Write-down narrows HEI’s net income

Hawaiian Electric Industries Inc. reported a sharp decline in fourth-quarter net income due mostly to a $24 million write-down related to rate relief the company is proposing for its utility customers.

HEI said it earned $13.8 million, or 14 cents a share, in the October-through-December period, down from $34.2 million, or 36 cents a share, in the same quarter a year earlier.

Hawaiian Electric Co., HEI’s utility subsidiary, announced last month that it had reached agreement with the state Division of Consumer Advocacy to reduce by $40 million the amount of revenue it will seek to recover from ratepayers for two projects. The proposal is subject to approval by the Public Utilities Commission.

For the full year, HEI reported net income of $138.7 million, little changed from $138.2 million in 2011. Earnings per share were $1.42 in 2012 compared with $1.44 a year earlier.

"HEI’s 2012 earnings reflect Hawaiian Electric Company’s agreement with the consumer advocate, which included a significant write-off of invested capital," Constance Lau, HEI president and chief executive officer, said in a news release.

"The agreement recognizes that the cost of oil remains stubbornly high in Hawaii, which is then felt by our customers in high electric bills as fuel makes up more than half of customers’ bills," Lau said in a conference call with analysts after the earnings release.

The HEI earnings report included results for the company’s American Savings Bank subsidiary, which were reported Jan. 30. American Savings Bank earned $14.4 million in the fourth quarter compared with $15.3 million in the year-earlier period. For the full year, American Savings earned $58.6 million versus $59.8 million a year earlier.

On Jan. 28 the consumer advocate announced that HECO agreed not to collect $40 million that it had hoped to recover from ratepayers to help pay for two major projects: a biofuel-fired power plant in Campbell Industrial Park and a new customer information system. HECO signed the settlement agreement in lieu of conducting regulatory audits of the two projects, according to a Securities and Exchange Commission filing. The after-tax charge to net income amounted to $24 million spread among HECO and its affiliated utilities serving Maui and Hawaii counties.

In addition, the utility’s Hawaii Electric Light Co. subsidiary agreed to withdraw its request to raise electricity rates for Hawaii island customers. HELCO had been seeking a rate increase of 4.2 percent, or $19.8 million. If the agreement is approved by the PUC, the next rate case for HELCO would not be filed until 2016.

Lau also said in the conference call that HECO signed agreements in 2012 to add 136 megawatts of generating capacity from renewable energy sources, including wind, solar and waste.

"Our primary initiative continues to be replacing oil with lower-cost renewables," Lau said. In addition, the utility’s focus on higher efficiency at its power plants allowed it to burn 250,000 fewer barrels of oil, she added.

HEI also reported that return on equity, a measure of profitability, increased at its utilities to 8.5 percent in 2012 from 7.7 percent in 2011 and 5.8 percent in 2010. HECO’s Oahu operations led the way with a 9.4 percent return on equity in 2012 from 7.1 percent in 2011 and 6.1 percent in 2010. The Public Utilities Commission allows the HECO companies to earn a return on equity of up to 10 percent on a consolidated basis.

HEI shares closed up 7 cents at $27.83 Friday on the New York Stock Exchange.