As filed with the Securities and Exchange Commission on
March 28, 2003
File No. 70-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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APPLICATION-DECLARATION
ON FORM U-1
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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UNITIL CORPORATION
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
Unitil Energy Systems, Inc.
UNITIL POWER CORP.
UNITIL REALTY CORP.
UNITIL RESOURCES INC.
UNITIL SERVICE CORP.
6 Liberty Lane West
Hampton, New Hampshire 03842-1720
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(Name of companies filing this statement and
address of principal executive offices)
UNITIL CORPORATION
6 Liberty Lane West
Hampton, New Hampshire 03842-1720
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(Name of top registered holding company parent)
Mark H. Collin
Senior Vice President, Chief Financial Officer & Treasurer
UNITIL CORPORATION
6 Liberty Lane West
Hampton, New Hampshire 03842-1720
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(Name and address of agent for service)
The Commission is requested to mail copies of
all orders, notices and communications to:
Sheri E. Bloomberg, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
Unitil Corporation, a New Hampshire corporation ("Unitil") and a registered
holding company under the Public Utility Holding Company Act of 1935, as amended
(the "Act"), and its wholly owned subsidiary companies, Fitchburg Gas and
Electric Light Company ("Fitchburg"), Unitil Energy Systems, Inc. ("Unitil
Energy"), Unitil Power Corp. ("Unitil Power"), Unitil Realty Corp. ("Unitil
Realty"), Unitil Resources, Inc. ("Unitil Resources") and Unitil Service Corp.
("Unitil Service" and, together with Fitchburg, Unitil Energy, Unitil Power,
Unitil Realty and Unitil Resources, the "Subsidiaries" or "Money Pool
Participants"),1 hereby submit this application-declaration on Form U-1 (the
"Application-Declaration") with the Securities and Exchange Commission (the
"Commission") for the authorization and approval under Sections 6(b), 7, 9(a),
10 and 12(b) of the Act and the Rules 43, 45 and 52 thereunder with respect to
the following transactions:
(a) short-term borrowing by Unitil through June 30, 2006 on a revolving
basis under current and proposed unsecured facilities from certain banks up
to an aggregate amount of $55 million for a period of time through June 30,
2006 to be used in connection with (i) loans or advances to Subsidiaries
through the Pooling Agreement (as defined below), (ii) payment of
indebtedness, (iii) short-term cash needs which may arise due to payment
timing differences, and (iv) other general purposes;
(b) short-term borrowings by Fitchburg2 through June 30, 2006 pursuant to
formal or informal credit lines up to $35 million; and
(c) in connection with the continued use of the system money pool ("Money
Pool") by Unitil and the Money Pool Participants,3 pursuant to the Cash
Pooling and Loan Agreement (the "Pooling Agreement") among Unitil and the
Money Pool Participants dated as of February 1, 1985, as amended (attached
hereto as Exhibit B-1), for the other Applicants to make loans to Fitchburg
in an amount not to exceed $35 million through June 30, 2006.
By order dated June 9, 2000, the Applicants are currently authorized to
make unsecured short-term borrowings in the amount of $45 million for Unitil and
$30 million for Fitchburg and
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1 For purposes of this Application-Declaration, Unitil and the Subsidiaries are
collectively referred to as the "Applicants."
2 Unitil Energy has obtained authorization for its short-term borrowings from
the New Hampshire Public Utilities Commission. Moreover, any such short-term
borrowings will be used solely for the purpose of financing its business at
interest rates and with maturity dates that would parallel such lender's
effective short-term cost of capital on any given date. Accordingly, such
short-term borrowings by Unitil Energy are exempt from the prior approval
requirements of Sections 6 and 9 of the Act under Rule 52(a) and (d).
3 Unitil Power, Unitil Realty, Unitil Resources and Unitil Services are
non-utility Subsidiaries of Unitil whose short-term borrowings will be used
solely for the purpose of financing their respective businesses at interest
rates and with maturity dates that would parallel such lender's effective
short-term cost of capital on any given date. Accordingly, such transactions are
exempt from the prior approval requirements of Section 6 of the Act under Rule
52(b).
to operate under the Money Pool, as more fully described in the joint
application-declaration on Form U-1, as amended, in File No. 70-09633, and the
Commission's order with respect thereto (HCAR No. 35-27182). In accordance with
the Commision's order of December 2, 2002 (HCAR No. 35-27609), Unitil's two New
Hampshire utilities, Concord Electric Company and Exeter & Hampton Electric
Company, merged to form Unitil Energy. Unitil Energy is a participant in the
Money Pool. Pursuant to Rule 52 under the Act, the continued operation of the
Money Pool does not require further Commission approval. In accordance with
Section 6(b) of the Act, none of the transactions contemplated herein will be
part of a public offering. The Applicants will continue to file reports on
short-term borrowings and Money Pool transactions on a quarterly basis within 30
days after the end of each calendar quarter, which shall contain, for each
company, (i) the maximum principal amount of short-term borrowings outstanding,
(ii) the average interest rate for the Money Pool borrowings for the period and
(iii) the maximum amount outstanding during the period for each source of
outside borrowings.
The Applicants are requesting an increase in the amount of short-term debt
authorization with respect to Unitil and Fitchburg in order to better ensure
that the system is able to meet it working capital and capital expenditure in
increasingly volatile markets, particularly with respect to the utilities' gas
and electric supply. In the winter of 2001 and again in the winter of 2003,
natural gas and oil commodity prices have both reached new highs and have been
extremely volatile. This combination of quick swings to high prices increases
the need for the Applicants to have rapid access to working capital. Other
factors that are expected to increase the Company's working capital requirements
in 2003 include increased power supply restructuring related cost recovery
deferrals and higher power supply related collateral and assurance requirements.
In addition, Unitil has a utility system construction program in place that is
expected to result in capital expenditures of over $21 million in 2003. This
construction spending principally relates to required system improvements and
customer growth projects that Unitil believes will benefit both its customers as
a result of improved service and shareholders as a result of growth in its core
operations.
The proposed transactions may be subject to Rules 53 and 54 under the Act.
Neither Unitil nor any Subsidiary thereof presently has, or as a consequence of
the proposed transactions will have, an interest in any exempt wholesale
generator ("EWG") or foreign utility company ("FUCO"), as those terms are
defined in Sections 32 and 33 of the Act, respectively. None of the proceeds
from the proposed transactions will be used to acquire any securities of, or any
interest in, an EWG or FUCO. Moreover, neither Unitil nor any of the
Subsidiaries is, or as a consequence of the proposed transactions will become, a
party to, and such entities do not and will not have any rights under, a
service, sales or construction contract with any affiliated EWGs or FUCOs except
in accordance with the rules and regulations promulgated by the Commission with
respect thereto. Consequently, all applicable requirements of Rule 53(a)-(c)
under the Act are satisfied as required by Rule 54 under the Act.
A. Bank Borrowing by Unitil
In this Application-Declaration, Unitil seeks to extend the authorization
through June 30, 2006 for its short-term bank borrowing arrangements and
increase its short-term borrowing limit to $55 million, as described herein.
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As of March 2003 Unitil had three unsecured lines of credit: a $21 million
unsecured line of credit from Fleet National Bank (attached hereto as Exhibit
B-2), an $11 unsecured line of credit from Sovereign Bank (attached hereto as
Exhibit B-3), and a $13 million unsecured line of credit from Citizens Bank
(attached hereto as Exhibit B-4).
(i) Fleet National Bank
The $21 million unsecured line of credit is available to Unitil through
June 30, 2004. The interest rate for borrowing under the facility shall be
either (a) the rate of interest announced publicly by Fleet National Bank as its
Base Rate or (b) the Money Market Rate, as elected by Unitil. In addition to
this line of credit, Fleet National Bank has approved an informal money market
lending arrangement for minimum amounts of $500,000, at fixed rates out to
ninety days, that is available to Unitil through June 30, 2004. The unsecured
line of credit and the informal money market lending arrangement are each
available to Unitil subject to the bank's continued satisfaction with the
financial condition of Unitil and the Subsidiaries and to no substantive changes
in monetary or governmental regulations.
(ii) Sovereign Bank
The $11 million unsecured line of credit is available to Unitil through
June 30, 2004. The interest rate for borrowing under the facility is equal to
either (a) the rate of interest announced by Sovereign Bank as its Prime Rate or
(b) a fixed rate based on an index plus a margin to be determined by Sovereign
Bank, as elected by Unitil. This line is available to Unitil subject to the
bank's continued satisfaction with the financial condition of Unitil and the
Subsidiaries and to no substantive changes in monetary or governmental
regulations.
(iii) Citizens Bank New Hampshire
The $13 million unsecured line of credit is available to Unitil through
August 31, 2003. The interest rate for borrowing under the facility is equal to
either (a) the Wall Street Journal Prime rate, or (b) the London Interbank
Offered Rate ("LIBOR") as in effect on the date of the loan plus a margin to be
determined by Citizens Bank, as elected by Unitil. This line is available to
Unitil subject to the bank's continued satisfaction with the financial condition
of Unitil and the Subsidiaries and to no substantive changes in monetary or
governmental regulations.
The term "Base Rate," as used in the above discussion of Unitil's
short-term borrowing facilities, is synonymous with the prime rate, which is the
interest rate per annum from time to time announced and made effective by a bank
as the Base Rate, or as the case may be, the Base, reference or other similar
rate then designated by it for general commercial lending reference purposes, it
being understood that such rate is a reference rate, not necessarily the lowest,
established from time to time which serves as the basis upon which effective
rates of interest are calculated for loan making reference thereto.
The term "Money Market Rate," as used in the above discussion of Unitil's
short-term borrowing facilities, is the overnight or term money market
facilities interest rate per annum which is communicated to Unitil by a bank.
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Money Market Rates are offered by certain banks at a given point in time
and will vary depending on a number of factors including: the availability of
bank funds, the bank's internal cost of funding, the creditworthiness of the
borrower, the term of the loan, the size of the loan and the degree of
competition among banks in a market. The Money Market Rate offered by a bank is
normally a lower rate with more favorable terms and conditions than it Base
Rate. Under its short-term bank borrowing facilities, Unitil borrows at Money
Market Rates when such rates are available and more favorable than Base Rates.
Any borrowings at Money Market Rates, under current facilities proposed below,
do not and will not exceed the Base Rate for unsecured loans by the same bank.
Unitil proposes to issue short-term notes pursuant to both formal and
informal lines of credit with lending institutions. Unitil's current borrowing
agreements, described above and attached as Exhibits B-2, B-3 and B-4 are
typical of the forms of short-term notes proposed to be used by Unitil.
Short-term unsecured promissory notes will be issued by Unitil to a particular
lending institution prior to the first borrowing under that promissory note.
Borrowings will be evidenced on a "grid" schedule, in the form attached to each
promissory note and will be recorded the day that the request for borrowing is
made. The bank holding the respective promissory notes will maintain the record
of borrowings and repayments without the necessity of issuing additional notes.
Unitil anticipates that the promissory notes used may vary from the forms
described above to reflect customary terms or particular lending practices and
policies of different lending institutions, but otherwise will be substantially
similar.
Unitil's present and proposed short-term borrowing arrangements provide,
and will provide, for borrowings at any of the rates described above and may be
subject to prepayment at the borrower's option, as the case may be. The
borrowing rate shall change as the base rate changes. Short-term notes may
provide informal borrowings at sub-prime rate or Money Market Rate which may be
made available under each credit line arrangement. Money Market Rates are fixed
rates. Under Unitil's current short-term borrowing arrangements, Money Market
Rate borrowings are not subject to prepayment. Money Market Rate borrowings
under the proposed facilities may or may not be subject to prepayment.
Borrowings under the proposed credit agreements will not exceed the shorter
of the term of the particular line of credit or nine months. Short-term notes
issued on a transactional basis, will be dated as of the date of issue, will
have a maximum term of nine months and will bear interest at the Base or Money
Market Rate, described above.
Unitil requests authority to secure both formal and informal credit lines
with a number of lending institutions. Formal credit lines under the proposed
facilities may be subject to compensating balances and/or fee requirements.
Compensating balance requirements will not exceed 5% of the committed credit
line amount, and fees will not exceed 50 basis points times the total line of
credit. Unitil may change its credit line arrangements and obtain additional
formal or informal credit lines over time. The continued availability of such
credit lines is subject to the continued review of the lending institutions. In
the future, the Company may choose to formalize its banking relationship with
its banks through a syndicated credit facility. A syndicated credit facility
would allow the Company to receive the administrative and economic efficiencies
of coordinated banking relationships. The duration of any such facility would
not exceed 365 days.
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Unitil requests authority to renew and extend current short-term borrowings
under the existing and proposed facilities as such borrowings mature and/or
secure credit lines with other lending institutions under similar conditions, to
refund such short-term borrowings with other, similar short-term borrowings, to
repay such short-term borrowings or to increase their amount from time to time
up to an aggregate amount of $55 million. Unitil requests that the authority to
undertake new short-term borrowing be granted through June 30, 2006.
Unitil anticipates its working capital requirements to increase in the
future, due in part to unstable natural gas and purchase power prices, utility
capital construction expenditures, increased power supply restructuring cost
recovery deferrals and power supply-related and assurance costs. Unitil expects
to use the proceeds derived from short-term bank borrowings authorized by this
Commission pursuant to this application/declaration for: (i) loans or advances
to Subsidiaries through the Pooling Agreement, (ii) payment of indebtedness,
(iii) short-term cash needs which may arise due to payment timing differences,
and (iv) other general purposes
B. Short-Term Borrowing by Fitchburg - Pooling Agreement and Other
Fitchburg requests that it be authorized by the Commission to incur
short-term borrowings from any source, including the Money Pool, in an aggregate
principal amount at any one time outstanding not to exceed $35 million, and to
increase the amount it is authorized to have outstanding at any time under such
arrangements to $35 million, as described herein.
It is anticipated that most short-term borrowings by Fitchburg will be made
pursuant to the Pooling Agreement. However, Fitchburg may borrow from parties
outside of the Pooling Agreement. Accordingly, Fitchburg seeks Commission
authorization for short-term borrowings up to $35 million through the Pooling
Agreement and through direct borrowings from commercial banks.
Fitchburg will use the proceeds from its short-term borrowing primarily to
meet working capital requirements and provide interim financing for its utility
construction expenditures. In addition to construction and other physical
improvements, the funds will be used for permitted debt and preferred stock
sinking fund redemptions.
Any short-term borrowing from commercial banks undertaken by Fitchburg will
be under terms and conditions substantially similar to the terms and conditions
of the current short-term borrowing agreements between Unitil and its commercial
banks described above in Section A. Fitchburg proposes to issue short-term notes
pursuant to both formal and informal lines of credit with lending institutions.
Short-term promissory notes are expected to be issued to a particular lending
institution prior to the first borrowing under that promissory note from that
lender. Borrowings will be evidenced on a so called "grid" schedule, in the form
attached to each promissory note and will be recorded the day that the request
for borrowing is made. The bank holding the respective promissory notes will
maintain the record of borrowings and repayments without the necessity of
issuing additional notes. Fitchburg anticipates that the promissory notes used
may vary from the forms described above to reflect customary terms or particular
lending practices and policies of different lending institutions, but otherwise
will be substantially similar.
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Short-term borrowing arrangements will provide for borrowings at the
so-called "Base Rate" or "prime rate" and will be subject to prepayment at the
borrower's option. In addition, short-term notes may provide informal borrowings
at alternate Base Rates, sub-prime rates or Money Market Rates which are to be
made available under the line of credit arrangements. Money Market Rates are
fixed rate loans and may or may not be subject to prepayment. Any borrowing at
Money Market Rates will be at a rate not to exceed the prime rate for unsecured
loans by the same bank.
Borrowings under credit agreements with commercial banks will not exceed
the shorter of the term of the particular line of credit or nine months.
Short-term notes issued on a transactional basis will be dated as of the date of
issue, will have a maximum term of nine months and will bear interest at the
Base or Money Market Rate described above.
Fitchburg requests authority to secure both formal and informal credit
lines with a number of lending institutions. Formal credit lines may be subject
to compensating balances and/or fee requirements. Compensating balance
requirements will not exceed 5% of the committed credit line amount, and fees
will not exceed 50 basis points times the total line of credit. Fitchburg may
change its credit line arrangements and obtain additional formal or informal
credit lines over time.
Pursuant to the requirements of Rule 24 under the Act, Unitil and its
Subsidiaries have filed a quarterly report on short-term borrowings and money
pool transactions as required by the Commission's order approving short-term
borrowings and the Unitil Money Pool. Pro Forma Balance Sheets and Income
Statements for Unitil and Fitchburg giving effect to requested maximum
borrowings are attached.
C. Pooling Agreement
All the Applicants currently participate in the Money Pool pursuant to the
Pooling Agreement among Unitil and the Money Pool Participants. The Pooling
Agreement allows Unitil and the Money Pool Participants to invest their surplus
funds and the Money Pool Participants to obtain advances (i.e., borrow funds)
from the System's Money Pool.4 Unitil Service administers the Money Pool for
Unitil and the other Money Pool Participants on an "at cost basis." This
arrangement is used to: (i) provide the Money Pool Participants with funds
supplied internally by Unitil and the Money Pool Participants (i.e., surplus
funds) and from external sources (i.e., bank borrowings), as described below;
and (ii) invest surplus funds of Unitil and the Money Pool Participants in
various short-term money market instruments. Any issuance of debt securities
under the Money Pool shall have a maximum term of nine months.
The Money Pool offers several advantages to Unitil and the Money Pool
Participants, including: lower overall short-term borrowing costs; a mechanism
for each Money Pool Participant to earn a higher return on interest from surplus
funds; and a decreased reliance on external funding sources. Lower borrowing
costs are derived from the elimination of the
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4 Unitil may incur short-term borrowings up to an aggregate amount of $55
million outstanding at any time which may be loaned or advanced to the Money
Pool Participants through the Pooling Agreement. Fitchburg may borrow up to an
aggregate amount of $35 million outstanding at any time.
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additional banking fees that would be required if each Money Pool Participant
had to maintain its own lines of credit and borrow on its own, and from
reduction in the short-term cost of money when Unitil borrows, in the aggregate,
on behalf of the Money Pool Participants, as opposed to each Money Pool
Participant borrowing on its own. In addition, the Money Pool provides a
mechanism for each Money Pool Participant to earn short-term interest on surplus
funds that are loaned to other Money Pool Participants, at a rate normally
charged by Unitil's lead bank instead of at the prevailing short-term investment
rate. In addition to commercial paper, Unitil may invest surplus funds in
various institutional money market funds (as defined by the Investment Company
Act of 1940) or comparable interest bearing instruments which seek to obtain a
high level of current income while preserving principal and liquidity. Overall,
the Money Pool arrangement allows Unitil and the Money Pool Participants to
effectively maximize the use of internally generated funds and, thereby,
decrease the reliance on external funding sources.
In connection with the continued use of the Money Pool by Unitil and the
Money Pool Participants through June 30, 2006, Fitchburg seeks approval to make
loans to the other Money Pool Participants and incur borrowings from the other
Applicants, and the other Applicants seek approval to make loans to Fitchburg.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses of the Applicants expected to be paid or
incurred, directly or indirectly, in connection with the transactions described
above are estimated as follows:
Legal fees........................................... $6,000
Miscellaneous........................................ $3,000
Total....................................... $9,000
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Sections 6(b), 7, 9(a), 10 and 12(b) of the Act, and Rules 43, 45 and 52
thereunder, are directly applicable to this Application-Declaration.
ITEM 4. REGULATORY APPROVALS
The Money Pool has already been approved by the Massachusetts Department of
Telecommunications and Energy with respect to Fitchburg and the New Hampshire
Public Utilities Commission with respect to Unitil, Unitil Energy and Unitil
Power. No state or federal agency other than the Commission has jurisdiction
with respect to any of the proposed transactions other than as described in this
item.
ITEM 5. PROCEDURE
It is requested that the Commission issue and publish no later than April
18, 2003 the requisite notice under Rule 23 with respect to this
Application-Declaration; such notice specifying a date not later than May 13,
2003 as the date after which an order granting and
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permitting this Application-Declaration to become effective may be entered by
the Commission and that the Commission enter not later than May 14, 2003, an
appropriate order granting and permitting this Application-Declaration to become
effective.
No recommended decision by a hearing officer or other responsible officer
of the Commission is necessary or required in this matter. The Division of
Investment Management of the Commission may assist in the preparation of the
Commission's decision in this matter. There should be no thirty-day waiting
period between the issuance and effective date of any order issued by the
Commission in this matter, and it is respectfully requested that any such order
be made effective immediately upon the entry thereof.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
Exhibit No. Description of Exhibit
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B-1 Cash Pooling and Loan Agreement, as amended (Filed with
the Commission as Exhibit A-1 to Form U-1 File No. 70-8623
and incorporated by reference herein).
B-1.1 Amendment No. 4 to Cash Pooling and Loan Agreement.
B-2 Line of Credit and Promissory Note from Fleet National
Bank (Amendment filed herewith; initial documents
previously filed).
B-3 Line of Credit and Promissory Note from Sovereign Bank
(Amendment filed herewith; initial documents previously
filed).
B-4 Line of Credit and Promissory Note from Citizens Bank
(Amendment filed herewith; initial documents previously
filed).
D-1 New Hampshire Public Utilities Commission Order No. 18,416
(Filed with the Commission as Exhibit D-3 to Form U-1
File No. 70-8066 and incorporated by reference herein).
D-2 New Hampshire Public Utilities Commission Order No. 24,072
(Filed with the Commission as Exhibit C-3 to Form U-1
File No. 70-10084 and incorporated by reference herein).
D-3 Massachusetts Department of Public Utilities Commission
Order No. MDPU 89-66 (Filed with the Commission as Exhibit
D-5 to Form U-1 File No. 70-8066 and incorporated by
reference herein).
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F-1 Opinion of Counsel (To be filed by Amendment).
F-2 "Past Tense" Opinion of Counsel (To be filed by Amendment).
G-1 Proposed Form of Notice.
(b) Financial Statements
No. Description of Financial Statement
--- ----------------------------------
FS-1 Unitil Corporation and Subsidiary Companies Consolidated
Actual Balance Sheet and Statement of Earnings,
December 31, 2002 (Filed with the Commission with Unitil's
10-K for the year ended December 31, 2002 and
incorporated by reference herein).
FS-2 Unitil Corporation and Subsidiary
Companies Consolidated Pro Forma
Balance Sheet and Statement of
Earnings, December 31, 2002.
FS-3 Unitil Corporation (Company Only) Actual and Pro Forma
Balance Sheet and Statement of Earnings, December 31, 2002.
FS-4 Fitchburg Actual and Pro Forma Balance Sheet and Statement of
Earnings, December 31, 2002.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
None of the matters that are the subject of this Application-Declaration
involve a "major federal action" nor do they "significantly affect the quality
of the human environment" as those terms are used in Section 102(2)(C) of the
National Environmental Policy Act. None of the proposed transactions that are
the subject of this Application-Declaration will result in changes in the
operation of the Applicants that will have an impact on the environment. The
Applicants are not aware of any federal agency which has prepared or is
preparing an environmental impact statement with respect to the transactions
proposed herein.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the Applicants have duly caused this Application-Declaration to be signed
on their behalf by the undersigned thereunto duly authorized.
Dated: March 28, 2003
UNITIL CORPORATION
By: /s/ Mark. H. Collin
Name: Mark H. Collin
Title: Senior Vice President, Chief Financial
Officer & Treasurer
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