HEI’s profit drops 52.8% after fee bump in 2016

A $90 million merger breakup fee swelled Hawaiian Electric Industries Inc.’s third-quarter earnings a year ago.

But the one-time item skewed HEI’s net income this time around as the parent company of American Savings Bank and three major electrical utilities in the state reported Thursday that net income fell 52.8 percent in the July-September period.

HEI’s earnings declined to $60.1 million, or 55 cents a share, from $127.1 million, or $1.17 a share, a year ago when the company received $63.8 million after taxes due to the collapse of its proposed $4.3 billion sale to Florida-based NextEra Energy Inc. The third quarter of 2016 also included favorable tax adjustments of $6 million. Excluding merger-related after-tax income and costs, HEI’s third-quarter 2016 core earnings were $63.3 million and 58 cents a share.

A ruling by the state Public Utilities Commission in July 2016 quashed the sale to NextEra, which also would have led to American Savings becoming an independent company.

HEI said net income for the utilities was virtually flat last quarter at $47.5 million while the bank’s net income jumped 16.5 percent to $17.6 million despite a decrease in loans. American Savings previously reported its earnings Monday.

Total revenue for HEI increased 4.2 percent to $673.2 million from $646.1 million. Utility revenue rose 4.6 percent to $598.8 million while bank revenue edged up 0.8 percent to $74.3 million.

“HEI’s core earnings compared well with the prior-year quarter, demonstrating the value of the unique combination of businesses which comprise HEI,” Connie Lau, president and CEO of HEI, said on the company’s earnings conference call.

Through its electrical utilities — Hawaiian Electric Co. on Oahu, Hawaii Electric Light Co. on the Big Island and Maui Electric Co. — HEI provides power to approximately 95 percent of Hawaii’s population.

The utilities paid more for fuel in the third quarter compared with the year- earlier period as costs rose 13.7 percent to $146.3 million from $128.6 million. The average price the utilities paid for a barrel of oil during the quarter increased to $66.73 from $57.72 in the year-earlier period.

The electrical utilities also paid more for power purchased from outside vendors in the quarter compared with the same period a year ago. Purchased power edged up 1.6 percent to $160.3 million last quarter compared with $157.8 million a year ago.

Lau called 2017 a year of transition for the company as it concurrently moves through three rate cases that would generate additional revenue for the utilities and raise customers’ electrical costs.

On Aug. 21 the PUC issued an interim decision for HELCO by approving an increase of $9.9 million in revenue. For Oahu, HECO is in settlement discussions with Dec. 15 the tentative date for the PUC to issue an interim order. And for Maui an interim decision is expected in the second half of 2018 on the utility’s request for a $30 million increase in revenue.

Lau also said the company continues to advance many of its initiatives that would move Hawaii toward its 100 percent renewable energy goal by 2045.

HEI’s stock closed up 18 cents at $36.31 Thursday after the results were released toward the end of the trading session. The company said it will continue to keep its quarterly dividend at 31 cents a share, which based on Thursday’s closing price indicates a 3.4 percent annualized yield that would make it the highest for any Hawaii-based company. It will be payable Dec. 12 to shareholders of record at the close of business Nov. 22.