UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8858

UNITIL CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (603) 772-0775

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

UNITIL CORPORATION AND SUBSIDIARY COMPANIES

FORM 10-Q

For the Quarter Ended September 30, 2024

Table of Contents

CAUTIONARY STATEMENT

This report and the documents incorporated by reference into this report contain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, included or incorporated by reference into this report, including, without limitation, statements regarding the financial position, business strategy and other plans and objectives for the Company’s future operations, are forward-looking statements.

These statements include declarations regarding the Company’s beliefs and current expectations. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology. These forward-looking statements are subject to inherent risks and uncertainties in predicting future results and conditions that could cause the actual results to differ materially from those projected in these forward-looking statements. Some, but not all, of the risks and uncertainties include those described in Part II, Item 1A (Risk Factors) and the following:

Many of these risks are beyond the Company’s control. Any forward-looking statements speak only as of the date of this report, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for the Company to predict all such factors, nor can the Company assess the effect of any such factor on its business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

PART I. FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Unitil Corporation’s 2023 Annual Report on Form 10-K for additional information.

OVERVIEW

Unitil Corporation (Unitil or the Company) is a public utility holding company headquartered in Hampton, New Hampshire. Unitil and its subsidiaries are subject to regulation as a holding company system by the Federal Energy Regulatory Commission (FERC) under the Energy Policy Act of 2005.

Unitil’s principal business is the local distribution of electricity and gas throughout its service territory in the states of New Hampshire, Massachusetts and Maine. Unitil is the parent company of three wholly-owned distribution utilities:

Unitil Energy, Fitchburg and Northern Utilities are collectively referred to as the “distribution utilities.” Together, the distribution utilities serve approximately 108,500 electric customers and 88,400 gas customers.

In addition, Unitil is the parent company of Granite State Gas Transmission, Inc. (Granite State), an interstate gas transmission pipeline company, operating 85 miles of underground gas transmission pipeline primarily located in Maine and New Hampshire. Granite State provides Northern Utilities with interconnection to major gas pipelines and access to domestic gas supplies in the south and Canadian gas supplies in the north.

Unitil had an investment in Net Utility Plant of $1.5 billion at September 30, 2024. Earnings from Unitil’s utility operations are derived primarily from the return on investment in the utility assets of the three distribution utilities and Granite State. Unitil’s total operating revenue includes revenue to recover the approved cost of purchased electricity and gas in rates on a fully reconciling basis. As a result of this reconciling rate structure, the Company’s earnings are not directly affected by changes in the cost of purchased electricity and gas.

Unitil Resources is the Company’s wholly-owned, non-regulated subsidiary. The Company’s other subsidiaries include Unitil Service Corp., which provides, at cost, a variety of administrative and professional services to Unitil’s affiliated companies; Unitil Realty Corp., which owns and manages Unitil’s corporate office building and property located in Hampton, New Hampshire and land for future use located in Kensington, New Hampshire; and Unitil Power Corp., which formerly functioned as the full requirements wholesale power supply provider for Unitil Energy. Unitil’s consolidated net income includes the earnings of the holding company and these subsidiaries.

RATES AND REGULATION

Regulation

Unitil is subject to comprehensive regulation by federal and state regulatory authorities. Unitil and its subsidiaries are subject to regulation as a holding company system by the FERC under the Energy Policy Act of 2005 with regard to certain bookkeeping, accounting and reporting requirements. Unitil’s utility operations related to wholesale and interstate energy business activities are also regulated by the FERC. Unitil’s distribution utilities are subject to regulation by the applicable state public utility commissions with regard to their rates, issuance of securities and other accounting and operational matters: Unitil Energy is subject to regulation by the New Hampshire Public Utilities Commission (NHPUC); Fitchburg is subject to regulation by the Massachusetts Department of Public Utilities (MDPU); and Northern Utilities is regulated by the NHPUC and the Maine Public Utilities Commission (MPUC). Granite State, Unitil’s interstate gas transmission pipeline, is subject to regulation by FERC with regard to its rates and operations. Because Unitil’s primary operations are subject to rate regulation, the regulatory treatment of various matters could significantly affect the Company’s operations and financial position.

Unitil’s distribution utilities deliver electricity and/or gas to all customers in their service territory, at rates established under cost of service regulation. Under this regulatory structure, Unitil’s distribution utilities recover the cost of providing distribution service to their customers based on historical test years, and earn a return on their capital investment in utility assets. The Company’s distribution utilities and its gas transmission pipeline company also may recover certain base rate costs, including capital project spending, qualifying storm expenses and enhanced reliability and vegetation management programs, through annual step adjustments or cost tracking rate mechanisms.

Revenue decoupling is the term given to the elimination of the dependency of a utility’s distribution revenue on the volume of electricity or gas sales. The difference between distribution revenue amounts billed to customers and the targeted revenue decoupling amounts is recognized as an increase or a decrease in Accrued Revenue, which forms the basis for resetting rates for future cash recoveries from, or credits to, customers. These revenue decoupling targets may be adjusted as a result of rate cases and other authorized adjustments that the Company files with the MDPU and NHPUC. Fitchburg has been subject to revenue decoupling since 2011. Unitil Energy has been subject to revenue decoupling since June 1, 2022. As a result of Unitil Energy now being subject to revenue decoupling, as of June 1, 2022, revenue decoupling now applies to substantially all of Unitil’s total annual electric sales volumes. Substantially all of Northern Utilities’ gas sales volumes in New Hampshire have been subject to decoupling since August 1, 2022. The Company's electric and gas sales in New Hampshire and Massachusetts are now largely decoupled.

RESULTS OF OPERATIONS

The following section of MD&A compares the results of operations for each of the two fiscal periods ended September 30, 2024 and September 30, 2023 and should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and the accompanying Notes to unaudited Consolidated Financial Statements included in Part I, Item 1 of this report, which are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

The Company’s results of operations historically have reflected the seasonal nature of the gas business. Annual gas revenues are substantially realized during the heating season as a result of higher sales of gas due to cold weather. Accordingly, the results of operations are historically most favorable in the first and fourth quarters. Fluctuations in seasonal weather conditions may have a significant effect on the results of operations. Sales of electricity are generally less sensitive to weather than gas sales, but also may be affected by the weather conditions in both the winter and summer seasons.

The MD&A includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures. The Company's management believes that the non-GAAP presentations of earnings and Earnings Per Share (EPS) and Electric and Gas Adjusted Gross Margins are a more meaningful representation of the Company's financial performance and provides additional and useful information to readers of this report in analyzing the historical and future performance of the business. The non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

The Company's earnings discussion includes Adjusted Net Income, a non-GAAP financial measure referencing our 2024 GAAP Net Income less certain transaction costs related to the Company's acquisition of Bangor Natural Gas Company (Bangor), which it disclosed previously in 2024. The Company's management believes that the transaction costs related to the acquisition of Bangor, which are included in Operation and Maintenance expense on the Consolidated Statements of Earnings, are not indicative of the Company's ongoing costs and not directly related to the ongoing operations of the business and therefore not an indicator of baseline operating performance.

In the following tables the Company has reconciled Adjusted Net Income to GAAP Net Income, which we believe to be the most comparable GAAP financial measure.

The Company analyzes operating results using Electric and Gas Adjusted Gross Margins, which are non-GAAP financial measures. Electric Adjusted Gross Margin is calculated as Total Electric Operating Revenue less Cost of Electric Sales. Gas Adjusted Gross Margin is calculated as Total Gas Operating Revenues less Cost of Gas Sales. The Company’s management believes Electric and Gas Adjusted Gross Margins are important financial measures to analyze revenue from the Company’s ongoing operations because the approved cost of electric and gas sales are tracked, reconciled and passed through directly to customers in electric and gas tariff rates, resulting in an equal and offsetting amount reflected in Total Electric and Gas Operating Revenue.

In the following tables the Company has reconciled Electric and Gas Adjusted Gross Margin to GAAP Gross Margin, which we believe to be the most comparable GAAP financial measure. GAAP Gross Margin is calculated as Revenue less Cost of Sales, and Depreciation and Amortization. The Company calculates Electric and Gas Adjusted Gross Margin as Revenue less Cost of Sales. The Company believes excluding Depreciation and Amortization, which are period costs and not related to volumetric sales, is a meaningful measure to inform investors of the Company’s profitability from electric and gas sales in the period.

Electric GAAP Gross Margin was $22.3 million in the three months ended September 30, 2024, a decrease of $0.3 million compared to the same period in 2023. Electric GAAP Gross Margin was $60.2 million in the nine months ended September 30, 2024, a decrease of $0.4 million compared to the same period in 2023. The three month period reflects higher depreciation and amortization expense of $0.8 million, partially offset by higher rates and customer growth of $0.5 million. The decrease in the nine month period was driven by higher depreciation and amortization expense of $2.0 million, partially offset by higher rates and customer growth of $1.6 million.

Gas GAAP Gross Margin was $11.8 million in the three months ended September 30, 2024, a decrease of $0.5 million compared to the same period in 2023. Gas GAAP Gross Margin was $82.4 million in the nine months ended September 30, 2024, an increase of $5.8 million compared to the same period in 2023. The decrease in the three month period was driven by higher depreciation and amortization of $1.6 million, partially offset by higher rates and customer growth of $1.1 million. The increase in the nine month period was driven by higher rates and customer growth of $9.2 million, partially offset by higher depreciation and amortization of $3.4 million.

Earnings Overview

The Company’s GAAP Net Income (Net Income) was $11 thousand, or $0.00 in EPS for the third quarter of 2024, a decrease of $1.4 million in Net Income, or $0.09 in EPS, compared to the third quarter of 2023. The Company’s Net Income was $31.5 million, or $1.96 in Earnings Per Share (EPS), for the first nine months of 2024, an increase of $1.8 million in Net Income, or $0.11 in EPS, compared to the first nine months of 2023. The Company's Adjusted Net Income (a non-GAAP financial measure) was $0.4 million, or $0.02 in EPS for the third quarter of 2024, a decrease of $1.0 million, or $0.07 in EPS, compared to the third quarter of 2023. The Company's Adjusted Net Income (a non-GAAP financial measure) was $32.1 million, or $2.00 in EPS, for the first nine months of 2024, an increase of $2.4 million, or $0.15 in EPS, compared to the first nine months of 2023. The Company’s earnings in the first nine months of 2024 reflect higher rates and customer growth.

Electric Adjusted Gross Margin (a non-GAAP financial measure) was $29.7 million and $81.7 million in the three and nine months ended September 30, 2024, respectively, increases of $0.5 million and $1.6 million, respectively, compared to the same periods in 2023. These increases reflect higher rates and customer growth.

Gas Adjusted Gross Margin (a non-GAAP financial measure) was $23.3 million and $115.6 million in the three and nine months ended September 30, 2024, respectively, increases of $1.1 million and $9.2 million, respectively, compared to the same periods in 2023. These increases reflect higher rates and customer growth.

Operation and Maintenance (O&M) expenses increased $0.7 million and $1.1 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increase in the three month period reflects higher labor costs of $0.4 million and higher utility operating costs of $0.3 million. The increase in the nine month period reflects higher labor costs of $0.9 million and higher utility operating costs of $0.2 million.

Depreciation and Amortization expense increased $2.3 million and $5.1 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, reflecting higher depreciation rates resulting from recent base rate cases, additional depreciation associated with higher levels of utility plant in service, and higher amortization of storm costs and other deferred costs.

Taxes Other Than Income Taxes increased $0.8 million and $1.5 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, reflecting higher local property taxes on higher utility plant in service and higher payroll taxes.

Interest Expense, Net increased $0.4 million and $1.0 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, primarily reflecting higher interest expense on short-term borrowings and higher levels of long-term debt, partially offset by higher interest income on regulatory assets and other interest income.

Other (Income) Expense, Net decreased $0.3 million in the three months ended September 30, 2024, compared to the same period in 2023, reflecting lower retirement benefit costs. Other (Income) Expense, Net increased $0.2 million in the nine months ended September 30, 2024, respectively, compared to the same period in 2023, reflecting higher retirement benefit costs.

Federal and State Income Taxes for the three and nine months ended September 30, 2024 decreased $0.9 million and increased $0.1 million, respectively, compared with the same periods in 2023. The decrease in the three month period reflects lower pre-tax earnings in the third quarter of 2024. The increase in the nine month period reflects higher pre-tax earnings in the first nine months of 2024.

At its January 2024, May 2024, July 2024 and October 2024 meetings, the Unitil Corporation Board of Directors declared quarterly dividends on the Company’s common stock of $0.425 per share. These quarterly dividends result in a current effective annualized dividend rate of $1.70 per share, representing an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock.

Electric Revenues, Adjusted Gross Margin and Sales

Electric Operating Revenues and Electric Adjusted Gross Margin - The following table details Total Electric Operating Revenues and Electric Adjusted Gross Margin for the three and nine months ended September 30, 2024 and 2023:

Total Electric Operating Revenue decreased $9.6 million, or 13.3%, and $52.3 million, or 21.4%, in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, reflecting lower costs of electric sales, which are tracked and reconciled to costs that are passed through directly to customers, partially offset by higher electric distribution rates and higher sales of electricity.

Electric Adjusted Gross Margin (a non-GAAP financial measure) was $29.7 million and $81.7 million in the three and nine months ended September 30, 2024, respectively, increases of $0.5 million and $1.6 million, respectively, compared to the same periods in 2023. These increases reflect higher rates and customer growth.

Kilowatt-hour Sales - Unitil’s total electric kWh sales increased 2.6% and 2.2% in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. Sales to Residential and Commercial and Industrial (C&I) customers increased 4.1% and 1.5%, respectively, in the three months ended September 30, 2024, compared to the same period in 2023, reflecting warmer weather for cooling purposes in the second quarter of 2024 compared to the same period in 2023, and customer growth. Sales to Residential and C&I customers increased 2.7% and 1.9%, respectively, in the nine months ended September 30, 2024, compared to the same period in 2023, reflecting warmer weather for cooling purposes in 2024 compared to 2023, and customer growth. Based on weather data collected in the Company's electric service areas, on average there were 12.2% more Cooling Degree Days in the first nine months of 2024 compared to the same period in 2023. As of September 30, 2024, the number of electric customers increased by approximately 1,100 over the previous year. Sales margins derived from decoupled unit sales are not sensitive to changes in electric kWh sales. Substantially all of the Company’s electric kWh sales volumes are decoupled.

The following table details total kWh sales for the three and nine months ended September 30, 2024 and 2023 by major customer class:

Gas Revenues, Adjusted Gross Margin and Sales

Gas Operating Revenues and Adjusted Gross Margin - The following table details Total Gas Operating Revenues and Gas Adjusted Gross Margin for the three and nine months ended September 30, 2024 and 2023:

Total Gas Operating Revenue decreased $1.4 million, or 4.4%, and $7.9 million, or 4.3%, in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. These decreases reflect lower costs of gas sales, which are tracked and reconciled costs that are passed through directly to customers, and lower gas sales, partially offset by higher gas distribution rates.

Gas Adjusted Gross Margin (a non-GAAP financial measure) was $23.3 million and $115.6 million in the three and nine months ended September 30, 2024, respectively, increases of $1.1 million and $9.2 million, respectively, compared to the same periods in 2023. These increases reflect higher rates and customer growth.

Therm Sales - Unitil’s total gas therm sales decreased 0.4% and 0.5% in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. In the third quarter of 2024, sales to Residential customers were essentially unchanged and sales to C&I customers decreased 0.4%, compared to the same period in 2023, reflecting lower average usage, partially offset by customer growth. In the first nine months of 2024, sales to Residential and C&I customers decreased 0.9% and 0.4%, respectively, compared to the same period in 2023, reflecting warmer winter weather in 2024 compared to 2023 and lower average usage, partially offset by customer growth and colder early spring weather in 2024, compared to the same period in 2023. As of September 30, 2024, the number of gas customers increased by approximately 720 over the previous year. Sales margins derived from decoupled unit sales (currently representing approximately 42% of total annual therm sales volume) are not sensitive to changes in gas therm sales, although those sales margins are sensitive to changes in the number of customers served.

The following table details total firm therm sales for the three and nine months ended September 30, 2024 and 2023 by major customer class:

Operating Expenses

Cost of Electric Sales - Cost of Electric Sales includes the cost of electric supply and spending on energy efficiency programs. Cost of Electric Sales decreased $10.1 million, or 23.5%, and $53.9 million, or 32.7%, in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. These decreases reflect lower wholesale electricity prices and an increase in the amount of electricity purchased by customers directly from third-party suppliers, partially offset by higher sales of electricity. Because the Company reconciles and recovers the approved Cost of Electric Sales in its rates at cost on a pass-through basis, changes in approved expenses do not affect earnings.

Cost of Gas Sales - Cost of Gas Sales includes the cost to supply the Company’s total gas requirements and spending on energy efficiency programs. Cost of Gas Sales decreased $2.5 million, or 26.0%, and $17.1 million, or 22.4%, in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. These decreases primarily reflect lower wholesale gas commodity prices, lower gas therm sales and an increase in the amount of gas purchased by customers directly from third-party suppliers. Because the Company reconciles and recovers the approved Cost of Gas Sales in its rates at cost on a pass-through basis, changes in approved expenses do not affect earnings.

Operation and Maintenance (O&M) - O&M expense includes electric and gas utility operating costs, and the operating cost of the Company’s corporate and other business activities. O&M expense increased $0.7 million, or 3.6%, and $1.1 million, or 2.0%, in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The increase in the three month period reflects higher labor costs of $0.4 million and higher utility operating costs of $0.3 million. The increase in the nine month period reflects higher labor costs of $0.9 million and higher utility operating costs of $0.2 million.

Depreciation and Amortization - Depreciation and Amortization expense increased $2.3 million, or 13.7%, and $5.1 million, or 10.2%, in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, reflecting higher depreciation rates resulting from recent base rate cases, additional depreciation associated with higher levels of utility plant in service, and higher amortization of storm costs and other deferred costs.

Taxes Other Than Income Taxes - Taxes Other Than Income Taxes increased $0.8 million, or 11.4%, and $1.5 million, or 7.1%, in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, reflecting higher local property taxes on higher utility plant in service and higher payroll taxes.

Other (Income) Expense, Net - Other (Income) Expense, Net decreased $0.3 million in the three months ended September 30, 2024, compared to the same period in 2023, reflecting lower retirement benefit costs. Other (Income) Expense, Net increased $0.2 million in the nine months ended September 30, 2024, respectively, compared to the same period in 2023, reflecting higher retirement benefit costs.

Provision for Income Taxes - Federal and State Income Taxes for the three and nine months ended September 30, 2024 decreased $0.9 million and increased $0.1 million, respectively, compared with the same periods in 2023. The decrease in the three month period reflects lower pre-tax earnings in the third quarter of 2024.

The increase in the nine month period reflects higher pre-tax earnings in the first nine months of 2024.

Interest Expense, Net - Interest expense is presented in the Consolidated Financial Statements net of interest income. Interest expense is mainly comprised of interest on long-term debt and short-term borrowings. In addition, certain reconciling rate mechanisms used by the Company’s distribution operating utilities give rise to regulatory assets and regulatory liabilities on which interest is accrued.

Unitil’s utility subsidiaries operate a number of reconciling rate mechanisms to recover specifically identified costs on a pass-through basis. These reconciling rate mechanisms track costs and revenue on a monthly basis. In any given month, this tracking and reconciling process will produce either an under-collected or an over-collected position. In accordance with the distribution utilities’ rate tariffs, interest is accrued on these balances and will produce either interest income or interest expense. Consistent with regulatory precedent, interest income is recorded on an under-collection of costs which creates a regulatory asset to be recovered in future periods when rates are reset. Interest expense is recorded on an over-collection of costs, which creates a regulatory liability to be refunded in future periods when rates are reset.

Interest Expense, Net increased $0.4 million, or 5.7%, and $1.0 million, or 4.7%, in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, primarily reflecting higher interest expense on short-term borrowings and higher levels of long-term debt, partially offset by higher interest income on regulatory assets and other interest income.

CAPITAL REQUIREMENTS

Sources of Capital

Unitil requires capital to fund utility plant additions, working capital and other utility expenditures recovered in subsequent periods through regulated rates. The capital necessary to meet these requirements is derived primarily from internally generated funds, which consist of cash flows from operating activities. The Company initially supplements internally generated funds through short-term bank borrowings, as needed, under its unsecured revolving Credit Facility. Periodically, the Company replaces portions of its short-term debt with long-term debt financings more closely matched to the long-term nature of its utility assets. Additionally, from time to time the Company accesses the public capital markets through public offerings of equity securities. The Company’s utility operations have a seasonal component and therefore are subject to seasonal fluctuations in cash flows. The amount, type and timing of any future financing will vary from year to year based on capital needs and maturity or redemptions of securities.

The Company and its subsidiaries are individually and collectively members of the Unitil Cash Pool (Cash Pool). The Cash Pool is the financing vehicle for day-to-day cash borrowing and investing. The Cash Pool allows for an efficient exchange of cash among the Company and its subsidiaries. The interest rates charged to the subsidiaries for borrowing from the Cash Pool are based on actual interest costs from lenders under the Company’s revolving Credit Facility (as defined below). At September 30, 2024, September 30, 2023 and December 31, 2023, the Company and all of its subsidiaries were in compliance with the regulatory requirements to participate in the Cash Pool.

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).

The Company utilizes the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $229.9 million for the nine months ended September 30, 2024. Total gross repayments were $327.6 million for the nine months ended September 30, 2024. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of September 30, 2024, September 30, 2023 and December 31, 2023:

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, 2024, September 30, 2023 and December 31, 2023, the Company was in compliance with the covenants contained in the Credit Facility in effect on those dates.

On July 6, 2023, Fitchburg issued $12.0 million of Notes due July 2, 2033, at 5.70% and $13.0 million of Notes due July 2, 2053 at 5.96%. Fitchburg used the net proceeds from these offerings to refinance existing debt and for general corporate purposes. Approximately $0.2 million of costs associated with this issuance were recorded as a reduction of Long-Term Debt for presentation purposes on the Consolidated Balance Sheet in the third quarter of 2023.

On August 21, 2024, Unitil Corporation issued $20.0 million of Notes due 2034 at 5.99%. Fitchburg issued $12.5 million of Notes due 2034 at 5.54% and $12.5 million of Notes due 2044 at 5.99%. Unitil Energy issued $40.0 million of Bonds due 2054 at 5.69%. Northern Utilities issued $25.0 million of Notes due 2034 at 5.54% and $15.0 million of Notes due 2039 at 5.74%. Granite State issued $10.0 million of Notes due 2034 at 5.74%.

The Company used the net proceeds from these offerings to refinance existing debt and for general corporate purposes. Approximately $1.0 million of costs associated with this issuance were recorded as a reduction of Long-Term Debt for presentation purposes on the Consolidated Balance Sheet in the third quarter of 2024.

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.

The continued availability of various methods of financing, as well as the choice of a specific form of security for such financing, will depend on many factors, including, but not limited to: security market conditions; general economic climate; regulatory approvals; the ability to meet covenant issuance restrictions; the level of earnings, cash flows and financial position; and the competitive pricing offered by financing sources.

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, 2024, there were no guarantees outstanding.

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 $8.8 million of natural gas storage inventory and corresponding obligations at September 30, 2024 related to these asset management agreements. The amount of natural gas inventory released in September 2024, which was payable in October 2024, was less than $0.1 million and was recorded in Accounts Payable at September 30, 2024.

Off-Balance Sheet Arrangements

The Company and its subsidiaries do not currently use, and are not dependent on the use of, off-balance sheet financing arrangements such as securitization of receivables or obtaining access to assets or cash through special purpose entities or variable interest entities. Unitil Corporation’s subsidiaries conduct a portion of their operations in leased facilities, and lease some of their vehicles, machinery and office equipment under both capital and operating lease arrangements. See Note 4 (Debt and Financing Arrangements) to the accompanying Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In making those estimates and assumptions, the Company sometimes is required to make difficult, subjective and/or complex judgments about the effect of matters that are inherently uncertain and for which different estimates that could reasonably have been used could have resulted in material differences in its financial statements. If actual results were to differ significantly from those estimates, assumptions and judgment, the financial position of the Company could be materially affected and the results of operations of the Company could be materially different than reported. As of September 30, 2024, the Company’s critical accounting policies and estimates had not changed significantly from December 31, 2023. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in the Company’s 2023 Annual Report on Form 10-K for additional information.

EMPLOYEES

As of September 30, 2024, the Company and its subsidiaries had 541 employees. The Company considers its relationship with employees to be good and has not experienced any major labor disruptions.

The Company strives to be the employer of choice in the communities it serves—regardless of race, religion, color, gender, or sexual orientation. The Company works diligently to attract the best talent from a diverse range of sources to meet the current and future demands of our business.

To attract and retain a talented workforce, Unitil provides employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. All employees are eligible for health insurance, paid and unpaid leave, educational assistance, retirement plan and life and disability/accident coverage. Feedback from employees is collected annually in the Company’s Employee Opinion survey. This feedback helps create action plans to improve the engagement of employees consistent with the Company’s culture of continuous improvement.

As of September 30, 2024, a total of 173 employees of certain of the Company’s subsidiaries were represented by labor unions. The following table details by subsidiary the employees covered by a collective bargaining agreement (CBA) as of September 30, 2024:

The CBAs provide discrete salary adjustments, established work practices and uniform benefit packages. The Company expects to negotiate new agreements prior to their expiration dates.

INTEREST RATE RISK

Unitil meets its external financing needs by issuing short-term and long-term debt. The majority of debt outstanding represents long-term notes or bonds bearing fixed rates of interest. Changes in market interest rates do not affect interest expense resulting from these outstanding long-term debt securities. However, the Company periodically repays its short-term debt borrowings through the issuance of new long-term debt securities. Changes in market interest rates may affect the interest rate and corresponding interest expense on any new issuances of long-term debt securities. In addition, short-term debt borrowings bear a variable rate of interest. As a result, changes in short-term interest rates will increase or decrease interest expense in future periods. For example, if the average amount of short-term debt outstanding was $25 million for the period of one year, a change in interest rates of 1% would result in a change in annual interest expense of approximately $250,000. The average interest rates on the Company’s short-term borrowings and intercompany money pool transactions for the three months ended September 30, 2024 and September 30, 2023 were 6.6% and 6.4%, respectively. The average interest rates on the Company’s short-term borrowings and intercompany money pool transactions for the nine months ended September 30, 2024 and September 30, 2023 were 6.6% and 6.2%, respectively. The average interest rate on the Company’s short-term borrowings for the twelve months ended December 31, 2023 was 6.4%.

COMMODITY PRICE RISK

Although Unitil’s three distribution utilities are subject to commodity price variations as part of their traditional operations, the current regulatory framework within which these companies operate allows for full collection of electric power and natural gas supply costs in rates on a pass-through basis. Consequently, there is limited commodity price risk after consideration of the related rate-making. As discussed in Note 6 (Regulatory Matters), the Company has divested its long-term power supply contracts and therefore, further reduced its exposure to commodity risk.

REGULATORY MATTERS

Refer to Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of Regulatory Matters.

ENVIRONMENTAL MATTERS

Refer to Note 7 to the Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of Environmental Matters.