Transactions with Related Party — City of Nashua
Pennichuck issued a promissory note to the City of Nashua in the amount of approximately
$120 million to be repaid over a thirty (30) year period with monthly payments of
approximately $707,000, including interest at 5.75%. Pennichuck recorded an additional
amount of approximately $30.6 million as contributed capital. The remaining outstanding
balance of the note payable to the City at December 31, 2018 and 2017 was approximately
$107 million and $109 million, respectively, as disclosed in Note 10 to these consolidated
financial statements. During 2018 and 2017, dividends of approximately $280,000 and
$279,000, respectively, were declared and paid to the City. The dividends paid to the City
during 2018 comprised approximately $280,000 of regular quarterly dividends declared and
paid; and no special dividend was declared or paid in 2018. The dividends paid to the City
during 2017 comprised approximately $279,000 of regular quarterly dividends declared and
paid; and no special dividend was declared or paid in 2017.
Additional ongoing transactions occur in the normal course of business, between the Company
and the City, related to municipal water usage, fire protection and sewer billing support
services, and property taxes related to real property owned by the Company within the City of
Nashua. For the years ended December 31, 2018 and 2017, respectively, approximately $3.4
million and $3.2 million were paid to the Company by the City for municipal water
consumption, fire protection charges, and sewer billing support services. Conversely, the
Company paid property taxes to the City of Nashua of approximately $2.6 million for the year
ended December 31, 2018, and approximately $2.9 million for the year ended December 31,
2017.
Rate Stabilization Fund — Restricted Cash
As a part of the acquisition, Pennichuck agreed to contribute $5,000,000 of the proceeds from
the settlement transaction to PWW, which was used to establish a Rate Stabilization Fund
(“RSF”), allowing for the maintenance of stable water utility rates and providing a mechanism
to ensure the Company’s continued ability to meet its obligations under the promissory note to
the City, in the event of adverse revenue developments. Restricted cash consists of amounts
set aside in the RSF account and is adjusted monthly as required in the PUC Order, as discussed
in Note | of these financial statements.
Municipal Acquisition Regulatory Asset (“MARA”)
Pursuant to the PUC Order, Pennichuck established a new Regulatory asset (MARA) which
represents the amount that the Acquisition Price exceeded the net book assets of Pennichuck’s
regulated subsidiaries (PWW, PEU, and PAC) at December 31, 2011. The initial amount of the
MARA was approximately $89 million for the regulated companies, offset by a non-regulated
amount of approximately $4.8 million. The MARA is to be amortized over a thirty (30) year
period in the same manner as the repayment of debt service for the City’s acquisition bonds. The
balance in the MARA at December 31, 2018 was approximately $75.4 million, reduced by the
non-regulated credit of approximately $4.1 million.
Aggregate amortization expense for the years ended December 31, 2018 and 2017 totaled
approximately $1,958,000 and $1,917,000, respectively.
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