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Hawaiian Electric's (HE) CAPEX & Clean Energy Goals Bode Well

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·3-min read
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Hawaiian Electric’s HE focus on growing its renewable assets and systematic investments in transmission and distribution projects will drive growth over the long haul.

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $2.13 and $2.14, respectively. Estimates for 2021 and 2022 indicate growth of 17.7% and 0.5%, respectively, from the corresponding year-ago reported figures. In the past six months, shares of this currently Zacks Rank #3 (Hold) Hawaiian Electric have lost 9% against the industry’s growth of 1.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Six Months' Price Performance

Zacks Investment Research
Zacks Investment Research

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Tailwinds

Hawaiian Electric continues making systematic investments in utility infrastructure development projects, primarily adding new-generation facilities, replacing aging infrastructure, and restoring transmission and distribution assets. In 2020 and during the first three quarters of 2021, HE invested $335 million and $219.3 million, respectively, in modernizing and improving Hawaii's electric grids. For the 2021-2023 period, it intends to invest up to $980-$1,230 million.

In Hawaii, Hawaiian Electric is the largest provider of electricity, supplying power to more than 95% of the state’s population and operating five separate grids. Hawaii’s two major industries, namely construction and tourism, are the major drivers of electricity consumption. While the tourism industry is yet to reach its pre-pandemic levels, real-estate activity improved during the third quarter of 2021.

In construction, HE experienced a year-over-year price appreciation of 8.7% for condos while that for single-family homes, the same went up a solid 20.2% in the third quarter. Over the long run, such favorable trends are expected in housing price, indicating the state’s real estate expansion, which will spur demand for electricity. This, in turn, should further benefit Hawaiian Electric.

In November, Hawaiian Electric announced plans to cut carbon emissions by 70% within 2030 from its 2005 levels and further become net carbon neutral by 2045. Such clean energy initiatives should attract more investment in the stock, with the entire world moving toward adopting a greener environment.

Other electric utilities also adopting measures to supply clean and reliable energy to their customers include Duke Energy DUK, DTE Energy DTE and Alliant Energy LNT. While DUK and DTE carry a Zacks Rank of 3 at present, LNT holds a Zacks Rank #2 (Buy). All three stocks are planning to provide absolute clean energy by 2050.

DTE Energy remains committed to reducing carbon emissions of its electric utility operations by 32% within 2023, 50% by 2030 and 80% by 2040 from the 2005 carbon emission levels. Duke Energy plans to lower its carbon footprint between approximately 55% and 75% through 2035. Alliant Energy intends to retire all the existing coal-fired generation units by 2040 to curb emissions from its 2005 baseline by 50% within 2030.

Headwinds

Recent forecasts indicate demand for electricity to remain depressed in Hawaii than the pre-pandemic levels, which might affect its revenues. Moreover, HE’s balance sheet reflects a weak solvency position. Its current ratio as of Sep 30, 2021 was 0.07, which being less than 1 indicates that the utility might not possess sufficient capital in hand to meet its short-term obligations.


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Duke Energy Corporation (DUK) : Free Stock Analysis Report

DTE Energy Company (DTE) : Free Stock Analysis Report

Hawaiian Electric Industries, Inc. (HE) : Free Stock Analysis Report

Alliant Energy Corporation (LNT) : Free Stock Analysis Report

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