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Capitalization
 12 Months Ended
Dec. 31, 2024
Capitalization [Abstract]  
Capitalization

Note 6 - Capitalization

 

All the transactions discussed below related to the issuance of securities were approved by either the NJBPU or DEPSC, except where otherwise noted.

 

Common Stock

 

The Company issues shares of its common stock in connection with its Middlesex Water Company Investment Plan (the Investment Plan), a direct share purchase and dividend reinvestment plan for the Company’s common stock. The Company raised approximately $1.0 million under the Investment Plan during 2024. Currently, 0.7 million

shares remain registered with the United States Securities and Exchange Commission and available for issuance to participants under the Investment Plan.

 

In April 2023, Middlesex received approval from the NJBPU to issue and sell up to 1.0 million shares of its common stock, without par value, through December 31, 2025. Sales of additional shares of common stock are part of the Company’s comprehensive financing plan to fund its multi-year utility plant infrastructure investment program. As described below in “Long-term Debt”, the NJBPU also approved the debt funding component of the financing plan.

 

The Company issues common shares under a restricted stock plan for certain management employees, which is described in Note 7 – Employee Benefit Plans.

 

The Company maintains a stock plan for its independent Directors as a component of outside members of the Board of Directors compensation. For the years ended December 31, 2024, 2023 and 2022, 7,570, 4,608 and 2,664 shares, respectively, of Middlesex common stock were granted and issued to the Company’s independent Directors under the plan. The maximum number of shares authorized for grant under the plan is 100,000, of which 34,283 shares remain available for future awards.

 

In the event dividends on the preferred stock are in arrears, no dividends may be declared or paid on the common stock of the Company.

 

Preferred Stock

 

At December 31, 2024 and 2023, there were 120,000 shares of preferred stock authorized and less than 16,000 shares of preferred stock outstanding. There were no preferred stock dividends in arrears.

 

The Company may not pay any dividends on its common stock unless full cumulative dividends to the preceding dividend date for all outstanding shares of preferred stock have been paid or set aside for payment. If four or more quarterly dividends are in arrears, the preferred shareholders, as a class, are entitled to elect two members to the Board of Directors in addition to Directors elected by holders of the common stock. In addition, if Middlesex were to liquidate, holders of preferred stock would be paid back the stated value of their preferred shares before any distributions could be made to common stockholders.

 

The conversion feature of the no par $7.00 Series Cumulative and Convertible Preferred Stock allows the security holders to convert one convertible preferred share for twelve shares of the Company's common stock. In 2024, 4,275 shares of the Company’s no par $7.00 Series Cumulative and Convertible Preferred Stock were converted into 51,300 shares (approximately $0.4 million) of the Company’s common stock. In addition, the Company may redeem up to 10% of the outstanding convertible stock in any calendar year at a price equal to the fair value of twelve shares of the Company's common stock for each share of convertible stock redeemed.

 

Long-term Debt

 

Subject to regulatory approval, the Company periodically issues long-term debt to fund its investments in utility plant. To the extent possible and fiscally prudent, the Company finances qualifying capital projects under State Revolving Fund (SRF) loan programs in New Jersey and Delaware. These government programs provide financing at interest rates typically below rates available in the broader financial markets.

 

Middlesex has received approval from the NJBPU to borrow up to $300.0 million from the New Jersey SRF Program, the New Jersey Economic Development Authority, private placement and other financial institutions as needed through December 31, 2025. The Company expects to issue debt securities in a series of one or more transaction offerings over a multi-year period to help fund Middlesex’s multi-year capital construction program.

 

In September 2024, Tidewater closed on a $2.2 million Delaware SRF loan with a 0.0% interest rate with an expected maturity date in 2044. This loan is for costs associated with Tidewater’s obligation, as required by federal law and Delaware regulations, to identify and inventory lead service lines throughout Tidewater’s service area. Tidewater has drawn down $1.7 million as of December 31, 2024.

In May 2024, Tidewater closed on four DEPSC-approved Delaware SRF loans totaling $5.6 million, all at interest rates of 2.0% with expected maturity dates in 2044. These loans are for the construction, relocation, improvement, and/or interconnection of transmission mains and construction of a water treatment facility. Tidewater has drawn down less than $0.1 million on these loans as of December 31, 2024. Each project has its own construction timetable with the last spending set to occur in 2026.

 

Separately, Tidewater has two active construction projects funded by prior year Delaware SRF loans totaling $8.3 million with remaining availability of funds for borrowing. These loans are for the construction of a one million gallon elevated storage tank and construction, relocation, improvement, and interconnection of transmission mains. Tidewater has drawn a total of $4.9 million through December 31, 2024 and expects that the requisitions will continue through the second quarter of 2025.

 

In July 2023, Pinelands Water and Pinelands Wastewater closed on $3.9 million and $3.6 million CoBank amortizing mortgage type loans, respectively, with an interest rate of 6.17% and a final maturity date of 2043 for each loan. Proceeds were used to pay off outstanding intercompany loans with Middlesex and for ongoing capital projects.

 

In May 2023, Tidewater closed on a $20.0 million loan from CoBank with an interest rate of 5.71% and a 2033 maturity date and fully drew all funds by June 30, 2023. Proceeds from the loan were used to pay off Tidewater’s outstanding balances under its bank lines of credit and for other general corporate purposes.

 

In April 2023, Tidewater closed on two DEPSC-approved Delaware SRF loans totaling $6.9 million, all at interest rates of 2.0% with maturity dates in 2043 and 2044. These loans are for the construction, relocation, improvement, and/or interconnection of transmission mains. Tidewater has fully drawn on these loans.

 

In March 2023, Middlesex closed on a $40.0 million, 5.24% private placement of First Mortgage Bonds (FMBs) with a 2043 maturity date designated as Series 2023A. Proceeds were used to reduce the Company’s outstanding balances under its bank lines of credit.

 

In May 2022, Middlesex repaid its two outstanding New Jersey Infrastructure Bank (NJIB) construction loans by issuing FMBs to the NJIB under two loan agreements. The total amount of FMBs issued is $52.2 million and designated as Series 2022A ($16.2 million) and Series 2022B ($36.0 million). The interest rate on the Series 2022A bond is zero and the interest rate on the Series 2022B bond ranges between 2.7% and 3.0%. The final maturity date for both FMBs is August 1, 2056, with scheduled debt service payments over the life of these loans.

 

The aggregate annual principal repayment obligations as of December 31, 2024 for all long-term debt over the next five years and thereafter are shown below:

 

Year  (In Millions)
Annual Maturities
    
2025  $7.7 
2026   7.5 
2027   7.3 
2028   7.0 
2029   6.5 
Thereafter   323.4 

 

The weighted average interest rate on all long-term debt at December 31, 2024 and 2023 was 3.64% and 3.65%, respectively.

 

Substantially all of the utility plant of the Company is subject to the lien of its mortgage, which includes debt service and capital ratio covenants. The Company is in compliance with all of its mortgage covenants and restrictions.

Earnings Per Share

 

The following table presents the calculation of basic and diluted earnings per share (EPS) of common stock for the years ended December 31, 2024, 2023 and 2022. Basic EPS is computed on the basis of the weighted average number of shares outstanding. Diluted EPS assumes the conversion of the Convertible Preferred Stock $7.00 Series.

 

 

   (In Thousands, Except Per Share Amounts)
   2024  2023  2022   
Basic:  Income  Shares  Income  Shares  Income  Shares
Net Income  $44,351    17,842   $31,524    17,732   $42,429    17,597 
Preferred Dividend   (112)        (120)        (120)     
Earnings Applicable to Common Stock  $44,239    17,842   $31,404    17,732   $42,309    17,597 
Basic EPS  $2.48        $1.77        $2.40      
Diluted:                              
Earnings Applicable to Common Stock  $44,239    17,842   $31,404    17,732   $42,309    17,597 
Convertible Preferred $7.00 Series Dividend   46    104    67    115    67    115 
Adjusted Earnings Applicable to Common Stock  $44,285    17,946   $31,471    17,847   $42,376    17,712 
Diluted EPS  $2.47        $1.76        $2.39      

 

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 consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and notes payable approximate their respective fair values due to the short-term maturities of these instruments. The fair value of FMBs and SRF 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:

 

   (In Thousands)
   At December 31,
   2024  2023
   Carrying  Fair  Carrying  Fair
   Amount  Value  Amount  Value
FMBs  $129,602   $125,067   $133,374   $131,745 

  

It was not practicable to estimate the fair value on our outstanding long-term debt for which there is no quoted market price and there is not an active trading market. For details, including carrying value, interest rate and due date on these series of long-term debt, please refer to those series of long-term debt titled “Amortizing Secured Notes” and “State Revolving Trust Notes” on the Consolidated Statements of Capital Stock and Long-Term Debt. The carrying amount of these instruments was $229.8 million and $231.3 million at December 31, 2024 and 2023, respectively. Advances for construction have carrying amounts of $22.6 million and $21.3 million at December 31, 2024 and 2023, 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.