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unconditional guarantee of PEU’s obligations to CoBank by Pennichuck pursuant to the
Guarantee of Payment (Continuing) dated as of February 9, 2010 between Pennichuck and
CoBank (the “Guaranty Agreement”), a copy of which is attached to this letter as Attachment C.
The Lender ~ CoBank, ACB. CoBank is a government sponsored enterprise (“GSE”) owned
by its customers, who consist of agricultural cooperatives, rural energy, communications and
water companies and other businesses that serve rural America. Asa GSE, CoBank issues its
debt securities with the implicit full faith and credit of the United States Government and uses
these low-cost funds to make loans to companies like PEU that meet its charter requirements.
Asa result of the implicit backing of the U.S. Government, CoBank’s borrowing costs are lower
than commercial banks and financial institutions, and these lower costs are passed on to its
borrowers. In addition to the lower rates, CoBank loans generally have fewer covenants or
restrictions as compared to loans from commercial banks and other financial institutions.
Approval by Pennichuck and PEU. The CoBank loan and guaranty, as well as the FALOC
renewal, have been approved by the Board of Directors of Pennichuck and PEU.
Pennichuck recommends that the City authorize (1) PEU to enter into the loan with CoBank; and
(ii) Pennichuck to guaranty the loan, and (iii) PEU shall be authorized to extend and renew its
FALOC with CoBank for another three years.
Lower Costs Are Good for Customers. Pennichuck and its Board of Directors have
determined that the capital projects to be refinanced by the CoBank loan, and the renewal and
extension of the FALOC, will allow PEU to continue to provide safe, adequate and reliable water
service to their customers on a cost-effective basis, The terms of the loan and FALOC are very
favorable compared to other alternatives and will result in lower financing costs than would be
available under other debt options. These lower financing costs will be passed on to customers.
Other Approvals. As a regulated public utility, PEU must obtain approval of the term loan and
FALOC renewal from the New Hampshire Public Utilities Commission (“NHPUC”), which will
approve the term loan and FALOC renewal if it finds the loan to be consistent with the public
good. PEU has filed a petition for approval with the NHPUC as of May 22, 2020 and expects
the NHPUC to consider the petition promptly.
Requested Approvals. For the reasons described above, Pennichuck respectfully requests that
the City, acting in its capacity as sole shareholder of Pennichuck and pursuant to Article IX(3) of
Pennichuck’s Articles of Incorporation, authorize the following actions:
RESOLVED, that the City hereby approves the loan to Pennichuck East Utility, Inc.
from CoBank, ACB, in an amount of $803,275, with a 25-year amortization schedule;
and
FURTHER RESOLVED, that the City hereby approves the guaranty by Pennichuck
Corporation of the payment by Pennichuck East Utility, Inc. of the loan authorized in
the prior resolution; and
FURTHER RESOLVED, that the City hereby approved the renewal of the Fixed Asset
Line of Credit (“FALOC”) for Pennichuck East Utility. Inc.. with CoBank, ACB, ata
facility level of $3 million for a period of three years; and
