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HE

HAWAIIAN ELECTRIC INDUSTRIES INC (HE)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025: revenue $744.1M and diluted EPS (continuing ops) $0.15; Core EPS was $0.23 as management excluded wildfire-related items and a Pacific Current loss; EPS missed S&P Global consensus of $0.23* .
  • Utility core performance improved: Hawaiian Electric net income rose to $47.8M (from $39.2M y/y) on higher ARA revenues and better heat rate; consolidated results included a $13M pre‑tax loss on Hamakua sale and ~$4.5M pre‑tax net wildfire costs .
  • Legislative catalysts advanced: SB 897 (PUC‑set wildfire liability cap and securitization for mitigation), HB 1001 (state settlement funding) and SB 1501 (IPP backstop) passed Legislature and awaited Governor’s signature; management sees these as credit positives and risk‑reducing .
  • Balance sheet actions: $384M of holding company debt was retired in April using ASB sale proceeds; utility dividend to HEI reinstated at $10M for Q1 2025 .
  • Settlement timing: remaining administrative steps expected to complete in early 2026, triggering the first ~$479M payment; restricted cash for the first payment remains in place .

What Went Well and What Went Wrong

What Went Well

  • Core utility earnings growth: Hawaiian Electric core net income rose to $49.7M vs $44.2M in Q1’24, driven by higher ARA revenues, improved heat rate, and lower bad debt expense (partially offset by wildfire mitigation and insurance costs) .
  • Legislative progress: “This month, the Hawaii State Legislature passed legislation directing the Public Utilities Commission to establish a liability cap for future wildfires… [and] authorizing securitization to finance wildfire safety improvements,” supporting affordability and decarbonization goals .
  • De‑risking and simplification: Completed sale of Hamakua Energy and used ASB proceeds to retire $384M of holding company debt; management emphasized a simpler, utility‑focused model and improved financial flexibility .

What Went Wrong

  • EPS miss vs consensus: Q1’25 diluted EPS (cont. ops) $0.15 vs S&P Global consensus $0.23*; limited coverage (2 EPS estimates)* .
  • Non‑core charges and wildfire costs: $13.2M pre‑tax loss on Hamakua sale at Pacific Current and ~$4.5M pre‑tax net wildfire expenses (about $2.5M at the utility) weighed on consolidated results .
  • Revenue down y/y: Consolidated revenue fell to $744.1M from $792.0M in Q1’24; while operating income improved, higher wildfire mitigation and insurance costs persisted .

Financial Results

Consolidated headline metrics (oldest → newest)

MetricQ1 2024Q4 2024Q1 2025Q1 2025 Consensus
Revenue ($M)$792.0 $799.2 $744.1 N/A*
Diluted EPS – Continuing Ops ($)$0.19 $0.17 $0.15 $0.23*
Operating Income ($M)$50.9 $53.7 $62.4 —

Notes: Asterisked consensus values are from S&P Global; limited analyst coverage for HE in Q1 2025.*

Profitability ratios (S&P Global fundamentals)

MetricQ1 2024Q4 2024Q1 2025
EBITDA ($M)$125.5*$135.1*$139.9*
EBITDA Margin (%)15.85%*13.27%*18.80%*
EBIT Margin (%)6.55%*6.83%*8.51%*
Net Income Margin (%)5.32%*-8.54%*3.58%*

Values marked * retrieved from S&P Global.

Segment breakdown (income for common stock)

Segment ($M)Q1 2024Q1 2025
Electric Utility$39.2 $47.8
Holding & Other$(18.0) $(21.1)
Consolidated Continuing Ops$21.2 $26.7

KPIs

KPIQ1 2024Q1 2025
kWh Sales – Total (MM kWh)1,906 1,965
Avg Fuel Oil Cost ($/bbl)$121.84 $104.55

Guidance Changes

Metric/TopicPeriodPrevious Guidance/ContextCurrent Guidance/UpdateChange
First Settlement Payment TimingNext payment windowQ4’24 call: “late this year or early next” (i.e., late 2025/early 2026) Early 2026 expected after court administrative steps complete Deferred toward early 2026
Utility Dividend to HEIQ1 2025Suspended since Q2’24 given cash needs Reinstated; $10M declared for Q1’25 Raised/reinstated
Utility CapEx (company commentary)2025–2027Q4’24 call: ~$350–$375M 2025; +$150–$175M 2026; +$200–$250M 2027, including ~$400M wildfire strategy over 3 years No quantified update in Q1 call; securitization authorized for first $500M of wildfire mitigation CapEx under SB 897 once signed Maintained trajectory; financing tool added
PBR Target Revenue Rebasing2026 test year; 2027 startAnnounced PUC order to rebase ahead of 2nd MRP Filing targeted for later in 2025; 2026 test year; potential changes to allowed ROE/equity ratio under evaluation Process advancing

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
Wildfire Tort SettlementSigned definitive agreement; 4 installments; prepay option (5.5% discount) Favorable HI Supreme Court decision on subrogation clears path; timeline toward approvals outlined First payment expected early 2026 after court steps Visibility improving; timing clarified
Legislative/RegulatoryPreparing wildfire plan; PBR review noted Pursuing wildfire recovery fund, securitization; strong momentum SB 897 (liability cap + securitization), HB 1001 (state funding), SB 1501 (IPP backstop) passed Legislature; positive credit implications Constructive legislation
Financing & Liquidity$558M equity raised (Sept. 2024); AR facility approved Restricted cash set aside for first payment; strong cash balances $384M debt retired in April; exploring mix of debt/equity over multiyear; no near‑term equity planned Balance sheet de‑risking
Utility Earnings DriversO&M pressures from mitigation/insurance Core utility NI ~$49M in Q4’24 Utility core NI up on ARA revenues, heat rate; mitigation & insurance still headwinds Mix improving
PBR/Rate SettingPBR review underway Emphasis on wildfire strategy costs & affordability Filing to rebase target revenues in 2025; 2026 test year; ROE/equity ratio may change Tariff structure transition

Management Commentary

  • “Our core operations performed well during the quarter… We’ve also made further strides in our efforts to regain HEI’s financial strength and emerge a stronger, more resilient company” — Scott Seu, CEO .
  • “With this critical supportive Supreme Court decision, the remaining administrative steps required to finalize the settlement are expected to be completed early next year… after which we’ll make our first $479 million payment” .
  • On legislation: “Senate Bill 897 is a milestone… that can reduce wildfire liability risk exposure for the utility… and allows for lower‑cost financing so the utility can implement wildfire mitigation plans” .
  • On PBR rebasing: “We expect to file an application to rebase target revenues towards the later part of this year… looking at a 2026 test year” .

Q&A Highlights

  • Ratings and legislation: Management expects SB 897 (liability cap) to be viewed as a credit positive by rating agencies once signed, among other milestones including final settlement approval .
  • Liability cap mechanics: PUC to set an aggregate cap after rulemaking; forms considered include flat dollar amounts, % of market cap or rate base; legislative discussions ranged around $500M–$1B as examples; cap must balance utility solvency and ratepayer impact .
  • Financing settlement tranches: First payment due early 2026; company will use a mix of debt and equity over time, but no near‑term equity plans; may be opportunistic based on market conditions; securitization is for utility CapEx, not settlement .
  • PBR/rebasing: “Rate case‑like” proceeding; filing later in 2025; 2026 test year; allowed ROE and equity ratio will be reassessed and could move positively or negatively .

Estimates Context

  • S&P Global consensus: Q1 2025 Primary EPS Consensus Mean $0.23 (2 estimates)* vs actual $0.15; indicates a miss and potential downward estimate revisions in near term.*
  • Revenue/EBITDA consensus data were not available for Q1 2025 in S&P Global (actuals only surfaced via filings).*

Values marked * retrieved from S&P Global.

Key Takeaways for Investors

  • Q1 print was operationally solid at the utility (ARA uplift, heat‑rate gains), but consolidated EPS missed a light consensus and remains sensitive to wildfire/legal items and non‑core losses .
  • Legislative progress (SB 897 liability cap + securitization; HB 1001 state funding; SB 1501 IPP backstop) is a material de‑risking catalyst that could improve credit view and reduce tail risk once signed and implemented .
  • Balance sheet de‑risking continues (retired $384M debt; utility dividend to HEI reinstated), enhancing flexibility ahead of 2026 settlement outflow and a multiyear CapEx cycle .
  • Settlement timeline clarity (first payment early 2026) reduces near‑term funding urgency; company indicates a mix of debt/equity over time with no immediate equity needs; securitization reserved for wildfire CapEx, not settlement .
  • PBR rebasing in 2025 (2026 test year) is a medium‑term earnings trajectory catalyst; watch for proposals on allowed ROE/equity ratio and wildfire cost recovery mechanics .
  • Fuel cost tailwind and volume uptick supported margins; sustained mitigation and insurance costs remain headwinds to O&M .
  • Near‑term trading: sentiment likely hinges on gubernatorial signature of SB 897/HB 1001/SB 1501 and any rating agency commentary; medium‑term thesis centers on regulated utility earnings normalization, securitized wildfire investments, and settlement overhang resolution .

Additional Detail From Q1 2025 8‑K and Press Releases

  • Consolidated revenue $744.1M (vs $792.0M y/y); operating income $62.4M (vs $50.9M y/y); diluted EPS continuing ops $0.15 (vs $0.19 y/y) .
  • Utility net income for common stock $47.8M (vs $39.2M y/y); kWh sales 1,965MM (vs 1,906MM); average fuel oil $104.55/bbl (vs $121.84/bbl) .
  • Core non‑GAAP reconciliations: consolidated core income continuing ops $39.8M ($0.23 per diluted share) vs $28.4M ($0.26 per diluted share) in Q1’24; after‑tax adjustments include wildfire items and loss on sale .
  • Board declared $10M utility dividend to HEI for Q1 2025 .

All document data are sourced as cited above. Values marked * retrieved from S&P Global.