Business Strategy and Outlook
Hawaiian Electric Industries derives approximately three fourths of consolidated earnings from an electric utility and the remaining from Hawaii-based American Savings Bank, a business mix unique among its utility peers.
Shareholders will need to be comfortable with a wide range of outcomes due to potential significant liabilities from recent wildfires in Maui. The largest fire in Lahaina killed more than 100 people and destroyed 2,200 structures with an estimated cost of $5.5 billion, according to a damage report released in mid-August by the Pacific Disaster Center and the Federal Emergency Management Agency. Plaintiffs will need to show that the utility was negligent or could have reasonably prevented a loss.
HEI's base allowed return on equity is 9.5%, though returns are likely to be much lower during the transition to the new ratemaking. For 2022, returns were just 8.2%. Even if Hawaiian Electric is found not liable for the Maui fires, we think returns will be below allowed returns during our forecast.
American Savings Bank provides low-cost capital for the utility. The bank has a history of maintaining a low risk profile and strong balance sheet.
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