HEI(US:HE)2021-02-17 04:11Financial Data and Key Metrics Changes - Consolidated net income for 2020 was $197.8 million, down from $217.9 million in 2019, resulting in earnings per share of $1.81 compared to $1.99 in 2019 [5][24] - Return on equity (ROE) for the last 12 months was 8.6%, down from 9.8% in 2019 [25] - Utility earnings grew about 8% to $169.3 million, while American Savings Bank (ASB) earnings decreased by $31 million or 35% due to net interest margin compression and higher provisions [24][25] Business Line Data and Key Metrics Changes - Utility segment achieved $169.3 million in earnings, reflecting efficiency improvements and lower operating and maintenance (O&M) expenses [24] - ASB's net interest margin (NIM) for the full year 2020 was 3.29%, with a record low cost of funds at 16 basis points [35] - ASB's provision for the year was $50.8 million, significantly higher than $23.5 million in 2019, reflecting credit risk due to COVID-19 [36] Market Data and Key Metrics Changes - Daily visitor arrivals in Hawaii improved to around 8,000, up from 2,000-3,000 before reopening to tourism [22] - Unemployment in Hawaii improved to 9.3% in December 2020, down from 24% at the pandemic's peak [22] - The housing market remained resilient, with single-family home sales up 2.3% in 2020 and median prices rising 5.2% to $830,000 [22] Company Strategy and Development Direction - The company focuses on delivering a cost-effective clean energy portfolio, improving customer experience, and advancing renewable energy and storage projects [8][10] - A three-year program to reduce costs and increase efficiency was outlined, achieving significant savings in 2020 [10][11] - The newly adopted Performance-Based Regulation (PBR) framework is expected to provide a balanced approach to customer value and utility opportunities [12][28] Management's Comments on Operating Environment and Future Outlook - Management views 2021 as a transition year with expectations for improved financial opportunities in 2022 as PBR is fully implemented [14][15] - The company anticipates modest renewable energy additions in 2021, with expectations for growth in 2022 and 2023 [15] - Management highlighted the importance of controlling expenses to ensure strong financial performance under the new PBR framework [28] Other Important Information - The company provided $2 million for the Aloha United Way Hawaii Utility Bill Assistance Program to support families [6] - Charitable commitments in 2020 totaled $5.5 million, more than double the typical level [6] - The company expects to maintain a dividend payout ratio of approximately 65% in 2021, amounting to about $112 million in dividends to the holding company [38] Q&A Session Summary Question: How do you think about the cost savings in the context of the recent arrangement? - Management indicated that cost savings from 2020 will carry forward into 2021, with half of the identified savings already achieved [46][48] Question: What is the expected ROE trend year-over-year? - Management expects a decline in ROE for 2021 to approximately 7.8%, with improvements anticipated in 2022 as PBR is fully implemented [54][56] Question: What challenges might arise from high renewable energy integration? - Management acknowledged the need to maintain reliability and resilience while transitioning to a more distributed energy resource-based system [65] Question: What are the expectations regarding digital banking and branch consolidation? - The bank consolidated eight branches in 2020, with expected occupancy cost reductions of about 10% in 2022 [67][69]