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Hawaii's largest power company remains financially stable even as legal claims and recovery costs from the Aug. 8 Maui wildfire disaster continue to rise.
Hawaiian Electric Co. on Tuesday reported fourth-quarter and full-year net income for 2023 that was higher than in 2022, allowing the parent company to stay strong despite declining profits over the same period. .
The utility company, which serves Oahu, Maui, Molokai, Lanai and Hawaii Island, reported a total profit of $58.2 million in the October-December period, up 20% from $48.6 million in the same period last year. Hawaiian Electric's full-year 2023 profit increased 3% to $194 million from $188.9 million in the same period last year.
Parent company Hawaiian Electric Industries' fourth-quarter profit was $48.8 million, down 15% from $57.3 million in the year-ago period, bringing 2023 profit to $199.2 million and 2022 profit to $200 million. 17% decrease from $41.1 million.
HEI's net income for both periods in 2023 would have been higher had it not been for the steep decline in profits at its U.S. savings bank subsidiary.
Scott Sew, HEI's president and CEO, said in the financial report that “our core businesses delivered solid results under difficult circumstances, and both our utilities and banks continue to support our regional We are focused on supporting society and our customers.”
“While 2023 has been one of the most challenging years ever for our company and the communities we serve, we are proud to announce that our state is continuing to make efforts to prioritize Maui's recovery from August's devastating wildfires. I am encouraged by the collaborative efforts of so many people,” said Seu. “Our hearts remain with the people of Maui and we remain committed to supporting recovery and rebuilding efforts. We continue to execute our plan.”
Hawaiian Electric's 2023 financial results exclude $10.9 million in Maui wildfire recovery costs deferred for accounting purposes, and the company expects future wildfire mitigation costs and They face the possibility of paying out legal claims from people who have suffered losses. At least 101 people were killed and approximately 3,500 homes and many non-residential areas were destroyed.
As of Monday, Hawaiian Electric and HEI had 101 lawsuits accusing the companies of starting wildfires on Maui, including one that destroyed much of Lahaina amid high winds that knocked down numerous utility poles. has been named as a defendant. On the same day, two fires broke out in Maui's interior, destroying 19 homes.
One of the lawsuits was filed by Maui County, and many of the lawsuits also name other defendants, including Maui County, the state, and private landowners such as Kamehameha Schools and West Maui Land Company.
On January 12, the utility and its parent company, along with Kamehameha Schools, Hawaiian Telecom, and Spectrum, were sued by 142 insurance companies seeking to recover insurance payments made to people and businesses who suffered losses in the disaster. It was done.
A state-led effort is underway to compensate the families of those killed and seriously injured in the fires if the lawsuits are abandoned. The initiative, announced by Gov. Josh Green in November, would provide at least $175 million from the so-called Maui Recovery Fund, including up to $75 million provided by Hawaiian Electric using insurance proceeds. .
The use of the fund is scheduled to begin on March 1st.
The second phase of the planned compensation fund is for bushfire property damage claims. The estimated cost of property damage from the fire is $5.6 billion.
In November, Hawaiian Electric and HEI reported that they had $90 million in liability insurance coverage left after spending $75 million in the Maui Recovery Fund.
Hawaiian Electric reported Tuesday that it has secured a recovery of $17.5 million for insurance-related costs related to the 2023 Maui storm and wildfires.
At the end of 2023, Hawaiian Electric and HEI had cash on hand of $106 million and $137 million, respectively. This is 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 credit facilities. HEI also suspended its stock dividends, resulting in approximately $40 million in cash being held up each quarter.
The Public Utility Commission is allowing Hawaiian Electric to defer accounting for non-labor utility restoration costs related to the Maui wildfires, and the company will later recover the charges with PUC approval. We may be able to recover such costs from payers or other means.
Hawaiian Electric is also moving ahead with plans to make the system more resilient to extreme weather events. Part of the effort includes spending half of it from the federal government, or $190 million, over five years. The PUC recently approved the utility's proposed plan for 2022.
HEI and Hawaiian Electric face challenges in raising capital due to credit rating downgrades and HEI's stock price decline since the Maui disaster. This has led to much speculation about whether the power company, founded in 1891, will be able to remain financially solvent without seeking bankruptcy protection.
HEI stock closed Tuesday at $13.11 before the financial report was released, down from $13.65 on Monday. HEI stock was valued at $37.36 the day before the Lahaina fire, and has since closed as low as $9.66 on Aug. 25.
HEI's chief financial officer, Scott DeGette, said on a conference call with equity analysts on Tuesday that the company plans to close on $200 million to $250 million in financing backed by future revenue from customers. He said he is working with major global banks.
“We continue to believe we have sufficient liquidity runway as we assess the timing of the potential impact of litigation related to the Maui wildfires,” he said.
Seau thanked shareholders and investors for their support during Tuesday's conference call, and said they would like to thank corporate efforts, the Maui Recovery Fund, and the He said a “whole-of-society” approach is needed, including the federal government. This includes government, charitable donations, and, in some cases, bills pending in state legislatures.
“It has been more than six months since the August 8 wildfire tragedy,” he said. “Our community continues to grieve, and we know it’s a long road. But so many people in our community have come together to restore our state and make it better. I am encouraged and inspired to work toward the short-term and long-term solutions we need to grow stronger.”
