Hawaiian Electric corrals cash amid Maui fire struggles

Hawaiian Electric is stockpiling cash in an effort to weather a financial and legal storm after the Maui fire disaster that razed Lahaina and killed at least 115 people.

The utility company and its parent, Hawaiian Electric Industries Inc., disclosed for investors Thursday two moves to bolster finances as they expend resources to restore utility infrastructure on Maui and deal with roughly a dozen lawsuits filed so far, including one by Maui County, that allege the companies are responsible for the Aug. 8 fires igniting and should pay damages.

On Wednesday, Hawai- ian Electric and HEI drew $370 million from credit facilities not secured by company assets, according to the disclosure filed with the U.S. Securities and Exchange Commission.

Hawaiian Electric drew $200 million and HEI drew $170 million, which the companies intend to invest in highly liquid short-term investments.

On Aug. 7, HEI reported having $314 million in cash or cash equivalents at the end of June.

The second move announced Thursday was HEI’s board of directors deciding to suspend the company’s quarterly cash dividend for owners of HEI common stock starting in the third quarter ending Sept. 30.

“We are proactively strengthening our balance sheets as Hawaiian Electric continues providing reliable service to our customers and supporting the recovery in Maui,” the disclosure said.

The companies expressed regret that the dividend suspension might negatively affect local residents who own HEI stock and rely on the distributions as income.

“Taking this action will allow us to continue to allocate cash to rebuilding and restoring power and ensure a strong future for the utility,” the companies said.

The most recent dividend of 36 cents per share was declared Aug. 3, five days before the Lahaina fire, and HEI is obligated to pay it Sept. 8.

More cash retained by Hawaiian Electric and HEI will help the utility and its affiliates cover extraordinary ongoing and advancing expenses without having to resort to other measures that could include filing for bankruptcy, as some analysts have raised as a possibility.

Bankruptcy, if sought, could allow the company to shed debt or any financial awards stemming from the Lahaina fire and two others on Aug. 8 in Upcountry Maui.

The disclosure Thursday can be seen as reassuring investors that the utility and HEI, the later of which also owns American Savings Bank, aren’t in financial peril even as HEI has taken big hits to its credit rating and stock price since the onslaught of fire litigation began.

“Others may take advantage of this situation to engage in speculation and opportunism, but our focus continues to be on the restoration, recovery and rebuilding efforts in our communities,” said the disclosure signed by Paul Ito, HEI’s chief financial officer, and Tayne Sekimura, Hawaiian Electric’s chief financial officer.

The statement continued, “HEI’s overarching objective is to remain a strong, financially healthy enterprise to empower a thriving future for Hawaii. While the fundamentals of our businesses remain strong, we are taking prudent and measured actions to reinforce our commitment to serving the community for the long term.”

Shares of HEI closed Friday at $9.66, a 19% slide from $11.86 on Thursday. Shares have fallen 74% from $37.36 on Aug. 7, the day before the fire.

In the “investor update” issued Thursday, Hawaiian Electric and HEI also announced board changes affecting American Savings and more progress restoring power on Maui.

The board change was effective Tuesday and resulted in three independent directors who had been board members at HEI and the bank discontinuing their role on HEI’s board and focusing only on the bank. Those members are Richard Dahl, Michael Kennedy and Yoko Otani.

The bank, according to the announcement, has a strong financial position and secure customer deposits.

“American Savings Bank customer deposits are safe — there is no risk to customer deposits as a result of legal claims related to the fires,” Ito and Sekimura said in their investor update.

Hawaiian Electric, which serves every county except Kauai, expects that 95% of customers who lost power on Maui amid the fires will have had their service restored over the next few days.

The Lahaina fire destroyed about 2,200 structures, mostly homes but also businesses, and damaged another roughly 500 structures. Losses are estimated at $5.6 billion, and the disaster is the deadliest U.S. wildfire in over a century.

No cause of the fire has been determined yet. Plaintiffs suing Hawaiian Electric and its affiliates over claims that include loss of property and life contend that the utility acted negligently by not cutting electricity to the grid in response to a National Weather Service Aug. 7 forecast for wind gusts up to 60 miles per hour and a “Red Flag” warning of high fire risk due to dry brush conditions, and that fallen live power lines ignited the disaster.

HEI and Hawaiian Electric said in its Thursday disclosure that they are working with the county, state and federal governments to determine what happened “in the course of an extraordinary climatological event” Aug. 8.

“The recent devastation on Maui is an unimaginable tragedy and is deeply personal for us at HEI and Hawaiian Electric — it impacts our friends, our families, our colleagues and our neighbors,” the companies said. “We are doing everything we can to support all of those who have been impacted and help Maui recover.”

The most recent fire damage lawsuit against the utility in state court as of midday Friday was filed by Hawaii island attorney Jeffrey Foster on behalf of Jack Grumet, a Makawao resident who lost a house on Prison Street in Lahaina to the fire.

“Defendants knew of the risk of fire,” Grumet’s complaint said. “Nevertheless, they put profits over people.”