SEC Filing Report: Hawaiian Electric Industries, Inc. (8-K) – February 21, 2025
Executive Summary
This 8-K filing from Hawaiian Electric Industries, Inc. (HEI) reports the company’s fourth quarter and full-year 2024 results. The results are significantly impacted by the Maui wildfire-related expenses. While the company highlights strategic progress, including a favorable court decision and the sale of American Savings Bank (ASB), the substantial net loss raises concerns about HEI’s financial stability. The suspension of utility dividends to HEI further underscores these concerns. Overall, a cautious approach is warranted. Investors should closely monitor the resolution of wildfire liabilities and the company’s progress in restoring financial health.
Company Overview
Hawaiian Electric Industries, Inc. (HEI) is a holding company with subsidiaries primarily involved in providing electric utility services through Hawaiian Electric Company, Inc. The company serves approximately 95% of Hawaii’s population. Recent significant events include the Maui wildfires and the subsequent legal and financial ramifications, the sale of a majority stake in American Savings Bank, and ongoing efforts to increase renewable energy generation.
Detailed Analysis
Results of Operations and Financial Condition (Item 2.02)
The 8-K primarily focuses on the financial results for Q4 and full-year 2024, highlighting both GAAP and non-GAAP (Core) measures. The “Core” measures exclude Maui wildfire-related costs, Pacific Current asset impairment, and expenses related to the ASB sale.
Key Financial Highlights:
- Net Loss: HEI reported a full-year 2024 net loss of $1,426 million, or $11.23 per share, compared to net income of $199 million, or $1.81 per share in 2023.
- Core Income: Core income from continuing operations was $124 million, or $0.98 per share, compared to $152 million, or $1.38 per share in 2023.
- Hawaiian Electric Net Loss: Hawaiian Electric’s full-year net loss was $1,226 million, compared to net income of $194 million in 2023.
- ASB Discontinued Operations: Loss from discontinued operations (ASB) totaled $103 million for the full year 2024, compared to net income of $53 million in 2023.
- Utility Dividend: The utility dividend to HEI remains suspended.
Financial Statement Analysis:
Consolidated Statements of Income Data (HEI and Subsidiaries)
| Line Item |
2024 (Full Year) |
2023 (Full Year) |
Change |
| Total Revenues |
$3,219.85 million |
$3,287.50 million |
-2.06% |
| Total Expenses |
$4,926.61 million |
$3,012.51 million |
+63.53% |
| Total Operating Income (Loss) |
$(1,706.76) million |
$274.99 million |
N/A |
| Net Income (Loss) for Common Stock |
$(1,426.01) million |
$199.24 million |
N/A |
| Diluted Earnings (Loss) per Common Share |
$(11.23) |
$1.81 |
N/A |
Key Ratios and Trends:
- Revenue Decline: A slight decrease in revenue indicates potential challenges in the core business.
- Expense Surge: A massive increase in expenses, primarily due to wildfire liabilities, is the primary driver of the net loss.
- Profitability Collapse: The shift from operating income to a significant operating loss highlights the devastating financial impact of the wildfires.
Consolidated Statements of Income Data (Hawaiian Electric)
| Line Item |
2024 (Full Year) |
2023 (Full Year) |
Change |
| Revenues |
$3,206.70 million |
$3,269.52 million |
-1.92% |
| Fuel Oil Expense |
$1,078.05 million |
$1,211.42 million |
-11.01% |
| Wildfire tort-related claims, net |
$1,875.00 million |
$0 million |
N/A |
| Net income (loss) for common stock |
$(1,226.36) million |
$193.95 million |
N/A |
Key Observations:
- Wildfire Impact: The $1.875 billion in wildfire tort-related claims is the dominant factor in Hawaiian Electric’s financial performance.
- Fuel Costs: Fuel oil costs decreased, which is a positive sign, but overshadowed by the wildfire expenses.
Management’s Narrative (MD&A) Insights:
- Positive Tone: Management expresses optimism and highlights strategic achievements despite the financial losses.
- Focus on Mitigation: Emphasis is placed on wildfire mitigation efforts and progress towards renewable energy goals.
- ASB Sale: The sale of ASB is presented as a strategic move to simplify the business and reduce debt.
- Court Decision: The favorable Hawaii Supreme Court decision is viewed as a positive step towards resolving wildfire litigation.
Red Flags and Uncommon Metrics:
- Massive Net Loss: The sheer magnitude of the net loss is a significant red flag.
- Suspended Dividend: The suspension of the utility dividend to HEI indicates financial strain.
- Reliance on Non-GAAP Measures: While non-GAAP measures can be helpful, the heavy reliance on “Core” income raises questions about the true underlying performance.
Financial Statements and Exhibits (Item 9.01)
The filing includes the news release (Exhibit 99) and the Inline XBRL data file (Exhibit 104).
Risk and Opportunity Assessment
Risks:
- Wildfire Liabilities: The primary risk is the uncertainty surrounding the ultimate cost of the Maui wildfire liabilities.
- Regulatory Scrutiny: Increased regulatory scrutiny and potential penalties related to the wildfires.
- Financial Instability: The significant net loss and suspended dividend raise concerns about HEI’s financial stability and ability to fund future investments.
- Renewable Energy Transition: Challenges in transitioning to renewable energy sources while maintaining grid reliability and affordability.
Opportunities:
- Favorable Court Decision: The Hawaii Supreme Court decision provides some clarity and potentially limits future liabilities.
- ASB Sale Proceeds: Proceeds from the ASB sale can be used to reduce debt and strengthen the balance sheet.
- Renewable Energy Growth: Continued progress in renewable energy adoption can improve the company’s environmental profile and potentially reduce fuel costs.
- Wildfire Mitigation: Effective wildfire mitigation efforts can reduce future risks and improve public safety.
Conclusion and Actionable Insights
HEI faces significant challenges due to the Maui wildfire liabilities. While management highlights strategic progress, the financial results paint a concerning picture. The company’s future hinges on its ability to effectively manage and resolve the wildfire litigation, restore financial stability, and successfully transition to renewable energy. Investors should exercise caution and closely monitor the company’s progress in these areas.
Overall Assessment: Hold/Sell. The significant risks outweigh the potential opportunities at this time.
Recommendations:
- Monitor Litigation: Closely track the progress of the Maui wildfire litigation and any related settlements or legal developments.
- Assess Financial Health: Evaluate HEI’s progress in reducing debt, restoring profitability, and reinstating the dividend.
- Evaluate Mitigation Efforts: Assess the effectiveness of the company’s wildfire mitigation efforts and their impact on reducing future risks.