Hawaiian Electric Industries profits down 17.7%

Hawaiian Electric Industries Inc. reported a 17.7% drop in second-quarter profit as utility maintenance spending increased and the American Savings Bank subsidiary set aside cash for possible losses after releasing a significant amount of its loan loss reserve in the prior year period.

The state’s largest utility today reported net income per common share of $52.5 million, or 48 cents per share, below analysts’ consensus estimate of 52 cents per share. In the prior year quarter, HEI had net income of $63.9 million, or 58 cents per share.

Revenue, however, jumped 31.7% to $895.6 million from $680.3 million.

“The utility continues to operate well under performance-based regulation and will continue to focus on cost control to moderate the impacts of inflation and high fuel costs on customer bills,” HEI President and CEO Scott Seu said in a statement. “We have seen an increase in maintenance expenses due to the deliberate acceleration of work on our generator sets to reduce downtime and ensure reliable service to our customers as we completely phase out coal and one of the largest power plants in the state on September 1.”

HEI, which is the utility’s holding company and bank, said operating and maintenance expenses for its utility were $5 million higher than in the prior year period.

Net income for the company’s Utilities segment, which covers Oahu, Maui County and the island of Hawaii, increased 5.3% in the quarter to $44.1 million from $41. $.9 million in the prior year, while revenue increased 36.1% to $818.9 million from $601.9 million.

On Sunday, the Hawaiian Electric subsidiary predicted that the Sept. 1 shutdown of AES Corp.’s 30-year-old coal-fired plant in Campbell Industrial Park will result in a $15, or 7%, increase in the monthly cost of a typical Oahu. residential customer using 500 kilowatt hours of electricity. The increase will begin to show for most customers in the invoices they receive in October.

The monthly increase is expected as Hawaiian Electric will initially rely on more electricity generated from oil, which is more expensive than coal.

“We know our communities and customers are feeling financially challenged, and we continue to provide options to help manage their utility bills, as our bank continues to work to help meet customers’ financial needs,” Seu said.

American Savings, the state’s third-largest bank, saw lending rise in the second quarter, but net income fell 42.3%, largely due to the release of a large sum of money from its reserve for loan losses in the year-ago quarter that has most distorted recent results.

The bank said separately on July 29 that it had a net profit of $17.5 million after setting aside $2.8 million for potential loan losses due to strong growth in this area during of the quarter. That compares to a profit of $30.3 million in the second quarter of 2021 when the bank released $12.2 million from its loan loss reserve.

Loans rose 4.7% to $5.43 billion from the prior quarter, but jumped 18.7% on an annualized basis from the January-March period.

“Our bank’s results reflect strong team execution and a level of earnings that is driven by a more normalized provision (loan loss) compared to recent periods,” Seu said. “The bank experienced strong loan growth in the quarter and credit quality is evolving favourably.”

On Thursday, HEI announced that it was maintaining its quarterly dividend at 35 cents per share. It will be payable on September 9 to shareholders of record at the close of business on August 18. The dividend payment is equivalent to an annualized return of 3.3%.

Shares of HEI fell 26 cents to $42.26 after the earnings release.

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