Yahoo Finance Hawaiian Electric Industries Inc (HE) (Q1 2024) Earnings Call Transcript Highlights: Navigating ...
Consolidated Net Income: $42.1 million for Q1 2024.
Earnings Per Share (EPS): Reported at $0.38, with core EPS at $0.45 excluding wildfire-related expenses.
Wildfire-related Expenses: Net impact of $7.2 million after tax.
Utility Net Income: Included $5 million of wildfire-related impacts, net of insurance recoveries and deferred costs.
Bank Net Income: Benefited from higher net interest margin and reserve release, specifics not quantified in provided text.
Core Return on Equity (ROE): Stood at 9.5%, excluding wildfire impacts.
Utility Core ROE: Decreased by 20 basis points to 8%, excluding wildfire impacts.
Bank Core ROE: Increased by 7 basis points to approximately 15.6%.
Liquidity: Holding company and utility had $127 million and $130 million of cash on hand, respectively.
Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Hawaiian Electric Industries Inc (NYSE:HE) is actively engaged in recovery efforts from the Maui wildfires, including collaboration with government initiatives like the One 'Ohana fund.
The utility has received approval for a $190 million grid resilience plan, which includes federal funding, to enhance wildfire mitigation and resilience.
American Savings Bank (ASB) showed improved profitability due to strategic balance sheet repositioning, leading to a decrease in cost of funds and expansion of net interest margin.
HEI reported a healthy consolidated core Return on Equity (ROE) of 9.5%, excluding wildfire impacts.
The utility is pursuing additional federal funding for projects focused on grid resilience and modernization, totaling approximately $900 million.
Negative Points
HEI and Hawaiian Electric Company face approximately 400 lawsuits related to the Maui wildfires, with significant legal and financial uncertainties.
The utility's net income decreased due to higher Operations and Maintenance (O&M) expenses driven by increased wildfire mitigation costs.
Legislation critical for wildfire risk reduction and financial stability did not pass in the recent legislative session, delaying potential benefits.
There are ongoing challenges with the ATF investigation into the Maui wildfires, with potential implications for the company depending on the findings.
The utility's capital expenditure for 2024 is heavily weighted towards wildfire mitigation, which may limit the availability of funds for other projects.
Q & A Highlights
Q: So as you mentioned, the Fire Department report and the HE's investigation report, are consistent with what you've been saying, making the distinction between a morning fire and an afternoon fire. Just wondering, in the event if the ATF's report were to link the afternoon fire to your company, just how are you -- how you are thinking about your approach or your options that you have to that situation? A: Mike, this is Scott. Yes, we're not going to speculate on what the findings of the ATF's report will be. Once that report comes out, we'll obviously review it very carefully and then make that determination, but we can't speculate right now.
Q: Great. And then secondly for me, press reports have indicated that you may be pursuing a sale of American Savings Bank. Just wondering if there's anything you could share on that? A: Mike, it's Scott DeGhetto. It's -- my comments are consistent with what we've said in the past. We continue to not speculate on any strategic transactions or alternatives.
Q: Okay. Great. And then just quickly, lastly for me. Obviously making progress with the first One 'Ohana fund. Just wondering if you have a sense for when the second fund for property owners and businesses could be launched and how it might be funded and if you're planning on making a contribution to that as well? A: Mike, the only thing we can say is that those discussions are in progress. We can't really say when or provide any details. Those discussions involve many different parties and we absolutely, just in general, we feel that it provides to the extent it can provide an attractive alternative for folks to reach closure as opposed to litigation, then it's worthy of our support.
Q: I was hoping you could just kind of expand a little bit on why you think the legislatures did not pass either the key pieces of the legislation during the regular session. And then would you say the prospects of like a special session being convened to do so are kind of eliminated by the establishment of the [cat] team and then would deferring the passage of potential legislation to 2025 would that be too late to provide the clarity and assistance that you all need? A: Jonathan, this is Scott. So yes, while we are obviously disappointed that we ran out of time to get the legislature passed we actually feel that we were able to make pretty significant progress across all fronts in terms of the key bills and issues, making it all the way to conference committee. What that really indicated was that there was a high degree of engagement and really a lot of good discussion with legislators in terms of the importance of the 3 initiatives that we were really promoting. And again, so that was the wildfire mitigation work, securitization and then establishment of a going-forward disaster recovery fund.
Q: Got you. That makes sense. I guess the One 'Ohana initiative, at least the first phase, how does that level of participation compared to your expectations? And do you expect it will move materially higher given the deadline was recently pushed back? A: Well, I think the way that we think about it is that for everybody who has registered that is one more family that will not have to go through the lengthy and unpredictable litigation process. So it's a good number. Of course, we are hopeful that it will continue to get steady uptake. And we will see where we are. And the governor and the others will determine May 31, whether it gets further extended or at that point, if that's where it stops. But overall, I think we're happy that there are at least a number -- a fair degree of interest coming from the families.
Q: Okay. And then like in terms of them being like firmly committed to it, like you remind me is it like the end date like July, which I think currently is July 1 for the completed forms, is that when like you're definitely in or people that have submitted forms, can they still change their mind? A: Yes. It's a voluntary participation. So at any time, a family can decide to opt out, even if they've registered or started the process. I think that's an important component. We wanted to make sure that families really had the optionality.
Q: Shifting gears a little bit, and I may have missed it as Scott mentioned, I apologize, but -- can you talk about the financial ramifications from the issues that the Hamakua Energy being completely out of service since like late February including like the impact on Pacific Current's earnings, the impact on potentially utility earnings from like the higher power costs or the CapEx to replace one of the generators or stuff like that? A: So in terms of Hamakua, we were hoping to get Hamakua, and there's 2 units there. There's a CT-1, CT-2, they're both 30 megs. We're looking to get CT-1 back in the next couple of weeks. What I would tell you is when the plant is not running, yes, we're not generating revenues, but they're also not burning fuel. There is a component, obviously, of O&M that continues to run through. But we're in the process of doing a root cause analysis in terms of what happened there. We currently believe it's tied to a fuel issue. And we'll keep you posted on that.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
