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Wednesday, February 1, 2012

Panel tends to Pennichuck business

NASHUA – A week after the celebration of the city’s acquisition of Pennichuck Corp., it’s all down to business with the public operation of the company and its three water utilities.

On Tuesday, an aldermanic committee allowed Pennichuck to open a $10 million line of credit, a source of money the company had prior to being acquired by the city of Nashua but needs again with new ownership.

The committee vote illustrated the steps the company now has to take with Nashua as its sole shareholder, rather than when it was a entity answering to a private board of directors and numerous shareholders.

A board of directors appointed by the mayor and city aldermen now oversees the day-to-day operations of Pennichuck and its three water utilities. That board approved the line of credit at its first meeting last Friday.

The city also needs to approve any major fiscal transaction for the company, thus Pennichuck also had to seek aldermanic approval for the credit line. With the aldermanic Pennichuck Water Special Committee approving the request Tuesday, the proposal now advances to a full board vote.

When Pennichuck was in private hands, it had a $12 million line of credit, but closed it, with no outstanding balance, upon the sale of the company, according to John Patenaude, interim CEO of Pennichuck.

The company wants to open a new revolving line of credit to finance capital needs when necessary, Patenaude said. As with other companies, Pennichuck would prefer to have a line of credit rather than having to seek several loans for when it needs to replace or repair basic equipment and other items, he said.

Pennichuck can open a $10 million line of credit with Bank of America at an interest rate of roughly 3.6 percent, Patenaude told the aldermanic committee. The company might tap the credit at the end of the year, he said.

Seeking aldermanic approval highlighted the unique nature of the city’s $200 million acquisition, which was made official last Wednesday after a decade of back-and-forth negotiations between the city and Pennichuck.

It is believed that Nashua is 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.

Pennichuck East Utility, one of the company’s three utilities, also is seeking aldermanic approval to borrow up to $525,000 from the New Hampshire revolving loan fund.

The money would fund the replacement of a PVC water main in the Locke Lake system in Barnstead. The aldermanic committee approved the loan, and now the full board vote awaits.

Aldermen having to vote on this loan request also puts into perspective how the city will have fiscal say on the running of Pennichuck water utilities in communities across the state.

The town of Merrimack had long objected to that level of control by Nashua officials, but dropped its protest to state regulators late last year as the Public Utilities Commission approved the sale of Pennichuck.

The city paid $29 a share for Pennichuck stock, a total of $137.8 million for about 4.7 million shares.

Also, the city will spend $2.2 million on 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.

The city borrowed $152 million to pay for the company, and water rates will largely pay for the transaction. The city could someday bond an additional $60 million to pay off outstanding debt it took on when it acquired the company.

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