanks, Paul.

Just kind of been watching the news. I haven’t seen much.

Have you seen any statements by Doug Ford about strategically, where he wants to take the company?

Paul, no. we have not.

Thank you, again.

Thanks, Paul.

Thank you to everyone for joining us today. We certainly appreciate your interest in our company.

And hope you have a great day.