Executive Summary / Key Takeaways

• Unitil Corporation is strategically expanding its regulated asset base through targeted acquisitions in natural gas and water utilities, alongside significant infrastructure modernization, positioning it for accelerated rate base and earnings growth through 2029.
• The company's core utility operations demonstrated solid performance in the first nine months of 2025, with adjusted gross margins increasing across both electric and gas segments, driven by higher distribution rates, customer growth, and effective decoupling mechanisms.
• Technological investments, including a new utility-scale solar facility and an Advanced Metering Infrastructure (AMI) upgrade, are enhancing operational efficiency, grid resilience, and customer engagement, while supporting Unitil's ambitious decarbonization goals.
• Unitil maintains a strong financial profile, evidenced by a robust funds from operations to debt ratio of nearly 17% and a recently increased dividend, underpinning its commitment to consistent shareholder returns.
• The company's long-term outlook remains positive, with reaffirmed guidance for 5-7% earnings growth (upper half with acquisitions) and 6.5-8.5% rate base growth, supported by a $1.1 billion capital plan and a constructive regulatory environment.

A New England Utility's Growth Story: Foundations and Forward Momentum

Unitil Corporation (NYSE:UTL) stands as a public utility holding company deeply embedded in the New England energy landscape, primarily distributing electricity and natural gas across New Hampshire, Massachusetts, and Maine. Incorporated in 1984, the company has built a reputation for operational stability and consistent shareholder returns, marked by an unbroken record of quarterly dividend payments. Unitil's foundational strategy centers on providing reliable, regulated utility services, underpinned by continuous infrastructure investment and a proactive approach to regional growth. This strategy is now accelerating through a series of strategic acquisitions and technological advancements, reshaping its competitive posture and long-term financial trajectory.

The utility sector in New England is characterized by stringent regulatory oversight, a growing emphasis on decarbonization, and increasing demand for resilient infrastructure. Unitil operates within this dynamic environment, competing with larger, diversified utilities such as Eversource Energy , Consolidated Edison (ED), and National Grid plc . While these larger peers benefit from greater scale and broader operational reach, Unitil carves out a strong niche through its localized service delivery and deep understanding of its specific regulatory jurisdictions. This community-focused approach fosters strong customer relationships and allows for tailored service offerings, which can be a differentiator against the more expansive, and at times less personalized, operations of its larger rivals.

Unitil's competitive advantages are primarily rooted in its exclusive regulatory licenses and established distribution networks, which act as significant barriers to entry for new competitors. Its regional infrastructure enables efficient energy delivery, potentially offering superior local reliability compared to the broader systems of some larger players. However, Unitil's smaller scale and regional focus can also present vulnerabilities, potentially limiting growth opportunities and exposing it to higher costs per customer compared to the economies of scale enjoyed by its larger counterparts. The company's strategic response to these dynamics involves targeted acquisitions that expand its footprint in complementary geographies, leveraging existing operational expertise and regulatory relationships.

Technological differentiation is becoming increasingly vital in the evolving utility landscape, and Unitil is making strategic investments to enhance its capabilities. A key initiative is the Advanced Metering Infrastructure (AMI) upgrade, which involves replacing all electric meters in its service areas with state-of-the-art smart meters. This technology provides near real-time information to customers, empowering them with improved energy decision-making capabilities and enabling enhanced grid optimization. The Massachusetts rollout of AMI is expected to be completed by year-end 2025, with New Hampshire commencing in 2026, representing a total capital investment of approximately $40 million. A portion of this investment in Massachusetts is eligible for accelerated cost recovery, directly supporting Unitil's financial performance.

Further demonstrating its commitment to modernizing infrastructure and supporting clean energy, Unitil Energy Systems’ utility-scale solar facility in Kingston, New Hampshire, became fully operational in May 2025. This 4.88 MW facility, capable of powering roughly 2,000 homes, reduces the amount of energy Unitil would otherwise import from the regional grid and is a first-of-its-kind project in the state. The company is actively seeking cost recovery for this investment through its pending New Hampshire rate case. Operationally, Unitil is also leveraging telematics for fleet optimization, analyzing driver behavior and fuel consumption to improve efficiency, lower costs, and support its greenhouse gas reduction goals. These technological advancements contribute to Unitil's competitive moat by enhancing operational efficiency, improving grid resilience, fostering customer engagement, and positioning the company as a leader in the clean energy transition within its service territories.

Strategic Acquisitions and Financial Performance

The year 2025 marks a pivotal period for Unitil's growth strategy, driven by significant acquisitions. On January 31, 2025, Unitil acquired Bangor Natural Gas Company for $71.40 million, adding approximately 8,500 gas customers in central Maine. This was followed by the acquisition of Maine Natural Gas Company for $86 million, which closed on October 31, 2025, further expanding its gas operations in Maine by approximately 15,000 customers. These natural gas acquisitions are particularly strategic given Maine's high reliance on fuel oil, positioning natural gas as a cleaner and more affordable alternative and driving strong customer growth of 4-5% in these attractive areas.

Diversifying beyond energy, Unitil entered the water distribution sector on May 6, 2025, with an agreement to acquire three Aquarion Water Companies in Massachusetts and New Hampshire for approximately $100 million, including assumed debt. This transaction, expected to close in late 2025, adds 23,000 customers and $78 million in rate base (as of December 31, 2024), representing Unitil's first entry into water utilities. These acquisitions are expected to be earnings-neutral in the short term but are projected to become earnings-accretive over the long run once new distribution rates, reflecting the current cost of service, take effect.

Unitil's financial performance for the first nine months of 2025 reflects the strength of its regulated business model and the initial impacts of its growth initiatives. Adjusted net income, excluding transaction-related costs, increased to $33.5 million, or $2.03 per share, for the nine months ended September 30, 2025, an increase of $1.4 million or $0.03 per share compared to the same period in 2024. For the third quarter of 2025, adjusted net income remained stable at $0.4 million, or $0.03 per share.

The company's Electric Adjusted Gross Margin for the nine months ended September 30, 2025, rose by $4.7 million, or 5.8%, to $86.4 million, driven by higher distribution rates and customer growth. Similarly, Gas Adjusted Gross Margin increased by $19.1 million, or 16.5%, to $134.7 million, benefiting from higher rates, customer growth, and colder winter weather in 2025. Bangor Natural Gas contributed $7.4 million to this gas margin increase. The company's revenue decoupling mechanisms for electric and a significant portion of gas sales (approximately 55% of gas customers as of September 30, 2025) effectively mitigate commodity price risk and stabilize distribution revenues.

Operating expenses saw increases, with Operation and Maintenance (O&M) expenses rising by $8.7 million for the nine months ended September 30, 2025, primarily due to higher utility operating costs and $2.3 million in acquisition transaction costs. Depreciation and Amortization expense also increased by $10.5 million, reflecting higher depreciation rates from recent base rate cases and increased utility plant in service. Interest expense, net, increased by $5.2 million, primarily due to higher levels of long-term debt and lower interest income on AFUDC.

Unitil maintains a strong liquidity position, supported by its unsecured revolving Credit Facility, which was expanded to $275 million in January 2025. An August 2025 public offering of 1.60 million common shares generated approximately $71.80 million in net proceeds, strengthening the balance sheet and funding equity needs for recent acquisitions. The company's funds from operations (FFO) to debt ratio of nearly 17% firmly places it above downgrade thresholds and aligns with the average for utility companies.

Outlook, Guidance, and Risk Assessment

Unitil's management has reaffirmed its long-term guidance, projecting earnings growth in the upper half of its 5-7% range, accelerated rate base growth of approximately 10% annually through 2029, and continued dividend growth. The company's current five-year capital plan, now totaling approximately $1.1 billion (a 19% increase over the prior plan) and including the acquired gas and water companies, is expected to drive rate base growth within the 6.5-8.5% long-term guidance range. Capital spending for 2025 is anticipated to be around $176 million.

Key to achieving this outlook are ongoing rate cases and the successful integration of new assets. Unitil Energy Systems (UES) filed a base rate case in New Hampshire in May 2025, seeking an $18.5 million increase in permanent rates, with temporary rates of $7.8 million taking effect in July 2025. Permanent rates are expected in the second quarter of 2026, with awards reconciled back to the temporary rate effective date. Future rate cases are planned for Bangor Natural Gas in early 2027 and Maine Natural Gas in mid-2027 to establish cost-of-service rates. The Board of Directors recently increased the quarterly dividend to $0.45 per share, resulting in an annualized rate of $1.80 per share (a 5.9% increase from 2024), reflecting a payout ratio firmly within the target range.

Despite a generally constructive outlook, Unitil faces several risks. Regulatory decisions, particularly concerning authorized rates of return, cost recovery, and the treatment of non-gas pipeline alternatives (NPAs) in Massachusetts' decarbonization inquiry, could impact profitability. The ongoing appeal regarding the absorption of $1.40 million in negative excess accumulated deferred income taxes (ADIT) in Massachusetts also presents a financial uncertainty. Integration risks associated with the recent acquisitions, while mitigated by Unitil's experience, could still pose challenges. Fluctuations in interest rates could affect financing costs for new debt issuances and variable-rate borrowings. While commodity price risk is largely mitigated by pass-through rates, the broader economic conditions and severe weather events remain inherent operational risks.

The competitive landscape also presents challenges. While Unitil's regional focus offers advantages, its smaller scale compared to peers like Eversource (ES) and National Grid (NGG) could limit its ability to capitalize on large-scale industry trends, such as the increasing load growth from AI and data centers. The shift towards sustainable energy and the Massachusetts Legislature's directives for offshore wind and energy storage procurement also highlight the need for continuous investment and adaptation.

Conclusion

Unitil Corporation is executing a clear and compelling growth strategy, leveraging its stable regulated utility model to expand into complementary natural gas and water distribution markets while simultaneously modernizing its existing electric and gas infrastructure. The company's recent acquisitions, coupled with strategic technological investments in AMI and solar energy, are foundational to its projected acceleration in rate base and earnings growth. Unitil's commitment to operational excellence, customer satisfaction, and environmental stewardship, alongside a strong balance sheet and a consistent dividend policy, reinforces its position as a reliable investment in the utility sector.

The company's ability to successfully integrate its new acquisitions, navigate ongoing regulatory proceedings, and effectively deploy advanced technologies will be crucial in realizing its long-term financial targets. While competitive pressures and regulatory shifts present ongoing considerations, Unitil's focused regional strategy and prudent financial management provide a solid framework for delivering sustainable value to shareholders. Investors looking for a utility with a clear growth trajectory, supported by strategic expansion and a commitment to modern infrastructure, will find Unitil's story compelling.