HE - Earnings call transcript Q4 2017 | Hawaiian Electric Industries, Inc.

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Operator

Hello, everyone and welcome to the Hawaiian Electric Industries Fourth Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Cliff Chen, Treasurer and Manager, Investor Relations. Please go ahead.

Cliff Chen

to call. fourth welcome end and and conference earnings you HEI’s quarter XXXX year Thank

Officer, this and senior are members Boards Executive be and and overview, earnings me for Hazelton, Officer; XXXX end other In Officer American answers. Company non-GAAP economy, you will Joining followed Alan morning Wacker, year American Officer; by management. HEI management our questions and Chief Chief President and Bank to as Electric and measures financial results of Connie Savings Chairman on guidance. and Executive company’s today’s presentation, provide Executive and Then, Oshima, Vice well Rich of Greg describe the Chief our Bank; Hawaiian as using Chief the update Savings and of Executive the President Electric and Connie an fourth Hawaiian we President quarter who Greg Lau, will operating will Financial will XXXX HEI with President Hawaii’s performance. Company conclude

press materials to posted equivalent Relations measures. HEI’s Investor including disclosures which contain non-GAAP the and presentation additional Our on website reconciliations regarding GAAP are these webcast release measures,

with otherwise. guidance, now forward-looking new as be undertakes differ overview. could our of to described company I also including which a that The additional differ. today’s to or EPS will to Connie statements update accompanying webcast regarding disclosure what Lau ask the future factors revise cautionary to obligation whether results in information important cause events will information, could begin slides the provides on Forward-looking CEO, statements, results an note Actual publicly materially those call. the or statements. made without on refer is limitation no any from result Please forward-looking statements

Connie Lau

am stronger expected and aloha performed to results. bank had produced that to XXXX year strong in and a than and our Thank utility within economy Hawaii’s guidance very proud everyone. I say Cliff you, our

negative which As with tax to will million $XX.X explain. act subject impacts other a in from some companies, one-time Greg we are the net reform XXXX,

like however, at Moving working positive benefit will to forward will Commission utility other the Customers utility as to benefits enterprise. will have the Utilities net lower tax banks and our reform our also with the customers. bank benefit that a consolidated net our subsidiary of tax impact rates on utility from Public return is

there catalyst to to company Utilities our three developments, all at with most the us of for a year, at and rate in Hawaii our to customers. supply and have very accretive in in to investment succession by utility year. meet important had was XXXX expected its construction worksites on Pacific to approved project purchase and announce utility will will together utilities. year other this carryout goals. a cases for new the Island. innovative, and bank’s efficiencies XXXX, Looking XXXX XXXX clean is the plan another power modern Public Pacific We XXX forward Commission results this one Current, was investment and impacts decisions XXX% is productive important Hawaii. The later purchase in helping underway Public a and for made for Hawaii mission power a Hawaii’s utility It our renewable be Honolulu our Hamakua bring Commission. that received Pacific In Island foundation on The state quick short. completion critical We milestones, look renewable Current approximately We reliably renewable year. lay And integrate Late non-regulated and XXXX XXXX the to also sustainability last we And are because Energy met foundational begun continue make enterprise teammates goal Current on and major investment and energy campus Hawaii-based to platform and the in our to continue we its its the better rate a original the purchasing pursuant strong resource customers. formed to to first stakeholders, no plant at the PUC toward bank commission with started we agreement, for utility provides energy. greater will our together Hamakua be and plant Utilities help constructive active collaborative XXXX. momentum for ownership

systems, generation, and fossil system in on XXXX our XXX% We and renewables approval with on by And reduction We power forward three cases received of Utility are approximately offsetting for of framework plan with need of move the acceptance triennial two to strategy. annual week with solar improvement grew grid decisions rate through our underway. modernization to the scale interim achieving In foundational oil part them. Public last our barrels. orders the on the incremental progressed addition supply of case we Commission’s the distributed cycle XXXX returning for latter our of consumption equivalent rate a grid and XXX,XXX XX%

renewables in are further towards newly the continued our to of were an approved through participate growth. PPA for which procurement new to to solar and state’s such community RFP renewable our customers approved as with We the recently. renewables the making transition utilities programs of largest ways response progress demands issuance goals The of innovative both program the renewable our develop our for advance ever and introduction

also We our internal on to continued work transformation.

million of over enterprise asset management have and We enterprise planning committed benefits resource as our project. $XXX are customer in part enhance to XX years and working efficiency to

of X.X% case years any Hawaii interim rate in effective increases allowed on interim and and was test without last test And on Electric, XX base February October December rate in August Evidentiary million increase rate X.X% and case Hawaiian increase a in application and on Light Oahu ROE effective XXXX of test XX. rate year of Turning case after $X.X Slide became and Electric In to our interim Maui increase were revenues the an in will X, X be XX. approved year Electric rate allowed XXXX of held will at case $XX remaining approved with its the year requesting filed XXXX Oahu hearings March. become in issues ROE revenues. $XX rate million a the

the expect For an we schedule, decision procedural PUC this August. interim

placed MPIR Station project and and PUC megawatt is by interim XX XX Generating expected last mechanism facility cases between We The major this Cap. established RAM cost awaiting this mentioned megawatt recovery. under placed are service to As are Schofield benefit our applied of rate be circumstances in the for for recovery order in into quarter limited XXXX for mechanism guidelines for decoupling MPIR year. projects related applies which projects Loch our to service Solar under West decisions the which net

will the ROE We timeliness and lag. expect increase the recovery that mechanism help of reduce MPIR

to incentive net commission performance three went performance. with our tax customers. XX, back at the of interruption tax beginning pertaining first working are we to and year flow utilities on The filed a call reform mechanisms And reform our effect estimated January center of on plan and this system finally, benefits benefits into all for we tax goals to from

renewable our to path XXX% Turning review future. developments let Slide significant on X, to me the

X-year island Power that filed for to renewable by provides megawatts for The filed to August achieve a process Hawaii’s proposed the new the system accepted filed the includes October of ready for resources our action flexibility grid goal firm provides utility or XXXX resilient XXXX the customer plan PUC generation. the draft for process company certainty XXXX. RFPs a energy this the amount roadmap PSIP their groundbreaking customers. XX has our Improvement we PUC renewable with in company renewable economic implementation Hawaii’s with proposed XXX% maximizes Plan modernization of grids. First greater of and to more and IPPs last final largest and extensive Supply including strategy provides and through megawatts a input our dispatch In is developed The approved July PPA PUC value building PUC week which month. which XXX and procuring greater needs with meet companion vision stakeholder ever In

air Phase first X, XX% for the year, continues fall, approved we residents. XX% we export can provided at strong and customers have CBRE grid cost where response systems. such based bid stable revised amount in power rooftop X applications. just will expanded energy to resources can Phase plus, saw CGS for customers marginal seamless to grid export hours solar, to to that demand order heating, included start for but supply up With smart Recovery in applications are X deferred the XXXX, cited and from in progress grid be has role integrate renewable charges base moderate on only be rates. able process for provide day cost. megawatts stability programs avoided state. up last solar solar, credited customer tool company with allowing will made in in increase the storage reserved approved export submit help launching of income and and In rate. in from price the customers continued The which or online they rooftop have the during the on allowing utility at an finish. prior largest Harbor-Hickam, new the will customer more anticipate plus, water installed two maintain Base an storage exports, which PUC through portfolio customers to grid structure. can tool, to utility a solar have our and storage integration XXXX, expected grid including program, our XXXX, and Customers a plus surcharge their credited year-over-year growth megawatts solar scale peak application We of the or the tariff since a grid. maintaining XXXX. megawatt energy its come Joint manage to introduced our of power of response XX interconnection a while resources October, to the storage PUC the energy when lowest community-based not on the Loch increase produce enables grid, kind in the of non-daylight demand grid administrative energy to scale equipment be renewable with continued which improve follow and online demand customers week until PUC last conditioning in December export approved process the The reliability. as battery believed solar their The to smart XXX with solar In January, the in are solar phases. during rate the In experiences the customer through a to customer West In We project will With Pearl with is the CGS status of to

We collective continue and while in future more Hawaii’s activities achieve to beyond bill. energy support to transport electrification a sustainable reducing

per our a greater to in an Greg outlook nation environment Ended fuel have sources this transportation by all in now of March various sales Public clean results a a vehicle achieve implementation level working with goal Hawaii’s pilot of is XXXX roadmap for file us private all economy with We in sectors. electric approximately to economy, will financial second with Hawaii growth state the XX%. and for our renewable with and remains stakeholders of of transportation initiative XXXX. Utilities project of XXXX, cover year-over-year is by the energy been Commission will electric all public and increase electrification conducting Along ask XXXX, fleet. for a communities. sustainability capita in in transportation XXX% the activities renewable company for Honolulu the and transition mayors and XXX% XXXX. help our to committed also strong bus for I the will

Greg Hazelton

in XXXX records a driver Hawaii’s was the tourism industry, state’s Thanks, strong. XXXX. economy of economy in set Connie. very Overall, Hawaii’s significant

from Hawaii’s year, unemployment for back in compared unemployment For tax serving categories. spending lowest jobs air record than revenue, In last condominiums and the declined lower volume dating the $XXX,XXX and was in record and prior for compared January generated while up sales increased and was the Sales XXXX Visitor median industry period last year, volume of to homes seats to homes year X.X% single-family home $XXX,XXX achieved on of same year. slightly. several market condominium of Oahu XXXX, Oahu single-family On X, in up rate of the except single-family transpacific is also remained XXXX. was sales January the as results. sales I prices supported the reform X.X%. of of Hawaii’s X.X% in rate sixth respectively real for on we tourism for December arrivals quarter X% line show totals will year expectations results largely the the tax The and Hawaii the key and fourth impact to Slide consecutive in statewide. current new address with quarter year full national HEI which and annual fourth XXXX condominiums estate full act, well. rate has the strong.

slide, primarily Going $XX.X from after was tax GAAP reduced one-time to the that GAAP of net including income net the $XX.X related LNG impact act deferred and bank one-time income left canceled and million, tax on spin-off GAAP included XXXX reform was year due contract the $XXX.X XXXX the consolidated shortly the $XXX.X million the of income net XXXX to the in of fee of effect. announced ASP. as right to terminated well the one-time net of act associated consolidated and revaluation net In tax merger million by balances the million liability as additional this the to to in costs the was consolidated impact of employees into went bonus XXXX. for compared net income terminated asset due full reform

Excluding per the results. at $X the Core by income top earnings enabling excluding holding and the by related company XXXX and $XXX.X the the deduction, $XXX.X associated per spin-off impacts in loss compared the in in XXXX. canceled earnings to HEI per one-time of than $XX.X in XXXX in compared XXXX, items, in net federal to million, as at benefits act $X.XX Recall EPS our operating DPAD $X.XX domestic offset was year in core partially million XXXX holding utility impacts $X.XX was to position of the was of approximately federal $X.XX to in per share company. recognition results, together company per the in moved net from On activities share bank GAAP share XXXX lower XXXX. share the of prior an reform benefited which benefits income ASP terminated tax compared of the $X.XX production million core the merger $X.XX out these basis, driven tax lower totaled XXXX million one-time share XXXX, holding better of was that net tax

XX HEI’s for As XXXX was shown consolidated on Slide ROE X.X%. GAAP

the approximately was the point of Excluding of negative tax HEI’s first of the year X.X%. act, XXXX thereby the impacted on consolidated XXXX due had expiration core basis core ROE X.X% the was RAM five core a which lower reform impacts to impact The ROE prior primarily settlement, utility of the compared ROE and months ROE. to XXXX XX

level impact deferred ROEs being our are current by cases. reform tax from negatively the that XX rate utility excluding In ROE utility addition, balances primarily basis through the ROE Lower net revaluation federal the of impacted points, achieved X.X%. at utility asset tax was core addressed

XXXX million to end partially case utility Oahu advocate. expenses, quarter offset utility Light and RAM $X.XX million earning period. call. costs fell costs due of and recovery in million the increased were of XXXX, to to per the XXXX Hawaii resource million higher Looking earnings rate consultant we XXXX $XX the August as due Hawaii net of $XXX effective basis, rate project had after-tax most O&M $X settlement commenced geothermal primarily higher on grid lower guidance Also, $X.XX share renewables maintenance EPS higher revenues in primarily interim power net million costs more with an RAM case which higher costs impact expenses modernization our as to income XXXX. million compared These Electric to of Utility primarily portion drivers were by of costs, RFP significant overhauls reliability increase consultant consumer XXXX, On as of due XXXX. related to guided investments well in $X $X.XX to our XXXX the in settlement are of performed $XXX – our our write-off $XX were integrating XX, partially planning enterprise higher revenues range the in supply third a the to the Slide improvement, lower the by Island of core comparable offset deferred

We Station expected is also project partially had service placed higher depreciation in $X million expense of $X Generating allowance be driven to higher used the Schofield offset for million funds by by construction next largely quarter. that during

from XXXX was year. tax $X.X Turning to million the $XX.X one-time the income benefit rates cash increased of pre-tax the taxes to Slide million million due XX bonus. to and deferred the special a compared from in $X,XXX arising to prior of $X.X compensation includes its year tax net the bank, in the of corporate through of adjustment $XX the primarily lower employees million

items, lower loans decision Excluding related million retail portfolio loan $X provision $XX of drivers and credit for on strong share Slide return items third banking the an margin. income to achieved a income by in points these reduction million was original see income partially for offset and on credit million reflected the primarily the offset elated to basis based were of guidance performance income points to the revised net primarily we driver after-tax growth XX of items higher performance most federal XX increased in of $X.XX losses $X.X $X retail over American’s our and interest and strong loan loan bonus basis: resolution and after-tax XX, quarter EPS employees. including portfolios reflecting profile assets the incentive above assets expense syndicated and cash deposit to in the reserves non-interest million national We required the return greater that on tax $X,XXX and bonuses special act costs, exceeding basis These our strategic impact the through improve due significant from of of partially for tax offset mortgage XXXX excluding due interest in growth $X.XX specific $X.XX. portfolio lower net tax points. million – positive by reform higher following On primarily our per $X earning our to to investment XXX range target basis by non-interest funded by net year The American’s reform ASP’s just lower were target reform. driven growth asset higher of XXXX than problem

interest at X.X%. of X.XX% above for net Our higher to – X.X% is of our X.X% and revised the of and our to than XXXX margin X.X% higher end range range quarter original third of the

margin net strong Our to drivers fourth growth our net in attributable was of yielding interest higher and XX on interest Slide yields shows X.XX% interest-earning XXXX. assets primarily in loan the higher margin portfolios. quarter of the of

the unchanged yield the On $XXX problem earning deposits or to by and were liability this XXXX $XX through cost million quality. the annualized. $XX.X up as $X.X growth estate XXXX, exposure up X.X% well increased in commercial Net for the point On loan credits lower national strong loans. cost year X basis deposits partially sale X.X%, and in X.X% of we million lower higher continued Slide specific $X.X low investment Our quarter. syndicated prior loan million by retail problem quarter The of growth up the our syndicated interest $XXX no deposits million XXXX. total in to has were mortgage were provision million and the credit of in reduction compared linked in increases specific the of asset our or contributed portfolio securities by to reduction XX.X%. Slide was million linked primarily resolution $XX funded due to reflects our million cost XXXX is increased of our higher required December our reduction interest banking our XX, profile quarter $X.X and of work year-over-year review reflecting of Total XX, year resolution million our lower as losses to slightly. growth was net Overall, quarter be commercial than offset in as retail in portfolio to portfolio. points improve have XX in compared deposit income to the from yields interest for of from income of or the million American’s real by investment by risk year-over-year of on and national reserves loans the loans and loans basis offset fourth credit gain loans credit The and lower loans $XXX of income although prior

In American’s prior ratio paid basis funding deposits the of is X.X%, end tangible is the as clean of or end X.X% percentage peer loan and or ratio fourth our deposits cost American XX.X%. XXX% the points, and tangible slightly the our margin quarter capitalized basis loan median loans lower and X.XX% lending was total compared $XX very of net X.XX% as X.X% assets capital portfolios. in at XXXX, million peers. for the charge-offs X.XX% $XXX the reliable held portfolio Slide our funds American’s Delivering while the with common end cost X.X% In by XXXX linked XXXX. quarter. Non-accrual to XXXX, our well quarter leverage compared peers, at the ratio equity outstanding of versus The asset points was the December and X.XX% of linked to loans which low energy relative to dividends December of low of maintaining XXXX higher to remains X.X%, was XX as total core quarter of last Our HEI XX sheet banks as and at and than increased dataset XX million $XX.X of American peer was complete compared in $XXX complete our banks. compared primary at of Station, in In investment the at driver with Base reflected losses ERP mix loan Joint A our consumer expect September year million of of as rate the X% total X.XX% to XXXX XXXX, In year. for to be based the growth. year X% attractive million Harbor-Hickam base bonus CapEx XX%. on to in and invested allowance Pearl available the XX% of funded continued driving in XXXX, the higher and resulting of prior balance our the for million receivable illustrates in XX our Schofield reform. growth loans the capital the for rate at and of a quarter Generating of CapEx in of estimate utility those base completion projects from projects lots depreciation investment to strategy. tax $XXX we to including a aggregate

pursuant we of forecast grid will XXXX, our applying projects CapEx each in be that a and power and for plan $XXX for modernization For year, we strategy. supply XXXX each range million $XXX million including improvement of to to

shareholders. energy a Turning capitalization. to our Slide to our strong return grade profile, as to a credit profile sustainable XX, XX% utility sustainability common to provide total of structure of and program capital and CapEx HEI support plan necessary Pacific strong Current at starts with investments credit It a is maintain our competitive equity investment consolidated is to and clean dividend part XXXX

in expect from during additional financing do needs any depreciation, program reinvestment higher we utility bonus not future Tax XXXX. dividend loss our to need for resulted equity due the in external While the or to of the equity Act has Reform

Pacific investments the Our refinance million XXXX as of plans, I as related companies and plans in net to holding cover plans $XX approximately company through also for debt well utility in holding investments XXXX. maturing $XX the impact million Earlier our walked additional $XXX one-time the long-term assume of finance financing Current in million, remainder reform at tax of our company needs. the our debt negative

from utility, tax to though, reform with as our to At to back impacts PUC federal Moving forward enterprise. benefits XX, the company see reform the customers. the rates the lower filed net we expected our an the tax tax are January On act. consolidated of positive estimated the flow overall

with a bank The non-executive to increased advocate benefit the the in industry, bank this employee throughout banking the of the customers. the per benefit. tax employees allow commission pay improve the to and the shared We others a consumer The to a increase form scale earnings our like will provides back bonus XXXX bank continue provide will minimum when and reform flow benefits portion the positive of capital and lower elevated how holding with from of will an specifics net work to $X,XXX these At in in rate and and the income generation bank’s wage tax improvement in organization. dividends the company. on

the in will the has Current’s company, employees, customers initial rate line. earnings is the expense net be an our not Pacific those will in lower our In addition, tax benefit investment bank XXXX. cover Hawaii with bottom loss net reform deductibility interest than positive At positive more to economy. to flow generating income, will company, the expense, interest its be net so and holding increased of issue. the more earnings holding tax slightly now company Overall, will interest a

We are range initiating earning $X.XX the share. of HEI’s $X guidance in the to per

We in $X.XX. the to $X.XX to bank utility of of and in $X.XX $X.XX range expect EPS EPS the the range XXXX

we XXXX. XX% XX% Our be Current’s need includes not excluding our capitalization, levels than guidance Fuel and utility pension upon greater depreciation. case mechanisms, million $XXX margins to to low or to be the equity XXXX other $XX accretion rate rate expected common expect for on on levels. any and in we overall $XX is investment. our range approximately intent the additional model X.X% to costs. of bonus investment O&M based initial of be XXXX returned with XXX Based between and $X.XX assume X% million in X.X%, growth equity provision consistent million bank, single-digit CapEx the basis guidance loss recovery the points. decoupling also interest expense of maintain expect plans assumes X% our asset utility, plans XXXX greater to and higher with At of CapEx bank do consolidated assets no the from mid net growth, We changes the expect to efficiency base At we than should Pacific to

incorporates the it the to slide. federal the tax I for previous as impacts reform on of Connie, discussed you turn guidance closing remarks. act will Our back

Connie Lau

In are American due benefit and case. from enterprise triennial from earnings Thanks rate reform returning Savings tax increased our the summary, capacity Greg. consolidated Bank. utility, dividend we the will to At

our to have major achieve our We renewable frameworks made goal. XXX% foundational progress state’s on

We focus our resilience enhancing electrification are energy options customer help sustainable independent. and to reliability and customer continued to broader communities promoting energy and Hawaii’s and expanding vision increase And clean we a achieve value. on increase to activities

campus And goals. completion year, operating asset it Our results making and financial new of to earnings expected better will bank boost a achieved the improving relationships, reform. achieve this even having quality efficiency easier, XXXX while American position a in better will banking XXXX in and positioned strong continue its on growing expected its from and portfolio. enhancing asset an profitability to customer tax enters than be focus its with with deepening

yield Board the as our month maintained of continues project soon. serve energy Pacific to clean and per as quarterly XXXX. formed XXXX as Hawaii. and is dividend in better be payment finally for at catalyst investment X.X% we share to we dividend Its addition, projects another close. uninterrupted our Current expected of In to attractive to be announce plan continuing yesterday’s And strategy part The our dividend of in invest enterprise sustainability accretive first since the in to $X.XX earlier Pacific our market a Current

Our focus our to forward customers, questions. now providing And we and hearing continue communities, will companies shareholders. value long-term for look employees your to on

Operator

Thank you.

We first session. Please with from ahead. begin will Instructions] of our Dumoulin-Smith the now [Operator And go question-and-answer Julien question comes America/Merrill Bank Lynch.

Julien Dumoulin-Smith

Hi, good morning.

Connie Lau

Hi Juliann.

Greg Hazelton

Hi Juliann.

Julien Dumoulin-Smith

Hi.

authorized it speak earn takes, utilities, about more of this thinking activity more point, how curious at case move you on perhaps comfort on, the closer earned years moving in obviously congratulations for the results. levels you puts you beyond to means sustainably as hear on have ROEs the to going good but So, ability still you I the on importantly this at expectations and am there? your to and – going forward rate years puts a certain to visibility got even but degree are can and through XXXX what back

Connie Lau

Okay.

turn but So a going make very XXXX, Julien, level just into Greg. I it last being will remember that let a year primarily transition thereafter year is of we about be talked delays of going to comment and the good rate XXXX that continuation transition, in high me to should it in of I some think over we you fairly be the Oahu the a shape. partially then case and because

Greg Hazelton

Yes. note going to I the same thing. was

cases this utilities a all reset base our all to X-year utilities two earnings rate have cases. all do in from set year to three flight still level out of of full rate We for three – utility of hiatus having power come

to So XXXX continues for that be to year a critical gap. close us

or for your our we that it address which certainly as or advocate this reset was allowed on. collection interim ROE a focus will with whether for how to to X.X% which cycles and continued show final slide. rate X.XX% the X items on the And X to allowed did at question, through we is unlikely and ROE in relative cycle some of structural this cured Maui June that we Hawaiian for under is of creates whole Item be accounted note to I would show keeping slide May the now as to adjusted just that continue on is order not we XX and Light the that meaning been to change Slide XX a we recovery something to that rate we some on maybe authorized in the commission still whether the lag of also that the it’s leakage lag that So remains educate cured this case through case X in X and that RAM the mechanism, will the Items Electric Electric, not Hawaiian the have result Electric. include include

points basis XXXX. XX so another be there you forward as will there look So, or to

have rate you or structural naturally XX into so of So probably recovery our built got points basis mechanisms. lag

gap perfect to all further earnings. minus out even be will way close not we the expect the opportunity allowed coming the that our narrow the we I that whether for the performance items. create would it of whatever other XXXX would so of or is just structural And can

going programs we so each now future supporting as always those I incorporated believe with rates utility Julien be is think I to there the in forth. you of to previously, investing need rate cases annual have and rate and you will cases spoken test the years through annual on in be element basis and an

your again you coming well, as see with to have we XXXX what of I would that So continued general. would say improvement but in is out maximizing results balance

Connie Lau

just that newer plus I case some to recovery also go of West Loch the do service like for test due rate XXXX two although under to other projects we this so and those mechanisms year the of qualify Yes. infrastructure Oahu and outside get some have the energy Schofield rate have And renewable has MPIR applied case Julien, in to therefore surcharge, MPIR, we are used projects add for program that the for of REIP. our year,

so the another help close to using we that And will be that’s mechanism gap.

Julien Dumoulin-Smith

or rate many – be of benefit outside annualized of alluded the that XXXX, ‘XX would to into case continue year? those right that just be to into would the you really And

Connie Lau

would be Yes, they during test year. the

Schofield for be Schofield So goes with it service. example would in

Julien Dumoulin-Smith

of case, the improvement? mechanisms to those rate about out think aggregate ROE are were in much quickly How just you it. if Got

Connie Lau

case, rate the of Schofield… Outside

Tayne Sekimura

is project. million Schofield another Schofield this $XXX is Base project $XX Harbor about project project is project, Julien, PV and million the Tayne. The Pearl Joint

said would recovered MPIR. in those Connie like be the So

Greg Hazelton

impact this Again, lag. coming any which any year will in, without and the in expect that under is recovery particular approved fairly that the are year. MPIR those in there lag projects we upon mechanisms mechanisms so assuming two be be are to closed mechanism we approved those the of by covered they investments and depend being So significant have two large lumpy, got that

Connie Lau

CapEx rate Julien, CapEx Greg and numbers as will when are service you base become the we So in our see numbers as for into growth then those they gave of you little the year, two how because XX% big through to XXXX service projects bit base a all this for is into primarily of X% and it at they that growth programs kind said the but are go planned rate in are numbers. our higher that’s works going

Julien Dumoulin-Smith

– did it. say there? throw catch that And Got Current, you are Pacific you did that right quickly, did on at a out Connie looking you second investment I it

Connie Lau

indeed, are we yes. Yes,

yet. to not just it quite are ready We announce

Julien Dumoulin-Smith

much. it. Got very you Thank Alright.

Connie Lau

you. Thank

Greg Hazelton

Julien, in we in see Boston. you will February

Julien Dumoulin-Smith

Thank you. there. you See

Greg Hazelton

Thanks.

Operator

Our Evercore next ahead. question with Please comes from go Greg Gordon ISI.

Greg Gordon

how Hi, Thanks. are you?

Connie Lau

Hi Greg.

Greg Hazelton

Hi Greg.

Greg Gordon

okay. – So

smoothly your where guess? said you earned need but points large build to lag, guidance the with rate to – are get a rate but of also are coming come of the were lumpy structural ROE cases that up eliminate sort on what – couple ROE projects perfectly we the to in and is mechanisms algebraically year all to do with operating you a the saying ROEs should and would whatever of did is a with assumed going at assumed is So authorized for are you or sorry if these indicate just that case ‘XX hoping point your a XX that do just then Julien’s this cycle, midpoint the you question, but you authorized basis were what

Greg Hazelton

Well, I I do math. can think the

to gap guidance We inwards number where do meaningfully were challenges, to to we within the the addressed achieved the is, expect a XXXX had close it of the haven’t closed to you provided point cases and rate between the a themselves. had know XXXX allowed were at number as and asked of which our challenges be relative range. It on

ROE the ROE authorized on within So range within the we depending expect final given much our hearing where – – out. stronger performance opportunity ROEs well in come well ROEs and reasonable level of the

Connie Lau

Greg And as as ‘XX decision. XXXX transition my year Oahu the based becoming to was just on about primarily well comment clarify, a

not I thought we into interim have The in some worked come that we that interim would issues resulted did December, in think reconsideration mid-February. decision if effect you has recall of December. rates a rates in going we out through those Oahu but until for

through Electric its is that Maui go for for going projects are case. rates case transition the So outside large those would the service. of assuming But large is be start still are been some rate expected the because MPIR and to into cycle through have as projects rate creating of approved they the applied of for us when course projects,

Greg Gordon

Understood.

and to that minus allowed and get structural of year the X% ‘XX – your is demonstrable minus start So into improvement you hope approaching core you allowed expect from the ROE earned sort what ‘XX as impediments structural fair? last the

Greg Hazelton

Yes.

was settlement. We basis year the XXXX of impacted. that XX points know because calendar of XXXX You lost loss the

we collect trust periodic our ROE costs costs. between significant and even so lag, because And you there, that I XXXX. But differential any which what contributed defer and and also get – you yes points performance have right we external were pick to periodic normalize we impact these periodic a we basis to so what XX much note part true just cases pension the actually pension including up of would although up an net that that if for also paid lost rate for we higher expect for would

create that. on so does drag not an that in are a We on differential, getting ROE it return earnings

And so and higher periodic these upper turning improving costs pension to our earn it’s our improving rate also cases net ROE. are flow ability cash as therefore as well

Greg Gordon

And Pacific Slide showing Current is entire underneath are you of second did Pacific question, Fantastic. numbers or that or then it correct, sort the numbers on I the believe XX, regulated is utility not Hamakua not you you us did, in acquisition but CapEx are those that was the the that correct, the – with…? rate base Current, gave CapEx you on

Greg Hazelton

no. No,

Connie Lau

regulated utility, strictly utility. That’s

Greg Hazelton

what that rate concept. our base utility into signaling solely just growth, And a and is driving was which was going base rate

Greg Gordon

Right.

acquisition this second you base the extent do totally or would you more the able and the forecast on construct identify us? rate outside be are theoretically this are to execute of giving in So that to future

Greg Hazelton

that. to it would Yes, incremental be

Greg Gordon

company and sort Pacific holding the of Right. on And loss? range sort expectation net net us range other a XX giving in the you are utility for just a Slide Current for guidance parent bank. guidance of the and Is

Greg Hazelton

neither per share. included the bank is to the or company is the the holding Yes, we range. guidance roll the it’s that as in utility consolidated of of It to part is. in EPS It $X $X.XX up –

in my about $X.XX comments, earnings I XXXX. As we from anticipated investment that indicated in accretion

Greg Gordon

that’s $X.XX net Right. the that’s on Slide noted XX? loss to incorporated into $X.XX And

Greg Hazelton

Yes.

Greg Gordon

in you above performance particular, in Thank by your are high-performing, the on peers much Can just are Perfect. well that to us advantage? you to is bank are net a you key your allowing the high-performing even I expectations relative forward think interest a that and at an performance great customer backdrop mean give metrics, I economic your the are very base, certain that going and your you your what’s achieve of state attributes incredible what over the underlying the sense of competitive way, peers. margin, sustainable

Greg Hazelton

thanks the Yes, comments. for

and and put doing just for more retail more more all make costs through our them were we It’s the customers. on Connie easy growth and you deposits retail selling we efforts deposit than them funded through in entire funding banking and sure the to relationship managing keep the have about we the actually an are so of the our good down. loan recorded more control what growth able plus No, side the see had the to book and portfolio. to them. talked of making our then core really as we use able work am we strong a bank is lot core basically I are with been costs and area on it becoming are is of to and deposits into the that yields hard And We very investment going we the prime balance and

been concentration able have think what helped there. us we has I retail to with So, heavier do

of in didn’t terms public kind of of lower growth. about share. component peers are only double-digits We relatively we have – compared to we we deposits deposits a deposit who in as public are in our portfolio, have managed a loan And have X% stronger our

a there good So, the are the we think that deposit help maintain the we and pretty think we side deposit doing we as forward. is were yields on pressure the the it, performance both manage go while we will and demand costs things to on able on

Connie Lau

in when you that better would because that the done characteristic steepening has then I this from historically the curve deposit particularly rising rates of this the add the a funding in to deposit on the Hawaii core banking marketplace is is core is side. very national also base. the market Greg, base, a of you look at if that relative deposits lot And of – strong just XX Rich’s a core Slide actually market, retail time have most general And in when

Greg Gordon

and quarter Talk luck Fantastic. with good Great everything. soon.

Greg Hazelton

Greg. Thanks,

Operator

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

Paul Patterson

Good are you? afternoon. How

Connie Lau

Paul. Hi,

Greg Hazelton

Hi, Paul.

Paul Patterson

of rate about be the see for going we you in incrementally just out the something quickly mentioned Just else that that are was when should a there seeing ‘XX base is increase bonus that growth, benefit, terms we depreciation or guys ‘XX? obviously much and thinking you driver is pretty the

Greg Hazelton

act. It expensing the utilities really were from of impact investments. tax the think don’t is excluded of We the capital reform largely

have as bonus lost We depreciation well.

excluded Those portion been current stimulus tax tax cash for by that have government was from investments federal of incentives we now the which law. our done that the major those So provided types were benefits. were funding through

So is be through capital. be means will capital that to of of have will more into the equity we more what utility that funding every goes funded investment and that dollar debt

of rate increase that increase, a will that greater So will drive in CapEx.

that those revalue customers returning to still time. had have often to it’s to mechanisms determine customers capital the back our done deferred those additional is amortized We or will we be rapidly refunding now in over rate tax that base. our and ultimately be to doing addition, back have have that also which we growth with increase to replaced liabilities full to and will also if timing is In will add for would

Paul Patterson

I so I the that rapidly, more that? I mean when mean to customers guys to Will upside that we we about estimated do so increase numbers there the say it have added further, how you return and when that’s in is think you the slides, what’s mean I guess at look

Greg Hazelton

Yes.

the which the and tends to as we a ability of terms that, of approach have assets to think life a the do I follow underlying of natural of tax is the law. that. that’s accelerate so majority class have the protected it done a in life not prescribed the measured by There pretty return investment large regulators or

pursuit we a So deviation accelerated the over then we that we have I made. determination think marginally unprotected But to a don’t the relative material – once be period on nor be a that reasonable can there were expect driven that reasonable I that classes impact somewhat. is made amortized to those or impact which is with once that material think again had investments decelerated anticipate that the final and estimate, from to

Paul Patterson

am just I not plan that? you think But correct do reiterate I equity, Right. about incremental issuing guys, is to that – on

Greg Hazelton

XXXX, would million, Well, what a also $XXX the I I were our have increased say midpoint thing year. which would say highlight But not does result indicating of during as reform. our is we tax is it The indicated previously. no. have last XX capital on One Slide we of not from plans that XXXX expenditure at

XXXX is $XXX with now which of that. We added consistent midpoint kind also million about have another

basis, growth base because primarily longer rate talking X% range than dynamics is term now are a rather to that to on X%, again So X% the we X% of about. higher

Paul Patterson

about? is that should XXXX in might maybe equity, So I you think

Greg Hazelton

a need plan reform would things being earlier amount XXXX – in It otherwise tax modest tax act now could as – early this will the XXXX. have. under equal as Yes. we the begin equity CapEx and than All

Connie Lau

change, And our investment allocation regulated starts our entities Paul it sure not capital policies capitalized because upon rating able are going agreed be as with are and appropriately you maintaining regulators. anticipate I making policies their both to i.e. and capital overall then with that think will that to grade

Paul Patterson

just…? then and Okay

Connie Lau

historically. So from you what have change it won’t seen

Greg Hazelton

would the result a higher bank as we anticipate a is a add upon dividend based expected from well. one earnings higher do of dividend as I reform or stronger thing that of level tax

benefit at also over for So additional moderate which company that’s equity holding the helps need our the time.

Paul Patterson

seems you the I we of process just think am like. the how just with it Great. guess is worked of thing not – in say or expecting terms any I are the recently know just terms And of I [indiscernible] going it’s let’s in sort in should guys given settlement outlook the on the settlements kind wondering your of settlement of change case litigated – how in how And commission then along sort the versus the if there about that? fully in

Connie Lau

have the Vice So Joe with much been us so activity regulatory today. front. Joe Viola, us Paul, be we is invited who has There Regulatory. our on actually President with We to

So, I that. will let him answer

Joe Viola

interim an Maui has as case cases The include anticipate August. opportunity schedule Hi, rate a The schedules Paul. Actually commission decision our procedural for would on that of the due to we give all us the settle. what case schedule, interim. an and rate approved in is the rate

in discussions couple that settlement that but next for months, we are we will So but Maui the pretty – the always settle, still be in at I looking really yet. are phase, the hopeful discovery the case, process in am we of process early we started Electric haven’t we would even just

Connie Lau

add just went also through the public X on XX, would just the I And we January hearings and of February. of XX

Paul Patterson

should we you general, this driver sounds guess a opportunities, could of XXXX, terms some earnings mean think And think we this I how of about how Current see finally, should Okay. in how I driver I mean, XXXX? mean big past – just I in like an just Pacific it interesting post guys

Connie Lau

Yes.

because time where of now amount encourage we on as Current’s last our the actually sustainability this it as described think to thing earnings place-based recall talk help the going and and our can I Hawaii to that’s the it’s think So State are strategy, to say a is in primarily Greg all i.e., forward clean the stage that for us right I and Pacific of more safest we about I to investments Paul and call, you I the not contribution quantify community. energy

has for we are think looking expecting to at of that Greg build grade of but of standard. and And to investment range least so that said before that ourselves a as meet I first at we are to rules we can going is going that and projects and that also an couple investments are say operation potentially looking process, what be means in range what are a that the we that

Paul Patterson

Okay, great. guys. Thanks so much,

Operator

Morningstar. with Charles from Please comes Fishman question go ahead. next Our

Charles Fishman

would prepared be accretive just be follow-up that well this assume Greg Current Can that Pacific on to Connie, disclosed accretive? said during the $X.XX as last that know this his Well, remarks project as I I I will comment. year. be Q&A will

Greg Hazelton

always of we immediately take as depends be that projects you to them whether whether we yes, that So, announcement in or an whether is long-term and accretion in development there are an bringing dilution account that It the is economic basis. and at into done initial conclusion projects continue we invest and there investments acquire will and initial on phase. value not or we on projects costs is as that any you accretive of look part accretively investments projects will types on

of looking range a So, at wide we projects. are

that around counterparties profile criteria for the fit this right credit high have the our right We criteria. contracted with

of criteria. that financial place appropriate and contribution we also as growth have very growing expect to greater only select as as will manage in a to that I get well. to our say but see we broader put meaningful and greater are expected that based platform the can on as we would scale we time, you and So organization not but other gain more start means dilution the careful over you criteria, you manage to scale accretion some we

at is the So, terms growing same organization of incurred some in there that time. costs

we are appropriately. are manage trying growth of So again, and to all that think we them are steps and modest positive very making we

Charles Fishman

slide, be, words or Okay. reform that dividend at extra really your cash this payout at dividend is your is dividend the also ratio the it will like bullet the summary to obviously but they flow or XX% look do look but Thanks, down point going higher, to if up Greg. think your they banks, payout I And bank of capacity then it’s they bank, the range, tax hit if have certainly see other top other and more utilities baked in question do earnings take a have to you we keep you in ratio also benefits they the ratio with low payout first guidance, – think account there improving bank, a MLPs driven that mean you of capacity not provide increase your of going some the is driving Connie, dividend parent, they the the into how it? will things how this where about are upstream Board are how for the to

Connie Lau

Yes.

subsidiary quarter the now of equity level surrounding has that file their bank with support change let what me utility the dividend to as I level to So we approve and and start reiterate the at side. at certain company. Federal capital every Reserve said first particularly above business then to the to don’t holding retain does intercompany dividends about bank level on policies the the our The

continuing that would company. and that automatically earnings generate up from extent dividend changing increased and the generation to to they to and their holding are the requested then are FRB capital not so basic operations And extra be

the coming dividend up HEI that’s tell when from are Board XX, the the certainly capacity that from Greg the going considering shareholders, increased from dividend. the the reference are the Slide from up two considers subsidiary. that as to the flows that covering subsidiaries cash the be to slide showed external coming And up So then dividends And financing subsidiaries. to the dividend you all external of it’s can

previously think those that’s kind would utility about payout consistent there looking remains an meet ratio to statements industry dividend of be Even is – external are our in enterprise the an level able I that Board So the with that to strengthens place. the be as our it’s HEI dividend average wanting at consolidated increase. at still

And be XX%, so we level roughly XX% and have range that when said the considering would we in we that. approach that

Charles Fishman

obviously bank to go solid again payout Okay. doing have non-utility as might the higher But consider in a allow is and other with which that question would seen the it utilities the ratio Board that bank business the we pretty a my unique guess I non-utilities…? is

Connie Lau

Yes.

bank bank just than let So a just we out payout there might actually from normal let higher me me a because be much in Charles, the break dividend do paying out.

the able to things to and for banking spin risk able with that we in growth out that American what need with be the – account their take discussions their were for think and regulators up capital relationship their just own you I as ratio potential enterprise normal also the are when It’s business. half rate like the might our to they banks risk credit don’t we the be the that excess of interest to recall payout of in around that was dividend parent.

out for the outsized payout bank. we ratio already So are an taking

Charles Fishman

That’s it. Okay. Thank you your for answer.

Operator

with comes question Our go Verition. next ahead. Khan Please Ashar from

Ashar Khan

of Congratulations, my be guess XX% assuming based to outlook that on asked utility. level? keep provided today on will midpoint going we board back we earnings going and should then so next by bank so we you respond the could the XX% based assume the the they XXXX, we year for that but question, below payout guidance year, because look to your for which Connie said this he what growing Can I then something would it, that the the reach you in level payout on

Greg Hazelton

we increase would our range. ratio we earnings the will that our we growth hit consider have potential XX% the part certainly increase, we dividend dividend Once a to been at we that’s a an recommending for earnings and the might Board with that have line potential that XX% of in Connie maintains remain the we certainly, period we and it to be payout has lowest shareholders mentioned dependent well be target other also that. in of as critical total certainly long had earnings the ratio sustainable return Pacific and payout is investment of had of – Maintaining see once range opportunities upon had would overall get forth, we those time. the Current as Yes, have of committed consideration – platform we down, a so Part our to to have but and and timing a us. of

Connie Lau

that And are waited very, Ashar, actually we base cognizant increase. depend islands that time shares of add our do on I shareholders lot and a being they here a retail a in shareholder of very our any of for heavily would dividend and quarter our that themselves kind our dividend long particular the

Greg Hazelton

Yes.

Ashar Khan

the I last we be one ready might Yes, if right, increase XXXX, dividend so Connie? am was for

Connie Lau

long a time. been It’s

Ashar Khan

Okay.

Greg Hazelton

understand. We

Connie Lau

Yes.

Ashar Khan

Okay, okay. Thank you so much. it. Appreciate

Greg Hazelton

Thanks, Ashar.

Operator

Frank Our next go ahead. with David Corso from Please comes question Management. Capital

David Frank

apologize you I regulated And the the actual late. savings, was utilities, a call businesses? savings at tax quantify the did little wondering income I joined I the Hi,

Connie Lau

with all the actually commission on that are January We on to generated but have for made side the utility benefits, XX back be benefits flowed filing a customers. those will

David Frank

but understand recently there I for way for other but that utility netting disallowed some to some would tax some or were savings of think you savings? cases. pension Well, Is might like were you your case that ask there instance. again, that some also the Is I And there costs have benefits the other of of maybe in anyway an Maui in the that, netting against instance? in you for open consider get ask the

Connie Lau

actually where of in will utilities rate on let to is Joe one three different our I case cycle. are the that, each So, answer they depending because

Joe Viola

Hi, David. Yes.

revise mentioned, progress from we actually the Electric actually, what last that the impact our up interim. working consumer requirements the three, of of expecting would the week We provided have with adjustment issues final ongoing, Hawaii reflect proposed impact review. case issued that’s for the commission don’t would to the in revenue a an remaining case three but be of we that’s that The Maui estimates actually also we order In be. that you our indicated that’s Light, tax to estimate for in with those case an in are the as would then the our strategy, one to would Electric and as those us under So we the reflect what come have we to well was that rate advocate the yet. commission And to still Hawaii expectation in all impacts utilities. have have try case

David Frank

Okay.

show of are also ways this? then filing you amend are you I in reflect benefit it’s So current if in was the but a going understand as to two you coming are it benefit if to and to is, what sort going cases

Joe Viola

up commission flow ultimately to want they back those to it’s to how benefits Well, customers. the

given have case of be reflect test case. really year to that two actually is case which that for we would them options, is process appropriate is So Maui case, the one more the a in XXXX the in

the award. matter Electric Hawaii really the them Light, outside that, essentially for case of the be rate and are reflect we XXXX that, cycle to we test that’s option under – decision, do commission to a given the expecting review final has Hawaii are For be number adjustment the case, it’s still have that Electric as revenue because we so the year, but an final would the ultimate to

David Frank

or are this expenditures growth? and goals Right. CapEx towards but way it planning be in obviously for nice on generation you guess keep I to it, renewable renewable particularly the meeting work could somehow if you if just would a allocated

Joe Viola

That nice. would be

David Frank

you. Thank

Greg Hazelton

you, Okay. David. Thank

Operator

remarks. back This the conference turn Chen concludes to to like session. any over closing would I Cliff question-and-answer for our

Cliff Chen

a joining we for thank Thank Valentine’s a today’s you, on have for good participating call. Steven and Thanks Day. on us everyone Hope you week.

Operator

The you conference for has Thank presentation. now attending concluded. today’s

You now may disconnect.

Hawaiian Electric Industries (HE) 14 Feb 182017 Q4 Earnings call transcript