- Staff Photo Illustration
City officials announced Friday their intention to purchase Pennichuck Water Works.
6. Pennichuck purchase set
It took eight years, a citywide vote, a lawsuit, two state Supreme Court rulings and closed-door negotiations galore, not to mention enough paperwork to dam the Merrimack River, but the city of Nashua is finally set to buy Pennichuck Corp. and control the local water supply and sewer system.
The $200 million deal – a $138 million stock purchase and the assumption of $60 million in debt – was announced in early November, culminating a process that started in April 2002 when the private Pennichuck Corp. announced it was being bought by a Pennsylvania firm. Resulting dismay about the city’s water supply being in the hands of out-of-staters launched a political ball rolling.
High points included a 2003 vote in which Nashuans approved the idea of buying Pennichuck by a 3-to-1 margin, which scuttled the Pennsylvania deal; a 2005 high court ruling that said the city could seize the property by eminent domain; a state regulatory ruling in 2008 that set a $203 million price tag, and a follow-up Supreme Court ruling in early 2010 that basically gave the city the go-ahead to take Pennichuck if negotiations faltered.
The sale still must be approved by two-thirds of Pennichuck shareholders, the state Public Utilities Commission and the federal Securities and Exchange Commission but seems likely to go through, probably in the second half of 2011.
One possible stumbling block is interest rates. The agreement says that if Nashua can’t obtain a rate of 6.5 percent or less on the bonds it would issue to finance the deal – that is, if it has to pay too much interest to get people to lend it enough money – then it can walk away from the deal. In the current financial environment, however, that doesn’t seem to be an issue.
If the deal does go through, Nashua will acquire all Pennichuck holdings, including three regulated utilities, a water services company and a real-estate holding company.
In the long term, city officials hope water rates will decrease because the city doesn’t have to worry about turning a profit for shareholders. In essence, the city would become the sole owner of roughly 4.7 million shares of company stock.
The water company wouldn’t become a city department but would continue to be run by its roughly 100 employees, except for a few members of senior management who will get hefty buyouts.
Plans are for a two-year transition, after which Pennichuck would be run by a board with no ties to city government. The first board would be appointed by the mayor and confirmed by the Board of Aldermen, but the board itself would appoint future members.
The board would include members from Nashua, as well as other communities served by Pennichuck.
– DAVID BROOKS