HEI exec called utility ‘weak,’ emails reveal

Jim Ajello, Hawaiian Electric Industries chief financial officer and an early proponent of the sale of the company to NextEra Energy Inc., called HEI an “extremely weak team” in need of a “white knight” to bail out Hawaii’s largest utility, according to 2014 emails recently made public.

The emails were the focus of Monday’s hearing held by the state Public Utilities Commission to review the proposed $4.3 billion purchase of HEI by Florida-based NextEra. The PUC must approve the sale for it to move forward.

Ajello said in a July 2014 email to HEI President and CEO Connie Lau that he couldn’t find a better solution than for NextEra to run the utility, given the restrictions the state was placing on the company.

“Truth be told, we are the supplicant and we are on our corporate knees begging not to be hurt,” Ajello said in the email. HEI’s long-term plan “is really a capitulation to what we think the PUC wants us to do. Sure we are doing the strategy, but, make no mistake, we are being forced to offer this, and once we do, we will find we will get whacked. … It is not something that is in our best interest. I really object to being forced into strategy by folks who really don’t operate business.”

Ajello said the NextEra offer to buy HEI was a way out of this difficult situation.

“You have an offer on one hand that needs to be fleshed out and improved, for sure, versus a concept we may be able to execute with an extremely weak team working in a hostile environment,” Ajello wrote in the email to Lau. “I’m racking my brain for a better plan where we can control our long-term destiny with our present set of cards that bests the (NextEra) approach, but I can’t seem to develop one — maybe you can.”

Lau said in an August 2014 email that she believed HEI could do it alone. The email referred to a conversation she had with Greg Hazelton, who was then the company’s vice president of finance, controller and treasurer.

“Long conversation with Greg,” Lau wrote to Hawaiian Electric Co. President Alan Oshima. “He wanted to tell me he disagrees with Jim (Ajello) on whether we could go it alone. He thinks we could (do it alone), versus Jim’s view that we need a white knight to bail us out of our current situation. Good to hear someone like him (Hazelton) say that. Affirmed to him that both you and I think we could do it too.”

Lau and NextEra CEO Jim Robo announced the plan to sell HEI to NextEra in December 2014. HEI has maintained since then that it can operate on its own but could achieve the state’s goal of 100 percent renewable electric power sooner if NextEra takes over.

At the hearing Monday, Ajello explained the “extremely weak team” comment, saying he meant the HEI team was weak because of its size compared with the challenge it faces in accommodating the PUC’s orders to change its business model. Ajello said his statements were “very, very candid commentary to the board of directors that we had some work to be done to improve.”

In April 2014 the PUC rejected the utility’s long-term capital plans and attached an outline of what the business model of the utility should be. The PUC pushed for more renewables, more rooftop solar and the idea of an electrical utility owning less generation — shifting the power production from the utility to a larger group.

In response, HECO offered a revised plan to the PUC in August 2014 that included lowering customer bills by 20 percent, reaching 65 percent renewable energy by 2045 and tripling rooftop solar. The PUC has asked for changes to the August 2014 filing.

The Ajello emails were part of a set of confidential emails PUC Chairman Randy Iwase ordered NextEra and HEI to release to the public in December.

Ajello said he disagreed with the use of the term “white knight” in Lau’s email.

“When I think of a white knight in a financial context,” he said, “I think of a company that is under duress and is failing. … That was certainly not our situation at that point in time.”

State Consumer Advocate Jeff Ono questioned Ajello Monday about the emails and about the golden parachutes HEI executives stand to gain if the company is sold to NextEra.

Ono asked whether HEI executives ever considered using the golden parachute money to provide greater consumer benefits as part of the merger.

“The topic never arose,” Ajello said.

Ajello said HEI executives are expected to get $20 million in change-of-control agreements if the sale closes.

“HEI executives are getting a significant payout,” Ono said. “That could have gone to consumers.”

The hearings, at a Neal S. Blaisdell Center conference room, are scheduled to continue though Feb. 10. They are held between 9:30 a.m. and 5 p.m. and are open to the public.

HEI Confidential Emails by Honolulu Star-Advertiser