Hawaiian Electric Industries: Navigating Wildfire Liabilities and Regulatory Shifts Amid Revenue Declines

Hawaiian Electric Industries (HE) reported a 6.0% year-over-year decline in first-quarter 2025 revenue to $744.1 million, driven by strategic asset sales and operational headwinds. Yet, core earnings rose 12.4%, underscoring resilience in its regulated utility business. Investors now face a complex calculus: How does HE balance its financial recovery from the 2023 Maui wildfires with its clean energy transition and regulatory uncertainties?

Key Financials: A Mixed Quarter

The company’s Q1 revenue fell to $744.1 million from $792.0 million in Q1 2024, primarily due to lower electric utility revenue ($738.4 million vs. $788.6 million). This contraction reflected the impact of asset sales—most notably, the $13.2 million pre-tax loss from divesting Pacific Current’s Hamakua Power Plant—and reduced demand response revenues.

However, core utility net income surged 12.4% to $49.7 million, benefiting from improved operational efficiency (better heat rate performance) and higher revenue adjustments. These gains offset rising costs, including wildfire mitigation expenses ($4.5 million pre-tax) and insurance premiums. The holding company’s net loss narrowed to $9.9 million from $15.8 million, aided by higher interest income from cash reserves.

The stock rose 0.67% during regular trading and another 0.19% after hours, closing at $10.51—a modest reaction to results that analysts deemed “solid but not transformative.”

Operational Progress and Strategic Shifts

HE is executing a multiyear strategy to simplify its business model, divesting non-utility assets like American Savings Bank and Pacific Current to focus on its regulated utility. This pivot has strengthened liquidity: the company retired $384 million in debt using ASB sale proceeds and now holds $600 million in combined cash and credit facilities.

The reinstatement of a $10 million quarterly dividend—a move paused after the 2023 wildfires—signals improved financial stability. CEO Scott Few emphasized the company’s “strengthened position” post-wildfires, citing progress on litigation and liquidity.

The Maui Wildfire Settlement: A Double-Edged Sword

The $1.99 billion Maui wildfire tort settlement remains the largest overhang. The first $479 million payment is due early 2026, with the remainder spread over four years. HE has set aside $492 million in restricted cash but must finance the remaining $1.51 billion through debt or equity—a challenge in volatile markets.

Legislative support offers a lifeline. Senate Bill 897, now law, caps economic damages from future wildfires if HE adheres to a PUC-approved mitigation plan. This reduces long-term liability risks and allows securitization of up to $500 million for wildfire safety investments.

Risks and Regulatory Crosscurrents

• Wildfire Costs: Ongoing expenses (e.g., $2.5 million allocated to the utility in Q1) and financing challenges could strain cash flows.
• Regulatory Uncertainty: The PUC’s rebasing of target revenues under Hawaii’s Performance-Based Regulation (PBR) framework, due in late 2025, will set rates for 2027–2031. A favorable rebasing could stabilize margins, while delays or unfavorable terms could pressure earnings.
• Liquidity Management: HE’s current ratio of 1.61 and beta of 0.64 suggest defensive resilience, but debt issuance to fund settlements could raise leverage ratios.

Legislative and Clean Energy Tailwinds

SB 1501, another recent law, enables state-backed guarantees for independent power producers, lowering financing costs for renewable projects. This aligns with Hawaii’s 100% renewable portfolio standard (RPS) by 2045, a goal HE is advancing through grid modernization and solar/wind investments.

Analyst Outlook and Valuation

Analysts’ price targets range from $10 to $14, suggesting HE’s stock is undervalued relative to its core utility’s defensive profile. The company’s 1.6% dividend yield offers income appeal, though it lags peers like NextEra Energy (NEE).

Conclusion: A Resilient Core, But Risks Remain

Hawaiian Electric Industries’ Q1 results highlight a company stabilizing its utility business amid wildfire liabilities and regulatory evolution. Core earnings growth and dividend reinstatement signal financial recovery, while legislative reforms (SB 897 and SB 1501) reduce long-term risks and support clean energy goals.

However, investors must weigh these positives against the $1.99 billion settlement’s financing demands and regulatory uncertainties. With liquidity at $600 million and a beta of 0.64, HE’s stock offers defensive appeal, but upside hinges on favorable PUC decisions and market conditions for debt/equity issuance.

For now, the company’s 12.4% core utility net income growth and 1.61 current ratio suggest it can navigate near-term challenges. But as Hawaii’s sole investor-owned utility, HE’s long-term success will depend on balancing wildfire recovery with its net-zero ambitions—and executing a flawless regulatory pivot.

Final note: HE’s stock trades at ~$10.50, with a 52-week range of $9.25–$11.50. Analysts’ price targets suggest a potential 33% upside to $14, but execution risks remain front and center.