ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) (In thousands of dollars, except per share amounts)
As of December 31, 2025, outstanding borrowings under the Company’s commercial paper program were $567,590, net of unamortized discount on issuance of $410, with a weighted average interest rate of 3.97% and weighted average remaining term of 8 days. Outstanding CP Notes are classified as long-term debt in the accompanying consolidated balance sheets and consolidated statements of capitalization since the Company has the intent and ability to refinance the CP Notes on a long-term basis using the Company’s revolving credit facility. The carrying value of CP Notes approximates their fair value, primarily due to their market interest rates, and are classified as Level 2 in the fair value hierarchy (see Note 13). Debt Covenants The Company is obligated to comply with covenants under some of its loan and debt agreements. These covenants contain a number of restrictive financial covenants, which among other things limit, subject to specific exceptions, the Company’s ratio of consolidated total indebtedness to consolidated total capitalization, and require a minimum level of earnings coverage over interest expense. During 2025, the Company was in compliance with its debt covenants under its loan and debt agreements. Failure to comply with the Company’s debt covenants could result in an event of default, which could result in the Company being required to repay or finance its borrowings before their due date, possibly limiting the Company’s future borrowings, and increasing its borrowing costs. Loans Payable – On June 3, 2025, Aqua Pennsylvania and PNG Companies, LLC amended and restated their respective $100,000 and $300,000 revolving credit agreements extending the maturity date by another 364-day period. The funds borrowed under these agreements are classified as loans payable and are used to provide working capital. As of December 31, 2025 and 2024, funds borrowed under the Aqua Pennsylvania revolving credit agreement were $39,139 and $31,158, respectively. Interest under this facility is based, at the borrower’s option, on the prime rate, an adjusted overnight bank funding rate, or an adjusted SOFR rate. A commitment fee of 0.05% is charged on the total commitment amount of Aqua Pennsylvania’s revolving credit agreement. The average cost of borrowing under the facility was 5.01% and 5.9%, and the average borrowing was $34,437 and $29,074, during 2025 and 2024, respectively. The maximum amount outstanding at the end of any one month was $55,347 and $42,691 in 2025 and 2024, respectively. As of December 31, 2025 and 2024, funds borrowed under the Peoples Natural Gas Companies revolving credit agreement were $111,000 and $155,384, respectively. Interest under this facility is based, at the borrower’s option, at the prime rate, an adjusted overnight bank funding rate, or an adjusted SOFR rate. A commitment fee of 0.08% is charged on the total commitment amount of Peoples’ revolving credit agreement. The average cost of borrowing under the facility was 5.20% and 6.18%, and the average borrowing was $63,840 and $96,609, during 2025 and 2024, respectively. The maximum amount outstanding at the end of any one month was $124,079 and $158,249 in 2025 and 2024, respectively. Interest Income and Expense– Interest income of $1,703, $3,318, and $3,401 was recognized for the years ended December 31, 2025, 2024, and 2023, respectively. Interest expense was $329,081, $302,467, and $283,362 in 2025, 2024, and 2023, including amounts capitalized for borrowed funds of $7,975, $7,372, and $5,241, respectively.
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