NOTE 4 – DEBT AND FINANCING ARRANGEMENTS

Details on long-term debt at September 30, 2016, September 30, 2015 and December 31, 2015 are shown below:


($ millions)	September 30,				December 31,
	2016		2015		2015
Unitil Corporation Senior Notes:
6.33% Notes, Due May 1, 2022	$	20.0	$	20.0	$	20.0
3.70% Notes, Due August 1, 2026		30.0		—		—

Unitil Energy Systems, Inc.:
First Mortgage Bonds:
5.24% Series, Due March 2, 2020		15.0		15.0		15.0
8.49% Series, Due October 14, 2024		12.0		15.0		12.0
6.96% Series, Due September 1, 2028		20.0		20.0		20.0
8.00% Series, Due May 1, 2031		15.0		15.0		15.0
6.32% Series, Due September 15, 2036		15.0		15.0		15.0

Fitchburg Gas and Electric Light Company:
Long-Term Notes:
6.75% Notes, Due November 30, 2023		11.4		15.2		11.4
7.37% Notes, Due January 15, 2029		12.0		12.0		12.0
7.98% Notes, Due June 1, 2031		14.0		14.0		14.0
6.79% Notes, Due October 15, 2025		10.0		10.0		10.0
5.90% Notes, Due December 15, 2030		15.0		15.0		15.0

Northern Utilities Senior Notes:
6.95% Senior Notes, Series A, Due December 3, 2018		30.0		30.0		30.0
5.29% Senior Notes, Due March 2, 2020		25.0		25.0		25.0
7.72% Senior Notes, Series B, Due December 3, 2038		50.0		50.0		50.0
4.42% Senior Notes, Due October 15, 2044		50.0		50.0		50.0

Granite State Senior Notes:
7.15% Senior Notes, Due December 15, 2018		10.0		10.0		10.0

Unitil Realty Corp.:
Senior Secured Notes:
8.00% Notes, Due Through August 1, 2017		0.6		1.3		1.1

Total Long-Term Debt		355.0		332.5		325.5
Less: Unamortized Debt Issuance Costs		3.0		3.0		2.9

Total Long-Term Debt, net of Unamortized Debt Issuance Costs		352.0		329.5		322.6
Less: Current Portion		17.0		3.8		17.1

Total Long-term Debt, Less Current Portion	$	335.0	$	325.7	$	305.5

Fair Value of Long-Term Debt – Currently, the Company believes that there is no active market in the Company’s debt securities, which have all been sold through private placements. If there were an active market for the Company’s debt securities, the fair value of the Company’s long-term debt would be estimated based on the quoted market prices for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities. The fair value of the Company’s long-term debt is estimated using Level 2 inputs (valuations based on quoted prices available in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are directly observable, and inputs derived principally from market data.) In estimating the fair value of the Company’s long-term debt, the assumed market yield reflects the Moody’s Baa Utility Bond Average Yield. Costs, including prepayment costs, associated with the early settlement of long-term debt are not taken into consideration in determining fair value.

($ millions)

September 30,

December 31,

2016

2015

Estimated Fair Value of Long-Term Debt

405.8

356.7

345.2

Credit Arrangements

On October 4, 2013, the Company entered into an Amended and Restated Credit Agreement (as further amended, restated, amended and restated, modified or supplemented from time to time, the “Credit Facility”). The Credit Facility terminates October 4, 2020 and provides for a borrowing limit of $120 million which includes a $25 million sublimit for the issuance of standby letters of credit. The Credit Facility provides Unitil with the ability to elect that borrowings under the Credit Facility bear interest under several options, including at a daily fluctuating rate of interest per annum equal to one-month London Interbank Offered Rate (LIBOR) plus 1.25%. Provided there is no event of default under the Credit Facility, the Company may on a one-time basis request an increase in the aggregate commitments under the Credit Facility by an aggregate additional amount of up to $30 million.

The Company utilizes the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $148.3 million and $77.1 million for the nine months ended September 30, 2016 and September 30, 2015, respectively. Total gross repayments were $153.4 million and $102.3 million for the nine months ended September 30, 2016 and September 30, 2015, respectively. In the third quarter of 2016, the Company issued a standby letter of credit for $1.1 million. The following table details the borrowing limits, amounts outstanding and amounts available under the revolving Credit Facility as of September 30, 2016, September 30, 2015 and December 31, 2015:


	Revolving Credit Facility ($ millions)
	September 30,				December 31,
	2016		2015		2015
Limit	$	120.0	$	120.0	$	120.0
Short-Term Borrowings Outstanding	$	36.9	$	4.1	$	42.0
Letters of Credit Outstanding	$	1.1	$	—	$	—

Available	$	82.0	$	115.9	$	78.0

The Credit Facility contains customary terms and conditions for credit facilities of this type, including affirmative and negative covenants. There are restrictions on, among other things, Unitil’s and its subsidiaries’ ability to permit liens or incur indebtedness, and restrictions on Unitil’s ability to merge or consolidate with another entity or change its line of business. The affirmative and negative covenants under the Credit Facility shall apply to Unitil until the Credit Facility terminates and all amounts borrowed under the Credit Facility are paid in full (or with respect to letters of credit, they are cash collateralized). The only financial covenant in the Credit Facility provides that Unitil’s Funded Debt to Capitalization (as each term is defined in the Credit Facility) cannot exceed 65%, tested on a quarterly basis. At September 30, 2016, September 30, 2015 and December 31, 2015, the Company was in compliance with the covenants contained in the Credit Facility in effect on that date. (See also “Credit Arrangements” in Note 5.)

The weighted average interest rates on all short-term borrowings were 1.7% and 1.6% for the nine months ended September 30, 2016 and September 30, 2015, respectively. The weighted average interest rate on all short-term borrowings for the twelve months ended December 31, 2015 was 1.5%.

Unitil Corporation and its utility subsidiaries, Fitchburg, Unitil Energy, Northern Utilities, and Granite State are currently rated “BBB+” by Standard & Poor’s Ratings Services.

In April 2014, Unitil Service Corp. entered into a financing arrangement, structured as a capital lease obligation, for various information systems and technology equipment. Final funding under this capital lease occurred on October 30, 2015, resulting in total funding of $13.4 million. The capital lease matures on September 30, 2020. As of September 30, 2016, there are $2.6 million of current and $8.4 million of noncurrent obligations under this capital lease on the Company’s Consolidated Balance Sheets.

Northern Utilities enters into asset management agreements under which Northern Utilities releases certain natural gas pipeline and storage assets, resells the natural gas storage inventory to an asset manager and subsequently repurchases the inventory over the course of the natural gas heating season at the same price at which it sold the natural gas inventory to the asset manager. There was $9.3 million, $9.9 million and $10.8 million of natural gas storage inventory at September 30, 2016, September 30, 2015 and December 31, 2015, respectively, related to these asset management agreements. The amount of natural gas inventory released in September 2016 and payable in October 2016 is $0.1 million and is recorded in Accounts Payable at September 30, 2016. The amount of natural gas inventory released in September 2015 and payable in October 2015 was $0.1 million and is recorded in Accounts Payable at September 30, 2015. The amount of natural gas inventory released in December 2015 and payable in January 2016 was $0.6 million and was recorded in Accounts Payable at December 31, 2015.

Guarantees

The Company provides limited guarantees on certain energy and natural gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of September 30, 2016, there were approximately $21.1 million of guarantees outstanding and the longest term guarantee extends through August 2017.

The Company also guarantees the payment of principal, interest and other amounts payable on the notes issued by Unitil Realty and Granite State. As of September 30, 2016, the principal amount outstanding for the 8% Unitil Realty notes was $0.6 million, and the principal amount outstanding for the 7.15% Granite State notes was $10.0 million.