Sign in

You're signed outSign in or to get full access.

HE

HAWAIIAN ELECTRIC CO INC (HAWEL)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 was dominated by a $1.71B pretax accrual for estimated Maui wildfire liabilities and an $82.2M pretax goodwill impairment at American Savings Bank, driving consolidated GAAP EPS to $(11.74); on a “core” basis excluding these items, HEI delivered $0.44 EPS and $49.1M core net income, with Hawaiian Electric’s core net income at $43.9M .
  • Management announced an agreement-in-principle to settle all tort claims related to the Maui wildfires and disclosed a “going concern” risk until definitive financing plans are in place; the utility dividend to HEI was suspended pending resolution .
  • Operationally, the utility advanced wildfire mitigation and grid hardening, including AI-enhanced camera deployments and PSPS capability; ASB’s bank NIM expanded 4 bps q/q to 2.79% with strong credit quality and reserve releases .
  • Estimates context: S&P Global consensus for Q2 2024 normalized EPS was $0.49; core EPS of $0.44 implies a miss, while revenue consensus for the quarter was unavailable (FY 2024 revenue consensus: ~$3.66B) .

What Went Well and What Went Wrong

What Went Well

  • Core operations at both utility and bank remained solid despite extraordinary items; enterprise core EPS was $0.44, utility core net income $43.9M, and bank core net income $20.7M .
  • Utility accelerated wildfire mitigation and resilience (grid hardening, covered conductors, strategic undergrounding); “our bank is improving profitability while maintaining a strong capital and liquidity position,” said CEO Scott Seu .
  • Bank NIM expanded to 2.79% (+4 bps q/q), with strong credit quality and another release of reserves, reflecting a healthy Hawaii economy .

What Went Wrong

  • A $1.71B pretax accrual for estimated wildfire tort liabilities and a $66.1M after-tax bank goodwill impairment produced a consolidated net loss of $1.295B and diluted EPS of $(11.74) .
  • “Going concern” risk disclosed pending definitive financing plans to fund settlement contributions; utility dividend to HEI suspended .
  • Utility O&M pressures (+$7M YoY) including wildfire mitigation costs and indemnification settlements, plus higher depreciation and adverse heat rate performance .

Financial Results

Consolidated and Segment Performance (YoY)

MetricQ2 2023Q2 2024
Total Revenues ($USD Millions)$895.685 $897.360
Utility Revenues ($USD Millions)$794.191 $792.331
Bank Revenues ($USD Millions)$96.885 $101.943
Other Revenues ($USD Millions)$4.609 $3.086
GAAP Diluted EPS ($)$0.50 $(11.74)
Core Diluted EPS ($)—$0.44
Net Income (Loss) for Common ($USD Millions)$54.610 $(1,295.484)
Utility Net Income (Loss) for Common ($USD Millions)$45.299 $(1,229.394)
Bank Net Income (Loss) for Common ($USD Millions)$20.204 $(45.787)
Other Net Income (Loss) for Common ($USD Millions)$(10.893) $(20.303)

Utility Operating Detail (YoY)

MetricQ2 2023Q2 2024
Operating Income (Loss) ($USD Millions)$73.625 $(1,644.440)
Fuel Oil Expense ($USD Millions)$280.157 $258.652
Purchased Power ($USD Millions)$168.434 $181.328
Other O&M ($USD Millions)$136.360 $147.561
Depreciation ($USD Millions)$60.689 $62.812
Taxes other than income ($USD Millions)$74.926 $74.418
Wildfire Tort-related Claims ($USD Millions)$—$1,712.000

Utility Volumes and Fuel

MetricQ2 2023Q2 2024
Total kWh Sales (Millions)1,994 1,971
Average Fuel Oil Cost ($/barrel)$122.69 $120.12

Bank KPIs

MetricQ2 2023Q2 2024
Net Interest Margin (%)2.75 2.79
Tier-1 Leverage Ratio (%)7.8 8.4
Allowance for Credit Losses to Loans (%)1.13 1.11
Nonaccrual Loans to Loans (%)0.22 0.53
Total Loans ($USD Billions, period-end)—$6.1
Total Deposits ($USD Billions, period-end)—$8.0
FDIC Insured or Fully Collateralized (%)—83% (79% insured)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Utility Dividend to HEIQ2 2024 onwardPaying regular dividend upstream to HEISuspended pending settlement financing and going concern resolution Lowered/Suspended
Bank Dividend to HEIQ2 2024Historically paid periodicallyNo dividend paid in Q2 to support capital levels Lowered/Suspended
Settlement/Tort Liabilities AccrualQ2 2024N/A$1.71B pretax accrual recorded New accrual
Going Concern DisclosureQ2 2024Not disclosed previously“Going concern” risk disclosed until financing plan is definitive/probable New disclosure

No formal revenue/margin/OpEx tax guidance ranges were provided in Q2 2024 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
AI/technology initiativesQ1 2024: advancing mitigation/resilience; July 16 press release launching AI camera network across elevated risk areas “By end of September, expects to have installed 44 AI-enhanced video cameras” with expanded monitoring capabilities discussed on the call Accelerating deployment
Regulatory/legalQ1 2024: One ‘Ohana initiative progressing; ongoing litigation and mitigation strategy Agreement-in-principle to settle all tort claims; $1.71B accrual; disclosure of going concern pending financing Moving toward resolution; financing risk elevated
Grid hardening/resilienceQ1 2024: continued resilience/hardening initiatives “Hardening the grid… upgrade poles, install covered conductors and strategically underground lines” reiterated by management Expanding scope
Bank performanceQ1 2024: strategic repositioning, stable NIM; reserve releases NIM rose to 2.79% (+4 bps q/q); strong credit quality; Tier-1 leverage 8.4% Improving profitability
Dividends/liquidityQ1 2024: regular course operationsUtility dividend to HEI suspended; ASB did not pay dividend to HEI in Q2 More conservative capital posture

Management Commentary

  • “Our core operations remain strong across the enterprise, and both our utility and bank remain very well-positioned to continue serving our customers and communities for the long term,” said President & CEO Scott Seu, emphasizing grid resilience and bank profitability .
  • “We… entered into an agreement in principle to settle all tort claims related to the Maui wildfires… We are confident that this settlement represents the best outcome for HEI… and increased certainty for our company’s path ahead,” added Seu .
  • Call highlight: Management detailed near-term wildfire safety deployments—“by the end of September… 44 AI‑enhanced video cameras in elevated risk areas… helping… identify potential wildfires early and respond more quickly” .

Q&A Highlights

  • Analysts probed settlement structure and insurer participation; discussion noted plaintiffs/defendants’ agreement without inclusion of insurance companies seeking significant amounts, underscoring complexities ahead .
  • Financing plan clarity: management outlined intent to finance settlement contributions through a mix of debt, common equity, and equity-linked securities; going concern disclosure remains until a definitive and probable plan is established .
  • Dividend policy and capital: utility dividend suspension and bank’s no-dividend in Q2 were reaffirmed to preserve liquidity and capital while advancing resolution .

Estimates Context

  • S&P Global consensus for Q2 2024 normalized EPS was $0.49; reported “core” diluted EPS was $0.44, implying a miss of ~10% and likely downward pressure on near-term EPS expectations absent faster cost offsets or rate mechanisms .
  • Quarterly revenue consensus for Q2 2024 was unavailable; S&P Global provided FY 2024 revenue consensus of ~$3,660.9M, but intra-quarter comparisons to revenue estimates cannot be made for Q2 .
  • Note: Estimates above are from S&P Global Market Intelligence.

Key Takeaways for Investors

  • The agreement-in-principle and $1.71B accrual create path-to-resolution visibility, but financing execution is the near-term stock catalyst; watch for mix, timing, and cost of capital signals to resolve the going concern disclosure .
  • Core performance remains resilient—utility core earnings and bank NIM/credit quality provide an operating base to work from while extraordinary items are addressed .
  • Dividend policy is conservative: utility dividend to HEI suspended and bank dividend withheld—expect capital preservation until settlement financing is finalized .
  • Mitigation investments (AI cameras, covered conductors, undergrounding) should lower risk and support regulatory recovery frameworks over time; monitor PUC decisions and cost deferral mechanisms .
  • Estimate path: Q2 core EPS missed S&P consensus; absent incremental rate mechanisms or faster O&M relief, Street may trim near-term EPS until financing and settlement cadence are clarified .
  • Trading lens: headlines around financing milestones (debt/equity/convertible issuance), removal of going concern, and final settlement terms are likely to drive volatility; tactical positioning around these events is key .
  • Medium-term thesis: regulated utility with improving resilience profile and a bank with stable NIM/credit quality; valuation and capital structure will hinge on settlement financing economics and regulatory recovery .

Sources

  • Q2 2024 8-K Item 2.02 and Exhibit 99 earnings press release, including non-GAAP reconciliations and segment detail .
  • Q2 2024 earnings call transcript (S&P Global Market Intelligence) .
  • AI camera deployment press release (July 16, 2024) .
  • Q1 2024 press release (for trend context) .