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Capitalization

3 Months Ended

Mar. 31, 2018

Note 3 – Capitalization

Common Stock - During the three months ended March 31, 2018 and 2017, there were 7,665 common shares (approximately $0.3 million) and 7,845 common shares (approximately $0.3 million), respectively, issued under the Middlesex Water Company Investment Plan.

Long-term Debt - In April 2018, the NJBPU approved Middlesex’s request to borrow up to $57.0 million under the New Jersey Infrastructure Bank (NJIB) program to fund the construction of a large-diameter transmission pipeline from the Carl J. Olsen (CJO) water treatment plant and interconnect with our distribution system. Middlesex currently expects to close on the NJIB construction loan in the second quarter of 2018 with funding requisitions occurring primarily throughout 2018 and 2019.

In April 2018, the NJBPU approved Middlesex’s request to borrow up to $55.0 million under the NJIB program to fund upgrades to the Company’s CJO water treatment plant. Middlesex currently expects to close on the NJIB construction loan in the fourth quarter of 2018 with funding requisitions beginning late in 2018 and through 2020.

In March 2018, the NJBPU approved Middlesex’s request to borrow up to $14.0 million under the NJIB program to fund the 2018 RENEW Program, which is an ongoing initiative to eliminate all unlined water distribution mains in the Middlesex system. Middlesex expects to close on the NJIB construction loan in the third quarter of 2018 with funding requisitions occurring in the third quarter 2018 through early 2019.

In March 2018, the DEPSC approved Tidewater’s request to borrow up to $0.9 million under the Delaware State Revolving Fund (SRF) program to fund the replacement of an entire water distribution system of a small Delaware subdivision. Tidewater expects to close on the SRF loan in the second quarter of 2018 and complete the project in 2018.

In November 2017, Middlesex closed out three of its NJIB construction loans (booster station upgrade, RENEW 2015 and RENEW 2016 projects) by issuing to the NJIB first mortgage bonds designated as Series XX ($11.3 million) and Series YY ($3.9 million). The interest rate on the Series XX bond is zero and the interest rate on the Series YY bond range between 3.0% and 5.0%. Through March 31, 2018, Middlesex has drawn down $14.8 million and expects to draw down the remaining proceeds by the third quarter of 2018. The final maturity date for both bonds is August 1, 2047, with scheduled principal and interest payments over the life of the loan.

Middlesex closed on a $9.5 million NJBPU approved NJIB construction loan in August 2017. The proceeds are being used to fund the RENEW 2017 project. The NJIB has notified the Company that the construction loan will be closed out on May 22, 2018 by issuing to the NJIB first mortgage bonds designated as Series 2018A and Series 2018B with a final maturity date of August 1, 2047 and with scheduled principal and interest payments over the life of the loan. The exact allocation amount for each of the first mortgage bonds and the interest rate on the Series 2018B first mortgage bond will be determined on the loan closing date. The interest rate on the Series 2018A first mortgage bond will be zero. Through March 31, 2018, Middlesex has drawn down $6.2 million and expects to draw the remaining proceeds after the closing.

Fair Value of Financial Instruments - The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments for which it is practicable to estimate that value. The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade receivables, accounts payable and notes payable approximate their respective fair values due to the short-term maturities of these instruments. The fair value of First Mortgage and State Revolving Fund Bonds (collectively, the Bonds) issued by Middlesex is based on quoted market prices for similar issues. Under the fair value hierarchy, the fair value of cash and cash equivalents is classified as a Level 1 measurement and the fair value of notes payable and the Bonds in the table below are classified as Level 2 measurements. The carrying amount and fair value of the Bonds were as follows:

	March 31, 2018		December 31, 2017
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
Bonds	$ 95,009	$ 96,556	$ 95,322	$ 98,036

For other long-term debt for which there was no quoted market price and there is not an active trading market, it was not practicable to estimate their fair value (for details, including carrying value, interest rate and due date on these series of long-term debt, please refer to those series noted as “Amortizing Secured Note”, “State Revolving Trust Note” and “Construction Loans” on the Condensed Consolidated Statements of Capital Stock and Long-Term Debt). The carrying amount of these instruments was $54.0 million and $52.5 million at March 31, 2018 and December 31, 2017, respectively. Customer advances for construction have carrying amounts of $21.0 million and $21.4 million at March 31, 2018 and December 31, 2017, respectively. Their relative fair values cannot be accurately estimated since future refund payments depend on several variables, including new customer connections, customer consumption levels and future rate increases.