NASHUA – Pennichuck Corp. wants to borrow $25.5 million to refinance outstanding debt with long-term bonds better suited to now being under city ownership and to build a $7 million operations center.

The company seeks Board of Aldermen approval to allow its subsidiary, Pennichuck Water Works Inc., to issue the tax-exempt bonds. Aldermen on Tuesday referred the proposed resolution to the Pennichuck Water Special Committee for review. The board must approve all borrowing under the company’s articles of incorporation.

The proposal calls for using $16.6 million to refinance already existing outstanding debt. The intent is to organize Pennichuck Water Works’ financing so it is more favorable to and consistent with city ownership, said Thomas J. Leonard, chairman of the Pennichuck Corp. board of directors.

The city of Nashua became the sole shareholder of Pennichuck Corp. on Jan. 25, 2012 when it acquired all 4.7 million shares of the company for $137.8 million.

“It’s just good business to match our borrowings to our true needs,” Leonard said.

Pennichuck owns five corporations, including Pennichuck Water Works, which is its flagship utility and provides water to about 27,600 customers in 11 communities, including Nashua, Amherst, Merrimack, Hollis and Milford.

The company’s current debt structure includes future so-called balloon, or lump-sum, payments. These could pose a risk given that Pennichuck no longer is a publicly traded company that can sell stock to raise equity, said Leonard, who is an attorney with Welts White and Fontaine law firm in Nashua.

Refinancing would allow the company to replace existing bonds with new ones that would offer 20- to 25-year terms and would enable the company to coordinate repayment schedules with infrastructure depreciation, Leonard explained.

It also would allow the company to avoid balloon payments and to take advantage of current low interest rates, he added.

In addition, the company would like to set aside $7 million of the $25.5 million to build a new operations facility to replace the existing one on Will Street, Leonard said.

The Will Street building is obsolete and too small to operate efficiently, he said.

Company officials made it a priority 18 months ago to replace it and have been exploring other possible sites since, Leonard said. Construction likely wouldn’t take place for three years, but the item is included in the overall borrowing package to keep the costs of going out to bond at a minimum.

The remaining $2.1 million would pay for the costs of issuing new bonds, including interest and debt service.

Pennichuck also must get the New Hampshire Public Utility Commission, New Hampshire Business Finance Authority and Governor and Executive Council to approve the $25.5 million borrowing plan. If successful, it expects to issue bonds in mid-fall, Leonard said.

The company revealed in its financial statements that consolidated revenues for the fourth quarter dropped from $8.5 million in 2013 to $8.2 million in 2014. The decrease is partly due to lower water usage at Pennichuck Water Works.

Consolidated year-to-date revenues increased slightly from $37.7 million in 2013 to $38.8 million in 2014.

Cash flow decreased from $2.9 million in the fourth quarter of 2013 to $2.6 million in the same quarter last year largely due to lower revenues,

“The only way we have revenue in Pennichuck Water Works is by selling water,” Leonard explained.

Wet weather can see water demand drop, particularly when people don’t use it as much to water lawns, he explained.

“We have to deal with the ups and downs of business. But, in the big picture, the company is doing exactly what everybody predicted. It is strong. The revenues are stable. The expenses are stable,” he explained.

The Board of Aldermen on Tuesday also unanimously voted to re-elect David P. Bernier, Stephen D. Genest and Leonard to three-year terms on the Pennichuck board of directors. The board also authorized the mayor to transmit that vote by proxy card at the May 9 annual shareholder meeting.

Kathryn Marchocki can be reached at 594-6589, kmarchocki@nashuatelegraph.com or @Telegraph_KMar.