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HEI(HE) - 2025 Q1 - Earnings Call Transcript
HEHEI(HE)2025-05-09 21:30
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Financial Data and Key Metrics Changes - In Q1 2025, the company generated net income of 26.7millionor26.7 million or 0.15 per share, which includes a 13.2millionpre−taxlossonthesaleofPacificCurrentand13.2 million pre-tax loss on the sale of Pacific Current and 4.5 million in Maui wildfire-related expenses [18][19] - Consolidated core net income was 39.8millionor39.8 million or 0.23 per share, compared to 28.4millionor28.4 million or 0.26 per share in Q1 2024 [19] - Utility core net income increased to 49.7millionfrom49.7 million from 44.2 million in Q1 2024, driven by better heat rate performance and higher revenues [19] Business Line Data and Key Metrics Changes - The utility segment showed improved performance with higher revenues from the annual revenue adjustment mechanism and lower bad debt expenses, despite increased wildfire mitigation program expenses [19] - The holding company reported a core net loss of 9.9million,reducedfrom9.9 million, reduced from 15.8 million in Q1 2024, due to higher interest income from cash reserves [20] Market Data and Key Metrics Changes - The company had approximately 492millioninunrestrictedcashattheholdingcompanyleveland492 million in unrestricted cash at the holding company level and 130 million at the utility level as of the end of Q1 2025 [20] - The holding company cash balance included 384millionfromthesaleofAmericanSavingsBank,whichwasusedtoretiredebt[21]CompanyStrategyandDevelopmentDirection−ThecompanyismovingtowardsasimplerbusinessmodelfocusedsolelyonregulatedutilityoperationsfollowingthesaleofAmericanSavingsBankandthedivestitureofPacificCurrentassets[8][12]−Thecompanyaimstoenhancesafety,reliability,andresiliencethroughsignificantinvestmentsintheutility′sgenerationsystemandelectricgrid[9]−ThecompanyremainscommittedtoadvancingHawaii′scleanenergygoals,targeting100384 million from the sale of American Savings Bank, which was used to retire debt [21] Company Strategy and Development Direction - The company is moving towards a simpler business model focused solely on regulated utility operations following the sale of American Savings Bank and the divestiture of Pacific Current assets [8][12] - The company aims to enhance safety, reliability, and resilience through significant investments in the utility's generation system and electric grid [9] - The company remains committed to advancing Hawaii's clean energy goals, targeting 100% renewable portfolio standard (RPS) and net zero by 2045 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's future, citing improved financial strength and a clearer path to resolving the Maui wildfire tort litigation [11][64] - The company anticipates that the legislative measures passed will positively impact credit ratings and reduce wildfire liability risk exposure [12][25] Other Important Information - The company reinstated a quarterly dividend of 10 million for Q1 2025 after a temporary suspension [23] - The Hawaii State Legislature passed several bills aimed at supporting the utility's operations and mitigating wildfire risks, including establishing a liability cap and a potential wildfire fund [12][15] Q&A Session Summary Question: Anticipated feedback from rating agencies if SB 897 is signed into law - Management expects positive feedback from rating agencies, indicating that key milestones will be credit positives [25] Question: How will SB 897 impact the wildfire fund? - The bill requires the Public Utilities Commission (PUC) to study the viability of a wildfire fund and provide recommendations [27] Question: What is the nature of the liability cap in SB 897? - The bill directs the PUC to establish an aggregate liability cap, considering various factors such as market cap and rate base [31][33] Question: Financing strategy for remaining settlement payments - Management indicated that financing will be a combination of debt and equity, with no immediate plans for financing the payments [35][45] Question: Planned rate case filing and test year - The utility will file for rebasing target revenues ahead of the second multiyear rate period starting in 2027, with a 2026 test year expected [46][51] Question: Why did the legislature defer decisions on the liability cap to the PUC? - The legislature believed the PUC could conduct a more thorough and technical review of the issues involved [56] Question: Governor's position on the liability cap - Management noted that the governor's office was actively involved in the legislative process and will have input once the PUC completes its rulemaking [59]