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Partners
in Prosperity

Unitil Corporation
2016 Annual Report

Distribution
Utilities
Service Areas

Electric

Gas

Mix

Granite State Pipeline

About Unitil Corporation

Unitil Corporation provides energy for life by safely and
reliably delivering natural gas and electricity in New England.
We are committed to the communities we serve and to
developing people, business practices, and technologies that
lead to the delivery of dependable, more efficient energy.
Unitil Corporation is a public utility holding company with
operations in Maine, New Hampshire, and Massachusetts.
Together, Unitil’s operating utilities serve approximately
104,300 electric customers and 79,900 natural gas
customers. Other subsidiaries include Usource, Unitil’s non-
regulated business segment. For more information about our
people, technologies, and community involvement please
visit www.unitil.com.

Highlights

2016 2015 2014

Financial Data (Millions) $383.4 $426.8 $425.8
Total Operating Revenues $65.3 $63.1 $60.0
Total Operating Income $27.1 $26.3 $24.7
Earnings Applicable to Common $98.1 $92.6
Capital Expenditures $103.9 $733.7
Net Utility Plant $883.4 $808.9

Common Share Data $1.94 $1.89 $1.79
Earnings Per Share $1.42* $1.40 $1.38
Dividends Paid Per Common Shares $20.82 $20.20 $19.62
Book Value Per Share (Year-End) $45.34 $35.88 $36.67
Market Price (Year-End) 13,996 13,920 13,847
Average Common Shares Outstanding (000s)

Operating Data 1,628.8 1,667.7 1,679.0
Electric Distribution Sales (Millions of kWh) 205.7 219.4 216.2
Firm Gas Distribution Sales (Millions of Therms)
Customers Served (Year-End) 184,210 182,018 180,612
Electric Customers Served (Year-End) 104,272 103,269 102,752
Gas Customers Served (Year-End) 77,860
79,938 78,749

* On January 25, 2017, the Board of Directors raised the quarterly dividend to $0.36 per share, increasing the annual dividend from $1.42 to $1.44 per share.

2016 ANNUAL REPORT

To Our
Shareholders

Your Company was on an interesting equity was 9.5 percent. Once again, Robert Schoenberger
roller coaster ride in 2016. Due to we generated financial results
the warm winter weather we found ranking among the top performing a supportive regulatory agenda.
ourselves down $0.20 per share in companies in our industry. Driven And our successful, non-regulated
the first quarter compared to 2015. to maintain stable and predictable energy-brokerage subsidiary Usource
growth, we surpassed our goals continued to demonstrate its value
Despite a slow start and thanks to and hit new all-time highs in terms to customers.
aggressive cost control and more of gas and electric sales margins
normal revenue growth in the second and the total number of customers Key to your Company’s steady
half of the year, Unitil finished 2016 we serve. We plan to sustain this performance are countless working
with earnings of $1.94, compared growth by expanding our gas utility partnerships with New England’s
to $1.89 the year before. This is a distribution system and customer communities and residents. The
significant achievement and I base, investing in gas and electric healthy economies enjoyed in these
compliment our employees for a utility infrastructure, reliability and towns and cities mirror the sound,
job well done. More important, customer service, and attending
your Company’s unique growth to our regulatory relationships
opportunities help us sustain this and processes.
performance year over year, even
when other external factors like We are making long-term investments
a warm winter or lower oil prices in grid modernization and
present new challenges to address. infrastructure and in the significant

“The healthy economies enjoyed in these towns and cities
mirror the sound, modern energy infrastructure we work to
optimize every day.”

We’re blessed with extremely upgrade and expansion of our gas modern energy infrastructure we
positive economic trends in our operations, while continuing to refine work to optimize every day. Over the
service territories, particularly along our customer service and information next few pages, we’ll describe how
the seacoasts of Maine and New technology systems. We remained we’re working with our communities
Hampshire. The cities of Portsmouth, committed to “safety first,” helping to realize the benefits of this
New Hampshire and Portland, to protect our people, customers, and economic resurgence. We believe
Maine are undergoing exciting communities. Our customer service, that when our region succeeds we
revitalizations across many economic as measured by call satisfaction succeed as well. It’s an enviable
sectors, including healthcare, retail, rates, reflected improving customer position to be in.
and hospitality. As a result, our gas experience and loyalty, and our
customer base and our weather- field teams delivered exceptional Chairman of the Board, CEO & President
normalized gas sales have increased operational and maintenance
over 20 percent since 2008. We response services. We also achieved
see this growth continuing well a reduction of more than 50 percent
into the future. in electric outages since 2010
as we continued to enhance the
Unitil’s performance in 2016 was reliability of our system year after
positive and consistent. Our net year. Across our service areas we
income rose 3 percent to $27.1 strengthened relationships with
million and our average return on regulators and successfully pursued

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Northern New England

Seasons of Opportunity

As a public utility holding company the New England and Northeast U.S. and prices are favorable. In 2015,
with operations in Maine, New trend of net out-migration of residents supporting a project from Dawn,
Hampshire, and Massachusetts, our to other states. This is good news Ontario, we made commitments
operating utilities serve more than for the region’s long-term hiring to increase total pipeline capacity
104,000 electric customers and prospects, since skilled individuals from abundant supply regions to our
80,000 natural gas customers every with higher levels of education are distribution systems by 10 percent.
day. These customers benefit from a the region’s key competitive resource. In 2016, supporting a project from
regional economy with higher growth northern New Jersey that’s fed by
rates and lower unemployment rates In Maine and New Hampshire we Appalachian shale gas, we made
than in any year since the 2008 also provide natural gas service at an additional commitment that will
recession. A well-educated population costs competitive with all other forms increase our total pipeline capacity
– in a region well known for top of home heating. As our customers by another 10 percent. Maintaining a
universities – drives local strengths continue to convert to natural gas for portfolio of pipeline and underground
in serving software, advanced home heating purposes, our natural storage contracts allows us to serve
manufacturing, aerospace, and gas sales easily exceed the regional our customers with gas from regions
defense industry needs. average. This demonstrated ability where supply is plentiful while
to provide value helps sustain and reducing reliability risks and exposure
Clearly, this is an excellent place to enhance future economic growth in to volatile prices. As we connect
live, learn, and do business – an our regions. new customers to gas service, we’ll
area where Unitil serves residential, continue to explore effective means of
commercial, and industrial customers During the past four years, in securing additional access to natural
in regions growing faster than New coordination with utilities and gas supply for customers.
England in general. The economic government agencies throughout New
strength of our core service territories England, pipeline companies have Unitil will continue to partner with
in Maine and New Hampshire proposed expansion projects to bring our customers to overcome energy
demonstrates more than employment more natural gas to the area and supply and pricing challenges across
and income growth. Strong, increasing connect domestic shale gas supplies New England, encouraging the
employment opportunities and a high from Pennsylvania and the Midwest to development of new natural gas
level of natural, cultural, and social markets in New England. We’ve been infrastructure, strategic investment
amenities in each region contribute restructuring our portfolio of pipeline in new electric transmission
to demographic trends that show capacity contracts in a measured infrastructure, and the continuation of
the Seacoast New Hampshire and way to access these supplies in a wide spectrum of energy efficiency
Greater Portland Maine areas bucking locations where gas supply is robust technologies and programs.

1900s 1849 Portland Gas Light Company founded
1800s 1852 Fitchburg Gas and Electric Light Company is organized to illuminate gas streetlights

2000s in Fitchburg, Massachusetts

1901 Concord Electric Company is founded
1908 Exeter & Hampton Electric Company is founded
1979 Northern Utilities, Inc. is incorporated; prior companies include Portland Gas Light Company
1984 Unitil Corporation is incorporated; subsidiaries include Concord Electric Company

and Exeter & Hampton Electric Company
1992 Unitil merges with Fitchburg Gas and Electric Light Company
1993 Unitil founds Unitil Resources, Inc.

2000 Usource, LLC is formed to provide energy brokerage services to large users
2002 Concord Electric Company and Exeter & Hampton Electric Company merge as

Unitil Energy Systems, Inc.
2008 Northern Utilities, Inc. and Granite State Gas Transmission, Inc. are acquired by Unitil

MASSACHUSETTS

Central
Massachusetts

Along the Nashua River

In Massachusetts, where our utility Noted for cultural assets such as the several years ago, completed major
has operated since the mid-1850s, Fitchburg Art Museum and Fitchburg heating and cooling overhauls at the
Unitil is collaborating with other State University, the area has iconic neighboring Montachusett Regional
utilities to develop a plan for electric roots in the paper industry but Vocational Technical School and
grid modernization to reduce the today is economically diverse – with Gardner Middle Schools. We helped
effects of outages, optimize energy pharmaceutical, tool and die, machine more than 2,000 households and
demand, integrate distributed manufacturing, plastic molding, and businesses become more energy
resources, and improve workforce textile companies in residence. Lately, efficient across the Fitchburg region.
and asset management. The plan Fitchburg has attracted modern These projects will realize nearly $20
also addresses the State’s aging medical device, precision instrument, million in benefits over their lifetimes
natural gas pipeline infrastructure. optics, and food processing industries and save in excess of eight thousand
Natural gas utilities spend more than as well. megawatt-hours and nearly 15 billion
$19 billion annually to enhance the BTUs of natural gas. We’re now
safety of natural gas infrastructure; Our long-time customer Fitchburg planning to build an approximately
we alone have nearly tripled our gas State University is a public institution 1.3-megawatt solar generation
contractor force over the last few offering highly regarded liberal facility on land we own in Fitchburg
years to meet demand. Forty-five arts and sciences studies. Founded that once hosted a coal gasification
miles west of Boston and just north in 1894, the university has more plant. Expected to operate by
of Worcester, Massachusetts, is the than 1,000 employees and 7,000 the end of 2017, the project will
City of Fitchburg, served by Unitil and full- and part-time students in 30 contribute to the City of Fitchburg’s
its predecessor companies for over undergraduate and 22 master’s tax base and become part of Unitil’s
a century along with surrounding degree programs. We recently renewable energy portfolio, helping
communities Townsend, Lunenburg, upgraded the University’s Aubuchon Massachusetts meet state goals
Ashby, Westminster, and Gardner. Hall to natural gas heating and, under the Green Communities Act.

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New Hampshire’s Capital
Region On the Upper Merrimack River

Just 15 miles north of Fitchburg, New The New England Rating Guide to Life multi-year revitalization of Main Street
Hampshire has a low tax burden in America’s Small Cities, and it was in Concord, completed late in 2016.
that continues to sustain strong named the fourth best state capital We worked from June to November
economic growth. The nonpartisan nationwide in which to live, according to install underground lines and
Tax Foundation consistently ranks the to Smart Asset’s third annual report, equipment to remove all overhead
state among the top ten in its State a ranking based on each city’s facilities in much of the Main Street
Business Tax Climate Index. At only standard of living. area. Unitil worked closely with the
2.6 percent as of December 2016, New City’s general contractor, engineering
Hampshire’s unemployment rate is In addition to hosting numerous state, firm, and associated utilities to help
among the very lowest in the country. county, local, and federal agencies, transform downtown Concord into an
Concord is a major distribution, even more desirable place to work,
Since the end of the last recession, industrial, and transportation hub and shop, dine, and live. More than a
Unitil’s New Hampshire service the site of several major law firms, dozen new businesses have opened
territory has grown jobs at a rate insurance companies, and banks. since the beginning of the project,
nearly 50 percent faster than the rest The service industry is the fastest living spaces have been revitalized
of New Hampshire. Our two largest growing segment of Concord’s to attract a growing workforce, and
regions (Capital and Seacoast New economy. Concord also is one of the downtown area is a more vibrant
Hampshire) have experienced much few New Hampshire cities with both attraction. Nearby, the New Hampshire
stronger population growth, with each industrial park space and construction Motor Speedway brings approximately
at approximately 2.4 percent. sites available. $50 million in tourism to Concord
each year.

We serve more than 30,000 customers More than 5,000 people in Concord
in our Capital region, including parts are employed in the delivery of
of the City of Concord and surrounding healthcare services. Concord Hospital,
towns. Since 2000, the City has had which has provided healthcare serves
a population growth of 5.1 percent, to the community for more than a
and future job growth over the next century, is the region’s second
10 years is predicted to be more than largest employer.
38 percent. Concord recently was
ranked fourth in per capita income in Unitil played an important part in the

NEW HAMPSHIRE
NEW HAMPSHIRE

2016 ANNUAL REPORT

New Hampshire’s
Seacoast The Great Bay Watershed

In the vibrant New Hampshire opportunities, easy access to In the Seacoast Town of Stratham,
Seacoast region, we serve nearly transportation, and proximity to premium chocolatier Lindt USA relies
two dozen communities and 79,000 major markets. The City features on Usource to strategically source
residents with reliable electricity and professional and business services, energy commodities while actively
natural gas. The region stretches healthcare and education services, monitoring market positions to ensure
north from our headquarters in and wholesale and retail trade. It budget and risk management goals
Hampton to Portsmouth, adjoining also hosts robust restaurant and are achieved. Usource advises Lindt
the State of Maine, and south to the hospitality, high-tech, and retail on reducing its total “energy spend,”
Massachusetts border. It encompasses components. The adjacent Pease recently supporting the sourcing of
countless quintessential New England International Tradeport, a Foreign a significant LED lighting retrofit. In
towns and 20 miles of Atlantic coastal Trade Zone covering 3,000 acres nearby Strafford County, Usource
living that draw new residents and of world-class office and industrial procures electricity and natural gas for
businesses to the area every year. space, is home to more than 250 the entire county government. Usource
companies employing nearly 10,000 has been the energy advisor of choice
Since 2004 the Seacoast also has people in four million square feet of for the New Hampshire Association of
attracted more and more companies office and industrial space. Counties since 2011 and the Business
known for innovation and rapid and Industry Association of New
growth, shifting a major locus of In New Hampshire, we will complete Hampshire since 2005.
key economic activity in the state. the replacement of all cast iron and
While marginally increasing its bare steel natural gas infrastructure The Seacoast region affords Unitil
share of New Hampshire’s private in 2017, continuing our commitment significant opportunity in the years

“In New Hampshire, we will complete the replacement of all cast
iron and bare steel natural gas infrastructure in 2017, continuing
our commitment to critical system upgrades.”

sector employment, the Seacoast to critical system upgrades. In ahead. According to the Portsmouth
has added significant employment nearby Kingston, our electric unit of CBRE/The Boulos Company,
numbers in the finance, insurance, operations department completed one of the world’s largest real estate
information technology, healthcare, and commissioned our largest-ever investment managers, the shortage
and manufacturing sectors. electric substation project this year of industrial land in the Seacoast
Remarkably, the region’s pace of job to help support this region’s rapid and lower vacancy rates will result
growth exceeds that in the rest of the growth. The new Kingston substation in higher rental rates. This will close
Northeast and nation over the last now serves nearly 18,000 electric the gap between the price of leasing
year – ranking 34th overall (ahead of customers and helps Eversource, existing space and the price of
Boston at #51) among the largest another major New England utility, building a new facility, causing more
200 metro regions in the country improve the reliability of its own companies in the market for space
on “the best performing cities in electric system. in the Seacoast to consider new
the country” in 2015 by the Milliken construction. The region’s lower tax
Institute. The region was ranked Across the New Hampshire Seacoast burden, comparatively low rents, and
19th in high-tech wage and salary and nationwide, our non-regulated high educational attainment appeal
growth and 12th in concentration of subsidiary Usource continues to to businesses. These advantages
high-tech employment. offer premier energy management will become more important when
expertise, advising organizations on business investment increases,
Portsmouth is clearly the business securing sustainable energy supply spurring job growth in professional,
hub and cosmopolitan center of and understanding intricate market scientific, and other technical services.
the Seacoast, with vigorous growth demands, risks, and regulations.

PAGE 6

NEW HAMPSHIRE

Maine’s Largest City

The Shores of Casco Bay

Unitil sees strong, continued growth also experienced employment now work in knowledge and creative
and ongoing opportunity to provide growth at more than twice the rate industries that have significant upside
increasing numbers of homes and of Maine overall. for the regional economy. Over the
businesses with clean natural gas next decade these industries will help
services in southern Maine. We Our Maine service region covers boost average incomes and support
already serve nearly 32,000 residents communities representing one-third demand for a range of private and
in the state, primarily in the Greater of all businesses in Maine and 40 public services. Key to this growth
Portland region. The region has 25 percent of all the employment in the will be the many higher education
percent of the state’s population state. We opened a new operations institutions in the area, such as the
and is Maine’s economic engine, office in 2015 to help serve this University of Southern Maine.
responsible for the majority of its important market. The 60,000-square
growth. According to recent estimates foot building provides staff, updated The finance industry in Portland is
by the Bureau of Economic Analysis, facilities, parking support, and a large also strong and Portland’s commercial
the Greater Portland region provides onsite warehouse to support local port – the largest in New England in
nearly $26 billion in earnings in operations effectively in Portland. terms of tonnage – is key to Maine’s
2015 – almost half of the entire Home to major national defense lobster and pulp/paper trade. Health
state’s economy. industries, Maine’s largest employers services play an equally important
include the Portsmouth Naval part in the Portland area’s economy.
Again, communities in our Maine Shipyard in Kittery, our largest natural
territory experienced much stronger gas customer. In partnership with the Maine
job growth than have those outside of Dept. of Transportation, the Cities
Unitil’s service territory (4.9% to 1.9%) A 2005 study by American City of Portland and South Portland,
between 2010 and 2015. Moreover, Business Journals found that the and the Maine Port Authority,
many of the larger communities Portland metropolitan area has the we relocated a major natural gas
experienced exceptional job growth strongest small-business sector distribution hub to allow for an
since the end of the recent recession. (companies with 100 or fewer enlarged commercial receiving area
With 70,000 jobs, Portland accounts employees) of any large metropolitan at the International Marine Terminal.
for 30 percent of the employment in area in the United States. A rising This upgrade feeds a significant
our service territory in Maine. Portland share of Portland area residents portion of key regions in Portland

2016 ANNUAL REPORT

and South Portland, and integrates coming two years to accommodate area’s growth, we’ll continue to make
with the Cities’ combined initiative to these growing needs. safety and efficiency our highest
expand the West Commercial Street priorities at Unitil. As such, we
corridor for business and community Ultimately, this commercial activity passed the 48 percent completion
development. We also completed the and Portland’s desirable quality of mark in 2016 on our 14-year System
site’s environmental remediation for life will continue to attract a diverse Upgrade for Reliable Energy (SURE)
this pivotal $5 million effort. group of new permanent residents and project, dedicated to upgrading the
businesses looking to engage a highly regional natural gas infrastructure. In
Maine Medical Center, the largest educated workforce. We’re prepared to 2017, we plan to replace or upgrade
hospital in the State and one meet this growth with safe, innovative another five miles of gas mains now
of the City’s largest employers, natural gas supply programs, such serving more than 15,000 Portland

“Communities in our Maine territory experienced much stronger
job growth than have those outside of Unitil’s service territory
(4.9% to 1.9%) between 2010 and 2015.”

recently announced $512 million as our “Targeted Area Buildout,” or area customers. Throughout New
in construction projects to expand TAB initiative. Pioneered in 2016 in England in 2016, we added 15.3 miles
and modernize its facilities. A recent neighboring Saco, TAB allows new of new gas mains, upgrading existing
influx of new residents and an aging customers immediate access to natural services and adding homes and
population will support further gas without paying traditional upfront businesses to our service territory.
healthcare job growth well into the fees. We build and commission the On the basis of economic growth,
next decade. Increased healthcare projects first, then apply a small clean energy demand, and innovation,
employment resulted in vacancy rates surcharge over a 10-year period to this is a very exciting time for your
at medical office buildings of one help recover initial costs. In 2016, we Company in Maine.
percent by the end of 2015, creating installed new natural gas main lines
strong pressure for new construction. in the City of Saco under our first
Portland’s Bayside Area, which TAB and exceeded our expectations.
hosts a diverse population and mix In 2017, we plan to continue this
of properties, is especially poised expansion in Saco and identify new
for major redevelopment, according areas for similar expansion.
to CBRE/The Boulos Company. New
construction will occur over the While keeping pace with the Portland

MAINE

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