雅虎香港財經 Hawaiian Electric Industries, Inc. (NYSE:HE) Q1 2024 Earnings Call Transcript
Hawaiian Electric Industries, Inc. (NYSE:HE) Q1 2024 Earnings Call Transcript May 10, 2024
Hawaiian Electric Industries, Inc. misses on earnings expectations. Reported EPS is $0.3856 EPS, expectations were $0.54. Hawaiian Electric Industries, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day. My name is Brianna, and I will be your conference operator. At this time, I would like to welcome everyone to the Hawaiian Electric Industries Inc. First Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn today's call over to Mateo Garcia, Director of Investor Relations. Please go ahead.
Mateo Garcia : Thank you. Welcome, everyone, to HEI's first quarter 2024 earnings call. Joining me today are Scott Seu, HEI's President and CEO; Scott Deghetto, HEI's Executive Vice President, CFO and Treasurer; Shelee Kimura, Hawaiian Electric President and CEO; Ann Teranishi, American Savings Bank President and CEO; and other members of senior management. Our earnings release and our presentation for this call are available in the Investor Relations section of our website. As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings and in the Investor Relations section of our website.
Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. Now, Scott Seu will begin with his remarks.
Scott Seu: Aloha kakou. Welcome everyone. For today's call, I'll start with key updates regarding the Maui wildfires, followed by operational updates, and then Scott Deghetto will walk you through our first quarter financial results before we open it up for questions. We continue to work in earnest with key stakeholders to help our community recover from the devastating impacts of the Maui wildfires. Last quarter, we discussed Governor Josh Green's One 'Ohana Initiative, which is intended to help the families most impacted by the fires heal and to help our state move forward. The first phase of One 'Ohana launched on March 1 and has seen a steady uptick. 58 total registrations have been received thus far, including 43 from families of decedents and 15 from injured survivors.
On April 29th, Governor Green announced that the registration deadline has now been extended to May 31. The governor has said that the deadline for completed claims forms will be July 1. Hawaii's annual legislative session concluded in early May, and last week, the Governor signed into law Senate Bill 582, which sets aside critical funding to help address the ongoing Maui Wildfire recovery efforts, including the state's contribution to the $175 million One ‘Ohana fund. Although we are disappointed that we ran out of time in this legislative session to pass legislation supporting the key priorities we laid out on our last earnings call, our state's lawmakers and leadership remain highly engaged in determining how to design wildfire legislation that makes sense for Hawaii, our customers and our company.
Legislation that creates a framework to reduce wildfire risk is critical to ensure Hawaii can attract low cost capital, which ultimately lowers the cost to customers of needed investments. Our state's leadership recognizes this, and last week, Governor Green announced the formation of a new climate advisory team that will play a critical role in drafting comprehensive climate resilience policy. As one of those first project, the advisory chain will recommend steps to create a fund to medicate the impacts of climate change and to develop a fair and comprehensive structure to resolve claims related to future disasters in our state. The governor has expressed the fund's necessity for stabilizing the insurance market and addressing the financial burdens arising from the increased impacts of climate change.
We'll continue to work constructively with Governor Green, our regulators and other parties to advance solutions that help keep Hawaii safe and will stabilize our energy future in the face of increasingly severe weather events. Last month, we saw the publication of two key reports, one from the County of Maui's Department of Fire and Public Safety and the other from Hawaii State Attorney General. Both the fire department's after action report and the Attorney General's Lahaina fire comprehensive timeline report were consistent with our understanding of the events that took place on August 8th, namely that a morning fire appears to have been caused by power lines that fell in high winds. The Maui County Fire Department responded to this fire, reported that it was 100% contained and later declared it extinguished.
A second afternoon fire began in the same area later that day after Hawaiian Electric's power lines in West Maui had been de energized for more than six hours. Neither of the reports released last month focuses on the cause of the Maui Wildfires. The cause of the afternoon fire that devastated Lahaina has still not been determined and is the focus of a separate investigation being conducted by the Bureau of Alcohol, Tobacco and Firearms. Turning to an update on litigation. As of May 9th, HEI and Hawaiian Electric Company have each been named as a defendant in approximately 400 lawsuits by plaintiffs claiming losses related to the August 8th windstorm and wildfires. Subrogation claims from about 160 different insurers with exposure in Maui have also been filed.
The Maui Circuit Court has set a September 9, 2024 trial date for six cases concerning the fires in upcountry Maui. As a reminder, those fires were separate from the fires that occurred in Lahaina. The upcountry fires occurred in the Olinda and Kula areas of Maui, over 35 miles from Lahaina. Fortunately, there were no fatalities in the upcountry fires and relatively few structures damaged in comparison to the Lahaina fires. The Maui Circuit Court has also set a November 18, 2024 trial date for four of the Lahaina cases filed. No trial dates have been set in cases pending in the Oahu Circuit Court or in Federal Court. Turning to operational updates. On Slide 4, the utility continues to advance wildfire mitigation and resilience efforts. And in the first few months of this year, progressed applications for federal funding to help to limit the cost of these investments to customers.
In February, Hawaiian Electric received PUC approval for its five year $190 million grid resilience plan, enabling the utility to move forward with finalizing $95 million in Department of Energy Infrastructure Investment and Jobs Act funding by matching it with $95 million in rate recovery. In addition to this, the utility is pursuing $450 million of matching federal funding for $900 million of projects, addressing wildfire-focused grid resilience, grid modernization and grid innovation projects. While pursuing these longer-term projects, the utility continues to take more immediate action to address wildfire risk. Over 35% of the utility's 2024 capital budget, nearly $120 million is dedicated to wildfire mitigation work. The utility is implementing enhanced wildfire operational strategies and practices, which will include a public safety power shutoff program as a last resort.
Investments are also being made to improve situational awareness through advanced technologies, including cameras utilizing artificial intelligence. The utility also continues to progress grid hardening work. These interim wildfire safety measures are part of the utility's longer-term wildfire safety strategy, which is being developed collaboratively with our communities and other stakeholders and which we expect to begin implementing in 2025. Turning to the bank. ASB continues to perform well, and in the first quarter, the Bank saw the benefits of the strategic actions undertaken in the fourth quarter of 2023. As you'll recall, last quarter, the Bank sold low-yielding securities and reduced high cost deposits with proceeds. We saw the benefits from that balance sheet repositioning this quarter as ASB's cost of funds decreased and net interest margin expanded, leading to improved profitability compared to last quarter.
The Bank also released a portion of the reserves initially taken following the wildfires on Maui, reflecting Maui's resilient economy and better-than-expected outlook. ASB's loyal and long tenure deposit base remains stable. And as of March 31, 86% of deposits were FDIC insured or fully collateralized. Customer deposits are safe and there is no risk to deposits as a result of legal claims related to the wildfires. I will now turn the call over to Scott Deghetto, who will discuss our financial results.
Scott Deghetto: Thank you, Scott. I'll start with the results for the quarter on Slide 6. We earned consolidated net income of $42.1 million and EPS of $0.38 in the first quarter. This included $7.2 million after tax or about $0.07 per share of wildfire related expenses net of insurance recoveries and deferrals. Excluding these expenses, core net income and EPS were $49.3 million and $0.45 per share compared to $54.7 million and $0.50 per share in the first quarter of 2023. Utility net income included $5 million of wildfire related impacts, net of $7.4 million of insurance recoveries and $5.9 million of deferred costs. The holding company and other segment included $2.3 million of wildfire expenses net of $1.9 million in insurance recoveries.
Net wildfire costs were immaterial to bank net income. The decrease in utility net income was driven by higher O&M expenses due to increased wildfire mitigation and other wildfire-related costs. Bank net income benefited from higher net interest margin resulting from the strategic balance sheet repositioning executed last quarter and also benefited from the reserve release that Scott mentioned. On a consolidated basis, core ROE remains healthy at 9.5% excluding wildfire impacts. This is down from 10% ROE in the first quarter of last year due primarily to lower utility and other segment earnings, partially offset by higher bank earnings. Utility core ROE was down 20 basis points to 8% excluding wildfire impacts and Bancorp ROE was up 7 basis points to about 15.6%.
The approximately $0.07 decrease in the utilities EPS contribution was driven by an $0.11 increase in O&M expenses. $0.05 of the increase was wildfire related primarily driven by the settlement of indemnification claims asserted by the state. The remaining O&M increase included higher insurance costs and higher vegetation management costs. Earnings were also driven lower by penalties from worse heat rate performance. These items were partially offset by increased revenues primarily from the annual revenue adjustment and major project interim recovery mechanisms as well as increased AFUDC and higher interest income. The approximately $0.02 increase in ASB's EPS contribution was driven by $0.02 of higher non-interest income and $0.02 of lower provision, partially offset by $0.02 of lower net interest income.
Holding company and other segment expenses were higher by about $0.07 per share primarily from $0.03 per share of lower Pacific current net income and $0.02 per share of wildfire expenses as well as a small impact from tax rate adjustments. Lower pacific current net income was mostly driven by a $2.6 million after tax write off from a fire at Pacific Current's biomass generating facility on Kauai. The fire was started by a contractor performing maintenance on the facility. Turning to our liquidity on Slide 8, we continue to prudently manage our liquidity as we work through the timing and impacts of litigation related to the Maui wildfires. As of the end of first quarter, the holding company and the utility had $127 million and $130 million of cash on hand respectively.
We continue to explore additional sources of liquidity and the utility accounts receivable financing facility we discussed last quarter is awaiting PUC approval. The PUC issued a procedural schedule for the accounts receivable facility docket earlier this week and a decision in order is scheduled for June 24. Once approved, we expect the facility to provide up to $250 million of additional liquidity. At that, let's open up the call to questions.
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