Hawaii’s largest electrical utility is maintaining financial stability in the face of still-growing legal claims and recovery expenses from the Aug. 8 Maui wildfire
disaster.
Hawaiian Electric on Tuesday reported fourth-quarter and full-year net income in 2023 topping figures in 2022, which helped its parent company achieve strong but reduced profit in the same comparable periods.
Profit for the utility company, which serves Oahu, Maui, Molokai, Lanai and Hawaii island, totaled
$58.2 million in the October-December quarter, up 20% from $48.6 million in the same quarter a year earlier. Full-year profit for Hawaiian Electric ticked up 3% to $194 million in 2023 from $188.9 million a year earlier.
Parent company Hawaiian Electric Industries Inc. reported earning $48.8 million in the fourth quarter, down 15% from $57.3 million a year earlier, which contributed to a 2023 profit of $199.2 million that was down 17% from $241.1 million in 2022.
HEI’s net income for both periods in 2023 would have been higher were it not for sharp drops in profit from its American Savings Bank subsidiary.
“Our core businesses delivered solid results under challenging circumstances, and both the utility and bank remain focused on supporting our communities and customers,” Scott Seu, HEI president and CEO, said in the financial report.
“Although 2023 was one of the most challenging years ever for our company and the communities we serve, I am encouraged by the collaborative efforts of so many in our state to prioritize Maui’s recovery following the devastating August wildfires,” Seu said. “Our hearts continue to be with the people of Maui, and we remain committed to supporting the recovery and rebuild effort. … The utility is continuing to execute on its plans to modernize its generation system and make our electric grids more resilient.”
The 2023 financial results for Hawaiian Electric excluded $10.9 million in Maui wildfire recovery expenses that were deferred for accounting purposes, and the company faces future costs for wildfire mitigation and the possibility of paying litigation claims from people who suffered losses in the fires, which killed at least 101 people and destroyed about 3,500 homes along with many nonresidential properties.
As of Monday, Hawaiian Electric and HEI have been named as defendants in 101 lawsuits blaming the companies for causing the Maui wildfires, including a fire that destroyed most of Lahaina amid gale-force winds that knocked down numerous utility poles. Two other fires on the same day in Upcountry Maui destroyed 19 homes.
One of the lawsuits was filed by Maui County, and many of the cases also name other defendants, including Maui County, the state and private landowners including Kamehameha Schools and West Maui Land Co.
On Jan. 12 the utility company and its parent along with Kamehameha Schools, Hawaiian Telcom and Spectrum were sued by 142 insurance companies seeking to recover claim payments being made to people and businesses who suffered losses in the disaster.
There is a state-led effort to compensate relatives of people killed by the fire and victims who were seriously injured if they forgo litigation. This initiative announced by Gov. Josh Green in November will provide at least $175 million from what is being called the Maui Recovery Fund, including up to $75 million provided by Hawaiian Electric using insurance proceeds.
Use of the fund is expected to begin March 1.
A planned second phase of the compensation fund is to be for wildfire property damage claims. The rough estimate of property damage from the fires is $5.6 billion.
In November, Hawaiian Electric and HEI reported having $90 million of liability insurance coverage
remaining after using
$75 million for the Maui
Recovery Fund.
On Tuesday, Hawaiian Electric reported that it had obtained $17.5 million of insurance-related expense recoveries related to the Maui windstorm and wildfires in 2023.
At the end of 2023, Hawaiian Electric and HEI had $106 million and $137 million in cash on hand,
respectively. That’s down from $275 million and
$127 million, respectively,
at the end of September.
Much of this cash was stockpiled in late August by drawing down available revolving lines of credit. HEI also suspended its stock dividend at the same time, representing about $40 million in cash retention quarterly.
The Public Utilities
Commission is allowing Hawaiian Electric to defer accounting of nonlabor utility service restoration expenses related to the Maui wildfires, with a possibility that the company can recover such expenses from ratepayers or other means later with PUC approval.
Hawaiian Electric also is moving forward with plans to make its system more
resilient against extreme weather events. Part of this effort includes spending $190 million, half from the federal government, over five years. The PUC recently approved this plan proposed by the utility company in 2022.
HEI and Hawaiian Electric face challenges with raising capital because of downgraded credit ratings and a downturn in HEI’s stock price since the Maui disaster, which has fueled much speculation as to whether the utility, established in 1891, can remain financially solvent without seeking bankruptcy protection.
Shares of HEI stock closed Tuesday at $13.11 before the financial report’s release, down from $13.65 Monday. HEI shares were at $37.36 the day before the Lahaina fire, and since then has closed as low as $9.66 on Aug. 25.
Scott Deghetto, HEI chief financial officer, said Tuesday on a conference call with stock analysts that the company is working with a large global bank to finalize $200 million to $250 million in financing underpinned
by future revenue from
customers.
“We continue to believe that we have sufficient liquidity runway as we work through the timing of potential impacts of litigation related to the Maui wildfires,” he said.
Seu, during Tuesday’s conference call, thanked shareholders and investors for support, and said supporting Maui’s recovery and addressing an increasing risk of wildfires amid climate change will take a “whole of society” approach that includes company efforts, the Maui Recovery Fund, the federal government, charitable contributions and possibly bills pending at the state
Legislature.
”It’s been just over six months since the tragedy of the Aug. 8 wildfires,” he said. “Our community continues to grieve, and we know that it will be a long road ahead. However, I’m encouraged and inspired by the way so many in our community have come together to work towards the near- and long-term solutions necessary to help
our state heal and emerge stronger.”
