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Business Context and Reporting Period

Company: Hawaiian Electric Industries, Inc. (HEI) and Hawaiian Electric Company, Inc. (Hawaiian Electric)

Reporting Period: Quarterly period ended June 30, 2026 (Form 10-Q)

Overview: HEI is the holding company for Hawaiian Electric, the primary electric utility serving Hawaii. The filing covers the second quarter of 2026, a period marked by the finalization of the Maui windstorm and wildfire tort settlement, the payment of the first installment, and significant regulatory developments regarding rate rebasing and renewable energy transitions.

Key Financial Metrics (Six Months Ended June 30, 2026)

Note: HEI consolidated results include non-utility segments (ASB Hawaii, Pacific Current) which reported a net loss of $19.6 million for the six-month period.

Material Changes vs. Prior Period

• Profitability Surge: Net income for common stock increased 191% year-over-year (from $52.8 million to $153.7 million). This was primarily driven by a $154 million benefit from the remeasurement of the remaining wildfire tort settlement liability to present value.
• Revenue Growth: Total revenues increased 13% year-over-year, driven by higher fuel oil prices (up 51.9% vs. prior year) and higher purchased power costs, partially offset by a slight decrease in kWh sales volume due to cooler weather.
• Settlement Payment: On April 10, 2026, the company paid the first of four equal annual installments of $479 million related to the Maui wildfire tort settlement. This payment was funded by proceeds from a September 2024 equity offering.
• Asset Sales: The "All Other" segment reported lower revenues and losses due to the divestiture of Pacific Current assets (Hamakua Energy, solar projects) completed in 2025. Mahipapa, LLC remains as the sole operating subsidiary of Pacific Current and is currently held for sale.

Guidance, Outlook, and Risks

Management Commentary and Outlook

• Settlement Liability: Following the first payment, the remaining settlement liability was remeasured and reduced from $1.44 billion to $1.30 billion. Three remaining installments of $479 million each are due in April 2027, 2028, and 2029.
• Financing Needs: Management is working on a financing plan to raise capital for the remaining settlement payments. While they believe they can raise the necessary capital, there is no assurance of success. Failure to do so could lead to liquidity issues or strategic alternatives.
• Regulatory Proceedings: The Public Utilities Commission (PUC) directed the Utilities to re-submit their request for an increase in revenue requirements for the next Multi-Year Rate Period (MRP2). The Utilities filed this application in July 2026.
• Renewable Energy: The Utilities are proceeding with the Waiau repower project ($847 million + inflation adjustment) and various Stage 3 renewable PPAs. However, federal tax credit changes (One Big Beautiful Bill Act) and trade policies pose risks to project economics and timelines.

Risks and Contingencies

• Wildfire Litigation: While the global tort settlement is effective, approximately 80 plaintiffs "opted out." A $500 million holdback fund is reserved to resolve these claims. If the holdback is insufficient, losses could be material.
• Insurance Disputes: Litigation continues with certain property insurers (HEI Insurers) regarding coverage for the Maui wildfires. The Utilities seek approximately $40.7 million in damages.
• Liquidity and Credit Ratings: Credit ratings remain below investment grade (e.g., S&P B+, Moody's Ba2), limiting access to low-cost capital. The company has suspended HEI common stock dividends since Q2 2023 to preserve liquidity.
• Going Concern: The filing notes that the ability to raise capital for settlement payments is critical to alleviating substantial doubt about the company's ability to continue as a going concern.

Investor Verification Checklist

• Settlement Funding: Verify the status of the financing plan for the remaining three $479 million settlement installments due in 2027-2029.
• Opt-Out Claims: Monitor the sufficiency of the $500 million holdback fund against claims from the ~80 plaintiffs who did not join the global settlement.
• Rate Case Outcome: Track the PUC's decision on the alternative re-basing application filed in July 2026, which seeks a $170 million increase in annual target revenues.
• Insurance Recovery: Review the outcome of ongoing litigation with property insurers regarding the $40.7 million claim for uncovered wildfire damages.
• Renewable Project Viability: Assess the impact of the "One Big Beautiful Bill Act" and trade tariffs on the cost and timeline of the Waiau repower project and Stage 3 renewable PPAs.