Note 4 - Debt AND FINANCING ARRANGEMENTS

Fair Value of Long-Term Debt - Currently, the Company believes there is no active market in the Company’s debt securities, which have all been sold through private placements. If there were an active market for the Company’s debt securities, the fair value of the Company’s long-term debt would be estimated based on the quoted market prices for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities. The fair value of the Company’s long-term debt is estimated using Level 2 inputs (valuations based on quoted prices available in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are directly observable, and inputs derived principally from market data). In estimating the fair value of the Company’s long-term debt, the assumed market yield reflects the Moody’s Baa Utility Bond Average Yield. Costs, including prepayment costs, associated with the early settlement of long-term debt are not taken into consideration in determining fair value.

On April 30, 2026, Fitchburg issued $23.0 million of Notes due 2036 at 5.62% and $17.0 million of Notes due 2041 at 5.87%. Fitchburg used the net proceeds to refinance existing debt and for general corporate purposes. Approximately $0.3 million of costs associated with this issuance will be recorded as a reduction of Long-Term Debt on the Consolidated Balance Sheet in the second quarter of 2026.

On July 8, 2025, Bangor issued $14.0 million of Notes due 2030 at 5.70% and $18.0 million of Notes due 2035 at 6.31%. Bangor used the net proceeds 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 on the Consolidated Balance Sheet in 2025.

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 the prior facility in full and on January 29, 2025, the Company executed an amendment that increased the borrowing limit under the Credit Facility from $200 million to $275 million and extended the maturity date from September 29, 2027 to September 29, 2028. Unitil may borrow under the Credit Facility through September 29, 2028, with the option for two additional one-year extensions under certain circumstances. The Credit Facility provides for a $275 million borrowing limit, including a $25 million sublimit for standby letters of credit and permits Unitil to increase the borrowing limit by up to an additional $75 million under certain circumstances. Borrowings under the Credit Facility may bear interest at various options, including a daily fluctuating rate equal to the forward-looking one-month secured overnight financing rate (SOFR) term rate (as administered by the Federal Reserve Bank of New York), plus 0.1000%, plus a margin ranging from 1.125% to 1.375% based on Unitil’s credit rating.

The Company accesses the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $174.5 million for the six months ended June 30, 2026. Total gross repayments were $238.0 million for the six months ended June 30, 2026. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of June 30, 2026, June 30, 2025 and December 31, 2025:

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 the 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 June 30, 2026, June 30, 2025 and December 31, 2025, the Company was in compliance with the covenants contained in the Credit Facility in effect on those dates.

The average interest rates on all short-term borrowings and intercompany money pool transactions were 4.9% and 5.6% for the six months ended June 30, 2026 and June 30, 2025, respectively. The average interest rate on all short-term borrowings for the twelve months ended December 31, 2025 was 5.4%.

On June 30, 2026, the Company entered into an Amended and Restated senior unsecured delayed-draw term loan facility with the Bank of Nova Scotia, which amended and restated the previous facility entered into on October 31, 2025. Tranche A in the agreement equals the aggregate commitment of $86.0 million used to fund the acquisition of Maine Natural on October 31, 2025 and has a maturity date of October 31, 2026. As of June 30, 2026, the Company’s Tranche A borrowings outstanding were $86.0 million. Tranche B in the agreement equals the aggregate commitment of $50.0 million used to fund the acquisition of the Aquarion Water companies on June 30, 2026 and has a maturity date of June 30, 2027. As of June 30, 2026, the Company’s Tranche B borrowings outstanding were $42.6 million. The facility provides that the Company has an option for determining whether interest on loans under the facility will bear interest based on a Base Rate plus an applicable margin of 0.25% or based on a one-month Term SOFR plus a SOFR adjustment of 0.10% plus an applicable margin of 1.25%. The Base Rate is equal to the highest of the (a) Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by The Bank of Nova Scotia as its "prime rate", or (c) one-month Term SOFR plus a SOFR adjustment of 0.10% plus 1.00%. The facility has a maturity date of October 31, 2026.

Northern Utilities and Bangor enter into asset management agreements under which Northern Utilities and Bangor release certain gas pipeline and storage assets, sell to an asset manager and subsequently repurchase the gas over the course of the gas heating season at the same price at which they sold the gas to the asset manager. There was $8.3 million of natural gas storage inventory and corresponding obligations at June 30, 2026 related to these asset management agreements.

Guarantees

The Company provides limited guarantees on certain energy and gas storage management contracts entered into by the energy distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of June 30, 2026, there were $50.3 million of guarantees outstanding.

The Company also guarantees the payment of principal, interest and other amounts payable on the notes issued by Abenaki. As of June 30, 2026, the total principal amount outstanding for the Abenaki notes was $2.7 million.

Leases

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

Total rental expense under operating leases charged to operations for the three months ended June 30, 2026 and June 30, 2025 amounted to $0.5 million and $0.6 million, respectively. Total rental expense under operating leases charged to operations for the six months ended June 30, 2026 and June 30, 2025 amounted to $1.1 million and $1.1 million, respectively.

Cash paid for amounts included in the measurement of operating lease obligations for the six months ended June 30, 2026 and June 30, 2025 was $1.1 million and $1.1 million and was included in Cash Provided by Operating Activities on the Consolidated Statements of Cash Flows.

Assets under capital leases amounted to approximately $0.9 million, $0.6 million and $0.9 million as of June 30, 2026, June 30, 2025 and December 31, 2025, respectively, less accumulated amortization of $0.4 million, $0.2 million and $0.3 million, respectively, and are included in Net Utility Plant on the Company’s Consolidated Balance Sheets.

The following table is a schedule of future operating lease payment obligations and future minimum lease payments under capital leases as of June 30, 2026. The payments for operating leases consist of $2.1 million of current Operating Lease Obligations and $4.3 million of noncurrent Operating Lease Obligations on the Company’s Consolidated Balance Sheets as of June 30, 2026. The payments for capital leases consist of $0.2 million of current capital lease obligations, which are included in Other Current Liabilities and $0.3 million of noncurrent capital lease obligations, which are included in Other Noncurrent Liabilities, on the Company’s Consolidated Balance Sheets as of June 30, 2026.

Operating lease obligations are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used the interest rate stated in each lease agreement. As of June 30, 2026, the weighted average remaining lease term is 3.4 years and the weighted average operating discount rate used to determine the operating lease obligations was 5.40%. As of June 30, 2025, the weighted average remaining lease term was 3.8 years and the weighted average operating discount rate used to determine the operating lease obligations was 5.0%.