Equity Offering Proceeds: $558 million in net proceeds from a successful equity offering. ATM Program and Credit Facility: $250 million ATM program and $250 million accounts receivable backed credit facility established. Renewable Portfolio Standard: Achieved 36% in 2024, up from 33% in 2023. Average Residential Bill: Decreased by 7% in 2024. Wildfire Safety Investment: Approximately $120 million invested in 2024 for wildfire safety improvements. ASB Sale Proceeds: $405 million from the sale of 90.1% of American Savings Bank. Net Loss from Discontinued Operations: $103 million for the full year 2024. Core Net Income: $124 million for 2024, excluding certain items. Utility Core Net Income: $181 million in 2024, down from $195 million in 2023. Holding Company Core Net Loss: $56 million in 2024, compared to $43 million in 2023. Unrestricted Cash: $566 million at the holding company and $184 million at the utility as of the end of Q4 2024. Restricted Cash for Settlement: $479 million set aside for the first installment payment of the Maui wildfire settlement.

Warning! GuruFocus has detected 6 Warning Signs with HE.

Release Date: February 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Hawaiian Electric Industries Inc (NYSE:HE) successfully signed final settlement agreements in the Maui wildfire tort litigation, providing an accelerated path to recovery for those impacted. The company closed a successful equity offering in September, resulting in $558 million in net proceeds, fully funding the first payment under the settlement. HE ended 2024 in the strongest liquidity position in its history, with significant cash reserves and credit facilities in place. The utility achieved a 36% renewable portfolio standard in 2024, up from 33% in 2023, keeping it on track to reach its interim goal of 40% RPS by 2030. The Hawaii Supreme Court issued a unanimous decision in favor of HE, aligning with the company's position on key questions related to the Maui wildfires settlement.

Negative Points

HE reported a loss from continuing operations of $1.3 billion for the full year 2024, including wildfire settlement accruals and other related expenses. The sale of 90.1% of American Savings Bank resulted in a net loss from discontinued operations totaling $103 million, including a net loss on the sale transaction. Utility core net income decreased to $181 million in 2024 from $195 million in 2023, driven by higher operating and maintenance expenses. The company faces ongoing challenges in securing supportive legislation for a wildfire recovery fund and mechanisms to support clean energy project financing. HE's financial results were impacted by a $35 million asset impairment recorded at Pacific Current in the third quarter of 2024.

Story Continues

Q & A Highlights

Q: Can you discuss your confidence level that the settlement will proceed without further interference from insurance companies? A: Scott Seu, President and CEO, explained that the Hawaii Supreme Court's decision was a positive step towards finalizing the settlement. They are awaiting the written order and will move to dismiss the insurers' claims based on the ruling. The process involves several steps, including preliminary approval expected in the second quarter and final approval in the fourth quarter of 2025.

Q: What is your expected investment level over the next few years, and how will it impact rate-based growth and FFO to debt targets? A: Paul Ito, CFO of Hawaiian Electric, stated they are refining their three-year capital forecasts. They expect CapEx to be moderately higher in 2025, around $350-$375 million, with additional opportunities in 2026 and 2027. Scott DeGhetto, CFO, mentioned they aim to maintain investment-grade credit ratings without specifying an FFO to debt target.

Q: How do you plan to finance the settlement payments, especially if required to finance $500 million-plus on behalf of investors? A: Scott Seu noted that it is early in the legislative process, and discussions are ongoing. The amounts from shareholders are not yet determined. They are focused on balancing impacts on customers and shareholders while strengthening the company's financial position.

Q: Can you elaborate on the wildfire legislation and stakeholder support? A: Scott Seu highlighted positive momentum compared to last year, with more clarity on settlement discussions. The reintroduction of the bill by a state senator is a positive sign, and discussions are ongoing to balance customer and shareholder needs while strengthening the company's financial position.

Q: What are the prospects for securitization, and how does it align with rating agencies' expectations? A: Scott Seu mentioned that securitization is seen as beneficial for securing lower-cost financing. Scott DeGhetto added that rating agencies want a backstop fund to enhance ratings, and any legislative progress would be credit positive.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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