Hawaiian Electric Industries Inc. (NYSE: HE) reported first-quarter net income of $30.5 million, an increase from $26.7 million a year earlier, as the company made its first of four annual $479 million payments to resolve the Maui wildfire tort settlement.
"This marks a pivotal milestone for those who were impacted by the Maui wildfires, and our hearts are with them as they continue on their journey of healing and recovery,” President and CEO Scott Seu said on the company's May 8 earnings call.
The utility's GAAP earnings improved as wildfire-related expenses fell to $1.5 million after-tax from $12.6 million in Q1 2025. However, core net income declined 22.1% to $31.0 million, or $0.18 per share, from $39.8 million a year prior. The decrease was driven by a $13.8 million surge in operations and maintenance costs, tied to severe storm response and higher insurance premiums. The utility's last twelve months return on equity was 6.1%, well below the 9.5% allowed by regulators.
Shares of Hawaiian Electric traded down 3.89% to $15.42 during regular hours following the announcement. The finalization of the wildfire settlement, which occurred after the last insurer appeals were withdrawn on April 10, marks a "year of transition" for the company as it shifts focus to grid investment and rate stabilization.
Rate and Investment Strategy
Hawaiian Electric is moving forward with a rate rebasing proposal filed jointly with consumer advocate Ulupono Initiative. The plan would increase consolidated base rates by 5.3%, or $170 million, phased in over two years to moderate the impact on customer bills. The average residential bill is expected to increase by $8 to $12 in 2027, with an additional $2 to $3 in 2028.
The company also received regulatory approval for its Waiau Generating Station repowering project, with the Public Utilities Commission approving $908 million in cost recovery. However, total project costs are now estimated at $1.155 billion due to inflation. The company plans to seek recovery for the additional $247 million in a future rate case around 2031. Capital expenditures are forecast to rise to between $625 million and $750 million in 2026, up from $368 million in 2025, to fund the Waiau project and wildfire mitigation efforts.
Financial Health and Outlook
The company ended the first quarter with $447 million in liquidity at the utility and holding company levels, with an additional $1.1 billion available through credit facilities and other programs. The first $479 million settlement payment was funded with cash previously set aside. Future payments are planned to be funded with debt and a mix of capital sources. Following the payment, Moody's upgraded the utility to Ba1 and the holding company to Ba2.
The results highlight the financial pressures on Hawaiian Electric as it navigates large-scale infrastructure investments and wildfire settlement obligations. Investors will be closely watching the progress of the rate rebasing proposal and the company's ability to manage costs and secure financing for future settlement payments, with the next payment due in April 2027.
This article is for informational purposes only and does not constitute investment advice.
