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Saturday, January 21, 2012

Nashua’s Pennichuck takeover finally on tap

NASHUA – After a decade of negotiations, public officials can finally toast the city’s historic acquisition of Pennichuck Corp. with glassed filled with city-owned water.

On Wednesday, the city is scheduled to close its $152 million purchase of Pennichuck and its various subsidiaries, including its water utilities.

Mayor Donnalee Lozeau will host a ceremony marking the occasion at the City Hall auditorium.

Alderman-at-Large Brian McCarthy – who has helped lead the city’s on-again, off-again, on-again talks with Pennichuck over the years – joked Friday he hopes to celebrate with tap water.

“It’s great,” McCarthy said of the long-awaited closing. “It’s the end of a decade of hard work and the beginning of a century of benefits.”

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 other New Hampshire towns.

Starting with Mayor Bernie Streeter, Lozeau’s predecessor, city officials have tried since 2002 to acquire Pennichuck to control the future of Nashua’s drinking water. For years, Pennichuck had sold property in the watershed for commercial development, raising concerns about the future of the water supply.

It also troubled Streeter, McCarthy and others when Pennichuck officials tried to sell the company to a Philadelphia company in 2002. Nashua stepped into the middle of the pending sale by offering to buy the company, prompting the Philadelphia company to scuttle its deal.

The city then pursued an eminent domain takeover, and Pennichuck retaliated by suing.

Finally, the two sides started to warm to one another. Pennichuck started offering its shares, while the city refused the offers and considered further takeover options. They eventually came to an agreement.

The city will pay $29 a share for Pennichuck stock, a total of $137.8 million for about 4.7 million shares. Also comprising the $152 million bill: $2.2 million for severance packages for outgoing Pennichuck executives, $5.3 million in legal and other fees, $5 million for a water rate stabilization fund and $1.8 million in bond issuance costs.

A merger agreement between Pennichuck and the city was set to expire on Dec. 31, but aldermen allowed Lozeau to extend it by more than a month to obtain bonds at a more favorable rate.

The city sold the bonds at a 4.09 percent rate, McCarthy said.

“I can say there was great demand for them,” he said. “When we put them out on the street, there were more responses than we thought there would be and that pushed down the rate.”

The bonds will be paid with Pennichuck revenue, in large part through water rates to be set by state regulators. Earlier this month, Fitch Ratings gave the city’s general obligation bonds the maximum “AAA” rating.

The city could potentially bond an additional $60 million in outstanding Pennichuck debt it will assume upon purchase. Aldermen have approved the borrowing of as much as $220 million.

Last month, aldermen approved the appointment of nine people to a Pennichuck Board of Directors for when the city takes control of the company.

Lozeau will serve as a board member for two years and one to three other seats could be filled at a later time.

The board’s first meeting is scheduled for Friday.

“I’m looking forward to Wednesday,” McCarthy said. “It’s a decision we won’t regret in the future.”

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