Note 12 — Transaction with the City of Nashua
On January 25, 2012, in full settlement of an ongoing Eminent Domain lawsuit filed by the
City of Nashua (“City”) and with the approval of the New Hampshire Public Utilities
Commission (“NHPUC”), the City acquired all of the outstanding shares of Pennichuck
Corporation (“Pennichuck”) and, thereby, indirect acquisition of its regulated subsidiaries.
The total amount of the acquisition was $150.6 million (“Acquisition Price”) of which
$138.4 million was for the purchase of the outstanding shares, $5.0 million for the
establishment of a Rate Stabilization Fund, $2.6 million for legal and due diligence costs,
$2.3 million for severance costs, $1.3 million for underwriting fees, and $1.0 million for
bond discount and issue costs. The entire purchase of $150.6 million was funded by General
Obligation Bonds (“Bonds”) issued by the City of Nashua. Pennichuck is not a party to the
Bonds and has not guaranteed nor is obligated in any manner for the repayment of the Bonds.
Pennichuck remains an independent corporation with an independent Board of Directors with
the City of Nashua as its sole shareholder.
Pennichuck Water Works, Inc. (““PWW”), Pennichuck East Utility, Inc. (“PEU”), Pittsfield
Aqueduct Company, Inc. (“PAC”), Pennichuck Water Service Corporation, and The
Southwood Corporation will continue as subsidiaries of Pennichuck Corporation and PWW,
PEU and PAC will continue as regulated companies under the jurisdiction of the New
Hampshire Public Utilities Commission. The terms of the merger and the requisite
accounting and rate-setting mechanisms were agreed to in the NHPUC Order 25,292 (“PUC
Order”) dated November 23, 2011.
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, 2015 and 2014 was approximately
$112.9 million and $114.7 million, respectively, as disclosed in Note 10 to these consolidated
financial statements. During 2015 and 2014, dividends of approximately $278,000 and
$277,000, respectively, were declared and paid to the City. The dividends paid to the City
during 2015 comprised approximately $278,000 of regular quarterly dividends declared and
paid; and no special dividend was declared or paid in 2015. The dividends paid to the City
during 2014 comprised approximately $277,000 of regular quarterly dividends declared and
paid, and no special dividend was declared or paid in 2014.
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, 2015 and 2014, respectively,
approximately $3.1 million and $3.3 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
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