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Shareholder Approval of Borrowings Required. Under Article IX of Pennichuck’s Articles of
Incorporation, the City, acting in its capacity as Pennichuck’s sole shareholder, must approve:
“(3) any action to (A) create, incur or assume any indebtedness for borrowed
money or guarantee any such indebtedness of any person, (B) issue or sell
any debt securities or warrants or other rights to acquire any debt securities
of the [Pennichuck]} Corporation or any of its Subsidiaries, or (C) guarantee
any debt securities of any person.”
Proposed Term Loan Borrowing from CoBark
PEU is a New Hampshire public utility corporation providing retail water service to
approximately 8,450 customers in the New Hampshire towns of Atkinson, Barnstead, Bow,
Chester, Conway, Derry, Exeter, Hooksett, Lee, Litchfield, Londonderry, Middleton, Pelham,
Plaistow, Raymond, Sandown, Tilton, Weare and Windham. PEU is wholly-owned by
Pennichuck which, in turn, is wholly-owned by the City.
PEU has entered into a Master Loan Agreement with CoBank dated as of February 9, 2010 (the
“Master Loan Agreement”), which provides the framework for CoBank to make loans to PEU from
time to time. A copy of the Master Loan Agreement is attached to this letter as Attachment A.
PEU requests the City’s approval for PEU to enter into a term loan with CoBank in an amount of
$1,135,409 with an amortization period of up to 25 years, with an interest rate to be determined
based on market conditions (currently estimated at approximately 4.25% per annum). A copy of
the CONFIDENTIAL term sheet for the term loan with CoBank is attached to this letter as
Attachment B.
The proceeds from the CoBank loan will be used to refinance and repay up to approximately
$1,135,409 of Fixed Asset Line of Credit (““FALOC”) borrowings by PEU, under its $3 million
FALOC with CoBank, which was used to fund capital improvements to the PEU water system
infrastructure during 2020, which were not funded by State of New Hampshire Drinking Water
Revolving Loan Fund (SRF) or NH Drinking Water and Groundwater debt or grants.
The FALOC with CoBank was approved by the Company’s Board of Directors, the NH Public
Utilities Commission (“NHPUC”), and the City of Nashua as shareholder, in March of 2018 (in
NHPUC Order No. 26,117; Docket PWC 17-157), to provide for capital improvements financing
during each calendar year, with subsequent annual refinancing and repayment of amounts
borrowed with term loans, consistent with the Company’s allowed rate structure with the
NHPUC, under Order No. 26,179 (Docket DW 17-128). This facility was renewed and
extended thru June 30, 2023 during 2020, with all of the approvals required at that time, and as
included in NHPUC Docket No. DW 20-081, and Order No. 26,418.
The CoBank loan will be secured by (i) a security interest in PEU’s equity interest in CoBank
(consisting of PEU’s $212,825 earned equity investment in CoBank from patronage dividends
received since 2010, and PEU’s right to receive future patronage dividends), and (ii) the
