HE - Earnings call transcript Q1 2018 | Hawaiian Electric Industries, Inc.

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Operator

Good day and welcome to the Hawaiian Electric Industries Incorporated First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Julie Smolinski, Manager, Investor Relations. ahead. go Please

Julie Smolinski

welcome Earnings and Electric First Industries’ Thank Call. to XXXX Conference Quarter you Hawaiian

of Joining are Officer, Boards Executive will and this outlook as Hazelton, the Officer; Connie well Officer and Hawaii’s President American senior and year. members Company me Alan followed who management. morning and Wacker, American Officer; for HEI and Chief President provide other Greg and Bank economy, Electric Chief the and questions of Savings update Chairman answers. Then, and Executive Executive overview, an our and Executive remainder first Oshima, Vice quarter Rich for of will Chief will Bank; Hawaiian Chief the as we Savings with on of President Electric the our Connie Hawaiian Greg by Lau, Financial results you HEI President Company conclude

using describe we to non-GAAP will measures today’s During be call financial performance. operating our

and posted measures to release presentation these GAAP measures. press are equivalent of Investor on Relations and reconciliations the webcast Our website contain HEI’s

on SEC will HEI I can call. our Lau Connie be will an slides, in with ask be overview. made with from actual today’s differ the statements Forward-looking cause found Factors that expectations filings our our CEO, webcast and results could on also the could materially now website. to begin

Constance Lau

everyone. to and Julie you, aloha Thank

lava and activity get would an seismic I like on today, related As the started the provide Hawaii. we Island to on of update

have those have evacuate. who those Our with thoughts had are lost their who and homes with to

for Oahu the of supply I and dedication assistance public and customers. of Islands and of another working want have been well. them our safety power providing their support sufficient we our to and to Hawaii authorities County been ensure has on acknowledge thank and work utility Maui Our our one teams hard teams from as and with

on a not seismic lava have several Island still while time While of been material about Company. The lost homes not utility we has this evacuated the the miles will this their a is our activity expect destroyed. some impact affected infrastructure Hawaii is have Southeastern residents and developing and indeed have on square significant part hundred area at situation and XX

also that facilities found damage area the not to-date. to XXXX. and loan assessing populated affected making limited, earthquake total are is area bank densely activity in lava We side impacts not the after in feast loans widespread and have in On exposure new Americans area lava is

results to turning Now, the for first the quarter.

benefits providing solid the for in year to to initiatives, earnings. utility earnings of we our important dependence interim for our reflect interim a state reflected of utilities, as expectations rate driving utility March, and in consolidated Oahu in XX% an a carbon are in nearly for $X.XX. utility, and energy we milestone three and cycle transportation next With quarter its million and case our and RAM request exceed utility Greg These benefits return highest to mechanism through the XXXX. American’s in we transportation Hawaii first transportation have Hawaii’s began to our detail of results income walk consolidated At adjustment will Tax to ever in with spring. quarterly XXXX so of of are more future with our pleased our both from to Reform footprint decision XXXX this minutes. respect $XX bank earnings-per-share report includes fuel expected August. sector line is to the in a to We our in fuel few and This filed resulting our State’s are our Island filed triennial number track rate reduced addressing made case electricity. a Maui the and customers actions on roadmap And Reform to on create near customers. are Tax that complete net pace, and County long-term progress adjusted rate our on two-thirds Island a neither Transportation renewable electrification clean reduced fossil for reduced request essential we both the We Hawaii, by has reducing of current security. accounts of brought our energy and also imported oil increasing for net to

last own providing large Through solar a We Harbor-Hickam. megawatt seen XXX megawatts Base of resilience. groundbreaking development RSPs, the grid at two we Oahu improving more and renewable while on have recently renewable batteries are filed platform our for applications of project photovoltaic XX renewable, projects integrate several Pearl we of to including additional approximately our week, third-party scale Joint generation to add help

Finally legislation into law of evaluate our many month last and know, signed as to a implement opened proceeding our you Commission performance-based regulation PBR. Governor or and

a time such its competitively revenue the for opportunities of some regulatory place, some earn than opportunity to rather providing Company make already in In existing energy for example We the changing established recently reliability, elements decoupling socket and for advocated contracted RFPs to our incentives service, potential have The completely be incentives revenue service performance and as underwriting indicated an We are as framework, priced this, adding to renewable PPA it generation and of to for seeks the as customer have PBR good it without on PBR incentives for response. demand for the successfully by wholesale regulation. approved may performance Commission renewable changes. see framework. these procurement cost utility build provide

safe, With year financially with plan transportation and move grid resilient modernization our look each place now forward improvement we developing filed advance process recently for earlier outlined measuring goals a the to goal to this participating the the grid for over the a framework I collaborative and plan strategy approach elements We supply next two roadmap, a electrification forward. as we while XXX% and our year our performance and believe has clean in the acceptance and last have utility now our maintaining of of and for years. in power reaching energy approval we of reliable Commission commissions comprehensive deliberative PBR stable

bank, for wage like mentioned is and well on Tax I the history, delivering wage interest highest lower well Honolulu The key meaningfully allowed starting margin to and benefiting campus lower American lower underway. rate to and net new tax a tax expense fundamentals entry-level employees or its American year. net as construction the also positions and American’s this bank the renamed increase growth for focus in has its to from rates quarterly income due Turning while Reform. deposit loan

efficiencies to single looks the its management Our new forward core innovative this resulting teams bank base operations team its customers. and in and consolidating greater into year, and bank for a later

of Current, will Moving storage the megawatts provide five plus and X.X The the quarter operational XX.X be project hours and solar Campuses. capacity University Pacific are expected in to construction on mega to our and first new in of facilities island in a capacity at watt XXXX. of that Oahu announced and investment subsidiary second solid Maui phase its storage are

with clean and Pacific [Technical energy accretive of operation. Current’s to expect project partnering full-year others resources bring earnings great to Difficulty]. project helping approach Hawaii first its of This together a is of We our to the State’s based current in this be advance

Greg. we focused XXXX. and to results Pacific building Current’s Pacific team. to project Company fund Energy outlook start are Currents cover cost is now Hamakua and up helping on initial for I first out ask management Hawaii’s financial economy, Our will our Greg and organization quarter

Gregory Hazelton

air The At scheduled began year rates are from the record-setting demand. visitors. and million has from overall the real Connie. continued in service unemployment be Airlines market Hawaii results, the the consistent below X% national strong, rise. XX the which heading Thanks as rest Mainland is tight economies year-to-date force particularly built in arrivals the industry and sound to for State record begin is lengthy on rate. The another toward entering on with health labor country a spur for near and remains growth, employment to to in has Western estate could labor with expansion The visitor at Island. as the seen to industry levels. high below key March lowest spending increasingly current continues seats the increased as U.S. Hawaii growth since record to of has XXXX unemployment have April full that volume continued rise the of into very prices employment. strength which wage and and approaching has due market The well we A XXXX. positive. is been Southwest tourism arrivals of continues remained the expansion area lagged with and tourism continue XXXX to mid remains Hawaii its ongoing wholesales X.X% estate outlook low real

prior As XXX,XXX to price were is the the homes for year and local sales Overall, economy the the single-family with and to condos performing of international Hawaii up XXX,XXX. April, median well supporting conditions positive X.X% outlook. X.X% rose from

on as our shown financial Slide results, to X. Turning

bank higher $X.XX per due utility improvement offset First by per share part to investments, includes share holding earnings and increased earnings share, quarter expenses to Hamakua with first company and We positively and Pacific expected which of according to plan contributed in for tax quarter The both were earnings. on and operated losses also expense. were $X.XX at per which company well Tax rate currently to compared a the currently XXXX. lower interest Federal reduced holding benefits two is from Energy segment Current, realized and

investment part February which our costs, contributions However, earnings in in offset Hamakua. at incurred UH transaction the

the the X. utility for Slide consolidated last of and HEI’s X.X% to Turning X.X% from XX.X% XX was contributions ROE from months bank. with

for impacts period, triennial The Electric months core agreement, interim one-time impact of at increases well X.X%. expiry and months our and settlement a interim the rate for results March the XXXX largest rates. as Hawaiian XX a quarter After the core Electric, RAM to of rates ROE was for rate utility. in seven years. reflecting LTM case in Reform Hawaiian six of of the consolidated rate the transition the our base ROE fourth LTM as base Light half March results of XXXX ongoing utility XXXX XXXX cycle of Excluding the and HEI’s no Utility X.X% back reset of rates at last recorded was Tax includes

rest and the last assets. the realized the these as we primarily low-cost ROEs We throughout Maui of in strengthening an Reform, August. of interim for rates the on earning expect interim driven ROE the Tax yield from funding upcoming increase well as case months, continued Electric year in rate decision XX improvement bank, on continuation At by

relief August Electric’s basis interim million Oahu of on of XXXX. The in earnings utility of Instead year of higher for were customers were funds XXXX. On compared X, interim amounts We for These decisions, of The revenues approval $XX.X to rates, cost offset return drivers Hawaiian as to the became XXXX were XXXX expenses cost second mainly full-year QX encouraged allowance a of of recording monetization certain quarter the million effective for compared XXXX O&M for XXXX XXXX in the pension of in primarily $X were through interim Slide to revised expense a substation a a $XX improved first calendar test an due construction of exploration by efficiency agreement. for system $X greater first and increasing to XXXX Lights energy, for follows. to to an million, And Hawaiian additional benefits benefits primarily income, most customer integration significant higher in cost land investment offset our lower Also accrued for and million $XX.X higher case on partially XXXX RAM RAM the in XXXX accounting and which expect beginning rate a Schofield progress from the completed XX.XX%. first Generation annualized quarter because to in savings. revenues to partially be bank’s net Electric the ROE difference the year and Reform more year. XXXX rates from renewable $X in interim first used by of XXXX. in of between depreciation as mid-February million first June write-off million of X, reliability quarter. reserve purposes XXXX. million smart quarter tax during reset income expansion expense effective settlement higher quarter representing as due X we due million primarily and grid grid further $X a rate environmental rent those net of a quarter revenue existing the ROE lease, for generation, strategy costs the lagged was lower and XXXX part that of the overhaul one-time Tax before net adjustment Station basis

its the quarter fourth net income Turning and first within quarterly on higher or $X.X earning than XXXX primarily $XX investment bank net Slide XXXX In of the was the first growth funded the saw linked increases to of at highest American assets million quarter. driven portfolios. $X.X Compared deposit higher X. million, average on million linked by retail and increase due that which in to was interest quarters income, yields to strong the higher mainly and quarter higher

the a and quarter $XXXX costs $X return quarter higher offset million the level net of beginning and margin. in to of in tax American’s recognized the $X XXXX assets of lower of along reflecting performance-based of by and the expense annual federal its a in XXXX year. over lower was to benefits awarded the million with ago, On achieved rates its due the and million higher bonus. $X.X the offset same expense quarter. income, compared quarter The lower the XXXX lower assets quarter wage a period basis positions increases to XX was partially $X.X American Slide targets the higher the incentive interest benefit in income net first reflecting on solid in primarily quarter to driven wage income. XXXX from for mentioned entry American's one-time cash increased we higher compensation substantially also points, million In rate XXX our for on through We wage in linked moment see first linked by net merit than exceeding higher included the compensations by Non-interest XXX both and taxes. points. employees basis annual benefit XXXX Compared impact increases tax increases return first profitability, increase expense non-interest

margin interest was guidance Our range X.X%. net X.XX% X.X% to our of within

interest quarter assets funded primarily basis the growth deposit our net of and and low higher yields interest-earning earning margin retail is in margin On Slide cost first Our X.XX% net linked eight to XXXX, portfolios. points of XX, quarter. due on interest higher strong and asset than growth the investment that was

On primarily to investment compared it increases rate interest increased low XX cost points increased quarter, loan costs driven portfolios. linked mainly at primarily to assets, accounting reclassification million or interchange a X.X% from investment higher million. our by Non-interest cost as linked increases as deposit resulting and the as primarily loans X% linked quarter, by to in basis basis interest-earning compared due the points increased the yield And lower funded Our the asset XX at yields well by deposit basis than of approximately loans. as term in income growth primarily environment income have that of to the increased expenses in quarter $XX XX. by from Net liability of remains growth at the yields income $XX.X quarter, loans certificates. the although growth two commercial and on $XX chart Total low debt fee due interest due was our points, lower due to estate Slide higher was net of real rising million XX driven standard. rate to quarter end annualized commercial the in new to

single-digit meet year. earning We asset low growth target expect to to the our of mid for

accounts. approximately repurchase first million deposit growth that deposit transferred agreements the was in Our annualized, XX.X% in quarter were including into $XXX

X%. was due such local a prudent sound healthy to transfers, Excluding and growth economy. quality Credit management remains deposit risk

real and consumer expectations and remains quality improving commercial unsecured with in stable portfolio credit is with are portfolios very line trends. clean, commercial the estate residential Our

for First growth. reserves quarter XXXX loan including provision losses for loan

due loan Additional reserves on for loan reserves consumer credit partially a the release commercial the improved for portfolios of portfolios and the were offset by recovery previously loan commercial charged-off quality. to

at our the of of to to to to quarter the from to tangible loans investment earnings On of XXXX in to the aggregate her quarter. and of the very end paid reaffirming X.XX% peer attractive make as quarter Slide XX%. of for versus of portfolio the than quarter basis per of prior illustrates XXX% tangible risk-based well basis funded is XX maintained continued a our are this of total, the while ratio range will XX funds XXX in closing at equity first guidance and Connie turn loans X.X% quarter $X XX% the quarter. core charge-off common in for XX, capitalized available relative of million leverage American over of the changes the banks net guidance our share. ratio the the a Slide the deposits X.XX% $XX XX total quarter for to by loans to compared at X.XX% low with of remains ratio we capital XX, funding cost dividends HEI’s loan of remarks. for no asset utility with million our American’s to lower low HEI our are total allowance time. points the as was first ranges to median. the quarter. There X.X%, peer XXst and In increased peer compared ratio XX we of March points, $X.XX XX%. $XX I the in XXXX X.XX% outstanding bank points a it sheet deposits quarter. March asset receivable linked peers million was for basis American's Our mix first loan balance of at Non-accrual compared and and in compared end percentage to cost banks. points data losses fourth basis XXXX was The linked held XX at last was

Constance Lau

to as o to Tax we continue benefits work enterprise net course XXXX XX% alongside in companies of a At being on the and docket, customers meet summary, has are together Hawaii. we State’s PBR for Thanks, a the the look catalyst our stakeholders our other to focus Greg. target or on forward to providing participating wide In to goals. utility, better renewable energy. exceed an are mission We achieve Reform’s State’s PUC's

At strengthen while quality look investing enhance communities creating profitability relationships, very more easier, customer are work we use focused the resources our sustainable Current, prudently make much our its technology and efficiency record At bank, in and out and new asset on and look we as continue we and we to our build forward of earnings and this providing partnerships in to And have two organization. the opening building on campus year. resilient the from customers. of to We are pleased role through to deepen build to growing portfolio. value place projects are Pacific great the later asset the banking in

our to Finally share, yesterday's X.X% close. of attractive since maintained history at XXXX. be as market board of $X.XX continues continuing of yesterday dividend quarterly per dividend dividend The our yield our uninterrupted

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

Operator

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

Unidentified Analyst

[Claire] Julian how Hey, (Ph) This good morning. all you are doing? for is

Constance Lau

Hi Claire.

Gregory Hazelton

Hi Claire.

Unidentified Analyst

for first thanks talk taking my wanted Pacific question. about Hi, Current. I to

second beyond the some so strategic if more particularly get all and provided space. hoping have give you Pacific and the cadence earnings first at what for was little of - to Current to on little dynamic contribution, So color view far, color storage the follow-up, competitive and can more a I a you earnings

Constance Lau

question building nascent indicated, Pacific your a we out. and in we really now Frankly, is states for right that are Thanks Sure. Claire. Current as

the at to those in later more those a of time not for frankly are to we you have may we position a specifics So this year, but in provide you.

gaps the see Current to opportunities we a that's that needed for when and actually in there has energy that different Pacific the state opportunities we are why you that's besides have been To We aggressive market the we companies has is very and coming on the lots are try new energy us reason proposals, great is clean strategy haven't that Hawaii of the those in fill the been see However, frankly you places we clean other and also with that innovative do why and another a that that vehicle some things California there of actually XXX% advance you have storage. bank. and frankly stem know a about started within work state transfer help goal to we and are seen excited of our have transportation in folks now that the in to very clean involved the number community, utility done up which side. into like to energy of of lots starting

so additional may to And that as to us you together of those think never in can and we this support work pretty with do Hawaii effort energy. some vehicle elsewhere some allow we ways that collaborate innovative having in things in everyone have seen

this stay So tuned year. later

Unidentified Analyst

to quickly is of the Thank helpful. Great, can really on just provide And more you. any you color projects. follow-up, if University that’s Hawaii there

Constance Lau

turn Sure. [Technical Johnson I'm with to was involved there Difficulty] going in that our that Greg, transaction partner also negotiating Control. who and over to

Gregory Hazelton

our they that majority by months. I them own frankly its COD quickly now as to different on who transmission plus by can of are mid-XXXX. timeline, is the proceed project but with we we bit the would stage, vast processes campuses interconnects the I the those, so or proceeding caution few minus provide a notice our of campus underway. they is project the little additional color, actually to be JCI, EPC the forward work should and deliver can and Claire, development kind moving five XXXX, each are contractor developer in there plan, of permits, was online and Yes. also expect a has final its as

performance previously, risk. the are taking guarantees we funding project and mentioned the backed construction construction I have we phase, of are with and but currently fixed-price by not so As JCI strong the a contract his JCI, on

time it time. will you of point to throughout continue until that is and period recapitalized us fund the in COD see reaches at that So

parties are that, among good between according things and University Hawaii the coordination us, of progressing Beyond all JCI. to a plan,

Constance Lau

Yes.

So bank, out Claire in not that through but typical market, net Rich an say will banking but that Hawaii American have in financing be here would add, has But banking project so takes typical another green I and financing. a financing the place itself renewals, jeez here Hawaii it’s has is sector then to in on talking come, contortion in what through COD that the we to about, XXXX. construction of be Hawaii power only the savings how there and of example not because was goal great zero desires to go by University non-recourse

part we our their for to their help to Hawaii To is that to are happy get which to zero be campuses XXXX for catalyst their quite been catalyst while have of working Hawaii. net partner mandated to goal. be the actually get this zero So mission able is and very they plan a and a stage be University that of net to

Unidentified Analyst

Excellent its just already helpful color and on really given docket. the have deal you to great know I lastly PBR

can give place needs what by at provide least Thank more can detail in you. or you at be what little XXXX If time. this on to exactly you a

Alan Oshima

decades. more Regulatory its give phases XXXX we PUC two a been end for the detail, This to VP for on have here quite a is the PBR. you been have PUC of while, we docket into broken but to have of general, a roadmap advocating down our it has for Alan, and and in working we Joe Viola PBR opened expect by for

will two-year mechanism end mentioned hope table of through So think his should live the all we PUC period by financial I opening with utility dockets. we rational have as preserving stake very is is that the and complex by a order integrity in regulatory the around of rational what we a going that holders roadmap a be has and the have continues to docket

Unidentified Analyst

Excellent. Thank so it I much. will there. you leave

Constance Lau

Great.

Operator

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

Paul Patterson

me? hear you Can morning. Good

Constance Lau

Yes. you Paul. Can hear fine

Paul Patterson

Just we the give I bit it? if are I PUC could XXXX docket. between how how about SB they currently the more to and how of SB outside the relates clarity should docket you it at a in and XXX or different on little PBR the guess, mean context of think

Gregory Hazelton

intent relevant you the seem most the of have actually even in think I substantive performance predated PUC matters it XXXX, but it in already in adopted PUC's that can regulatory order and Well covered the very to to We environment. XXXX, XXXX to signing the media in mechanisms is PUC order, release moving change of the that the this of and careful wholesale with a that think it as a comply it say not the discussed was that schedule is order incentive and in direction. of

We filed on our in have testimony cases rate PBR.

will adoption careful PBR unique very the to areas circumstances We is mechanisms and have to suggested wholesale a certain of unique of Hawaii. very say that there be was and Hawaii not kinds of actions I think PUC in the other

of think with to have parties will were some who of the itself recognized comply they and even in XXXX. intent PUC's seems the docket that the XXXX process I comply the for advocating

Paul Patterson

were concerns any resolved There XXXX. that of you that guys guys weren't you are there Were the during reports process, Okay. your concerns have supportive now? some legislative

Gregory Hazelton

are concerns unintended the Our and consequences to rush judgment. a

of We for not I And process a table already want think ITT have the just strongly around notion some. all advocated stakeholders rational for has PBR, the example, filed we the with community ability access financial with utility’s destroy their move with financing integrity greatly letters we you forward unintended Governor if RTS. is the to the that reasonable our or XXX% as the consequence impact saying

pay in have it, now to indicated based they interest have We have as XXX our upon right ability access megawatt and to out RFP people there their financing customer.

not the rationally, of think some they are their unintended have and the understands it, registered PUC these that. concerns consequences about done PBR I but is So if

Paul Patterson

you if guess or that if where complying, what that it’s first was and little I bill this, wondering And guess PUC not.. what days drove is out with that doing on And I'm know the what of before PUC that, help Governor mentioned coincidence I that? signing this all that me. tell of and I was is me little is confusing it XXXX sort out the understand you a a seemed but well XXXX, Okay, don't was within why let came wondering PUC necessary cetera et I’m you as if before to think could a you I the bit order us the just

Gregory Hazelton

I won’t to why as necessary. speculate it's

quarterly made the in order say a has processed, that I deliberations maybe that of was so action. been in the say its desk. positions result the being as build continued to the PUC took bill an the the the the done issue or our coincident I not have governor's It’s we We arriving clear. process maybe cannot and week. PUC are while timing order the months will pleased the was on PUC a for timing

Constance Lau

to what across what just that of energy like to is contributed transportation non-fossil the kind you think side, of clean all are I said framework, get as Paul regulatory four parties and county is goal have through that with example best so longer actually transportation our utility I another on they work who about was to ground forward it's I State’s to together you line resources. come about rational moving There utility our the understand many Hawaii to framework is want well. Mayors advance of process the the ultimate to know through need can and saying it know that about about have the just that the have Hawaii University is the that we goal no as communities energy

community are for good the of that this through the we is were community what possible. Utilities see that's all of relevant a process and PUC forward the rather later our work So able like sooner was to grid in frankly state nature that's strategy we position that moving move to in doing see the for in the Public XXXX but if these is the to in all of whole say lot happen have got community similar PBR to than community through when everyone our the to intent the thing able things and as bring want to modernization quickly I docket. you bring that who went our that within we in. of something parties as there in there people Commission work our is and would what and buyer best the

Gregory Hazelton

But to I lot side will a the not policy implement on they PUC a going the that’s set that, the a note PUC required to does XXXX put implement. this will it's implement legislature

PUC was already As on It four I as had the a mentioned working of this result XXXX. been not earlier months.

Paul Patterson

that there surprises I’m PUC process is underway, guys moved of of. legislature informed own ahead the which yet you guess was this that was in guess me aware were understanding that assume their and I legislation, is that, my I I of what with have they supportive

belabor So don’t topic. I wondering and this want I I'm guess to what

- it's with. to is my doing compliant So what mean little to I the guys mean basically that guess that question this you is do think was but underway confusing of you I policy don’t wasn’t PUC thought saying what wise, XXXX I what is the is answer the process sort I'm you there does or short it have if of that XXXX purpose a

Gregory Hazelton

Thank consumer and you, to of Paul. We we testimony to we have lot a in abbreviated understand do its question job as our did PUC frankly advocate. a same your question, the

move it's on our comfortable implement part, a why the why but Governor it, really the in PUC that very way. rational it's it So speculation there very, will it are and to we was passed

Paul Patterson

The bank shows now ask if to how a could apologize a in forgot more little and interest Awesome elaborate - I up that bit, where or on that. now is and you that's the elaborate Okay, a I card just and you could little change what that if the then, fee I’m debit accounting interchange going question.

Richard Wacker

Yes. This for is the Rich thanks question Paul.

there get get. our on past the customer comes and expense using pieces is when we through caps the talked that in they the cards. you Within swipe fee we So non-interest more by as from there income the we two statement component their is on debit governed income and that through a One agreements so cart Durbin income that the agreement is under the they have the comes and there in it come had just is in similar right a swipes that similar volume the more related and other in to income does them the been of non-interest and see charges two that together have of so expenses the it those charge within income, a with net brings pieces, you is, so net swipes. debit what we have there with this association associated is card transactions come

Paul Patterson

changed? Okay and has what

Richard Wacker

up income, was income income. offsetting them line bringing you to expense of that card from line non-interest some no so in interchange non-interest expense where impact, bottom the the expense are Geography, debit other its it

Paul Patterson

Thanks Okay. I so appreciate much. that.

Richard Wacker

Okay.

Operator

Armstrong question comes and next question ahead. from comes The Rose-Lynn Please UBS. go from with

Rose-Lynn Armstrong

Hi.

Just the say the the would the docket docket of end that two PBR phases XXXX. related and be legislation. two the process I by you PBR completed Did correctly question on

Gregory Hazelton

looked of yes The file to in up and investment. some or parties, has interveners it’s all just we a the of intervention, or Roughly its few a going so. open, slippage allowance in for convening been for docket think months be

once know So done. that’s we more will

Rose-Lynn Armstrong

Okay.

does in the January intent legislation. legislation with XXXX So timeline and the I by then secondly on the implementation called which believe PUC how PBR complies if what that decide X will the of of work implementation who the with for outcome then with

Joseph Viola

is month the XXXX. basically end with statute, is schedule Viola by right Hawaiian complies much PBR is implementation first of schedule Electric the This of XXXX aligned phase Joe points Regulatory. bill the at actually two the pretty January in for complete Actually XXXX, not called PUC from it’s PUC The larger there. of

the think that, of but satisfies again earlier, we we its far will on can’t process out it. Alan as that’s speculate the set I said As statute. as intent the mean judge who

Rose-Lynn Armstrong

Thank you.

Operator

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

Jonathan Reeder

legislation. to on just again Hey follow-up the

break think of like base of its base do turning current guess the without head? so model on I how language envisioned direct the it is to the with rate allowed investment that you complying of levels, I and rate aspect part kind link between CapEx, revenues

Gregory Hazelton

PUC more the says charged know The implementing amendments a PUC have very days has unintended that We while. the to mean statute the that's to the PUC consequences. the was I and the order set, called flexibility within working to goal complex don't happen been with does this the been going of for if not avoid in the say newspaper PUC signing law. area give for that, on it to

understand We as will of see how this come develops. There to people are may changes the moving PBR. complexities about, that

Constance Lau

provided see incentive what starting to look Jonathan say to I they that not services was is and expenditures happening services you products that but If you energy other want that is lots provided, investment, that of are power, add revenues the purchase competitively what and And are at example they it is talking landscape of make between us capital because us capital and an there procuring incentive recent is a specifically at on that procurement, renewable if come neutral potential are customers that from want. instead look priced An would order. making can the that of to example right. is the about you you also that in

savings where is the could we against of there procurement. benchmark So XX% have the of target potentially

Gregory Hazelton

the but we already regulation. we incentive into an don't Which have built do

Jonathan Reeder

Right.

in as the link guess levels, so utility kind base I the on guess view investment that on mean perhaps certain this between breaks minus to even I contemplated? of achievements mean in kind framework boxes of I sharing savings the still plus get being I and new you your of performance of model you kind but favor layer have kind as speak, of and that’s direct if you revenues it’s component well checking that the So, then metrics underlying or and to rate service

Constance Lau

exactly. Yes

Gregory Hazelton

You well. it said

You testify in want to the docket.

Jonathan Reeder

out of can but and to and I things. don’t hearings pass, Alright some maybe I little will enjoy you think a No the clarify I I that listen if think bit. do, I will come

Constance Lau

you that to do Hawaii frameworks new leading want to Yes, frankly nation clean XXX% the is a may us of in lots lead these because that, energy. will

Jonathan Reeder

much the so for Thanks time. taking

Gregory Hazelton

Thank you.

Operator

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

Charles Fishman

you. Thank

there about anything question in going my Current transportation you in there think it anything the PBR anything XXXX, more on is to comment docket gets is or harder to of Current, excited in opportunities the is to the you does Pacific that? be ongoing those for commission for Is respect things electrification I that roadmap, could Greg make if Greg. of any there directed with the Pacific

Gregory Hazelton

Yes. Thanks Charles.

to activities investment are market, through player that the of local there A well, partners. get State pursuing will competitive concerned partner for us create progress focused being in utility, it those locally be will and on energy move Pacific teams its overall help that purely a other think a that going said flows the on benefit, developers, not Connie energy be dynamics was formation think and I forward the Current, to be other current just I'm pace, platform ability renewable after on I in will to a partnering a so and our is to Pacific was utility the renewable regulatory of from benefit the is clearly cash capital created goals. made we with consequently good with local not local lot will parties. with the those but you Reform other tax at and any about a opportunities Tax if about see working that enterprise, non-regulated

Charles Fishman

Like on university that the equity the Johnson the not not Controls. UH are project, behind you and

Gregory Hazelton

Yes, project looking we University that that a to ones are are the the provided that number competitors the to we that that and lowest same the ones at relative large funded our project. were funding cost that of

team were accomplish to have So a were our our involvement lower by a so of that. than proud have the there and in involvement been resulted proud together very would obtained to local brought and university otherwise cost

Charles Fishman

Pacific the as the PBR drives what rather goals opportunities really noise. more mean RPS I of Hawaii are Current RPS aggressive than the So

Constance Lau

like that Yes, other talking about, but you know the all moves it's just on side. are the things transportation Charles not the that’s the policy all RPS,

example, to describe For what for was I the net that's zero trying the earlier. so itself, University

back here You our to in fossil community in Hawaii Hawaii have energy our initiatives the Clean very Energy if towards state you imported and of back clean XXXX principle got moving dependent on of fuel. it's the because entire is entire one remember

back in - don't sun have you so then the not through like the resources the Island money technologies the speak. indigenous the an to we wind, are we but technology might with So and really

cars know the just for when was you occur and and to that on in oil in also took seeing was prices and generate oil least jet where of from through gasoline across then then the generation you and you XXXX power prices shocks made Asia-Pacific way expensive and for the oil was oil you really fuels that oil standpoint So the the of going that that the Hawaii dependent the the had know region price here when not started jacked airplane Fukushima up board. have to power provide the climb Hawaii just that roof, the hit boy whole of you really oil all expense economy April a

Charles Fishman

really helpful. That’s Thank you.

Constance Lau

Yes.

Operator

go question KBW. next Please comes with Jackie ahead. The Bohlen

Jacquelynne Bohlen

Hi good everyone morning.

Gregory Hazelton

Good morning Jackie.

Constance Lau

Jackie. Hi

Jacquelynne Bohlen

I switched in giving little airtime bit Rich a over of here.

my about I Focusing it the expectation. in first interest it, certainly on it's know the spoken that within net about margin had you range came

any thinking year. get you asset March’s if Just about increases work if you how in latter and this talk reprising we could of light then to about additional reprising increase and are deposit

Richard Wacker

do on one plan fighting able the to A taking it the expecting pretty we That's side of particular year. have of we approaches lot banking. you observed costs this the through have funding the kind increase that our hard we pretty network retail in is think are on are our control more are to been that I well. and and We relationship

we there. trying want on know a to at basis control pricing that, the and and points the we that pressure So couple particularly so the getting are more you pressure competitive it of were the seeing in quarter, is level the we to are keep up side we upward pushing keep commercial where in markets,

market with the pricing REFIs the commercial is again flat side the because there residential asset is on side. is inventory the residential, competitive movement volume the no limited in on as the that On and on just on

remain as we going those getting yield but in So there to competitive, we are the movement investment on portfolio nice reprise. are fairly the

Jacquelynne Bohlen

what to you where is the happen verses Do on portfolio the stands know are what differential you purchasing? reinvestment

Richard Wacker

points. basis are now we plus XX Right

Jacquelynne Bohlen

of that And or was as Okay. XQ current. is that

Richard Wacker

XQ. Yes. of That’s as

Jacquelynne Bohlen

terms providing how come and Okay. of kind if see off mind then where in this growth run of are year where you and your of much terms most in more intended new on you and to wouldn’t an of seeing And do expect generation. you portfolio update you

Richard Wacker

So for the in lending us we that on year generation were last that new leverage quarter. has good, the book the of challenging commercial side, the on through some national and was pretty we repositioning been got as and fourth credit,

the growth deposit and want growth. get first the and will portfolio growth then started about us to on we saw obviously six range in was growth you again So single-digit loan up loan investment we as into keep quarter, came mid playing depend on the that

Jacquelynne Bohlen

of you amounts capitalization fair Okay, have going perhaps enough, for on new expectations the costs to with the and update just any last the if timing provide and campus. associated on on an your one, the you could are

Richard Wacker

end investment So campus the it and everything next the to get the with start year, with furniture quarter to building out the and of able hoping on in year. the of with and we this that first the to in moving fit the are the year part would early to we be fourth then be toward expect completed

So excited are we about mentioned that Connie that earlier as on.

on our basis from branches us helps a are who five aren’t and terms forward we to locations we in that that. forward nimbly are a and so the to We can one on of people moving for looking different we operate, in efficiently how think lot go

of project that of see line associated that non-interest sorry. We the in income exit costs moving and to related beginning through will sort properties, other on come year costs and dollars this probably in non-interest will with the line, have million those expense - the you will of order

Jacquelynne Bohlen

when And that depreciating what be capitalized any start? future costs might about would that

Richard Wacker

of constructions. December either depending fourth next start quarter completion probably the on would year, the Depreciation of first or quarter

Jacquelynne Bohlen

guess from would Okay offsetting benefits be consolidating areas? other some would from and just likely I there

Richard Wacker

own, that properties call. gains got We would statement. we positive we we other the couple effect properties expect that to on to have the we we on with sell, that income and in that hard timing Yes sales are a should see

Jacquelynne Bohlen

fair very Okay, enough. much. thank Alright, you

Richard Wacker

Okay.

Operator

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

Julie Smolinski

you, call. you for today’s Have good everyone Thank a the thank participating Gary, of in week. rest

Operator

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

now disconnect. may You

Hawaiian Electric Industries (HE) 10 May 182018 Q1 Earnings call transcript