Hawaiian Electric Industries - Q4 2023

Executive Summary

• Q4 2023 consolidated revenue was $961.351M and diluted EPS was $0.44; utility net income was $58.183M, bank net income was $3.231M; versus Q4 2022 revenue $1,019.113M and EPS $0.52.
• Core diluted EPS was $0.48 and core net income was $53.425M, excluding wildfire-related items and the bank’s securities sale loss; full-year core EPS was $2.04.
• Utility results benefited from ARA/MPIR mechanisms and deferral/insurance recoveries related to Maui wildfires; Hawaiian Electric’s Q4 core net income was $48.947M; O&M was higher, partially due to transmission/distribution and outside services.
• Bank results were impacted by a strategic balance sheet repositioning: a $14.965M pre-tax ($11.0M after-tax) loss on securities; Q4 bank core net income was $16.172M; funding mix shifted to higher-cost CDs, compressing NIM.
• Utility dividend to HEI was reduced to $13M (from ~$30M in each of the prior three quarters), a notable cash retention move at the utility; HEI’s dividend to common shareholders remained suspended.

What Went Well and What Went Wrong

What Went Well

• PUC approved a 5-year $190M grid resilience plan enabling $95M of DOE funds with matching rate recovery; management highlighted constructive regulatory support and federal engagement.
• Stage 3 RFP progressing with negotiations across 16 projects: ~517 MW variable generation, ~694 MW firm renewables, and ~2.1 GWh storage; the utility’s Waiau repowering bid advanced.
• “In December, the utility connected the world’s most advanced battery energy storage system to Oahu’s grid… Kapolei energy storage battery plant provides 185 MW and 565 MWh” (Scott W. Seu).

What Went Wrong

• ASB recorded a $14.965M pre-tax ($11.0M after-tax) loss on securities to reduce high-cost deposits; Q4 bank GAAP net income fell to $3.231M; core was $16.172M.
• Elevated O&M: utility cited $8M higher O&M (T&D, bad debt, outside services) in Q4; full-year O&M up $28M, including $8M wildfire response labor.
• Litigation uncertainty persists: HECO and HEI named in ~101 lawsuits; additional subrogation claims filed; investigation timelines (ATF, HI AG) remain unclear.

Transcript

Operator (participant)

Good day and welcome to the Hawaiian Electric Industries' Fourth Quarter 2023 Earnings Conference Call. Please note that this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. I will now turn the call over to Mateo Garcia, Director of Investor Relations. You may begin your conference.

Mateo Garcia (Director of Investor Relations)

Thank you. Welcome, everyone, to HEI's Fourth Quarter and Full Year 2023 Earnings Call. Joining me today are Scott Seu, HEI President and CEO, Scott DeGhetto, HEI Executive Vice President, CFO and Treasurer, Shelee Kimura, Hawaiian Electric President and CEO, Ann Teranishi, American Savings Bank President and CEO, and other members of senior management. Our earnings release and our presentation for this call are available in the Investor Relations section of our website.

As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings, and in the Investor Relations section of our website. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. Now, Scott Seu will begin with his remarks.

Scott Seu (President and CEO)

Aloha kakou. Welcome, everyone. For today's call, I'll start with key updates regarding the Maui wildfires, followed by financial and operational updates, and then Scott DeGhetto will walk you through our 2023 financial results in more detail before we open it up for questions. It's been just over six months since the tragedy of the August 8 wildfires. Our community continues to grieve, and we know that it will be a long road ahead. However, I'm encouraged and inspired by the way so many in our community have come together to work towards the near and long-term solutions necessary to help our state heal and emerge stronger. It's clear that supporting Maui's recovery and addressing the increasing risk of wildfires as our climate changes will take a whole-of-society approach.

We're seeing this whole-of-society view reflected in the One Ohana Initiative Governor Josh Green announced last fall and in our state's legislative session that is now underway. One Ohana lays out a holistic framework to support Maui's recovery, protect our communities against future extreme weather events, and ensure that as a state we can attract the capital needed to invest in wildfire mitigation and keep our communities safe. Governor Green has also stated his intention for our state to avoid protracted legal conflicts, which could not only jeopardize Hawaii's energy future but could also severely delay reconstruction and economic recovery. The intentions of One Ohana align with our company's values and priorities. Under One Ohana, many parties are working together to find solutions to help the families most impacted by the fires, reduce the risk of catastrophic wildfires, and provide economic stabilization for the state.

Meaningful progress has been made towards these goals in just the three months since One Ohana was announced. The Maui Recovery Fund, one aspect of the Governor's One Ohana initiative, provides an alternative to litigation for families who have lost a loved one and those who were severely injured in the Maui fires. It now has $175 million of commitments and is targeting a March 1 launch. Hawaiian Electric will contribute up to $75 million, and the state of Hawaii, Maui County, Kamehameha Schools, Spectrum, and Hawaiian Telcom have committed to contribute the remainder. The speed at which this first fund has come together is encouraging, and as the Governor has said, it will help with healing and help everyone move forward. The next phase of this process will seek to support property owners and businesses who have been severely impacted by the fire.

As part of the One Ohana framework, Governor Green also laid out intentions to explore legislative solutions to address not only Maui's recovery but also measures for our state to address the impacts of increasingly severe weather events going forward. The legislative session began last month, and in the range of bills that have been introduced, we're seeing a whole-of-society approach to ensuring our state, utilities, and communities have the tools needed to address the challenges we face. We're focused on bills that would establish a fund for property owners to recover damages from future catastrophic wildfires, wildfire risk mitigation planning requirements overseen by the Public Utilities Commission along with cost recovery for implementing approved plans, and securitization as a financing option. The Office of the Governor has expressed the importance of legislation that can help stabilize the electric utility and Hawaii's energy future.

His administration has proposed a bill that requires the utility to develop a wildfire mitigation plan overseen by the Public Utilities Commission and also includes securitization as a tool to finance wildfire safety and recovery. Dozens of bills have been introduced to address other aspects of wildfire risk more broadly. The legislature is considering bills that would establish a state fire marshal, a state wildfire fuel reduction task force, a wildfire safety advisory board, and a state firefighting helicopter program, to name a few examples. It's still early in the legislative process, and bills can undergo significant changes over the legislative session, which will run through early May. However, I'm pleased to see commitment among so many in Hawaii to urgently address the risks wildfires and other extreme weather events pose to our state. We also continue to work through the litigation process.

As of February 12, Hawaiian Electric Company has been named as a defendant in 101 lawsuits by plaintiffs claiming losses related to the August 8 windstorm and wildfires, and HEI has been named in 101 as well. Most of these lawsuits have been removed from the state court to federal court, but jurisdiction is still in the process of being settled. Certain milestone dates that were set earlier by the state court, such as when we'll need to file counterclaims, are no longer in effect and will be revisited once jurisdiction is settled. Subrogation claims from about 150 different insurers with exposure on Maui have also been filed and will respond to those complaints once they are served on us.

Turning to the next slide, our utility received several constructive regulatory decisions in recent months that support our efforts to strengthen the resiliency of our system while we continue to advance Hawaii's clean energy goals. Earlier this month, Hawaiian Electric received PUC approval for their 5-year $190 million grid resilience plan. The plan includes a slate of foundational resilience investments as the first phase of a long-term climate adaptation effort that will help harden the utility's grids against severe weather-related events fueled by climate change. This approval enables the utility to move forward with $95 million in Department of Energy Infrastructure Investment and Jobs Act funding by matching it with $95 million in rate recovery. The utility also received several important regulatory decisions prior to 2023 year-end, including approvals to defer costs associated with the Maui wildfires and to recover $8.8 million in previously deferred costs from the COVID-19 pandemic.

Our approximately $82 million Waena Battery Energy Storage Project on Maui was also approved. This is a critical project for ensuring adequacy of supply on the island. The utility has continued to progress its Stage 3 RFP, its largest renewables procurement ever. Contract negotiations are in process with the developers of 16 renewable energy projects across our islands. The projects will further reduce Hawaii's dependence on imported oil for power generation. The negotiations are expected to produce long-term contracts for approximately 517 megawatts of variable generation, 694 megawatts of firm renewable generation, and 2.1 gigawatt-hours of storage. As we've discussed previously, the utility's own 253-megawatt Waiʻau repowering project on Oahu was selected in the RFP. The project will be built at the site of Hawaiian Electric's existing 85-year-old facility and could potentially use renewable gas or hydrogen when it becomes commercially available.

The utility is working closely with the Department of Energy on federal loan funding options to help fund the project. We're also pursuing additional federal funding sources, including nearly $450 million of grants for grid resilience, modernization, and innovation for investments to increase resilience to natural hazards, including wildfires. In December, the utility connected the world's most advanced battery energy storage system to Oahu's grid. The Kapolei Energy Storage Battery Plant provides 185 megawatts of total power capacity and 565 megawatt-hours of energy, and this is the first time a standalone battery has provided grid-forming services at this scale. We're pleased with the utility's continued progress towards a clean energy-powered grid and encouraged by the constructive regulatory and federal government engagement on Hawaii's clean energy future. I'm also pleased to announce that we recently reached agreement with our union, IBEW 1260, on a new three-year contract effective through October 2027.

The contract provides stability and visibility as we continue performing critical work to modernize our generation system and make our electric grids more resilient. Turning now to our financial results. Our core operations have continued to perform in line with expectations while we work alongside others in the Maui reconstruction efforts. On a consolidated basis, 2023 net income was $199.2 million and earnings per share was $1.81. This included about $14 million of Maui wildfire-related expenses net of insurance recoveries and deferrals, and a loss in the sale of securities of $11 million resulting from a strategic balance sheet repositioning at the bank. Excluding these items, core net income was $224 million and EPS was $2.04, down about 5% compared to last year's core net income, which excludes the gain on sale of an equity method investment recorded in 2022 at Pacific Current.

Utility net income and EPS were $194 million and $1.76, or $195.1 million and $1.77 on a core basis, up about 3% compared to 2022. Bank net income and EPS were $53.4 million and $0.48. Excluding wildfire-related expenses and the securities loss, core net income was $72.6 million and EPS was $0.66, down from $80 million and $0.73 last year. At the holding company level, the net loss of $48.1 million in 2023 was up from $27.8 million in the prior year and included $4.7 million of wildfire-related expenses. Excluding these expenses, core net loss was $43.4 million and core EPS loss was $0.39. Turning to the bank, ASB's business proved resilient through the economic impacts of the Maui wildfires and the challenging interest rate environment experienced in 2023.

ASB's loyal and long-tenured deposit base remained stable during the year, and as of December 31, 86% of deposits were FDIC insured or fully collateralized. Customer deposits are safe, and there is no risk to customer deposits as a result of legal claims related to the wildfires. Asset quality remains strong, and the Hawaii market continues to be characterized by strong credit quality and low delinquency rates in comparison to the mainland. The bank's capital remains strong, with ample liquidity and lending capacity. The sale of investment securities executed in the fourth quarter positions ASB for improved profitability and net interest margin while strengthening the balance sheet. In the fourth quarter, the bank sold low-yielding securities and reduced high-cost deposits with proceeds. Scott DeGhetto will discuss the transaction in greater detail.

ASB has continued to support the Maui community at a time when they most need us, and the bank has provided numerous options for our Maui customers facing financial hardship as a result of the fires, including waived ATM fees, forbearance and deferment for commercial and consumer loans, and emergency personal lines of credit. In addition, the bank has provided $135,000 of charitable contributions to support the Maui community and has partnered with the Hawaii Restaurant Association, the Hawaii Bankers Association, and others to provide donations and other resources for Maui residents during this difficult time. We are optimistic regarding Hawaii's economic outlook, and the economy has proved resilient following the wildfires in August. Hawaii's statewide seasonally adjusted unemployment rate was 2.9% in December and continues to outperform the U.S. average of 3.7%.

The University of Hawaii Economic Research Organization, or UHERO, forecasts that the state unemployment rate will remain low at 2.5% in 2024. UHERO's latest outlook is an improvement compared to their outlook immediately following the wildfires. UHERO had initially predicted a more prolonged recovery, estimating that Maui's visitor arrivals would be 50% of the previous years, and Maui unemployment would be over 10%. Maui's unemployment rate was around 5% as of year-end, and in the month of December, visitor arrivals to Maui were 75% of the previous years. Total statewide arrivals for the year were 90% of pre-pandemic levels. Despite the economic impacts from the Maui wildfires, statewide visitor spending for the full year was up over 2022. Visitor spending increased 5.5% to $20.8 billion in 2023. This is well above pre-pandemic levels by almost 20%, despite Japanese visitor arrivals being at about half of pre-pandemic levels.

Real estate values in Hawaii remain consistently strong. In December, the Oahu median single-family home price was over $1 million, and the median condo sales price was just under $510,000. Home sales volumes were down year-over-year, but we're encouraged to see the recent decline in mortgage rates. Hawaii's market continues to be characterized by limited inventory and stable prices, supported by limited land available for property development. I'll now hand it off to Scott DeGhetto to walk through our financial results in more detail.

Scott DeGhetto (EVP, CFO and Treasurer)

Thank you, Scott. I'll start with our results for the year on slide eight. We earned consolidated net income of $199.2 million and EPS of $1.81 for the full year. That included $14.1 million, or about $0.13 per share, of wildfire-related expenses net of insurance recoveries and deferrals, and $11 million, or $0.10 per share, from a loss on a sale of securities at the bank resulting from the bank's balance sheet repositioning. Excluding those non-recurring expenses, core net income and EPS were $224.3 million and $2.04 compared to $235 million and $2.14 in 2022. Utility net income included $1.1 million of windstorm and wildfire-related impacts. Bank net income included $8.3 million, and the holding company and other segment included $4.7 million of these costs.

In December, the PUC granted the utilities request for deferral treatment of windstorm and wildfire-related incremental non-labor expenses, and as a result, the utility deferred $10.9 million of after-tax O&M expenses in 2023. In total, the utility's incremental after-tax Maui windstorm and wildfire-related expenses of $1.1 million were comprised of $29.6 million of expenses, net of $17.5 million of insurance-related recoveries, and the $10.9 million in deferred costs. As mentioned, the bank executed a balance sheet repositioning in the fourth quarter that resulted in an $11 million after-tax loss on the sale of investment securities. This resulted from a strategic sale of $185 million of low-yielding assets with proceeds used to reduce ASB's highest cost source of funding, which was certificates of deposit.

The transaction is expected to improve this year's net interest income and net interest margin. In addition, lower asset levels will allow ASB's leverage ratio to improve faster. On a consolidated basis, core ROE remains healthy at 9.9% excluding wildfire impacts and the loss on sale of securities. This is down from 10.2% core ROE last year due primarily to lower bank earnings and a higher holding company loss. Utility core ROE was flat at 8.2% excluding wildfire impacts, and bank core ROE was up 80 basis points to 14.9% excluding wildfire impacts. The higher bank ROE reflects the impacts of higher interest rates to bank AOCI, which reduces shareholders' equity.

The approximately $0.04 increase in the utilities' EPS contribution was the result of a $0.28 increase in revenues, primarily from the annual revenue adjustment and major project interim recovery mechanisms, a $0.05 increase in AFUDC, and a $0.04 increase from the fuel cost risk sharing mechanism. These increases were partially offset by a $0.24 increase in O&M expense, a $0.06 increase in depreciation, $0.03 of higher interest expense, and about $0.01 per share of incremental wildfire costs net of insurance recoveries and deferred costs.

The approximately $0.25 decrease in ASB's EPS contribution was driven by the $0.10 loss from the bank's balance sheet repositioning, $0.09 of higher non-interest expenses, $0.08 of wildfire-related expenses including $0.04 of additional provision recorded in Q3, and $0.02 of higher provision partially offset by a $0.03 increase in non-interest income. Holding company and other segment expenses were higher by about $0.19 per share, consisting of $0.04 in wildfire expenses, $0.05 from lower Pacific Current asset performance, $0.04 of interest expense, and a $0.06 negative variance due to the 2022 gain on sale of an equity investment at Pacific Current. Turning to our liquidity on slide 10, we continue to believe that we have sufficient liquidity runway as we work through the timing and potential impacts of litigation related to the Maui wildfires.

As of the end of fourth quarter, the holding company and the utility had $137 million and $106 million of cash on hand respectively. In addition, we continue to pursue additional financing through an accounts receivable facility at the utility, which we expect will provide $200-$250 million of additional liquidity. Last week, Hawaiian Electric's board of directors declared a $13 million quarterly cash dividend to HEI. With the suspension of HEI's dividend to our common shareholders, cash needs at the HEI parent company are limited relative to cash needs prior to the dividend suspension.

Right-sizing the utility's dividend to HEI allows more cash to be kept at the utility, supporting its ability to perform needed restoration work in West Maui and make critical capital investments for wildfire mitigation and in other electrical infrastructure while capital markets access remains constrained. In closing, I want to acknowledge what a challenging year 2023 was for our community, our employees, and our shareholders. We will continue taking the right steps and working collaboratively with our community, regulators, and lawmakers to remain a financially healthy enterprise, best positioned to support the needs of our customers and the state. At that, let's open up the call to questions.

Operator (participant)

Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star one. Your first question comes from Michael Lonegan with Evercore. Please go ahead.

Michael Lonegan (Director of Equity Research)

Yeah, hi. Thanks for taking my question. So utility cash on hand decreased from $275 million at the end of the third quarter to $106 million as of year-end. I was just wondering if you could share some of the key uses of cash during the quarter and any details you can share on your current level of CapEx and also ongoing level of investment given grid resilience, storage, and other projects that are ongoing.

Scott DeGhetto (EVP, CFO and Treasurer)

Yeah. Hey, Mike. It's Scott DeGhetto. Yeah, so I think when you look at the $275 million and you compare it to the $106 million, what you need to keep in mind is that the $275 had a pre-funding of the $100 million maturity. So the way I look at it is we really ended the quarter at $175, and so $175 versus the $106. And again, as you know, there's varying capital requirements and cash requirements as you move through a business and throughout the year.

And so I would just keep that in mind as you look at the end-of-the-year number. The other thing I can tell you is, as we said on the call, we're working through the accounts receivable facility. We've retained a large global bank to work with us on that facility, and we're basically finalizing that as we speak. And we'll be filing with the PUC in the not-too-distant future to get formal approval for that facility.

Michael Lonegan (Director of Equity Research)

Great. Thank you. And then secondly from me, on the Maui Recovery Fund, do you have a sense or expectation of the participation in it? And could there be upside to the $175 million between now and launch on March 1st?

Scott Seu (President and CEO)

Yeah, hi, Mike. This is Scott Seu. At this stage, we don't have any projections for the potential uptake. I mean, the sizing of the fund and the consideration of payments of $1.5 million per claim, we're hopeful. I think the governor's office is trying to get the word out about why this provides an attractive option for claimants to litigation. At this stage, we won't be able to tell you until the fund is actually launched on 1 March.

Michael Lonegan (Director of Equity Research)

Great. Thanks, Scott.

Scott Seu (President and CEO)

Sure, Mike.

Operator (participant)

Your next question comes from Jonathan Reeder with Wells Fargo. Please go ahead.

Jonathan Reeder (Equity Research Analyst)

Hey, good morning, team. Thanks for taking my question.

Scott Seu (President and CEO)

Hey, Jonathan.

Jonathan Reeder (Equity Research Analyst)

So I was just kind of curious, as currently being considered in the legislature, can you discuss how the governor-sponsored bill, the HB 2407, does or does not potentially mitigate any of HECO's potential liabilities related to the August 2023 Maui wildfires?

Scott Seu (President and CEO)

Yeah. Well, so the governor-sponsored bills, Jonathan, they focus on wildfire mitigation plans and allowing the utility to use securitization to pay for improvements as a result of those plans. I would say that those bills, as currently drafted, are forward-looking. I think the governor, in one of the testimonies on one of the other bills, made the point that as we consider these bills that are more forward-looking with respect to wildfire mitigation strategies, securitization, even a wildfire relief fund, it's still noted that we all still have to work through the issues of resolving the claims from last August.

We talked a lot about fund number one already. Suffice to say that there's active discussions happening right now with respect to claims dealing with property damage, business losses, and the like. So the long and short of it is the bills are predominantly forward-looking, albeit there is still capacity to think about funds, securitization, and the like, which could possibly apply towards past claims. But most of the bills' focus is on a forward-looking basis.

Jonathan Reeder (Equity Research Analyst)

Okay. So, I mean, in terms of any specific legislative proposals that would be more related to the wildfires themselves, at this point, there's nothing. It's more related to, I guess, the One Ohana Recovery Fund stuff?

Scott Seu (President and CEO)

Well, I would say this. I would think about it this way, Jonathan. The One Ohana, specifically on fund two, there are any number of options available when you consider what the sources of funding might be, which could include, for example, anything ranging from securitization if it's deemed appropriate. It could include thinking from the HEI perspective, shareholder contributions. It could include use of insurance funds. The governor has also mentioned potential philanthropy. So I'd say that for fund two, it is still a we're working through a number of different options, and there could very well be some overlap or interplay with some of the bills that are being considered. It's still very early in the process for the legislative bills.

Jonathan Reeder (Equity Research Analyst)

Okay. When does the legislative session end? I mean, when you're saying it's early in the process.

Scott Seu (President and CEO)

Yeah, it will end in May. But I would say that the next significant milestones in the legislature are first crossover on March 7th, and then later on, second crossover is April 11th. Crossover is very important because at that point, that's when you'll see what one house or the House or the Senate, where they ultimately land on the initially proposed bills.

Jonathan Reeder (Equity Research Analyst)

Okay. That helps. Any further insight into when the results of the ATF-led investigation into the cause of the fire, even the Hawaii AG's investigation, will be finalized and shared?

Scott DeGhetto (EVP, CFO and Treasurer)

Yeah, we don't have any further updates, Jonathan, from what we talked about last quarter. At that point, there was still no hard-and-fast schedule for the ATF Maui Fire Department investigation and the state Attorney General's investigation. I think, as we talked about last time, they had been initially planning to share some initial results back in December, but there were some delays as they needed to get more information from Maui County. So we still don't know of any further updates to their timing either.

Jonathan Reeder (Equity Research Analyst)

Okay. And then, I guess, based on the lawsuits filed and maybe just the time that's passed since the wildfires, do you have any sense of what the total damages may be, excluding, obviously, any potential punitive damages? For instance, I think the state has disclosed that residential property losses claimed through at least the end of November amount to just over $1.5 billion.

Scott DeGhetto (EVP, CFO and Treasurer)

Yeah, we don't have any additional information beyond that, Jonathan.

Jonathan Reeder (Equity Research Analyst)

Okay. Great. Now, I know you're still working through all that. So good luck as you go through the process, and interested to see how it all plays out. I appreciate you taking the questions.

Scott DeGhetto (EVP, CFO and Treasurer)

Thank you, Jonathan.

Jonathan Reeder (Equity Research Analyst)

Your next question comes from Paul Patterson with Glenrock Associates. Please go ahead.

Paul Patterson (Equity Research Analyst)

Hey, good morning.

Scott DeGhetto (EVP, CFO and Treasurer)

Hi, Paul.

Paul Patterson (Equity Research Analyst)

Hi. So Jonathan asked a lot of my questions, but just sort of following up on a few of them, do we have I know it's still kind of early, but you were talking about the wildfire mitigation and going forward kind of efforts and what have you. Do we have any sense, or do you guys have any sense about what the size of that might be or when we might get a better picture as to what you're when we might get a better idea about what that would be?

Scott DeGhetto (EVP, CFO and Treasurer)

Paul, I think you're asking about the proposed wildfire relief fund. Is that correct?

Paul Patterson (Equity Research Analyst)

It's not the fund. It's actually just what if there's any idea about what the level of mitigation expenditures might have to be, do we have any senses to when we'll get a better picture as opposed to the funding for it, just what the actual amount might be? Do you follow what I'm saying?

Scott DeGhetto (EVP, CFO and Treasurer)

Yeah, I think so. That still needs to be determined, Paul. One component of that is actually sizing what the overall wildfire risk would be to the state. And I know that there has been discussion, and part of some of the proposals are to do it from an actuarial perspective, doing a risk assessment, which will help size the overall risk and what the fund and potential investments could be. At the utility, of course, it will continue to do its own work looking at its wildfire mitigation plans, and that analysis is still in process and will play out.

Paul Patterson (Equity Research Analyst)

Okay. And then in terms of the bank and this sale, this balance sheet repositioning, what will be could you just give a little bit more of a description as to the high-cost loans and what have you that you were paying down? What was the cause of the when did they occur? Just if you could give me a little bit more flavor on that, that would be helpful.

Ann Teranishi (President and CEO)

Yeah. Hi, Paul. This is Ann Teranishi. The proceeds from the sale were used to pay our highest-cost funding, which were public CDs.

Paul Patterson (Equity Research Analyst)

And when did those CDs what's the tenor on them? In other words, are they recently issued CDs? Just sort of so they're about that high cost? I'm just a little surprised.

Ann Teranishi (President and CEO)

Yeah. So the public funds were yielding 5.6%, and they were 60-90-day certificates of deposit.

Paul Patterson (Equity Research Analyst)

Okay. Okay. And then just really finally, the labor contract, can you give us a sense of the cost increases that are going to be that's sort of the annual CAGR of what you guys negotiate with your union?

Shelee Kimura (President and CEO)

Hi, Paul. This is Shelee Kimura.

Paul Patterson (Equity Research Analyst)

Hey, Shelee.

Shelee Kimura (President and CEO)

Hi. Nice to hear from you. So we're talking about an extension, basically, of the current contract. So those would be 3% increases every year. We had a separate component for our linemen given the market rates for linemen in our sector. And the cost increase for that should not be different. It should actually be a little bit less than what we experienced in 2023 because we had a pilot program ongoing. And so the total impact of that should be about in the same range, if not a little bit less.

Paul Patterson (Equity Research Analyst)

Okay. Great. Thanks so much.

You're welcome.

Operator (participant)

Your next question is a follow-up from Jonathan Reeder with Wells Fargo. Please go ahead.

Jonathan Reeder (Equity Research Analyst)

Hey, perhaps I did miss it in the slide, but can you let us know how much utility-funded CapEx is planned for 2024 and perhaps even over the 2024 to 2026 period? Obviously, there's the resiliency spending, which portion of that's going to come from the DOE funds. But it looks like you have some utility-owned repowering, battery projects, stuff like that. Can you give us a sense? Or is that going to be laid out in the K?

Paul Patterson (Equity Research Analyst)

Hey, Jonathan. This is Paul. So we are not providing guidance on CapEx, but what I would say is, as we look at our liquidity, we're managing to what we can afford in terms of our financial resources. I would say, generally, we would probably be on the lower end of what we've seen historically. As we mentioned, we are reprioritizing our spend to focus on critical things like wildfire mitigation, resilience. There will be some moderation in other areas as long as it doesn't impact public safety. But again, it's a matter of managing within our financial resources. And as Scott mentioned, we do have our facility that we're working on. We've made good progress on that. So that should provide additional capital as we operate our business going forward.

Jonathan Reeder (Equity Research Analyst)

Okay. Thanks, Paul. Appreciate that.

Operator (participant)

There are no further questions at this time. I will now turn the call back over to Scott Seu for any closing remarks.

Scott Seu (President and CEO)

Thank you for joining us today. To our shareholders, thank you for your continued support and investment through these challenging times. I think that all of us here at the companies, our hearts continue to be with the people of Maui, including our many customers and, of course, our own employees. We're going to support and work alongside them every step of the way. As I said earlier, I'm encouraged by the support and collaboration that has really characterized the reconstruction efforts. We look forward to continuing our work with the community, governor, lawmakers, and others. We will chart our path forward together.

Operator (participant)

Thank you very much. This concludes today's conference call. Thank you for joining us. You may now disconnect.