HEI Consolidated: Navigating Challenges, Securing the Future

Overview

HEI, the parent company of Hawaiian Electric, has faced significant challenges in recent months, but the company remains committed to powering a thriving future for Hawaii. The August 2023 Maui windstorm and wildfires caused widespread damage and loss of life, leading to a $1.99 billion settlement to resolve related legal claims. This settlement will be paid out in four annual installments, straining the company’s liquidity in the short-term.

Despite these setbacks, HEI has taken proactive steps to strengthen its financial position. The company raised $557.7 million through a common stock offering to fund the first settlement payment. HEI has also secured additional credit facilities and is exploring other financing options to cover the remaining $1.44 billion in settlement costs.

The Maui windstorm and wildfires have had a substantial impact on HEI’s financial performance. For the first quarter of 2025, the company reported a 37% decrease in net income compared to the same period in 2024, largely due to the sale of its bank segment and a decline in the “all other” business segment. However, the electric utility segment saw a 26% increase in net income, highlighting the underlying strength of the core business.

Revenue and Profit Trends

HEI’s consolidated revenues decreased by 6% in the first quarter of 2025 compared to the same period in 2024. This was primarily due to lower revenues in the electric utility segment, partially offset by an increase in the “all other” segment.

The electric utility segment saw a 3.1% increase in kWh sales volume, driven by warmer weather and the continued economic recovery from the Maui windstorm and wildfires. However, this was offset by lower fuel oil and purchased power costs, which are passed through to customers. The segment’s operating income increased by 23%, reflecting better heat rate performance and lower operating and maintenance expenses.

In contrast, the “all other” segment, which includes the company’s corporate operations and its Pacific Current subsidiary, reported a net loss of $21.1 million, compared to a net loss of $18.0 million in the first quarter of 2024. This was primarily due to a loss on the sale of Hamakua Holdings, a subsidiary of Pacific Current, as well as higher interest expense and corporate expenses.

Strengths and Weaknesses

HEI’s key strength is the resilience of its electric utility segment, which continues to perform well despite the challenges posed by the Maui windstorm and wildfires. The utility has implemented various regulatory mechanisms, such as decoupling and performance-based ratemaking, that help mitigate the impact of factors like lower sales volumes and rising costs.

However, the company’s overall financial position has been weakened by the settlement costs related to the Maui windstorm and wildfires. The downgrades to HEI’s and Hawaiian Electric’s credit ratings have also limited the company’s access to capital markets and other sources of financing, which could hinder its ability to fund future investments and operations.

Another weakness is the performance of the “all other” segment, which has been a drag on the company’s overall profitability. The sale of Hamakua Holdings and the ongoing challenges faced by Pacific Current’s other subsidiaries have contributed to the segment’s losses.

Outlook and Future Considerations

Looking ahead, HEI’s primary focus will be on managing the financial impact of the Maui windstorm and wildfires settlement and securing the necessary funding to cover the remaining payments. The company is working with its financial advisors to develop a comprehensive financing plan, which may include additional equity offerings, asset sales, and other strategies.

The company’s ability to access capital markets and other sources of financing will be crucial in the coming years. HEI’s credit ratings and the financial stability of its electric utility segment will be closely watched by investors and regulators.

Beyond the settlement costs, HEI and its electric utility subsidiary face other challenges, such as the need to invest in grid modernization, renewable energy integration, and wildfire mitigation efforts. The company’s success in navigating these operational and regulatory hurdles will be key to its long-term sustainability.

Despite these challenges, HEI remains committed to its mission of providing innovative energy leadership and empowering a thriving future for Hawaii. The company’s focus on renewable energy, grid resilience, and customer-centric initiatives positions it well to meet the state’s ambitious decarbonization goals.

Conclusion

HEI has faced significant headwinds in recent months, but the company’s core electric utility business continues to demonstrate resilience. While the Maui windstorm and wildfires settlement will strain the company’s liquidity in the short-term, HEI is taking proactive steps to secure its financial future.

The company’s ability to navigate the regulatory landscape, access capital markets, and execute on its operational strategies will be crucial in the coming years. By maintaining a strong focus on reliability, sustainability, and community engagement, HEI can continue to power a brighter future for Hawaii.