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  • Staff photo by Bob Hammerstrom

    Barbara Pressley holds up one of the original signs from a vote years ago to persue local control of the water supply as city officials and the public discuss the Pennichuck acquisition during a public information meeting Monday, November 15, 2010, at Nashua City Hall.
  • Staff photo by Bob Hammerstrom

    John Patenaude looks on as Arthur Gottlieb discusses the Pennichuck acquisition during a public information meeting Monday, November 15, 2010, at Nashua City Hall.
  • Staff photo by Bob Hammerstrom

    Bill Doherty asks a question to the panel as city officials discuss the Pennichuck acquisition during a public information meeting Monday, November 15, 2010, at Nashua City Hall.
  • Staff photo by Bob Hammerstrom

    About two dozen people showed up to listen to city officials discuss the Pennichuck acquisition during a public information meeting Monday, November 15, 2010, at Nashua City Hall.
Tuesday, November 16, 2010

$198m deal applauded

NASHUA – Most of the 25 or so people who attended an informational meeting Monday on the city’s deal to acquire Pennichuck were current or former city officials.

A handful of people not tied to city government sat quietly and listened; a few asked questions.

No one said the $198 million deal was a bad idea.

In fact, several speakers, after asking a slew of detailed, tough questions, concluded by praising the officials for the eight-year odyssey to acquire the city’s drinking water source and to protect the watershed.

“I think what we’ve got going on here is an excellent deal,” said Bill Doherty, who earlier peppered Mayor Donnalee Lozeau, Alderman-at-Large Brian McCarthy and three consultants with questions about the cost of closing the deal, the track its on for approval, the state of Pennichuck water tanks and equipment and accuracy of maps of watershed property.

But Doherty noted that he grew up in North Reading, Mass., a town he said has a contaminated water supply, and he lived in California, where water is a scarce, precious commodity.

The Pennichuck acquisition seems to be a good deal for the money, Doherty said.

Another speaker thanked officials for putting control of the city’s water supply into the public’s hands, “even if it costs a lot of money.”

Former Alderman-at-Large Fred Teeboom, after asking a series of questions, said he opposed acquiring Pennichuck Water Works, one of the company’s subsidiaries, through eminent domain.

But buying the entire company for right price is a different story, Teeboom said.

“If you get a good deal, buy it lock, stock and barrel,” he said.

That’s just what the city is doing, acquiring Pennichuck Corp. through a stock purchase worth $138 million and assuming $60 million in company debt. The deal would have the city own not only Pennichuck Water Works, which serves Nashua, but two other regulated utilities, a real-estate holding company and a water services company.

In essence, the city would become the sole owner of roughly 4.7 million shares of company stock. The water company would not become a city department, but would continue to be run by company employees. Its current board of directors would be replaced by a board initially appointed by the mayor and approved by aldermen. After two years, the board would submit its own slate of candidates for office, but they would still have to be approved by the city.

The board would include members from Nashua as well as other communities served by Pennichuck.

“We would like to see the representation to be mostly from Nashua, because we have the most stake in the game, but from the other towns as well,” said McCarthy, president of the Board of Aldermen.

The acquisition must still be approved by the Board of Aldermen, two-thirds of Pennichuck shareholders and the N.H. Public Utilities Commission. PUC approval itself is likely to take three to nine months, and officials say they hope the sale will close in the latter half of 2011.

Consultant Arthur Gottlieb of C.W. Downer and Co. said a “critical component” of the deal is the interest rate of the bonds that the city would issue to finance the deal.

Above 7 percent, the deal wouldn’t make financial sense for the city or the ratepayers, Gottlieb said.

Written into the agreement is the provision that if the city can’t obtain an interest rate of 6.5 percent or less, the city can walk away from the deal, Gottlieb said.

Currently, interest rates are available at just below 6 percent, he said.

Another consultant, William Ardinger of Rath, Young & Pignatelli, said that Nashua isn’t obligated to pay the legal costs Pennichuck Corp. incurred in fighting eminent domain proceedings, which the deal halts, or in other matters related to the acquisition.

The city of Nashua is facing about $6 million in legal costs of its own.

“Each party bears its own legal costs,” Ardinger said.

Former Nashua Mayor James Donchess asked if the deal allows Pennichuck to proceed with the 19 percent rate increase it is seeking. The company hiked rates by 22 percent last year, Donchess noted.

Pennichuck is seeking the rate increase to cover money it spent on improving its treatment process and to cover its operating expenses, the consultants noted. The city won’t own the company for another year until the deal closes, and Pennichuck is free to proceed seeking a rate increase in the meantime.

Transaction executive John Patenaude gave an outline of the deal at the meeting. His presentation and the merger agreement itself will be available today on the city’s website, www.gonashua.com.

Patrick Meighan can be reached at 594-6518 or pmeighan@nashuatelegraph.com.