Debt crisis may loom for Pennichuck

Pennichuck Corporation may have had had a good fourth quarter, but it faces a looming debt crisis over the next three years, according to a filing with the Securities and Exchange Commission.

In a press release, Pennichuck trumpeted a fourth-quarter profit of $452,000, mainly due to legal costs associated with Nashua attempt to take over the water utility, but the release did not mention that upcoming capital costs increase the company’s debt from $48.2 million at the end of last year to about $75 million by 2009. That would bring the firm’s total capitalization ratio from 52 to 60 percent, pushing it dangerously close to violating the terms of the company’s arrangements with its current creditors, the company says in its annual filing.

New regulations and aging equipment are the main reasons the company needs to make capital improvements, it says.

For instance, new turbidity standards would cost the company some $10 million in 2007 and $41 million over the next three years to upgrade its treatment plant. The company has asked for a rate increase to cover this cost, but while the Public Utilities Commission gave the company much of what it asked for in an Aug. 1 increase, its staff last month recommended that a 20.6 percent increase worth some $3.4 million be cut by more than half to some 8 percent, or $1.34 million.

Things would come to a head if the city of Nashua succeeds in taking over the utility. (Both parties agreed in January to suspend their eminent domain battle to work out a negotiated settlement). Bondholders would likely call in the debt, the company warned. – BOB SANDERS