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Sunday, January 8, 2012

New board for Pennichuck in Nashua facing unique circumstances

NASHUA – Pennichuck Corp.’s new board of directors will face an unusual set of circumstances as it shifts the company from private control to public ownership.

That’s because the city’s impending purchase of Pennichuck Corp. is unusual in itself.

“It really is the first of its kind,” said Jay Lustig, one of nine people recently appointed to the Pennichuck Board of Directors. “We have a lot to learn. We will have a lot of people watching us.”

It is widely believed Nashua will be the only municipality in the country to own a water utility, have an independent board supervise the company’s operations and still have to answer to state regulators – all while serving customers in this city and some other towns.

Pennichuck’s incoming directors will take all that into consideration as soon as they start overseeing the company as early as next month.

Last month, aldermen approved the appointment of nine people to the board for when the city takes control of the company. Mayor Donnalee Lozeau will also serve as a board member for two years and one to three other seats could be filled at a later time.

Lustig, a Nashua resident, said the transition shouldn’t be difficult; rather, it’s more a matter of commitment for board members. They’re going to have to work hard, but he suspects no one would have applied for the job if they didn’t want to roll up their sleeves.

They will start working in earnest as soon as the city assumes ownership of Pennichuck Corp. and its water utilities.

Thomas J. Leonard, an attorney from Nashua and a former mayor, is among the freshman directors. He said one of the first tasks the board will have is learning each others’ skills.

“The first thing we need to do is learn and understand one another,” Leonard said. “It’s a team effort.”

They will be bosses with bosses: The directors have to seek approval from Nashua’s Board of Aldermen for any major transaction, much as executives of a privately owned company have to earn the blessing of shareholders for big deals. Aldermen will also approve Pennichuck’s budget.

But the board will oversee the day-to-day operations of Pennichuck, work that some of the incoming directors believe will be challenging enough.

The board will also have to review operations immediately, Leonard said. Because of confidentiality protections, the board has a limited understanding of how Pennichuck has run as a private entity, but as soon as the city owns the company, everything will become an open book, he said.

“We want to make sure the thing is operating the way it has been,” Leonard said. “Generally speaking, the company was well run.”

The board will have to deal with the various financial aspects of running Pennichuck, Leonard said.

In November, state regulators approved the city’s $152.1 million purchase of Pennichuck. The acquisition was scheduled to be completed New Year’s Day, but late last month Lozeau lobbied aldermen to postpone the purchase until no later than Feb. 3 so the city could obtain more favorable bond rates.

“There are probably going to be some surprises. Nothing like this has ever happened,” Ward 4 Alderman Arthur Craffey said. “I’m sure something will happen that we didn’t expect, but hopefully, it won’t be a big deal.”

The executives who have run Pennichuck as a private company will be leaving when the city assumes ownership, but the staff will remain in place.

Moving a private company into the public domain won’t be without its share of hiccups, but these employees will provide continuity, Craffey and others predict.

The state Public Utilities Commission will continue to regulate Pennichuck utilities and approve any water rate hikes. The revenue from those rates will, in large part, pay for the bonds the city will float to borrow money to buy Pennichuck’s private shares.

Elizabeth Dunn, a Windham resident who will serve on the board, said communicating with staff will be a primary goal of the new directors.

“We have to set up a system of how we all work and interact with corporate … the people on the ground,” Dunn said. “What is our role of directors? What is ours to decide? What’s not?

“I’m not interested in being a day-to-day manager, but we want to make sure the policies and strategies are appropriate ones.”

Anything that normally would have been voted on by Pennichuck shareholders during its private ownership will now go before aldermen, Alderman-at-Large Brian McCarthy said.

For instance, if Pennichuck were to make a substantial acquisition of another water utility or sell something, city approval would be required, he said.

At some point, the directors will choose a permanent CEO, McCarthy said. Financial consultant John Patenaude will serve as interim CEO when the city gets the keys to Pennichuck.

Leonard said the board will conduct business in a transparent fashion because of its public ownership. Affairs should consistently reflect the state Right-to-Know Law, he said.

Aside from water production and distribution, Dunn said, directors have to consider the other aspect of Pennichuck Corp.: its land holdings.

“That’s a whole other area of expertise and a learning curve,” Dunn said. “That’s really the challenge.”

A large reason why Nashua started its journey to acquire Pennichuck nearly a decade ago was to protect watershed lands from being sold and developed by the company.

Since 1985, Pennichuck’s real-estate subsidiary, Southwood Corp., has sold as many as 1,000 acres in Nashua and Merrimack that it said could be developed without harming the region’s drinking water.

One last such parcel in Nashua is scheduled to be sold to a developer for elderly housing, but Lozeau has asked Pennichuck and the builder to delay the sale so that a compromise can be found.

Residents have argued that building on the Concord Street parcel could harm the watershed, a claim Pennichuck denies.

Critics of the city’s Pennichuck purchase say the water has already spilled out of the glass; there is no more land to protect. But McCarthy says the city buying Pennichuck will stop the company from selling about 400 acres of developable land in Merrimack.

Lustig said preserving what land is available and keeping the watershed intact will be a board priority.

More than anything, the transition to city ownership should be “seamless for customers – that they’d barely know it,” Dunn said. “They should know about it, but it shouldn’t affect them.

“We have some big responsibilities here. Water is important in people’s lives.”

Albert McKeon can be reached at 594-6528 or amckeon@nashuatelegraph.com. Also, follow McKeon on Twitter (@Telegraph_AMcK).