NOTE 4 - DEBT AND FINANCING ARRANGEMENTS

Details on long-term debt at September 30, 2022, September 30, 2021 and December 31, 2021 are shown

below:


($ millions)	September 30,				December 31,
	2022		2021		2021
Unitil Corporation:
3.70% Senior Notes, Due August 1, 2026	$	30.0	$	30.0	$	30.0
3.43% Senior Notes, Due December 18, 2029		30.0		30.0		30.0
Unitil Energy First Mortgage Bonds:
8.49% Senior Secured Notes, Due October 14, 2024		1.5		3.0		1.5
6.96% Senior Secured Notes, Due September 1, 2028		12.0		14.0		14.0
8.00% Senior Secured Notes, Due May 1, 2031		13.5		15.0		15.0
6.32% Senior Secured Notes, Due September 15, 2036		15.0		15.0		15.0
3.58% Senior Secured Notes, Due September 15, 2040		27.5		27.5		27.5
4.18% Senior Secured Notes, Due November 30, 2048		30.0		30.0		30.0
Fitchburg:
6.79% Senior Notes, Due October 15, 2025		6.0		10.0		6.0
3.52% Senior Notes, Due November 1, 2027		10.0		10.0		10.0
7.37% Senior Notes, Due January 15, 2029		8.4		9.6		9.6
5.90% Senior Notes, Due December 15, 2030		15.0		15.0		15.0
7.98% Senior Notes, Due June 1, 2031		14.0		14.0		14.0
3.78% Senior Notes, Due September 15, 2040		27.5		27.5		27.5
4.32% Senior Notes, Due November 1, 2047		15.0		15.0		15.0
Northern Utilities:
3.52% Senior Notes, Due November 1, 2027		20.0		20.0		20.0
7.72% Senior Notes, Due December 3, 2038		50.0		50.0		50.0
3.78% Senior Notes, Due September 15, 2040		40.0		40.0		40.0
4.42% Senior Notes, Due October 15, 2044		50.0		50.0		50.0
4.32% Senior Notes, Due November 1, 2047		30.0		30.0		30.0
4.04% Senior Notes, Due September 12, 2049		40.0		40.0		40.0
Granite State:
3.72% Senior Notes, Due November 1, 2027		15.0		15.0		15.0
Unitil Realty Corp.:
2.64% Senior Secured Notes, Due December 18, 2030		4.3		4.5		4.5

Total Long-Term Debt		504.7		515.1		509.6
Less: Unamortized Debt Issuance Costs		3.4		3.7		3.6

Total Long-Term Debt, net of Unamortized Debt Issuance Costs		501.3		511.4		506.0
Less: Current Portion		8.2		10.1		8.2

Total Long-term Debt, Less Current Portion	$	493.1	$	501.3	$	497.8

Fair Value of Long-Term Debt

Currently, the Company believes 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,
	2022		2021		2021
Estimated Fair Value of Long-Term Debt	$	458.3	$	598.2	$	584.9

On September 29, 2022, the Company entered into a Third Amended and Restated Credit Agreement with a syndicate of lenders (collectively, the “Credit Facility”), which amended and restated in its entirety the prior credit facility. Unitil may borrow under the Credit Facility until September 29, 2027, subject to two

one-year

extensions under certain circumstances. The Credit Facility terminates and all amounts outstanding thereunder are due and payable on September 29, 2027, subject to the potential extension discussed in the prior sentence.

The Credit Facility has a borrowing limit of $200 million, which includes a $25 million sublimit for the issuance of standby letters of credit. Unitil may increase the borrowing limit under the Credit Facility by up to $75 million under certain circumstances. The Credit Facility generally provides Unitil with the ability to elect that borrowings under the Credit Facility bear interest under several options, including a daily fluctuating rate equal to (a) the forward-looking secured overnight financing rate (as administered by the Federal Reserve Bank of New York) term rate with a term equivalent to one month beginning on that date, plus (b) 0.1000%, plus (c) a margin of 1.125% to 1.375% (based on Unitil’s credit rating). As of the close of business on September 29, 2022, Unitil’s aggregate borrowings under the Credit Facility were approximately $65.5 million at an interest rate per annum of approximately 4.272% (which interest rate was based on the lowest end of the margin range discussed above).

The Company uses the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $214.0 million for the nine months ended September 30, 2022. Total gross repayments were $206.1 million for the nine months ended September 30, 2022. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of September 30, 2022 and the prior credit facility as of September 31, 2021 and December 31,

2021:


	Revolving Credit Facility ($ millions)
	September 30,				December 31,
	2022		2021		2021
Limit	$	200.0	$	120.0	$	120.0
Short-Term Borrowings Outstanding		72.0		30.5		64.1

Available	$	128.0	$	89.5	$	55.9

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 incur 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 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, 2022, September 30, 2021 and December 31, 2021, the Company was in compliance with the covenants contained in the Credit Facility or the prior credit facility, as applicable, in effect on those dates.

The average interest rates on all short-term borrowings and intercompany money pool transactions were 3.6% and 1.2% for the three months ended September 30, 2022 and September 30, 2021, respectively. The average interest rates on all short-term borrowings and intercompany money pool transactions were 2.4% and 1.2% for the nine months ended September 30, 2022 and September 30, 2021, respectively. The average interest rate on all short-term borrowings for the twelve months ended December 31, 2021 was 1.2%.

Unitil Corporation and its utility subsidiaries, Fitchburg, Unitil Energy, Northern Utilities, and Granite State currently are rated “BBB+” by Standard & Poor’s Ratings Services. Unitil Corporation and Granite State currently are rated “Baa2”, and Fitchburg, Unitil Energy and Northern Utilities are currently rated “Baa1” by Moody’s Investors Services.

Northern Utilities enters into asset management agreements under which Northern Utilities releases certain gas pipeline and storage assets, sells to an asset manager and subsequently repurchases the gas over the course of the gas heating season at the same price at which it sold the gas to the asset manager. There was $23.4 million, $9.7 million and $8.3 million of gas obligations at September 30, 2022, September 30, 2021 and December 31, 2021, respectively, related to these asset management agreements. The amount of gas released in September 2022 and payable in October 2022 is $0.3 million and is recorded in Accounts Payable at September 30, 2022. The amount of gas released in September 2021 and payable in October 2021 was $0.1 million and was recorded in Accounts Payable at September 30, 2021. The amount of gas released in December 2021 and payable in January 2022 was $1.6 million and was recorded in Accounts Payable at December 31, 2021.

Guarantees

The Company provides limited guarantees on certain energy and 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, 2022, there were approximately $1.6 million of guarantees outstanding with a duration less than one year.

Leases

Unitil’s subsidiaries lease some of their vehicles, machinery and office equipment under both capital and operating lease arrangements.

Total rental expense under operating leases charged to operations for the three months ended September 30, 2022 and 2021 amounted to $0.5 million and $0.5 million, respectively. Total rental expense under operating leases charged to operations for the nine months ended September 30, 2022 and 2021 amounted to $1.4 million and $1.4 million, respectively.

The balance sheet classification of the Company’s lease obligations was as

follows:


	September 30,				December 31,
Lease Obligations ($ millions)	2022		2021		2021
Operating Lease Obligations:
Other Current Liabilities (current portion)	$	1.6	$	1.6	$	1.6
Other Noncurrent Liabilities (long-term portion)		3.0		3.5		3.1

Total Operating Lease Obligations	$	4.6	$	5.1	$	4.7

Capital Lease Obligations:
Other Current Liabilities (current portion)	$	0.1	$	0.2	$	0.1
Other Noncurrent Liabilities (long-term portion)		0.1		0.2		0.2

Total Capital Lease Obligations	$	0.2	$	0.4	$	0.3

Total Lease Obligations	$	4.8	$	5.5	$	5.0

Cash paid for amounts included in the measurement of operating lease obligations for the nine months ended September 30, 2022 and September 30, 2021 was $1.4 million and $1.4 million and was included in Cash Provided by Operating Activities on the Consolidated Statements of Cash Flows.

Assets under capital leases amounted to approximately $0.6 million, $0.7 million and $0.7 million as of September 30, 2022, September 30, 2021 and December 31, 2021, respectively, less accumulated amortization of $0.3 million, $0.3 million and $0.3 million, respectively and are included in Net Utility Plant on the Company’s Consolidated Balance Sheets.

The following table is a schedule of future operating lease payment obligations and future minimum lease payments under capital leases as of September 30, 2022. The payments for operating leases consist of $1.6 million of current operating lease obligations, which are included in Other Current Liabilities and $3.0 million of noncurrent operating lease obligations, which are included in Other Noncurrent Liabilities, on the Company’s Consolidated Balance Sheets as of September 30, 2022. The payments for capital leases consist of $0.1 million of current capital lease obligations, which are included in Other Current Liabilities and $0.1 million of noncurrent capital lease obligations, which are included in Other Noncurrent Liabilities, on the Company’s Consolidated Balance Sheets as of

September 30,

2022.


Lease Payments ($000’s) Year Ending December 31,	Operating Leases		Capital Leases
Rest of 2022	$	457	$	36
2023		1,655		114
2024		1,325		59
2025		759		26
2026		456		6
2027-2031		291		3

Total Payments		4,943		244

Less: Interest		329		9

Amount of Lease Obligations Recorded on Consolidated Balance Sheets	$	4,614	$	235

Operating lease obligations are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used the interest rate stated in each lease agreement. As of September 30, 2022, the weighted average remaining lease term is 3.4 years and the weighted average operating discount rate used to determine the operating lease obligations was 3.7%. As of September 30, 2021, the weighted average remaining lease term was 3.7 years and the weighted average operating discount rate used to determine the operating lease obligations was 4.0%.