Q1 2025 Hawaiian Electric Industries Inc Earnings Call
Unknown Executive: Thank you. Welcome everyone to HEI's first quarter 2025 earnings call. Joining me today are Scott Seu, HEI President and CEO, Scott DeGhetto, HEI Executive Vice President and CFO, Shelley Kimura, Hawaiian Electric President and CEO, and other members of senior management.
Thank you welcome everyone to <unk> first quarter 2025 earnings call. Joining me today are Scott tier Hei, President and CEO, Scott together, Hei Executive Vice President and CFO, Shelly Kimura, Hawaiian electric President and CEO and other members.
<unk> senior management.
Unknown Executive: Our earnings release and our presentation for this call are available in the Investor Relations section of our website. As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings, and in the Investor Relations section of our website. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. We will take questions from institutional investors at the end of this call.
Our earnings release, and our presentation for this call are available in the Investor Relations section of our website.
As a reminder, forward looking statements will be made on today's call.
Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings and in the Investor Relations section of our website.
Today's presentation also includes references to non-GAAP financial measures.
Should refer to the information contained in the slides accompanying today's presentation for definitions information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure.
We will take questions from institutional investors at the end of this call individual.
Unknown Executive: Individual investors and others can reach out to Investor Relations.
Investors and others can reach out to Investor relations.
Scott Seu: Now Scott Seu will begin with his remarks. Aloha kakou. Welcome, everyone.
Scott: Now Scott will begin with his remarks.
Scott: Hello, Hong Kong Cool welcome everyone for today's call I'll start with an update on our continued efforts to regain hei's financial strength and emerge a stronger more resilient company.
Scott Seu: For today's call, I'll start with an update on our continued efforts to regain HEI's financial strength and emerge a stronger, more resilient company. I'll also touch on the recently concluded Hawaii legislative session and the remaining steps required for execution of the Maui Wildfire Settlement Agreement.
Scott: I'll also touch on the recently concluded.
Scott: Slate of session and.
Scott: And the remaining steps required for execution of the Maui wildfire settlement agreement.
Scott Seu: I'll then turn it over to Scott DeGhetto, who will walk through our financial results, and then we'll open it up for questions. Last quarter, we discussed the important progress made in 2024 to ensure a strong financially healthy future for HCI and to best position our company to serve the communities in which we operate for the long term. This progress has continued in 2025, with important strides made to resolve the Maui wildfire tort litigation, while laying a foundation for financial strength and resilience moving forward. In February, the Hawaii State Supreme Court issued a decision resolving the outstanding issue with insurers who filed segregation claims related to the Maui wildfires.
Scott: I'll, then turn it over to Scott to get him, who will walk through our financial results and then we'll open it up for questions.
Scott: Last quarter, we discussed the important progress made in 2024 to ensure a strong financially healthy future for hei and to best position our company to serve the communities in which we operate for the long term.
Scott: This progress has continued in 2025 with important strides made to resolve them all your wildfire tort litigation, while laying the foundation for financial strength and resilience moving forward in.
Scott: In February the whole state Supreme Court issued a decision resolving the outstanding issue with insurers, who filed segregation claims related to the moly wildfires.
Scott Seu: The court clarified that, once the settlement becomes final, insurers seeking to recover amounts they've paid to settling plaintiffs cannot separately sue defendants. The decision aligned with our position and was a key step in finalizing the settlement. With this critical, supportive Supreme Court decision, the remaining administrative steps required to finalize the settlement are expected to be completed early next year, after which we'll make our first $479 million payment. In March, Governor Greene announced the commencement of the first disbursement under the $175 million One Ohana Initiative to participating families who lost loved ones and individuals who suffered serious physical injuries in the Maui wildfire.
Scott: The court clarified that once the settlement becomes final insurers seeking to recover amounts paid to settling cletus cannot separately suite defendants.
Scott: The decision to align with our position and was a key step in finalizing the settlement.
Scott: With this critical supportive Supreme Court decision the remaining administrative steps required to finalize the settlement are expected to be completed early next year after which we will make our first $479 million payment.
Governor Green: In March Governor Green announced the commencement of the first disbursement under the 175 million dollar one on an initiative to participating families who lost loved ones and individuals who suffered serious physical injuries in the moly wildfires.
Scott Seu: As a reminder, the One Ohana Initiative was established to provide relief as quickly as possible to those most seriously impacted. Our company contributed $75 million to One Ohana, and this is part of our $1.99 billion total contribution to the settlement. The path toward resolving the Maui wildfire tort litigation is clearer now than at any time since August 2023. With the sale of American Savings Bank and ongoing divestiture of Pacific Current Assets, we're moving to a simpler business model, which will eventually be focused solely on regulated utility operations. With the actions we took last year to improve our balance sheet and liquidity, we're also moving forward with greater financial strength.
Governor Green: As a reminder, the one <unk> initiative was established to provide relief as quickly as possible to those most seriously impacted.
Speaker Change: Our company contributed $75 million to one, Ohio and this is part of our $1 $99 billion total contribution to the settlement.
Speaker Change: The path toward resolving the moly wildfire tort litigation is clearer now than at any time since August 2023.
Speaker Change: With the sale of American savings Bank and ongoing divestiture of Pacific current assets, we're moving to a simpler business model, which will eventually be focused solely on regulated utility operations.
Speaker Change: With the actions, we took last year to improve our balance sheet and liquidity. We're also moving forward with greater financial strength.
Scott Seu: We're well positioned to finance the remaining settlement payments amidst the robust capex cycle expected at Hawaiian Electric. The significant investments planned in the Utilities Generation System and Electric Grid will enhance safety, reliability, and resilience for our customers. We're also moving forward with an operational risk profile that's greatly improved since the 2023 Maui wildfire. The utility has continued to implement the enhanced wildfire safety measures outlined in the 2025 through 2027 wildfire safety strategy submitted to the Public Utilities Commission in January. Another priority for 2025 and 2026 is to rebase the utility's target revenues in the Performance-Based Regulation, or PBR, framework.
Speaker Change: We're well positioned to finance the remaining settlement payments.
Speaker Change: The robust capex cycle expected at Hawaiian electric.
Speaker Change: The significant investments planned in the utility's generation system, and the electric grid will enhance safety reliability and resilience for our customers.
Speaker Change: We're also moving forward with an operational risk profile, that's greatly improved since the 2023 Maui wildfires.
Speaker Change: The utility has continued to implement the enhanced wildfire safety measures outlined in the 2025 through 2027 wildfire safety strategy submitted to the public Utilities Commission in January.
Speaker Change: Another priority for 2025, and 2026 is to Rebase the utility's target revenues in the performance based regulation or PBR framework.
Scott Seu: In February, the PUC ordered that target revenues should be rebased ahead of the second multi-year rate period of the PBR framework using a rate case like proceeding. We expect to file an application to rebase target revenues towards the later part of this year. Our progress in making our company stronger and more resilient has not come at the expense of other key priorities. We remain committed to advancing our state's clean energy goals and our path to 100% RPS and net zero by 2045. In summary, we believe our company's investment thesis is stronger today than it has been at any point since the Maui wildfires.
Speaker Change: In February the PUC order that target revenues should be Rebase ahead of the second multiyear rate period of the PBR framework using a rate case like proceeding.
Speaker Change: We expect to file an application to rebase target revenues towards the later part of this year.
Our progress in making our company stronger and more resilient has not come at the expense of other key priorities.
Speaker Change: We remain committed to advancing our state's clean energy goals and our path to 100% Rps and net zero by 2045.
Speaker Change: In summary, we believe our company's investment thesis is stronger today than it has been at any point since the moly wildfires.
Scott Seu: We've made significant progress toward resolving the wildfire tort litigation and simplifying our corporate structure and the actions we've taken to improve our company's risk profile and financial flexibility have positioned us well for the future.
Speaker Change: We've made significant progress towards resolving the wildfire tort litigation and simplifying our corporate structure and the actions we've taken to improve our company's risk profile and financial flexibility.
Speaker Change: Positioned us well for the future.
Scott Seu: Turning to the next slide. This legislative session, several measures passed and are awaiting signature by Governor Greene. Last week, the Hawaii State Legislature passed House Bill 1001, appropriating funds for the State of Hawaii's contribution to the Maui Wildfire Tort Litigation Settlement. This was a crucial step to ensure the settlement is implemented. The legislature also passed Senate Bill 897, directing the Public Utilities Commission to establish an aggregate liability cap on economic damages from future wildfires. Numerous factors will be considered in determining the cap, including impacts on credit ratings, borrowing costs, and customer rates. In order to assert the liability cap, the utility needs to have a PUC approved wildfire mitigation plan and a PUC determination that the plan is being implemented on an approved timeline.
Speaker Change: Turning to the next slide.
Speaker Change: This legislative session. Several measures passed and are awaiting signature by governor agree.
Speaker Change: Last week, the Hawaii State Legislature passed house Bill 1001, appropriating funds for the state of all his contribution to the Maui wildfire tort litigation settlement.
Speaker Change: This was a crucial step to ensure the settlement is implemented.
Speaker Change: The legislature also passed Senate Bill 897, directed at the public Utilities Commission to establish an aggregate liability cap on economic damages from future wildfires.
Speaker Change: Numerous factors will be considered in determining the cap, including impacts on credit ratings borrowing costs and customer rates.
Speaker Change: In order to assert the liability cap the.
Speaker Change: The utility needs to have a PUC approved wildfire mitigation plan and the PUC determination that the plan is being implemented on an approved timeline.
Scott Seu: Senate Bill 897 also authorizes securitization to finance wildfire safety improvement. This will ensure that these critical safety improvements can be implemented at lower cost to customers. and Senate Bill 897 also directs the PUC to study the creation of a disaster recovery fund with recommendations to be provided to the legislature prior to the 2026 legislative session. Although many details will need to be worked through, Senate Bill 897 is a milestone piece of legislation that can reduce wildfire liability risk exposure for the utility going forward. It also allows for lower cost financing so that the utility can implement wildfire mitigation plans in a more cost effective manner.
Speaker Change: Senate Bill 897, also authorizes securitization to finance wildfire safety improvements.
Speaker Change: This will ensure that these critical safety improvements can be implemented at lower cost to customers.
Speaker Change: In Senate Bill 897 also directs the PUC to study the accretion of a disaster recovery plan.
Speaker Change: With recommendations to be provided to the legislature prior to the 2026 legislative session.
Speaker Change: Although many details will need to be worked through Senate. Bill 897 is a milestone piece of legislation that can reduce wildfire liability risk exposure for the utility going forward.
Speaker Change: It also allows for lower cost financing so that the utility can implement wildfire mitigation plans in a more cost effective manner.
Scott Seu: Hawaii is now one of 15 states that have passed or are considering utility related wildfire legislation, including laws to limit utilities exposure to liability if they take action to reduce the risk of ignition. Legislation was also passed supporting the utility's ability to procure reliable, affordable, clean energy. Senate Bill 1501 will help reduce financial risk concerns for independent power producers contracting with the utility. It authorizes the state to provide a financial backstop in certain situations to ensure utility payments to independent power producers. This ensures that developers have access to capital at reasonable rates and can provide the utility with clean, reliable power while preserving project economics and customer affordability.
Speaker Change: Hawaii is now one of 15 states that have passed or are considering utility related wildfire legislation, including loss limit utilities exposure to liability if they take action to reduce the risk of ignition.
Speaker Change: Legislation was also passed supporting the utility's ability to procure reliable affordable clean energy.
Speaker Change: And that Bill 15, O one will help reduce financial risk concerns for independent power producers contracting with the utility.
Speaker Change: It authorizes the state to provide a financial backstop in certain situations to ensure utility payments to independent power producers.
Speaker Change: This ensures that developers have access to capital at reasonable rates and can provide the utility with clean reliable power, while preserving project economics and customer affordability.
Scott Seu: This legislation also supports our state's drive towards 100% RPS and carbon neutrality by 2045. This year's constructive legislative outcome was the result of months of debate, collaboration, and hard work from policy makers and numerous Hawai'i stakeholders. We look forward to continuing our work with the governor, our legislature, the PUC, and other stakeholders after these bills are signed into law.
Speaker Change: This legislation also supports our states drive towards 100% Rps and carbon neutrality by 2045.
Speaker Change: This year's constructive legislative outcome was the result of months of debate collaboration and hard work from policymakers and numerous Hawaii stakeholders.
Speaker Change: We look forward to continuing our work with the Governor and legislature, the PUC and other stakeholders. After these bills are signed into law.
Scott Seu: Lastly, slide five shows the expected timing for the remaining steps required to finalize the settlement agreement. The Maui District Court is working through the administrative steps required for the settlement to take effect. These include granting approvals of the agreements. and Making Good Faith Determinations, among other steps. We expect these steps will be completed in early 2026, which will then trigger our first payment obligation.
Speaker Change: Lastly, slide five shows the expected timing for the remaining steps required to finalize the settlement agreement.
Speaker Change: The Maui District Court is working through the administrative steps required for the settlement to take effect.
Speaker Change: Include granting approvals of the agreements.
Speaker Change: Making good faith determination among other steps.
Speaker Change: We expect these steps will be completed in early 2026, which will then trigger our first payment obligation.
Scott Deghetto: I'll now hand the call off to Scott DeGhetto, who will take you through the quarter's financial results. Thank you, Scott. I'll start with our financial results for the quarter on slide six. In the first quarter, we generated net income $26.7 million for 15 cents per share. The quarter's results include a $13.2 million pre-tax loss on sale recorded at Pacific Current, resulting from the sale of its largest asset, the Hamakua Power Plant. Quarters results also include $4.5 million of pre-tax Maui wildfire related expenses, net of insurance recoveries and deferrals. Approximately $2.5 million of the $4.5 million in net wildfire expenses was recorded at the utility.
Speaker Change: I'll now hand, the call off to Scott together, who will take you through the quarter's financial results.
Speaker Change: Thank you Scott I'll start with our financial results for the quarter on slide six.
Scott: In the first quarter, we generated net income $26 $7 million or <unk> 15 per share. The quarter's results include a $13 2 million pre tax loss on sale recorded at Pacific current resulting from the sale of its largest asset the hammock solar power plant.
Scott: Quarter's results also include $4 5 million of pretax Maui wildfire related expenses net of insurance recoveries and deferrals.
Scott: Approximately $2 5 million of the $4 5 million in net wildfire expenses was recorded at the utility.
Scott Deghetto: Excluding these items, consolidated core net income was $39.8 million for the quarter, or $0.23 per share. This compares to core income from continuing operations, $28.4 million, or $0.26 per share in the first quarter of 2024.
Scott: Excluding these items consolidated core net income was $39 8 million for the quarter or 23 per share.
Scott: This compares to core income from continuing operations was $28 4 million or <unk> 26 per share in the first quarter of 2024.
Scott Deghetto: As a reminder, income from continuing operations is the appropriate 2024 metric to compare to, as it excludes the operations of American Savings Bank, which we sold at the end of last year. Utility Core Net Income for the quarter was $49.7 million compared to $44.2 million in the first quarter of 2024. The increase in Utility Core Net Income was driven by better heat rate performance, higher annual revenue adjustment mechanism revenues, and lower bad debt expense, partially offset by higher wildfire mitigation program expenses and higher insurance costs. Holding company core net loss was $9.9 million compared to $15.8 million in the first quarter of 2024.
Scott: As a reminder income from continuing operations as the appropriate 2024 metric to compare too as it excludes the operations of American savings Bank, which we sold at the end of last year.
Scott: <unk> core net income for the quarter was $49 $7 million compared to $44 2 million in the first quarter of 2024. The increase in utility core net income was driven by better heat rate performance higher annual revenue adjustment mechanism revenues and lower bad debt expense harsher.
Scott: Really offset by higher wildfire mitigation program expenses and higher insurance costs.
Scott: Holding company core net loss was $9 9 million compared to $15 8 million in the first quarter of 2024.
Scott Deghetto: The lower core net loss was driven by higher interest income from holding company cash being held on the balance sheet, primarily to make the first settlement payment.
Scott: The lower core net loss was driven by higher interest income from holding company cash being held on the balance sheet, primarily to make the first settlement payment.
Scott Deghetto: Turning to the next slide, I'll provide a few key updates on our capitalization and liquidity. As of the end of the first quarter, the holding company and the utility had approximately $492 million and $130 million of unrestricted cash on hand, respectively. The March 31st holding company cash balance includes the approximately $384 million from the ASB sale that was used to retire debt on April 9th. In addition, the holding company has approximately $300 million in combined liquidity available under its ATM program and revolver capacity. The utility also has approximately $300 million of liquidity available under its accounts receivable credit facility and revolver capacity.
Scott: Turning to the next slide I'll provide a few key updates on our capitalization and liquidity.
As of the end of the first quarter, the holding company and the utility had approximately $492 million and $130 million of unrestricted cash on hand, respectively.
Scott: The March 31, holding company cash balance includes the approximately $384 million from the Asp's sale that was used to retire debt on April nine.
Scott: In addition, the holding company has approximately $300 million in combined liquidity available under its ATM program and revolver capacity.
Scott: Utility also has approximately $300 million of liquidity available under its accounts receivable credit facility and revolver capacity.
Scott Deghetto: The first settlement payment of $479 million continues to be held in a subsidiary created for addressing first installment payment pursuant to the Maui wildfire settlement. This is included in restricted cash on the balance sheet until we make the first settlement payment expected in early 2026. We mentioned previously that the net proceeds from last year's sale of 90.1% of American Savings Bank would be used for debt reduction at the holding company. Following a successful tender offer in March, on April 9th, HEI retired approximately $384 million of debt. The lower holding company debt balance gives us more financial flexibility as we formulate plans for financing the balance of the settlement payments.
Scott: The first settlement payment of $479 million continues to be held in a subsidiary created for addressing the first installment payment pursuant to the Maui wildfire settlement.
Scott: This is included in restricted cash on the balance sheet until we make the first settlement payment expected in early 2026.
Scott: We mentioned previously that the net proceeds from last year's sale of 91% of American savings Bank would be used for debt reduction at the holding company.
Scott: Following a successful tender offer in March on April 9th Hei retired approximately $384 million of debt.
Scott: The lower holding company debt balance gives us more financial flexibility as we formulate plans for financing the balance of the settlement payments.
Scott Deghetto: Looking ahead, HEI remains committed to a simpler, more focused business model. Following the successful sale of Pacific Current's largest asset, we are continuing to explore our options with the remaining assets.
Scott: Looking ahead.
Scott: <unk> remains committed to a simpler more focused business model. Following the successful sale of Pacific Current's largest asset we are continuing to explore our options with the remaining assets.
Scott Deghetto: Lastly, the utility dividend to HEI has been reinstated after the temporary suspension that began with the second quarter 2024 dividend.
Scott: Lastly, the utility dividend to hei has been reinstated after the temporary suspension that began with our second quarter 2024 dividend.
Scott Deghetto: Hawaiian Electric's Board of Directors approved a $10 million quarterly dividend for the first quarter of 2025. This decision was made after considering several factors, including the continued progress of the Maui windstorm and fire settlement, as well as the utility's results of operations and liquidity position.
Scott: Wine Electrics board of directors approved a $10 million quarterly dividend for the first quarter of 2025.
Scott: This decision was made after considering several factors, including the continued progress of the Maui, One storm and wildfire settlement as well as the utilities results of operations and liquidity position.
Unknown Executive: At that, let's open up the call to questions. We will now begin the question and answer session. In order to ask a question, press star, followed by the number one on your telephone keypad.
Scott: At that let's open up the call to questions.
Scott: We will now begin the question and answer session in order to ask a question press star followed by the number one on your telephone keypad. Our first question comes from the line of Nicholas Campanella with Barclays. Please go ahead.
Unknown Executive: Our first question comes from the line of Nicholas Campanella with Barclays. Please go ahead. Yeah, the simple answer to that is yes, we don't want to speculate on You know what the rating agencies are thinking or how they'll respond to that, but they've given us very strong indications that once that is signed, as well as a number of other key milestones, including the final court approval of the settlement agreement, that those are all credit positive.
Speaker Change: Hi, This is Michael Brown on for Nicholas Campanella.
Speaker Change: First question is do you anticipate a positive feedback from the rating agencies.
Speaker Change: <unk> 907 is signed into law.
Speaker Change: How do you think that there will be though.
Speaker Change: Yes, the simple answer to that is yes, we don't want to speculate on.
Speaker Change: You know what the rating agencies are thinking or how low respond to that but they've given us very strong indications that once that is signed as well as a number of other key milestones, including the final court approval of the settlement agreement that those are all credit positives.
Speaker Change: The next question is.
Speaker Change: Great.
Scott Seu: SB 897 is signed into law. Is this like, what kind of step forward is this for? wildfire.
Speaker Change: SBA seven and signed into law is this like what kind of step forward is this for the wildfire fund going forward.
Scott Seu: Mike, I'm this is Scott. See, I'm not quite sure your question with with respect to 897 is what How will this legislation shift the discussion towards a future wildfire? Well, as part of Senate Bill 897, there is a component that requires the PUC to study the viability of a wildfire fund and come back to the legislature prior to the next session with recommendations on whether a fund should be created, if so, how large should it be, what should be the structure, and other considerations. So the PUC will be doing this study towards the end of this year.
Speaker Change: Mike This is Scott I'm not quite sure. Your question with respect to <unk> seven is one.
Speaker Change: Hi.
Speaker Change: How will this legislation is shift the discussion towards the future.
Speaker Change: Wildfire fund implementation.
Speaker Change: Well as part of the Senate Bill 897, there is a component that requires the PUC to study the.
Speaker Change: The viability of a wildfire fund and come back to the legislature prior to the next session with recommendations on.
Speaker Change: Whether a fund should be created if so how large should it be what should be the structure and other considerations.
Speaker Change: So the PUC will we will be doing this study towards the end of this year.
Speaker Change: Thank you.
Julian Dumoulin Smith: Our next question will come from the line of Julian Dumoulin Smith with Jeffries. Please go ahead. Hey, good afternoon, or good morning, good afternoon, as it may be. Thank you for the time. Let me just pick up on SB 897 from a second ago. I mean, what is this liability cap, if you will? I mean, obviously, they're directing the PUC to establish one. How do you think about a range that's appropriate? Or how do you even think about the concept of this supposed liability cap? I mean, and how are you engaging with parties on even approaching what that might conceivably construed as being?
Our next question will come from the line of Julien Dumoulin Smith with Jefferies. Please go ahead.
Speaker Change: Hey, good afternoon.
Speaker Change: Good morning. Good afternoon, maybe thank you for the time, let me just pick up on the SBA 97 from a second ago I mean, what does this liability cap. If you will I mean, obviously, they're directing the PUC to establish one.
Speaker Change: How do you think about a range is appropriate or how do you even think about the concept of the supposedly liability cap I mean, and how are you engaging with parties on even approaching what that might conceivably construed as being.
Scott Seu: Yeah, hi, Julian. This is Scott. I think what's important is that SB 897 it, it essentially says that there shall be a an aggregate liability cap. So that's that's the first important The meat of the bill, of course, is directing the PUC to start a rulemaking process. to consider a number of different factors that we touched upon in my earlier remarks and which are listed in the bill itself. And the PUC will take into account, you know, should the liability cap be based on a cap within a set time period? Should it be on a per-event basis?
Speaker Change: Yeah, Hi, Julien this is Scott.
Julien: I think what's important is that SPE 97.
Julien: It essentially says that there shall be a an aggregate liability cap. So thats the first important point.
Julien: The meat of the Bill of course is directing the PUC to start a rulemaking process to consider a number of different factors that we touched upon in my earlier remarks.
Julien: And our which are listed in the bill itself and the PUC will will take into account.
Julien: Should this should the liability cap.
Julien: Based on a cap within a set time period should it be on a per event basis.
Scott Seu: Should it be a flat dollar amount, should it be a percent of our market cap or rate base? So a number of these different factors all listed in the legislation. So I think it's important that we don't get ahead of the PUC process, but just remember that the bill directs that a cap will be established, and it's put to the PUC to follow their rulemaking process to establish exactly what the best form is to serve the purposes of the cap.
Julien: Should it be a flat dollar amount should be a percent of our market cap where rate base. So.
Julien: A number of these different factors all listed in the legislation. So I think it's important that we don't get ahead of the PUC process, but just remember that the bill directs that E cap will be established and it's put to the PUC to follow their rulemaking process to establish exactly what the best form is.
Julien: To serve the purposes of the cap.
Shelley Kimura: And if I can just add a little bit more color to that, Julian, this is Shelley, to help you put some parameters around it. During the legislative session, proposals were made to have it be the lesser of 500 million or some other parameters, and later in legislation it was discussed at a billion. The challenge in the legislative session was folks getting comfortable with that number. And the way the legislation is written now is that for the PUC to determine the amount, it's similar to the California law, where it's looking at what can the utility pay without harming rate payers or our ability to deliver service.
Shelly: And if I can just add to that Julian This is Shelly to help you put some parameters around it.
Speaker Change: During the legislative session proposals were made to have it be the lesser of 500 million or some other parameters and later in legislation. It was discussed that $1 billion.
Speaker Change: The challenge in the Legislative session was folks getting comfortable with that number and the way. The legislation is written now is that for the PUC to determine the amount it's similar to the California law, where it's looking at what can the utility pay without harming ratepayers are.
Speaker Change: Our ability to deliver service.
Speaker Change: Okay.
Julian Dumoulin Smith: Got it. No, fair enough. And I get it. It's early on. So I appreciate that it's dynamic.
Speaker Change: Got it fair enough and I get it it's early on so I appreciate that its dynamics and then maybe if I can come back like look I mean, just in terming assuming this legislation become block can you elaborate on your financing strategy for the remaining three settlement payments right. I mean, obviously you elaborate you spoke to the first one here, but how are you thinking.
Julian Dumoulin Smith: And then maybe if I can come back, like, look, I mean, just in terming, assuming this legislation becomes law, can you elaborate on your financing strategy for the remaining three settlement payments? Right? I mean, obviously, you elaborate, you spoke to the first one here. But how are you thinking about the remaining payments here? And maybe securitization elements, potentially ahead?
Speaker Change: About the remaining payments here and maybe securitization elements potentially had.
Scott Seu: so And I know you ask this every quarter, and I tend to answer it the same, Julian, which is we're continuously looking at the capital markets to determine how to best finance it. We're going to do that by looking at a variety of different factors. You know, as it turns out, the first payment will not be made until, you know, sometime in early 2026, so we're still about a year out from thinking about raising the funds for the second payment. So I think it's premature to come to any definitive conclusions as to how we'll finance it other than what I've been saying in the past, which is it'll be a combination of both debt and Yeah, no, fair enough.
Speaker Change: So.
Speaker Change: And I know he asked this every quarter and I tend to answer it the same Julien which is were continuously looking at the capital markets to determine how to best finance. It we're going to do that by looking at a variety of different factors.
Speaker Change: As it turns out the first payment will not be made.
Speaker Change: Until summer.
Speaker Change: Sometime in 2020 early 2026, so we're still about a year out from thinking about raising the funds for the second payment. So I think it's premature to come to any definitive conclusions as to how we'll finance it other than what I've been saying in the past, which is it'll be a combination of both debt and equity.
Speaker Change: <unk>.
Speaker Change: Yes, no fair enough I get his preliminary we are all job, but at the bed and I Hope you appreciate that Scott.
Julian Dumoulin Smith: I get it's preliminary. We're all chomping at the bit. And I hope you appreciate this, Scott.
Speaker Change: Let me let me ask.
Scott Seu: As time goes on, and we get closer, we'll be more definitive in how we answer that question. Got it. And you talk about, you know, getting to the final line on some of this stuff. I mean, how do you think about, you know, you got the Supreme Court decision on subrogation, you check that box. Are there any remaining obstacles that remain here to get that final approval done and fully close that out? Yeah, so at this stage, I mean, that was probably one of the most important decisions to allow the settlement process to continue forward.
Speaker Change: As time goes on and we get closer we'll be more definitive in how we answer that question.
Got it and you talk about you know getting to the final a final line on some of the stuff I mean, how do you think about.
Speaker Change: <unk> got the Supreme Court decision on Subrogation, you check that box are there any remaining obstacles that remain here to get that final approval done and fully close that out.
Speaker Change: Yes. So at this stage I mean that was probably one of the most important decisions to allow the settlement process to continue forward.
Scott Seu: So going ahead, the Maui Circuit Court will go through a number of proceedings, including preliminary approval of the class settlement agreement, individual plaintiffs' approval of their settlement as well. After you get to the class settlement preliminary approvals, then there's some administrative steps, including notice to the class. opportunities for individuals to sign on. And that period will probably span several months.
Speaker Change: So going ahead.
Speaker Change: The Maui Circuit Court will go through a number of proceedings, including preliminary approval of the class settlement agreement.
Speaker Change: Individual plaintiffs approval there settlement as well.
Speaker Change: After you get through the class settlement preliminary approvals then there is some administrative steps, including notice to the class.
Speaker Change: Opportunities for individuals to sign to sign on and that period will probably expand several months.
Scott Seu: All of which would lead to our our estimation that a final approval hearing would happen sometime the first quarter of 2026 and then following that we would make our first payment.
Speaker Change: All of which would lead to our our estimation that a final approval hearing would happen sometime in the first quarter of 2026 and then following that we will make our first payment.
Michael Lonegan: One other point, Julian, I wanted to make because I didn't answer the second part of your question on securitization. Just to be clear, the securitization authorization is for utility CapEx. It is not for funding any of the settlement or the settlement payments. Okay, thank you for that clarity. Appreciate you following up. All right, guys, thank you all very much. Appreciate it. Best of luck. We'll see what happens.
Speaker Change: One other probably here lately I wanted to make because I didn't answer the second part of your question on securitization just to be clear.
Speaker Change: The securitization authorization is for utility Capex. It is not for funding any of the settlement or the settlement payments.
Speaker Change: Okay. Thank you for that clarity there, but I. Appreciate you following up alright, guys. Thank you all very much appreciate it best of luck.
Speaker Change: We'll see what happens.
Michael Lonegan: Our next question comes from the line of Michael Lonegan with Evercore. Please go ahead. Hi, thanks for taking my questions. Um, so to follow up on the securitization, you know, obviously it's for the wildfire mitigation and resiliency investment. Will you approach it that way as a securitization or is it something we could, you know, see as an investment to generate earnings?
Speaker Change: Our next question comes from the line of Michael <unk> with Evercore. Please go ahead.
Michael <unk>: Hi, Thanks for taking my questions.
Michael <unk>: To follow up on the securitization, obviously, it's for the wildfire mitigation and resiliency investment.
Speaker Change: Is that where you approach it that way is on securitization or is it something that you could.
Michael <unk>: <unk> is an investment to generate earnings on.
Scott Seu: Yeah, Mike, the way the that SB 897 is drafted is that It appears as though the first $500 million of utility CapEx towards wildfire mitigation would be using this securitization method. Okay, thank you. And then. To follow up on the financing, is there, you know, I know you've talked about combo of debt and equity over time, you know, the settlement periods for over four years. Is there a scenario where you could be opportunistic with, you know, some block equity or your ATM, you know, in the event your, say your stock price is boosted with clarity on the tariff situation and the economy?
Michael <unk>: Yes, Mike the way that SB 897 as drafted is that.
Michael <unk>: It appears as though the first $500 million of utility capex towards wildfire mitigation would be using this securitization method.
Michael <unk>: Okay. Thank you and then.
Michael <unk>: To follow up on the financing is there I know you've talked about combo of debt and equity over time the settlement periods for over four years.
Michael <unk>: Is there a scenario where you could be opportunistic with some block equity or ATM in the event. Your say your stock prices boosted with clarity on the tariff situation in the economy.
Scott Seu: Um, good question. I mean, as it relates to the tariffs, you know, that's Changing, you know, on a daily basis, if not more frequently than that. And so, you know, based upon that, and where we're looking at the future financings, I would tell you that I'm hoping the tariffs don't play into it. And again, we have, as you said, you know, two, three and four years from now, we're looking at financing the balance of those payments. I mean, If it if it made sense to pre fund based upon what was happening in the markets at a particular time, yeah, we would absolutely look at taking advantage.
Michael <unk>: Good question I mean, as it relates to the tariffs.
Michael <unk>: That's.
Michael <unk>: Changing.
Michael <unk>: Now on a daily basis, if not more frequently than that and so.
Michael <unk>: Based upon that and where we're looking at the future financings I would tell you that.
Michael <unk>: I'm, hoping the tariffs don't play into it and again, we have as you said.
Michael <unk>: Two three and four years from now we're looking at financing the balance of those payments.
Michael <unk>: If it if it made sense to pre fund based upon what was happening in the markets at a particular time, yes, we would absolutely look at taking advantage right.
Scott Seu: But right now, we're not, you know, we don't have any current plans in the near future to finance, you know, any of those payments. Again, the first payment, we know, will not be made until first quarter 2026. At least that's the timeline that we believe will play out.
Michael <unk>: Right now we're not we don't have any current plans.
Michael <unk>: In the near future to finance any of those payments again, the first payment.
Michael <unk>: We will not be made until first quarter of 2026 at least that's the timeline that we believe will play out.
Michael Lonegan: Great. And then, thank you.
Speaker Change: Great and then thank you and then lastly for me just wondering if you could talk about the planned rate case filing.
Scott Seu: And then lastly, for me, just wondering if you could talk about the planned rate case filing, you know, the key components of it, you know, is it going to be a 12-month forward test year? And, you know, what are your expectations for, you know, potential revisions to the five-year PDR framework? Yeah, I'll kick things off here. And maybe if Shelly or others from the utility want to add in. But essentially what what's happening, Mike, is when PBR was first adopted by the PUC, they established that the current multi year rate period will end May 31 of next year.
Michael <unk>: The key components of it nor is it going to be.
Michael <unk>: 12 month forward test year, and what are your expectations for potential revisions to the five year PBR framework.
Michael <unk>: Yes.
Speaker Change: Kick things off here.
Speaker Change: Maybe if shelly or others from the utility want to add in.
Speaker Change: But essentially what what's happening Mike is when PBR was first adopted.
Speaker Change: By the PUC.
Established that the current multiyear rate period.
And May 31 of next year.
Speaker Change: This the next next period, the second multi year rate period will commence beginning of 2027 January one 2027.
Scott Seu: Next period, the second multi-year rate period will commence beginning of 2027, January 1, 2027. So what the PUC ordered back in February of this year was that between now and January 1 of 2027, the utility will go through the process of rebasing the target revenues ahead of the start of the second multi-year rate period in 2027. And then that translates to, as I said in my remarks, the utility will file information to the PUC towards the later part of this year to support the rebasing of target revenues. It will be a, and the PUC was very explicit in their order, it will be a rate case-like proceeding.
Speaker Change: So what the PUC ordered back in February of this year was that between now and January one of 2027. The utility will go through the process of re basing the target revenues.
Speaker Change: Ahead of the start of the second multiyear rate period in 2027.
Speaker Change: And then that translates to as I said in my remarks, the utility will file infer.
Speaker Change: The information to the PUC towards the later part of this year.
Speaker Change: To support the Rebase of target revenues.
Speaker Change: It will be in the PUC was very explicit in their order it will be a REIT case like proceeding.
Scott Seu: They wanted to reserve the ability to provide some flexibility in terms of the process for that proceeding to make it more efficient and to be very much focused on the PBR context. So, it's early on, we are going to be going through this preparation for the filing. And once the filing is made, you know, there's going to be an ongoing process focused on the target revenue rebasing, but also looking at what other modifications might be appropriate to the overall PBR framework. So there's going to be a number of moving parts happening in parallel there. Great, I would just add one thing that I think that I, Scott did a really good job describing it.
Speaker Change: They wanted to reserve the ability to provide some flexibility in terms of the process for the proceeding to make it more efficient and to be very much focused on the the PBR context. So.
Speaker Change: It's early on.
Speaker Change: We are going to be going through this preparation for the filing.
Speaker Change: And once the filing is made.
Speaker Change: There's going to be.
Speaker Change: An ongoing process.
Speaker Change: <unk> on the target revenue <unk>, but also <unk>.
Speaker Change: Looking at what other modifications might be appropriate to the overall PBR framework, so theres going to be a number of moving parts happening in parallel there.
Speaker Change: Great and then just one.
Speaker Change: One thing that I think that.
Speaker Change: Scott did a really good job describing it I think the one question you asked was the test year. So we're looking at a 2026 test here.
Scott Seu: I think the one question you asked was the test year. So we're looking at a 2026 test year. Okay, thank you.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Jonathan Reeder: Our next question will come from the line of Jonathan Reeder with Wells Fargo. Please go ahead. Hey, good morning, team. Thanks for taking my question. I just wanted to follow up quickly on on that last topic.
Speaker Change: Our next question will come from the line of Jonathan Reeder with Wells Fargo. Please go ahead.
Jonathan Reeder: Hey, good morning team. Thanks for taking my question I just wanted to follow up quickly on that last topic you set a 2026 test year is it safe to say that the nine 5% allowed Roe.
Scott Seu: You said a 2026 test year, is it safe to say that the nine and a half percent allowed ROE and 57% I believe it is equity ratio, that those items will be, you know, scrutinized and readdressed? So we're gonna take another look at that given our current environment and our current context. And so that is something that we'll be evaluating and proposing in our filing later this year. But it will be an item that I guess could potentially change, you know, positively.
Speaker Change: 57% I believe it is equity ratio.
Jonathan Reeder: Those items will be.
Speaker Change: Scrutinize and readdress.
Speaker Change: So we're going to take.
Another look at that given our current environment and our current context, and so that is something that will be.
Speaker Change: Evaluating and proposing in our filing later this year.
Speaker Change: Okay, but it will be an item that I guess could potentially change.
Speaker Change: Positive.
Speaker Change: Yes.
Speaker Change: Yes.
Scott Seu: Scott, I wanted to go back to Senate Bill 897, just found it interesting, you know, after months of debate around the issues, why do you think the legislature ultimately just deferred these very important decisions, you know, around the liability cap and the potentially creation of the fund to the PUC? Just kind of, you know, punted on them. Yeah. You know, the legislature, I mean, they really spent quite a bit of time digging into, you know, what things to consider, how would you establish a methodology, what should be, what are some other examples, what's happened with other states and so on.
Speaker Change: Yes.
Jonathan Reeder: Scott I wanted to go back to Senate Bill 897.
Speaker Change: Just wanted interesting after months of debate around the issues why do you think the legislature ultimately just deferred these very important decisions around the liability cap potentially creation of the fund to the PUC just kind of putting it on them.
Jonathan Reeder: Yes.
Jonathan Reeder: The legislature I mean, they really spent quite a bit of time digging into.
Jonathan Reeder: What things to consider how would you establish a methodology what should be.
Jonathan Reeder: What are some other example is whats happened with other states and so on.
Scott Seu: At the end of the day, it was felt that the PUC would be able to use a more robust, more in-depth process to, you know, really dive into the details of all these different considerations, many of which are very technical in nature, and that's why they ended up deciding that, you know, rather than trying to just throw out a number and put it into law, have the PUC work through a very thoughtful rulemaking process. So, it wasn't meant to be, I don't think it's fair to consider this as a, let's just punt it to the PUC.
Jonathan Reeder: At the end of the day. It was felt that the PUC would be able to use a more robust more more in depth process to re.
Dive into the details of all these different considerations many of which are very technical in nature and that's why they ended up deciding that rather than trying to just throw out a number and put it into law.
Jonathan Reeder: Have the PUC work through a very thoughtful rulemaking process.
Speaker Change: So it wasn't meant to be I don't think it would it's fair to consider that consider this as a let's just pointed to the PUC. It was a very thoughtful and.
Scott Seu: It was a very thoughtful and very deliberative discussion that they came to this.
Speaker Change: Very deliberative discussion that came to this.
Scott Seu: Okay, curious, what is your understanding of what the governor's position is on the liability cap, since, you know, ultimately, he has to sign off on what the PUC rules are? Well, again, I can't speak for the governor. But the governor's office was, they always play a very active role in any legislative session. They did provide testimony on various stages of this bill as it worked through the legislative process. Ultimately, having the governor have that say once the PUC completes the rulemaking, it provides the governor his opportunity to weigh in and have any other thoughts considered by the PUC if necessary.
Speaker Change: Okay.
Speaker Change: I'm curious what is your understanding of what the Governor's position is on the liability cap.
Speaker Change: Ultimately he has to sign off on what the PUC rules are.
Speaker Change: Well again I can't speak for the Governor.
Speaker Change: But the Governor's office was they always play a very active role in any legislative session.
Speaker Change: <unk>.
Speaker Change: They did provide testimony on various stages of this bill as it worked through the legislative process.
Speaker Change: Ultimately, having the governor have that say.
Speaker Change: Once the PUC completes their rulemaking it provides the governor his opportunity to weigh in.
Speaker Change: And have have any any other thoughts considered by the PUC if necessary. So I think overall again the outcome of the bill provides for appropriate process and input.
Jonathan Reeder: So, I think overall, again, the outcome of the bill provides for appropriate process and input from many stakeholders, including the governor. Got it. Okay. Well, we'll be watching that to see how it plays out.
Speaker Change: From from many stakeholders, including Governor.
Speaker Change: Got it okay.
Speaker Change: We'll be watching that to see how it plays out I appreciate the time and.
Jonathan Reeder: Appreciate the time and, you know, good luck on the on the process forward. Thanks, Jonathan.
Speaker Change: Good luck on the on the process forward.
Jonathan Reeder: Thanks, Jonathan.
Unknown Executive: And that will conclude our question and answer session.
Scott: And that will conclude our question and answer session I will hand, the call back over to Scott for closing remarks.
Scott Seu: I'll hand the call back over to Scott Seu for closing remarks. All right, well, I just want to thank everybody again for joining us today. In closing, I want to reiterate that we are in a stronger position today that at any point since the 2023 Maui wildfires. Our position is a direct result of the actions that we've taken to regain our financial strength and emerge a stronger, more resilient company. With resolution of the wildfire tort litigation expected over the next year, our simpler business model focused solely on regulated operations, our strong and improving safety profile, and earnings improvement opportunities on the horizon, we're very optimistic about our future.
Alright.
Speaker Change: I want to thank everybody again for joining us today in closing I want to reiterate that we are in a stronger position today than at any point since the 2023 Molly wildfires.
Speaker Change: Our position is a direct result of the actions that we've taken to regain our financial strength and emerge a stronger more resilient company with resolution of the wildfire tort litigation expected over the next year are simpler business model focused solely on regulated operations are strong and improving safety profile and.
Speaker Change: Earnings improvement opportunities on the horizon, we're very optimistic about our future. So thank you again everybody.
Scott Seu: So thank you again.
Unknown Executive: This will conclude today's call. Thank you all for joining. You may now disconnect.
Speaker Change: This will conclude today's call. Thank you all for joining you may now disconnect.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].