Capitalization

3 Months Ended

Mar. 31, 2017

CAPITALIZATION:

Capitalization

Note 3 – Capitalization

Common Stock

During the three months ended March 31, 2017 and 2016, there were 7,845 common shares (approximately $0.3 million) and 15,488 common shares (approximately $0.4 million), respectively, issued under the Middlesex Water Company Investment Plan.

Long-term Debt

In January 2017, the New Jersey Board of Public Utilities (NJBPU) approved Middlesex’s request to borrow up to $37.0 million under the New Jersey State Revolving Fund (SRF) program to fund the construction of a large-diameter transmission pipeline from the Carl J. Olsen water treatment plant and interconnect with our distribution system. Middlesex expects to close on the SRF construction loan in 2017 with proceeds requisitions occurring throughout 2017, 2018 and 2019.

In January 2017, the NJBPU approved Middlesex’s request to borrow up to $10.0 million under the New Jersey SRF program to fund the 2017 RENEW Program, which is an ongoing initiative to eliminate all unlined water distribution mains in the Middlesex system. Middlesex expects to close on the SRF construction loan in 2017 with proceeds requisitions occurring throughout 2017 through early 2018.

In July 2016, the NJBPU approved Middlesex’s request to borrow up to $4.0 million under the New Jersey SRF program to fund the upgrade of a booster station at one of its well fields. Middlesex expects to close on the SRF construction loan in May 2017 with proceeds requisitions occurring through December 2017.

Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments for which it is practicable to estimate that value. The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade receivables, accounts payable and notes payable approximate their respective fair values due to the short-term maturities of these instruments. The fair value of First Mortgage and SRF Bonds (collectively, the Bonds) issued by Middlesex is based on quoted market prices for similar issues. Under the fair value hierarchy, the fair value of cash and cash equivalents is classified as a Level 1 measurement and the fair value of notes payable and the Bonds in the table below are classified as Level 2 measurements. The carrying amount and fair value of the Bonds were as follows:

	March 31, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Bonds	$	82,453	$	84,535	$	82,786	$	84,821

For other long-term debt for which there was no quoted market price and there is not an active trading market, it was not practicable to estimate their fair value (for details, including carrying value, interest rate and due date on these series of long-term debt, please refer to those series noted as “Amortizing Secured Note”, “State Revolving Trust Note” and “Construction Loans” on the Condensed Consolidated Statements of Capital Stock and Long-Term Debt). The carrying amount of these instruments was $61.6 million and $59.7 million at March 31, 2017 and December 31, 2016, respectively. Customer advances for construction have carrying amounts of $20.9 million and $20.8 million at March 31, 2017 and December 31, 2016, respectively. Their relative fair values cannot be accurately estimated since future refund payments depend on several variables, including new customer connections, customer consumption levels and future rate increases.