Travis Meyer - IR Bob Rowe - President and CEO Brian Bird - VP and CFO John Hines - Vice President, Supply

Dan Eggers - Credit Suisse Chris Elinghouse - William Capital Paul Ridzon - KeyBanc Brian Russo - Ladenburg Thalmann Brian Shin - Bank of America Merrill Lynch Jonathan Reeder - Wells Fargo Doug Christopher - D.A, Davidson

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 adjustment and we did add back for the year $0.17 as a result of that warmer weather over the year and that broke out $0.09 in the first quarter, $0.06 in the fourth quarter and even we have some heating degree days and of course in the second quarter, that also had a $0.02 impact there to equate to the $0.17. Just a little more color there.

You may also notice that we did have a bit warmer summer, but that had very little impact on our business, and I think if you look at the amount of heating degree days we have versus cooling degree days in Montana, we have 19 times more heating degree days than cooling degree days and nine times more in South Jakarta. So certainly our heating load has a significant impact on our business and thus warmer weather also has a significant impact on our margin.

With that, I'm going to move forward to operating expenses. The good news here from an operating expense standpoint, even though operating expenses were up as a whole, 31.3 million, that was only a 5.8% increase and again compare that to the 16t% increase in margin, one of the reasons for the lower increase for expenses is that the operating, general and administrative expense line item actually, that line-item, expenses were actually down.

I want to really drill that as Bob mentioned earlier that the insurance recovery is one of those items, nearly 21 million, but also we had Hydro transaction costs in 2014 that we didn't incur in 2015 and as a result of lower share price scenario basis, we have lower non-employee directors deferred comp that reduced our operating, general and administrative expenses, but I think as everyone knows, that item has also offset in other income. Those favorable variances were offset to a great degree by Hydro operations expenses, up 33.2 on a year-over-year basis and we did have higher employee benefit compensation costs, primarily on medical benefits.

If you take those two groupings, those favorable items I talked about, approximately 35 million of the benefit and then the Hydro and the employee benefit, that's about 37 million detriments. Net-net, expenses would have went up about 2 million, just taking into those into consideration.

So these other items you mentioned equate to approximately 10 million. I just ultimately lump that in the category of favorable cost control.

I think the company did a nice job of understanding the impacts of weather, really starting in the first quarter, work very hard during the year to manage its cost structure. So net-net, operating, general and administrative expenses were down 8.4 million or down 2.7%.

Property taxes, depreciation and depletion, however, they were up 18.8 million and 20.9 million respectively, but also approximately 16% up in each of those categories, again in line with what margin did for the year. Moving forward to operating income, taking those factors into consideration and talking about margin expense.

Operating income was actually up 87.8 million, just over 49%. Below that, interest expense increased by 14.4 million.

Nearly all of that attributed to hydro incremental -- as a result of the hydro transaction. Other income actually was down 2.6 million, primarily driven by as I talked about the deferred non-employee directors deferred comp adjustment, that's where it’s offset in expenses and that was partially offset by higher AFUDC on a year-over-year basis.

That leads us to income before taxes of 70.8 million or 64% on a year-over-year basis and then lastly talking about income taxes, income taxes are $40 million higher on a year-over-year basis and I really would love those really into two buckets. We did a higher pre-tax income on a year-over-year basis that really drives about 25 million of that $40 million variance.

So we also had -- in last year, we had prior tax adjustments that were favorable to us and those equated to about approximately 18 million. So those two represent the lion’s share of those variances.

So our tax rate in 2015, 16.6% versus in 2014 a negative 9.3%, or a 9.3% benefit in that year. All in all, as we mentioned earlier, net income up 30.5 million with a 25% increase on a year-over-year basis.

Moving onto the balance sheet, on page 10, very quickly, nice improvement in PP&E, up 8% over 2014, primarily driven by our acquisition of the Beethoven wind project and other investments and our system improved safety, reliability, capacity. Also, we’ve had a nice 8% increase in shareholder's equity on the balance sheet.

Lastly, I’d point out ratio to debt to total capitalization is a means for us to -- at a very high level, there are credit metrics, we did see an improvement, on a year-over-year basis, but we are at the high end of our 50% to 55% debt to cap limit this time. On the cash flow slide, the main thing I’d like to speak to here is, we had a $90 million improvement in cash flow from operations primarily driven by the improvement in net income and improvement in some non-cash adjustments, I think depreciation, those are the primary drivers and think also primarily driven from the hydro transaction.

So that 90 million improvement in cash flow from operations was clearly not to help us cover incremental additions to PP&E that we did on a year-over-year basis and also to cover our dividend. We did make an acquisition, we talked about Beethoven, you can see that in there, but that was primarily financed by issuance of common stock and our borrowings during the year.

The other thing I'd like to point out on the cash flow slide, you may have noticed that as a result of Beethoven PTCs and primarily the bonus extension, those two things will allow us now to be a non-cash taxpayer into 2020. Moving onto non-GAAP adjusted EPS, for the fourth quarter, our GAAP diluted EPS was $.92.

That was slightly higher than the $0.85 from the prior year. From a diluted EPS perspective, we did add back $0.06 of unfavorable weather to get to an adjusted $0.98 on a comparative basis versus $0.89 in diluted EPS for the fourth quarter of 2014.

On a full-year basis, we did have GAAP diluted EPS of $3.17. That was 6% higher than the GAAP diluted EPS of $2.99 from fiscal year ‘14.

We did have several adjustments during the year as I mentioned, the $0.17 of unfavorable weather that we did add back, we did remove the insurance settlement and then we did add back the QF liability adjustment. Those netted to a $0.02 reduction, so the adjusted diluted EPS of $3.15.

That's a 17.5% improvement over $2.68 from the prior year. A little more detail on page 13 and non-GAAP adjusted earnings, obviously, had a chance to take a look at these slides in more detail.

I would have you focused on the green box at the bottom of the page, we do show down there, the 17.5% improvement of diluted EPS on a year-over-year basis -- on an adjusted basis, but also very nice improvement in pre-tax after all of the adjustments for 15% and 14 and 55% in net income of 42.5%. Regarding 2016 earnings guidance, diluted earnings per share range at $3.20 to $ 3.40 has not changed since the last time we shared our guidance.

Primary drivers for that guidance of course normal weather, excluding any impacts associated with anything happening with the Dave Gates generating station and a FERC decision associated with that, but did adjust our income tax rate to a range of 9% to 13% and we do have a share out of 98.5 million on a going forward basis. We think as we look at our past performance and look forward into 2016, we will continue to target a 7% to 10% total return for our investors.

I would also point out that the 315, $3.15 of adjusted earnings was within both our original and our revised earnings guidance of the year, revised at $3.10 to $3.25. So this variable to deliver on our attendance for the year.

Moving forward to slide 15, excuse me, bridge if you will from net adjusted to diluted EPS in ’15 and $3.15 up to the midpoint of the $3.20 to $3.40 or 330 cent midpoint that we showed there. The primary movers, of course, I talked about and very high-level gross margin improvement, pretty sizeable gross margin improvement, primarily driven by South Dakota rate case, benefit of that, by the way, Beethoven as well, and [indiscernible’ on a year over year basis.

Offset to a degree by current cost that we recover up in margin, going away in 2016, and also the elimination of LRAM that occurred, so we’ll not have any impact in 2016. On OG&A expenses increases, slight increase, it’s on a year-over-year basis, certainly a full-year cost of Beethoven and inflationary costs for all of our business, but those are also offset by per expenses that will be going away in 2016.

Bank property taxes, depreciation and interest expense going up of course as we continue to grow the business and as we put a note on the slide we certainly show incremental tax benefits as I talked about earlier in the Beethoven production tax credits, bonus depreciation and increased repairs tax deduction. With that I will pass it back over to Bob.

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 or a return on the Kerr part of the transaction and conversely there would be no customer risk and the fact we were quite pleased to be able at the time of conveyance to show a net customer benefit over that time of about $2.7 million.

As we were required to do under the initial hydro order we did file a compliance filing in December of 2015 removing the Kerr project from the hydro cost of service and then at the same time removing the Kerr benefit making adjustments to actual taxes and then truing up the order -- the interim order on the compliance filing as a rate effective date in February. So there is some lag and there will be a true-up associated with that.

Last thing I would say about the hydro system, I think I pointed this out on our last call as well but it's worth reminding ourselves of is that Talen in October announced the sale of 292 MW of hydro for $860 million which would be about $2,945 per kilowatt and the purchaser there was Brookfield Renewables an active participant in this space. And the cost was essentially 49% higher than what we paid for the 439 MW of hydro that we purchased net of Kerr for $870 million.

So the October 2015 transaction had $2,945 per KW compared to our $1,982 per KW, so again more evidence that I think we got a great, great asset at a very good price for our customers. Turning to some of the positive things happening in South Dakota.

First, the Beethoven wind project, in September we completed the purchase of the 80 MW Beethoven project near Tripp, South Dakota for about $143 million in a transaction with BayWa r.e. Wind LLC and the South Dakota commission granted approval of our request to place the assets into rate base using a three-year levelized rate calculation.

Financed project was $70 million and 25 bonds at 4.26% and then $57 million of equity issued at 1.1 million shares at $51.81. Had a successful outcome I think all around in the South Dakota rate case from a customer perspective and from our perspective In October, the South Dakota commission approved a settlement agreement we reached with the South Dakota staff after thorough and extensive discovery providing for an increase in base rates of about $20.2 million and that was based on overall rate of return of 7.24%.

And in addition, the settlement allowed us to collect -- will allow us to collect about $9 million annually related to Beethoven. We anticipate net income to increase by about $13.6 million in 2016 as a result of full-year impact of the rate adjustment and the Beethoven acquisition.

Concerning transmission, effective October 1 of last year, we are now a transmission owning member of the Southwest power pool for our South Dakota transmission operations. Marketing activities and SPP are handled for us by a third-party provider who acts as our agent.

And by entering SPP, we of course exited out of MAPP which had been our transmission planning region. We’re very engaged in the activities in the southwest power pool and so far I think we like what we see.

The energy, the owned and rate based cost of energy from the Beethoven wind project over the next 20 years is expected to be about $44 million at $25 million NPV and that's less than what the amount of PPA alternatives would have been. So again we were able through this transaction to show up a very clear benefit to our customers.

I’d probably spend a little bit less time on the equally EPA Clean Power Plan that I would have two or three days ago but it is still notable and we are still paying attention to it. I’m going to spend just a minute on slide 18 because it does highlight I think the real virtue from carbon perspective of our Montana portfolio and specifically the hydro acquisition and that's important regardless of final disposition of the EPA rule.

If you spend just a minute at looking at this slide, left axis pounds of CO2 per net megawatt-hour of generation and the years along the right axis. The dotted green line trending down was the original EPA rule.

We’ve referred to that as the Glide Path. The sharp green line heading down to actually a lower end point in 2030 was the EPA final rule.

And the aqua colored line at the bottom is the carbon intensity of our Montana portfolio thanks to the hydro acquisition. So what’s important is that our portfolio in Montana is actually cleaner from a carbon perspective than the EPA or had been the EPA target for the State of Montana in 2030 and whether the EPA rules are or are not in effect that is I think extraordinarily good news.

As many of you know turning to page 19, the EPA final rule had set a 47% production target in Montana/ And that I think was causing tremendous concern by most of the business and public leaders in the State of Montana. We have participated in litigation as had the attorneys general in both South Dakota and Montana.

We’d also filed a request for reconsideration with the EPA making the point that we did not have because of the dramatic change from the initial to the final rule we now have the opportunity to comment on the final rule we do still hope that the EPA will take the opportunity to look carefully at our request to reconsideration and we’re also working again in both South Dakota and Montana with other parties on compliance plans probably going through the important steps to obtain a two-year extension that appeared to be the directions the stats of South Dakota and Montana were both proceeding. With the Supreme Court's 54 decision the rules are stayed in our attorney's point out that first of all this was an historic decision by the Supreme Court saying agency rules at the stage and secondly that the state would remain in effect until the prior litigation process is concluded rather than just sending that back to the court.

Various scenarios over how long the litigation will take obviously the [00:27:43] will be moving ahead quite expeditiously but there are scenarios suggest this could take two full years. Given that we believe our portfolios of high quality and it’s clean given that we made investments to the benefit of our customers we think this is a good outcome and certainly doesn’t affect our commitment to providing a clean and diverse and reliable and affordable portfolio for our customers.

Couple of other activities to highlight on the environmental front again, the Big Stone Air Quality project and as you know Big Stone, we jointly own, we own 23.4% of the Big Stone plant which is subject to best available retrofit technology requirements of the Regional Haze Rule and the project was to install and operate a new system to reduce both SOx and NOx in particular. We ended up capitalizing $98 million for our share of the project was a very well conducted, well executed project and as we informed the commission of the project over time that was quite clearly recognized at the South Dakota commission.

Project ultimately was completed and placed into service on December 29. As many of you know we’ve had a very sharp focus on our distribution and transmission investment.

The distribution system infrastructure plan is ongoing, we’re really little bit over midway through that, our customers are seeing the benefit of that and then parallel to that is ongoing work on the transmission side. We described for some time our intent has been to essentially combine those efforts into an end to end electric and gas infrastructure program.

We’ve now kicked off our infrastructure stakeholder group which is now met twice its next meeting in fact will be next week at our new general office in Butte. It's a really a blue ribbon group of business leaders, civic leaders, public sector readers focused on infrastructure and shared by the Chancellor of Montana Don Blackketter.

What we can think of as our programatic transmission and distribution investments on top of the base budget over the next five years or anticipated to be over $360 million so this is very important to ensure the long-term adequacy of our system for our customers. We always do touch on natural gas reserves and I wish I have breaking news but do not.

We currently own 27% of our retail loads of our 20 BCF annual retail gas loads, and about 21% including another 5 BCF that we used for electrical generation including at Dave Gates. We’ve invested about $100 million through December of 2014.

We think a good question for us to be for our customers would be to own about 50% of our needs taking advantage of current low gas prices. We estimate that again at current prices that could require additional investment of $50 million to $100 million to reach our goal.

However, as we have discussed previously at current low prices, we are not able to find sellers who are willing to transact. A note on news concerning Dave Gates Generating Station which is to say that there is no news concerning Dave Gates Generating Station.

As you know there is a decision in April of 2014, which allowed us to recover on the FERC side as opposed to the stateside only a fraction of the cost that we believe we are incurring to serve our FERC jurisdictional customers and that has resulted in about $8 million annual under recovery that request for rehearing is still pending. We have differed about $27.3 million of revenue.

At some point we will receive word concerning the request for rehearing. What we understand it's not unusual for this kind of very long dormancy periods to exist.

Although I also understand that Chairman Bay is focused on trying to clear a lot of the backlog including the backlog in this area. Couple of highlights for 2015, was a strong year for safety I can’t say that it was a great year because we had a fatality and that really overshadows everything else, but it was the fewest OSHA recordable events of any year and it was one of our very best years for loss time incidence which are two of the three measures that we track on safety.

And our employees are really showing a great commitment to safety. Next, we had record best customer satisfaction scores with JD Power and that’s something we are very proud of and committed to.

Next, we just a few days ago received a word form Cogent Reports which runs a quite a rigorous survey in some way similar to JD Power that we are a residential utility customer champion and that’s based 50,000 utility customer interviews to identify leading utility brands based on trust, product excellence and operational satisfaction. Very importantly, I think to this audience, as you know, we were recognized for the corporate governance award winner, recognized for our proxy statement as the top award for exemplary proxy statement disclosure from the New York Stock Exchange Governance Services.

Finally, we opened our new general office in Butte, Montana just over the last few weeks. It is not a Taj Mahal, but it is a very efficient, very functional building that provides a great investment in an historic part of Butte.

I am going to quote one of our senior very respected engineers just blocking out the door when I just said, thank you for providing a facility where we can indicate respect for employees, so we can do our work as professionals serving our customers and that really I thought said it all. Turning to our capital forecast and as you know, as we depict this forecast, it tends to ramp down in the out-years, because we are depicting the investments that we know and so here you see Montana and South Dakota Electric, Montana and South Dakota Nebraska Gas and our current cumulative capital spending for ‘16 through ‘20 is $1.47 billion and we anticipate being able to fund these capital projects with combination of cash flows aided by the availability of NOLs which we now anticipate to be available into 2020 and then also long term debt.

And very much as with Beethoven project, if other opportunities arise, they are not included in the above projects like natural gas reserves, peaking, other possible acquisitions, new equity funding might be necessary. So 2015, despite some significant challenges and quite a lot of risk around things such as CUR was a good year and a busy year.

I think we laid a great foundation. So in 2016 we are probably just putting our feet up on the desk and relaxing, but we are not.

So what to anticipate this year, first of all, from your perspective a full year at South Dakota rates in place including Beethoven and we anticipate net income to increase by about $13.6 million this year as a result of the first year impact of that rate adjustment. And again, as I mentioned the air quality control system at Big Stone is successfully placed into service at the end of December.

Things are working on. I mentioned first of all the infrastructure stakeholder group, this is an effort that we take very seriously as we consult with customers and stakeholders to plan the system that serves them.

They will be meeting monthly through 2016. A couple of the important transmission projects, first of all you may be aware of some of the really extraordinary growth in the Bozeman and Big Sky area and this will be the final year of a very challenging and important transmission project through a mountain corridor to upgrade service into that rapidly growing area.

That has been a 37 mile upgrade through a narrow canyon, little project cost about $46 million. This project and it is also the foundation for both transmission substation distribution work in the Big Sky area.

And then very excitingly this will be the first year of actual construction on a new $47 million transmission line at carbon still water line and you can think about this as being west and south of the Billings, area also quite a mountainous area and this will be to serve our customers including industrial customers and our co-op customers in the Columbus, Red Lodge area and that’s’ scheduled to be completed in 2017. Our lands and permitting folks with transmission have done a really great job laying the foundation to move to actual construction.

Out Montana Electric Supply Resource Plan will be filed by the end of this quarter and as we talked about that’s a very important document of where we will layout the foundation for operating a diverse energy portfolio in Montana with a particular focus on how we will meet our capacity needs going forward, alternative to meet our capacity needs and again to optimize operation of the system for the benefit of our customers. I mentioned the Hydro Compliance Filing was made in December 2015.

There is not a procedural schedule out yet, we expect that soon and the interim rate will be effective this month. And again I mentioned the Supreme Court’s stay of the clean power plant but nonetheless our ongoing work with our stakeholders on environmental efforts overall.

As we say every year, we will be evaluating our need for any rating filings and anticipate providing you with an update on our first quarter earnings call which will be in April. And with that, Travis’ minions are available to answer your questions.

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.

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.

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.

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.

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.

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.

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.

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.

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.