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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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Restricted Cash — Bond Project Funds

This restricted cash balance consists of funds remaining from the issuance of the Series 2014,
2015, 2019 and 2020 tax-exempt bonds (the “Bonds”) in December of 2014, October of 2015,
April of 2019, and April and August of 2020, respectively. The proceeds from those bond
issuance transactions are maintained in separate restricted cash accounts, with Trustee
oversight, and are subject to withdrawal as a reimbursement of eligible capital project
expenditures for the years 2014 through 2019, as defined by the indenture and issuance
documents associated with each offering. The restricted cash accounts are also used as a
“conduit” for the transfer of money from operating cash to restricted cash, allowing the
Trustee to make the required payments to bondholders for principal and interest due semi-
annually.

As of December 31, 2019, the funds in these restricted cash accounts totaled approximately
$3.4 million. During 2020, approximately $3.4 million was withdrawn from the restricted cash
accounts to make the principal and interest payments for the Bonds, on January 1, July 1 and
October 1. In December 2020, approximately $215,000 was transferred into these restricted
cash accounts from the Company’s operating cash accounts, to provide the funds needed to
make the net principal and interest payments due on January 1, 2021 for the Bonds. As of
December 31, 2020, the funds in these restricted cash accounts totaled approximately
$237,000.

Concentration of Credit Risks

Financial instruments that subject the Company to credit risk consist primarily of cash
(including cash equivalents and restricted cash) and accounts receivable. Cash balances are
invested in financial institutions insured by the Federal Deposit Insurance Corporation
(“FDIC”). At December 31, 2020 and 2019, the Company had approximately $9,300,000 and
$9,600,000 in excess of FDIC insured limits, respectively. Our accounts receivable balances
primarily represent amounts due from the residential, commercial and industrial customers
of our regulated water utility operations, as well as receivables from our Service Corporation
customers.

Accounts Receivable — Billed, Net
Water utility accounts receivable (regulated) are recorded at invoiced amounts.

Non-regulated accounts receivable are recorded based on contracted prices when the
Company obtains an unconditional right to payment under the terms of the contract.

The allowance for doubtful accounts is our best estimate of the amount of probable credit
losses in our existing accounts receivable and is determined based on historical write-off
experience and the aging of account balances. We review the allowance for doubtful
accounts quarterly. Account balances are written off against the allowance when it is
probable the receivable will not be recovered.

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Accounts Receivable ~ Unbilled, Net

We read our customer meters on a monthly basis and record revenues based on meter
reading results. Information from the last meter reading date is used to estimate the value of
unbilled revenues through the end of the accounting period. Estimates of water utility
revenues for water delivered to customers but not yet billed are accrued at the end of each
accounting period. Actual results could differ from those estimates.

Inventory
Inventory is stated at the lower of cost or net realizable value, cost being determined using
the average cost method which approximates the first-in, first-out (FIFO) method.

Deferred Land Costs

Deferred land costs have been recorded in all reporting periods leading up to and including
2019 by Southwood, the Company’s real estate subsidiary. Southwood was passively engaged
in the management and maintenance of land holdings outside of any of the land holdings
held in ownership by the Company's utility subsidiaries. Included in deferred land costs is the
Company’s original basis in its undeveloped landholdings and any land improvement costs,
which are stated at the lower of cost or market. All costs associated with real estate and land
projects are capitalized and allocated to the project to which the costs relate. Administrative
labor and the related fringe benefit costs attributable to the acquisition, active development,
and construction of land parcels are capitalized as deferred land costs. No labor and benefits
were capitalized for the years ended December 31, 2020 and 2019.

As of the end of 2019, all of the land holdings previously owned by Southwood were
transferred to the Company, which now has assumed the passive management and
maintenance of those land holdings. On a going forward basis, Southwood will be
maintained as a “corporate shell” allowing for its usage in possible future land management
opportunities, should they occur.

Deferred Charges and Other Assets

Deferred charges include certain regulatory assets and other assets. Regulatory assets are
amortized over the periods they are recovered through NHPUC-authorized water rates. The
Company’s utility subsidiaries have recorded certain regulatory assets in cases where the
NHPUC has permitted, or is expected to permit, recovery of these costs over future periods.
Currently, the regulatory assets are being amortized over periods ranging from 2 to 25 years.

Unamortized Debt Issuance Costs

Unamortized debt issuance costs are amortized over the original term of the related bonds
and notes. The Company’s utility subsidiaries have recorded unamortized debt issuance costs
in cases where the NHPUC has permitted or is expected to permit recovery of these costs
over future periods. The debt issuance costs are being amortized over the original lives of the
associated debt.

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Contributions in Aid of Construction

Under construction contracts with real estate developers and others, the Company’s utility
subsidiaries may receive non-refundable advances for the cost of installing new water mains.
These advances are recorded as CIAC. The Company’s utility subsidiaries also record to plant
and CIAC the fair market value of developer installed mains and any excess of fair market
value over the cost of community water systems purchased from developers. CIAC are
amortized over the life of the related properties.

Paycheck Protection Program Loan

The Company accounts for its Paycheck Protection Program (PPP) loan in accordance with
the guidelines established by the Financial Accounting Standards Board (FASB) ASC 470, Debt.
The guidance requires the company to account for the proceeds from the PPP loan as debt
and apply interest considering the ten-month interest payment deferral allowed for the loan.
The loan and accrued interest may be forgivable after eight or twenty-four weeks if the loan
proceeds are used for eligible purposes. The Company has elected to report the PPP loan as
long-term debt. No income will be recognized from the extinguishment of the PPP debt
(whether as a result of forgiveness or otherwise) until the Company has been legally released
as the primary obligor of the loan.

Revenue Recognition ~ Regulated Entities

Standard charges for water utility services to customers are recorded as revenue, based upon
meter readings and contract service, as services are provided. The majority of the Company’s
water revenues are based on rates approved by the NHPUC. Estimates of unbilled service
revenues are recorded in the period the services are provided. Provision is made in the
consolidated financial statements for estimated uncollectible accounts.

Revenue Recognition — Non-Regulated Entities

The Company derives its non-regulated revenues primarily from water management services
which include contract operations and maintenance, and water testing and billing services to
municipalities and small, privately owned community water systems. Revenue is measured
based on consideration specified in contracts with customers. The Company recognizes
revenue when it satisfies performance obligations under the terms of the contract which
generally occurs with the transfer of control of the services to the customer. Revenues from
unplanned additional work are based upon time and materials incurred in connection with
activities not specifically identified in the contract, or for which work levels exceed contracted
amounts.

Revenues from real estate operations, other than undistributed earnings or losses from
equity method joint ventures, are recorded upon completion of a sale of real property. The
Company’s real estate holdings outside of the Company’s utility subsidiaries are comprised
primarily of undeveloped land.

The Company does not have any significant financing components as payment is received at
or shortly after the point of sale.

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Contract Combination

To determine the proper revenue recognition method for contracts, the Company evaluates
whether two or more contracts should be combined and accounted for as one single contract
and whether the combined or single contract should be accounted for as more than one
performance obligation. This evaluation requires significant judgment and the decision to
combine a group of contracts or separate a combined or single contract into multiple
performance obligations could change the amount of revenue and profit recorded in a given
period. Contracts are considered to have a single performance obligation if the promise to
transfer the individual goods or services is not separately identifiable from other promises in
the contracts, which is mainly because the Company provides a significant service of
integrating a complex set of tasks and components into a single project or capability.

For contracts with multiple performance obligations, the Company allocates the transaction
price to each performance obligation using management’s best estimate of the standalone
selling price of each distinct good or service in the contract. In cases where the Company does
not provide the distinct good or service on a standalone basis, the primary method used to
estimate standalone selling price is the expected cost plus a margin approach, under which
management forecasts the Company’s expected costs of satisfying a performance obligation
and then adds an appropriate margin for that distinct good or service.

Performance Obligations
For performance obligations related to operations, planned maintenance, and water testing

and billing services, control transfers to the customer over time as the services are provided.
These services are sold primarily to municipalities or small, privately owned community water
systems. The majority of the Company’s unplanned maintenance contracts are billed on a
time and materials basis and revenue is recognized over time as the services are performed.
The majority of the Company’s operations, planned maintenance, and water testing and
billing contracts are billed on a fixed price basis. For fixed price contracts, the Company
measures its progress towards complete satisfaction of the performance obligation using a
time-based measure. This method is used because management considers time elapsed to
be the best available measure of progress on contracts.

Contract Estimates and Modifications

Due to the nature of the work required to be performed on many of the Company’s
performance obligations, the estimation of total revenue and cost at completion is complex,
subject to many variables and requires significant judgment.

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Page 1 of 2

Fred S. Teeboom
24 Cheyenne Drive, Nashua NH 03063

Public Comments to Nashua Board of Aldermen
9 November 2016

Ordinance O-16-11 Reduced Taxation for Charter Schools has lingered “on the table” for about 6
months.

Let us examine the facts.

Two charter schools are located in Nashua: the Academy for Science and Design (ASD) and the

MicroSociety Academy.

> ASD (grades 6-12) has 525 students, of whom 263 reside in Nashua.
> MicroSociety (grades K-8) has 151 students, of whom 96 reside in Nashua.

A total of 464 students resident within Nashua attend charter schools in the region, within and
outside Nashua. This data is tabulated on the Nashua Board of Education website, under “budgets.”

The students who reside within Nashua and attend the two charter schools located in Nashua
must be provided with bus transportation provided by the Nashua School District, by state law

Now let us examine the cost savings.

The tuition cost to taxpayers for a student K-12 in the Nashua School District is $13,000 per
year. The cost for a student attending a charter school is $5,600 a year. Thus the savings in
tuition cost per student who attend a Charter School is $7,400 per student. This totals to a
savings of $3.4 million for the 464 Nashua students who attend charter schools, offloaded from
the Nashua School District

The cost to transport students resident in Nashua to the two Charter Schools in Nashua is about
$160,000 according to the Nashua School District business office.

Thus the cost savings to the Nashua taxpayers is $3.2 million, for students attending charter
schools who otherwise would be attending the Nashua School District

The loss of tax revenues under O-16-11 is $80,000 for ASD and $65,000 for the MicroSociety,
for a combined loss of $145,000. This figure, missing from the financial analysis section of this
ordinance, was provided by alderman Dowd.

Thus the net cost savings is over $3 million.

What do we get for these savings?

According to the comprehensive School Digger rankings (www.school digger.com) the Academy
for Science and Design is consistently the top performing high school in New Hampshire.

Furthermore, it is ranked among the top 50 high schools in the entire United States. Consider
that the ASD must accept, by law, special education students with an IEP.