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PENNICHUCK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

As of December 31, 2020 and 2019
(in thousands, except share data)

ASSETS
Property, Plant and Equipment, net

Current Assets:
Cash and cash equivalents
Restricted cash - RSF
Restricted cash - CIAC
Restricted cash - Bond Project Funds
Accounts receivable - billed, net
Accounts receivable - unbilled, net
Accounts receivable - other
Inventory
Prepaid expenses
Prepaid property taxes
Deferred and refundable income taxes

Total Current Assets

Other Assets:
Deferred charges and other assets
Acquisition premium, net

Total Other Assets
TOTAL ASSETS

$

2020

242,469

310
8,611
274
237
4,297
4,473
16
598
507
1,290

20,613

17,014

67,202
84,216
347,298

2019

$__ 237,182

4,885
1,963
3,426
3,041
2,975
16
648
418
992

8

17,972

13,727
69,263

- 82,990
$ 338,144

The accompanying notes are an integral part of these consolidated financial statements.

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PENNICHUCK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets - Continued
As of December 31, 2020 and 2019
(in thousands, except share data)

2020
STOCKHOLDER'S EQUITY AND LIABILITIES
Stockholder's Equity:
Common stock; $0.01 par value; 1,000 shares
authorized, issued and outstanding S -
Additional paid in capital 30,561
Accumulated deficit (30,403)
Accumulated other comprehensive income 254
Total Stockholder's Equity 412
Long-Term Debt, Less Current Portion
and Unamortized Debt Issuance Costs 223,805
Current Liabilities:
Lines of credit 5,480
Current portion of long-term debt 6,018
Accounts payable 2,973
Deferred revenue 66
Accrued interest payable 1,304
Other accrued expenses 390
Accrued wages and payroll withholding 306
Customer deposits and other 435
Total Current Liabilities 16,972
Other Liabilities and Deferred Credits:
Deferred income taxes 14,931
Accrued pension liability 15,424
Unamortized debt premium 3,109
Deferred investment tax credits 405
Regulatory liability 9,918
Accrued post-retirement benefits 4,910
Customer advances 84
Contributions in aid of construction, net 56,536
Derivative instrument 460
Other long-term liabilities 332
Total Other Liabilities and Deferred Credits 106,109
TOTAL STOCKHOLDER'S EQUITY AND LIABILITIES S$ 347,298

$

2019

30,561
(28,140)
318

2,739

__212,296

9,283
6,582
3,529
59
1,723
898
192
322

22,588

14,427
12,971
3,162
438
9,930
3,982
84
54,770
353
404

100,521
338,144

The accompanying notes are an integral part of these consolidated financial statements.

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PENNICHUCK CORPORATION AND SUBSIDIARIES

Consolidated Statements Of Income (Loss)
For the Years Ended December 31, 2020 and 2019

(in thousands)

Operating Revenues

Operating Expenses:
Operations and maintenance
Depreciation and amortization
Taxes other than income taxes

Total Operating Expenses
Operating Income

Interest Expense
Other, Net

Loss Before Provision for Income Taxes
Provision for Income Taxes

Net Loss

2020

50,091

24,768
8,549

6,445
39,762

10,329

(11,896)
90

(1,477)

(507)
(1,984)

$

2019

44,779

24,158
8,449

6,287
38,894

5,885

(11,172)
264

(5,023)

(314)
(5,337)

The accompanying notes are an integral part of these consolidated financial statements.

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PENNICHUCK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2020 and 2019
(in thousands)

2020 2019
Net Loss S (1,984) S (5,337)
Other Comprehensive Loss:
Unrealized loss on derivatives (149) (160)
Reclassification of net income realized in net loss 42 70
Income tax provision relating to
other comprehensive loss 43 36
Other Comprehensive Loss (64) (54)
Comprehensive Loss S (2,048) $ (5,391)

The accompanying notes are an integral part of these consolidated financial statements.

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Balance as of
January 1, 2020

Common dividends declared
Net loss
Other comprehensive income:

Unrealized loss on derivatives,
net of taxes of $(60)

Reclassification of net income
realized in net loss, net of
taxes of $17

Balance as of
December 31, 2020

PENNICHUCK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholder's Equity

For the Year Ended December 31, 2020
(in thousands, except per share data)

Accumulated

Additional Other
Common Stock Paid in Accumulated Comprehensive
Shares Amount Capital Deficit Income Total
1,000 $ - $ 30,561 $ (28,140) $ 318 $ 2,739
- - (279) - (279)
- - - (1,984) - (1,984)
- - - (89) (89)
- - - 25 25
1,000 $ - $30,561 $ (30,403) S 254 $ 412

The accompanying notes are an integral part of these consolidated financial statements.

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Balance as of
January 1, 2019

PENNICHUCK CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholder's Equity

For the Year Ended December 31, 2019
(in thousands, except per share data)

Accumulated

Common dividends declared - -

Net loss

Other comprehensive income:

Unrealized gain on derivatives,

net of taxes of $(63)

Reclassification of net income
realized in net income, net of

taxes of $27

Balance as of
December 31, 2019

Additional Other
Common Stock Paid in Accumulated Comprehensive
Shares Amount Capital Deficit income Total
1,000 $ - $ 30,561 $ (22,523) $ 372 S$ 8,410
- (280) - (280)
- - - (5,337) - (5,337)
- - - - (97) (97)
- - - - 43 43
1,000 S - $ 30,561 $ (28,140) $ 318 $2,739

The accompanying notes are an integral part of these consolidated financial statements.

PENNICHUCK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows
For the Years Ended December 31, 2020 and 2019
(in thousands)

2020 2019
Cash Flows From Operating Activities:
Net Loss $ (1,984) $ (5,337)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 8,637 8,537
Amortization of deferred investment tax credits (33) (33)
Provision for deferred income tax 534 341
Undistributed loss in real estate partnership - 104
Gain on disposition of property - (150)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable billed, unbilled and other (3,154) 718
(Increase) decrease in inventory 50 (37)
(Increase) decrease in prepaid expenses (387) 221
(Increase) decrease in refundable income taxes 8 (8)
(Increase) decrease in deferred charges and other assets (2,079) (2,579)
Increase (decrease) in accounts payable and deferred revenue (549) (1,836)
Increase (decrease) in accrued interest payable (419) 41
Increase in other 3,027 3,818
Net cash provided by operating activities 3,651 3,800
Cash Flows From Investing Activities:
Purchase of property, plant and equipment including debt
component of allowance for funds used during construction (10,165) (16,843)
Proceeds from sale of property - 221
Net cash used for investing activities (10,165) (16,622)

(continued)

The accompanying notes are an integral part of these consolidated financial statements.

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PENNICHUCK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows - Continued
For the Years Ended December 31, 2020 and 2019
(in thousands)

2020 2019

Cash Flows From Financing Activities:

Borrowings (payments) on lines of credit, net S (3,803) $ 2,657

Payments on long-term debt (65,649) (6,034)

Contributions in aid of construction 35 48

Proceeds from long-term borrowings 87,290 18,692

Debt issuance costs (11,922) (327)

Dividends paid (279) 280
Net cash provided by financing activities 5,672 14,756
Increase (Decrease) in cash, cash equivalents, and restricted cash (842) 1,934
Cash, cash equivalents, and restricted cash at beginning of period 10,274 8,340
Cash, cash equivalents, and restricted cash at end of period S 9,432 $ 10,274

Supplemental Disclosure of Cash Flow and Non-cash items
For the Years Ended December 31, 2020 and 2019 (in thousands)

2020 2019
Cash paid during the period for:
Interest S 11,207 S 10,963
Income taxes 96 157
Non-cash items:
Contributions in aid of construction 3,391 4,061
Forgiveness of debt 89 89

The accompanying notes are an integral part of these consolidated financial statements.

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PENNICHUCK CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Description of Business and Summary of Significant Accounting Policies

Description of Business

Pennichuck Corporation (“the Company,” “we,” or “our’) is a holding company head-
quartered in Merrimack, New Hampshire with five wholly owned operating subsidiaries:
Pennichuck Water Works, Inc., (“Pennichuck Water’) Pennichuck East Utility, Inc.,
(“Pennichuck East”) and Pittsfield Aqueduct Company, Inc. (“PAC”) (collectively referred to as
the Company’s “utility subsidiaries”), which are involved in regulated water supply and
distribution to customers in New Hampshire; Pennichuck Water Service Corporation (“Service
Corporation”) which conducts non-regulated water-related services; and The Southwood
Corporation (“Southwood”) which has historically owned several parcels of undeveloped land
(please refer to “Deferred Land Costs” in Note 1).

The Company’s utility subsidiaries are engaged principally in the collection, storage,
treatment and distribution of potable water to approximately 38,047 customers throughout
the State of New Hampshire. The utility subsidiaries, which are regulated by the New
Hampshire Public Utilities Commission (the “NHPUC”), are subject to the provisions of
Accounting Standards Codification (“ASC”) Topic 980 “Regulated Operations.”

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions have been
eliminated in consolidation.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Property, Plant and Equipment

Property, plant and equipment, which includes principally the water utility assets of the
Company’s utility subsidiaries, is recorded at cost plus an allowance for funds used during
construction on major, long-term projects and includes property funded with contributions
in aid of construction.

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Maintenance, repairs and minor improvements are charged to expense as incurred. Improve-
ments which significantly increase the value of property, plant and equipment are capitalized.

Cash and Cash Equivalents
Cash and cash equivalents generally consist of cash, money market funds and other short-
term liquid investments with original maturities of three months or less.

Restricted Cash — RSF

This restricted cash balance consists of funds maintained for the Rate Stabilization Fund
(“RSF”), which was established in conformity with the requirements of NHPUC Order No.
25,292, as explained more fully in Note 15 of these financial statements. The RSF is an imprest
fund of $5 million, which is subject to funding above or below the imprest fund balance,
reflecting actual revenue performance as it relates to prescribed revenue levels supported by
the RSF. The excess or deficient amount (versus the $5 million imprest balance) is subject to
return or collection to rate payers over the succeeding three-year period of time, as of the
rate order issued with the next promulgated rate case filing. On November 7, 2017, the
NHPUC approved and issued Order No. 26,070 which established new rates for Pennichuck
Water. In addition, the rate order then authorized the reallocation of the existing $5,000,000
RSF among the Company's utility subsidiaries. Such that, Pennichuck Water’s allocated share
of the RSF would now be $3,920,000, with the remaining balance of $1,080,000 to be
allocated between Pennichuck East and PAC. Rate order No. 26,179, under docket DW 17-
128 then allocated $980,000 of the $1,080,000 to Pennichuck East with the remaining
$100,000 to PAC. The purpose for splitting and allocating the existing RSF is to provide
additional reserves which ensure sufficient capital to enable the Company to support its
operations. For the years ended December 31, 2020 and 2019, the balances in the RSF were
approximately $8.6 million and $2.0 million, respectively.

Restricted Cash — CIAC

This restricted cash balance consists of funds maintained for the income tax impact from
Contributions in Aid of Construction (“CIAC”), which was established in conformity with the
NHPUC approval provided to the Company's regulated utilities on November 27, 2019. This
amendment to the Company’s tariffs allows for the recovery from developers and other CIAC
contributors, the tax costs needed to fully fund the associated tax liability created from the
elimination of an exemption whereby CIAC to water utilities was exempt from taxation, was
eliminated with the passage of the Tax Cuts and Jobs Act of 2017 (“the TCJA”). For the years
ended December 31, 2020 and 2019, the balances in this restricted cash account were
approximately $0.2 million and $0, respectively. In accordance with the amended tariffs,
these funds are the first used to pay for income tax liability payments incurred by the
Company, when and if actually incurred.

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