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The Company currently has 126 employees. The employees are committed to supporting the
Company’s mission. Each of our managers has goals and objectives to support the strategies
supporting the mission. Pennichuck is an Equal Opportunity/Affirmative Action Employer. It is
the policy of the Company to hire, train, promote, and otherwise provide terms and conditions of
employment without regard to race, color, religion. sex, sexual orientation, gender identity,
national origin. ancestry, age, marital status, pregnancy, disability or veteran status. All
employment and promotion decisions are based solely on valid requirements, in accordance with
the principles of equal employment opportunity and affirmative action.

Financial Performance During the Last Year

($ Millions)
4" Quarter Year-to-Date
2021 2020 2021 2020

Revenues $13.8 $12.1 $51.7 $49.7
Operating Expenses (10.7) (10.4) (42.0) (39.4)
Operating Income 3.1 1.7 9.7 10.3
Interest Expense (3.3) (3.6) (13.9) (11.9)
Other Income 0.0 0.1 0.3 0.1
Pre-Tax Income (Loss) (9.2) (1.8) (3.9) (1.5)
Income Tax Provision (Benefit) 0.2 0.8 (0.2) 0.5
Net Income (Loss) (0.4) (2.6) (3.7) (2.0)
Dividends Paid to the Shareholder 0.1 0.1 0.3 0.3

Earnings Before Interest, Taxes,

Depreciation and Amortization (EBITDA) 5.4 4.0 18.9 19.1

Consolidated revenues for the fourth quarter increased by $1.7 million from $12.1 million
in 2020 to $13.8 million in 2021. The increase is attributable to (1) $2.3 million in
additional recoupment revenues earned and recorded for Pennichuck Water Works in the
fourth quarter, which resulted from the December 9, 2021 NHPUC issued Order No.
26,555. This order approved a QCPAC surcharge of 3.9%, which was effective for capital
projects placed in service in 2019; and (2) on November 9, 2021, the NHPUC issued
Order No. 26,544 approving a permanent rate increase of 5.45% for Pittsfield Aqueduct,
becoming effective with services rendered back to December 17, 2020.

Consolidated year-to-date revenues increased from $49.7 million in 2020 to $51.7 million
in 2021, an increase of 4.0%. Revenues from the regulated utilities increased due to:

(1} the additional $2.3 million in recoupment revenues recorded for Pennichuck Water
Works, resulting from the December 9, 2021 NHPUC order, as previously discussed;

(2) the 5.45% permanent rate increase for Pittsfield Aqueduct, which was approved by the
NHPUC on November 9, 2021, as previously discussed; and (3) the Service Company
revenues which increased from the prior year due to increases in their Unplanned Revenues
and Backflow Sales, as these activities returned to their historical pre-COVID-19 pandemic
levels.

Consolidated operating expenses increased by $0.3 million for the fourth quarter of 2021,
over the same quarter in 2020. The increase is related to a rise in direct operating costs
associated with the rate increases in fuel, power and purification costs. The Company has
also recognized increases in its employee benefit costs, including but not limited to,
employee pension costs and healthcare premiums.

Consolidated operating expenses increased by $2.6 million, or 6.6%, for the full year,
from 2020 to 2021, mainly due to the higher direct production costs, as well as labor and
benefit costs, as previously discussed.

Interest expense increased in 2021 when compared to 2020 due to interest costs
associated with: (1) the additional financed amounts for capital projects which have been
incurred for ongoing infrastructure replacement, in conformity with the Company’s key
mission objectives; (2) interest costs associated with a $2.5 million Paycheck Protection
Program Loan which was received on May 7, 2020 as part of the Coronavirus Aid, Relief
and Economic Security Act; and (3) increased debt amortization costs associated with the
write-off to maturity in 2014 and 2015 of escrow deposits required to facilitate the
advanced refunding ofiexisting debt, which resulted from the issuance of $73.6 million of
taxable bonds by Pennichuck Water Works on September 2, 2020.

Pre-tax loss for the fourth quarter decreased to $0.2 million in 2021 versus $1.8 million in
2020, due to the increase in overall revenues as previously discussed.

The pre-tax loss for the year increased from $1.5 million in 2020 to $3.9 million in 2021,
or 160%. This was due to the $2.0 million increase in interest expense coupled with
operating expense increases, as discussed previously, which resulted in a higher pre-tax
loss in 2021.

Dividends paid to the sole shareholder in both 2021 and 2020 were consistent with, and
were paid pursuant to, the CBFRR structure provided for in the New Hampshire Public
Utilities Commission’s Order approving the City’s ownership of the Company.

The Income Tax Provision in the current year reflects the tax accounting for the amortization
of the Municipal Acquisition Regulatory Asset, which is not deductible for tax purposes, and
as such, constitutes a permanent difference in the deductibility of those amortization
expenses for tax purposes, as opposed to their inclusion in the GAAP based financial
statements. The Income Tax Provision (Benefit) also reflects the taxation of CIAC as
income for Regulated Water Utilities, due to the elimination of an exemption allowed prior to
the passage of the 20/7 Tax Cuts and Jobs Act (“TCJA”) which made broad and complex
changes to the U.S. tax code. However, on November 27, 2019, the regulated utilities
received NHPUC approval on the requested amendments to their tariffs which now allow for
recovery ofitax costs from developers and other CIAC contributors. This will now allow the
regulated utilities to fully fund the associated tax liability, which resulted from the change in
the 2017 federal tax law, for all CIAC contributions from independent third parties. On
November 6, 2021, the CIAC tax exemption, for federal income taxes, was subsequently
reinstated with passage of the federal infrastructure bill, but only for contributions made after
December 31, 2020. A bill is in the process of receiving final approval in the State of NH,

Summary

CHANGE IN CONTRACT PRICE: CHANGE IN CONTRACT TIMES:
Original Contract Price Original Contract Times
$48,600 Substantial completion: Oct 15, 2019
Ready for final payment: Oct 31, 2019
Net changes from previous Change Orders Net change from previous Change Orders

Change Order 1 $ 22,800
Change Order 2 $ 94,400
Change Order 3 $100,500

$217,700 730 Days
Contract Price prior to this Change Order Contract Times prior to this Change Order
$266,300 Substantial completion: Oct 15, 2021
Ready for final payment: Oct 31, 2021
Net Increase (decrease) of this Change Order Net Increase (decrease) of this Change Order
$ 63,795 365 Days
Contract Price with all approved Change Orders Contract Times with all approved Change Orders
$330,095 Substantial completion: Oct 15, 2022
Ready for final payment: Oct 31, 2022
RECOMMENDED: ACCEPTED: APPROVED:
By: By: By:
Daniel Hudson, DPW Jason G. Richard, CFO Mayor Jim Donchess
City Engineer S.W. Cole Owner
(Authorized Signature) (Authorized Signature) (Authorized Signature)
Date: Date: Date:
Change Order #4 2 of 2

2019 Asphalt Testing

that will reinstate the exemption from taxation of CIAC, for NHBPT taxes, if and when
passed. Due to these two significant items, the year-to-date results reflect a tax provision of
approximately 4.9% of pre-tax income for 2021, compared to the statutory tax rate expense
of 27.08%.

Earnings Before Interest, Taxes, Depreciation and Amortization increased in the fourth
quarter from $4.0 million in 2020 to $5.4 million in 2021, or 35.0%, due to an increase in
revenues as discussed previously, over-and-above any operating expense increases.

Earnings Before Interest, Taxes, Depreciation and Amortization for 2021 decreased
from 2020 by approximately $0.2 million, or 1.0%, again due to increased operating
expenses year-over-year, over-and-above any earned revenue increases.

Unaudited Cash Flow Statement

Cash Flow on a GAAP basis for the fourth quarter of 2021 as compared to the fourth quarter of
2020, and the year-to-date 2021 versus 2020, are as follows:

($000’s}
Quarter Ended Year-to-Date
December 31, December 31, December 31, December 31,
2071 2020 2021 2020
Operating Activities:
Net Income (Loss) $_ (400) $ (2.577) $ (3.699) $ (1.984)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 2,275 2,223 8,843 8,637
Provision for Deferred Taxes 200 790 (161) 534
(Gain) on Disposition of Property (345) 0 (345) 0
Other 235 (8) (33) (33)
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (1,375) (964) (1,084) (3,154)
(Increase) Decrease in Inventory (59) 28 (135) 50
(Increase) Decrease in Other Assets 3,837 (3,686) 8,544 (2,441)
Increase (Decrease) in Accounts Payable 898 287 (521) (550)
Increase (Decrease) in Other Liabilities (2,509) 4.265 (2.206) 2.610
Net Cash Provided by (Used in} Operating Activities 2.757 358 9.203 3.669
Investing Activities:
Purchases of Property, Plant & Equipment,
including the Debt Component of AFUDC (2,690) (4,419) (8,816) (10,165)
(Increase) Decrease in Restricted Cash/Investments 0 0 0 0
Proceeds from Sale of Property 712 0 429 0
Change in Deferred Land Costs 0 0 0 0
Net Cash Provided by (Used in) Investing Activities (1,978) (4,419) (8.387) (10.165)
Financing Activities:
Borrowings (Repayments) on Line of Credit 1,055 218 1,128 (3,803)
Payments on Long-term Debt (1,156) (1,064) (6,348) (77,588)
Contributions in Aid of Construction 17 15 40 35
Proceeds from Long-term Borrowings 2,546 2,255 9,614 87,290
Debt Issuance Costs 0 0 0 0
Dividends Paid __(69) (70) (279) (280)
Net Cash Provided by (Used in) Financing Activities _ 2.393 1.354 4.155 5.654
Increase (Decrease) in Cash and Cash Equivalents 3,172 (2,707) 4,97] (842)
Cash and Cash Equivalents at Beginning of Period 11,231 12.139 9.432 10,274

Cash and Cash Equivalents at End of Period $ 14.403 $ _ 9.432 $ 14.403 %__9.432

Unaudited Balance Sheet ($000’s)
As of As of
December 31. 2021 December 31. 2020
Assets
Property, Plant & Equipment, Net $ 245.197 $ 242.469

Current Assets:

Cash 1,493 310
Restricted Cash 8! 12,656 8,885
Investments - Bond Project Funds 255 237
Accounts Receivable %**? 9,869 8,785
Inventory 733 598
Other Current Assets ‘ole? 1.431 1.797
Total Current Assets 26.437 20,612
Other Assets:
Acquisition Premium N° 4 65,082 67,202
Other Assets 12,517 17,014
Total Other Assets 77.599 84.216
TOTAL ASSETS $ 349.233 $ 347.297

Shareholders’ Equity and Liabilities

Shareholders’ Equity $ (3.464) $ 412

Bonds, Notes and Mortgages > 233.265 226.912

Current Liabilities:

Lines of Credit 6,608 5,480
Current Portion of Long-Term Debt 6,607 6,020
Other Current Liabilities 6.245 5.474
Total Current Liabilities 19,460 16,974

Other Long-Term Liabilities:

CIAC, net 57,302 56,536
Deferred Income Taxes 14,850 14,931
Accrued Pension Liability ‘°° 12,159 15,424
Other Long-Term Liabilities 15,661 16,108
Total Other Long-Term Liabilities 99.972 102.999
TOTAL SHAREHOLDERS’ EQUITY AND $ 349.233 $ 347.297

LIABILITIES

Notes to Balance Sheet

Note | (Restricted Cash) — At December 31, 2021, the balance of $12.7 million represents an
increase of $3.8 million from the end of 2020, mainly due to the cash generated from the increased
revenue levels year-over-year, as well as the approved changes in the allowed revenue structure
for Pennichuck Water Works in its last filed rate case (and pending for Pennichuck East Utility in
its currently approved rate case), which has a new structure element included (the MOEF -
Material Operating Expense Factor) designed to reinforce the Company’s ongoing cash flow
position on an ongoing basis, and between permanent rate filings.

Note 2 (Accounts Receivable) — At December 31, 2021, the balance in Accounts Receivable
increased approximately $1.1 million from the year-end total at December 31, 2020 of $8.8 million.
This is attributed to: (1) revenue increases generated by the regulated utilities due to the increased
consumption levels year-over-year; and (2) the additional $2.3 million in recoupment revenues
recorded for Pennichuck Water Works (which remain as unbilled receivables as of December 31,
2021), resulting from the December 9, 2021 NHPUC order as previously discussed.

Note 3 (Other Current Assets) — At December 31, 2021, approximately $0.9 million of this
balance is comprised of prepatd property taxes, which will be expensed in the first quarter of
2022, relating to taxes paid in November and December of 2021 for the second half of the
property tax year ended March 31, 2021.

Note 4 (Acquisition Premium) — In accordance with GAAP, the Acquisition Premium is being
written-off over the 30-year life of the principal of the City Acquisition Debt. This amortization
will continue until the full value of this asset is written off in January 2042.

Note 5 (Bonds, Notes and Mortgages) — At December 31, 2021, the balance in Bonds, Notes and
Mortgages increased approximately $6.4 million from the year-end total at December 31, 2020 of
$226.9 million. This is attributed to the additional financed amounts for capital projects which
have been incurred for ongoing infrastructure replacement, in conformity with the Company’s key
mission objectives.

Note 6 (Accrued Pension Liability) — During 2021, approximately $1.1 million was contributed into
the Pension Plan, while approximately $0.8 million in benefit payments were made to participants,
and approximately $2.9 million of investment gains were recorded, attributed to changes in market
values.

Capital Expenditures

Capital expenditures in the fourth quarter of 2021 were $2.2 million compared to $4.9 million in
the fourth quarter of 2020. For the year 2021, capital expenditures were $8.7 million as
compared to $10.7 million in 2020.

The major expenditures for 2021 were as follows:

Kessler Farm Tank Replacement $3.967,000

Coburn Woods Main Replacements $653,000

Merrimack River Pumping Station $270,000

Locke Lake Surface Water Treatment $253,000
Rate Cases

Pennichuck Water Works — On October 21, 2021, Pennichuck Water Works filed an emergency
tariff sheet request for approval with the NHPUC. The Company’s emergency tariff filing was on
behalf of a single customer, the Merrimack Village District (MVD), and would allow this
customer to purchase bulk water at Pennichuck Water Works’ variable cost of production. The
initial rate to be billed will be $0.67 per cubic feet. This would allow MVD access to Pennichuck
Water Works’ bulk water supply in late 2021 and during 2022, while MVD’s water supply
systems are brought into compliance with water quality regulations for PFAS contaminants.

On November 12, 2021, the NHPUC issued Order No. 26,552, with an effective date of
November 20, 2021, approving Pennichuck Water Works’ request for an emergency tariff filing
on behalf of a single customer, the MVD. This emergency tariff is on a temporary basis and
must not exceed a term longer than six months from the effective date. In conjunction with this,
Pennichuck Water Works also opened a docket under DW 21-134 for the approval of a special
contract for these emergency rates, in order to bring those rates into full force and effect
(preceding and succeeding the emergency rate tariff), upon approval, for the time period from
which the emergency usage of this water was initiated on October 20, 2021, for a period not to
exceed a termination date of December 31, 2022.

Pennichuck East Utility - On November 24, 2020, Pennichuck East Utility filed a request with
the NHPUC for a rate increase of 21.05% over its current rates for the test year 2019, effective
December 24, 2020, for which 15.0% of this increase request was related to a request for a
temporary rate increase effective for services rendered on or after December 24, 2020. The
15.0% temporary rate increase would be inclusive of a 2.98% QCPAC surcharge which was
approved on December 6, 2019 in Order No. 26,313 and a 1.97% QCPAC surcharge which is
currently pending in DW 20-019. This temporary rate increase request was approved on
August 16, 2021, with Order No. 26,508, at a rate of 14.03%.

On February 18, 2022, the NHPUC issued Order No. 26,586 approving a permanent rate increase of
16.79%, becoming effective with services rendered as of December 24, 2020 for its customers. The
implementation of this permanent rate increase has not yet gone effective, as the Company is seeking
final approval of its recoupment calculations for the rate increase, with the Commission.

Pittsfield Aqueduct —On November 16, 2020, Pittsfield Aqueduct filed a request with the
NHPUC for a rate increase of 11.18% over its current rates for the test year 2019, effective

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December 17, 2020. The overall rate increase is subject to the normal regulatory filing process
with the NHPUC, as followed for all prior rate case filings, and as such, the final permanent rate
increase granted will be effective retroactive back to the filing date.

On November 9, 2021, the NHPUC issued Order No. 26,544 approving a permanent rate
increase of 5.45%, becoming effective with services rendered back to December 17, 2020.

Financing

On April 2, 2021, the Company’s Pennichuck Water Works subsidiary issued approximately
$5.2 million of tax-exempt and taxable bonds through the NH Business Finance Authority as
reimbursement for its 2020 capital improvements in Pennichuck Water Works’ water supply,
distribution and support systems. The bond issuance was approved by the Pennichuck Board of
Directors and the Sole Shareholder. This issuance had previously received NHPUC approval on
Order No. 26,101, dated February 2, 2018, which authorized up to $32.5 million in bonds via
multiple issuances for the years 2018-2021. This April 2021 bond issuance was the last annual
issuance that will occur from this overall multi-year bonding approval.

On May 6, 2020, the NHPUC issued Order No. 26,354 which permitted Pennichuck Water Works
to borrow up to $2,563,662 from the federal Small Business Administration Paycheck Protection
Program. This loan includes a 2-year maturity at an interest rate of | percent, which includes a
provision in which a portion or all of the loan can be forgiven if all employees are kept on the
payroll for eight weeks upon disbursement of the loan proceeds. The loan proceeds were disbursed
by TD Bank, Inc., on behalfiof'the Small Business Administration on May 8, 2020. The PPP loan
was approved by the Pennichuck Corporation Board of Directors and the Sole Shareholder.

On February 2, 2022, the Small Business Administration determined that the Company was
ineligible for forgiveness of the $2.5 million PPP loan which was established as part of the CARES
Act. The PPP loan is payable over two years from the initial approval date of the loan, at an interest
rate of' 1%. Monthly payments on this obligation begin on February 18, 2022, with a final maturity
date of May 7, 2022.

Qualified Capital Project Adjustment Charge (OCPAC)

On February 19, 2020, Pennichuck Water Works filed a petition with the NHPUC for a 3.83%
QCPAC surcharge on all capital improvements completed and placed in service by Pennichuck Water
Works in 2019. On December 9, 2021, the NHPUC issued Order No. 26,555 approving a QCPAC
surcharge of 3.90% for capital projects placed in service in 2019. This order became effective with
services rendered back to April 23, 2020 and allows for recovery in the form of a monthly
recoupment surcharge, to be collected over a twelve-month period from the date of the order.

On February 11, 2021, Pennichuck Water Works filed a petition with the NHPUC for a 5.44%
QCPAC surcharge (inclusive of the 3.83% filed for and approved in Order No. 26,555) on all
capital improvements completed and placed in service by Pennichuck Water Works in 2020.
The Commission has not issued an Order approving this requested surcharge. When the
Commission issues the Order, the surcharge will become effective retroactively to customers on
a “service rendered basis” back to April 1, 2021, which is the date for which Pennichuck Water
Works’ annual bond issuance associated with these capital investments and the QCPAC
surcharge will be completed and funded. The Order will allow recoupment of the surcharge

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from all its customers based on their actual bills incurred between April 1, 2021 and the final
effective date of the Order.

On February 11, 2021, Pennichuck East Utility filed a petition with the NHPUC for a 4.08%
surcharge on all capital improvements completed and placed in service by Pennichuck East
Utility in 2020. The Commission has not issued an Order approving this requested surcharge.
When the Commission issues the Order, the surcharge will become effective retroactively on a
“service rendered basis” back to a date on or around September 28, 2021, consistent with the
date for which Pennichuck East Utility completed its annual debt financing with CoBank, ACB,
which is done each year to convert FALOC borrowings used to fund capital projects for the
previous year, to a term loan with repayment terms of up to 25 years. The Order will allow
recoupment of the surcharge from all its customers based on their actual bills incurred between
this estimated September 28, 2021 date and the final effective date of the Order. The Company
has filed a settlement agreement with the Commission for this docket, along with the NH
Department of Energy Staff, which if approved would result in this recoupment being billed over
a five-month period of time, once the Order goes effective.

Other Events

PFOA Contamination Issues

As has been disclosed in the past, during 2016, the Company was significantly involved in
assisting the New Hampshire Department of Environmental Services (“NHDES”) in assessing
and bringing remediation solutions to bear, in light of the PFOA contamination issues discovered
in the towns surrounding the Saint-Gobain Performance Plastics (“SGPP”) site in north
Merrimack. This included self-instituting comprehensive and regular testing of the Company’s
water supplies and water systems, not only in the area adjacent to this site, but taking and
processing at least two sets of tests at all water sources that the Company owns throughout the
State. This was done in order to detect if any levels of contamination existed in the water
sources, to aid the NHDES in completing their statewide assessment, and to allow the Company
to respond with certainty to any of its customers as to any detectable levels. With regards to the
water supply systems directly adjacent to or connected to the Merrimack Village District, the
Company has been taking periodic regularly scheduled samples since this contamination site was
disclosed in March of 2016. The results of these tests were that none of the Company’s water
sources had detectable levels exceeding EPA lifetime advisory levels, or the State’s emergency
and impending permanent standard detection levels.

Additionally, at the request of the NHDES, during 2016 and 2017 the Company was asked to
enter into a contract with SGPP for the design of the expansion of public water to residents in the
northern portion of Litchfield, where private wells had been contaminated, in some cases well
above acceptable levels. Based upon the results of that design work, the Company was then
contracted by SGPP to expand the public water system owned by the Company in Litchfield to
approximately 400 property owners, including nearly 10 miles of new water mains and nearly
10 miles of new service lines. The cost of the design work and the expansion of the water
system has and is being paid totally by SGPP and was contributed to the Company as
Contributions in Aid of Construction (CIAC), as assets to be owned by the Company, the Town
or DOT (for pavement restoration on town or State roads), or the residents (in the case of the
service lines) going forward. Also, during 2018 the Company was asked by NHDES to contract
for similar design services with SGPP for expansion of its public water system in southern