What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-02-25 compared with 2021-02-25 · 226 added, 190 removed, 236 unchanged (64% of the section changed)

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In the event dividends on the preferred stock are in arrears, no dividends may be declared or paid on the common stock of the Company.

In November 2019, the Company sold and issued 0.8 million shares of its common stock in a public offering priced at $60.50 per share.

The net proceeds of $43.7 million were used for general corporate purposes including repayment of a portion of the Company’s short-term debt outstanding.

The Company issues shares of its common stock in connection with its Middlesex Water Company Investment Plan (the Investment Plan), a direct share purchase and dividend reinvestment plan for the Company’s common stock.

Since the inception of the Investment Plan and its predecessor plan, the Company has periodically replenished the level of authorized shares in the plans.

Currently, there remains 0.4 million shares registered with the SEC for the Investment Plan and available for potential issuance to participants.

Currently, 0.3 million shares remain registered with the SEC for the Investment Plan and available for potential issuance to participants.

The Company raised approximately $3.8 million through the issuance of shares under the Investment Plan during 2021.

In 2019, the Company raised approximately $12.7 million primarily through a limited duration six-month share purchase discount feature of the Investment Plan.

The 0.2 million share purchase limit was reached and the discount offer ceased prior to the original ending date.

The Company maintains a long-term incentive compensation plan where awards are made in the form of restricted common stock for certain management employees (the 2018 Restricted Stock Plan).

Shares of restricted common stock issued in connection with the 2018 Restricted Stock Plan are subject to forfeiture by the employee in the event of termination of employment for any reason within five years of the award, other than as a result of retirement at normal retirement age, death, disability or change in control.

The maximum number of shares authorized for grant under the 2018 Restricted Stock Plan is 0.3 million shares, of which approximately 89% remain available for award.

The Company maintains a stock compensation plan for its outside directors (the Outside Director Stock Compensation Plan) as a component of Director compensation.

In 2020, shares of the Company’s common stock valued at $0.2 million were granted and issued to the Company’s outside directors under the Outside Director Stock Compensation Plan.

The maximum number of shares authorized for grant under the Outside Director Stock Compensation Plan is 0.1 million.

Approximately 53% of the authorized shares remain available for future.

Set forth below is a line graph comparing the yearly change in the cumulative total return (which includes reinvestment of dividends) of a $100 investment for the Company’s common stock, a peer group of investor-owned water utilities, and the S&P 500 Stock Index for the period of five years commencing December 31, 2015.

On September 1, 2021, the Company began offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan.

The discount offering will continue until 200,000 shares are purchased at the discounted price or, August 1, 2022, whichever event occurs first.

Through February 25, 2022, 44,323 shares have been purchased through the discounted offering.

The discount applies to all common stock purchases made under the Investment Plan, whether by optional cash payment or by dividend reinvestment.

Previously, in 2019, the Company raised approximately $12.7 million primarily through a share discount program.

The Company maintains a long-term incentive compensation plan for certain management employees where awards are made in the form of restricted common stock.

Shares issued in connection with this plan are subject to forfeiture by the employee in the event of termination of employment for any reason within five years of the award, other than as a result of retirement at normal retirement age, death, disability or change in control.

The maximum number of shares authorized for award under this plan is 0.3 million shares, of which approximately 84% remain available for award.

The Company maintains a stock plan for its independent members of the Board of Directors as a component of their compensation.

In 2021, shares of the Company’s common stock valued at $0.3 million were granted and issued to the independent Directors.

The maximum number of shares authorized for grant under this plan is 0.1 million.

Approximately 49% of the authorized shares remain available for future issuance.

Set forth below is a graph comparing the yearly change in the cumulative total return (which includes reinvestment of dividends) of a $100 investment for the Company’s common stock, a peer group of investor-owned water utilities, and the S&P 500 Stock Index for the period of five years commencing December 31, 2016.

The S&P 500 Stock Index measures the stock performance of 500 large companies listed on stock exchanges in the United States.

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S&P 500 Stock Index

SELECTED FINANCIAL DATA.

CONSOLIDATED SELECTED FINANCIAL DATA

(Thousands Except per Share Data)

Operating Revenues

Operating Expenses:

Operations and Maintenance

Total Operating Expenses

Operating Income

Other Income (Expense), Net

Interest Charges

Preferred Stock Dividend

Earnings Applicable to Common Stock

Earnings per Share:

Average Shares Outstanding:

Dividends Declared and Paid Per Share

Convertible Preferred Stock

Long-term Debt

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of the Company’s historical results of operations and financial condition should be read in conjunction with the Company’s consolidated financial statements and related notes.

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We are in the business of collecting, treating and distributing water for domestic, commercial, municipal, industrial and fire protection purposes.

We also operate water and wastewater systems under contract for governmental entities and private entities primarily in New Jersey and Delaware and provide regulated wastewater services in New Jersey and Delaware through five subsidiaries.

We operate water and wastewater systems under contract for governmental entities and private entities primarily in New Jersey and Delaware and also provide regulated wastewater services in New Jersey.

We are regulated by state public utility commissions as to rates charged to customers for water and wastewater services, as to the quality of water and wastewater services we provide and as to certain other matters in the states in which our regulated subsidiaries operate.

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(USA-PA) and White Marsh Environmental Services, Inc.

(White Marsh) subsidiaries are not regulated public utilities as related to rates and

services quality.

(White Marsh) subsidiaries are not regulated public utilities as related to rates and services quality.

All municipal or commercial entities whose utility operations are managed by these entities however, are subject to environmental regulation at the federal and state levels.

Our primary New Jersey water utility system (the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey.

Our principal New Jersey water utility system (the Middlesex System) provides water services to approximately 61,000 retail customers, primarily in central New Jersey.

The Middlesex System also provides water sales under contract to municipalities in central New Jersey with a total population of over 0.2 million.

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Tidewater’s subsidiary, White Marsh, services approximately 4,500 customers in Kent and Sussex Counties through various operations and maintenance contracts.

Our Tidewater Environmental Services, Inc.

(TESI) subsidiary provides wastewater services to approximately 3,900 retail customers in Sussex Counties, Delaware.

USA-PA operates the water and wastewater systems for the City of Perth Amboy, New Jersey (Perth Amboy) under a 10-year operations and maintenance contract expiring in 2028.

In addition to performing day-to day operations, USA-PA is also responsible for emergency response and management of capital projects funded by Perth Amboy.

USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a 10-year operations and maintenance contract expiring in 2022.

In addition to performing day-to-day operations, USA is responsible for billing, collections, customer service, emergency response and management of capital projects funded by Avalon.

USA operates the Borough of Avalon, New Jersey’s (Avalon) water utility, sewer utility and storm water system under a 10-year operations and maintenance contract expiring in June 2022.

USA expects to participate in the public proposal process for the extension of this contract.

In addition to performing day-to-day service operations, USA is responsible for billing, collections, customer service, emergency response and management of capital projects funded by Avalon.

Beginning July 1, 2020, USA began operating the Borough of Highland Park, New Jersey’s (Highland Park) water and wastewater systems under a 10-year operations and maintenance contract.

Under a marketing agreement with HomeServe, USA offers residential customers in New Jersey and Delaware water and wastewater related services and home maintenance programs.

Under a marketing agreement with HomeServe USA Corp.

(HomeServe) expiring in 2031, USA offers residential customers in New Jersey and Delaware water and wastewater related services and home maintenance programs.

HomeServe is a leading national provider of such home maintenance service programs.

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The Company plans to invest approximately $88 million in 2022 in connection with this plan for projects that include, but are not limited to:

Completion of construction of a facility to provide an enhanced treatment process at the Company’s largest water treatment plant in Edison, New Jersey to mitigate the formation of disinfection by-products that can develop during the water treatment process, as well as other improvements;

Construction of a facility to provide an enhanced treatment process at the Company’s largest wellfield in South Plainfield, New Jersey to comply with new state water quality regulations relative to poly- and perfluoroalkyl substances, collectively referred to as PFAS, and integrate surge protection to mitigate spikes in water pressures along with enhancements to corrosion control and chlorination processes;

Renovations and related construction at our 37-year old Middlesex Operations facility in New Jersey, including more efficient work space to meet the evolved needs of the business, enhancements to information technology infrastructure, improved energy efficiency and regulatory requirements;

Replacement of approximately four miles of water mains including service lines, valves, fire hydrants and meters in Metuchen, New Jersey;

Construction of a new upgraded wastewater treatment plant to serve our customers in the Town of Milton, Delaware.

Novel Coronavirus (COVID-19) - On March 13, 2020, the United States had declared the COVID-19 pandemic a national emergency.

The ongoing impact on changing economic conditions due to COVID-19 continues to be uncertain and could affect the Company’s results of operations, financial condition and liquidity in the future.

While the Company’s operations and capital construction program have not been significantly disrupted to-date from COVID-19, we are unable to assess with certainty the impact that COVID-19 will have on our business, our customers and our vendors prospectively, due to numerous uncertainties, including the continued severity and duration of the pandemic, sufficiency of the government’s vaccination program and actions which could potentially be taken by federal or state governmental and/or regulatory authorities.

The New Jersey Board of Public Utilities (NJBPU) and the Delaware Public Service Commission (DEPSC) have allowed for potential future recovery of COVID-19 related incremental costs through customer rates by the regulated utilities under their respective jurisdictions.

Neither jurisdiction has yet to establish a timetable or definitive formal procedures for seeking cost recovery.

We will continue to monitor the COVID-19 situation and evaluate its impact on the Company’s business, results of operations, financial condition and liquidity.

Contract Operations –

In May 2020,USA, through a competitive bidding process, was awarded a ten-year, $8.3 million contract to operate and maintain Highland Park’s water and wastewater systems.

The contract commenced July 1, 2020.

Private Placement Loan –

In November 2020, Middlesex closed on a $40.0 million, 2.90% private placement loan with a maturity date of November 2050 by issuing first mortgage bonds (FMBs).

Proceeds were used to reduce the Company’s existing short-term borrowings under its lines of credit and for the Company’s 2020 capital program.

Replacement of approximately six miles of water mains including full main and service line replacements, meter pit installations and fire hydrants replacements in the Township of Woodbridge, New Jersey;

Upgrade of Work and Asset Management Information System;

Construction of two elevated water storage tanks in our Tidewater service territory;

Various water main replacements and improvements.

Regulatory Notice of Non-Compliance - In September 2021, the New Jersey Department of Environmental Protection (NJDEP) issued a Notice of Non-Compliance (Notice) to Middlesex based on self-reporting by Middlesex that the level of Perfluorooctanoic Acid (PFOA) in water treated at its Park Avenue Wellfield Treatment Plant in New Jersey exceeded a recently promulgated NJDEP standard effective in 2021.

Neither the NJDEP nor Middlesex has characterized this exceedance as an acute health emergency.

However, Middlesex was required to notify its affected customers and complied in November 2021.

Further, the Notice required the Company to take any action necessary to comply with the new standard by September 7, 2022.

The NJDEP standard for PFOA was developed based on a Health-based Maximum Contaminant Level (MCL) of 14 parts per trillion (ppt).

Although the United States Environmental Protection Agency (USEPA) has not yet implemented an enforceable regulation relative to PFOA, the water distributed from the Park Avenue Well Field Treatment Plant does meet the USEPA’s current health advisory level of 70 parts per trillion (ppt) and would meet the NJDEP’s pre-2021 standard guidance level of 40 ppt, which was not a regulation.

Construction of an enhanced treatment process at the Park Avenue Well Field Treatment Plant to comply with the NJDEP standard had already begun when the Notice was issued by the NJDEP.

Since completion is not expected until mid-2023, in December 2021, the Company implemented an interim solution to meet the Notice requirements.

The Park Avenue Well Field Treatment Plant was taken off-line and alternate sources of supply have been obtained.

The Company is in the process of implementing an acceleration of a portion of the Park Avenue Wellfield treatment upgrades in order to meet anticipated increases in the historical higher water demand periods during the summer months and is also intended to result in compliance with the requirements of the Notice.

In November 2021, the Company was served with two PFOA-related class action lawsuits seeking restitution for medical, water replacement and other claimed related costs.

These lawsuits are in the early stages of the legal process and their ultimate resolution cannot be predicted at this time.

The Company’s insurance provider has acknowledged coverage of potential liability resulting from these lawsuits.

For further discussion of this matter, see Item 3 - Legal Proceedings.

In 2018, the Company identified the party believed to be the source of the PFAS in the wells supplying the Park Avenue Well Field Treatment Plant and filed a lawsuit against that entity seeking compensatory damages for the resulting damage to its properties and costs to remediate PFAS, punitive damages and attorney’s fees and costs.

The ultimate resolution of this matter cannot be predicted at this time.

In January 2022, the Company filed a petition with the New Jersey Board of Public Utilities (NJBPU) seeking to establish a regulatory asset and deferred accounting until its next base rate setting proceeding for all costs associated with the interim solution to comply with the Notice.

While the Company believes other administrative or monetary penalties are unlikely, the issuance of the Notice does not preclude the State of New Jersey or any of its agencies from initiating formal administrative and/or judicial enforcement action, including assessment of penalties of up to $25,000 per day per offense if the Company is not in compliance with the requirements of the Notice by September 7, 2022.

Sale of Subsidiary - In August 2021, Middlesex entered into a definitive agreement with Artesian Wastewater Management, Inc.

to sell 100% of the common stock of Tidewater Environmental Services, Inc.

(TESI) for $6.4 million in cash and other consideration.

The Delaware Public Service Commission (DEPSC) approved the transaction which closed on January 14, 2022.

The Company will continue to own and operate its non-regulated contract operations business in Delaware.

Coronavirus (COVID-19) Pandemic - On January 16, 2022, the United States Secretary of Health and Human Services renewed the determination that a nationwide health emergency exists as a result of the COVID-19 Pandemic.

While the Company’s operations and capital construction program have not been materially disrupted to date from the pandemic, the COVID-19 impact on economic conditions nationally continues to be uncertain and could affect the Company’s results of operations, financial condition and liquidity in the future.

In New Jersey, the declared COVID-19 State of Emergency Order remains in effect through at least March 10, 2022.

In Delaware, the declared COVID-19 State of Emergency Order ended in July 2021.

The NJBPU and the DEPSC have approved the tracking of COVID-19 related incremental costs for potential recovery in customer rates in future rate proceedings.

Neither jurisdiction has established a timetable or definitive formal procedures for seeking cost recovery.

Since March 2020, the Company has increased its allowance for doubtful accounts for expected increases in accounts receivable write-offs due to the financial impact of COVID-19 on customers.

The Company has not deferred any COVID-19 related incremental costs.

We will continue to monitor the effects of COVID-19 and evaluate its impact on the Company’s results of operations, financial condition and liquidity.

Middlesex Financings - In June 2021, Middlesex received approval from the NJBPU to redeem up to $45.5 million of outstanding first mortgage bonds (FMBs), specifically Series RR ($22.5 million) and Series SS ($23.0 million), and issue replacement FMBs at an overall lower cost of debt.

In November 2021, Middlesex closed on a $45.5 million, 2.90% private placement of FMBs with a 2051 maturity date to effectuate the redemptions.

In November 2021, Middlesex closed on a NJBPU approved $19.5 million, 2.79% private placement of FMBs with a 2041 maturity date.

Proceeds were used to reduce the Company’s outstanding balances under its lines of credit.

Tidewater Financings - In March 2021, Tidewater entered into a loan agreement with CoBank, ACB, pursuant to which Tidewater borrowed $20.0 million in September 2021 at an interest rate of 3.94% with a 2046 maturity date.

Proceeds from the loan were used to pay off its outstanding balances under its lines of credit.

In November 2021, Tidewater received approval from the DEPSC to borrow up to $5.0 million under the Delaware State Revolving Fund (SRF) Program for construction of a one million gallon elevated storage tank.

Tidewater closed on the $5.0 million loan in December 2021 and began receiving disbursements in January 2021.

Borrowing under this loan is expected to continue through mid-2023.

The final maturity date on the loan is 2044.

Common Stock Purchase Discount - The Company issues shares of its common stock in connection with its Middlesex Water Company Investment Plan (the Investment Plan), a direct share purchase and dividend reinvestment plan for the Company’s common stock.

On September 1, 2021, the Company began offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan.

The discount offering will continue until 200,000 shares are purchased at the discounted price or August 1, 2022, whichever event occurs first.

Through February 25, 2022, 44,323 shares have been purchased through the discounted offering.

The discount applies to all common stock purchases made under the Investment Plan, whether by optional cash payment or by dividend reinvestment.

Twin Lakes Utilities, Inc.

(Twin Lakes) - Twin Lakes provides water services to approximately 115 residential customers in Shohola, Pennsylvania.

In 2020, Twin Lakes filed a petition requesting the Pennsylvania Public Utilities Commission (PAPUC) to exercise its discretion under Section 529 of the Pennsylvania Public Utility Code (the Code) to order the acquisition of Twin Lakes by a public utility as defined by the Code.

The PAPUC assigned an Administrative Law Judge (ALJ) to adjudicate the matter and submit a decision to the PAPUC.

Pre-filed testimony was submitted by all parties and an evidentiary hearing was held by the ALJ in early January 2021.

The briefing schedule concluded on February 25, 2021 and a decision by the ALJ is expected to be issued in the second quarter of 2021.

A final PAPUC Order on this matter is expected to also be issued during the second quarter of 2021.

Separately, in January 2021, the PAPUC issued an Order appointing a large Pennsylvania based investor-owned water utility as the receiver (the Receiver Utility) of the Twin Lakes system effective January 15, 2021 with the receivership to remain in place until the final outcome of the Section 529 proceeding.

In connection with this receivership, the Receiver Utility’s responsibilities will include operating and maintaining the system assets in compliance with all state, federal and local laws and regulations, maintaining existing or necessary permits, licenses, approvals, authorizations, orders, consents, registrations or filings, providing a list of recommended capital improvements, providing all supervision and personnel necessary and responding to system emergencies by taking necessary action to ensure the continued provision of adequate, efficient, safe and reasonable service.

We cannot predict whether the PAPUC will ultimately approve or deny the Section 529 petition.

Twin Lakes’

PAPUC-approved annual revenues and rate base are currently set at $0.2 million and $1.5 million, respectively, and its financial results, total assets and financial obligations are not material to the Company.

Pursuant to the Pennsylvania Public Utility Code, Twin Lakes filed a petition requesting the Pennsylvania Public Utilities Commission (PAPUC) to order the acquisition of Twin Lakes by a capable public utility.

The PAPUC assigned an Administrative Law Judge (ALJ) to adjudicate the matter and submit a recommended decision (Recommended Decision) to the PAPUC.

As part of this legal proceeding the PAPUC also issued an Order in January 2021 appointing a large Pennsylvania based investor-owned water utility as the receiver (the Receiver Utility) of the Twin Lakes system until the petition is fully adjudicated by the PAPUC.

In November 2021, the PAPUC issued an Order affirming the ALJ’s Recommended Decision, ordering the Receiver Utility to acquire the Twin Lakes water system and for Middlesex to submit $1.7 million into an escrow account within 30 days.

Twin Lakes immediately filed a Petition For Review (PFR) with the Commonwealth Court of Pennsylvania (the Pennsylvania Court) seeking reversal and vacation of the escrow requirement on the grounds that it violates the Pennsylvania Public Utility Code as well as the United States Constitution.

In addition, Twin Lakes filed an emergency petition for stay of the PAPUC Order pending the Pennsylvania Court’s review of the merits arguments contained in Twin Lakes’

In December 2021, the Pennsylvania Court granted Twin Lakes’

emergency petition, pending its review.

A final decision by the Pennsylvania Court is not expected before June 2022.

The final adjudication of this matter cannot be predicted at this time.

The financial results, total assets and financial obligations of Twin Lakes are not material to Middlesex.

Strategy for Growth

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Operation of municipal and industrial water and wastewater systems on a contract basis which meet our risk profile.

Middlesex - In November 2020, Middlesex filed a petition with the NJBPU seeking approval to reset its Purchased Water Adjustment Clause (PWAC) tariff rate currently in effect to recover additional costs of $1.1 million for the purchase of treated water from a non-affiliated regulated water utility regulated by the NJBPU.

A PWAC is a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings.

The PWAC is reset to zero once those increased costs are included in base rates.

We cannot predict whether the NJBPU will ultimately approve, deny or reduce the amount of our request.

In March 2020, the NJBPU approved Middlesex’s petition to reset its PWAC tariff rate to recover additional costs of $0.6 million for the purchase of treated water from a non-affiliated water utility regulated by the NJBPU.

Middlesex - In December 2021, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an expected increase in annual operating revenues of $27.7 million.

The approved tariff rates were designed to recover increased operating costs as well as a return on invested capital of $513.5 million, based on an authorized return on common equity of 9.6%.

The increase is being implemented in two phases with $20.7 million of the increase effective January 1, 2022 and the remaining $7.0 million effective January 1, 2023.

As part of the negotiated settlement, the Purchased Water Adjustment Clause (PWAC), which is a rate mechanism that allows for recovery of increased purchased water costs between base rate case filings, was reset to zero.

In March 2021, the NJBPU approved Middlesex’s annual petition to reset its PWAC tariff rate to recover additional costs of $1.1 million for the purchase of treated water from a non-affiliated regulated water utility.

The new PWAC rate became effective April 4, 2021.

In March 2020, the NJBPU approved Middlesex’s annual petition to reset its PWAC tariff rate to recover additional costs of $0.6 million for the purchase of treated water from a non-affiliated water utility regulated by the NJBPU.

The new PWAC rate became effective on April 4, 2020.

In March 2018, Middlesex’s petition to the NJBPU seeking permission to increase its base water rates was concluded, based on a negotiated settlement, resulting in an increase in annual operating revenues of $5.5 million.

The approved base water rates were designed to recover increased operating costs as well as a return on invested capital in rate base of $245.5 million, based on an authorized return on common equity of 9.6%.

As part of the settlement, Middlesex received approval for regulatory accounting treatment of accumulated deferred income tax benefits associated with required adoption of tangible property regulations issued by the Internal Revenue Service.

The settlement agreement allowed for a four-year amortization period for $28.7 million of deferred income tax benefits as well as prospective recognition of the income tax benefits for the immediate deduction of repair costs on tangible property.

The rate increase became effective April 1, 2018.

Tidewater Rate Matters

Effective January 1, 2021, Tidewater increased its DEPSC-approved Distribution System Improvement Charge (DSIC) rate, which is expected to generate revenues of approximately $0.6 million annually.

Tidewater - Effective January 1, 2021, Tidewater increased its DEPSC-approved Distribution System Improvement Charge (DSIC) rate, which was expected to generate revenues of approximately $0.6 million annually.

A DSIC is a rate-mechanism that allows water utilities to recover investments in, and generate a return on, qualifying capital improvements made between base rate proceedings.

In March 2021, Tidewater was notified by the DEPSC that it had determined Tidewater’s earned rate of return exceeded the rate of return authorized by the DEPSC.

Consequently, Tidewater reset its DSIC rate to zero effective April 1, 2021 and has refunded customers, with interest, principally in the form of an account credit for DSIC revenue billed between April 1, 2020 and March 31, 2021.

Accordingly, in March 2021, Tidewater recorded a $0.8 million reserve, net of tax, for such refunds.

Tidewater applied the refund credits to individual customer accounts during the second quarter of 2021.

Effective March 1, 2019, Tidewater received approval from the DEPSC to reduce its rates to reflect the lower corporate income tax rate enacted by the Tax Cuts and Jobs Act of 2017 (the Tax Act), resulting in a 3.35% rate decrease for certain customer classes.

Pinelands Rate Matters

Effective November 4, 2019, Pinelands Water and Pinelands Wastewater received approval from the NJBPU to increase its base rates by $0.5 million.

The increased revenues were necessitated by capital infrastructure investments both companies had made and increased operations and maintenance costs.

Southern Shores Rate Matters

Effective January 1, 2020, the DEPSC approved the renewal of a multi-year agreement for water service to a 2,200 unit condominium community in Sussex County, Delaware.

Under the agreement, current rates will remain in effect until December 31, 2024, but should there be unanticipated capital expenditures or regulatory related changes in operating expenses exceeding certain thresholds during this time period, rates are permitted to be adjusted to reflect such cost changes.

Pinelands - Effective November 4, 2019, Pinelands received approval from the NJBPU to increase base rates by $0.5 million.

The increased revenues were necessitated by capital infrastructure investments and increased operations and maintenance costs.

Southern Shores - Effective January 1, 2020, the DEPSC approved the renewal of a multi-year agreement for water service to a 2,200 unit condominium community we serve in Sussex County, Delaware.

Under the agreement, current rates will remain in effect until December 31, 2024.

In the event there are unanticipated capital expenditures or regulatory related changes in operating expenses exceeding certain thresholds during this time period, rates are permitted to be adjusted to reflect such cost changes.

Thereafter, rate increases, if any, cannot exceed the lesser of the regional Consumer Price Index or 3%.

The new agreement expires on December 31, 2029.

The agreement expires on December 31, 2029.

Our ability to increase operating income and net income is based significantly on four factors:

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An additional factor that may affect our outlook in 2022 is the impact of COVID-19 on the general economy and the resulting impact on our customers.

For example, while many commercial and industrial business operations have curtailed operations as a result of COVID-19 in the respective states in which we operate, potentially resulting in lower water demand for those classes of customer, usage by residential customers has increased due to remote working arrangements (for further discussion of the impact of COVID-19 on the Company, see Recent Developments, Novel Coronavirus (COVID-19) above).

In addition, our customer collection efforts for Middlesex and Pinelands have been suspended based on State of Emergency Orders (SEOs).

Meanwhile, these SEOs have declared utility construction projects to be essential and therefore, are allowed to continue subject to nationally-established COVID-19 safety precautions.

For example, while many commercial and industrial business operations may have returned to normal levels of operations in our service territories, potentially new variants of COVID-19 could lead to renewed economic disruptions resulting in lower water demand for those classes of customer (for further discussion of the impact of COVID-19 on the Company, see Recent Developments, Coronavirus (COVID-19) above).

In addition, our customer collection efforts for Middlesex and Pinelands have been suspended based on State of Emergency Orders (SEOs) since 2020 and are presently scheduled to end in March 2022.

Organic residential customer growth for our Tidewater system is expected to be comparable to that experienced in 2021, which was approximately 6%.

The Company has projected it will spend approximately $314 million for its 2021-2023 capital investment program, including approximately $18 million for the upgrade of Middlesex’s primary water treatment plant in New Jersey, $43 million on our RENEW Program, our ongoing initiative to replace water mains in the Middlesex System, $38 million for wellfield treatment upgrades in the Middlesex System and $14 million for construction of a new replacement wastewater treatment plant in Milton, Delaware.

The Company has projected to spend approximately $229 million for the 2022-2024 capital investment program, including approximately $39 million for PFAS-related treatment upgrades in the Middlesex System, $33 million on the RENEW Program, which is our ongoing initiative to replace water mains in the Middlesex System, $13 million for construction of elevated storage tanks in our Tidewater and Middlesex Systems and $10 million for the rehabilitation and other improvements associated with Middlesex’s main field operations and inventory facilities.

Operating Results by Segment

The Company has two operating segments, Regulated and Non-Regulated.

Our Regulated segment contributed approximately 91%, 91% and 88% of total revenues for the years ended December 31, 2020, 2019 and 2018, respectively and approximately 93%, 93% and 93% of net income for the years ended December 31, 2020, 2019 and 2018, respectively.

Our Regulated segment contributed approximately 91% of total revenues for each of the years ended December 31, 2021, 2020, and 2019 and approximately 93% of net income for each of the years ended December 31, 2021, 2020, and 2019.

The discussion of the Company’s results of operations is on a consolidated basis and includes significant factors by subsidiary.

The segments in the tables included below are comprised of the following companies:

Regulated- Middlesex, Tidewater, Pinelands, Southern Shores, TESI and Twin Lakes;

Regulated- Middlesex, Tidewater, Pinelands, Southern Shores and TESI;

Non-Regulated- USA, USA-PA, and White Marsh.

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Years Ended December 31,

Non-Regulated

Operations and maintenance expenses

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Operating revenues for the year ended December 31, 2021 increased $1.5 million from the same period in 2020 due to the following factors:

Middlesex System revenues increased $3.1 million due to increased customer water consumption resulting from increased demand from our residential and wholesale contract customers;

Tidewater System revenues increased $2.9 million due to additional customers and related residential developer connection fees;

Pinelands revenues increased $0.5 million due to the base rate increase that went into effect in November 2019;

Non-regulated revenues increased $0.3 million due to USA’s new contract to operate and maintain the Highland Park’s water and wastewater systems (for further information, see discussion under Recent Developments-Contract Operations ) and increased supplemental services under existing contracts;

All other revenue categories increased $0.2 million.

Middlesex System revenues decreased by $0.4 million due to lower water demand from general meter service and wholesale customers, offset by an increase in the PWAC tariff rate effective April 4, 2021 (see Rates, Middlesex above for further discussion);

Tidewater System revenues increased $1.7 million due to additional customers and higher customer demand for water, partially offset by $1.0 million due to the DSIC revenue refund (for further information, see Rates, Tidewater above for further discussion);

Non-regulated revenues increased $0.3 million, primarily due to USA’s contract to operate and maintain Highland Park’s water and wastewater systems, which commenced July 1, 2020;

All other revenue categories decreased $0.1 million.

Operation and Maintenance Expense

Operation and maintenance expenses for the year ended December 31, 2021 increased $2.9 million from the same period in 2020 due to the following factors:

Variable production costs increased $1.7 million due to higher customer water consumption and higher treatment costs due to weather-impacted changes in raw water quality;

Retirement benefit plan expenses increased $0.8 million primarily due to higher actuarially-determined retirement benefit plan service expense;

Bad debt expense increased $0.4 million due to expected increases in future write-offs due to COVID-19;

All other operation and maintenance expense categories decreased $0.1 million.

Higher weather-related water main break activity in our Middlesex system during the winter months resulted in $0.5 million of additional non-labor costs;

Labor costs increased $0.9 million due to wage increases and lower allocation of labor to capital projects;

Increased business insurance premiums resulted in $0.3 million of additional costs;

Increased Avalon and Highland Park billable supplemental service expenses increased $0.5 million;

Outside services and consultant costs increased $0.2 million due to higher regulatory and corporate activity, including compliance with America’s Water Infrastructure Act of 2018;

Transportation expenses increased $0.2 million due to higher fuel prices;

Information technology costs increased $0.2 million due to greater software licensing fees;

All other operation and maintenance expense categories increased $0.1 million.

Depreciation expense for the year ended December 31, 2021 increased $2.6 million from the same period in 2020 due to a higher level of utility plant in service.

Other taxes for the year ended December 31, 2020 increased $0.5 million from the same period in 2019 primarily due to higher revenue related taxes on increased revenues in our Middlesex system.

Other taxes for the year ended December 31, 2021 increased $0.2 million from the same period in 2020 primarily due to higher payroll taxes on increased labor costs.

Other Income, net

Other Income, net for the year ended December 31, 2020 increased $1.9 million from the same period in 2019 primarily due to higher Allowance for Funds Used During Construction resulting from a higher level of capital projects in progress and lower actuarially-determined non-service expense for our employee retirement benefit plans partially offset by higher new business development costs.

Interest Expense

Interest expense for the year ended December 31, 2020 increased $0.2 million from the same period in 2019 due to higher average balance of debt outstanding partially offset by lower average interest rates on both long-term and short-term borrowings.

The benefit from income taxes for the year ended December 31, 2020 increased overall by $1.0 million from the same period in 2019, primarily due to the regulatory accounting treatment of tax benefits associated with repair expenditures on tangible property owned by Middlesex, partially offset by higher pre-tax income.

Other Income, net for the year ended December 31, 2021 increased $1.6 million from the same period in 2020 primarily due to lower actuarially-determined retirement benefit plans non-service expense offset by lower Allowance for Funds Used During Construction (AFUDC) on a lower average level of capital construction projects in progress.

Interest Charges

Interest charges for the year ended December 31, 2021 increased $0.6 million from the same period in 2020 due to higher long-term and short-term debt outstanding in 2021 as compared to 2020 partially offset by lower average interest rates on short term borrowings year-over-year.

The benefit from income taxes for the year ended December 31, 2021 increased by $1.4 million from the same period in 2020 primarily due to lower pre-tax income.

Net Income and Earnings Per Share

Net income for the year ended December 31, 2020 increased $4.5 million as compared with the same period in 2019.

Net income for the year ended December 31, 2021 decreased $1.9 million as compared with the same period in 2020.

Basic earnings per share were $2.08 and $2.19 for the year ended December 31, 2021 and 2020, respectively.

Diluted earnings per share were $2.07 and $2.18 for the year ended December 31, 2021 and 2020, respectively.

In anticipation of this expected decrease, in 2021, Middlesex filed and settled a base rate increase request with the NJBPU, with rate increases becoming effective on January 1, 2022 and January 1, 2023 (for further discussion of Middlesex’s rate increase, see Rates, Middlesex above).

Results of Operations for 2020 as Compared to 2019

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Years Ended December 31,

Non-Regulated

Operations and maintenance expenses

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Operating Revenues

Operating revenues for the year ended December 31, 2019 decreased $3.5 million from the same period in 2018.

This decrease was related to the following factors:

Middlesex System total revenues remained consistent with the same period in 2018 due to the following:

Reduced water consumption related to lower demand from our industrial and contract customers, resulting in reduced revenues of $1.2 million;

An NJBPU-approved base rate increase, implemented in April 2018, resulted in higher revenues of $1.2 million;

Tidewater System revenues increased $1.0 million primarily due to additional customers, but was mitigated by reduced base tariff rates as approved by the DEPSC in March 2019.

The lower rate was prompted by the lower corporate income tax rate enacted under the Tax Act.

There is a corresponding decrease in income tax expense;

Non-regulated revenues decreased $4.6 million, primarily due to changes resulting from USA-PA’s new 10-year contract with Perth Amboy.

Under the new contract, effective January 1, 2019, USA-PA has direct management control for wastewater services, for which USA-PA is compensated.

Under the prior contract, USA-PA utilized, and was compensated for, subcontracted wastewater services.

Elimination of these subcontracted wastewater services resulted in a related decrease in operations and maintenance expense along with an increase in operating margin;

All other operating revenue categories increased $0.1 million.

Operating revenues for the year ended December 31, 2020 increased $7.0 million from the same period in 2019 due to the following factors:

Middlesex System revenues increased $3.1 million due to increased customer water consumption resulting from increased demand from our residential and wholesale contract customers;

Tidewater System revenues increased $2.9 million due to additional customers and related residential developer connection fees;

Pinelands revenues increased $0.5 million due to the base rate increase that went into effect in November 2019;

Non-regulated revenues increased $0.3 million due to USA’s new contract to operate and maintain the Highland Park’s water and wastewater systems and increased supplemental services under existing contracts;

All other revenue categories increased $0.2 million.

Operation and Maintenance Expense

Operation and maintenance expenses for the year ended December 31, 2019 decreased $3.6 million from the same period in 2018, primarily related to the following factors:

Operation and maintenance expenses in our non-regulated subsidiaries decreased $5.2 million, primarily due to our new Perth Amboy operating contract, effective January 1, 2019, under which USA-PA no longer incurs sub-contractor fees for wastewater services.

This results in a related decrease in operating revenues along with an increase in operating margin;

Retirement benefit plan expenses decreased $0.4 million primarily due to lower actuarially-determined retirement benefit plan service expense;

Labor costs increased $2.1 million due to increased headcount, increased average labor rates and payments relative to certain retiring employees;

Operation and maintenance expenses for the year ended December 31, 2020 increased $2.8 million from the same period in 2019 due to the following factors:

Variable production costs increased $1.7 million due to higher customer water consumption and higher treatment costs due to weather-impacted changes in raw water quality;

Retirement benefit plan expenses increased $0.8 million primarily due to higher actuarially-determined retirement benefit plan service expense;

Bad debt expense increased $0.4 million due to expected increases in future write-offs due to COVID-19;

All other operation and maintenance expense categories decreased $0.1 million.

Depreciation expense for the year ended December 31, 2020 increased $1.8 million from the same period in 2019 due to a higher level of utility plant in service.

Other taxes for the year ended December 31, 2019 increased $0.1 million from the same period in 2018 primarily due to higher payroll taxes offset by lower revenue related taxes on lower revenues in our Middlesex system.

Other taxes for the year ended December 31, 2020 increased $0.5 million from the same period in 2019 primarily due to higher revenue related taxes on increased revenues in our Middlesex system.

Other Income, net

Other Income, net for the year ended December 31, 2019 decreased $0.5 million from the same period in 2018, primarily due to higher actuarially-determined non-service expense for our employee retirement benefit plans, White Marsh contract compliance costs, TESI business development costs and the sale of wastewater franchise rights by our TESI subsidiary in 2018.

These decreases were partially offset by higher Allowance for Funds Used During Construction resulting from a higher level of capital construction projects in progress.

Interest Charges

Interest charges for the year ended December 31, 2019 increased $0.5 million from the same period in 2018 due to higher average debt outstanding in 2019 as compared to 2018 partially offset by lower interest assessment from the IRS examination of the Company’s federal income tax returns.

Income taxes for year ended December 31, 2019 decreased $4.1 million from the same period in 2018, primarily due to lower pre-tax income and the regulatory accounting treatment of tax benefits associated with repair expenditures on tangible property owned by Middlesex.

In addition, Tidewater’s effective income tax rate was decreased in March 2019, reflecting the rate reduction approved by the DEPSC to reflect the lower corporate income tax rate resulting from implementation of the 2017 Tax Act.

This has resulted in a corresponding decrease in operating revenues .

Other Income, net for the year ended December 31, 2020 increased $1.9 million from the same period in 2019 primarily due to higher AFUDC resulting from a higher level of capital projects in progress and lower actuarially-determined non-service expense for our employee retirement benefit plans partially offset by higher new business development costs.

Interest Expense

Net Income and Earnings Per Share

Net income for the year ended December 31, 2020 increased $4.5 million as compared with the same period in 2019.

Basic earnings per share were $2.02 and $1.97 for the years ended December 31, 2019 and 2018, respectively.

Diluted earnings per share were $2.01 and $1.96 for the years ended December 31, 2019 and 2018, respectively.

Basic earnings per share were $2.19 and $2.02 for the year ended December 31, 2020 and 2019, respectively.

Diluted earnings per share were $2.18 and $2.01 for the year ended December 31, 2020 and 2019, respectively.

Liquidity and Capital Resources

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The effect of those factors on net income is discussed in the Results of Operations section above.

For the year ended December 31, 2020, cash flows from operating activities increased $17.3 million to $53.4 million.

The increase in cash flows from operating activities primarily resulted from reduced income tax payments, timing of vendor payments and higher net income.

For the year ended December 31, 2021, cash flows from operating activities decreased $20.3 million to $33.0 million.

The decrease in cash flows from operating activities primarily resulted from the timing of vendor payments and higher income tax and interest payments.

Increases in certain operating costs impact our liquidity and capital resources.

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Cash Flows from Investing Activities

For the year ended December 31, 2020, cash flows used in investing activities increased $16.5 million to $105.6 million, which was attributable to higher utility plant expenditures.

For further discussion on the Company’s future capital expenditures and expected funding sources, see “Capital Expenditures and Commitments”

For the year ended December 31, 2021, cash flows used in investing activities decreased $26.2 million to $79.4 million, which was attributable to lower utility plant expenditures.

For further discussion on the Company’s future capital expenditures and expected funding sources, see “

Capital Expenditures and Commitments ”

Cash Flows from Financing Activities

For the year ended December 31, 2020, cash flows provided by financing activities decreased $77.7 million to $16.2 million.

The decrease in cash flows provided by financing activities is due to net lower proceeds from the issuance of long-term debt and common stock and a reduction in net short-term bank borrowings.

For the year ended December 31, 2021, cash flows provided by financing activities increased $23.3 million to $39.5 million.

The increase in cash flows provided by financing activities is due to increases in short-term and long-term borrowings and proceeds from the issuance of common stock offset by higher repayment of long-term debt and higher common stock dividends.

For further discussion on the Company’s short-term and long-term debt, see “

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Our estimated capital expenditures for the items listed above are primarily comprised of the following:

Distribution/Network System - Projects associated with replacement, installation and relocation of water mains and service lines and wastewater collection systems, construction of water storage tanks, installation and replacement of hydrants, meters and meter pits and our RENEW Program.

RENEW is our ongoing initiative to replace water mains in the Middlesex System.

In connection with our RENEW Program, we expect to spend approximately $11 million in 2021, $13 million in 2022 and $11 million in 2023.

Production System - Projects associated with our water production and water/wastewater treatment plants, including $18 million of expenditures in 2021 for the upgrade of the Carl J.

Olsen (CJO) water treatment plant, $38 million of expenditures between 2021 and 2022 for wellfield treatment upgrades in our Middlesex System and $14 million of expenditures between 2021 and 2022 for construction of a new replacement wastewater treatment plant in Milton, Delaware.

IT Systems - Further upgrade of our enterprise resource planning system and hardware and software purchases for our other IT systems.

Other - Purchase of transportation equipment, tools, furniture, laboratory equipment, security systems and other general infrastructure needs including improvements to our operations center in Iselin, New Jersey.

The actual amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project scheduling and continued refinement of project scope and costs and could be impacted if the effects of the COVID-19 pandemic continue for an extended period of time.

In connection with RENEW, we expect to spend approximately $11 million in each of 2022, 2023 and 2024.

We expect to spend $13 million between 2022 and 2023 for construction of elevated storage tanks in our Tidewater and Middlesex systems.

Production System - Projects associated with our treatment plants, including $39 million of expenditures between 2022 and 2023 for wellfield PFAS treatment upgrades in our Middlesex system.

Information Technology (IT) Systems - Further upgrade of our enterprise resource planning system and hardware and software purchases for other IT systems.

Other - Purchase of transportation equipment, tools, furniture, laboratory equipment, security systems and other general infrastructure needs including improvements to field and inventory management facilities in Iselin, New Jersey.

The actual amount and timing of capital expenditures is dependent on the need for replacement of existing infrastructure, customer growth, residential new home construction and sales, project scheduling and continued refinement of project scope and costs and, could be impacted if new variants of the COVID-19 pandemic arise and continue for an extended period of time.

To pay for our capital program in 2022, we plan on utilizing some or all of the following:

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Short-term borrowings, as needed, through $140 million of available lines of credit with several financial institutions.

As of December 31, 2020, there was $2.0 million borrowed under these lines (see discussion under “

As of December 31, 2021, $13.0 million was outstanding under these lines (see discussion under “

Sources of Liquidity-Short-term Debt ”

Proceeds from the Delaware State Revolving Fund (SRF).

SRF programs provide low cost financing for projects that meet certain water quality and system improvement benchmarks (see discussion under “

Sources of Liquidity-Long-term Debt ”

Remaining proceeds from the issuance and sale of FMBs through the New Jersey Economic Development Authority (NJEDA) in August 2019 (see discussion under “

SRF programs provide low cost financing for projects meeting certain water quality and system improvement benchmarks (see discussion under “

Sources of Liquidity-Long-term Debt ”

Proceeds from the sale and issuance of FMBs in private placement offerings and/or through the NJEDA;

Proceeds from the sale and issuance of FMBs in private placement offerings;

Proceeds from the Investment Plan (see discussion under “

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Short-term Debt.

In January 2021, the Company reduced its’

available lines of credit from $140 million to $110 million.

In January 2022, the Company increased available lines of credit from $110 million to $140 million.

The outstanding borrowings under the credit lines at December 31, 2021 were $13.0 million, at a weighted average interest rate of 1.04%.

The weighted average daily amounts of borrowings outstanding under the Company’s credit lines and the weighted average interest rates on those amounts were $28.3 million and $52.4 million at 1.55% and 3.33% for the years ended December 31, 2020 and 2019, respectively.

The weighted average daily amounts of borrowings outstanding under the credit lines and the weighted average interest rates on those amounts were $23.7 million and $28.3 million at 1.12% and 1.55 % for the years ended December 31, 2021 and 2020, respectively.

Long-term Debt.

Subject to regulatory approval, the Company periodically issues long-term debt to fund its investments in utility plant.

To the extent possible, the Company finances qualifying capital projects under SRF loan programs in New Jersey and Delaware.

These government programs provide financing at interest rates that are typically below rates available in the broader financial markets.

Subject to regulatory approval, the Company periodically issues long-term debt to fund investments in utility plant.

To the extent possible and fiscally prudent, the Company finances qualifying capital projects under SRF loan programs in New Jersey and Delaware.

These government programs provide financing at interest rates typically below rates available in the broader financial markets.

A portion of the borrowings under the New Jersey SRF is interest-free.

Under the New Jersey SRF program, borrowers first enter into a construction loan agreement with the New Jersey Infrastructure Bank (NJIB) at a below market interest rate.

The interest rate on the Company’s current construction loan borrowings is zero percent (0%).

Under the New Jersey SRF program, borrowers first enter into a construction loan agreement with the New Jersey Infrastructure Bank (NJIB) and submit requisitions for cost reimbursements over the life of the construction period.

The interest rate on the Company’s current construction loan borrowings is near zero percent.

When construction on the qualifying project is substantially complete, NJIB will coordinate the conversion of the construction loan into a long-term securitized loan with a portion of the principal balance having a stated interest rate of zero percent (0%) and a portion of the principal balance at a market interest rate at the time of closing using the credit rating of the State of New Jersey.

The term of the long-term loans currently offered through the NJIB is up to thirty years.

The NJIB generally schedules its long-term debt financings in May and November.

Middlesex currently has two projects that are in the construction loan phase of the New Jersey SRF program as follows:

Under the Delaware SRF program, borrowers typically enter into a long-term note agreement for a term not to exceed twenty years and submit requisitions for cost reimbursements for up to two years after the agreement is executed.

Middlesex currently has two projects in the construction loan phase of the New Jersey SRF program:

In April 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund the construction of a 4.5 mile large-diameter transmission pipeline from the Carl J.

Olsen water treatment plant in Edison, New Jersey and interconnect with our distribution system.

Middlesex closed on a $43.5 million NJIB interest-free construction loan in August 2018.

Through December 31, 2020, Middlesex has drawn a total of $41.9 million and expects to draw any remaining funding requests on this construction loan in the first quarter of 2021.

In March 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund the 2018 RENEW Program, which is an ongoing initiative to eliminate unlined water distribution mains in the Middlesex system.

Middlesex closed on a $43.5 million NJIB interest-free construction loan in August 2018 and completed withdrawal of the proceeds in June 2021;

In March 2018, the NJBPU approved Middlesex’s request to participate in the NJIB loan program to fund the 2018 RENEW Program, which is an ongoing initiative to rehabilitate or replace water distribution mains in the Middlesex system.

Middlesex closed on an $8.7 million NJIB construction loan in September 2018 and completed withdrawal of the proceeds in October 2019.

The Company expects that the large-diameter transmission pipeline and the 2018 RENEW construction loans will be included in the NJIB May 2021 long-term debt financing program.

In September 2018, the NJIB announced changes to the SRF program for project funding priority ranking, the proportions of interest free loans and market interest rate loans and overall loan limits on interest free loan balances to investor-owned water utilities.

The Company anticipates these two construction loans will be converted into long-term securitized loans by the NJIB by June 30, 2022.

The NJIB has changed the SRF program for project funding priority ranking, the proportions of interest free loans and market interest rate loans and overall loan limits on interest free loan balances to investor-owned water utilities.

These changes affect SRF projects for which the construction loan closes after September 2018.

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As a result of all these changes, the Company’s future capital funding plan currently does not include participating in the NJIB SRF program.

In June 2021, Middlesex received approval from the NJBPU to redeem up to $45.5 million of outstanding FMBs, specifically Series RR ($22.5 million) and Series SS ($23.0 million), and issue replacement FMBs at an overall lower cost of debt.

In November 2021, Middlesex closed on a $45.5 million, 2.90% private placement of FMBs, designated as Series 2021B with a 2051 maturity date to effectuate the redemptions.

In May 2020, Middlesex received approval from the NJBPU to borrow up to $100 million, in one or more private placement transactions through December 31, 2023 to help fund Middlesex’s multi-year capital construction program.

In November 2020, Middlesex closed on a $40.0 million private placement loan with a payment maturity date of November 2050 and an interest rate of 2.90% by issuing a FMB designated as Series 2020A.

Proceeds from this loan were used to reduce the Company’s existing short-term borrowings under its lines of credit and for the Company’s 2020 capital program.

In order to help ensure adherence to its comprehensive financing plan, Middlesex received approval from the NJBPU in February 2019 to issue and sell up to $140 million of FMBs through the NJEDA in one or more transactions through December 31, 2022.

In connection with this approval:

In November 2021, Middlesex closed on a $19.5 million, 2.79% private placement of FMBs with a 2041 maturity date designated as Series 2021A.

Proceeds were used to reduce the Company’s outstanding balances under its lines of credit.;

In November 2020, Middlesex closed on a $40.0 million, 2.90% private placement of FMBs with a 2050 maturity date designated as Series 2020A.

Proceeds were used to reduce the Company’s outstanding balances under its lines of credit and for the Company’s 2020 capital program.

In November 2021, Tidewater received approval from the DEPSC to borrow up to $5.0 million under the Delaware SRF Program for construction of a one million gallon elevated storage tank.

Tidewater closed on the $5.0 million loan in December 2021 and began receiving disbursements in January 2022.

Borrowing under this loan is expected to continue through mid-2023.

The final maturity date on the loan is 2044.

In March 2021, Tidewater entered into a loan agreement with CoBank, ACB, pursuant to which Tidewater borrowed $20.0 million in September 2021 at an interest rate of 3.94% with a 2046 maturity date.

Proceeds from the loan were used to pay off its outstanding balances under its lines of credit.

In order to help ensure adherence to its comprehensive financing plan, Middlesex received approval from the NJBPU in February 2019 to issue and sell up to $140 million of FMBs through the New Jersey Economic Development Authority (NJEDA) in one or more transactions through December 31, 2022.

Because the interest paid to the bondholders is exempt from federal and New Jersey income taxes, the interest rate on debt issued through the NJEDA is generally lower than otherwise achievable in the traditional taxable corporate bond market.

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In August 2019, Middlesex priced, and closed on, a NJEDA debt financing transaction of $53.7 million by issuing FMBs designated as Series 2019A ($32.5 million at coupon interest rate of 4.0%) and Series 2019B ($21.2 million at coupon interest rate of 5.0%).

The proceeds, including an issuance premium of $7.1 million, are being used to finance several projects under the Water For Tomorrow capital program initiated by the Company to upgrade and replace aging water utility infrastructure.

The total proceeds of $60.8 million, initially recorded as Restricted Cash on the balance sheet, are held in escrow by a bond trustee and are drawn down by requisition for the qualifying projects.

Through December 31, 2020, Middlesex has drawn a total of $55.1 million and currently expects to draw the remaining $5.7 million of proceeds, currently included in Restricted Cash, through the second quarter of 2021.

The proceeds, including an issuance premium of $7.1 million, were used to finance several projects under the Water For Tomorrow capital program initiated by the Company to upgrade and replace aging water utility infrastructure.

The total proceeds of $60.8 million, initially recorded as Restricted Cash on the balance sheet, were held in escrow by a bond trustee.

Funds were drawn by requisition for the qualifying projects as costs were incurred with the final requisition made in February 2021.

In March 2018, the DEPSC approved Tidewater’s request to borrow up to $0.9 million under the Delaware SRF program to fund the replacement of an entire water distribution system of a small Delaware community.

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Common Stock .

The Company issues shares of its common stock in connection with the Investment Plan, a direct share purchase and dividend reinvestment plan for the Company’s common stock.

The Company raised approximately $3.8 million through the issuance of shares under the Investment Plan during 2021.

On September 1, 2021, the Company began offering shares of its common stock for purchase at a 3% discount to participants in the Investment Plan.

The discount offering will continue until 200,000 shares are purchased at the discounted price or August 1, 2022, whichever event occurs first.

Through February 25, 2022, 44,323 shares have been purchased through the discounted offering.

The discount applies to all common stock purchases made under the Investment Plan, whether by optional cash payment or by dividend reinvestment.

In November 2019, the Company sold and issued 0.8 million shares of common stock in a public offering priced at $60.50 per share.

The net proceeds of $43.7 million were used for general corporate purposes including repayment of a portion of the Company’s short-term debt outstanding.

The Company raised approximately $1.2 million through the issuance of shares under the Investment Plan during 2020.

In 2019, the Company raised approximately $12.7 million primarily through a limited duration six-month share purchase discount feature of the Investment Plan.

The 0.2 million share purchase limit was reached and the discount offer ceased prior to the original ending date.

In order to fully fund the ongoing large investment program in our utility plant infrastructure and maintain a balanced capital structure for a regulated water utility, Middlesex may offer for sale additional shares of its common stock.

In order to fully fund the ongoing capital investment program and maintain a balanced capital structure for a regulated water utility, Middlesex may offer for sale additional shares of its common stock.

The amount, the timing and the sales method of the common stock is dependent on the timing of the construction expenditures, the level of additional debt financing and financial market conditions.

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Revenue from contracts with customers is recognized when control of a promised good or service is transferred to customers at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services.

The Company’s regulated revenue from contracts with customers is derived from tariff-based sales that result from the obligation to provide water and wastewater services to residential, industrial, commercial, fire-protection and wholesale customers.

The Company’s residential customers are billed quarterly while most of the Company’s industrial, commercial, fire-protection and wholesale customers are billed monthly.

The Company’s regulated revenue results from tariff-based sales from provision of water and wastewater services to residential, industrial, commercial, fire-protection and wholesale customers.

Residential customers are billed quarterly while most industrial, commercial, fire-protection and wholesale customers are billed monthly.

Payments by customers are due between 15 to 30 days after the invoice date.

The Company recognizes revenue as the water and wastewater services are delivered to customers as well as records unbilled revenues estimated from the last meter reading date to the end of the accounting period utilizing factors such as historical customer data, regional weather indicators and general economic conditions in its service territories.

Unearned Revenues and Advance Service Fees include fixed service charge billings in advance to Tidewater customers that are recognized as service is provided to the customer.

Revenue is recognized as the water and wastewater services are delivered to customers as well as from accrual of unbilled revenues estimated from the last meter reading date to the end of the accounting period utilizing factors such as historical customer data, regional weather indicators and general economic conditions, in the relevant service territories.

Unearned Revenues and Advance Service Fees include fixed service charge billings in advance to Tidewater customers recognized as service is provided to the customer.

Non-regulated service contract revenues consist of base service fees as well as fees for additional billable services provided to customers.

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The Company considers the amounts billed to represent the value of these services provided to customers.

These contracts expire at various times through June 2030 and thus contain remaining performance obligations for which the Company expects to recognize revenue in the future.

These contracts expire at various times through 2030 and thus, contain remaining performance obligations for which the Company expects to recognize revenue in the future.

These contracts also contain customary termination provisions.

Almost all of the amounts included in operating revenues are from contracts with customers.

Substantially all of the amounts included in operating revenues are from contracts with customers.

Retirement Benefit Plans

We maintain a noncontributory defined benefit pension plan (Pension Plan) which covers all currently active employees who were hired prior to April 1, 2007.

In addition, the Company maintains an unfunded supplemental plan for its executive officers.

We maintain a noncontributory defined benefit pension plan (Pension Plan) which covers all currently active employees hired prior to April 1, 2007.

In addition, the Company maintains an unfunded supplemental plan for certain executive officers.

The Company has a retirement benefit plan other than pensions (Other Benefits Plan) for substantially all of its retired employees.

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The allocation by asset category of retirement benefit plan assets at December 31, 2021 and 2020 is as follows:

Other Benefits Plan

Asset Category

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See Note 1(r) of the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risk associated with changes in interest rates and commodity prices.

The Company is subject to the risk of fluctuating interest rates in the normal course of business.

Our policy is to manage interest rates through the use of fixed rate long-term debt and, to a lesser extent, variable rate short-term debt.

The Company’s interest rate risk related to existing fixed rate, long-term debt is not material due to the term of the majority of our First Mortgage Bonds, which have final maturity dates ranging from 2021 to 2059.

Over the next twelve months, approximately $6.7 million of the current portion of existing long-term debt instruments will mature.

The Company manages its interest rate risk related to existing variable-rate short-term debt by limiting our variable rate exposure.

Applying a hypothetical change in the rate of interest charged by 10% on those fixed- and variable-rate borrowings would not have a material effect on our earnings.

Our risks associated with commodity price increases for chemicals, electricity and other commodities are reduced through contractual arrangements and the ability to recover price increases through rates.

Non-performance by these commodity suppliers could have a material adverse impact on our results of operations, financial position and cash flows.

We are exposed to credit risk for both our Regulated and Non-Regulated business segments.

Our Regulated operations serve residential, commercial, industrial and municipal customers while our Non-Regulated operations engage in business activities with developers, government entities and other customers.

Our primary credit risk is exposure to customer default on contractual obligations and the associated loss that may be incurred due to the non-payment of customer accounts receivable balances.

Our credit risk is managed through established credit and collection policies which are in compliance with applicable regulatory requirements and involve monitoring of customer exposure and the use of credit risk mitigation measures such as letters of credit or prepayment arrangements.

Our credit portfolio is diversified with no significant customer or industry concentrations.

In addition, our Regulated businesses are generally able to recover all prudently incurred costs including uncollectible customer accounts receivable expenses and collection costs through rates.

The Company's retirement benefit plan assets are exposed to the market price variations of debt and equity securities.

Changes to the Company's retirement benefit plan assets’

value can impact the Company's retirement benefit plan expense, funded status and future minimum funding requirements.

Risk is mitigated through our ability to recover retirement benefit plan costs through customer rates.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity