HE - Earnings call transcript Q4 2018 | Hawaiian Electric Industries, Inc.

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Operator

Good day, and welcome to the Hawaiian Electric Fourth Quarter 2018 Earnings Conference Call. All participants will be in a 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, Director of Investor Relations. ahead. go Please

Julie Smolinski

welcome Full and Electric Fourth Industries Thank XXXX to Earnings and Year Conference Quarter you, Hawaiian Call.

Current Electric and the Pacific overview Joining Executive American me President with Executive Executive of Bank; who of Chief will Officer; Officer; fourth HEI Valentino, Chief Chief full and Connie Chief economy, an Scott of Executive Oshima, President quarter members provide HEI will American Vice Bank's Hawaii's Hawaiian Greg Savings Boards year, we management. President Hazelton, conclude today the our are followed along and with Officer senior results Hawaiian Wacker, Connie on and other and Greg, for outlook Electric Officer; questions-and-answers. Lau, our President and Company Then Rich Savings and President update for Financial will you and and Alan by XXXX. Chairman Company,

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

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

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

Constance Lau

net reform core great the prior accomplishment EPS results. grew and company healthy and quarter Julie you, impacts tax our We XXXX and net and was XXXX Thank XXXX, for XX% XX% our fourth to growth each income aloha of to financial in XXXX the core year. of year to achieved income to a excluding a EPS from over compared operational, environmental everyone.

tax XXXX XX ROE Our XXXX. X.X% represents adjustments in for equity points. quarter XXX in X.X% from strengthened basis core improvement basis Normalizing return of the XXXX reform to fourth that one-time points on a

expected and positive to our HEI. this the to Savings companies continued of start endured efficiency higher economy, of improve earnings was contributed our growing American hard the All income delivering healthy to work disciplined performer, Bank build than to tax American dividends -- operating our benefit helped and stronger state's XX% which on outcome. XX%, shareholders. growth benefits reform deliver of in by

Our recovery up performed for rates utility new over the our utilities the prior at with after MPIR reflecting Schofield and years also of utility the cycle all mechanism three well our for of with earnings first XX% resumption rate implementation projects project. interim year, case six major triennial the

not However, as utility earnings were strong as anticipated.

evaluate to addition on wrote-off the for with evaluating the that impacts call of events last sufficient experienced weeks quarterly one-time the we of expenses the LNG. scope severe that In expenses during quarter, And of us in how merger in to we year, provided this potential PIMs looking year in with new a incentive time commission the performance and the or penalties reliability working, after the new the experience PIM, under mechanism. in earlier are first provided has time incurred updates we two an the The which to applied December, of fourth XXXX. unexpected weather outage resulted modifications in of period we've import for mechanism, are opportunities our combined into

on release year Light through anticipate and case. the to under filing side, for results earnings further we rate will performance of the Oahu. rate cycle, positive to Due case rate began continue we XXXX grow call Electric XXXX our latest in improvement which reward next case a the see in due December our are center to our test with Hawaii strong cycle, eligible in this obtained call the On center we PIM,

strong customers, which financial shareholders on Our long-term to focus going have grow for our a foundation delivering community. from we value investments and forward. And

continued yesterday $X.XX utility our share a financial Board and the confidence our X.X% our approved bank, in to future, strength $X.XX. our per at quarterly With our from dividend earnings improving increase the of in our

offering climate resources HEI, of Many investing value of goals neutral whom focused forth strategic to customer Hawaii's and this modern set are leader a energy effective our working renewable achieve be with a to investing align And technology in portion renewable creating company in stakeholder to platform, our our solutions, energy, market state's improving to strengthening cost improving transformation experience. a the and XXXX address energy state's by XXXX customers of our here investors in more and integrate companies company, to ensuring in the grid accomplishments to our on live goals XXXX innovative initiatives transportation customer models Hawaii relationships, nation-leading which moving a our utility culture our transformation have clean with energy delivering our renewable large to portfolio, continues industry XXXX, transformation on While aggressively goals. renewable stakeholders goal addressing provide financial for strength in Hawaii. regulatory ambitious and change. and and transform help to to the of reflect we In carbon efforts and deliver and plan, more

sources, one XXXX. Agreement fossil achieved Geothermal greenhouse and and largest new Public to in solar Commission projects the energy use carbon Purchase Utilities eligible emissions, -- implementing low deliver third-party-owned storage XXX under energy reflect to energy been Purchase new grid commission make gigawatt uncertainty energy and the the our last due Power our for prices fuel asked gives of renewable cost even reduce On prices schedule shutdown we the to that hour ability Puna clean are will And XX% plus Power of them Agreement achieved established very our priorities which lower these RFP engage by the renewable from solar over of satisfaction add innovative help the year. plant on storage. These approve our than to XX% from XXXX power to we called meet state's each cut by clean XXXX versus PIM advanced us participate Six of an XXXX. XX% compared seven customer procurement generation megawatts We've with by experience, XX% ways emissions flexibility despite of sales greenhouse lowest since reduced have cost completed program. offer of the fuel that have fossil lava for gas award us On of for to mind programs renewable blowing If a of clean projects what improvement sales we XXXX. XX% independent XX% to us reduce gas utility renewables, our the fossil emissions to of customer use We energy the by continue and reach XX% since approved our XXXX. and since to energy new XXXX new will needs reduce for more customers in flows. develop helps Our We these cut by and and dispatch accelerated fuel and producers. and transformation. energy,

own footprint paperless now to and rooftop earlier Oahu reducing renewable launched carbon renewable those of taking As just that than with who this solar adding easier number approval apply to proud single-family made we don't our homes We've to rooftop from savings. to rooftop for XX% commission to system time. like; vehicle. add actions program customers month, or to established energy the a buying And few we're solar XXXX benefit on examples, one project improved we moving electric to community-based for customers billing, faster enable their reward rooftop energy adoption. online again for the have it in in solar. new an I'm say solar nation private More

store integrate, In modernized our effort transportation provide vehicles, roadmap, growing more I electric charging strategic system value the of laid customer. to of approval. and more for scale of infrastructure manage drivers also take are and storage and of which foundation advantage additional and energy electrification customers applied levels grid options We bus for for the and effort. grid, enhanced our more our storage to we to to and Phase battery offer need XXXX to more We technology advancing modernization expanding of grid state's and electric on a filing pending two distributed renewable the projects approval

agreement provides attachment XXXX or our PBR opportunities made also and to enables XXX,XXX become and Performance to us state's our to major stakeholder framer and utility, managing new evaluation poles owner Our the customers. transformation the regulatory policy our with add model. benefit marked revenues. ensure year pole market utility of of like beginning state's of Telcom It alignment last as of Regulation strides of with Based engagement formal regulatory goals. the respect to to with XG earn Hawaiin optimize ownership well technologies that asset as We

which stakeholders XXXX which We this the incentives the and achieve and effort on developing of the advocate process, forward guiding this integrity health have of of on mechanism. to the stakeholders rate and principle. to measures following the financial X many been first utility utility's triennial will gradualism working of together the maintained significant We resumption has to been PBR consumer use goal. performance in focus other collective commission, look the and continuing work with as productive with on financial collaborative commission and to We which has important in and Phase specific in our made cases the progress MPIR

new operational We'll utility enterprise efficiency. and and We live several efficiency million in many system and advanced across new systems by automation economies October will and underway through this other took efforts systems, also system and related procurement increasing company disparate system three common customer scale. capture five enables deliver utility, We $XXX into our in improve initiative, to successfully our savings the one increase consolidating maintenance SAP next is enterprise platform a processes years. to greater XX island standardizing of our This over which efficiency and standardization.

and initiatives We consolidation will costs programs. of through other including facilities reduce review also benefit to

to cohesion five of to changes our continue also one our across our bring organizational island around initiative. sense with align teams a cultural company system greater We

team flows to the memory. XXXX and to make the of natural disasters hurricane is recent several landfall in proud on Maui in Island, lava Hawaii in and tropical our very I'm Finally, a for responded storm prepared first way including

resilience and quickly. investments enabled to very disaster and damage in Our preparedness recover outages us limited had

which hard also and of to has efforts ways and the lower already customers, increase levels customer and lower-cost a for easier use banking to and service. this ratio the basis XXXX American bank improvement its addition on our a record XX.X%, through earnings, XXX and point improvement XXXX. its point slide done in over strengthened XXXX. American achievements basis efficiency American since a to of focus four, consistent to significant in XX%. has had has drives to reduced automate making Turning cost footprint by XXX bank's number worked its occupancy of processes permits culture to high its deliver simplify non-branch

American is gains new ahead, its the campus. improvement Looking in future its XXX A several ratio basis driver of by over the key points next efficiency efficiency targeting annual years. bank's is

solar are bringing of its together. excited the this sustainability further presents improve in serves power also about to campus efficiency platform to Pacific and the non-branch campus an well. consolidation benefits other American's energy partnerships hundreds development cultural operational also of employees the The new goals community efficiency, and of smart panels state-of-the-art We building was campus opportunities core. not mention as helps important with our helping to and of further employees The XXXX into revitalization year Honolulu's for as of to urban part a Current's and billing technology.

projects place set of time a being opportunities campuses, team identify relationships, We a forward, lead five and to to strategy, solar management Pacific second our acquisition, built establish out optimizing its partnerships team. storage state's a build to at right Hawaii future. leadership the small assets Current existing University plus have local further in invest now and highly-talented our was of develop Following further in sustainable

Current you in update new Pacific projects. will as We undertakes the future

highlights. can on see, and very and Greg a to And ask had our I'll update we've year. our Greg? you XXXX XXXX As productive active results you now, financial

Gregory Hazelton

economy, fundamentals still XXXX, monthly dip driver visitors more the in expenditures December did maintains compared see with slight significant end Hawaii continues to Overall, In grow, X.X%. with islands in making time growth to spending the rates. and the up in pace the significantly more Hawaii's were nation's We a remains Hawaii unemployment of Connie. strength state's the Hawaii's in of XXXX the of in arrivals our year. in estate expenditures the strong. should Unemployment year up at tourism moderating. lowest the X.X% than national real industry decline economy December in remain December X.X%, X.X% is rate was X.X%. one of XXXX. purchases of below visitor were a in although and is the healthy Thanks prior

While and prior increases X.X% X.X% by of prices family on X.X% condos. single for median for year single sales Oahu declined homes with condos, and to the for volumes family from rise for continued homes X.X%

expansion While as still is the growth the continued slowed economies rate business matured, has of expected. has cycle

Turning net full to HEI's shows income our financial for results, fourth slide quarter. year six and the

As financial with our XXXX, performance contributing Connie both companies had noted in results. to strong reported earlier consolidated we operating

XX% left on million Going GAAP from to relative the net $XXX.X full for to consolidated year increase. slide million right XXXX XXXX, income was this a for $XXX.X in

net There net lower year well at for of earnings same combined $XX.X by new is Bank. XX%. on Net included company income. earnings normalized was higher holding the you Current. reform holding offsetting strong X% with million. operating contributed up of no tax consolidated quarter or to by reform. remember across companies in as offset and driven one-time reform that the federal the our income quarter adjusting was headwinds from net to a in these due positively $XX.X impacts bank the contributions Fourth late expenses adjustments company to and were at holding the at was the Pacific -- core over utility XXXX, which in company Pacific due reflecting other million primarily by one-time by tax in Savings income expenses After expenses, and/or year, quarter fourth QX adjustments compensation grew impacts, experienced segment year, the had Current cash non-core to higher the of in utility $XXX.X from loss As XXX interest we for may benefits Full some grew holding by segment XXXX tax tax partially last enterprise. certain million non-core impacts XXXX and company of income XXXX net income both other flow performance American net partially modestly the offset investment as and

were to share per earnings $X.XX GAAP $X.XX XXXX XXXX. For compared in

Excluding of impact and core $X.XX Through XXXX, by one-time are share. $X.XX tax earnings to holding were income grow per we growth dilution per a core reform XX% $X.XX bank grew a structures net share XXXX, of basis EPS -- and in business. core because growing practically XX% me, GAAP of net able federal share and translated earnings of per stable excuse on for dividend XX% no bank as into in dividend income our growth each company on a

with ROE XX As of utility X.X% case XX HEI's The shown an Notably despite XXXX net of basis on X.X% improvement allowed achieved basis core and growth side -- the at the X.X% despite slide, rate points higher XXXX increase XXXX X.X% of the a the utility despite strong earnings right allowed XX bank XXXX a consolidated ROE ROE utility. the prior ROE after basis in point reflects to our management compared to reflects for compared ROE earnings lower ROE allowed. improvement. and a at the latest of was improved core X.X%. basis, increases On point of loss GAAP

to utility the of Turning XXXX million million. income income of $XXX was core $XXX to tax slide which income million net GAAP XXXX impact compared excludes of net eight, reform $XXX in one-time and net

of $X.XX our $X.XX EPS to to XXXX net below contributed $X.XX Our guidance utility range income of utility per share, $X.XX.

costs including and primarily higher case reset rate compared O&M our NPI reliability net $X Hawaii million with revenues after-tax million a to for of on decisions, cost project rate receivables the than years from evaluating release events of higher in circuits Telcom, fees operation LNG time and the income income period the of expected impacted and claims, income benefits resulting of quarter the most recovery interest related On the higher As in as of reduction were drivers $XX for Connie to XXXX in maintenance favorable and merger the licensing to the late part was penalties with adjustments cycle first in expenses exceeded in the base difference from connection ensure settlement net reform result million $X and net write-off case utility lower filing revenue tax after largely underground pension rates between smart resetting reserves mentioned on grid cost the related XXXX, Hawaii to million to preventative return tax of which imports, six mechanisms; expected. of from basis, higher the during significant our $XX operating agreements savings planning incurred station XXXX net by adjustments, through to net the from the realized. to the reliability, actual generating partially compensation return, as RAM fourth maintenance year workers' pool and tax which an and one-time requirement and of including Telcom; the the to income due offset was and the the customers, made our PIM attachment

to record impact XX% reform. million to a in of the included compared positive the reported net with million, net Turning a prior $X net Bank tax had nine, income million in was income. year, year earnings which American XXXX, $XX $XX.X for slide increase for

adjustments, income impact bank of was $XX XXXX the tax reform Excluding net million.

partially from increase above million growth as to an call, for and to quarter million of noted EPS additional As card good million the the a Strong come reporting of and reflecting consumer to credit accounting our result $X.XX portfolios, construction card real yields estate real new the of loan non-interest to portfolio, due drivers estate per debit loan commercial loan commercial year-over-year of significant interest of The range loss by due income, year. XXXX. were: offset in quarter share. expected higher commercial resulting $XX $X.XX improved per improved quality $X losses, $X guidance lower $X.X primarily the as the guidance, fees, due portfolio; which and criticized interchange at as interest-earning which reserves for to to income; a in and exceeded, expenses reclassified rates contributed on pay-off most bank on reserves losses employees $X.XX that provision standard end performance fourth assets, million for as the consumer very loss due additional described. in the lower driven the of releases compensation from in non-interest well merit $X loan loan of ASP higher lower loan of tax we a third our were debit expense, primarily primarily XXXX higher rate of the in the increase $X.XX increases, expenses salary to the high for entry income, the loan by benefit environment; share, management debit card XXXX for just provision I as increase bank's partially of reclassification the due to offset decision higher increase net by was well non-interest million expenses to in reserves to in interest the and after-tax annual

return XXX XXX on equity. points basis our assets Turning points XXXX showed in profitability XXX exceeding of basis the American's assets to point the basis return threshold increased a XXXX, assets on on for third of return both on with higher of year. XX, We return quarter and quarter for solid fourth and/or achieved slide through

return above the the XXX to points XX%, achieved high return well-capitalized for margin average just continues the achieved XX, X.X%. assets return we efficiently well bank. peers. over the full on equity, equity basis for to and against slide X.X% comparing linked-quarter, well medium XXXX, in XXXX a Fourth compared For as guidance threshold We XXXX, favorably year to of grew our of to of and X.XX% quarter and to a manage on range on for peers at year interest XXXX our our XXXX, average of X.XX% American's has Hawaii-based return the while by of XXXX interest peer full net margin XXXX. XX.X% XX.X%. high-performing to perform On on XX.X% maintaining in end was average strengthen compared annual Our X.X% equity, the optimize continued Net to capital as

the the the fourth For was quarter to XXXX linked improvement, low higher earning XXXX, interest fourth attributable X.XX% margin deposits. of on assets primarily the and compared to and in cost X.XX% yields quarter quarter in X.XX% interest net continued of with

interest We XX continue income. X.XX% quarters FAS to amortization by in within loan the margin margin interest Normalizing to fourth and was investment in investments quarter. supported quarter within lower been previous our effectively portfolios grow amortization portfolio. net the for premium assets our fourth our the earning to improve XXXX, our would've Net

the interest relationship low interest low in cost approach asset funding increased benefit yields to over costs -- maintained focus and X.XX%. earning Our our banking. linked-quarter rate from We've our the environment disciplined to on and fund our continue rising

reflecting estate linked in outstanding losses for loan other of loans loan credit fees year-end interchange for a due and from Hawaii non-interest X.XXX% significant fourth card non-interest and environment. compared as quarter and XXXX earning quarter income Net interest $XX million funds and X% card non-interest quarter the below prudent billion million, as held driven $X.X the was of loans $XX.X was was assets quarter the in to remains The annualized our there X.XX% investment points to higher XXXX quality estate to of growth interest linked over to management to billion in compared and consumer million of quarter commercial additional $XX.X million, million rate total than of retail in $XX.X year in to $XX.X quality December primarily a of $XX.X $X.X or new stable for the approach fourth and the Provision are for compared of was partially of economy. healthy $XXX.X The losses XXXX. a peers. improving X.XX% XX, was also XXXX, quarter provision. well loans credit $X.X of the was December was loan portfolios standard On non-interest In linked Fourth of criticized increase percentage reserves real linked-quarter a reserves a from XX $XX credit by the compared real residential that compared quarter X.XX% Non-accrual expenses the of sound fourth commercial to income were Allowance payoff at X.X% of lower in income at prior linked-quarter loan at receivable for million with slide lower result at $XXX $XX accounting led portfolios. commercial and debit December X.XX% interest portfolio. cost loan Our strong million of Americans basis X.X% income end million XXXX. basis the quality expense XXXX, and slide due offset the million deposits to very in And fourth portfolio due points or XX, XXXX. with just XX, risk a for at million XX, income loans the expected interest reflected XXXX. the year. increased trends. lower which improved portfolio, XXXX disciplined $XX.X the to from the Total an and reclassified grew up loans of XX, to fourth our million million million to of quarter total in Non-interest was $XXX growing the XX, net towards quarter, year. On by in as the that X.XX% above debit in remains construction two year prior release the December up the XXXX end in income. X.X% improved the of

versus year. Our loan full of which versus improvement net XX to and the over fourth basis basis the fourth quarter personal basis points linked charge-off XX linked charge-off prior in adjustments profitable. by The XX quarter to the the personal the the basis well points XXXX, peer American's XX net banks points remains funded seasons as for American's on of A The peers. quarter portfolio was process. our for of shown collections the as XXX% portfolio low was points XXXX, attractive mix funding XX left remains peer and portfolio cost strategy it as our XX asset the core side of management's points parameters The of of loan at improve cost driven the full for slide the better average to funds the ratio XX for loan relative basis to reflects increased for basis its with median. deposits XX%. aggregate than quarter the ratio unsecured XX points points to was year year compared nearly unsecured basis its

XX.X% and delivered key for the year per year focus fourth about efficiency efficiency full XX, next points years. Turning the results a slide and improvement efficiency XXX compared has quarter XXX basis year, bank XX.X% key remains ratio the ratio a about basis ratio improvement Efficiency with consistent of prior management a its moving meaningful three American to the in was improvement has of of been points targeting basis -- for XXXX XXX to focus the strengthening efficiency points ratio. achieved efficiency of better. management bank the and XXXX XXXX over over American's an forward

projects projects Turning and now permitting, year. and energy. two its investing and XX to target distributed of modestly In storage invest our million both and given depending that and the Phase more $XXX by resilience largely to $XXX can, improve expectations of in our as starting timeliness as to future CapEx well between forecast we in year vary on XXXX million forecast, stakeholder CapEx of driven and utility and approvals year. as utility $XXX reliability X of community help approval, well Grid battery $XXX for CapEx initiative, XXXX still for we per require course, million CapEx, baseline commission million as renewable PUC any expect integrate processes. XXXX, other its engagement on revised Modernization Building with result, our and -- XXXX, performance exceeded the of which

the bank self-fund earnings through our Importantly, our financial is to long as period needs to dividend the markets. to expect strengthened our to we and to condition. its holding forecasted capital And be to for The million. CapEx ASBs expenditure to ensure financial XX, utility XX% improved Utility maintain to has its financing to improved. capital to expected capital to has In able equity increased investment programs, dividend XXXX with needs access slide while capital increase its sufficient the increased planning through has results which have investment HEI capital its XXXX access the and On retained in meet able continue HEI for grade self-fund Utility its $XX earnings debt the XXXX, is outlook structure. company million. that to XXXX necessary reflects its XX% been an dividend will $XX self-funding

the need attractive cash other anticipate the opportunities not distributions improved the While of from currently to external issue do and plan. or bank Outside XXXX. our any investment in included equity utility, in we not accretive

outlook our and grow flow while dividend, allowed ratings. and capital structure continuing has maintain manage investment-grade In addition, to improved us HEI cash the the for earnings to our

utility $X.XX of share guidance we the to to Turning are consolidated at $X.XX $X.XX $X.XX per $X.XX the initiating and consisting to earnings HEI's at $X.XX bank. to XX, of slide XXXX

net on assumes approximately or incentive, no includes the incentive, Hawaiian and adjustments also O&M customer penalty guidance case in benefit can that Maui below benefit major latest a items and Our and XXXX or and Electric impact pension focused reflects It penalties one-time projected million to decisions from utility appendix. impacted efficiency the Electric an a from performance, be X% detailing adjustments increase our income $X material found XXXX no our regulatory rate customer mechanisms in rewards. from those Utility O&M from with to inflation. -- impacts continued -- performance, excluding change guidance recovery schedule management's

as embedded positive Note Our selling growth. of strength incur range it it a reflects to ASB reflecting impact offset into two margin bank and per relocates XXXX low to of net growth in bank on moves year ongoing our to for approach the a its embedded bank guidance new cost facilities, asset the focus with its is as $X.XX and disciplined this guidance earning one-time space. the in $X.XX mid-single-digit on campus, by anticipated is will interest to -- gain American's in share net sale efficiency continued new the XXXX,

further team regarding Also we promising from our important the new note to comment that platform stage expect would and pursues issued to of do no it earnings management XXXX be a -- company overall HEI given I remains to as opportunities. part develops Current contribute we Pacific anticipate meaningfully dividend strategy, of not While XXXX. as increase. new project plans and an our the early from manage and equity the the

is dividend over policy Our I’ll to to in turn approval accretive capital while grade investment board payout rating. her to remarks. it XX% XX% the range for with other growth is Further investment opportunities. subject dividend closing and structure maintaining consideration Connie and

Constance Lau

a through continues of beat targeting of our projects to board asset will goal new invest our of customers and our efficiency the and the HEI, foundation continue a Pacific implementation other making its strategy delivering the the to easier strong our to enables significant energy our At and our focused our on sources, growth. non-branch our pursued focus employees strong continue from efforts. company we've new affordable, and to position and initiative even future and we to acceleration of on continued banking customer innovative quarter Thanks we through We're and which Current, campus to relationship making enable forward its of enterprise, growth improvement company The track enterprise lead supporting a the and pursuit stage history. sales XXXX expected while optimistic and strategy to on development, Across ways relationships. of in accomplishments one to resilience this renewables, At we're on customers, And ability value our O&M vehicles, bring by for transformation XX%. into marks in our two Greg. across about Consolidation system efforts. headway shareholders. We're more new sustainable this based focus building resources for proud to financial resource are on grid by needed ensuring first space optimization, with reliable, the and of of XXXX our going even XX% start At at for deeper Hawaii the the reliability we very place financial company, a created our team increased strategic our of well-positioned the building, of to customers. new for dividend, XXXX customers achieve opportunities. X.X%. further build which We're more also long-term new American's is more earnings initiatives value in provide forward. we're year we're employees efficiency electric the for company savings for electric system, continue utility, the renewable modernizing and renewable communities, more in remains core all improving bank, our will and more build in and

our in succession, success before may at board directors happy take to with questions. extensive strength have we're three to all to of our of new And and part Finally, we experience plan our that, track records as our Q&A, Board. bring the upcoming to you are our to release get seen now of your nominating we board annual talented that independent meeting add

Operator

Thank you.

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

Unidentified Analyst

Julien. Eric for on is This

Constance Lau

Eric. Hi,

Gregory Hazelton

Eric. Hi,

Unidentified Analyst

afternoon. Good Hi.

be specifically this you changed? currently proposal latest could might list are performance on So, staff of the from metrics? the proposal the and significantly first you PBR five-year question, on comment And staff on sale anticipate proposed what

Constance Lau

actually and question. Eric absolutely, anticipated that we had Yes,

us invited of we've with Viola, be who today. the Regulatory And so Department, Head our is Joe to

over so, turn to Joe. And I'll it

Joe Viola

The still staff's a is of approach Hi. progression it PBR on Phase regulatory balanced middle Proposal of still This Eric, X is process. kind to believe kind pretty came a February in again continues currently. the really our Joe be -- we're of that our We from We out presents of the to quality of this framework Viola. staff. commissioned end product consideration work proposal I. Staff high at of the

submit And parties March Statements a statements We'll then on period. that discovery will parties to of limited will There be the after comment Phase issue The Position X X. proposals. position will briefs its on on the of decision those be present Now implied on X. will April commission providing time.

constructive, So, we're as still the But a of little look forward of professional process, right think early the lot bit with details discussion, commissioned matter. and middle now, and we we in recognized a report agree the providing on conceptual process in comments that in very very our to I the March.

Unidentified Analyst

challenges? on And do you expect it. you would read as ROE Got proposal – the current helping

Joe Viola

Again, on as providing. II. been some There opportunities, encouraged Phase of again the be to to potentially certainly of the the we'll the for a I we've could bunch think the that the traditionally there The to concepts that. are offer actual potentially services opportunities regulatory potential We're what but see to Really, details that. constructive a very development reduce opportunities certainly an of for matter. utility, the lag. by in have will details some Certainly, for earn discussion opportunity

Constance Lau

well Joe considers proposal professionally process and of I stakeholders would the just as particularly it's very in the different thought this add And think what's really important through the done customer. Eric, I said, all that, about

thing. So, important that's really, really

Unidentified Analyst

contributions Solar basis? Plus for going relative on trends further Got Storage stand-alone projects you the XXXX? you uptick Could And to side. talk about talk And to drag about the the would secondly, XXXX it. you specific on Thanks. in could from the earnings HoldCo a

Gregory Hazelton

Hazelton. Hi. Greg this Eric, is yes,

work So, currently. they been Current And new office and to yes investing It's have you in the the platform year. that establishing -- the Pacific noted did earnings was know, the we have overall. modest as we've relative talent as through contribute ongoing other

basis did within So, of share, a well -- grow internally It net forward. on again brining -- but earnings as the platform the well management Current per over making -- all the online. Pacific after made to to moving as $X.XX bringing bringing as that's as it's investments contribute investments team

at The to reform on interest the and the higher were holding increases and holding the a loss other company level. bottom tax expenses after-tax. primarily line at a based that falls realizes After-tax, company loss

about term debt quarter, fourth rate we interest a in noticed the commercial at at of rate you the did out $XXX interest term interest as contributed environment, holding and which million refunded company. costs the current our to higher So, higher some in paper

Unidentified Analyst

Yes.

if acquisition to there? contribution to be for would able the referring second Solar expectations to five you any I'm clarify. the to XXXX? further color Plus The Just announcement Storage those, around for provide project earnings standalone

Gregory Hazelton

actively of a in I being process been basis. that are on team those And the know and So, his Scott have completed. day-to-day managing

about those timing those expectations have the of we think bringing I So, -- online.

add? being most online. will So, as while capitalized see earnings the construction, those costs Scott, are you of anything do they're under contribution you are brought and have to

Scott Valentino

first remainder relative those due a for with All projects starting come the the very relative one, late the be basis, spring, contribution online sort The Yes, sometime projects to early come sequentially year. of on the small nil, will if summer, online timing. five targeting not though just early of summer. XXXX will probably

Unidentified Analyst

to change any effort? a question could free spin Thanks. And be potential then, potential to the LEI a bank? you last tax see of forthcoming able report openness Got co-op the helpful. that's Would one before I queue. of to discuss And telco? the sale around any it, for variables And

Constance Lau

So, told potential speculative increase proposals Eric, comment always have But I team don't this value. we all has investors, might been on evaluating the open really management think that proposals. always shareholder as we've to to

never those kinds really is anything we've but that I comment shied speculative. of So, away from can't on analysis,

Unidentified Analyst

I'll you. to Got it, see understood. queue. the Thank

Operator

will ahead. of come from go question Paul Associates. Glenrock Patterson Please next The

Paul Patterson

going? how's Hey, it

Constance Lau

Paul. Hi

Gregory Hazelton

Paul. Hi

Paul Patterson

beyond the you So, of I was XXXX million, said, is on the and $X potentially, which impact reset? what think

Gregory Hazelton

reset, the recovery net now at periodic have pension so the rate the current You we're cases under costs we mean incurring. that

our in cases of to a basis with were As actually to been rate on and basis. trust for cost, the actual we on the out cash a cash environment were, the and you number of cash those a old costs the external requirement collecting rate know, programs contribute years fully we've we interest not

basis, an has costs relative. rate we -- to because what see we see on those the Relative we're -- aligned basis, our are an with earnings does really question? cases being So And costs Is collected don't that as your been that of reporting. that have impact the go-forward cured. address programs so

Paul Patterson

does. it think I

okay. I So, you mean, so --

seems that the you're before. XX maybe for Is on -- slide what -- represent? which missed guys So, slide exactly it maybe does a I like new that then and what you not

Gregory Hazelton

what directly. had made were talked that we've Those Tayne to look -- speak but are Okay. I'll concessions we've maybe to terms about benefit over through settle now the And I'll that have reduction cases to customer been recent time, were of that the that those rate adjustments. scheduled in a

Tayne Sekimura

Yes.

So, Paul, line. the is on Tayne this

part it rate our Maui as worked benefit on we we requirements revenue on As Greg particular were and out. customer did for what adjustments. to cases the schedule as they in being these Electric this agreed mentioned, And and of are the slide Electric Hawaiian

with and attempt You that will to is going we're will we it's through notice revenues what And these team the we over got find to to reduced. lower to that these amounts cope do rate time, the as management manage case. offsets

Paul Patterson

Okay, great.

Gregory Hazelton

We clarity around wanted provide these challenges. to

this us to think look But as achieve achieved importantly as that time, will things to this and offset are ability that these improve to will recognizing -- have out reduced allow we all As over to ways you and see equal. better that you do time our then those. find we being ROE our capture about have you to XXXX I think results naturally over

Paul Patterson

with following seemed bit Day caught to you a sort having idea were then Eric's questions, savings. which elaborate what integrity for? actually is eye. sense on on actually second it of they thought is financial savings? up the the stands is -- have little And that brought with two up Do one up, to Eric that the Okay. there speak a PBR my them utility. term me that that of entail or is It with Day of that what Could one more comes gotten what what the things And might when you you process that

Joe Viola

Joe is this Hi, Viola.

immediate proposed multiyear some a where plan commission immediate term Really, Day was and a to it adjustment believe savings advocate the proceeding that had of the customers. consumer any represent call parties and to addition similar start in The exists. question, on requirement question new what It's that's from staff in would in I Several PBR to that. Blue proposed the one earlier the dividend type dividend. rate maybe kind represent customer the First report of Planet to of is savings the that a revenue plan reduction customer they benefit. the

might I revenue staff be think essentially to goal the a multiyear what rate by ensure productivity commission stretch plan that represented factor report improvements requirement. as in case above describes our otherwise productivity the

that's in in report will a proposal on a commenting that be the the that's So, staff briefing. utilities and the parties including

very did rating only goals. They continue not important financial credit financial integrity that third-party far docket important lot the is rely think the our their to energy And of a of beginning. that on the recognition is help discussion been As It's That's integrity, appreciative the power we utility's providers. since actually financial integrity. commission acknowledgment in our financial as second represents question were the the state the on of utility what and achieving projects. I to the finance we of certainly stands to the to our of integrity importance

development guiding express that -- principles of an it's defined one the many So, of that. We're recognition in of recognition been guiding PBR of fact X. and as that, appreciative one has is certainly a Phase very the of the to

Paul Patterson

looking could But guess risk think items, is where at be follow I of when the -- seems talking at that might do two a day potential a the if that that when such of what plan? -- like savings. we're one guess situation Do am actually of impact how sort there was earnings you you I saying? sort It we're one there it sounds about Okay. I these --

Joe Viola

-- that staff well there's are always other simple is risk. just There factor But -- to answer there factors. that's one commission that give a

that will lag one other how But could to have opportunities. some what's the customer mechanisms provide change report increase the the in this of regulatory we from out. mentioned table. elements So proposal also could also us, details are us regulatory day savings We that revenue opportunities before on the it to for dividend will see Is staff matter. plays reduce commission

we So, context considered it’s and package that. a be as proposal in will we briefing

Paul Patterson

amortization would've mentioned heard If would that interest did to bank. guys then -- the lowered just correctly that that I And Okay. have that hear premium -- net you X.XX, you that the gotten correctly? on margin at for I the

Richard Wacker

correct. Yes, this is Rich. That's

Paul Patterson

about what that? forward, Okay. should And going we think

Richard Wacker

how bounce in -- was quarter lower what it year, the average would be think that but back to much and will be rate it amortization comparable run We up on for would a quarter-to-quarter, don't know it'll think than we on basis. we XXXX. We the saw

Paul Patterson

with just then be the Okay. associated earning out the $X.XX moving the that we should And only the to guidance? But called onetime sale. is to slide, thinking the with on you bank campus one about in guidance the time finally $X.XX new

Gregory Hazelton

are have our other onetime in forecast at scheduled we headwinds we've -- adjustments that there's we’ve Yes, other known out included no -- this provided detail. No full there time. the the customer benefit and adjustments that

Paul Patterson

to some have good Okay. snow. Well, talking pretty had thanks but great That -- amazing, so much. weekend. you I was -- you. And a hear sounds Enjoy, guys

Constance Lau

Thanks Paul.

Operator

go Morningstar question Fishman ahead. Please from next of come Our Research. will Charles

Charles Fishman

thank don’t now. know right I And is, guys. what you snowing snow where it's I I am

Constance Lau

That’s true Charles.

Charles Fishman

pending? will approval. When projects on commission waiting the exactly big plus Those footnote the a mod you projects battery was do What's slide There for CapEx are grid what date or think that is XX. meeting occur? your two

Gregory Hazelton

Yes.

grid completed on under have modernization, procedural steps the review. I think now the of commission been it's and the docket So,

fairly soon. we'd relatively pretty anticipate expect something We

-- completing statements battery relatively of to as position. close our On applications, filing reply the storage there in we're process case that think I been current procedural have well, a

So, those commission will soon for be ready decision-making.

Charles Fishman

Okay.

a So, slide that in little has slide quarter you had and bit. a the third changed

XXXX $XXX $XXX Is $XXX battery million You that CapEx were you're and those to million two for projects? million. the of timing now of showing at

Joe Viola

granular. as and progressed Yes. more our permits CapEx approvals, scheduling, prioritization. planning gets It We on pretty it gets as to -- a detailed down and well

mod our it is a on a the been the years way you will million power sequenced. see movement supply and think which are $XXX consistent periods. scheduled million in see and -- to baseline long-term have and we've major our with is that about The level upside potential between green planning those level. $XXX that based how in at and thinking I grid you in some we certain And upon of kind the projects

or You renewable. we is our a requirements There year need into pushed to all we the a a it different expenditures investments but is and our crosses as that. project so forth, may a see -- of transform at lot integrate to that consistent base if year a needs gets that achieve have times make that put -- to be to a delayed pretty of period grid of to or through consistent there the needed lot the new

forecast. commission subject other are Of course, projects all of to those prior of major to in initiation expenditures approval any our included the

may So, again, see over shift time slightly. projects you

level our with the we're spend as of and over ready level and upside become level time. million and added filing they comfortable project CapEx But New generally, to the for that to $XXX for approval. -- potential

Charles Fishman

Okay.

guidance thing, dividend new the On since a is this guide. leverage

Greg. Just time, will a let's the make look or projected core at Board year Is of income Board to ratio payout EPS Connie what XXXX process use that Do at XX%. XX% will you next you the net that of the is is for think the like and how core your it, of understand envision? sure look this I year say, beginning or end XXXX, at to the

Constance Lau

at potential be results forecast we And And Current year. also be of Pacific at year the course Charles. going the they'll also, Yes, views will might be the looking in for look of course, forward. they'll for like what investments XXXX including making, on this in

the that consider that of they the at be factors time. So, will will all

Gregory Hazelton

ensure management; as core of value capital our overtime. do -- proposition access do to shareholders competitive view We we a as our to a to dividend part

it we as as achieve take And we very Connie So we said, performance. evaluated seriously.

a the strong bank, Fortunately we utility underwrite time. that the can as profile the have and and of the performance flow, improving well over dividend stable of as cash dividend strength

Charles Fishman

you. Thank it. That’s Okay.

Gregory Hazelton

Charles. Thanks

Operator

Our next go Reeder Wells Jonathan will from of Fargo. come ahead. question Please

Jonathan Garrett

quickly denied, dip or $XXX following If have do question. battery just below doesn't spend in even are So, the opportunity, Charles' Greg delayed such storage approvals on XXXX? that that the million you CapEx backfill to the CapEx

Gregory Hazelton

to over process. time. hand she's levels abilities have Tayne increase We the over because capital very planning that have shift do and -- to me modestly we let But reprioritize and close to

Tayne Sekimura

have Yes, our at are our reliability so can is we of types other we will resilience things there our projects at we're to and look CapEx and in looking at contribute -- system. these to the that of look baseline

at from those look done, spend void levers to what ability can our to that have if we be fill CapEx so changes there projects. in other and So, we major that have

Jonathan Garrett

Okay.

So million like really we Tayne, it of $XXX sounds of pretty think the it? as kind close to should floor then or the

Tayne Sekimura

pretty million range. $XXX It's the close roughly to

Gregory Hazelton

to have at. have be lot reliability other are been things. looked the can that they to of Again in they right certainly ability a as to relative for demands doing also manage in that that There's it's relative to is prioritization If pushed, queue not things. XXXX ready planning the the and manage projects and system, increasing projects may something

-- our in shift to the comfortable But If late able level. process, something the unexpected if major in we're year were So, not we're to $XXX or comfortable level. the key bring accelerate may with be delayed project in and that at the new generally we a projects. of something $XXX late happen one things happened and million gears million

Jonathan Garrett

the the you in financing of that the XXXX. or did clear Greg, at this that some sorry? I'm at XXXX And the exclusively maybe I to question drag great. interest year, I first it end on increasing some wasn't of Okay, think about HoldCo like versus Is end expense entirely higher was XXXX, $X.XX

Gregory Hazelton

million We quarter, our of Yes. facility. also incremental, another at debt in fourth levels you which $XXX the issued which paper repriced -- we commercial as we higher -- did is versus was saw, issued

natural So, well. we sheet we as the consolidated -- growth sheet balance some our the as of in increases balance see overall year-over-year and see company

see the of relative we -- And the higher after-tax expense losses. now, so then to rate and benefit don't tax

So, there you well. as see that increase

growth trend it's the nothing a a elements itself. in it's in compensation above company, above at inflation combination natural and of holding and other and significantly or the So combination of then -- but some

Jonathan Garrett

Okay, great. Thanks.

Operator

Levi Andrew will of ExodusPoint. next come from Our go ahead. Please question

Gregory Hazelton

Andy? there? Are you

Operator

your Mr. is Levi, line open.

Andrew Levi

I was Sorry, muted. sorry,

Gregory Hazelton

That's unusual.

Andrew Levi

snowed God. or It Very guys snowed realize in good. doing? it didn’t the I there, My Touché. How you mountains Oh! like--?

Constance Lau

Yes, yes, volcano. tops up in the the of

Andrew Levi

That happens happen year? -- does every that

Constance Lau

every year. No, not

Andrew Levi

one do questions, anyway, asked have last. but actually all Paul Well, Okay. my I

brought up. had and -- it else someone just So,

discussed we implications that tax the great. company either we've you on cash you and before, as the will this if implications about the Just know if can't. but just and spinning or you bank But mind, the don't also can if be of talk I bank of can, the selling well

Gregory Hazelton

how billion over we put sustained $X.X to the regularly, current earnings, we analysis or our we talk billion -- you value view have of a We at increase $X basis overtime. to you look the it's area. Obviously, a of with bank, its if Board. alternatives Andy -- So, do the on but discussed multiple all shareholder value a do this previously, we've as and is potential

bank Our the tax that a low. would tax is tax bank. the but relatively don't the that I perspective number our outright in provided to from in is bank basis sale significantly do we inefficient publicly, -- be it know an basis relatively of

material investment-grade and dividend we lose which and don't -- to on the know we materially see that need cash drive consolidated the and basis quality separation HEI. the you you it our the many so value the and to of and high see benefits strength, of growing so of equity lack part external earnings of bank on go with overall regular a performing basis from of a consolidated a an of flow as And growth, company the the a consolidated with you -- helps of company, would the peers, adds as do our credit for bank

separate, remaining tax do So, outside at basis. And and value are a there. ourselves now on of as look see the as as our you there consolidated recapitalization have company efficiently consequences to ability of we a fund meaningful we other as and we implications separate to

the consolidated us the Pacific has and investment -- enterprise also including helped it's the So, pursue strength -- helped also also of enterprise of opportunities Current. that has new creation

significant ability well. as since and -- there's been increase as time in it So, we not considered backed this the sustained to execute merger separation I've a a and look makes of shareholder seat value our point to view overtime lot would process. as basis adds strategic of we've a in we outside There's where and capture sense or value what on meaningfully during been

Andrew Levi

was that weekend. really a Have it. said Got great Greg.

Gregory Hazelton

Thanks Andy.

Constance Lau

Thanks Andy.

Operator

from next The Instructions] Merrill America Please Julien from [Operator follow-up go ahead. is Bank question Dumoulin-Smith a of Lynch.

Unidentified Analyst

the follow-up One, expansion the have short two appointments? an specifically just is three Eric Board? drivers could again. discuss new if is I This confirm Hi. a on you this or you board could of questions. And current replacement behind

Constance Lau

our Committee Governance since Eric, the of focusing actually succession out been merger. Nominating has on and and So, both Corporate NextEra coming board management

And so, we have and potential been sourcing interviewing been, on a directors. basis, continual

them three settled and in directors really our kinds mix excited one that of the our skill release. now And bring we been have on knowledge sets We're the talent to names the on about the so, of whose and each board. of have

are of opportunity you nexuses about one very who of the policy at one expertise. it's another energy people almost them. combination And interesting isn't whole its we've so, wonderful experience that electric area, great and We've financial I think water But of have there if the number our selected, green go that a ag start and state to folks you Particularly area and look think course the energy forward climate And looking sector. through happy been the which, areas I'm each helping entire sustainability, it new that Hawaii, I of as industry for and finally, towards been the transportation. has focused overall could change, our things how also prepare strategy, know, in of of between this really here help of a goals. well. be Current we've does to like that companies, important achieve as sector and in Pacific on to the with as greening we in states only that's actually all the for And then always, look highlighted

round joining to so, have in this also our we And And will that actually a three directors. a also seeing well -- Board. succession Chair Fargo to be proxy, changeover Non-Gov of yet did we'll will as but of the get appointed that closer of of want and as Chair. part included the not to more be signal fact as that And we these that's as finally, Vice be us our as we the normal Board Tom the Admiral issuing new

Unidentified Analyst

nine Board, is Got the an just this to XX from expansion directors? to it. right, confirm And of

Constance Lau

the what actually as will have Board of specific the yet. not disclosed on number We be

Unidentified Analyst

it. on XXXX? are June end final you still file got a triennial cycle Okay, And with rate expecting the question to in my HECO as case

Constance Lau

we are. Yes,

Unidentified Analyst

Got it, weekend. thank Have you. a good

Constance Lau

Eric that will X. be July actually

Unidentified Analyst

Got July Appreciate it. X. it. it, Got

Gregory Hazelton

Eric. Thanks

Operator

next Our a question of is Charles follow-up Research. Fishman Please go from ahead. Morningstar

Charles Fishman

Pacific Is only Scott on the Current? Real quick. employee still full-time

Gregory Hazelton

no. No,

Constance Lau

We you. can't tell

Gregory Hazelton

additional and focused two three. so Current Development the other now is Asset more and on And on brought is Strategy actually of Business We've employees, one Development. Management No. a team more Pacific is the -- Business and

Charles Fishman

as read that sign. I positive a

Gregory Hazelton

promising. and taking It's engagement Yes. very active. asset team Very management. in is pretty over The talented their qualified

Constance Lau

and been company You Current built in forward. take Greg's can Pacific up are holding Scott staff his really and happy hear the that that and voice could has team he

Gregory Hazelton

Absolutely.

Charles Fishman

much. Got Have you weekend. it, Thank a okay. good very

Gregory Hazelton

Yes, thanks Chuck.

Constance Lau

Thanks.

Operator

question-and-answer gentlemen, conference closing like this Ladies our the and back Julie will turn session. this any I'd At conclude to Smolinski to over time, remarks. for

Julie Smolinski

you for weekend. have hope excellent and everyone an you joining Thank We your questions us for today.

Operator

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

may now your You lines. disconnect

Julie Smolinski	Director, IR
Constance Lau	President and CEO
Gregory Hazelton	EVP and CFO
Joe Viola	VP, Regulatory Affairs
Scott Valentino	President, Pacific Current
Tayne Sekimura	SVP and CFO, Hawaiian Electric Company
Richard Wacker	President and CEO, American Savings Bank, F.S.B.
Paul Patterson	Glenrock Associates LLC
Charles Fishman	Morningstar Research
Jonathan Reeder	Wells Fargo
Andrew Levi	ExodusPoint Capital Management

Hawaiian Electric Industries (HE) 16 Feb 192018 Q4 Earnings call transcript