DEBT

12 Months Ended

Dec. 31, 2022

DEBT [Abstract]

DEBT

NOTE 8

DEBT

At December 31, 2022, Artesian Resources had a $40 million line of credit with Citizens Bank, or Citizens, which is available to all subsidiaries of Artesian Resources.  As of December 31, 2022, there was $26.9 million of available funds under this line of credit.   The previous interest rate for borrowings under this line was the London Interbank Offered Rate, or LIBOR, plus 1.00%. It is expected that the LIBOR rate for USD currency will be discontinued after June 30, 2023.  As a result, effective May 20, 2022, this line of credit agreement was amended to replace LIBOR with the Daily Secured Overnight Financing Rate, or SOFR.  The interest rate is a one month SOFR plus 10 basis points, or Term SOFR, plus an applicable margin of 0.85%. Term SOFR cannot be less than 0.00%. This is a demand line of credit and therefore the financial institution may demand payment for any outstanding amounts at any time.  The term of this line of credit expires on the earlier of May 21, 2023 or any date on which Citizens demands payment.  The Company expects to renew this line of credit.

At December 31, 2022, Artesian Water had a $20 million line of credit with CoBank, ACB, or CoBank, that allows for the financing of operations for Artesian Water, with up to $10 million of this line available for the operations of Artesian Water Maryland.  As of December 31, 2022, there was $12.9 million of available funds under this line of credit.  The previous interest rate for borrowings under this line allowed the Company to select either LIBOR plus 1.50% or a weekly variable rate established by CoBank; the Company historically used the weekly variable interest rate.  In October 2022, this line of credit was amended to replace the previous interest rate options with a daily SOFR rate plus 1.45% option or a term SOFR rate plus 1.45% option that is locked in for either one or three months. The term of this line of credit expires on October 29, 2023. Artesian Water expects to renew this line of credit.

On April 29, 2022, Artesian Water and CoBank entered into a Bond Purchase Agreement, or the Agreement, relating to the issue and sale by Artesian Water to CoBank of a $30 million principal amount First Mortgage Bond, Series W, or the Bond, due April 30, 2047, or the Maturity Date.  The Bond was issued pursuant to Artesian Water’s Indenture of Mortgage dated as of July 1, 1961, as amended and supplemented by supplemental indentures, including the Twenty-Fifth Supplemental Indenture dated as of April 29, 2022, or the Supplemental Indenture, from Artesian Water to Wilmington Trust Company, as Trustee.  The Supplemental Indenture is a first mortgage lien against substantially all of Artesian Water’s utility plant.  The proceeds from the sale of the Bond were used to pay down outstanding lines of credit of the Company and a loan payable to Artesian Resources, with any additional proceeds used to fund capital investments in Artesian Water.  The Delaware Public Service Commission approved the issuance of the Bond on April 20, 2022.  The Bond carries an annual interest rate of 4.43% through but excluding the Maturity Date.  Interest is payable on June 30th, September 30th, December 30th and March 30th in each year and on the Maturity Date, beginning June 30, 2022, until Artesian Water’s obligation with respect to the payment of principal, premium (if any) and interest shall be discharged.  Overdue payments shall bear interest as provided in the Supplemental Indenture. The term of the Bond also includes certain limitations on Artesian Water’s indebtedness.

On August 12, 2022, Artesian Water entered into three Financing Agreements, or the Financing Agreements, with the Delaware Drinking Water State Revolving Fund (the “Fund”), acting by and through the Delaware Department of Health & Social Services, Division of Public Health, a public agency of the state of Delaware, or the Department.  The Department makes loans to, and acquires obligations of, eligible persons in Delaware to finance the costs of drinking water facilities in accordance with the Federal Safe Drinking Water Act using funds from the Fund. Under the Financing Agreements, the Department has agreed to advance to Artesian Water up to $966,000, $1,167,000 and $3,200,000 (collectively, the “Loans”) from the Fund to finance all or a portion of the costs to replace specific water transmission mains in service areas located in New Castle County, Delaware (collectively, the “Projects”).  In accordance with the Financing Agreements, Artesian Water will from time to time request funds under the Loans as it incurs costs in connection with the Projects. In connection with the Financing Agreements, Artesian Water issued to the Department three General Obligation Notes dated as of August 12, 2022, or the Notes. Under the Notes, borrowings under the Financing Agreements bear interest at a rate of 1.0% per annum and are further subject to an administrative fee at a rate of 1.0% per annum (collectively, interest and the administrative fee are referred to herein as “Fee”).  The Fee shall be paid semiannually on each February 1 and August 1, beginning on February 1, 2023.  The Notes will mature on February 1, 2043.  As of December 31, 2022, approximately $1.8 million was borrowed under the Loans.

On December 9, 2022, Artesian Water Company entered into three Financing Agreements, or the Financing Agreements, with the Fund, acting by and through the Department. Under the Financing Agreements, the Department has agreed to advance to or to reimburse Artesian Water up to $901,170, $1,042,695 and $1,050,000 (collectively, the “Loans”) from the Fund to finance all or a portion of the costs to replace specific water transmission mains in service areas located in New Castle County, Delaware (collectively, the “Projects”).  In accordance with the Financing Agreements, Artesian Water will from time to time request funds under the Loans as it incurs costs in connection with the Projects.  In connection with the Financing Agreements, Artesian Water issued to the Department three General Obligation Notes dated as of December 9, 2022, or the Notes.  Under the Notes, borrowings under the Financing Agreements bear interest at a rate of 1.0% per annum and are further subject to an administrative fee at a rate of 1.0% per annum (collectively, interest and the administrative fee are referred to herein as “Fee”).  The Fee shall be paid semiannually on each June 1 and December 1, beginning on June 1, 2023.  Two notes will mature on June 1, 2043 and one will mature on December 1, 2043.  As of December 31, 2022, approximately $1.0 million was requested under the Loans, and funds received in January 2023.

CoBank may make an annual patronage refund. The $20 million line of credit, the First Mortgage Bonds and the promissory note are with CoBank.  The patronage refunds earned by Artesian in 2022 and 2021 were $1.3 million and $1.2 million, respectively. In 2022, CoBank issued a one-time additional all-cash patronage distribution of $233,000, or 0.16%, of the average line of credit and loan volume outstanding in the prior year, which was in addition to the standard 0.80% patronage rate. In 2021, CoBank issued a one-time additional all-cash patronage distribution of $226,000, or 0.165%, of the average line of credit and loan volume outstanding in the prior year, which was in addition to the standard 0.80% patronage rate.

The weighted average interest rate on the lines of credit discussed above paid by the Company was 3.04% for the year ended December 31, 2022. These lines of credit, as well as the long-term debt obligations shown below, require us to abide by certain financial covenants and ratios.  As of December 31, 2022, we were in compliance with these  financial covenants.

Long-term debt consists of:

	December 31,
In thousands	2022		2021
First mortgage bonds
Series R, 5.96%, due December 31, 2028	$	25,000	$	25,000
Series S, 4.45%, due December 31, 2033		6,600		7,200
Series T, 4.24%, due December 20, 2036		40,000		40,000
Series U, 4.71%, due January 31, 2038		25,000		25,000
Series V, 4.42%, due October 31, 2049		30,000		30,000
Series W, 4.43%, due April 30, 2047		30,000		—
		156,600		127,200
State revolving fund loans
3.57%, due September 1, 2023		102		200
3.64%, due May 1, 2025		373		513
3.41%, due February 1, 2031		1,577		1,735
3.40%, due July 1, 2032		1,590		1,729
1.187%, due November 1, 2041		617		646
1.187%, due November 1, 2041		724		758
1.187%, due November 1, 2041		1,128		1,181
2.00%, due February 1, 2043		846		—
2.00%, due February 1, 2043		974		—
2.00%, due June 1, 2043		1,044		—
		8,975		6,762
Notes Payable
Promissory Note, 5.12%, due December 30, 2028	$	10,478	$	10,888
Asset Purchase, 2.00%, due May 26, 2027		1,569		—
		12,047		10,888
Sub-total		177,622		144,850
Less: current maturities (principal amount)		2,003		1,591
Total long-term debt	$	175,619	$	143,259

Payments of principal amounts due during the next five years and thereafter:

In thousands	2023		2024		2025		2026		2027		Thereafter
First Mortgage bonds	$	600	$	600	$	600	$	600	$	600	$	153,600
State revolving fund loans		656		702		643		581		597		5,796
Asset Purchase-Contractual Obligation		314		314		314		314		313		—
Promissory note		433		454		480		505		532		8,074
Total payments	$	2,003	$	2,070	$	2,037	$	2,000	$	2,042	$	167,470

Substantially all of Artesian Water’s utility plant is pledged as security for our First Mortgage Bonds.  As of December 31, 2022, no other water utility plant has been pledged as security for loans.  Two parcels of land in Artesian Wastewater are pledged as security for the promissory note.