UTL · Read the filing

Item 1A. Risk Factors

When considering an investment in our securities, investors should consider the following risk factors, as well as the information contained under the caption “Cautionary Statement” immediately following the Table of Contents in this Annual Report on Form

10-K.

Additional risks not presently known to the Company or that the Company currently believes are immaterial may also impair business operations and financial results. If any of the following risks actually occur, the Company’s business, financial condition or results of operations could be adversely affected. In such case, the trading price of the Company’s common stock could decline and investors could lose all or part of their investment. The risk factors below are categorized by operational, regulatory, financial and general.

OPERATIONAL RISKS

A substantial disruption or lack of growth in interstate natural gas pipeline transmission and storage capacity and electric transmission capacity may impair the Company’s ability to meet customers’ existing and future requirements.

In order to meet existing and future customer demands for natural gas and electricity, the Company must acquire sufficient supplies of natural gas and electricity. In addition, the Company must contract for reliable and adequate upstream transmission and transportation capacity for its distribution systems while considering the dynamics of the natural gas interstate pipelines and storage, the electric transmission markets and its own

on-system

resources. The Company’s financial condition or results of operations may be adversely affected if the future availability of natural gas and electric supply were insufficient to meet future customer demands for natural gas and electricity.

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The Company’s electric and natural gas distribution activities (including storing natural gas and supplemental gas supplies) involve numerous hazards and operating risks that may result in accidents and other operating risks and costs. Any such accident or costs could adversely affect the Company’s financial position or results of operations.

Inherent in the Company’s electric and natural gas distribution activities are a variety of hazards and operating risks, including leaks, explosions, electrocutions, mechanical problems and aging infrastructure. These hazards and risks could result in loss of human life, significant damage to property, environmental pollution, damage to natural resources and impairment of the Company’s operations, which could adversely affect the Company’s financial position or results of operations.

The Company maintains insurance against some, but not all, of these risks and losses in accordance with customary industry practice. The location of pipelines, storage facilities and electric distribution equipment near populated areas (including residential areas, commercial business centers and industrial sites) could increase the level of damages associated with these hazards and operating risks. The occurrence of any of these events could adversely affect the Company’s financial position or results of operations.

The Company’s operational and information systems on which it relies to conduct its business and serve customers could fail to function properly due to technological problems, a cyber-attack, acts of terrorism, severe weather, a solar event, an electromagnetic event, a natural disaster, the age and condition of information technology assets, human error, or other reasons, that could disrupt the Company’s operations and cause the Company to incur unanticipated losses and expense.

The operation of the Company’s extensive electric and natural gas systems rely on evolving information technology systems and network infrastructure that are likely to become more complex as new technologies and systems are developed. The Company’s business is highly dependent on its ability to process and monitor, on a daily basis, a very large number of transactions, many of which are highly complex. The failure of these information systems and networks could significantly disrupt operations; result in outages and/or damages to the Company’s assets or operations or those of third parties on which it relies; and subject the Company to claims by customers or third parties, any of which could have a material effect on the Company’s financial condition, results of operations, and cash flows.

The Company’s information systems, including its financial information, operational systems, metering, and billing systems, require constant maintenance, modification, and updating, which can be costly and increases the risk of errors and malfunction. Any disruptions or deficiencies in existing information systems, or disruptions, delays or deficiencies in the modification or implementation of new information systems, could result in increased costs, the inability to track or collect revenues, the diversion of management’s and employees’ attention and resources, and could negatively affect the effectiveness of the Company’s control environment, and/or the Company’s ability to timely file required regulatory reports. Despite implementation of security and mitigation measures, all of the Company’s technology systems are vulnerable to impairment or failure due to cyber-attacks, computer viruses, human errors, acts of war or terrorism and other reasons. If the Company’s information technology systems were to fail or be materially impaired, the Company might be unable to fulfill critical business functions and serve its customers, which could have a material effect on the Company’s financial condition, results of operations, and cash flows.

In the ordinary course of its business, the Company collects and retains sensitive electronic data including personal identification information about customers and employees, customer energy usage, and other confidential information. The theft, damage, or improper disclosure of sensitive electronic data through security breaches or other means could subject the Company to penalties for violation of applicable privacy laws or claims from third parties and could harm the Company’s reputation and adversely affect the Company’s financial condition and results of operations.

In addition, the Company’s electric and natural gas distribution and transmission delivery systems are part of an interconnected regional grid and pipeline system. If these neighboring interconnected systems were to be disrupted due to cyber-attacks, computer viruses, human errors, acts of war or terrorism or other reasons, the Company’s operations and its ability to serve its customers would be adversely affected, which could have a material effect on the Company’s financial condition, results of operations, and cash flows.

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We outsource certain business functions to third-party suppliers and service providers, and substandard performance by those third parties could harm our business, reputation and results of operations.

We outsource certain services to third parties in areas including information technology, telecommunications, networks, transaction processing, human resources, payroll and payroll processing and other areas. Outsourcing of services to third parties could expose us to substandard quality of service delivery or substandard deliverables, which may result in missed deadlines or other timeliness issues,

non-compliance

(including with applicable legal requirements and industry standards) or reputational harm, which could negatively affect our results of operations. We also continue to pursue enhancements to modernize our systems and processes. If any difficulties in the operation of these systems were to occur, they could adversely affect our results of operations, or adversely affect our ability to work with regulators, unions, customers or employees.

The inability to attract and retain a qualified workforce including, but not limited to, executive officers, key employees and employees with specialized skills, could have an adverse effect on the Company’s operations.

The success of our business depends on the leadership of our executive officers and other key employees to implement our business strategies. The inability to maintain a qualified workforce including, but not limited to, executive officers, key employees and employees with specialized skills, may negatively affect our ability to service our existing or new customers, or successfully manage our business or achieve our business objectives. There may not be sufficiently skilled employees available internally to replace employees when they retire or otherwise leave active employment. Shortages of certain highly skilled employees may also mean that qualified employees are not available externally to replace these employees when they are needed. In addition, shortages in highly skilled employees coupled with competitive pressures may require the Company to incur additional employee recruiting and compensation expenses.

The Company may be adversely affected by work stoppages, labor disputes, and/or pandemic illness to which it may not able to promptly respond.

Approximately

one-third

of the Company’s employees are represented by labor unions and are covered by collective bargaining agreements. Disputes with the unions over terms and conditions of the agreements could result in instability in the Company’s labor relationships and work stoppages that could affect the timely delivery of natural gas and electricity, which could strain relationships with customers and state regulators and cause a loss of revenues. The Company’s collective bargaining agreements may also increase the cost of employing its union workforce, affect its ability to continue offering market-based salaries and employee benefits, limit its flexibility in dealing with its workforce, and limit its ability to change work rules and practices and implement other efficiency-related improvements to successfully compete in today’s challenging marketplace, which may negatively affect the Company’s financial condition and results of operations.

Additionally, pandemic illness could result in part, or all, of the Company’s workforce being unable to operate or maintain the Company’s infrastructure or perform other tasks necessary to conduct the Company’s business. A slow or inadequate response to this type of event may adversely affect the Company’s financial condition, results of operations, and cash flows.

The coronavirus outbreak could adversely affect Unitil’s business, financial conditions, results of operations and cash flows.

In December 2019, a novel strain of coronavirus

(COVID-19)

emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, the virus spread to several other countries and infections have been reported globally. The extent to which the coronavirus affects Unitil’s financial condition, results of operations, and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus, and the actions to contain the coronavirus or treat its effect, among others. In particular, the continued spread of the coronavirus could adversely affect Unitil’s business, including (i) by disrupting

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Unitil’s employees and contractors ability to provide ongoing services to Unitil, (ii) by reducing customer demand for electricity or gas, or (iii) by reducing the supply of electricity or gas, each of which could have an adverse effect on Unitil’s financial condition, results of operations, and cash flows.

REGULATORY RISKS

The Company is subject to comprehensive regulation, which could adversely affect the rates it is able to charge, its authorized rate of return and its ability to recover costs. In addition, certain regulatory authorities have the statutory authority to impose financial penalties and other sanctions on the Company, which could adversely affect the Company’s financial condition, results of operations, and cash flows.

The Company is subject to comprehensive regulation by federal regulatory authorities (including the FERC) and state regulatory authorities (including the NHPUC, MDPU and MPUC). These authorities regulate many aspects of the Company’s operations, including the rates that the Company can charge customers, the Company’s authorized rates of return, the Company’s ability to recover costs from its customers, construction and maintenance of the Company’s facilities, the Company’s safety protocols and procedures, including environmental compliance, the Company’s ability to issue securities, the Company’s accounting matters, and transactions between the Company and its affiliates. The Company is unable to predict the effect on its financial condition and results of operations from the regulatory activities of any of these regulatory authorities. Changes in regulations, the imposition of additional regulations, regulatory proceedings regarding fossil fuel use and system electrification, or regulatory decisions particular to the Company could adversely affect the Company’s financial condition and results of operations.

The Company’s ability to obtain rate adjustments to maintain its current authorized rates of return depends upon action by regulatory authorities under applicable statutes, rules and regulations. These regulatory authorities are authorized to leave the Company’s rates unchanged, to grant increases in such rates, or to order decreases in such rates. The Company may be unable to obtain favorable rate adjustments or to maintain its current authorized rates of return, which could adversely affect its financial condition, results of operations, and cash flows.

Regulatory authorities also have authority with respect to the Company’s ability to recover its electricity and natural gas supply costs, as incurred by Unitil Power, Unitil Energy, Fitchburg, and Northern Utilities. If the Company is unable to recover a significant amount of these costs, or if the Company’s recovery of these costs is significantly delayed, then the Company’s financial condition,results of operations, or cash flows could be adversely affected.

In addition, certain regulatory authorities have the statutory authority to impose financial penalties and other sanctions on the Company if the Company is found to have violated statutes, rules or regulations governing its utility operations. Any such penalties or sanctions could adversely affect the Company’s financial condition, results of operations, and cash flows.

The Company’s business is subject to environmental regulation in all jurisdictions in which it operates and its costs of compliance are significant. New, or changes to existing, environmental regulation, including those related to climate change or greenhouse gas emissions, and the incurrence of environmental liabilities could adversely affect the Company’s financial condition, results of operations, and cash flows.

The Company’s utility operations are generally subject to extensive federal, state and local environmental laws and regulations relating to air quality, water quality, waste management, natural resources, and the health and safety of the Company’s employees. The Company’s utility operations also may be subject to new and emerging federal, state and local legislative and regulatory initiatives related to climate change or greenhouse gas emissions including the U.S. Environmental Protection Agency’s mandatory greenhouse gas reporting rule. Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties and other sanctions; imposition of remedial requirements; and issuance of injunctions to ensure future compliance. Liability under certain environmental laws and regulations is strict, joint and several in nature. Although the Company believes it is

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in material compliance with all applicable environmental and safety laws and regulations, we cannot assure you that the Company will not incur significant costs and liabilities in the future. Moreover, it is possible that other developments, such as increasingly stringent federal, state or local environmental laws and regulations, including those related to climate change or greenhouse gas emissions, could result in increased environmental compliance costs.

FINANCIAL RISKS

The Company may not be able to obtain financing, or may not be able to obtain financing on acceptable terms, which could adversely affect the Company’s financial condition and results of operations.

The Company requires capital to fund utility plant additions, working capital and other utility expenditures. While the Company derives the capital necessary to meet these requirements primarily from internally-generated funds, the Company supplements internally generated funds by incurring short-term and long-term debt, as needed. Additionally, from time to time the Company has accessed the public capital markets through public offerings of equity securities. A downgrade of our credit rating or events beyond our control, such as a disruption in global capital and credit markets, could increase our cost of borrowing and cost of capital or restrict our ability to access the capital markets and negatively affect our ability to maintain and to expand our businesses.

The Company’s short-term debt revolving credit facility typically has variable interest rates. Therefore, an increase or decrease in interest rates will increase or decrease the Company’s interest expense associated with its revolving credit facility. An increase in the Company’s interest expense could adversely affect the Company’s financial condition and results of operations. As of December 31, 2020, the Company had approximately $54.7 million in short-term debt outstanding under its revolving credit facility. If the lending counterparties under the Company’s current credit facility are unwilling or unable to meet their funding obligations, the Company may be unable to, or limited in its ability to, incur short-term debt under its credit facility. This situation could hinder or prevent the Company from meeting its current and future capital needs, which could correspondingly adversely affect the Company’s financial condition, results or operations, and cash flows.

Also, from time to time the Company repays portions of its short-term debt with the proceeds it receives from long-term debt financings or equity financings. General economic conditions, conditions in the capital and credit markets and the Company’s operating and financial performance could negatively affect the Company’s ability to obtain such financings or the terms of such financings, which could correspondingly adversely affect the Company’s financial condition, results of operations, and cash flows. The Company’s long-term debt typically has fixed interest rates. Therefore, changes in interest rates will not affect the Company’s interest expense associated with its presently outstanding fixed rate long-term debt. However, an increase or decrease in interest rates may increase or decrease the Company’s interest expense associated with any new fixed rate long-term debt issued by the Company, which could adversely affect the Company’s financial condition, results of operations, and cash flows.

The Company may need to use a significant portion of its cash flow to repay its short-term debt and long-term debt, which would limit the amount of cash it has available for working capital, capital expenditures and other general corporate purposes and could adversely affect its financial condition, results of operations, and cash flows.

Changes in taxation and the ability to quantify such changes could adversely affect the Company’s financial results.

The Company is subject to taxation by the various taxing authorities at the federal, state and local levels where it does business. See “Tax Cuts and Jobs Act of 2017” in “Rates and Regulation” section. Legislation or regulation which could affect the Company’s tax burden could be enacted by any of these governmental authorities. The Company cannot predict the timing or extent of such

tax-related

developments which could have a negative effect on the financial results. The Company uses its best judgment in attempting to quantify and reserve for these tax obligations. However, a challenge by a taxing authority, the Company’s ability to utilize tax benefits such as carryforwards or tax credits, or a deviation from other

tax-related

assumptions may cause actual financial results to deviate from previous estimates. (See Note 9 (Income Taxes) to the Consolidated Financial Statements.)

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Declines in capital market valuations could require the Company to make substantial cash contributions to cover its pension and other post-retirement benefit obligations. If the Company is unable to recover a significant amount of pension and other post-retirement benefit obligation costs in its rates, or if the Company’s recovery of these costs in its rates is significantly delayed, its financial condition and results of operations could be adversely affected.

The amount of cash contributions the Company is required to make in respect of its pension and other post-retirement benefit obligations is dependent upon the valuation of the capital markets. Adverse changes in capital market valuations could result in the Company being required to make substantial cash contributions in respect to these obligations. These cash contributions could have an adverse effect on the Company’s financial condition, results of operations, and cash flows if the Company is unable to recover such costs in rates or if such recovery is significantly delayed. See section titled

Critical Accounting Policies—Retirement Benefit Obligations

in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Note 10 (Retirement Benefit Plans) to the accompanying Consolidated Financial Statements for a more detailed discussion of the Company’s pension obligations.

The terms of the Company’s and its subsidiaries’ indebtedness restrict the Company’s and its subsidiaries’ business operations (including their ability to incur material amounts of additional indebtedness), which could adversely affect the Company’s financial condition and results of operations.

The terms of the Company’s and its subsidiaries’ indebtedness impose various restrictions on the Company’s business operations, including the ability of the Company and its subsidiaries to incur additional indebtedness. These restrictions could adversely affect the Company’s financial condition, results of operations, and cash flows. See sections titled

Liquidity, Commitments and Capital Requirements

in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Note 5 (Debt and Financing Arrangements) to the accompanying Consolidated Financial Statements for a more detailed discussion of these restrictions.

Unitil is a public utility holding company and has no operating income of its own. The Company’s ability to pay dividends on its common stock is dependent on dividends and other payments received from its subsidiaries and on factors directly affecting Unitil, the parent corporation. The Company cannot assure that its current annual dividend will be paid in the future.

The ability of the Company’s subsidiaries to pay dividends or make distributions to Unitil depends on, among other things:

In addition, before the Company can pay dividends on its common stock, it has to satisfy its debt obligations and comply with any statutory or contractual limitations.

As of February 2, 2021, the Company’s current effective annualized dividend is $1.52 per share of common stock, payable quarterly. The Company’s Board of Directors reviews Unitil’s dividend policy periodically in light of a number of business and financial factors, including those referred to in this report, and the Company cannot assure the amount of dividends, if any, that may be paid in the future.

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GENERAL RISKS

The Company’s electric and natural gas sales and revenues are highly correlated with the economy, and national, regional and local economic conditions may adversely affect the Company’s customers and correspondingly the Company’s financial condition, results of operations, and cash flows.

The Company’s business is influenced by the economic activity within its service territory. The level of economic activity in the Company’s electric and natural gas distribution service territories directly affects the Company’s business. As a result, adverse changes in the economy may adversely affect the Company’s financial condition, results or operations, and cash flows. Economic downturns or periods of high electric and gas supply costs typically can lead to the development of legislative and regulatory policy designed to promote reductions in energy consumption and increased energy efficiency and self-generation by customers. This focus on conservation, energy efficiency and self-generation may result in a decline in electricity and gas sales in our service territories. If any such declines were to occur without corresponding adjustments in rates, our revenues would be reduced and our future growth prospects would be limited. In addition, a period of prolonged economic weakness could affect our customers’ ability to pay bills in a timely manner and increase customer bankruptcies, which may lead to increased bad debt expenses or other adverse effects on our financial position, results of operations, and cash flows.

A significant amount of the Company’s sales are temperature sensitive. Because of this, mild winter and summer temperatures could decrease the Company’s sales, which could adversely affect the Company’s financial condition and results of operations. Also, the Company’s sales may vary from year to year depending on weather conditions, and the Company’s results of operations generally reflect seasonality.

The Company estimates that approximately 70% of its annual natural gas sales are temperature sensitive. Therefore, mild winter temperatures could decrease the amount of natural gas sold by the Company, which could adversely affect the Company’s financial condition, results of operations, and cash flows. The Company’s electric sales also are temperature sensitive, but less so than its natural gas sales. The highest usage of electricity typically occurs in the summer months (due to air conditioning demand) and the winter months (due to heating-related and lighting requirements). Therefore, mild summer temperatures and mild winter temperatures could decrease the amount of electricity sold by the Company, which could adversely affect the Company’s financial condition, results of operations, and cash flows. Also, because of this temperature sensitivity, sales by the Company’s distribution utilities vary from year to year, depending on weather conditions.

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

Catastrophic events could adversely affect the Company’s financial condition and results of operations.

The electric and natural gas utility industries are from time to time affected by catastrophic events, such as unusually severe weather and significant and widespread failures of plant and equipment. Other catastrophic occurrences, such as terrorist attacks on utility facilities, may occur in the future. Such events could inhibit the Company’s ability to deliver electricity or natural gas to its customers for an extended period, which could affect customer satisfaction and adversely affect the Company’s financial condition, results of operations, and cash flows. If customers, legislators, or regulators develop a negative opinion of the Company, this situation could result in increased regulatory oversight and could affect the equity returns that the Company is allowed to earn. Also, if the Company is unable to recover in its rates a significant amount of costs associated with catastrophic events, or if the Company’s recovery of such costs in its rates is significantly delayed, the Company’s financial condition, results or operations, or cash flows may be adversely affected.

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The Company’s business could be adversely affected if it is unable to retain its existing customers or attract new customers, or if customers’ demand for its current products and services significantly decreases.

The success of the Company’s business depends, in part, on its ability to maintain and increase its customer base and the demand that those customers have for the Company’s products and services. The Company’s failure to maintain or increase its customer base and/or customer demand for its products and services could adversely affect its financial condition, results of operations, and cash flows.

The natural gas and electricity supply requirements of the Company’s customers are fulfilled by the Company or, in some instances and as allowed by state regulatory authorities, by third-party suppliers who contract directly with customers. In either scenario, significant increases in natural gas and electricity commodity prices may negatively affect the Company’s ability to attract new customers and grow its customer base.

Developments in distributed generation, energy conservation, power generation and energy storage could affect the Company’s revenues and the timing of the recovery of the Company’s costs. Advancements in power generation technology are improving the cost-effectiveness of customer self-supply of electricity. Improvements in energy storage technology, including batteries and fuel cells, could also better position customers to meet their

around-the-clock

electricity requirements. Such developments could reduce customer purchases of electricity, but may not necessarily reduce the Company’s investment and operating requirements due to the Company’s obligation to serve customers, including those self-supply customers whose equipment has failed for any reason, to provide the power they need. In addition, because a portion of the Company’s costs are recovered through charges based upon the volume of power delivered, reductions in electricity deliveries will affect the timing of the Company’s recovery of those costs and may require changes to the Company’s rate structures.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2020, Unitil owned through its natural gas and electric distribution utilities, five utility operating centers located in New Hampshire, Maine and Massachusetts; including our new operating center in Exeter, New Hampshire. The Company’s real estate subsidiary, Unitil Realty, owns the Company’s corporate headquarters building and the land on which it is located in Hampton, New Hampshire.

The following tables detail certain of the Company’s natural gas and electric operations properties.

Natural Gas Operations

Northern Utilities Fitchburg GraniteState Total

Description NH ME

Natural Gas Transmission Pipeline—Miles — — — 86 86

Electric Operations

Description Unitil Energy Fitchburg Total

Primary Transmission and Distribution Pole Miles—Overhead 1,293 454 1,747

Conduit Distribution Bank Miles—Underground 235 68 303

Transmission and Distribution Substations 34 16 50

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The Company’s natural gas operations property includes two liquid propane gas plants and two liquefied natural gas plants. Northern Utilities also owns a propane air gas plant and an LNG storage and vaporization facility. Fitchburg owns a propane air gas plant and an LNG storage and vaporization facility, both of which are located on land owned by Fitchburg in north central Massachusetts.

Northern Utilities’ gas mains are primarily made up of polyethylene plastic (81.5%), coated and wrapped cathodically protected steel (15.5%), cast/wrought iron (2.4%), and unprotected bare and coated steel (0.6%). Fitchburg’s gas mains are primarily made up of coated steel (44.8%), polyethylene plastic (39.3%), cast/wrought iron (13.8%), and bare steel (2.1%).

Granite State’s underground natural gas transmission pipeline, regulated by the FERC, is located primarily in Maine and New Hampshire.

Unitil Energy’s electric substations are located on land owned by Unitil Energy or land occupied by Unitil Energy pursuant to perpetual easements in the southeastern seacoast and state capital regions of New Hampshire

Unitil Energy’s electric distribution lines are located in, on or under public highways or private lands pursuant to lease, easement, permit, municipal consent, tariff conditions, agreement or license, expressed or implied through use by Unitil Energy without objection by the owners. In the case of certain distribution lines, Unitil Energy owns only a part interest in the poles upon which its wires are installed, the remaining interest being owned by telecommunication companies.

The physical utility properties of Unitil Energy, with certain exceptions, and its franchises are subject to its indenture of mortgage and deed of trust under which the respective series of first mortgage bonds of Unitil Energy are outstanding.

Fitchburg’s electric substations, with minor exceptions, are located in north central Massachusetts on land owned by Fitchburg or occupied by Fitchburg pursuant to perpetual easements. Fitchburg’s electric distribution lines and gas mains are located in, on or under public highways or private lands pursuant to lease, easement, permit, municipal consent, tariff conditions, agreement or license, express or implied through use by Fitchburg without objection by the owners. Fitchburg owns full interest in the poles upon which its wires are installed.

The Company believes that its facilities are currently adequate for their intended uses.

Item 3. Legal Proceedings

The Company is involved in legal and administrative proceedings and claims of various types, including those which arise in the ordinary course of business. The Company believes, based upon information furnished by counsel and others, that the ultimate resolution of these claims will not have a material effect on its financial position, operating results or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

The Company’s common stock is listed on the New York Stock Exchange under the symbol “UTL.” As of December 31, 2020, there were 1,279 shareholders of record of our common stock.

Common Stock Data

See “Dividends” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations).

Information regarding securities authorized for issuance under our equity compensation plans, as of December 31, 2020, is set forth in the following table.

Equity Compensation Plan Information

(a) (b) (c)

Equity compensation plans approved by security holders(1) — — 213,817

Equity compensation plans not approved by security holders — — —

NOTES: (also see Note 6 (Equity) to the accompanying Consolidated Financial Statements)

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Stock Performance Graph

The following graph compares Unitil Corporation’s cumulative stockholder return since December 31, 2015 with the Peer Group index, comprised of the S&P 500 Utilities Index, and the S&P 500 index. The graph assumes that the value of the investment in the Company’s common stock and each index (including reinvestment of dividends) was $100 on December 31, 2015.

Comparative Five-Year Total Returns

NOTE:

Unregistered Sales of Equity Securities and Uses of Proceeds

There were no sales of unregistered equity securities by the Company for the fiscal period ended December 31, 2020.

Issuer Purchases of Equity Securities

Pursuant to the written trading plan under Rule

10b5-1

under the Securities Exchange Act of 1934, as amended (the Exchange Act), adopted and announced by the Company on May 1, 2020, the Company will periodically repurchase shares of its Common Stock on the open market related to the stock portion of the Directors’ annual retainer for those Directors who elected to receive common stock. There is no pool or maximum number of shares related to these purchases; however, the trading plan will terminate when $516,000 in value of shares have been purchased or, if sooner, on May 1, 2021.

The Company may suspend or terminate this trading plan at any time, so long as the suspension or termination is made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule

10b-5

under the Exchange Act, or other applicable securities laws.

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The following table provides information regarding repurchases by the Company of shares of its common stock pursuant to the trading plan for each month in the quarter ended December 31, 2020.

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Item 6. Selected Financial Data

Customers Served (Year-End):

Electric:

Natural Gas:

Electric and Gas Sales:

Consolidated Statements of Earnings:

Dividends on Preferred Stock — — — — —

Earnings Applicable to Common Shareholders $ 32.2 $ 44.2 $ 33.0 $ 29.0 $ 27.1

Balance Sheet Data (as of December 31,):

Capitalization:

Capital Structure Ratios (as of December 31,):

Long-Term Debt, less current portion 57 % 54 % 52 % 53 % 52 %

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OVERVIEW

Unitil is a public utility holding company headquartered in Hampton, New Hampshire. Unitil is subject to regulation as a holding company system by the FERC under the Energy Policy Act of 2005.

Unitil’s principal business is the local distribution of electricity and natural gas to approximately 192,700 customers throughout its service territory in the states of New Hampshire, Massachusetts and Maine. Unitil is the parent company of three wholly-owned distribution utilities:

Unitil Energy, Fitchburg and Northern Utilities are collectively referred to as the “distribution utilities.” Together, the distribution utilities serve approximately 107,100 electric customers and 85,600 natural gas customers in their service territories. The distribution utilities are local “pipes and wires” operating companies.

In addition, Unitil is the parent company of Granite State, a natural gas transmission pipeline, regulated by the FERC, operating 86 miles of underground gas transmission pipeline primarily located in Maine and New Hampshire. Granite State provides Northern Utilities with interconnection to three major natural gas pipelines and access to North American pipeline supplies.

Unitil had an investment in Net Utility Plant of $1,193.2 million at December 31, 2020. Unitil’s total revenue was $418.6 million in 2020, which includes revenue to recover the approved cost of purchased electricity and natural gas in rates on a fully reconciling basis. As a result of this reconciling rate structure, the Company’s earnings are not affected by changes in the cost of purchased electricity and natural gas. Earnings from Unitil’s utility operations are derived from the return on investment in the three distribution utilities and Granite State.

Unitil previously conducted

non-regulated

operations principally through Usource, which was wholly-owned by Unitil Resources. The Company divested Usource in the first quarter of 2019. Usource provided energy brokering and advisory services to large commercial and industrial customers in the northeastern United States. See additional discussion of the divestiture of Usource in “Divestiture of

Non-Regulated

Business Subsidiary” in Note 1 (Summary of Significant Accounting Policies) to the Consolidated Financial Statements. The Company’s other subsidiaries include Unitil Service, which provides, at cost, a variety of administrative and professional services to Unitil’s affiliated companies, and Unitil Realty, which owns and manages Unitil’s corporate office building and property located in Hampton, New Hampshire. Unitil’s consolidated net income includes the earnings of the holding company and these subsidiaries.

Regulation

Unitil is subject to comprehensive regulation by federal and state regulatory authorities. Unitil and its subsidiaries are subject to regulation as a holding company system by the FERC under the Energy Policy Act of 2005 with regard to certain bookkeeping, accounting and reporting requirements. Unitil’s utility operations related to wholesale and interstate energy business activities are also regulated by the FERC. Unitil’s distribution utilities are subject to regulation by the applicable state public utility commissions, with regard to their rates, issuance of securities and other accounting and operational matters: Unitil Energy is subject to regulation by the NHPUC; Fitchburg is subject to regulation by the MDPU; and Northern

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Utilities is regulated by the NHPUC and MPUC. Granite State, Unitil’s interstate natural gas transmission pipeline, is subject to regulation by the FERC with regard to its rates and operations. Because Unitil’s primary operations are subject to rate regulation, the regulatory treatment of various matters could significantly affect the Company’s operations, financial position, and cash flows.

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

Most of Unitil’s customers have the opportunity to purchase their electricity or natural gas supplies from third-party energy suppliers. Many of Unitil’s distribution utilities’ largest C&I customers purchase their electricity or gas supply from third-party suppliers, while most small C&I customers, as well as residential customers, purchase their electricity or gas supply from the distribution utilities under regulated rates and tariffs. Unitil’s distribution utilities purchase electricity or natural gas from unaffiliated wholesale energy suppliers and recover the actual approved costs of these supplies on a pass-through basis, through reconciling rate mechanisms that are periodically adjusted.

Also see

Regulatory Matters

in this section and Note 8 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements for additional information on rates and regulation.

Fitchburg is subject to revenue decoupling. Revenue decoupling is the term given to the elimination of the dependency of a utility’s distribution revenue on the volume of electricity or natural gas sales. The difference between distribution revenue amounts billed to customers and the targeted revenue decoupling amounts is recognized as an increase or a decrease in the current portion of Accrued Revenue which forms the basis for resetting rates for future cash recoveries from, or credits to, customers. These revenue decoupling targets may be adjusted as a result of rate cases that the Company files with the MDPU. The Company estimates that revenue decoupling applies to approximately 27% and 11% of Unitil’s total annual electric and natural gas sales volumes, respectively.

RESULTS OF OPERATIONS

The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the accompanying Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.

The Company is responding to the coronavirus pandemic by taking steps to mitigate the potential risks posed by its spread. The Company’s electric and gas service utility distribution operating systems have continued to provide service to customers without disruption due to the coronavirus pandemic through the date of this filing. The Company has implemented its Crisis Response Plan to address specific aspects of the coronavirus pandemic. The Crisis Response Plan guides emergency response, business continuity, and the precautionary measures being taken on behalf of employees and the public. The Company has initiated extra precautions to protect employees who work in the field and for employees who continue to work in operations, distribution and corporate facilities. The Company has implemented social distancing and work from home policies, where appropriate. The Company continues to implement strong physical and cyber-security measures to ensure that its systems remain functional in order to serve both operational needs with a remote workforce and to help ensure uninterrupted service to customers.

The extent to which the coronavirus pandemic impacts the Company’s financial condition, results of operations, and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus pandemic, and the actions to contain the coronavirus pandemic or treat its impact, among others. In particular, the continued spread of the coronavirus could adversely impact the Company’s business, including (i) by disrupting the Company’s employees and contractors ability to

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provide ongoing services to the Company, (ii) by reducing customer demand for electricity or gas, or (iii) by reducing the supply of electricity or gas, each of which could have an adverse impact on the Company’s financial condition, results of operations, and cash flows.

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

non-GAAP

measure) are derived from a higher percentage of fixed billing components, including customer charges. Therefore, future gas revenues and gas adjusted gross margin will be less affected by the seasonal nature of the gas business. In addition, approximately 27% and 11% of the Company’s total annual electric and gas sales volumes, respectively, are decoupled and changes in sales to existing customers do not affect GAAP gross margin and adjusted gross margin.

The Company analyzes operating results using Gas and Electric Adjusted Gross Margins, which are

non-GAAP

measures. Gas Adjusted Gross Margin is calculated as Total Gas Operating Revenue less Cost of Gas Sales. Electric Adjusted Gross Margin is calculated as Total Electric Operating Revenues less Cost of Electric Sales. The Company’s management believes Gas and Electric Adjusted Gross Margins provide useful information to investors regarding profitability. The Company’s management also believes Gas and Electric Adjusted Gross Margins are important measures to analyze revenue from the Company’s ongoing operations because the approved cost of gas and electric sales are tracked, reconciled and passed through directly to customers in gas and electric tariff rates, resulting in an equal and offsetting amount reflected in Total Gas and Electric Operating Revenue.

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

Twelve Months Ended December 31, 2020 ($ millions)

Gas Electric Non-Regulatedand Other Total

Less: Depreciation and Amortization (29.8 ) (23.8 ) (0.9 ) (54.5 )

Twelve Months Ended December 31, 2019 ($ millions)

Gas Electric Non-Regulatedand Other Total

Less: Depreciation and Amortization (28.5 ) (22.6 ) (0.9 ) (52.0 )

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Twelve Months Ended December 31, 2018 ($ millions)

Gas Electric Non-Regulatedand Other Total

Less: Depreciation and Amortization (24.9 ) (23.1 ) (2.4 ) (50.4 )

Gas GAAP Gross Margin was $92.8 million in 2020, a decrease of $0.9 million compared to 2019. The decrease was driven by unfavorable effects of $4.4 million from lower sales due to warmer weather in 2020, $2.1 million attributed to lower sales primarily associated with the economic slowdown caused by the coronavirus pandemic, and higher depreciation and amortization of $1.3 million. These decreases were partially offset by higher rates of $5.1 million and customer growth of $1.8 million.

Gas GAAP Gross Margin was $93.7 million in 2019, an increase of $1.7 million compared to 2018. The increase was driven by higher rates of $5.6 million and higher gas sales of $0.9 million, partially offset by milder weather in the fourth quarter of 2019. The positive effect of higher rates and customer growth was partially offset by the absence in 2019 of a $1.2 million

non-recurring

adjustment recognized in the second quarter of 2018 to increase gas revenue and operating expenses in connection with a then ongoing base rate case for the Company’s New Hampshire natural gas utility, and higher depreciation and amortization of $3.6 million.

Electric GAAP Gross Margin was $69.1 million in 2020, a decrease of $0.2 million compared to 2019. The decrease reflects an unfavorable effect of $0.8 million attributed to the combined net effect of lower Commercial and Industrial (C&I) sales and higher Residential sales associated with the coronavirus pandemic, and higher depreciation and amortization of $1.2 million, partially offset by higher rates of $1.4 million and the positive combined effect of customer growth and warmer summer weather of $0.4 million.

Electric GAAP Gross Margin was $69.3 million in 2019, an increase of $0.5 million compared to 2018. The increase reflects higher rates of $1.6 million and lower depreciation and amortization of $0.5 million, partially offset by a decrease of $1.6 million from lower kWh sales.

Net Income and EPS Overview

2020 Compared to 2019

—The Company’s Net Income was $32.2 million, or $2.15 in Earnings Per Share, for the year ended December 31, 2020, a decrease of $12.0 million, or $0.82 per share, compared to 2019. In the first quarter of 2019, the Company recognized a

one-time

net gain of $9.8 million, or $0.66 per share, on the Company’s divestiture of its

non-regulated

business subsidiary, Usource. The Company’s earnings in 2020 reflect higher Gas and Electric Adjusted Gross Margins (a

non-GAAP

measure) and higher operating expenses. The Company estimates that warmer than normal weather negatively affected Net Income by approximately $3.1 million, or $0.20 per share, in 2020. Additionally, the Company estimates that the coronavirus pandemic negatively affected Net Income by approximately $1.4 million, or $0.09 per share, in 2020.

Gas Adjusted Gross Margin (a

non-GAAP

measure) was $122.6 million in 2020, an increase of $0.4 million compared to 2019. The increase was driven by higher rates of $5.1 million and customer growth of $1.8 million, largely offset by unfavorable effects of $4.4 million from lower sales due to warmer weather in 2020, and $2.1 million attributed to lower sales primarily associated with the economic slowdown caused by the coronavirus pandemic.

Gas therm sales decreased 7.5% in 2020 compared to 2019. The decrease in overall gas therm sales in the Company’s service areas reflects warmer weather in 2020 compared to 2019, as well as lower sales to C&I customers, primarily in the second, third and fourth quarters, due to the economic slowdown caused by

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the coronavirus pandemic. These negative effects on 2020 gas therm sales were partially offset by customer growth. As of December 31, 2020, the number of gas customers served increased by 1,663, including seasonal accounts, over the previous year. Based on weather data collected in the Company’s gas service areas, there were 8.2% fewer Effective Degree Days (EDD) in 2020, on average, compared to 2019 and 8.0% fewer EDD compared to normal. The Company estimates that weather-normalized gas therm sales, excluding decoupled sales, were 1.6% lower in 2020 compared to 2019.

Electric Adjusted Gross Margin (a

non-GAAP

measure) was $92.9 million in 2020, an increase of $1.0 million compared with 2019. The increase reflects higher rates of $1.4 million and the positive combined effect of customer growth and warmer summer weather of $0.4 million, partially offset by an unfavorable effect of $0.8 million attributed to the combined net effect of lower C&I sales and higher Residential sales associated with the coronavirus pandemic.

Electric kilowatt-hour (kWh) sales in 2020 were essentially on par with 2019. Sales to Residential customers increased 6.5% and sales to C&I customers decreased 4.5% in 2020 compared to 2019. The increase in sales to Residential customers reflects higher consumption by Residential customers due to the coronavirus pandemic and warmer summer weather in 2020 compared to 2019 which resulted in higher use of air conditioning, and customer growth. As of December 31, 2020, the number of electric customers served increased by 948 over the previous year. These positive effects on 2020 electric kWh sales were partially offset by the warmer winter weather in 2020 which adversely affected the usage of electricity for heating purposes. The decrease in sales to C&I customers reflects lower usage as a result of the economic slowdown caused by the coronavirus pandemic, and the warmer winter weather in 2020, partially offset by customer growth. Based on weather data collected in the Company’s electric service areas, there were 37.9% more Cooling Degree Days (CDD) in 2020, on average, compared to 2019.

Operation and Maintenance (O&M) expenses decreased $1.5 million in 2020 compared to 2019. The decrease includes $0.4 million of lower operating costs attributed to Usource operations incurred in the first quarter of 2019. The change in O&M expenses also reflects lower labor costs of $1.3 million, partially offset by higher utility operating costs of $0.2 million. The lower labor costs reflect lower employee benefit costs.

Depreciation and Amortization expense increased $2.5 million in 2020 compared to 2019, reflecting increased depreciation on higher levels of utility plant in service and higher amortization of software.

Taxes Other Than Income Taxes increased $1.2 million in 2020 compared to 2019, reflecting higher local property taxes on higher utility plant in service of $1.2 million as well as the absence in 2020 of $0.6 million in property tax abatements recognized in 2019. This increase was partially offset by lower payroll taxes in 2020 reflecting the recognition of $0.6 million of payroll tax credits associated with the CARES Act in 2020.

Interest Expense, Net increased $0.1 million in 2020 compared to 2019 reflecting higher levels of long-term debt, largely offset by lower rates on short-term debt and lower interest expense on regulatory liabilities.

Other Expense (Income), Net changed from income of $8.6 million in 2019 to expense of $5.2 million in 2020, a net change of $13.8 million. This change primarily reflects a

pre-tax

gain of $13.4 million on the Company’s divestiture of Usource in the first quarter of 2019 and $0.4 million of other costs in 2020.

Federal and State Income Taxes decreased $3.6 million in 2020 compared to 2019, primarily reflecting lower

pre-tax

earnings in the current period.

In 2020, Unitil’s annual common dividend was $1.50 per share, representing an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock. At its January 2021 meeting, the Unitil Corporation Board of Directors declared a quarterly dividend on the Company’s common stock of $0.38 per share, an increase of $0.005 per share on a quarterly basis, resulting in an increase in the effective annualized dividend rate to $1.52 per share from $1.50 per share.

2019 Compared to 2018

— The Company’s Net Income was $44.2 million, or $2.97 in earnings per share, for the year ended December 31, 2019, an increase of $11.2 million, or $0.74 per share, compared to

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2018. In the first quarter of 2019, the Company recognized a

one-time

net gain of $9.8 million, or $0.66 per share, on the Company’s divestiture of its

non-regulated

business subsidiary, Usource. Excluding the Usource divestiture, the Company’s Net Income was $34.4 million, or $2.31 per share, for the year ended December 31, 2019, an increase of $1.4 million, or $0.08 per share, compared to 2018. The increase in earnings was driven by higher natural gas sales margins, partially offset by increases in operating expenses.

Gas Sales, Revenues and Adjusted Gross Margin

Therm Sales

—Unitil’s total therm sales of natural gas decreased 7.5% in 2020 compared to 2019. Sales to Residential and C&I customers decreased 6.9% and 7.6%, respectively in 2020 compared to 2019. The decrease in overall gas therm sales in the Company’s service areas reflects warmer weather in 2020 compared to 2019, as well as lower sales to C&I customers, primarily in the second, third and fourth quarters, due to the economic slowdown caused by the coronavirus pandemic. These negative effects on 2020 gas therm sales were partially offset by customer growth. As of December 31, 2020, the number of gas customers served increased by 1,663, including seasonal accounts, over the previous year. Based on weather data collected in the Company’s gas service areas, there were 8.2% fewer EDD in 2020, on average, compared to 2019 and 8.0% fewer EDD compared to normal. The Company estimates that weather-normalized gas therm sales, excluding decoupled sales, were 1.6% lower in 2020 compared to 2019. Sales margin derived from decoupled unit sales (representing approximately 11% of total annual therm sales volume) is not sensitive to changes in gas therm sales.

Unitil’s total therm sales of natural gas increased 0.4% in 2019 compared to 2018. Sales to residential decreased 1.4% and sales to C&I customers increased 0.9% in 2019 compared to 2018. The overall increase in gas therm sales was driven by customer growth, partially offset by milder weather in the fourth quarter of 2019 compared to 2018. Based on weather data collected in the Company’s natural gas service areas, there were 6.7% fewer EDD in 2019, on average, compared to 2018. The Company estimates that weather-normalized gas therm sales, excluding decoupled sales, were up 4.2% in 2019 compared to 2018. As of December 31, 2019 the number of natural gas customers served increased by 1,152 over the previous year.

The following table details total therm sales for the last three years, by major customer class:

Therm Sales (millions) Change

Gas Operating Revenues and Adjusted Gross Margin

—The following table details total Gas Operating Revenue and Gas Adjusted Gross Margin for the last three years by major customer class:

Gas Operating Revenues and Gas Adjusted Gross Margin(millions)

Change

Gas Operating Revenue:

Gas Adjusted Gross Margin (a

non-GAAP

measure) was $122.6 million in 2020, an increase of $0.4 million compared to 2019. The increase was driven by higher rates of $5.1 million and customer

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growth of $1.8 million, largely offset by unfavorable effects of $4.4 million from lower sales due to warmer weather in 2020, and $2.1 million attributed to lower sales primarily associated with the economic slowdown caused by the coronavirus pandemic.

The decrease in Total Gas Operating Revenues of $12.0 million, or 5.9%, in 2020 compared to 2019 reflects lower cost of gas sales, which are tracked and reconciled costs as a pass-through to customers, and lower sales volumes.

Gas Adjusted Gross Margin (a

non-GAAP

measure) was $122.2 million in 2019, an increase of $5.3 million compared to 2018. The increase was driven by higher rates of $5.6 million and higher therm sales of $0.9 million, partially offset by milder weather in the fourth quarter of 2019. The positive effect of higher rates and customer growth was partially offset by the absence in 2019 of a $1.2 million adjustment recognized in the second quarter of 2018 to increase gas revenue and operating expenses in connection with a then ongoing base rate case for the Company’s New Hampshire natural gas utility.

The decrease in Total Gas Operating Revenues of $12.7 million, or 5.9%, in 2019 compared to 2018 reflects lower cost of gas sales, which are tracked and reconciled costs as a pass-through to customers and the adjustment recognized in the second quarter of 2018, discussed above, partially offset by higher gas sales volumes and higher rates.

Electric Sales, Revenues and Adjusted Gross Margin

Kilowatt-hour Sales

—Unitil’s total electric kWh sales in 2020 were essentially on par with 2019. Sales to Residential customers increased 6.5% and sales to C&I customers decreased 4.5% in 2020 compared to 2019. The increase in sales to Residential customers reflects higher consumption by Residential customers due to the coronavirus pandemic and warmer summer weather in 2020 compared to 2019, which resulted in higher use of air conditioning, and customer growth. As of December 31, 2020, the number of electric customers served increased by 948 over the previous year. These positive effects on 2020 electric kWh sales were partially offset by the warmer winter weather in 2020 which adversely affected the usage of electricity for heating purposes. The decrease in sales to C&I customers reflects lower usage as a result of the economic slowdown caused by the coronavirus pandemic, and the warmer winter weather in 2020, partially offset by customer growth. Based on weather data collected in the Company’s electric service areas, there were 37.9% more CDD in 2020, on average, compared to 2019. Sales margins derived from decoupled unit sales (representing approximately 27% of total annual sales volume) are not sensitive to changes in kWh sales.

Unitil’s total electric kWh sales decreased 4.8% in 2019 compared to 2018. Sales to Residential customers and C&I customers decreased 5.4% and 4.3%, respectively, in 2019 compared to 2018, reflecting milder summer weather in 2019 compared to 2018, lower average usage per customer due to energy efficiency initiatives and net metered distributed generation, as well as reduced usage by some industrial customers, partially offset by customer growth. Based on weather data collected in the Company’s electric service areas, there were 22.3% fewer CDD in 2019, on average, compared to 2018. As of December 31, 2019, the number of electric customers served increased by 558 over the previous year.

The following table details total kWh sales for the last three years by major customer class:

kWh Sales (millions) Change

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Electric Operating Revenues and Electric Adjusted Gross Margin

—The following table details Total Electric Operating Revenue and Electric Adjusted Gross Margin for the last three years by major customer class:

Electric Operating Revenues and Electric Adjusted Gross Margin(millions)

Change

Electric Operating Revenue:

Electric Adjusted Gross Margin $ 92.9 $ 91.9 $ 91.9 $ 1.0 1.1 % $ — —

Electric Adjusted Gross Margin (a

non-GAAP

The decrease in Total Electric Operating Revenue of $6.7 million, or 2.9%, in 2020 compared to 2019 reflects lower cost of electric sales, which are tracked and reconciled costs as a pass-through to customers, partially offset by higher sales of electricity.

Electric Adjusted Gross Margin (a

non-GAAP

measure) was $91.9 million in 2019, on par with 2018. Electric sales margins in 2019 were positively affected by higher rates of $1.6 million, offset by a decrease of $1.6 million from lower kWh sales, for the reasons noted above.

The increase in Total Electric Operating Revenue of $10.6 million, or 4.7%, in 2019 compared to 2018 reflects higher cost of electric sales, which are tracked and reconciled costs as a pass-through to customers, partially offset by lower sales of electricity.

Operating Revenue—Other

Total Other Operating Revenue (See “Other Operating Revenue –

Non-regulated”

in Note 1 to the accompanying Consolidated Financial Statements) is comprised of revenues from the Company’s

non-regulated

energy brokering business, Usource, which was divested in the first quarter of 2019 (See “Divestiture of

Non-Regulated

Business Subsidiary” in Note 1 to the accompanying Consolidated Financial Statements). Usource’s revenues were primarily derived from fees and charges billed to suppliers as customers take delivery of energy from those suppliers under term contracts brokered by Usource. Usource’s revenues decreased $0.9 million in 2020 compared to 2019 and $3.8 million 2019 compared to 2018, reflecting the Company’s divestiture of Usource in the first quarter of 2019.

Operating Expenses

Cost of Gas Sales

—Cost of Gas Sales includes the cost of natural gas purchased and manufactured to supply the Company’s total gas supply requirements and spending on energy efficiency programs. Cost of Gas Sales decreased $12.4 million, or 15.3%, in 2020 compared to 2019. This decrease reflects lower wholesale gas commodity prices and lower gas sales, partially offset by a decrease in the amount of gas purchased by customers directly from third-party suppliers. The Company reconciles and recovers the approved Cost of Gas Sales in its rates at cost on a pass through basis and therefore changes in approved expenses do not affect earnings.

In 2019, Cost of Gas decreased $18.0 million, or 18.1%, compared to 2018. This decrease reflects lower wholesale natural gas prices, partially offset by higher sales of natural gas.

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Cost of Electric Sales

—Cost of Electric Sales includes the cost of electric supply as well as other energy supply related restructuring costs, including power supply buyout costs, and spending on energy efficiency programs. Cost of Electric Sales decreased $7.7 million, or 5.4%, in 2020 compared to 2019. This decrease reflects lower wholesale electricity prices, partially offset by slightly higher sales of electricity and a decrease in the amount of electricity purchased by customers directly from third-party suppliers. The Company reconciles and recovers the approved Cost of Electric Sales in its rates at cost on a pass through basis and therefore changes in approved expenses do not affect earnings.

In 2019, Cost of Electric Sales increased $10.6 million, or 8.1%, compared to 2018. This increase reflects higher wholesale electricity prices and a decrease in the amount of electricity purchased by customers directly from third-party suppliers, partially offset by lower sales of electricity.

Operation and Maintenance

—O&M expense includes electric and gas utility operating costs, and the operating costs of the Company’s

non-regulated

business activities. Total O&M expenses decreased $1.5 million, or 2.2% in 2020 compared to 2019. The decrease includes $0.4 million of lower operating costs attributed to Usource operations incurred in the first quarter of 2019. The change in O&M expenses also reflects lower labor costs of $1.3 million, partially offset by higher utility operating costs of $0.2 million. The lower labor costs reflect lower employee benefit costs.

In 2019, total O&M expenses decreased $2.3 million compared to 2018. Excluding the adjustment which increased gas revenue and O&M expenses by $1.2 million in the second quarter of 2018 in connection with a then ongoing base rate case for the Company’s New Hampshire natural gas utility; O&M expenses decreased $1.1 million in 2019 compared to 2018. The decrease in 2019 includes $2.4 million of lower labor and other costs related to the divestiture of Usource. Excluding the lower expenses associated with the Usource divestiture and the 2018 adjustment, discussed above; O&M expenses were higher by $1.3 million. The change in O&M expenses reflects higher utility operating costs of $0.7 million, higher labor costs of $0.5 million, and higher professional fees of $0.1 million.

Depreciation and Amortization

—Depreciation and Amortization expense increased $2.5 million, or 4.8%, in 2020 compared to 2019, reflecting increased depreciation on higher levels of utility plant in service and higher amortization of software.

In 2019, Depreciation and Amortization expense increased $1.6 million, or 3.2%, compared to 2018, reflecting increased depreciation on higher levels of utility plant in service, partially offset by lower amortization.

Taxes Other Than Income Taxes—

Taxes Other Than Income Taxes increased $1.2 million, or 5.3%, in 2020 compared to 2019, reflecting higher local property taxes on higher utility plant in service of $1.2 million as well as the absence in 2020 of $0.6 million in property tax abatements recognized in 2019. This increase was partially offset by lower payroll taxes in 2020 reflecting the recognition of $0.6 million of payroll tax credits associated with the CARES Act in 2020. See Note 9 (Income Taxes) to the accompanying Consolidated Financial Statements.

In 2019, Taxes Other Than Income Taxes increased $0.3 million, or 1.3%, compared to 2018, reflecting higher local property tax rates on higher levels of utility plant in service, partially offset by $1.0 million of property tax abatements received in 2019.

Interest Expense, Net

Interest expense is presented in the Consolidated Financial Statements net of interest income. Interest expense is mainly comprised of interest on long-term debt and short-term borrowings (See Note 5 (Debt and Financing Arrangements) to the accompanying Consolidated Financial Statements). Certain reconciling rate mechanisms used by the Company’s distribution utilities give rise to regulatory assets and regulatory liabilities on which interest is calculated.

Interest Expense, Net increased $0.1 million, or 0.4%, in 2020 compared to 2019 reflecting higher levels of long-term debt, largely offset by lower rates on short-term debt and lower interest expense on regulatory liabilities.

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Interest Expense, Net decreased $0.3 million, or 1.3%, in 2019 compared to 2018 reflecting lower interest on long-term debt and higher interest income on AFUDC, partially offset by interest on higher levels of short-term borrowings.

Other (Income) Expense, Net

Other Expense (Income), Net changed from income of $8.6 million in 2019 to expense of $5.2 million in 2020, a net change of $13.8 million. This change primarily reflects a

pre-tax

gain of $13.4 million on the Company’s divestiture of Usource in the first quarter of 2019 and $0.4 million of other costs in 2020.

Other Expense (Income), Net changed from an expense of $5.8 million in 2018 to income of $8.6 million in 2019, a net change of $14.4 million. This change primarily reflects a

pre-tax

gain of $13.4 million on the Company’s divestiture of Usource and lower retirement benefit costs in the current period. The Usource divestiture generated a capital gain to the Company and a $3.6 million provision is included in the Company’s income tax expense for 2019.

Provision for Income Taxes

Federal and State Income Taxes decreased $3.6 million in 2020 compared to 2019, primarily reflecting lower

pre-tax

earnings in the current period.

Federal and State Income Taxes increased $5.4 million in 2019 compared to 2018 reflecting income taxes associated with the gain on the Company’s divestiture of Usource and higher

pre-tax

earnings in 2019 compared to 2018.

LIQUIDITY, COMMITMENTS AND CAPITAL REQUIREMENTS

Sources of Capital

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

The Company and its subsidiaries are individually and collectively members of the Unitil Cash Pool (Cash Pool). The Cash Pool is the financing vehicle for

day-to-day

cash borrowing and investing. The Cash Pool allows for an efficient exchange of cash among the Company and its subsidiaries. The interest rates charged to the subsidiaries for borrowing from the Cash Pool are based on actual interest costs from lenders under the Company’s revolving Credit Facility. At December 31, 2020 and December 31, 2019, the Company and all of its subsidiaries were in compliance with the regulatory requirements governing participation in the Cash Pool.

On July 25, 2018, the Company entered into a Second Amended and Restated Credit Agreement (Credit Facility) with a syndicate of lenders, which amended and restated in its entirety the Company’s prior credit agreement, dated as of October 4, 2013, as amended. The Credit Facility extends to July 25, 2023, subject to two

one-year

extensions and has a borrowing limit of $120 million, which includes a $25 million sublimit for the issuance of standby letters of credit. The Credit Facility provides the Company with the ability to elect that borrowings under the Credit Facility bear interest under several options, including at a daily fluctuating rate of interest per annum equal to

one-month

London Interbank Offered Rate plus 1.125%. Provided there is no event of default, the Company may increase the borrowing limit under the Credit Facility by up to $50 million.

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The Company utilizes the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $248.9 million and $252.7 million for the years ended December 31, 2020 and December 31, 2019, respectively. Total gross repayments were $252.8 million and $276.9 million for the years ended December 31, 2020 and December 31, 2019, respectively. The following table details the borrowing limits, amounts outstanding and amounts available under the revolving Credit Facility as of December 31, 2020 and December 31, 2019:

Revolving Credit Facility (millions)

December 31,

Short-Term Borrowings Outstanding $ 54.7 $ 58.6

Letters of Credit Outstanding $ 0.1 $ 0.1

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 permit 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 Company is monitoring the coronavirus pandemic and does not believe it will adversely affect the Company’s access to capital and funding sources and its planned capital expenditures. The Company believes the future operating cash flows of the Company, along with its existing borrowing availability and access to financial markets for the issuance of new long-term debt, will be sufficient to meet any working capital and future operating requirements, and forecasted capital investment opportunities.

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 December 31, 2020 and December 31, 2019, the Company was in compliance with the covenants contained in the Credit Facility in effect on that date. (See also “Credit Arrangements” in Note 5 (Debt and Financing Arrangements.)

Issuance of Long-Term Debt

—On December 18, 2020, Unitil Realty Corp. entered into a loan agreement in the amount of $4.7 million at 2.64%, with a maturity date of December 18, 2030. Less than $0.1 million of costs associated with this loan have been recorded as a reduction to the proceeds. Unitil Realty Corp. used the net proceeds from this loan for general corporate purposes.

On September 15, 2020, Northern Utilities issued $40 million of Notes due 2040 at 3.78%. Fitchburg issued $27.5 million of Notes due 2040 at 3.78%. Unitil Energy issued $27.5 million of Bonds due 2040 at 3.58%. Northern Utilities, Fitchburg and Unitil Energy used the net proceeds from these offerings to repay short-term debt and for general corporate purposes. Approximately $0.5 million of costs associated with these issuances have been recorded as a reduction to Long-Term Debt for presentation purposes on the Consolidated Balance Sheets.

On December 18, 2019, Unitil Corporation issued $30 million of Notes due 2029 at 3.43%. Unitil Corporation used the net proceeds from this offering to repay short-term debt and for general corporate purposes. Approximately $0.2 million of costs associated with these issuances have been recorded as a reduction to Long-Term Debt for presentation purposes on the Consolidated Balance Sheets.

On September 12, 2019, Northern Utilities issued $40 million of Notes due 2049 at 4.04%. Northern Utilities used the net proceeds from this offering to repay short-term debt and for general corporate purposes. Approximately $0.2 million of costs associated with these issuances have recorded as a reduction to against Long-Term Debt for presentation purposes on the Consolidated Balance Sheets.

Unitil Corporation and its utility subsidiaries, Fitchburg, Unitil Energy, Northern Utilities, and Granite State are currently rated “BBB+” by Standard & Poor’s Ratings Services. Unitil Corporation and Granite

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State are currently rated “Baa2”, and Fitchburg, Unitil Energy and Northern Utilities are currently rated “Baa1” by Moody’s Investors Services.

In April 2014, Unitil Service Corp. entered into a financing arrangement, structured as a capital lease obligation, for various information systems and technology equipment. Final funding under this capital lease occurred on October 30, 2015, resulting in total funding of $13.4 million. This capital lease was paid in full in the second quarter of 2019.

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

Contractual Obligations

The table below lists the Company’s known specified contractual obligations as of December 31, 2020.

Payments Due by Period

Other (Including Capital and Operating Lease Obligations) 6.1 1.9 2.9 1.1 0.2

The Company and its subsidiaries have material energy supply commitments that are discussed in Note 7 (Energy Supply) and Note 8 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements. Cash outlays for the purchase of electricity and natural gas to serve customers are subject to reconciling recovery through periodic changes in rates, with carrying charges on deferred balances. From year to year, there are likely to be timing differences associated with the cash recovery of such costs, creating under- or over-recovery situations at any point in time. Rate recovery mechanisms are typically designed to collect the under-recovered cash or refund the over-collected cash over subsequent periods of less than a year.

The Company provides limited guarantees on certain energy and natural gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of December 31, 2020, there were approximately $1.3 million of guarantees outstanding with a duration of less than one year.

Northern Utilities enters into asset management agreements under which Northern Utilities releases certain natural gas pipeline and storage assets, resells the natural gas storage inventory to an asset manager and subsequently repurchases the inventory over the course of the natural gas heating season at the same price at which it sold the natural gas inventory to the asset manager. There was $5.4 million and $6.5 million of natural gas storage inventory at December 31, 2020 and 2019, respectively, related to these asset management agreements. The amount of natural gas inventory released in December 2020, which was payable in January 2021, was $1.0 million and was recorded in Accounts Payable at December 31, 2020. The amount of natural gas inventory released in December 2019, which was payable in January 2020, was $1.0 million and was recorded in Accounts Payable at December 31, 2019.

Benefit Plan Funding

The Company, along with its subsidiaries, made cash contributions to its Pension Plan in the amounts of $4.7 million and $6.9 million in 2020 and 2019, respectively. The Company, along with its subsidiaries,

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contributed $4.2 million and $4.0 million to Voluntary Employee Benefit Trusts (VEBTs) in 2020 and 2019, respectively. The Company, along with its subsidiaries, expects to continue to make contributions to its Pension Plan and the VEBTs in 2021 and future years at minimum required and discretionary funding levels consistent with the amounts recovered in the distribution utilities’ rates for these benefit plans. See Note 10 (Retirement Benefit Plans) to the accompanying Consolidated Financial Statements.

Off-Balance

Sheet Arrangements

The Company and its subsidiaries do not currently use, and are not dependent on the use of,

off-balance

sheet financing arrangements such as securitization of receivables or obtaining access to assets or cash through special purpose entities or variable interest entities. As of December 31, 2020, there were approximately $1.3 million of guarantees on certain energy and natural gas storage management contracts entered into by the distribution utilities outstanding. See Note 5 (Debt and Financing Arrangements) to the accompanying Consolidated Financial Statements.

Cash Flows

Unitil’s utility operations, taken as a whole, are seasonal in nature and subject to seasonal fluctuations in cash flows. The tables below summarize the major sources and uses of cash (in millions) for 2020 and 2019.

Cash Provided by Operating Activities $ 75.7 $ 104.9

Cash Provided by Operating Activities

—Cash Provided by Operating Activities was $75.7 million in 2020, a decrease of $29.2 million compared to 2019.

Cash flow from Net Income, adjusted for the total of

non-cash

charges was $96.0 million in 2020 compared to $96.3 million in 2019, a decrease of $0.3 million. The change to Net Income, absent the gain on the Usource divestiture in 2019, is primarily attributable to increases in natural gas and electric sales margin and customer growth. The increase in depreciation and amortization of $2.5 million in 2020 compared to 2019 reflects higher depreciation on higher utility plant in service. The decrease in the deferred tax provision of $4.2 million in 2020 compared to 2019 is primarily driven by a larger use of the Net Operating Loss Carryforward in 2019 from the Usource divestiture as compared to the 2020 Net Operating Loss Carryforward utilization against taxable income.

Changes in working capital items resulted in a ($15.3) million use of cash in 2020 compared to a $13.9 million source of cash in 2019, representing a decrease of $29.2 million. The change in working capital in 2020 compared to 2019 is primarily related to the change in accounts receivables and accrued revenue and is reflective of the effect of the current macroecoomic environment on business and operating conditions.

Deferred Regulatory and Other Charges decreased by $9.3 million in 2020 compared to 2019, primarily driven by changes in Regulatory Assets and Liabilities, and the change in Other, net in 2020 compared to 2019 was $4.3 million.

Cash Used in Investing Activities $ (122.6 ) $ (105.8 )

Cash Used in Investing Activities

—Cash Used in Investing Activities was ($122.6) million in 2020 compared to ($105.8) million in 2019, an increase of $16.8 million. Absent the proceeds from the Usource divestiture in 2019, the increase in 2020 compared to 2019 is $3.4 million. The higher spending in 2020 is primarily related to utility capital expenditures for electric and gas utility system additions. The Company’s projected capital spending range for 2021 is $135 million to $140 million.

Cash Provided by (Used in) Financing Activities $ 47.7 $ (1.7 )

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Cash Provided by (Used in) Financing Activities

—Cash Provided by Financing Activities was $47.7 million in 2020 compared to cash used of ($1.7) million in 2019. The higher cash provided from financing activities in 2020 compared to 2019 is primarily attributable to the proceeds from the issuance of long-term debt of $99.7 million less the repayment of maturing and discretionary long-term debt of ($24.8) million, repayment of short-term debt of ($3.9) million and dividends paid of ($22.6) million. Other changes in financing activities in 2020 total ($0.7) million.

FINANCIAL COVENANTS AND RESTRICTIONS

The agreements under which the Company and its subsidiaries issue long-term debt contain various covenants and restrictions. These agreements do not contain any covenants or restrictions pertaining to the maintenance of financial ratios or the issuance of short-term debt. These agreements do contain covenants relating to, among other things, the issuance of additional long-term debt, cross-default provisions, business combinations and covenants restricting the ability to (i) pay dividends, (ii) incur indebtedness and liens, (iii) merge or consolidate with another entity or (iv) sell, lease or otherwise dispose of all or substantially all assets. See Note 5 (Debt and Financing Arrangements) to the accompanying Consolidated Financial Statements.

Unitil’s 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 permit 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 December 31, 2020 and December 31, 2019, the Company was in compliance with the covenants contained in the Credit Facility in effect on that date.

The Company and its subsidiaries are currently in compliance with all such covenants in these debt instruments.

DIVIDENDS

Unitil’s annual common dividend was $1.50 per common share in 2020, $1.48 per common share in 2019, and $1.46 per share in 2018. Unitil’s dividend policy is reviewed periodically by the Board of Directors. Unitil has maintained an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock. At its January 2021 meeting, the Unitil Corporation Board of Directors declared a quarterly dividend on the Company’s common stock of $0.38 per share, an increase of $0.005 per share on a quarterly basis, resulting in an increase in the effective annualized dividend rate to $1.52 from $1.50. The amount and timing of all dividend payments are subject to the discretion of the Board of Directors and will depend upon business conditions, results of operations, financial conditions and other factors. In addition, the ability of the Company’s subsidiaries to pay dividends or make distributions to Unitil, and, therefore, Unitil’s ability to pay dividends, depends on, among other things:

In addition, before the Company can pay dividends on its common stock, it has to satisfy its debt obligations and comply with any statutory or contractual limitations. See

Financial Covenants and

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Restrictions

in this report, as well as Note 5 (Debt and Financing Arrangements) to the accompanying Consolidated Financial Statements.

LEGAL PROCEEDINGS

REGULATORY MATTERS

See Note 8 (Commitments and Contingencies) to the Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

The preparation of the Company’s Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In making those estimates and assumptions, the Company is sometimes required to make difficult, subjective and/or complex judgments about the effect of matters that are inherently uncertain and for which different estimates that could reasonably have been used could have resulted in material differences in its financial statements. If actual results were to differ significantly from those estimates, assumptions and judgment, the financial position of the Company could be materially affected and the results of operations of the Company could be materially different than reported. The following is a summary of the Company’s most critical accounting policies, which are defined as those policies where judgments or uncertainties could materially affect the application of those policies. For a complete discussion of the Company’s significant accounting policies, refer to the financial statements and Note 1 (Summary of Significant Accounting Policies).

Regulatory Accounting

—The Company’s principal business is the distribution of electricity and natural gas by the three distribution utilities: Unitil Energy, Fitchburg and Northern Utilities. Unitil Energy and Fitchburg are subject to regulation by the FERC. Fitchburg is also regulated by the MDPU, Unitil Energy is regulated by the NHPUC and Northern Utilities is regulated by the MPUC and NHPUC. Granite State, the Company’s natural gas transmission pipeline, is regulated by the FERC. Accordingly, the Company uses the Regulated Operations guidance as set forth in the Financial Accounting Standards Board Accounting Standards Codification (FASB Codification). In accordance with the FASB Codification, the Company has recorded Regulatory Assets and Regulatory Liabilities which will be recovered from customers, or applied for customer benefit, in accordance with rate provisions approved by the applicable public utility regulatory commission.

The FASB Codification specifies the economic effects that result from the cause and effect relationship of costs and revenues in the rate-regulated environment and how these effects are to be accounted for by a regulated enterprise. Revenues intended to cover certain costs may be recorded either before or after the costs are incurred. If regulation provides assurance that incurred costs will be recovered in the future, these costs would be recorded as deferred charges or “regulatory assets.” If revenues are recorded for costs that are expected to be incurred in the future, these revenues would be recorded as deferred credits or “regulatory liabilities.”

The Company’s principal regulatory assets and liabilities are included on the Company’s Consolidated Balance Sheet and a summary of the Company’s Regulatory Assets is provided in Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements. Generally, the Company receives a return on investment on its regulated assets for which a cash outflow has been made. Regulatory commissions can reach different conclusions about the recovery of costs, which can have a material affect on the Company’s consolidated financial statements.

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The Company believes it is probable that its regulated distribution and transmission utilities will recover their investments in long-lived assets, including regulatory assets. If the Company, or a portion of its assets or operations, were to cease meeting the criteria for application of these accounting rules, accounting standards for businesses in general would become applicable and immediate recognition of any previously deferred costs, or a portion of deferred costs, would be required in the year in which the criteria are no longer met, if such deferred costs were not recoverable in the portion of the business that continues to meet the criteria for application of the FASB Codification topic on Regulated Operations. If unable to continue to apply the FASB Codification provisions for Regulated Operations, the Company would be required to apply the provisions for the Discontinuation of Rate-Regulated Accounting included in the FASB Codification. In the Company’s opinion, its regulated operations will be subject to the FASB Codification provisions for Regulated Operations for the foreseeable future.

Utility Revenue Recognition

—Utility revenues are recognized according to regulations and are based on rates and charges approved by federal and state regulatory commissions. Revenues related to the sale of electric and gas service are recorded when service is rendered or energy is delivered to customers. However, the determination of energy sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each calendar month, amounts of energy delivered to customers since the date of the last meter reading are estimated and the corresponding unbilled revenues are calculated. These unbilled revenues are estimated each month based on estimated customer usage by class and applicable customer rates, taking into account current and historical weather data, assumptions pertaining to metering patterns, billing cycle statistics, and other estimates and assumptions.

Retirement Benefit Obligations

—The Company sponsors the Unitil Corporation Retirement Plan (Pension Plan), which is a defined benefit pension plan. Effective January 1, 2010, the Pension Plan was closed to new non-union employees. For union employees, the Pension Plan was closed on various dates between December 31, 2010 and June 1, 2013, depending on the various Collective Bargaining Agreements of each union. The Company also sponsors a

non-qualified

retirement plan, the Unitil Corporation Supplemental Executive Retirement Plan (SERP), covering certain executives of the Company, and an employee 401(k) savings plan. Additionally, the Company sponsors the Unitil Employee Health and Welfare Benefits Plan (PBOP Plan), primarily to provide health care and life insurance benefits to retired employees.

The FASB Codification requires companies to record on their balance sheets as an asset or liability the overfunded or underfunded status of their retirement benefit obligations (RBO) based on the projected benefit obligation. The Company has recognized a corresponding Regulatory Asset, to recognize the future collection of these obligations in electric and gas rates. The Company’s RBO and reported costs of providing retirement benefits are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience. The Company has made critical estimates related to actuarial assumptions, including assumptions of expected returns on plan assets, future compensation, health care cost trends, and appropriate discount rates. The Company’s RBO is affected by actual employee demographics, the level of contributions made to the plans, earnings on plan assets, and health care cost trends. Changes made to the provisions of these plans may also affect current and future costs. If these assumptions were changed, the resulting change in benefit obligations, fair values of plan assets, funded status and net periodic benefit costs could have a material effect on the Company’s financial statements. The discount rate assumptions used in determining retirement plan costs and retirement plan obligations are based on an assessment of current market conditions using high quality corporate bond interest rate indices and pension yield curves. For the year ended December 31, 2020, a change in the discount rate of 0.25% would have resulted in an increase or decrease of approximately $629,000 in the Net Periodic Benefit Cost for the Pension Plan. Similarly, a change of 0.50% in the expected long-term rate of return on plan assets would have resulted in an increase or decrease of approximately $610,000 in the Net Periodic Benefit Cost for the Pension Plan. (See Note 10 (Retirement Benefit Plans) to the accompanying Consolidated Financial Statements.)

Income Taxes

—The Company is subject to Federal and State income taxes as well as various other business taxes. This process involves estimating the Company’s current tax liabilities as well as assessing temporary and permanent differences resulting from the timing of the deductions of expenses and recognition of taxable income for tax and book accounting purposes. These temporary differences result in deferred tax assets and liabilities, which are included in the Company’s Consolidated Balance Sheets. The

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Company accounts for income tax assets, liabilities and expenses in accordance with the FASB Codification guidance on Income Taxes. The Company classifies penalties and interest expense related to income tax liabilities as income tax expense and interest expense, respectively, in the Consolidated Statements of Earnings.

Provisions for income taxes are calculated in each of the jurisdictions in which the Company operates for each period for which a statement of earnings is presented. The Company accounts for income taxes in accordance with the FASB Codification guidance on Income Taxes, which requires an asset and liability approach for the financial accounting and reporting of income taxes. Significant judgments and estimates are required in determining the current and deferred tax assets and liabilities. The Company’s deferred tax assets and liabilities reflect its best assessment of estimated future taxes to be paid. The Company assesses the realization of its deferred tax assets and liabilities and adjusts the income tax provision, the current tax liability and deferred taxes in the period in which the facts and circumstances that gave rise to the revision become known.

Commitments and Contingencies

—The Company’s accounting policy is to record and/or disclose commitments and contingencies in accordance with the FASB Codification as it applies to an existing condition, situation, or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur. As of December 31, 2020, the Company is not aware of any material commitments or contingencies other than those disclosed in the Significant Contractual Obligations table in the “Contractual Obligations” section and the Commitments and Contingencies footnote to the Company’s consolidated financial statements.

Refer to “Recently Issued Pronouncements” in Note 1 of the Notes of Consolidated Financial Statements for information regarding recently issued accounting standards.

For additional information regarding the foregoing matters, see Note 1 (Summary of Significant Accounting Policies), Note 7 (Energy Supply), Note 8 (Commitments and Contingencies), Note 9 (Income Taxes), and Note 10 (Retirement Benefit Plans) to the Consolidated Financial Statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Please also refer to Part I, Item 1A. “Risk Factors”.

INTEREST RATE RISK

Unitil meets its external financing needs by issuing short-term and long-term debt. The majority of debt outstanding represents long-term notes bearing fixed rates of interest. Changes in market interest rates do not affect interest expense resulting from these outstanding long-term debt securities. However, the Company periodically repays its short-term debt borrowings through the issuance of new long-term debt securities. Changes in market interest rates may affect the interest rate and corresponding interest expense on any new issuances of long-term debt securities. In addition, short-term debt borrowings bear a variable rate of interest. As a result, changes in short-term interest rates will increase or decrease interest expense in future periods. For example, if the average amount of short-term debt outstanding was $25 million for the period of one year, a change in interest rates of 1% would result in a change in annual interest expense of approximately $250,000. The average interest rate on short-term borrowings and intercompany money pool transactions was 1.7%, 3.4%, and 3.3% during 2020, 2019, and 2018, respectively.

COMMODITY PRICE RISK

Although Unitil’s three distribution utilities are subject to commodity price risk as part of their traditional operations, the current regulatory framework within which these companies operate allows for full collection of electric power and natural gas supply costs in rates on a pass-through basis. Consequently, there is limited commodity price risk after consideration of the related rate-making. Additionally, as discussed in the section entitled

Rates and Regulation

in Part I, Item 1 (Business) and in Note 8 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements, the Company has divested its long-term power supply contracts and therefore, further reduced its exposure to commodity risk.

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of Unitil Corporation:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Unitil Corporation and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of earnings, changes in common stock equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of

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records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impact of Rate-Regulation on Various Account Balances and Disclosures—Refer to Notes 1 and 8 to the financial statements

Critical Audit Matter Description

Unitil’s (the “Company”) principal business is the distribution of electricity and natural gas and is subject to regulation by the Massachusetts, New Hampshire and Maine Public Service Commissions as well as the Federal Energy Regulatory Commission (the “Commissions”). Accordingly, the Company accounts for their regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 980, Regulated Operations, and has recorded Regulatory Assets and Regulatory Liabilities which will be recovered from customers, or applied for customer benefit, in accordance with rate provisions approved by the applicable Commission. The Company believes it is probable that its regulated distribution and transmission utilities will recover their investments in long-lived assets, including regulatory assets. If the Company, or a portion of its assets or operations, were to cease meeting the criteria for application of these accounting rules, immediate recognition of any previously deferred costs, or a portion of deferred costs, would be required in the year in which the criteria are no longer met. In the Company’s opinion, its regulated operations will be subject to the FASB Codification provisions for Regulated Operations for the foreseeable future.

Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. While the Company has indicated that it expects to recover costs and a return on its investments, there is a risk that the Commissions’ will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of December 31, 2020, and the judgments made by management to support its assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the commissions, auditing these judgments requires specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:

/s/ Deloitte & Touche LLP

Boston, MA

February 2, 2021

We have served as the Company’s auditor since 2014.

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CONSOLIDATED STATEMENTS OF EARNINGS

(Millions, except per share data)

Operating Revenues:

Operating Expenses:

Other Expense (Income), Net 5.2 (8.6 ) 5.8

Net Income Applicable to Common Shares $ 32.2 $ 44.2 $ 33.0

Earnings per Common Share—Basic and Diluted $ 2.15 $ 2.97 $ 2.23

Weighted Average Common Shares Outstanding—(Basic and Diluted) 15.0 14.9 14.8

(The accompanying Notes are an integral part of these consolidated financial statements.)

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CONSOLIDATED BALANCE SHEETS

(Millions)

ASSETS

Current Assets:

Cash and Cash Equivalents $ 6.0 $ 5.2

Accounts Receivable, Net 62.0 55.1

Exchange Gas Receivable 4.9 6.1

Gas Inventory 0.6 0.8

Materials and Supplies 8.5 7.9

Prepayments and Other 6.4 5.8

Utility Plant:

Construction Work in Progress 34.8 37.4

Less: Accumulated Depreciation 401.8 356.0

Other Noncurrent Assets:

Operating Lease Right of Use Assets 5.2 4.0

Total Other Noncurrent Assets 145.4 128.4

(The accompanying Notes are an integral part of these consolidated financial statements.)

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CONSOLIDATED BALANCE SHEETS (cont.)

(Millions, except number of shares)

LIABILITIES AND CAPITALIZATION

Current Liabilities:

Long-Term Debt, Current Portion 8.5 19.5

Regulatory Liabilities 5.5 7.4

Energy Supply Obligations 10.4 10.5

Environmental Obligations 0.3 0.6

Other Current Liabilities 23.5 25.6

Noncurrent Liabilities:

Retirement Benefit Obligations 162.3 141.9

Cost of Removal Obligations 105.2 96.0

Regulatory Liabilities 44.3 46.6

Environmental Obligations 1.8 2.1

Other Noncurrent Liabilities 6.9 6.5

Capitalization:

Long-Term Debt, Less Current Portion 523.1 437.5

Stockholders’ Equity:

Preferred Stock 0.2 0.2

Commitments and Contingencies (Note 8)

TOTAL LIABILITIES AND CAPITALIZATION $ 1,477.9 $ 1,370.8

(The accompanying Notes are an integral part of these consolidated financial statements.)

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Millions)

Operating Activities:

Adjustments to Reconcile Net Income to Cash Provided by Operating Activities:

Gain on Divestiture, net (See Note 1) — (13.4 ) —

Changes in Working Capital Items:

Accrued Revenue (0.9 ) 4.7 (1.4 )

Regulatory Liabilities (1.9 ) (4.1 ) 2.3

Exchange Gas Receivable 1.2 2.0 (2.3 )

Accounts Payable (4.4 ) (5.0 ) 1.1

Other Changes in Working Capital Items (2.4 ) 4.6 3.6

Deferred Regulatory and Other Charges (9.3 ) (5.3 ) (11.3 )

Other, net 4.3 — (5.5 )

Cash Provided by Operating Activities 75.7 104.9 78.5

Investing Activities:

Property, Plant and Equipment Additions (122.6 ) (119.2 ) (102.4 )

Proceeds from Divestiture, Net (See Note 1) — 13.4 —

Financing Activities:

(Repayment of) Proceeds from Short-Term Debt, net (3.9 ) (24.2 ) 44.5

Repayment of Long-Term Debt (24.8 ) (18.8 ) (30.1 )

Long-Term Debt Issuance Costs (0.6 ) (0.4 ) (0.1 )

Decrease in Capital Lease Obligations (0.1 ) (5.3 ) (3.0 )

Net (Decrease) Increase in Exchange Gas Financing (1.1 ) (2.0 ) 2.1

Proceeds from Issuance of Common Stock 1.1 1.1 1.2

Cash Provided by (Used In) Financing Activities 47.7 (1.7 ) 22.8

Net Increase (Decrease) in Cash and Cash Equivalents 0.8 (2.6 ) (1.1 )

Cash and Cash Equivalents at Beginning of Year 5.2 7.8 8.9

Cash and Cash Equivalents at End of Year $ 6.0 $ 5.2 $ 7.8

Supplemental Information:

Income Taxes Paid $ 0.9 $ 0.8 $ 0.4

Payments on Capital Leases $ 0.3 $ 5.5 $ 3.3

Capital Expenditures Included in Accounts Payable $ 1.7 $ 0.6 $ 0.5

Non-Cash Additions to Property, Plant and Equipment $ — $ — $ —

Right-of-Use Assets Obtained in Exchange for Lease Obligations $ 1.2 $ 4.0 $ —

(The accompanying Notes are an integral part of these consolidated financial statements.)

Table of Contents

CONSOLIDATED STATEMENTS OF

CHANGES IN COMMON STOCK EQUITY

(Millions, except shares data)

Common Equity Retained Earnings Total

UTL US Equity

UTL · 10-K · period ended 2020-12-31

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 6. Selected Financial Data

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

UTL US Equity☆

UTL · 10-K · period ended 2020-12-31

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 6. Selected Financial Data

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

UTL US Equity