HEI Consolidated: Navigating Challenges, Securing the Future

Overview

HEI, the parent company of Hawaiian Electric, has faced significant challenges in recent months, including the devastating Maui windstorm and wildfires that caused widespread damage and loss of life. Despite these setbacks, the company remains committed to providing reliable, affordable and clean energy to its customers across Hawaii.

The company’s financial performance in the first quarter of 2025 was mixed, with revenues declining 6% compared to the same period in 2024, but operating income and net income for common stock increasing by 23% and 26% respectively. This was driven by improved results in the electric utility segment, which offset a decrease in the “all other” business segment.

Revenue and Profit Trends

The electric utility segment, which includes Hawaiian Electric and its subsidiaries, saw revenues decline by $51 million, or 6.5%, primarily due to lower fuel oil prices and purchased power costs. However, the segment’s operating income increased by $13 million, or 20.6%, due to higher revenue from the Annual Rate Adjustment (ARA), better heat rate performance, and lower operation and maintenance expenses.

In contrast, the “all other” business segment, which includes the company’s corporate operations and Pacific Current’s renewable energy investments, reported a net loss of $21.1 million, compared to a net loss of $18 million in the same period in 2024. This was largely due to a loss on the sale of Hamakua Holdings, higher interest expense, and increased corporate expenses.

Strengths and Weaknesses

One of HEI’s key strengths is its electric utility segment, which continues to perform well despite the challenges posed by the Maui windstorm and wildfires. The utility has made progress in transitioning to renewable energy sources, with 35.8% of its generation coming from renewable sources in 2024. Additionally, the company’s regulatory framework, which includes mechanisms like decoupling and the Annual Rate Adjustment, helps to mitigate some of the financial risks associated with the transition to clean energy.

However, the company’s overall financial position has been significantly impacted by the Maui windstorm and wildfires. HEI and Hawaiian Electric have accrued an estimated $1.92 billion in liabilities related to the settlement of tort-related legal claims, which will need to be paid in four equal annual installments starting in early 2026. This has put significant strain on the company’s liquidity and access to capital markets.

The company’s credit ratings have also been downgraded to below investment grade, further limiting its ability to access unsecured, short-term borrowings and the capital markets. This, combined with higher working capital requirements due to inflation and elevated fuel prices, has created significant uncertainty around the company’s long-term financial outlook.

Outlook and Future Considerations

Looking ahead, HEI and Hawaiian Electric face a number of challenges and uncertainties. The company is working to raise the necessary capital to fund the remaining $1.44 billion in wildfire settlement payments, but there is no guarantee that its financing plans will be successful. If the plans are unsuccessful, the company may need to consider other strategic alternatives.

The company’s liquidity and capital resources will also continue to be impacted by the higher costs associated with the transition to renewable energy, as well as the ongoing economic effects of the Maui windstorm and wildfires. The company is exploring a range of options to strengthen its financial position, including reducing capital spending, managing operating expenses, and seeking additional sources of liquidity.

Despite these challenges, HEI remains committed to its mission of providing innovative energy leadership and enabling a sustainable energy future for Hawaii. The company is continuing to invest in renewable energy projects, grid modernization, and other initiatives to support its decarbonization goals and meet the state’s renewable portfolio standard targets.

The company’s success in navigating these challenges will depend on its ability to secure the necessary financing, effectively manage its operations and costs, and continue to work closely with regulators and other stakeholders to find solutions that balance the needs of customers, the community, and the company’s long-term financial health.

Tables

HEI Consolidated Financial Highlights

Metric	Q1 2025	Q1 2024	% Change
Revenues	$744,070	$792,014	-6%
Operating Income	$62,420	$50,887	23%
Income from Continuing Operations for Common Stock	$26,671	$21,188	26%
Income from Discontinued Operations	$0	$20,934	-100%
Net Income for Common Stock	$26,671	$42,122	-37%

Maui Windstorm and Wildfires Related Expenses, Net

(in thousands)	Q1 2025	Q1 2024
Legal Expenses	$8,850	$14,944
Outside Services Expense	$124	$1,122
Other Expense	$5,928	$9,336
Interest Expense	$2,031	$4,825
Total Maui Windstorm and Wildfires Related Expenses	$16,933	$30,227
Insurance Recoveries	$(6,722)	$(12,577)
Deferral Treatment Approved by the PUC	$(5,683)	$(7,898)
Total Maui Windstorm and Wildfires Related Expenses, Net	$4,528	$9,752

HEI Consolidated Available Liquidity

(in millions)	As of March 31, 2025
Electric Utility Total Available Credit	$299
All Other Total Available Credit	$304
Consolidated Cash and Cash Equivalents	$629
Total Available Liquidity	$1,232

Hawaiian Electric Consolidated Capital Structure

(in millions)	March 31, 2025	December 31, 2024
Short-term Borrowings, net	$49 (1%)	$49 (1%)
Long-term Debt, net	$1,809 (54%)	$1,901 (61%)
Preferred Stock	$34 (1%)	$34 (1%)
Common Stock Equity	$1,492 (44%)	$1,157 (37%)
Total	$3,384 (100%)	$3,141 (100%)