Relatively small wildfire costs on Maui weighed on Hawaiian Electric and its parent company's earnings in the first three months of the year.
Hawaiian Electric Industries, which owns the state's largest power utility, reported first-quarter profit of $42.6 million, down 23% from $55.2 million a year earlier.
In its latest quarterly financial report released Friday, the company said its long-term financial health is more uncertain, but it continues to maintain liquidity to stabilize its near-term operations.
HEI said the number of lawsuits filed against it and its utility subsidiaries in connection with the Aug. 8 Maui wildfires that destroyed much of Lahaina and killed 101 people increased to about 100 in mid-February. He pointed out that the number of cases has increased to about 400 at present.
Some lawyers estimate that more than 1,000 lawsuits could be filed against the utility, considering that about 2,700 buildings were damaged or destroyed. The estimated cost of property damage from the fire is $5.6 billion. The official cause of the fire has not yet been determined.
HEI said in its report that “there can be no assurance that the Company will be successful in defending the litigation and that insurance will be available or sufficient to fund potential settlements, judgments and costs associated with the litigation.” There are no guarantees.” “If such losses are sufficiently large, a company may not have liquidity or the ability to access liquidity at the level necessary to offset such losses.”
HEI also notes that its cash reserves, combined with cash generated from operations, are expected to be sufficient to meet short-term needs, but may be adjusted if further liquidity is required. He also said. Such measures include reducing capital expenditures on non-essential projects and considering asset sales, the company said.
In April, Bloomberg News reported that HEI was considering moves with its advisers, including the possible sale of its American Savings Bank subsidiary. At the time, HEI declined to comment on what it called rumors and speculation.
On Friday, HEI Chief Financial Officer Scott DeGette answered questions about the bank sale on a conference call with equity analysts and restated the company's position.
“We will not continue to speculate on any strategic transactions or alternatives,” he said.
HEI's first quarter net income was $20.9 million, up from $18.6 million in the year-ago period. On a tax basis, HEI values the bank at approximately $680 million.
Hawaiian Electric, which has about 471,000 customers on Oahu, Maui County and Hawaii Island, had first-quarter profit of $39.7 million, down from $47.5 million in the same period a year ago.
Other HEI operations, including a power plant on Hawaii Island that has been shut down in recent months due to equipment issues, suffered losses of $18 million, compared with a loss of $10.9 million in the first quarter of 2023.
Hawaiian Electric and its parent company have sought to strengthen their finances since the Maui wildfires primarily to address anticipated extraordinary expenses from Maui wildfire litigation and statewide wildfire risk mitigation.
In late August, they raised $370 million from a loan facility. At that time, HEI also suspended stock dividends, which amounted to approximately $40 million in cash holdings each quarter.
At the end of March, HEI and Hawaiian Electric reported cash on hand of $257 million, up from $243 million at the end of 2023.
“We continue to carefully manage our liquidity as we address the timing and impact of litigation related to the Maui wildfires,” DeGette said on the conference call.
DeGette also said Hawaiian Electric is seeking a short-term credit facility of up to $250 million secured by future revenue from customers. The loan requires approval from the state Public Utilities Commission. A decision is expected to be made on June 24th.
The utility recently failed to persuade key leaders in the Hawaii state Legislature to approve a $2.5 billion special loan for wildfire risk mitigation.
Such a bill would have allowed Hawaiian Electric to sell low-cost bonds backed by ratepayers' income for 30 years.
Under this arrangement, the debt would be repaid by ratepayers, subject to PUC approval. Hawaiian Electric said secured debt financing is cheaper for ratepayers because the Maui fires lowered its credit rating from investment to junk, raising the cost of conventional bonds. HEIs are also at a disadvantage when it comes to raising capital by selling shares.
HEI stock closed at $9.99 on Friday before the financial report was released, down from $10.24 on Thursday. HEI stock was trading at $37.36 the day before the Lahaina fire, before closing at a low of $9.52 on April 16th.
HEI President and CEO Scott Hsu said on a conference call that he is more hopeful that legislation allowing bond securitization financing will be passed in 2025.
Meanwhile, Hawaiian Electric plans to spend $117 million on wildfire mitigation efforts this year, with matching grants from the federal government to fund $900 million in improvement projects to reduce fire risk. is seeking $450 million.
The company also received a preliminary $95 million federal grant award on Aug. 30 to pay for half of the $190 million climate-adaptive power transmission and distribution resiliency plan it proposed to the PUC in June 2022. received the money. The terms of this grant are still being negotiated.
Costs related to the Aug. 8 wildfires, which included two fires that destroyed 19 homes in Maui's interior, have so far had a relatively small impact on higher education institutions' revenues.
Total sales from August to the end of March were $168.5 million, including $30 million in the first quarter. However, HEI only paid him $28.8 million of the total, including his $9.6 million in the first quarter. This is because most of the costs were covered by insurance or deferred for accounting purposes.
These costs include $75 million from Hawaiian Electric's insurance proceeds to compensate relatives of those killed in the fires and seriously injured victims if they abandon their lawsuits. It will help create a $175 million state-managed fund.
HEI also announced in its financial report on May 4 that it will spend up to $18.4 million this year to settle claims asserted by the state related to fees for consultants advising the state on the Maui wildfire issue. He said he agreed to pay the state.
“Our utilities are committed to making the investments necessary to reduce wildfire risk and advance critical safety and resiliency efforts,” Seau said in a statement. Ta.
