HE

Hawaiian Electric Industries, Inc. (HEI) - Q1 2025 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2025, for Hawaiian Electric Industries, Inc. (HEI) and its principal subsidiary, Hawaiian Electric Company, Inc. (Hawaiian Electric). HEI operates as a holding company for electric utilities serving Hawaii (excluding Kauai) and non-regulated subsidiaries. The reporting period reflects the company's ongoing recovery and financial restructuring following the August 2023 Maui windstorm and wildfires. Notably, the company sold its banking subsidiary, American Savings Bank (ASB), in December 2024, and its results are now presented as discontinued operations.

Key Financial Metrics

Note: Q1 2024 Net Income included $20.9 million from discontinued operations (ASB), which was sold in late 2024.

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 6% year-over-year, primarily driven by lower fuel oil prices and reduced purchased power costs, partially offset by a 3.1% increase in kilowatt-hour (kWh) sales volume.
• Profitability Shift: While Net Income for common stock decreased 37% due to the absence of ASB income, Operating Income increased 23% to $62.4 million. This improvement was driven by better heat rate performance, lower O&M expenses, and higher Annual Revenue Adjustment (ARA) revenues.
• Asset Sales: HEI recorded a $13.2 million loss on the sale of Hamakua Holdings, LLC (a renewable energy asset) in March 2025. The sale of ASB in December 2024 resulted in the elimination of the "Bank" segment.
• Wildfire Settlement Liability: The company has accrued a total liability of approximately $1.99 billion related to the Maui wildfire tort settlement. This is classified as $479 million current liability (first installment due early 2026) and $1.44 billion non-current liability.

Guidance, Outlook, and Risks

• Liquidity Position: HEI reported total available liquidity of approximately $1.23 billion as of March 31, 2025. This includes $629 million in cash, $479 million in restricted cash (held in subsidiary GLST1 for the first settlement payment), and $299 million in undrawn credit facilities for the utilities.
• Financing Strategy: To fund the first settlement installment, HEI completed a common stock offering in September 2024 raising $557.7 million. The company is actively working on financing plans for the remaining $1.44 billion settlement obligation. HEI maintains an at-the-market offering program for up to $250 million of additional equity.
• Dividend Status: HEI suspended its quarterly cash dividend in August 2023. Hawaiian Electric resumed a $10 million quarterly dividend to HEI in May 2025, but HEI has not declared a dividend to its shareholders.
• Key Risks:
  • Settlement Funding: Uncertainty regarding the ability to raise capital for the remaining wildfire settlement payments on acceptable terms.
  • Credit Ratings: HEI and Hawaiian Electric remain below investment grade (S&P revised outlook to "Positive" in March 2025), restricting access to unsecured capital markets.
  • Regulatory & Litigation: Ongoing securities class actions and shareholder derivative lawsuits related to the wildfires; potential delays in renewable energy projects due to supply chain and financing constraints.
  • Trade Policy: Potential impact of U.S. trade policies on the cost of capital goods and battery components for grid modernization.

Investor Verification Checklist

• Settlement Funding Plan: Verify the specific financing instruments HEI intends to use to fund the remaining $1.44 billion wildfire settlement liability beyond the initial equity raise.
• Insurance Recoveries: Monitor the status of insurance claims and the remaining coverage limits ($12 million excess liability, $117 million D&O) to offset legal and liability costs.
• Renewable Portfolio Standards (RPS): Assess progress on Stage 3 RFP projects and the risk of penalties ($20/MWh) if RPS targets are missed due to project delays.
• Accounts Receivable Quality: Review the trend of past-due accounts receivable, particularly on Maui where disconnection moratoriums remain in effect through June 2025.
• Capital Expenditure Execution: Track the deployment of the $95 million federal IIJA grant for the Climate Adaptation Transmission and Distribution Resilience Program, noting potential delays from federal executive orders.