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What changed in HAWAIIAN ELECTRIC INDUSTRIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HAWAIIAN ELECTRIC INDUSTRIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+754 added−730 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-27)

Top changes in HAWAIIAN ELECTRIC INDUSTRIES INC's 2023 10-K

754 paragraphs added · 730 removed · 515 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

107 edited+16 added−21 removed150 unchanged
Biggest changeYears ended December 31 2022 2021 2020 2019 2018 MWh sales (thousands) Residential 2,415.2 2,491.6 2,525.4 2,439.3 2,410.8 Commercial 2,628.8 2,572.5 2,456.0 2,793.0 2,810.8 Industrial 3,295.7 3,174.3 3,118.0 3,467.2 3,425.1 Other 14.3 22.7 20.8 40.5 42.1 8,354.0 8,261.1 8,120.2 8,740.0 8,688.8 MWh net generated and purchased (thousands) Net generated 5,011.9 4,501.0 4,629.2 4,972.7 4,966.4 Purchased 3,750.4 4,153.7 3,896.2 4,168.6 4,139.3 8,762.3 8,654.7 8,525.4 9,141.3 9,105.7 MWh customer-sited solar (thousands) 1,522.4 1,418.0 1,325.8 1,224.6 948.4 RPS (%) 1 31.8 38.4 34.5 28.4 26.7 Losses and system uses (%) 4.4 4.3 4.5 4.2 4.4 Energy supply (December 31) Net generating capability—MW 1,738 1,738 1,737 1,737 1,739 Firm and other purchased capability—MW 2 362 540 517 517 517 2,100 2,278 2,254 2,254 2,256 Net peak demand—MW 3 1,467 1,471 1,471 1,601 1,598 Btu per net kWh generated 10,941 10,988 10,834 10,860 10,826 Average fuel oil cost per MBtu (cents) 2,310.9 1,305.4 1,028.7 1,337.6 1,420.2 Customer accounts (December 31) Residential 413,744 414,713 412,484 409,689 407,505 Commercial 54,416 54,373 54,035 54,233 54,075 Industrial 696 698 694 700 696 Other 812 828 826 844 813 469,668 470,612 468,039 465,466 463,089 Electric revenues (thousands) Residential $ 1,069,974 $ 843,655 $ 770,135 $ 791,398 $ 788,028 Commercial 1,077,521 802,878 708,180 829,000 843,326 Industrial 1,211,242 853,293 754,775 884,722 882,443 Other 7,884 7,780 6,440 11,915 12,410 $ 3,366,621 $ 2,507,606 $ 2,239,530 $ 2,517,035 $ 2,526,207 Average revenue per kWh sold (cents) 40.30 30.35 27.58 28.80 29.07 Residential 44.30 33.86 30.50 32.44 32.69 Commercial 40.99 31.21 28.83 29.68 30.00 Industrial 36.75 26.88 24.21 25.52 25.76 Other 55.24 34.19 31.01 29.39 29.47 Residential statistics Average annual use per customer account (kWh) 5,821 6,022 6,145 5,967 5,923 Average annual revenue per customer account $ 2,579 $ 2,039 $ 1,874 $ 1,936 $ 1,936 Average number of customer accounts 414,910 413,725 410,973 408,768 407,044 1.
Biggest changeYears ended December 31 2023 2022 2021 2020 2019 MWh sales (thousands) Residential 2,342.1 2,415.2 2,491.6 2,525.4 2,439.3 Commercial 2,586.7 2,628.8 2,572.5 2,456.0 2,793.0 Industrial 3,273.5 3,295.7 3,174.3 3,118.0 3,467.2 Other 24.4 14.3 22.7 20.8 40.5 8,226.7 8,354.0 8,261.1 8,120.2 8,740.0 MWh net generated and purchased (thousands) Net generated 5,343.0 5,011.9 4,501.0 4,629.2 4,972.7 Purchased 3,271.2 3,750.4 4,153.7 3,896.2 4,168.6 8,614.2 8,762.3 8,654.7 8,525.4 9,141.3 MWh customer-sited solar (thousands) 1,585.5 1,522.4 1,418.0 1,325.8 1,224.6 RPS (%) 1 33.3 31.8 38.4 34.5 28.4 Losses and system uses (%) 4.2 4.4 4.3 4.5 4.2 Energy supply (December 31) Net generating capability—MW 1,739 1,738 1,738 1,737 1,737 Firm and other purchased capability—MW 2 362 362 540 517 517 2,101 2,100 2,278 2,254 2,254 Net peak demand—MW 3 1,447 1,467 1,471 1,471 1,601 Btu per net kWh generated 11,102 10,941 10,988 10,834 10,860 Average fuel oil cost per MBtu (cents) 2,060.0 2,310.9 1,305.4 1,028.7 1,337.6 Customer accounts (December 31) Residential 416,072 413,744 414,713 412,484 409,689 Commercial 54,060 54,416 54,373 54,035 54,233 Industrial 702 696 698 694 700 Other 771 812 828 826 844 471,605 469,668 470,612 468,039 465,466 Electric revenues (thousands) Residential $ 1,028,415 $ 1,069,974 $ 843,655 $ 770,135 $ 791,398 Commercial 1,029,927 1,077,521 802,878 708,180 829,000 Industrial 1,156,909 1,211,242 853,293 754,775 884,722 Other 9,967 7,884 7,780 6,440 11,915 $ 3,225,218 $ 3,366,621 $ 2,507,606 $ 2,239,530 $ 2,517,035 Average revenue per kWh sold (cents) 39.21 40.30 30.35 27.58 28.80 Residential 43.91 44.30 33.86 30.50 32.44 Commercial 39.82 40.99 31.21 28.83 29.68 Industrial 35.34 36.75 26.88 24.21 25.52 Other 40.79 55.24 34.19 31.01 29.39 Residential statistics Average annual use per customer account (kWh) 5,628 5,821 6,022 6,145 5,967 Average annual revenue per customer account $ 2,471 $ 2,579 $ 2,039 $ 1,874 $ 1,936 Average number of customer accounts 416,177 414,910 413,725 410,973 408,768 1.
After 2030, progress on elimination of carbon from power generation assumes continued use of proven resources, including wind, solar, geothermal, hydroelectric, biofuels and energy storage, along with the development of new technologies. Those technologies may include offshore wind, green hydrogen, wave energy and carbon-capture—all currently under development around the world—as well as other solutions that will emerge.
After 2030, progress on elimination of carbon from power generation assumes continued use of proven resources, including wind, solar, geothermal, hydroelectric, biofuels and energy storage, along with the development of new technologies. 5 Those technologies may include offshore wind, green hydrogen, wave energy and carbon-capture—all currently under development around the world—as well as other solutions that will emerge.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the FDICIA) establishes a statutory framework that is triggered by the capital level of a financial institution and subjects it to progressively more stringent restrictions and supervision as capital levels decline. The prompt corrective action capital requirements establish thresholds for varying degrees of oversight and intervention by regulators.
The Federal Deposit Insurance Corporation Improvement Act of 1991 establishes a statutory framework that is triggered by the capital level of a financial institution and subjects it to progressively more stringent restrictions and supervision as capital levels decline. The prompt corrective action capital requirements establish thresholds for varying degrees of oversight and intervention by regulators.
Other properties . The Utilities own overhead transmission and distribution lines, underground cables, pole (some jointly) and metal high voltage towers. Electric lines are located over or under public and nonpublic properties. Hawaiian Electric owns a total of 133 acres of land on which substations, transformer vaults, distribution baseyards and the Kalaeloa cogeneration facility are located.
Other properties . The Utilities own overhead transmission and distribution lines, underground cables, pole (some jointly) and metal high voltage towers. Electric lines are located over or under public and nonpublic properties. 14 Hawaiian Electric owns a total of 133 acres of land on which substations, transformer vaults, distribution baseyards and the Kalaeloa cogeneration facility are located.
Currently ASB does not use interest rate swaps to manage interest rate risk, but may do so in the future. Generally speaking, the OCC rules permit financial institutions to engage in transactions involving financial derivatives to the extent these transactions are otherwise authorized under applicable law and are safe and sound.
Currently ASB does not use interest rate swaps to manage interest rate risk, but may do so in the future. Generally speaking, the 17 OCC rules permit financial institutions to engage in transactions involving financial derivatives to the extent these transactions are otherwise authorized under applicable law and are safe and sound.
Although the Gramm Act further restricted the creation of so-called “unitary savings and loan holding companies” (i.e., companies such as HEI whose subsidiaries include one or more savings associations and one or more nonfinancial subsidiaries), the unitary savings and loan holding company relationship among HEI, ASB Hawaii and ASB is “grandfathered” under the Gramm Act so that HEI and its subsidiaries will be able to continue to engage in their current activities so long as ASB maintains its qualified thrift lender (QTL) status test discussed under “Bank—Regulation—Qualified thrift lender test.” ASB met the QTL test at all times during 2022; however, the failure of ASB to satisfy the QTL test in the future could result in a need for HEI to divest ASB.
Although the Gramm Act further restricted the creation of so-called “unitary savings and loan holding companies” (i.e., companies such as HEI whose subsidiaries include one or more savings associations and one or more nonfinancial subsidiaries), the unitary savings and loan holding company relationship among HEI, ASB Hawaii and ASB is “grandfathered” under the Gramm Act so that HEI and its subsidiaries will be able to continue to engage in their current activities so long as ASB maintains its qualified thrift lender (QTL) status test discussed under “Bank—Regulation—Qualified thrift lender test.” ASB met the QTL test at all times during 2023; however, the failure of ASB to satisfy the QTL test in the future could result in a need for HEI to divest ASB.
The OCC also regularly 17 examines ASB’s information technology practices and its performance under Community Reinvestment Act measurement criteria. The Federal Deposit Insurance Act, as amended, addresses the safety and soundness of the deposit insurance system, supervision of depository institutions and improvement of accounting standards.
The OCC also regularly examines ASB’s information technology practices and its performance under Community Reinvestment Act measurement criteria. The Federal Deposit Insurance Act, as amended, addresses the safety and soundness of the deposit insurance system, supervision of depository institutions and improvement of accounting standards.
See “Commitments and contingencies-Regulatory proceedings-Performance-based regulation framework” in Note 3 of the Consolidated Financial Statements. 6 A summary of these regulatory mechanisms, most of which have been either maintained, modified, or approved under PBR as noted, is as follows: Mechanism Description PBR Framework (effective June 2021) Sales decoupling Provides predictable revenue stream by fixing net revenues at the level approved in last rate case (revenues not linked to kWh sales).
See “Commitments and contingencies-Regulatory proceedings-Performance-based regulation framework” in Note 4 of the Consolidated Financial Statements. 6 A summary of these regulatory mechanisms, most of which have been either maintained, modified, or approved under PBR as noted, is as follows: Mechanism Description PBR Framework (effective June 2021) Sales decoupling Provides predictable revenue stream by fixing net revenues at the level approved in last rate case (revenues not linked to kWh sales).
CERCLA and ERL exempt persons whose ownership 19 in a facility is held primarily to protect a security interest, provided that they do not participate in the management of the facility. Additional information.
CERCLA and ERL exempt persons whose ownership in a facility is held primarily to protect a security interest, provided that they do not participate in the management of the facility. Additional information.
Affiliate transactions . Certain transactions between HEI’s electric public utility subsidiaries (Hawaiian Electric, Hawaii Electric Light and Maui Electric) and HEI and affiliated interests (as defined by statute) are subject to regulation by the PUC.
Certain transactions between HEI’s electric public utility subsidiaries (Hawaiian Electric, Hawaii Electric Light and Maui Electric) and HEI and affiliated interests (as defined by statute) are subject to regulation by the PUC.
Because they are located in the State of Hawaii, Hawaiian Electric and its subsidiaries are exempt by statute from limitations set forth in the Powerplant and Industrial Fuel Use Act of 1978 on the use of petroleum as a primary energy source. Regulatory Developments . See “Regulatory proceedings” in Note 3 of the Consolidated Financial Statements for additional discussions.
Because they are located in the State of Hawaii, Hawaiian Electric and its subsidiaries are exempt by statute from limitations set forth in the Powerplant and Industrial Fuel Use Act of 1978 on the use of petroleum as a primary energy source. Regulatory Developments . See “Regulatory proceedings” in Note 4 of the Consolidated Financial Statements for additional discussions.
Further, the PUC could limit the ability of the electric utility subsidiaries to pay dividends on their common stock. See also Note 14 of the Consolidated Financial Statements and “Electric utility—Regulation” below. In October 2021, Pacific Current requested informal guidance from the PUC regarding application of the affiliate transaction requirements (ATRs) to certain investments.
Further, the PUC could limit the ability of the electric utility subsidiaries to pay dividends on their common stock. See also Note 15 of the Consolidated Financial Statements and “Electric utility—Regulation” below. In October 2021, Pacific Current requested informal guidance from the PUC regarding application of the affiliate transaction requirements (ATRs) to certain investments.
As of December 31, 2022, the Utilities’ ownership in generating assets was as follows: Property Location (island) Principal Fuel Type Generating Capacity (MW) Status Hawaiian Electric: Waiau 1 Oahu LSFO / Diesel 480.8 Active Kahe 1 Oahu LSFO 620.5 Active Campbell Industrial Park (CIP) 1 Oahu Diesel 129.0 Active Honolulu Power Plant 1 Oahu N/A — Deactivated in 2014 Schofield Generating Station 2 Oahu Biodiesel / ULSD 49.4 Active West Loch PV Project 3 Oahu Renewable (Solar) 20.0 Active Hawaii Electric Light 4 : Shipman Hawaii N/A — Retired in 2015 Waimea Hawaii ULSD 7.5 Active Keahole Hawaii Diesel / ULSD 77.6 Active Puna Hawaii HSFO / Diesel 36.7 Active Hill/Kanoelehua Hawaii HSFO / ULSD 55.4 Active Distributed generators at substation sites Hawaii ULSD 5.0 Active Maui Electric 5 : Kahului Maui HSFO 35.9 Active Maalaea Maui Diesel / ULSD 210.4 Active Miki Basin Lanai ULSD 9.4 Active Palaau Molokai ULSD 12.0 Active 1 The four plants are situated on Hawaiian Electric-owned land having a combined area of 542 acres. 2 Hawaiian Electric has a 35-year land lease on 8.13 acres, effective September 1, 2016 (with an option to extend an additional 10 years), with the Department of the Army. 3 Hawaiian Electric has a 37-year land lease on 102 acres, effective July 1, 2017, with the Secretary of the Navy. 4 The plants are situated on Hawaii Electric Light-owned land having a combined area of approximately 44 acres.
As of December 31, 2023, the Utilities’ ownership in generating assets was as follows: Property Location (island) Principal Fuel Type Generating Capacity (MW) Status Hawaiian Electric: Waiau 1 Oahu LSFO / Diesel 480.8 Active Kahe 1 Oahu LSFO 620.5 Active Campbell Industrial Park (CIP) 1 Oahu Diesel 129.0 Active Honolulu Power Plant 1 Oahu N/A — Retired in 2023 Schofield Generating Station 2 Oahu Biodiesel / ULSD 49.4 Active West Loch PV Project 3 Oahu Renewable (Solar) 20.0 Active Hawaii Electric Light 4 : Shipman Hawaii N/A — Retired in 2015 Waimea Hawaii ULSD 7.5 Active Keahole Hawaii Diesel / ULSD 77.6 Active Puna Hawaii HSFO / Diesel 36.7 Active Hill/Kanoelehua Hawaii HSFO / ULSD 55.4 Active Distributed generators at substation sites Hawaii ULSD 5.0 Active Maui Electric 5 : Kahului Maui HSFO 35.9 Active Maalaea Maui Diesel / ULSD 208.4 Active Miki Basin Lanai ULSD 9.4 Active Palaau Molokai ULSD 12.0 Active Distributed generators at substation sites Maui ULSD 3.8 Active 1 The four plants are situated on Hawaiian Electric-owned land having a combined area of 542 acres. 2 Hawaiian Electric has a 35-year land lease on 8.13 acres, effective September 1, 2016 (with an option to extend an additional 10 years), with the Department of the Army. 3 Hawaiian Electric has a 37-year land lease on 102 acres, effective July 1, 2017, with the Secretary of the Navy. 4 The plants are situated on Hawaii Electric Light-owned land having a combined area of approximately 44 acres.
For additional information about ASB, see the sections under “Bank” in HEI’s MD&A, HEI’s “Quantitative and Qualitative Disclosures about Market Risk” and HEI’s Consolidated Financial Statements, including Note 4 thereto . Properties. ASB owns or leases several office buildings in Honolulu and owns land on which a number of its branches are located.
For additional information about ASB, see the sections under “Bank” in HEI’s MD&A, HEI’s “Quantitative and Qualitative Disclosures about Market Risk” and HEI’s Consolidated Financial Statements, including Note 5 thereto . Properties. ASB owns or leases several office buildings in Honolulu and owns land on which a number of its branches are located.
The following table contains certain generation statistics as of and for the year ended December 31, 2022. The net generating and firm purchased capability available for operation at any given time may be more or less than shown because of capability restrictions or temporary outages for inspection, maintenance, repairs or unforeseen circumstances.
The following table contains certain generation statistics as of and for the year ended December 31, 2023. The net generating and firm purchased capability available for operation at any given time may be more or less than shown because of capability restrictions or temporary outages for inspection, maintenance, repairs or unforeseen circumstances.
Accordingly, if ASB were to be in financial distress or to otherwise be viewed by the regulators as in unsatisfactory condition, HEI could be required to provide additional capital or liquidity support or take other action, in support of ASB. Lending activities. See Note 4 of the Consolidated Financial Statements for the composition of ASB’s loan portfolio.
Accordingly, if ASB were to be in financial distress or to otherwise be viewed by the regulators as in unsatisfactory condition, HEI could be required to provide additional capital or liquidity support or take other action, in support of ASB. Lending activities. See Note 5 of the Consolidated Financial Statements for the composition of ASB’s loan portfolio.
Advances from the Federal Home Loan Bank (FHLB) of Des Moines and securities sold under agreements to repurchase continue to be additional sources of funds, but they are a higher cost funding source than deposits. Competition. The banking industry in Hawaii is highly competitive.
Advances from the Federal Home Loan Bank (FHLB) of Des Moines, borrowings from the Federal Reserve Bank and securities sold under agreements to repurchase continue to be additional sources of funds, but they are a higher cost funding source than deposits. Competition. The banking industry in Hawaii is highly competitive.
Generally, the amount of all deposits held by a depositor in the same capacity (even if held in separate accounts) is aggregated for purposes of applying the insurance limit. See “Federal Deposit Insurance Corporation assessment” in Note 4 of the Consolidated Financial Statements for a discussion of FDIC deposit insurance assessment rates. Recent legislation and issuances .
Generally, the amount of all deposits held by a depositor in the same capacity (even if held in separate accounts) is aggregated for purposes of applying the insurance limit. See “Federal Deposit Insurance Corporation assessment” in Note 5 of the Consolidated Financial Statements for a discussion of FDIC deposit insurance assessment rates. Recent legislation and issuances .
FDIC regulations restrict the ability of financial institutions that are undercapitalized to offer interest rates on deposits that are significantly higher than the rates offered by competing institutions. As of December 31, 2022, ASB was “well capitalized” and thus not subject to these interest rate restrictions. Qualified thrift lender test .
FDIC regulations restrict the ability of financial institutions that are undercapitalized to offer interest rates on deposits that are significantly higher than the rates offered by competing institutions. As of December 31, 2023, ASB was “well capitalized” and thus not subject to these interest rate restrictions. Qualified thrift lender test .
Origination, purchase and sale of loans . Generally, residential and commercial real estate loans originated by ASB are collateralized by real estate located in Hawaii. For additional information, including information concerning the geographic distribution of ASB’s mortgage-backed securities portfolio and the geographic concentration of credit risk, see Note 15 of the Consolidated Financial Statements.
Origination, purchase and sale of loans . Generally, residential and commercial real estate loans originated by ASB are collateralized by real estate located in Hawaii. For additional information, including information concerning the geographic distribution of ASB’s mortgage-backed securities portfolio and the geographic concentration of credit risk, see Note 16 of the Consolidated Financial Statements.
As of December 31, 2022, and at all times during 2022, ASB was a qualified thrift lender. Federal Home Loan Bank System . ASB is a member of the FHLB System, which consists of 11 regional FHLBs, and ASB’s regional bank is the FHLB of Des Moines. The FHLB System provides a central credit facility for member institutions.
As of December 31, 2023, and at all times during 2023, ASB was a qualified thrift lender. Federal Home Loan Bank System . ASB is a member of the FHLB System, which consists of 11 regional FHLBs, and ASB’s regional bank is the FHLB of Des Moines. The FHLB System provides a central credit facility for member institutions.
The abilities of certain of HEI’s subsidiaries to pay dividends or make other distributions to HEI are subject to contractual and regulatory restrictions (see Note 14 of the Consolidated Financial Statements). HEI is headquartered in Honolulu, Hawaii and has three reportable segments—Electric utility, Bank, and Other. Electric Utility .
The abilities of certain of HEI’s subsidiaries to pay dividends or make other distributions to HEI are subject to contractual and regulatory restrictions (see Note 15 of the Consolidated Financial Statements). HEI is headquartered in Honolulu, Hawaii and has three reportable segments—Electric utility, Bank, and Other. Electric Utility .
Possible restrictions include precluding or limiting: (i) the payment of dividends by ASB; (ii) transactions between ASB, HEI or ASB Hawaii, and their subsidiaries or affiliates; and (iii) any activities of ASB that might expose ASB to the liabilities of HEI and/or ASB Hawaii and their other affiliates. See also Note 14 of the Consolidated Financial Statements.
Possible restrictions include precluding or limiting: (i) the payment of dividends by ASB; (ii) transactions between ASB, HEI or ASB Hawaii, and their subsidiaries or affiliates; and (iii) any activities of ASB that might expose ASB to the liabilities of HEI and/or ASB Hawaii and their other affiliates. See also Note 15 of the Consolidated Financial Statements.
See also “Electric utility—Hawaii Electric Light firm capacity PPAs” section below and Note 2 of the Consolidated Financial Statements for additional information on Pacific Current activities. The “Other” segment also includes ASB Hawaii, Inc. (ASB Hawaii) (a holding company), which owns ASB. Additional information .
See also “Electric utility—Hawaii Electric Light firm capacity PPAs” section below and Note 4 of the Consolidated Financial Statements for additional information on Pacific Current activities. The “Other” segment also includes ASB Hawaii, Inc. (ASB Hawaii) (a holding company), which owns ASB. Additional information .
PUC approval is also required for all surcharges and adjustments before they are reflected in rates. See “Utility projects” under “Commitments and contingencies” in Note 3 of the Consolidated Financial Statements. Competition. See “Competition” in Hawaiian Electric’s MD&A. Regulation.
PUC approval is also required for all surcharges and adjustments before they are reflected in rates. See “Utility projects” under “Commitments and contingencies” in Note 4 of the Consolidated Financial Statements. Competition. See “Competition” in Hawaiian Electric’s MD&A. Regulation.
Maui Electric also owns approximately 18 acres of land which house some of its substations, leases approximately 3,600 square feet of land for its telecommunication and microwave facilities, leases approximately 6,000 square feet of land at Kahului Harbor for pipeline purposes, and leases 17,958 square feet of land at Puunene for the Puunene Substation.
Maui Electric also owns approximately 20 acres of land which house some of its substations, leases approximately 3,600 square feet of land for its telecommunication and microwave facilities, leases approximately 6,000 square feet of land at Kahului Harbor for pipeline purposes, and leases 17,958 square feet of land at Puunene for the Puunene Substation.
ASB is subject to OCC rules relating to derivatives activities, such as interest rate swaps, interest rate lock commitments and forward commitments. See “Derivative financial instruments” in Note 4 of the Consolidated Financial Statements for a description of interest rate lock commitments and forward commitments used by ASB.
ASB is subject to OCC rules relating to derivatives activities, such as interest rate swaps, interest rate lock commitments and forward commitments. See “Derivative financial instruments” in Note 5 of the Consolidated Financial Statements for a description of interest rate lock commitments and forward commitments used by ASB.
Except as otherwise disclosed in this report (see “Risk Factors” in Item 1A, and Notes 1 and 3 of the Consolidated Financial Statements), the Utilities believe that each subsidiary has appropriately responded to environmental conditions requiring action and that, as a result of such actions, such environmental conditions will not have a material adverse effect on the capital expenditures, earnings and competitive position of the Utilities.
Except as otherwise disclosed in this 12 report (see “Risk Factors” in Item 1A, and Notes 1 and 4 of the Consolidated Financial Statements), the Utilities believe that each subsidiary has appropriately responded to environmental conditions requiring action and that, as a result of such actions, such environmental conditions will not have a material adverse effect on the capital expenditures, earnings and competitive position of the Utilities.
A diverse portfolio of resources will also enhance resilience to climate-related events. 5 Sales of electricity.
A diverse portfolio of resources will also enhance resilience to climate-related events. Sales of electricity.
The Federal Reserve Board announced the adoption of a final rule that implements the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U. S. Treasury securities.
The Federal Reserve Board announced the adoption of a final rule that implements the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that replaced LIBOR in certain financial contracts after June 30, 2023. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U. S. Treasury securities.
As of December 31, 2022, as a result of certain HEI contributions of capital to ASB over the years, HEI’s maximum obligation under the agreement to contribute additional capital has been reduced to approximately $28.3 million.
As of December 31, 2023, as a result of certain HEI contributions of capital to ASB over the years, HEI’s maximum obligation under the agreement to contribute additional capital has been reduced to approximately $28.3 million.
Maui Electric also owns approximately 89 acres of undeveloped land at Waena, Palaau, and Kahului. Fuel storage facilities are located on Maui Electric-owned properties at Kahului Baseyard, Kahului Power Plant, Maalaea Power Plant, Miki Basin, Palaau, and Hana. Two, 1-MW stand-by diesel generators are located within the Maui Electric-owned land at Hana Substation.
Maui Electric also owns approximately 87 acres of undeveloped land at Waena, Palaau, and Kahului. Fuel storage facilities are located on Maui Electric-owned properties at Kahului Baseyard, Kahului Power Plant, Maalaea Power Plant, Miki Basin, Palaau, Hana, and the Kuihelani Substation. Two, 1-MW stand-by diesel generators are located within the Maui Electric-owned land at Hana Substation.
The Utilities have set an aggressive goal to cut carbon emissions from power generation 70% by 2030, compared with 2005 levels. The emissions covered by this goal include stack emissions from generation owned by Hawaiian Electric and independent power producers (IPPs) who sell electricity to the Utilities.
In 2021, the Utilities set an aggressive goal to cut carbon emissions from power generation 70% by 2030, compared with 2005 levels. The emissions covered by this goal include stack emissions from generation owned by Hawaiian Electric and independent power producers (IPPs) who sell electricity to the Utilities.
PGV’s capability of 25.7 MW has been incorporated into the utility’s firm contract power capability as of December 31, 2022. 3 Noncoincident and nonintegrated. Generating reliability and reserve margin. Hawaiian Electric serves the island of Oahu and Hawaii Electric Light serves the island of Hawaii.
PGV’s current capability of 25.7 MW has been incorporated into the utility’s firm contract power capability as of December 31, 2023. 3 Noncoincident and nonintegrated. Generating reliability and reserve margin. Hawaiian Electric serves the island of Oahu and Hawaii Electric Light serves the island of Hawaii.
See also “Electric utility” section below. Bank . ASB is one of the largest financial institutions in the State of Hawaii (based on total assets), with assets totaling approximately $9.5 billion as of December 31, 2022. ASB provides a wide array of banking and other financial services to Hawaii consumers and businesses. See also “Bank” section below. Other .
See also “Electric utility” section below. Bank . ASB is one of the largest financial institutions in the State of Hawaii (based on total assets), with assets totaling approximately $9.7 billion as of December 31, 2023. ASB provides a wide array of banking and other financial services to Hawaii consumers and businesses. See also “Bank” section below. Other .
In addition to the firm capacity PPAs described below, the electric utilities also purchase energy on an as-available basis directly from nonutility generators and through its Feed-In Tariff programs, as well as through a new renewable dispatchable generation power purchase agreement. The electric utilities also receive renewable energy from customers under its Net Energy Metering and Customer Grid Supply programs.
In addition to the firm capacity PPAs described below, the electric utilities also purchase energy on an as-available basis directly from nonutility generators and through its Feed-In Tariff programs, as well as through renewable dispatchable generation power purchase agreements. The electric utilities also receive renewable energy from customers under its Net Energy Metering and Customer Grid Supply programs.
The dual-train combined-cycle facility consists of two oil-fired combustion turbines and a steam turbine that utilizes waste heat from the combustion turbines, which primarily burns naphtha (a mixture of liquid hydrocarbons) and, starting in late 2019, biodiesel (comprising approximately 21% of HEP’s fuel mix in 2022).
The dual-train combined-cycle facility consists of two oil-fired combustion turbines and a steam turbine that utilizes waste heat from the combustion turbines, which primarily burns naphtha (a mixture of liquid hydrocarbons) and, starting in late 2019, biodiesel (comprising approximately 24% of HEP’s fuel mix in 2023).
In particular, the rules define the relevant capital measures for the categories of “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” As of December 31, 2022, ASB was “well-capitalized.” 18 Interest rates .
In particular, the rules define the relevant capital measures for the categories of “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” As of December 31, 2023, ASB was “well-capitalized.” Interest rates .
ASB’s required holding in the stock of the FHLB is both membership and activity-based. Membership is based on a percentage of total assets (0.12%) while the portion related to activity is based on a percentage of outstanding activity, mainly advances (4%).
ASB’s required holding in the stock of the FHLB is both membership and activity-based. Membership is based on a percentage of total assets (0.06%) while the portion related to activity is based on a percentage of outstanding activity, mainly advances (4.5%).
As of December 31, 2022, ASB had loan commitments, undisbursed loan funds and unused lines and letters of credit of $2.1 billion. Management believes ASB’s current sources of funds will enable it to meet these obligations while maintaining liquidity at satisfactory levels. Supervision .
As of December 31, 2023, ASB had loan commitments, undisbursed loan funds and unused lines and letters of credit of $1.8 billion. Management believes ASB’s current sources of funds will enable it to meet these obligations while maintaining liquidity at satisfactory levels. Supervision .
At December 31, 2022, there were 7 financial institutions insured by the FDIC headquartered in the State of Hawaii.
At December 31, 2023, there were 7 financial institutions insured by the FDIC headquartered in the State of Hawaii.
This next phase is focused on stimulating deployment of clean energy infrastructure as a catalyst for economic growth, energy system innovation and test bed investments. Energy efficiency.
This next phase is focused on stimulating deployment of clean energy infrastructure as a catalyst for economic growth, energy system innovation and test bed investments. Electrification of Transportation .
As of December 31, 2022, ASB was required and owned capital stock in the FHLB of Des Moines in the amount of $26.6 million. Community Reinvestment . The Community Reinvestment Act (CRA) requires financial institutions to help meet the credit needs of their communities, including low- and moderate-income areas, consistent with safe and sound lending practices.
As of December 31, 2023, ASB was required and owned capital stock in the FHLB of Des Moines in the amount of $14.7 million. 18 Community Reinvestment . The Community Reinvestment Act (CRA) requires financial institutions to help meet the credit needs of their communities, including low- and moderate-income areas, consistent with safe and sound lending practices.
Retention and sustained growth of these low-cost deposit types will be challenging in the current environment . ASB borrows on a short-term basis to compensate for seasonal or other reductions in deposit flows. ASB may borrow on a longer-term basis to support expanded lending or investment activities.
Retention of low-cost deposits will be challenging in the current environment . ASB borrows on a short-term basis to compensate for seasonal or other reductions in deposit flows. ASB may borrow on a longer-term basis to support expanded lending or investment activities.
As of December 31, 2022, ASB’s unused FHLB of Des Moines borrowing capacity was approximately $1.6 billion. ASB utilizes growth in deposits, advances from the FHLB of Des Moines and securities sold under agreements to repurchase to fund maturing and withdrawable deposits, repay maturing borrowings, fund existing and future loans and make investments.
As of December 31, 2023, ASB’s unused FHLB of Des Moines borrowing capacity was approximately $1.9 billion. ASB utilizes growth in deposits, advances from the FHLB of Des Moines, borrowings from Federal Reserve Bank and securities sold under agreements to repurchase to fund maturing and withdrawable deposits, repay maturing borrowings, fund existing and future loans and make investments.
Hawaii Electric Light also has a firm capacity PPA with PGV for 34.6 MW that went offline due to lava flow on Hawaii Island since May 2018, but returned to service with firm capacity of 13 MW in the first quarter of 2021 and ramped up to 25.7 MW in the second quarter of 2022.
Hawaii Electric Light also has a firm capacity PPA with PGV for 34.6 MW that went offline due to lava flow on Hawaii Island since May 2018, but returned to service with firm capacity in the first quarter of 2021.
Accordingly, investors should routinely monitor such portions of HEI’s website, in addition to following HEI’s, Hawaiian Electric’s and ASB’s press releases, SEC filings and public conference calls and webcasts. Investors may also wish to refer to the PUC website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC.
Accordingly, investors should routinely monitor such portions of HEI’s website, in addition to following HEI’s, Hawaiian Electric’s and ASB’s press releases, SEC filings and public conference calls and webcasts. Investors may also wish to refer to the PUC website at hpuc.my.site.com/cdms/s/ in order to review documents filed with and issued by the PUC.
In 2022, the electric utilities’ revenues and net income amounted to approximately 91% and 78% respectively, of HEI’s consolidated revenues and net income, compared to approximately 89% and 72% in 2021 and approximately 88% and 86% in 2020, respectively.
In 2023, the electric utilities’ revenues and net income amounted to approximately 89% and 97% respectively, of HEI’s consolidated revenues and net income, compared to approximately 91% and 78% in 2022 and approximately 89% and 72% in 2021, respectively.
In December 2019, Hawaii Electric Light entered into an Amended and Restated PPA with PGV to, among other things, extend the term by 25 years to 2052 and expand the firm capacity capable of being delivered to 46 MW, subject to PUC approval.
In December 2019, Hawaii Electric Light entered into an Amended and Restated PPA (ARPPA) with PGV to, among other things, extend the term by 25 years to 2052 and expand the firm capacity capable of being delivered to 46 MW. The ARPPA was approved by the PUC subject to certain conditions on December 29, 2023.
ASB is a full-service community bank that serves both consumer and commercial customers and operates 38 branches on the islands of Oahu (27), Maui (5), Hawaii (3), Kauai (2), and Molokai (1) as of December 31 2022.
ASB is a full-service community bank that serves both consumer and commercial customers and operates 35 branches on the islands of Oahu (25), Maui (4), Hawaii (3), Kauai (2), and Molokai (1) as of December 31, 2023.
Curriculum includes technical banker training programs that cover all aspects of banking laws, banking operations, new product and service offerings, legal and regulatory compliance and company procedures and ethics. The Bank delivers company-wide financial education, empowering its employees to make wise personal decisions to help meet their financial goals and provide valuable customer guidance.
Curriculum includes technical banker training programs that cover all aspects of banking laws, banking operations, new product and service offerings, legal and regulatory compliance and company procedures and ethics. The Bank delivers financial education, empowering employees to provide valuable customer guidance.
ASB is one of the largest financial institutions headquartered in the State of Hawaii with assets of $9.5 billion and deposits of $8.2 billion, as of December 31, 2022.
ASB is one of the largest financial institutions headquartered in the State of Hawaii with assets of $9.7 billion and deposits of $8.1 billion, as of December 31, 2023.
In Hawaii, kWh sales tend to increase in the warmer, more humid months as a result of increased demand for air conditioning, and with cloudy and rainy weather due to lower production by privately owned customer photovoltaic (PV) systems.
In Hawaii, kWh sales tend to increase in the warmer, more humid months as a result of increased demand for air conditioning, and with cloudy and rainy weather due to lower production by privately owned customer photovoltaic (PV) systems. In 2023, kWh sales decreased compared to the prior year due to impacts from the Maui windstorm and wildfires.
The distributed generators are located within Hawaii Electric Light-owned substation sites having a combined area of approximately four acres. 5 The four plants are situated on Maui Electric-owned land having a combined area of 60.7 acres. 14 As of December 31, 2022, the Utilities’ ownership in fuel storage facilities was as follows: Facility Location (island) Fuel Type Capacity (barrels in thousands) Generation Serviced Hawaiian Electric: Barbers Point Tank Farm Oahu LSFO 1,000 Kahe, Waiau Generation sites - various (in aggregate) Oahu LSFO 770 Various Generation sites - various (in aggregate) Oahu Diesel 132 Various Generation sites - various (in aggregate) Oahu Biodiesel 11 Various Hawaii Electric Light 1 : Generation sites - various (in aggregate) Hawaii HSFO 48 Various Generation sites - various (in aggregate) Hawaii Diesel 82 Various Maui Electric 2 : Generation sites - various (in aggregate) Maui HSFO 81 Various Generation sites - various (in aggregate) Maui Diesel 95 Various 1 There are an additional 19,200 barrels of diesel and 24,770 barrels of HSFO storage capacity for Hawaii Electric Light-owned fuel off-site at Island Energy Services, LLC-owned terminalling facilities. 2 There are an additional 56,358 barrels of diesel oil storage capacity off-site at Aloha Petroleum, Ltd-owned terminalling facilities.
As of December 31, 2023, the Utilities’ ownership in fuel storage facilities was as follows: Facility Location (island) Fuel Type Capacity (barrels in thousands) Generation Serviced Hawaiian Electric: Barbers Point Tank Farm Oahu LSFO 1,000 Kahe, Waiau Generation sites - various (in aggregate) Oahu LSFO 770 Various Generation sites - various (in aggregate) Oahu Diesel 132 Various Generation sites - various (in aggregate) Oahu Biodiesel 11 Various Hawaii Electric Light 1 : Generation sites - various (in aggregate) Hawaii HSFO 48 Various Generation sites - various (in aggregate) Hawaii Diesel 82 Various Maui Electric 2 : Generation sites - various (in aggregate) Maui HSFO 81 Various Generation sites - various (in aggregate) Maui Diesel 95 Various 1 There are an additional 19,200 barrels of diesel and 24,770 barrels of HSFO storage capacity for Hawaii Electric Light-owned fuel off-site at Island Energy Services, LLC-owned terminalling facilities. 2 There are an additional 56,358 barrels of diesel oil storage capacity off-site at Aloha Petroleum, Ltd-owned terminalling facilities.
Hawaii Electric Light’s and Maui Electric’s steam generating units burn high sulfur fuel oil (HSFO) and Hawaii Electric Light’s and Maui Electric’s Maui combustion turbine generating units burn diesel. Hawaii Electric Light’s and Maui Electric’s Maui, Molokai, and Lanai diesel engine generating units burn ULSD.
Hawaii Electric Light’s and Maui Electric’s steam generating units burn high sulfur fuel oil (HSFO) and Hawaii Electric Light’s and Maui Electric’s Maui combustion turbine generating units burn diesel. Hawaii Electric Light’s and Maui Electric’s Maui, Molokai, and Lanai diesel engine generating units burn ULSD. See “Fuel contracts” in Hawaiian Electric’s MD&A.
Hamakua Energy, LLC (Hamakua Energy), an indirect wholly owned subsidiary of Pacific Current, which is included in the “Other” segment, owns a 60-MW dual-train combined-cycle facility and a total of approximately 93 acres located on the Hamakua coast on the island of Hawaii.
See “Electric Utility” and “Bank” sections for a description of properties they own and lease. 4 Hamakua Energy, LLC (Hamakua Energy), an indirect wholly owned subsidiary of Pacific Current, which is included in the “Other” segment, owns a 60-MW dual-train combined-cycle facility and a total of approximately 93 acres located on the Hamakua coast on the island of Hawaii.
Hawaiian Electric Hawaii Electric Light Maui Electric Island of Oahu Island of Hawaii Island of Maui Island of Lanai Island of Molokai Total Net generating and firm purchased capability (MW) as of December 31, 2022 1 Conventional oil-fired steam units 999.5 50.1 35.9 — — 1,085.5 Diesel internal combustion engine — 29.5 96.8 9.4 9.8 145.5 Simple-cycle combustion turbines 230.8 46.3 — — 2.2 279.3 Dual train combined-cycle unit — 56.3 113.6 — — 169.9 Biodiesel internal combustion engine 57.4 — — — — 57.4 Firm contract power 2 276.5 85.7 — — — 362.2 1,564.2 267.9 246.3 9.4 12.0 2,099.8 Net peak demand (MW) 3 1,072.0 187.7 195.1 6.0 5.8 1,466.6 Reserve margin 45.2 % 42.7 % 29.5 % 56.7 % 107.1 % 43.2 % Annual load factor 69.2 % 68.2 % 63.1 % 69.2 % 62.4 % 68.2 % MWh net generated and purchased (thousands) 6,495.2 1,121.1 1,077.9 36.4 31.7 8,762.3 1 Hawaiian Electric units at normal ratings; Hawaii Electric Light and Maui Electric units at reserve ratings. 2 Nonutility generators - Hawaiian Electric: 208 MW (Kalaeloa Partners, L.P., oil-fired) and 68.5 MW (HPOWER, refuse-fired); Hawaii Electric Light: 60 MW (Hamakua Energy, oil-fired).
Hawaiian Electric Hawaii Electric Light Maui Electric Island of Oahu Island of Hawaii Island of Maui Island of Lanai Island of Molokai Total Net generating and firm purchased capability (MW) as of December 31, 2023 1 Conventional oil-fired steam units 999.5 50.1 35.9 — — 1,085.5 Diesel internal combustion engine — 29.5 98.6 9.4 9.8 147.3 Simple-cycle combustion turbines 230.8 46.3 — — 2.2 279.3 Dual train combined-cycle unit — 56.3 113.6 — — 169.9 Biodiesel internal combustion engine 57.4 — — — — 57.4 Firm contract power 2 276.5 85.7 — — — 362.2 1,564.2 267.9 248.1 9.4 12.0 2,101.6 Net peak demand (MW) 3 1,060.0 187.3 187.9 6.0 5.8 1,447.0 Reserve margin 47.5 % 43.0 % 34.6 % 56.7 % 106.9 % 45.2 % Annual load factor 69.0 % 67.6 % 62.6 % 66.7 % 61.2 % 68.0 % MWh net generated and purchased (thousands) 6,409.3 1,108.7 1,030.1 35.1 31.1 8,614.3 1 Hawaiian Electric units at normal ratings; Hawaii Electric Light and Maui Electric units at reserve ratings. 2 Nonutility generators - Hawaiian Electric: 208 MW (Kalaeloa Partners, L.P., oil-fired) and 68.5 MW (HPOWER, refuse-fired); Hawaii Electric Light: 60 MW (Hamakua Energy, oil-fired).
The following table sets forth the number of bank branches owned and leased by ASB by island: Number of branches December 31, 2022 Owned Leased Total Oahu 8 19 27 Maui 1 4 5 Hawaii 2 1 3 Kauai 1 1 2 Molokai — 1 1 12 26 38 As of December 31, 2022, the net book value (NBV) of branches and office facilities was $171 million ($165 million represents the NBV of the land and improvements for the branches and office facilities owned by ASB and $6 million represents the NBV of ASB’s leasehold improvements).
The following table sets forth the number of bank branches owned and leased by ASB by island: Number of branches December 31, 2023 Owned Leased Total Oahu 8 17 25 Maui 1 3 4 Hawaii 2 1 3 Kauai 1 1 2 Molokai — 1 1 12 23 35 As of December 31, 2023, the net book value (NBV) of branches and office facilities was $168 million ($163 million represents the NBV of the land and improvements for the branches and office facilities owned by ASB and $5 million represents the NBV of ASB’s leasehold improvements).
See “Fuel contracts” in Hawaiian Electric’s MD&A. 10 The following table sets forth the average cost of fuel oil used by Hawaiian Electric, Hawaii Electric Light and Maui Electric to generate electricity in 2022, 2021 and 2020: Hawaiian Electric Hawaii Electric Light Maui Electric Consolidated $/Barrel ¢/MBtu $/Barrel ¢/MBtu $/Barrel ¢/MBtu $/Barrel ¢/MBtu 2022 144.63 2,339.5 131.36 2,183.4 135.39 2,274.5 141.49 2,310.9 2021 79.10 1,275.9 80.52 1,333.9 83.45 1,404.0 80.06 1,305.4 2020 62.06 1,003.7 63.21 1,048.3 66.81 1,122.7 63.00 1,028.7 The average per-unit cost of fuel oil consumed to generate electricity for Hawaiian Electric, Hawaii Electric Light and Maui Electric reflects a different volume mix of fuel types and grades as follows: Hawaiian Electric Hawaii Electric Light Maui Electric % LSFO % Biodiesel/Diesel % HSFO % Diesel % HSFO % Diesel 2022 93 7 36 64 24 76 2021 93 7 41 59 22 78 2020 94 6 39 61 24 76 The prices that Hawaiian Electric and Hawaii Electric Light pay for purchased energy from certain older nonutility generators are generally linked to the price of oil.
The following table sets forth the average cost of fuel oil used by Hawaiian Electric, Hawaii Electric Light and Maui Electric to generate electricity in 2023, 2022 and 2021: Hawaiian Electric Hawaii Electric Light Maui Electric Consolidated $/Barrel ¢/MBtu $/Barrel ¢/MBtu $/Barrel ¢/MBtu $/Barrel ¢/MBtu 2023 127.45 2,051.1 124.04 2,063.7 124.86 2,101.1 126.76 2,060.0 2022 144.63 2,339.5 131.36 2,183.4 135.39 2,274.5 141.49 2,310.9 2021 79.10 1,275.9 80.52 1,333.9 83.45 1,404.0 80.06 1,305.4 10 The average per-unit cost of fuel oil consumed to generate electricity for Hawaiian Electric, Hawaii Electric Light and Maui Electric reflects a different volume mix of fuel types and grades as follows: Hawaiian Electric Hawaii Electric Light Maui Electric % LSFO % Biodiesel/Diesel % HSFO % Diesel % HSFO % Diesel 2023 92 8 35 65 22 78 2022 93 7 36 64 24 76 2021 93 7 41 59 22 78 The prices that Hawaiian Electric and Hawaii Electric Light pay for purchased energy from certain older nonutility generators are generally linked to the price of oil.
The Utilities estimate that 75% of the net energy they generate will come from fossil fuel oil in 2023 compared to 67% in 2022. Hawaiian Electric generally maintains an average system fuel inventory level equivalent to 47 days of forward consumption.
Hamakua Energy’s energy prices vary primarily with the cost of naphtha. The Utilities estimate that 74% of the net energy they generate will come from fossil fuel oil in 2024 compared to 75% in 2023. Hawaiian Electric generally maintains an average system fuel inventory level equivalent to 47 days of forward consumption.
As of December 31, 2021, the NBV of branches and office facilities was $175 million ($168 million represents the NBV of the land and improvements for the branches and office facilities owned by ASB and $7 million represents the NBV of ASB’s leasehold improvements).
As of December 31, 2022, the NBV of branches and office facilities was $171 million ($165 million represents the NBV of the land and improvements for the branches and office facilities owned by ASB and $6 million represents the NBV of ASB’s leasehold improvements).
On December 31, 2019, Hawaii Electric Light and PGV entered into an Amended and Restated Power Purchase Agreement, which delinks the pricing for energy delivered from the facility from fossil fuel prices. Hamakua Energy’s energy prices vary primarily with the cost of naphtha.
The energy prices for Kalaeloa, which purchases LSFO from Par Hawaii Refining, LLC (PAR), vary primarily with the price of Asian crude oil. On December 31, 2019, Hawaii Electric Light and PGV entered into an Amended and Restated Power Purchase Agreement, which delinks the pricing for energy delivered from the facility from fossil fuel prices.
PGV returned to service at a level providing limited output without firm capacity in the fourth quarter of 2020 and is currently providing 25.7 MW of capacity. See “New renewable PPAs” in the “Developments in renewable energy efforts” section in Hawaiian Electric’s MD&A.
PGV returned to service at a level providing limited output without firm capacity in the fourth quarter of 2020 and is currently providing 25.7 MW of capacity.
In August 2020, the Utilities committed to electrifying 100% of its class 1 vehicles (sedans, SUVs and light trucks) by 2035. The Utilities operate 30 public DC fast chargers (DCFC) as part of the EV-U pilot and EV-MAUI tariff.
In August 2020, the Utilities committed to electrifying 100% of its class 1 vehicles (sedans, SUVs and light trucks) by 2035. The Utilities launched the Smart Charge Hawaii Telematics pilot in May 2023 and are currently acquiring participants and collecting data. The Utilities operate 32 public DC fast chargers (DCFC) as part of the EV-U pilot and EV-MAUI tariff.
They filed a request in the fourth quarter of 2021 to expand and make permanent the public charging pilot with an additional 150 DCFCs and 150 level 2 charging stations at 75 locations. This request will be ready for decision making in the first quarter of 2023. Renewable Portfolio Standards.
They filed a request in the fourth quarter of 2021 to expand and make permanent the public charging pilot with an additional 150 DCFCs and 150 level 2 charging stations at 75 locations. In December 2023, the Utilities filed their supplemental reply statement of position and the request is ready for decision making.
These targets reward improvements in workplace safety, promote employee well-being, and help reduce expenses over time. Hawaiian Electric promotes a safety culture that aims for zero incidents through all employees taking ownership of safety for themselves, their co-workers, contractors, and the public. More information on such targets is available in HEI’s annual proxy statement.
These targets reward improvements in workplace safety, promote employee well-being, and contribute to long-term expense reductions. Hawaiian Electric promotes a safety culture that aims for zero incidents, with every employee taking ownership of their own safety, as well as that of their co-workers, contractors, and the public. More information on such targets is available in HEI’s annual proxy statement.
Learning and development initiatives are integrated with annual performance evaluations to reinforce development as integral parts of individual performance goals. Annual succession planning ensures the identification and development of successors, high potential individuals, and nurtures a leadership pipeline. ASB . ASB invests in continuous training and development of its employees.
Learning and development initiatives align with individual and organizational performance, and are reinforced in the annual performance evaluation process. Ongoing leadership succession planning ensures the identification and development of successors, high potential individuals, and nurtures a leadership pipeline. ASB . ASB invests in continuous training and development of its employees.
In 2022, ASB’s revenues and net income amounted to approximately 9% and 33% of HEI’s consolidated revenues and net income, respectively, compared to approximately 11% and 41% in 2021 and approximately 12% and 29% in 2020. 15 At the time of HEI’s acquisition of ASB, HEI agreed with the Office of Thrift Supervision (OTS), Department of Treasury’s predecessor regulatory agency, that ASB’s regulatory capital would be maintained at a level of at least 6% of ASB’s total liabilities, or at such greater amount as may be required from time to time by regulation.
At the time of HEI’s acquisition of ASB, HEI agreed with the Office of Thrift Supervision (OTS), Department of Treasury’s predecessor regulatory agency, that ASB’s regulatory capital would be maintained at a level of at least 6% of ASB’s total liabilities, or at such greater amount as may be required from time to time by regulation.
ASB is committed to supporting the continued health and safety of its employees through a wellness program which takes a holistic approach to improving the health and well-being of its employees by focusing on all aspects of wellness including nutrition, fitness, mindfulness and finances. ASB also encourages participation in the program through various physical challenges and community charity walks.
ASB is committed to supporting the continued health and safety of its employees through a holistic approach that focuses on various aspects of wellness including nutrition, fitness, mindfulness and finances. ASB encourages participation in the program through various physical challenges and community charity walks. ASB also offers outdoor and virtual fitness classes, including high intensity interval training and yoga.
Key elements of the 2030 plan to reduce emissions include: • The closing of the state’s last coal plant, which occurred in September 2022 upon expiry of the PPA • Adding nearly 50,000 rooftop solar systems, more than a 50% increase, compared to the approximately 90,000 systems online in 2021 when the Climate Change action plan was developed • Retiring at least six fossil-fueled generating units and significantly reducing the use of others as new renewable resources come online • Adding additional renewable energy projects capable of generating a total of at least 1 gigawatt beyond resources in place in 2021, including shared solar (community-based renewable energy) • Using more grid-scale and customer-owned energy storage • Expanding geothermal resources • Creating innovative programs that provide customers incentives for using clean, lower-cost energy at certain times of the day and using less fossil-fueled energy at night By 2030, Hawaiian Electric’s renewable portfolio standard is expected to exceed 70%, with renewable resources available to provide close to 100% of the electricity generated on Hawaii Island and in Maui County.
Key elements of the 2030 plan to reduce emissions include: • The closing of the state’s last coal plant, which occurred in September 2022 upon expiry of the PPA • Adding nearly 50,000 rooftop solar systems, more than a 50% increase, compared to the approximately 90,000 systems online in 2021 when the Climate Change action plan was developed • Retiring at least six fossil-fueled generating units and significantly reducing the use of others as new renewable resources come online • Adding additional renewable energy projects capable of generating a total of at least 1 gigawatt beyond resources in place in 2021, including shared solar (community-based renewable energy) • Using more grid-scale and customer-owned energy storage • Expanding geothermal resources • Creating innovative programs that provide customers incentives for using clean, lower-cost energy at certain times of the day and using less fossil-fueled energy at night Since the time the 2030 goal was established, delays and cancellations in the commercial operation of new renewable third-party generation resources and higher costs as a result of supply chain disruptions and inflationary pressures, as well as federal policies related to solar panel imports, have slowed the pace of progress toward reducing greenhouse gas (GHG) emissions.
Hawaiian Electric currently has two major PPAs that provide a total of 276.5 MW of firm capacity, representing 18% of Hawaiian Electric’s total net generating and firm purchased capacity on the Island of Oahu as of December 31, 2022. 9 Under a 1988 PPA, as amended, Hawaiian Electric is committed to purchase 208 MW of firm capacity from Kalaeloa Partners, L.P.
Hawaiian Electric currently has two major firm capacity PPAs that provide a total of 276.5 MW of firm capacity, representing 18% of Hawaiian Electric’s total net generating and firm purchased capacity on the Island of Oahu as of December 31, 2023.
The Adjustable Interest Rate (LIBOR) Act addresses the issue by specifying a specific SOFR rate that replaces certain LIBOR rates. ASB is preparing itself to meet the June 30, 2023, deadline. Other laws .
The Adjustable Interest Rate (LIBOR) Act addresses the issue by specifying a specific SOFR rate that replaces certain LIBOR rates. ASB implemented SOFR successfully. Other laws .
The amended RPS calculation results in a lower calculated percentage than the amount calculated under the previous methodology. 2 Puna Geothermal Venture (PGV) with 34.6 MW of firm capacity went offline due to lava flow on Hawaii Island since May 2018, but returned to service with firm capacity of 13 MW in the first quarter of 2021 and ramped up to 25.7 MW in the second quarter of 2022 and continued to provide 25.7 MW for the remainder of 2022. 3 Sum of the net peak demands on all islands served, noncoincident and nonintegrated. 8 Generation statistics.
The amended RPS calculation results in a lower calculated percentage than the amount calculated under the previous methodology. 2 Puna Geothermal Venture (PGV) with 34.6 MW of firm capacity went offline due to lava flow on Hawaii Island in May 2018, but returned to service in the first quarter of 2021 and is currently providing 25.7 MW.
Level Officials, 1.2-First/ Mid-Level Officials, 2-Professionals, 3-Technicians, 4-Sales Workers, 5-Administrative Support Workers, 6-Craft Workers, 7-Operatives, 8-Laborers and Helpers, 9-Service Workers 5 Includes Pacific Current employees, but excludes new employees related to the acquisition of a closed-loop biomass plant in 2022 for which complete employee information was not available Racial composition Diversity-All workforce Hawaii 1 HEI 2 Hawaiian Electric ASB White 20.8 % 12.0 % 10.1 % 11.1 % Asian 36.5 % 66.0 % 51.1 % 60.1 % Black 1.8 % 0.0 % 0.6 % 0.8 % Hispanic 11.1 % 0.0 % 4.2 % 5.1 % Native Hawaiian or other Pacific Islander 9.6 % 6.0 % 12.4 % 13.8 % American Indian or Alaska Native 0.1 % 2.0 % 0.3 % 0.2 % Two or more races 19.8 % 14.0 % 21.3 % 8.9 % 1 Source: 2021 U.S.
Level Officials, 1.2-First/ Mid-Level Officials, 2-Professionals, 3-Technicians, 4-Sales Workers, 5-Administrative Support Workers, 6-Craft Workers, 7-Operatives, 8-Laborers and Helpers, 9-Service Workers 5 Includes Pacific Current and Mahipapa LLC employees Racial composition Diversity-All workforce Hawaii 1 HEI 2 Hawaiian Electric ASB White 20.7 % 10.7 % 10.2 % 11.0 % Asian 34.6 % 54.7 % 50.3 % 59.2 % Black 1.6 % 1.3 % 0.7 % 0.6 % Hispanic 11.1 % 0.0 % 4.1 % 5.9 % Native Hawaiian or other Pacific Islander 9.3 % 21.3 % 12.3 % 13.6 % American Indian or Alaska Native 0.1 % 1.3 % 0.3 % — % Two or more races 22.1 % 10.7 % 22.1 % 9.6 % 1 Source: 2022 U.S.
The Utilities derived approximately 12%, 11% and 11% of their operating revenues in 2022, 2021 and 2020, respectively from the sale of electricity to various federal government agencies. Hawaiian Electric continues to work with various federal agencies to implement measures that will help them achieve their energy efficiency, resilience and clean energy objectives. 7 Selected consolidated electric utility operating statistics.
Hawaiian Electric continues to work with various federal agencies to implement measures that will help them achieve their energy efficiency, resilience and clean energy objectives. 7 Selected consolidated electric utility operating statistics.
The parties executed an Amended and Restated Power Purchase Agreement (ARPPA) on October 29, 2021, which among other provisions extends the term for ten contract years after the effective date. The ARPPA was approved on November 23, 2022. The parties executed a letter agreement to establish that the rates under the ARPPA became effective on January 1, 2023.
The PPA term ended on May 23, 2016 and was extended while the parties were in negotiations for a new agreement. The parties executed an Amended and Restated Power Purchase Agreement (ARPPA) on October 29, 2021, which among other provisions extends the term for ten contract years after the effective date. The ARPPA was approved on November 23, 2022.
P. (HEP). The agreement requires Hawaii Electric Light to purchase up to 60 MW (net) of firm capacity for a period of 30 years, expiring on December 31, 2030.
In October 1997, Hawaii Electric Light entered into an agreement with Encogen, which was succeeded by Hamakua Energy Partners, L. P. (HEP). The agreement requires Hawaii Electric Light to purchase up to 60 MW (net) of firm capacity for a period of 30 years, expiring on December 31, 2030.
Years ended December 31 2022 2021 2020 (dollars in thousands) Customer accounts* Electric sales revenues Customer accounts* Electric sales revenues Customer accounts* Electric sales revenues Hawaiian Electric 306,978 $ 2,422,232 308,721 $ 1,772,183 307,378 $ 1,592,463 Hawaii Electric Light 88,757 479,566 88,103 375,775 87,357 329,195 Maui Electric 73,933 464,823 73,788 359,648 73,304 317,872 469,668 $ 3,366,621 470,612 $ 2,507,606 468,039 $ 2,239,530 * As of December 31.
Years ended December 31 2023 2022 2021 (dollars in thousands) Customer accounts* Electric sales revenues Customer accounts* Electric sales revenues Customer accounts* Electric sales revenues Hawaiian Electric 309,631 $ 2,324,044 306,978 $ 2,422,232 308,721 $ 1,772,183 Hawaii Electric Light 89,477 458,157 88,757 479,566 88,103 375,775 Maui Electric 72,497 443,017 73,933 464,823 73,788 359,648 471,605 $ 3,225,218 469,668 $ 3,366,621 470,612 $ 2,507,606 * As of December 31.
Hawaii Electric Light has two major PPAs that provide a total of 85.7 MW of firm capacity, representing 32% of Hawaii Electric Light’s total net generating and firm purchased capacity on the Island of Hawaii as of December 31, 2022. In October 1997, Hawaii Electric Light entered into an agreement with Encogen, which was succeeded by Hamakua Energy Partners, L.
Hawaii Electric Light has two major firm capacity PPAs that provide a total of 85.7 MW of firm capacity, representing 32% of Hawaii Electric Light’s total net generating and firm purchased capacity on the Island of Hawaii as of December 31, 2023.
ASB also offers outdoor and virtual fitness classes, including high intensity interval training and yoga. ASB’s employees can also participate in a program which allows employees to enjoy national fitness center chains or workout in their homes at a reduced price.
ASB’s employees can participate in a program which allows them to enjoy national fitness center chains or workout in their homes at a reduced price.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe ability of HEI’s subsidiaries to pay dividends or make other distributions to HEI, in turn, is subject to the risks associated with their operations and to contractual and regulatory restrictions, including: • the provisions of an HEI agreement with the PUC, which could limit the ability of HEI’s principal electric public utility subsidiary, Hawaiian Electric, to pay dividends to HEI in the event that the consolidated common stock equity of the Utilities falls below 35% of total capitalization of the electric utilities; • the provisions of an HEI agreement entered into with federal bank regulators in connection with its acquisition of its bank subsidiary, ASB, which requires HEI to contribute additional capital to ASB (up to a maximum amount of additional capital of $28.3 million as of December 31, 2022 under the Regulatory Capital Maintenance/Dividend Agreement dated May 26, 1988, between HEI, HEIDI (HEI Diversified Inc.) and the Federal Savings and Loan Insurance Corporation) upon request of the regulators in order to maintain ASB’s regulatory capital at the level required by regulation; • obligations under federal law and Federal Reserve Board policy, which require that a savings and loan holding company serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls, and accordingly, if ASB were to be in financial distress or to otherwise be viewed by the regulators as in unsatisfactory condition, HEI could be required to provide additional capital or liquidity support or take other action, in support of ASB; • the minimum capital and capital distribution regulations of the OCC that are applicable to ASB and capital regulations that become applicable to HEI and ASB Hawaii; • the receipt of a letter from the FRB communicating the OCC’s and the FRB’s non-objection to the payment of any dividend ASB proposes to declare and pay to ASB Hawaii and HEI; and • the provisions of preferred stock resolutions and debt instruments of HEI and its subsidiaries.
Biggest changeThe ability of HEI’s subsidiaries to pay dividends or make other distributions to HEI, in turn, is subject to the risks associated with their operations and to contractual and regulatory restrictions, including: • the provisions of an HEI agreement with the PUC, which could limit the ability of HEI’s principal electric public utility subsidiary, Hawaiian Electric, to pay dividends to HEI in the event that the consolidated common stock equity of the Utilities falls below 35% of total capitalization of the electric utilities; • the provisions of an HEI agreement entered into with federal bank regulators in connection with its acquisition of its bank subsidiary, ASB, which requires HEI to contribute additional capital to ASB (up to a maximum amount of additional capital of $28.3 million as of December 31, 2023 under the Regulatory Capital Maintenance/Dividend Agreement dated May 26, 1988, between HEI, HEIDI (HEI Diversified Inc.) and the Federal Savings and Loan Insurance Corporation) upon request of the regulators in order to maintain ASB’s regulatory capital at the level required by regulation; • obligations under federal law and Federal Reserve Board policy, which require that a savings and loan holding company serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls, and accordingly, if ASB were to be in financial distress or to otherwise be viewed by the regulators as in unsatisfactory condition, HEI could be required to provide additional capital or liquidity support or take other action, in support of ASB.
Among such risks are: (1) the potential delay by the Public Utilities Commission of the State of Hawaii (PUC) in considering (and potential disapproval of actual or proposed) renewable energy proposals and related costs; (2) the dependence on outside parties, such as the state, developers and third-party suppliers of renewable purchased energy, which if the Utilities are unsuccessful in negotiating purchased power agreements with such IPPs or if a major IPP delays or fails to deliver the anticipated capacity and/or energy in its purchased power agreement, could impact the Utilities’ achievement of their commitments to RPS and other climate related goals, eligibility for performance incentive mechanisms associated with the speed of increasing renewable generation, the ability to retire fossil fuel units, and/or the Utilities’ ability to deliver reliable service; (3) delays in acquiring or unavailability of non-fossil fuel supplies for renewable generation; (4) the impact of intermittent power to the electrical grid and reliability of service if appropriate supporting infrastructure is not installed or does not operate effectively; (5) the inability to recover the undepreciated cost of fossil fuel generating units if they are required to be retired before the end of their expected useful life; (6) uncertainties surrounding current and future renewable technologies, 28 such as solar power, wind power, biofuels, battery storage, hydro, hydrogen, as well as related environmental assessments required to meet RPS and other climate related goals; (7) the impacts of implementation of the renewable energy proposals on future costs of electricity and potential penalties imposed by the PUC for delays in the commercial operations of renewable energy projects; (8) the likelihood that the Utilities may need to make substantial investments in related infrastructure, which could result in increased borrowings and, therefore, materially impact the financial condition and liquidity of the Utilities; (9) the imputed debt related to the pending renewable power purchase agreements under the stage 1, stage 2, stage 3 and other RFPs could result in a credit rating downgrade for the Utilities and the Company; and (10) the commitment to support a variety of initiatives, which, if approved by the PUC, may have a material impact on the results of operations and financial condition of the Utilities depending on their design and implementation.
Among such risks are: (1) the potential delay by the Public Utilities Commission of the State of Hawaii (PUC) in considering (and potential disapproval of actual or proposed) renewable energy proposals and related costs; (2) the dependence on outside parties, such as the state, developers and third-party suppliers of renewable purchased energy, which if the Utilities are unsuccessful in negotiating purchased power agreements with such IPPs or if a major IPP delays or fails to deliver the anticipated capacity and/or energy in its purchased power agreement, could impact the Utilities’ achievement of their commitments to RPS and other climate related goals, eligibility for performance incentive mechanisms associated with the speed of increasing renewable generation, the ability to retire fossil fuel units, and/or the Utilities’ ability to deliver reliable service; (3) delays in acquiring or unavailability of non-fossil fuel supplies for renewable generation; (4) the impact of intermittent power to the electrical grid and reliability of service if appropriate supporting infrastructure is not installed or does not operate effectively; (5) the inability to recover the undepreciated cost of fossil fuel generating units if they are required to be retired before the end of their expected useful life; (6) uncertainties surrounding current and future renewable technologies, such as solar power, wind power, biofuels, battery storage, hydro, hydrogen, as well as related environmental assessments required to meet RPS and other climate related goals; (7) the impacts of implementation of the renewable energy proposals on future costs of electricity and potential penalties imposed by the PUC for delays in the commercial operations of renewable energy projects; (8) the likelihood that the Utilities may need to make substantial investments in related infrastructure, which could result in increased borrowings and, therefore, materially impact the financial condition and liquidity of the Utilities; (9) the imputed debt related to the pending renewable power purchase agreements under the stage 1, stage 2, stage 3 and other RFPs could result in a credit rating downgrade for the Utilities and the Company; and (10) the commitment to support a variety of initiatives, which, if approved by the PUC, may have a material impact on the results of operations and financial condition of the Utilities depending on their design and implementation.
The Utilities rely on evolving and increasingly complex operational and information systems, networks and other technologies, which are interconnected with the systems and network infrastructure owned by third parties to support a variety of business processes and activities, including procurement and supply chain, invoicing and collection of payments, customer relationship management, human resource management, the acquisition, generation and delivery of electrical service to customers, and to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements.
The Utilities rely on evolving and complex operational and information systems, networks and other technologies, which are interconnected with the systems and network infrastructure owned by third parties to support a variety of business processes and activities, including procurement and supply chain, invoicing and collection of payments, customer relationship management, human resource management, the acquisition, generation and delivery of electrical service to customers, and to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting and legal and tax requirements.
For example: 22 • ASB, one of the largest financial institutions in the state, is in direct competition for deposits and loans not only with two larger institutions that have substantial capital, technology and marketing resources, but also with smaller Hawaii institutions and other U.S. institutions, including credit unions, mutual funds, mortgage brokers, finance companies, non-traditional providers of financial services and investment banking firms.
For example: • ASB, one of the largest financial institutions in the state, is in direct competition for deposits and loans not only with two larger institutions that have substantial capital, technology and marketing resources, but also with smaller Hawaii institutions and other U.S. institutions, including credit unions, mutual funds, mortgage brokers, finance companies, non-traditional providers of financial services and investment banking firms.
The results of competitive bidding, competition from IPPs, customer self-generation, and potential cooperative ownership or municipality structures for electric utility service, and the rate at which technological developments facilitating nonutility generation of electricity, combined heat and power technology, off-grid microgrids, and customer energy storage may render the operations of the Utilities less competitive or outdated and adversely affect the Utilities and the results of their operations.
The results 22 of competitive bidding, competition from IPPs, customer self-generation, and potential cooperative ownership or municipality structures for electric utility service, and the rate at which technological developments facilitating nonutility generation of electricity, combined heat and power technology, off-grid microgrids, and customer energy storage may render the operations of the Utilities less competitive or outdated and adversely affect the Utilities and the results of their operations.
Such ratings are not recommendations to buy, sell or hold any securities; such ratings may be subject to revision or withdrawal at any time by the rating agencies; and each rating should be evaluated independently of any other rating. Changes in the U.S. capital markets can also have significant effects on the Company.
Such ratings are not recommendations to buy, sell or hold any securities; such ratings may be subject to revision or withdrawal at any time by the rating agencies; and each rating should be evaluated independently of any other rating. 21 Changes in the U.S. capital markets can also have significant effects on the Company.
If a hurricane or other uninsured catastrophic natural disaster were to occur, and if the PUC did not allow the affected Utilities to recover from ratepayers restoration costs and revenues lost from business interruption, the lost revenues and 24 repair expenses could result in a significant decrease in HEI’s consolidated net income or in significant net losses for the affected periods.
If a hurricane or other uninsured catastrophic natural disaster were to occur, and if the PUC did not allow the affected Utilities to recover from ratepayers restoration costs and revenues lost from business interruption, the lost revenues and repair expenses could result in a significant decrease in HEI’s consolidated net income or in significant net losses for the affected periods.
For example, severe weather and its related impacts could cause significant harm to the Utilities’ physical facilities. Third Party Performance Risk—Electric utility operations depend heavily on third-party suppliers of fuel and purchased power . The Utilities rely on fuel suppliers and shippers, and IPPs to deliver fuel and power, respectively, in accordance with contractual agreements.
For example, severe weather and its related impacts could cause significant harm to the Utilities’ physical facilities. Third Party Performance Risk—Electric utility operations depend heavily on third-party suppliers of fuel and purchased power . The Utilities rely on fuel suppliers and shippers, and IPPs to deliver fuel and power, respectively, in accordance with 26 contractual agreements.
An increase in market interest rates, especially a sudden increase, similar to the rapid federal funds rate increases experienced in 2022, could also adversely affect the ability of ASB’s adjustable-rate borrowers to meet their higher payment obligations. If this occurred, it could cause an increase in nonperforming assets and charge-offs.
An increase in market interest rates, especially a sudden increase, 29 similar to the rapid federal funds rate increases experienced in 2022, could also adversely affect the ability of ASB’s adjustable-rate borrowers to meet their higher payment obligations. If this occurred, it could cause an increase in nonperforming assets and charge-offs.
As a holding company with no significant operations of its own, HEI’s cash flows and consequent ability to service its obligations and pay dividends on its common stock is dependent upon its receipt of dividends or other distributions from its operating subsidiaries and its ability to issue common stock or other equity securities and to incur additional debt.
As a holding company with no significant operations of its own, HEI’s cash flows and consequent ability to service its obligations and pay dividends on its common stock is dependent upon its receipt of dividends or other distributions from its operating subsidiaries and its ability to issue common stock or other 20 equity securities and to incur additional debt.
There is no assurance that any such credit rating will remain in effect for any given period of time or that such rating will not be lowered, suspended or withdrawn entirely by the applicable rating agency if, in such rating agency’s judgment, 21 circumstances, such as current, past or future effects or events so warrant.
There is no assurance that any such credit rating will remain in effect for any given period of time or that such rating will not be lowered, suspended or withdrawn entirely by the applicable rating agency if, in such rating agency’s judgment, circumstances, such as current, past or future effects or events so warrant.
Long-term inflationary pressures could result in higher labor, fuel oil, commodities, materials and supplies, outside services and capital costs, among others, that may not fully be offset by 32 an increase in revenues, which would adversely affect the Company’s profitability and results of operations.
Long-term inflationary pressures could result in higher labor, fuel oil, commodities, materials and supplies, outside services and capital costs, among others, that may not fully be offset by an increase in revenues, which would adversely affect the Company’s profitability and results of operations.
Under the PBR Framework, the Utilities’ annual revenue adjustment (ARA) includes a customer dividend consisting of a negative adjustment of 0.22% compounded annually and a flow through of the “pre-PBR” savings commitment from the management audit recommendations developed in the 2020 test year rate case.
Under the PBR Framework, the Utilities’ annual revenue adjustment (ARA) includes a customer dividend consisting of a negative adjustment of 0.22% compounded annually and a flow through of the “pre-PBR” savings commitment from the 25 management audit recommendations developed in the 2020 test year rate case.
Product Concentration Risk—A large percentage of ASB’s loans and securities are collateralized by real estate, and adverse changes in the real estate market and/or general economic or other conditions may result in loan losses and adversely affect the Company’s profitability .
Product Concentration Risk—A large percentage of ASB’s loans and securities are collateralized by real estate, and adverse changes in the real estate market and/or general economic or other conditions may result in loan losses and adversely 31 affect the Company’s profitability .
National and international concern about climate change and the contribution of greenhouse gas (GHG) emissions (including carbon dioxide emissions from the combustion of 27 fossil fuels) to climate change have led to federal legislative and regulatory proposals and action by the state of Hawaii to reduce GHG emissions.
National and international concern about climate change and the contribution of greenhouse gas (GHG) emissions (including carbon dioxide emissions from the combustion of fossil fuels) to climate change have led to federal legislative and regulatory proposals and action by the state of Hawaii to reduce GHG emissions.
In addition, the Hawaii economy could be directly or indirectly affected by implications and potential impacts of U.S. and foreign capital and credit market conditions and federal, state and international responses to those conditions and the potential impacts of global and local developments (including economic conditions and uncertainties; unrest, terrorist acts, wars (such as the Russia-Ukraine war), conflicts, political protests, deadly virus epidemic, pandemics, or other crisis; the effects of changes that have or may occur in U.S. policy, such as with respect to immigration and trade).
In addition, the Hawaii economy could be directly or indirectly affected by implications and potential impacts of U.S. and foreign capital and credit market conditions and federal, state and international responses to those conditions and the potential impacts of global and local developments (including economic conditions and uncertainties; unrest, terrorist acts, wars (such as the Russia-Ukraine war and the Israel-Hamas war), conflicts, political protests, deadly virus epidemic, pandemics, or other crisis; the effects of changes that have or may occur in U.S. policy, such as with respect to immigration and trade).
The ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by the ARA or not achieving the customer dividend and 25 cost savings commitment could have a material adverse effect on the Utilities.
The ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by the ARA or not achieving the customer dividend and cost savings commitment could have a material adverse effect on the Utilities.
Though both commercial and commercial real estate loans have shorter terms and earn higher spreads than residential mortgage loans, these loan types 31 generally entail higher underwriting and other service costs and present greater credit risks than traditional residential mortgages.
Though both commercial and commercial real estate loans have shorter terms and earn higher spreads than residential mortgage loans, these loan types generally entail higher underwriting and other service costs and present greater credit risks than traditional residential mortgages.
The change in the definition is to be applied prospectively to future milestone measurements and will require that the Utilities acquire more renewable energy than under the previous RPS calculation to comply with the RPS milestones.
The change in the definition is to be 27 applied prospectively to future milestone measurements and will require that the Utilities acquire more renewable energy than under the previous RPS calculation to comply with the RPS milestones.
In common with other companies in its line of business, the Utilities’ overhead and underground transmission and distribution systems (with the exception of substation buildings and contents), which have a replacement value roughly estimated at $9 billion, are largely not insured against loss or damage because the amount of transmission and distribution system insurance capacity is limited and the premiums are cost prohibitive.
In common with other companies in its line of business, the Utilities’ overhead and underground transmission and distribution systems (with the exception of substation buildings and contents), which have a replacement value roughly estimated at $12 billion, are largely not insured against loss or damage because the amount of transmission and distribution system insurance capacity is limited and the premiums are cost prohibitive.
Private and public entities, such as the North American Electric Reliability Corporation, and the U.S. federal government, including the Departments of Defense, Homeland Security and Energy, and the White House, have noted that cyber-attacks targeting utility systems are increasing in sophistication, magnitude, and frequency. The Utilities’ systems have been, and will likely continue to be, a target of attacks.
Private and public entities, such as the North American Electric Reliability Corporation, and the U.S. federal government, including the Departments of Defense, Homeland Security and Energy, and the White House, have noted that cyberattacks targeting utility systems are increasing in sophistication, magnitude, and frequency. The Utilities’ systems have been, and will likely continue to be, a target of attacks.
Conversely, a decrease in interest rates or a mismatching of maturities of interest sensitive financial instruments could result in an acceleration in the prepayment of loans and mortgage-backed securities and impact ASB’s ability to reinvest its liquidity in similar yielding assets. ASB relies on customer deposits as a sizable source of relatively stable and low-cost funds.
Conversely, a decrease in interest rates or a mismatching of maturities of interest sensitive financial instruments could result in an acceleration in the prepayment of loans and mortgage-backed securities and impact ASB’s ability to reinvest its liquidity in similar yielding assets. ASB relies on customer deposits as a sizable source of relatively stable and low-cost funding.
Additionally, if the Company fails to adapt, or is perceived to have failed in addressing investor, lender, and other stakeholder ESG expectations or standards, which continue to evolve, or if the Company fails to fully and accurately report its progress on managing risk under its ESG initiatives, the Company may suffer reputational damage and its business or financial condition could be materially and adversely affected.
Additionally, if the Company fails to adapt, or is perceived to have failed in addressing investor, lender, and other stakeholder sustainability expectations or standards, which continue to evolve, or if the Company fails to fully and accurately report its progress on managing risk under its sustainability initiatives, the Company may suffer reputational damage and its business or financial condition could be materially and adversely affected.
The Company and its subsidiaries rely on information technology systems, some of which are managed or hosted by third party service providers, to manage its business data, communications, and other business processes. Such information technology systems may be vulnerable to cyberattacks or other security incidents, which could result in unauthorized access to confidential data, ransomware demands or disruptions to operations.
The Company and its subsidiaries rely on information technology systems, some of which are managed or hosted by third party service providers, to manage its business data, communications, and other business processes. Such information technology systems are vulnerable to cyberattacks or other security incidents, which could result in unauthorized access to confidential data, ransomware demands or disruptions to operations.
See “Performance-based regulation framework” in Note 3 of the Consolidated Financial Statements. The Utilities could be required to refund to their customers, with interest, revenues that have been or may be received under interim rate orders in their rate case proceedings and other proceedings, if and to the extent they exceed the amounts allowed in final orders.
See “Performance-based regulation framework” in Note 4 of the Consolidated Financial Statements. The Utilities could be required to refund to their customers, with interest, revenues that have been or may be received under interim rate orders in their rate case proceedings and other proceedings, if and to the extent they exceed the amounts allowed in final orders.
Although the Utilities continue to make investments in their cybersecurity program, including personnel, technologies, cyber insurance and training of Utilities personnel, there can be no assurance that these systems or their expected functionality will be implemented, maintained, or expanded effectively; nor can security measures completely eliminate the possibility of a cybersecurity breach.
The Utilities continue to make investments in their cybersecurity program, including personnel, technologies, cyber insurance and training of Utilities personnel; however, there can be no assurance that these systems or their expected functionality will be implemented, maintained, or expanded effectively; nor can security measures completely eliminate the possibility of a cybersecurity breach.
Disruptions in the credit markets, a liquidity crisis in the banking industry or increased levels of residential mortgage delinquencies and defaults may result in decreases in the fair value of ASB’s investment securities and an impairment, requiring ASB to write down its investment securities. As of December 31, 2022, ASB’s investment in U.S.
Disruptions in the credit markets, a liquidity crisis in the banking industry or increased levels of residential mortgage delinquencies and defaults may result in decreases in the fair value of ASB’s investment securities and an impairment, requiring ASB to write down its investment securities. As of December 31, 2023, ASB’s investment in U.S.
ESG Risk—Increased scrutiny and changing stakeholder expectations with respect to our environmental, social and governance (ESG) programs may result in increased costs and expenses and may expose the Company to new or incremental risks . Companies across all industries, including HEI, face increasing stakeholder scrutiny related to ESG practices.
Sustainability Risk—Increased scrutiny and changing stakeholder expectations with respect to our environmental, social and governance ( sustainability ) programs may result in increased costs and expenses and may expose the Company to new or incremental risks . Companies across all industries, including HEI, face increasing stakeholder scrutiny related to sustainability practices.
This increased focus and activism related to ESG may hinder the cost of, or access to, capital or financing as these investors or lenders may elect to increase their required returns on capital offered to the company, reallocate capital or not commit capital as a result of their assessment of a company’s ESG risk profile.
This increased focus and activism related to sustainability may hinder the cost of, or access to, capital or financing as these investors or lenders may elect to increase their required returns on capital offered to the company, reallocate capital or not commit capital as a result of their assessment of a company’s sustainability risk profile.
Changes in market interest rates impact the interest paid on deposits and can significantly impact the Bank’s net interest income. Changes in interest rates may also impact the level of low-cost core deposits that the Bank’s customers maintain in their accounts, which may require ASB to seek higher costing wholesale borrowings.
Changes in interest rates impact the interest paid on deposits and can significantly impact the Bank’s net interest income and net interest margin. Changes in interest rates may also impact the level of low-cost core deposits that the Bank’s customers maintain in their accounts, which may require ASB to seek higher costing wholesale borrowings.
ASB’s revenues and expenses may be adversely affected by various factors, including: • local, regional, national and other economic and political conditions that could result in declines in employment and real estate values, which in turn could adversely affect the ability of borrowers to make loan payments and the ability of ASB to recover the full amounts owing to it under defaulted loans; • the ability of borrowers to obtain insurance and the ability of ASB to place insurance where borrowers fail to do so, particularly in the event of catastrophic damage to collateral securing loans made by ASB; • faster than expected loan prepayments that can cause an acceleration of the amortization of premiums on loans and investments and the impairment of mortgage servicing assets of ASB; • changes in ASB’s loan portfolio credit profiles and asset quality, which may increase or decrease the required level of allowance for credit losses; • technological disruptions affecting ASB’s operations or financial or operational difficulties experienced by any outside vendor on whom ASB relies to provide key components of its business operations, such as business processing, network access or internet connections; • events of default and foreclosure of loans whereby ASB becomes the owner of mortgage properties that presents environmental risk or potential clean up liability; • the impact of legislative and regulatory changes, including changes affecting capital requirements, increasing oversight of and reporting by banks, or affecting the lending programs or other business activities of ASB; • additional legislative changes regulating the assessment of overdraft, interchange and credit card fees, which can have a negative impact on noninterest income; • public opinion about ASB and financial institutions in general, which, if negative, could impact the public’s trust and confidence in ASB and adversely affect ASB’s ability to attract and retain customers and expose ASB to adverse legal and regulatory consequences; • increases in operating costs (including employee compensation expense and benefits and regulatory compliance costs), inflation and other factors, that exceed increases in ASB’s net interest, fee and other income; and • the ability of ASB to maintain or increase the level of deposits, ASB’s lowest costing funds.
ASB’s revenues and expenses may be adversely affected by various factors, including: • local, regional, national and other economic and political conditions that could result in declines in employment and real estate values, which in turn could adversely affect the ability of borrowers to make loan payments and the ability of ASB to recover the full amounts owing to it under defaulted loans; • the ability of borrowers to obtain insurance and the ability of ASB to place insurance where borrowers fail to do so, particularly in the event of catastrophic damage to collateral securing loans made by ASB; • faster than expected loan prepayments that can cause an acceleration of the amortization of premiums on loans and investments and the impairment of mortgage servicing assets of ASB; • changes in ASB’s loan portfolio credit profiles and asset quality, which may increase or decrease the required level of allowance for credit losses; • technological disruptions affecting ASB’s operations or financial or operational difficulties experienced by any outside vendor on whom ASB relies to provide key components of its business operations, such as business processing, network access or internet connections; • events of default and foreclosure of loans whereby ASB becomes the owner of mortgage properties that presents environmental risk or potential clean up liability; • the impact of legislative and regulatory changes, including changes affecting capital requirements, increasing oversight of and reporting by banks, or affecting the lending programs or other business activities of ASB; • additional legislative changes regulating the assessment of overdraft, interchange and credit card fees, which can have a negative impact on noninterest income; • public opinion about ASB and financial institutions in general, which, if negative, could impact the public’s trust and confidence in ASB and adversely affect ASB’s ability to attract and retain customers and expose ASB to adverse legal and regulatory consequences; • increases in operating costs (including employee compensation expense and benefits and regulatory compliance costs), inflation and other factors, that exceed increases in ASB’s net interest, fee and other income; and • the ability of ASB to maintain or increase the level of deposits, ASB’s lowest costing funds. 30 Banking Regulatory Risk—Banking and related regulations could result in significant restrictions being imposed on ASB’s business or in a requirement that HEI divest ASB .
In addition, operations could be negatively impacted by interruptions in fuel supply, inability to negotiate satisfactory collective bargaining agreements when existing agreements expire or other labor disputes, inability to comply with regulatory or permit requirements, disruptions in delivery of electricity, operator error and catastrophic events such as earthquakes, tsunamis, hurricanes, fires, explosions, lava flows, floods or other similar occurrences affecting the Utilities’ generating facilities or transmission and distribution systems.
In addition, operations could be negatively impacted by interruptions in fuel supply, inability to negotiate satisfactory collective bargaining agreements when existing agreements expire or other labor disputes, inability to comply with regulatory or permit requirements, disruptions in delivery of electricity, operator error, adverse weather or environmental conditions and catastrophic events such as earthquakes, tsunamis, hurricanes, fires, explosions, lava flows, floods or other similar occurrences affecting the Utilities’ generating facilities or transmission and distribution systems.
For example, if management determines that a PPA requires the consolidation of the IPP in the financial statements, the consolidation could have a material effect on Hawaiian Electric’s and HEI’s consolidated financial statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses.
For example, if management determines that a PPA requires the consolidation of the IPP in the financial statements, the consolidation could have a material effect on Hawaiian Electric’s and HEI’s consolidated financial statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. 33 ITEM 1B.
On December 19, 2008, the PUC approved a penalty of $20 for every MWh that an electric utility is deficient under Hawaii’s RPS law.
On December 19, 2008, the PUC approved a penalty of $20 for every megawatt-hour (MWh) that an electric utility is deficient under Hawaii’s RPS law.
Loss of sensitive customer data are attempts to steal sensitive customer data, such as account numbers and social security numbers, through unauthorized access to computer systems, including computer hacking. Such attacks are less frequent, but could present significant reputational, legal and regulatory costs if successful.
Loss of sensitive customer data are attempts to steal sensitive customer data, such as account numbers and social security numbers, through unauthorized access to computer systems, including computer hacking. Such attacks could present significant reputational, legal and regulatory costs if successful.
In addition, a variety of economic and social factors are exacerbating the current labor supply shortage, which may make it difficult to staff critical positions and retain key employees, and could result in significantly higher costs to maintain appropriate staffing levels with the right talent.
In addition, a variety of economic and social factors are exacerbating the current labor supply shortage for qualified individuals, which may make it difficult to staff critical positions and retain key 32 employees, and could result in significantly higher costs to maintain appropriate staffing levels with the right talent.
In this plan, the partnership committed to a 16% reduction in GHG emissions in accordance with the rule, which the partnership achieved in 2017 in advance of the 2020 requirement. The DOH issued the air permits incorporating the ERP, including provisions to address the period of unavailability of the PGV facility on Hawaii Island.
In this plan, the partnership committed to a 16% reduction in GHG emissions in accordance with the rule, which the partnership achieved in 2017 in advance of the 2020 requirement. The State of Hawaii Department of Health issued the air permits incorporating the ERP, including provisions to address the period of unavailability of the PGV facility on Hawaii Island.
ASB’s net interest income consists primarily of interest income received on fixed-rate and adjustable-rate loans, mortgage-backed securities and investments, less interest expense consisting primarily of interest paid on deposits and other borrowings. Interest rate risk arises when earning assets mature or when their interest rates change in a time frame different from that of the costing liabilities.
ASB’s net interest income consists primarily of interest income received on fixed-rate and adjustable-rate loans, mortgage-backed securities and investments, less interest expense consisting primarily of interest paid on deposits and other borrowings. Interest rate risk arises when earning assets mature or reprice in a time frame different from that of costing liabilities.
Bank Regulatory Risk - Heightened regulatory requirements if ASB’s total assets exceed $10 billion . As of December 31, 2022, ASB had total assets of approximately $9.5 billion and it is possible that total assets could exceed $10 billion in the near future.
Bank Regulatory Risk - Heightened regulatory requirements if ASB’s total assets exceed $10 billion . As of December 31, 2023, ASB had total assets of approximately $9.7 billion and it is possible that total assets could exceed $10 billion in the near future.
Credit and Capital Market Risk—The Company, and its credit rating, is subject to risks associated with the Hawaii economy (in the aggregate and on an individual island basis), volatile U.S. capital markets and changes in the interest rate and credit market environment that have or could result in higher retirement benefit plan funding requirements, declines in ASB’s interest rate margins and investment values, higher delinquencies and charge-offs in ASB’s loan portfolio and restrictions on the ability of HEI or its subsidiaries to borrow money or issue securities .
Credit and Capital Market Risk—The Company, and its lowered credit rating, is subject to risks associated with the Hawaii economy, including catastrophic events such as the Maui windstorm and wildfire (in the aggregate and on an individual island basis), volatile U.S. capital markets and changes in the interest rate and credit market environment that have or could result in higher retirement benefit plan funding requirements, declines in ASB’s interest rate margins and investment values, higher delinquencies and charge-offs in ASB’s loan portfolio and restrictions on the ability of HEI or its subsidiaries to borrow money or issue securities .
Cybersecurity Risk—The Company may be subject to information technology and operational system failures, network disruptions, cyber attacks and breaches in data security that could adversely affect its businesses and reputation .
Cybersecurity Risk—The Company is subject to information technology and operational system failures, network disruptions, cyber attacks and breaches in data security that could materially and adversely affect its businesses and reputation.
Neither HEI nor Hawaiian Electric management can predict future rating agency actions or their effects on the future cost of capital of HEI or Hawaiian Electric.
Neither HEI nor Hawaiian Electric management can predict the duration of the downgrades and future rating agency actions or their effects on the future cost of capital of HEI or Hawaiian Electric.
In addition, there is increasing cybersecurity risk associated with the broad adoption of a remote working environment as a result of the pandemic. If the Company is unable to prevent or adequately respond to and resolve an incident, it may have a material impact on the Company’s operations or business reputation. Utilities .
In addition, there is increasing cybersecurity risk associated with the broad adoption of a remote working environment. If the Company is unable to prevent or adequately respond to and resolve an incident, it may have a material impact on the Company’s business, financial condition, results of operations and reputation. Utilities .
In accordance with state requirements, the Utilities submitted an Emissions Reduction Plan (ERP) to the DOH on June 30, 2015, with the most recent revision filed on June 9, 2020, to reflect the partnership established between the Utilities and several IPPs.
In accordance with state requirements, the Utilities submitted an Emissions Reduction Plan (ERP) to the State of Hawaii Department of Health on June 30, 2015, with the most recent revision filed on June 9, 2020, to reflect the partnership established between the Utilities and several IPPs.
If events or circumstances should change, such that the criteria are no longer satisfied, the Utilities expect that their regulatory assets (amounting to $243 million as of December 31, 2022), net of regulatory liabilities (amounting to $1,056 million as of December 31, 2022), would be charged to the statement of income in the period of discontinuance.
If events or circumstances should change, such that the criteria are no longer satisfied, the Utilities expect that their regulatory assets (amounting to $295 million as of December 31, 2023), net of regulatory liabilities (amounting to $1,151 million as of December 31, 2023), would be charged to the statement of income in the period of discontinuance.
Additionally, changes in tax legislation or IRS interpretations could increase the Company’s tax burden and adversely affect the Company’s financial position, results of operations, and cash flows. Litigation Risk—The Company could be subject to the risk of uninsured losses in excess of its accruals for litigation matters .
Additionally, changes in tax legislation or IRS interpretations could increase the Company’s tax burden and adversely affect the Company’s financial position, results of operations, and cash flows. Litigation Risk—The Company could be subject to the risk of uninsured losses in excess of its accruals for litigation matters, such as litigation related to the Maui windstorm and wildfires .
Changes in market interest rates, including changes in the relationship between short-term and long-term market interest rates (e.g., a flat or an inverted yield curve) or between different interest rate indices, and the duration and severity of the changes in market interest rates can impact ASB’s net interest margin.
Changes in interest rates, including changes in the relationship between short-term and long-term tenors (e.g., a flat or an inverted yield curve) or between different interest rate indices, can impact ASB’s net interest margin.
The Utility maintains cyber liability insurance that covers certain damages caused by cyber incidents. However, there is no guarantee that adequate insurance will continue to be available at rates the Utility believes are reasonable or that the costs of responding to and recovering from a cyber incident will be covered by insurance or recoverable 23 in rates.
The Utilities maintain cyber liability insurance that covers certain damages caused by cyber incidents. However, there is no guarantee that adequate insurance will continue to be available at rates the Utilities believe are reasonable or that the costs of responding to and recovering from a cyber incident will be covered by insurance or recoverable in rates.
Because of the uncertainties associated with litigation, there is a risk that litigation against HEI or its subsidiaries, even if vigorously defended, could result in costs of defense and judgment or settlement amounts not covered by insurance and in excess of reserves established in HEI’s consolidated financial statements.
Because of the uncertainties associated with the litigation related to the Maui windstorm and wildfires and other routine litigation, there is a risk that this litigation against HEI or its subsidiaries, even if vigorously defended, could result in costs of defense and judgment or settlement amounts not covered by insurance and in excess of reserves established in HEI’s consolidated financial statements.
In July 2022, Governor Ige signed Act 240 (H.B.2089), that amended the RPS calculation from renewable energy as a percentage of sales to renewable energy as a percentage of total generation. The amended RPS calculation results in a lower calculated percentage than the amount calculated under the previous methodology.
The most recent amendment to Hawaii’s RPS law occurred in July 2022, which Governor Ige signed Act 240 (H.B.2089), that amended the RPS calculation from renewable energy as a percentage of sales to renewable energy as a percentage of total generation. The amended RPS calculation results in a lower calculated percentage than the amount calculated under the previous methodology.
Approximately 72% of the net energy generated or purchased by the Utilities in 2022 was generated from the burning of fossil fuel oil, and purchases of power by the Utilities provided about 43% of their total net energy generated and purchased for the same period.
Approximately 79% of the net energy generated or purchased by the Utilities in 2023 was generated from the burning of fossil fuel oil, and purchases of power by the Utilities provided about 38% of their total net energy generated and purchased for the same period.
ITEM 1B. UNRESOLVED STAFF COMMENTS HEI: None. Hawaiian Electric: Not applicable.
UNRESOLVED STAFF COMMENTS HEI: None. Hawaiian Electric: Not applicable.
Higher market interest rates could lead to higher interest rates paid on deposits and other borrowings. Significant increases in market interest rates, or the perception that an increase may occur, could adversely affect ASB’s ability to originate new loans and grow.
Increases in market interest rates could have an adverse impact on ASB’s cost of funds. Higher market interest rates could lead to higher interest rates paid on deposits and other borrowings. Significant increases in market interest rates, or the perception that an increase may occur, could adversely affect ASB’s ability to originate new loans.
The consumer loan portfolio primarily consists of personal unsecured loans with risk-based pricing. Repayment is based on the borrower’s financial stability as these loans have no collateral and there is less assurance that ASB will be able to collect all payments due under these loans or have sufficient collateral to cover all outstanding loan balances. General Risk Factors.
Repayment is based on the borrower’s financial stability as these loans have no collateral and there is less assurance that ASB will be able to collect all payments due under these loans or have sufficient collateral to cover all outstanding loan balances. General Risk Factors.
In addition, the Utilities are pursuing complex business transformation initiatives, which include the implementation of new systems and the upgrade or replacement of existing systems. Significant system changes increase the risk of system interruptions. Although the Utilities maintain change control processes to mitigate this risk, system interruptions may occur.
In addition, the Utilities are pursuing complex business transformation initiatives, which include the implementation of new systems and the upgrade or replacement of existing systems. Significant system changes increase the risk of system interruptions, which may occur.
Interest Rate Risk—Fluctuations in interest rates could result in lower net interest income, impair ASB’s ability to originate new loans or impair the ability of ASB’s adjustable-rate borrowers to make increased payments or cause such borrowers to repay their adjustable-rate loans or impact ASB’s ability to attract deposits . Interest rate risk is a significant risk of ASB’s operations.
Interest Rate Risk—Fluctuations in interest rates could result in lower net interest income, impair ASB’s ability to originate new loans, impair the ability of ASB’s adjustable-rate borrowers to make increased payment obligations or impact ASB’s ability to attract and retain deposits . Interest rate risk is a significant risk of ASB’s operations.
Further, the Uti lities’ operational networks may be subject to new cybersecurity risks due to modernizing and interconnecting existing infrastructure with new technologies and control systems, including those owned by third parties, such as independent power producers, distributed energy resource aggregators and customers.
Further, the Uti lities’ operational networks may be subject to unforeseen operational/cybersecurity risks due to the reliance on legacy operational components or mo dernizing and interconnecting existing infrastructure with new technologies and control systems, including those owned by third parties, such as independent power producers, distributed energy resource aggregators and c ustomers.
Further, if HEI’s or Hawaiian Electric’s commercial paper ratings were to be downgraded, HEI and Hawaiian Electric might not be able to sell commercial paper and might be required to draw on more expensive bank lines of credit or to defer capital or other expenditures.
Because HEI’s and Hawaiian Electric’s credit ratings were downgraded, HEI and Hawaiian Electric are unable to sell commercial paper and were required to draw on more expensive bank lines of credit and to defer capital or other expenditures.
Substantially all of ASB’s consumer loan customers are Hawaii residents. A significant portion of the commercial loan customers are also located in Hawaii. While a majority of customers are on Oahu, ASB also has customers on the neighbor islands (whose economies have traditionally been weaker than Oahu’s economy during economic downturns).
Substantially all of ASB’s consumer loan customers are Hawaii residents. A significant portion of the commercial loan customers are also located in Hawaii. While a majority of customers are on Oahu, ASB also has customers on the neighbor islands (whose economies are smaller and less diverse than Oahu’s economy).
Despite the Utilities security measures, all of their systems are vulnerable to disability, failures or unauthorized access caused by natural disasters, cybersecurity incidents, security breaches, user error, unintentional defects created by system changes, military or terrorist actions, power or communication failures or similar events.
Their systems are vulnerable to disability, failures or unauthorized access caused by natural disasters, cybersecurity incidents, security breaches, user error, unintentional defects created by system changes, military or terrorist actions, nation-state threat actors, criminal organizations, power or communication failures or similar events.
HEI and its subsidiaries are involved in routine litigation in the ordinary course of their businesses, most of which is covered by insurance (subject to policy limits and deductibles). However, other litigation may arise that is not routine or involves claims that may not be covered by insurance.
HEI and its subsidiaries are involved in routine litigation in the ordinary course of their businesses, most of which is covered by insurance (subject to policy limits and deductibles).
Weather Conditions Risk—Electric utility operations are significantly influenced by weather conditions and natural disasters . The Utilities’ results of operations can be affected by the weather and natural disasters. Weather conditions, particularly temperature and humidity, directly influence the demand for electricity.
Weather Conditions Risk—Electric utility operations are significantly influenced by weather conditions and natural disasters . The Utilities’ results of operations can be affected by the weather and natural disasters. Weather conditions, particularly temperature and humidity, directly influence the demand for electricity. Additionally, severe weather and natural disasters may become more intense and/or frequent because of global climate changes.
In addition, as the IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units to ensure the availability of their units.
In addition, as the IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units to ensure the availability of their units. Also, as these contractual agreements end, the Utilities may not be able to purchase fuel and power on terms equivalent to the current contractual agreements.
The regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities and examination policies to address not only ASB’s compliance with applicable banking laws and regulations, but also capital adequacy, asset quality, management ability and performance, earnings, liquidity and various other factors. 30 Under certain circumstances, including any determination that ASB’s relationship with HEI results in an unsafe and unsound banking practice, these regulatory authorities have the authority to restrict the ability of ASB to transfer assets and to make distributions to its shareholders (including payment of dividends to HEI), or they could seek to require HEI to sever its relationship with or divest its ownership of ASB.
Under certain circumstances, including any determination that ASB’s relationship with HEI results in an unsafe and unsound banking practice, these regulatory authorities have the authority to restrict the ability of ASB to transfer assets and to make distributions to its shareholders (including payment of dividends to HEI), or they could seek to require HEI to sever its relationship with or divest its ownership of ASB.
Commercial and commercial real estate loans have a higher risk profile than residential loans, in part due to larger average balances than residential loans.
ASB had been pursuing a strategy that included expanding its commercial, commercial real estate and consumer lines of business. Commercial and commercial real estate loans have a higher risk profile than residential loans, in part due to larger average balances than residential loans.
Further, delay or failure to complete the integration of information systems and processes may result in delays in regulatory cost recovery, or the failure to realize the benefits anticipated to be derived from these initiatives. The Utilities have disaster recovery and incident response plans in place to protect their businesses from information technology service interruptions.
Further, delay or failure to complete the integration of information systems and processes may result in delays in regulatory cost recovery, or the failure to realize the benefits anticipated to be derived from these initiatives. 23 The Utilities’ disaster recovery plans may not be successful in preventing the loss of customer data, service interruptions and disruptions to operations or damage to important facilities.
See “Quantitative and Qualitative Disclosures about Market Risk.” Although ASB pursues an asset-liability management strategy designed to mitigate its risk from changes in market interest rates, unfavorable movements in interest rates could result in lower net interest income.
See “Quantitative and Qualitative Disclosures about Market Risk.” Although ASB pursues an asset-liability management strategy designed to mitigate its risk from changes in interest rates, adverse movements in interest rates could result in lower net interest income or net interest margin. Residential 1-4 family fixed-rate mortgage loans comprised about 37% of ASB’s loan portfolio as of December 31, 2023.
Although the Utilities have not experienced a material cybersecurity breach to date, such incidents may occur and may have a material adverse effect on the Utilities and the Company in the future. In order to address cybersecurity risks to their information systems, the Utilities maintain security measures designed to protect their information technology systems, network infrastructure and other assets.
Although the Utilities have not experienced a material cybersecurity breach to date, such incidents may occur and may have a material adverse effect on the Utilities and the Company in the future.
Based on the current operations of the Utilities and regulatory framework, including the impact of the approved PBR Framework, the Utilities continue to follow regulatory accounting under Accounting Standards Codification (ASC) 980.
See “Performance-based regulation framework” and “Regulatory assets for Maui windstorm and wildfires related costs” in Note 4 of the Consolidated Financial Statements. Based on the current operations of the Utilities and regulatory framework, including the impact of the approved PBR Framework, the Utilities continue to follow regulatory accounting under Accounting Standards Codification (ASC) 980.
Also, as these contractual agreements end, the Utilities may not be able to purchase fuel and power on terms equivalent to the current contractual agreements. 26 Capacity Risk—The capacity provided by the Utilities’ generating resources and third-party purchased power may not be sufficient to meet customers’ energy requirements .
Capacity Risk—The capacity provided by the Utilities’ generating resources and third-party purchased power may not be sufficient to meet customers’ energy requirements . The Utilities rely upon their generating resources and purchased power from third parties to meet their customers’ energy requirements.
If the Utilities’ cybersecurity measures were to be breached, the Utilities could suffer financial loss, business disruptions, liability to customers, regulatory intervention or damage to their reputations . Due to the size, scope and complexity of the Utilities’ business, the development and maintenance of information technology systems to process and track information is critical and challenging.
If the Utilities’ operational technologies or networks were to malfunction or fail or cybersecurity measures were to be breached, the Utilities could suffer financial loss, business disruptions, liability to customers, regulatory intervention or damage to their reputations.
Intrusion detection and prevention systems, anti-virus software, firewalls and other general information technology controls have been put in place to detect and prevent cyberattacks or information system breaches. A disaster recovery plan has been developed in the event of a natural disaster, security breach, military or terrorist action, power or communication failure or similar event.
Intrusion detection and prevention systems, anti-virus software, firewalls and other general information technology controls have been put in place to help detect and prevent cyberattacks or information system breaches. Disaster recovery and incident response plans have been developed to respond to unplanned incidents such as natural disasters, cyberattacks and other disruptive events.
Environmental Regulation—Increased federal and state environmental regulation will require an increasing commitment of resources and funds and could result in construction delays or penalties and fines for non-compliance .
ASB is subject to the risks of borrower defaults and bankruptcies, special hazard losses not covered by the required insurance and the insurance company’s inability to pay claims on existing policies. Environmental Regulation—Increased federal and state environmental regulation will require an increasing commitment of resources and funds and could result in construction delays or penalties and fines for non-compliance .
When these events occur, they can cause outages and property damage and require the Utilities to incur significant additional expenses that may not be recoverable. Climate Change Risk—Electric utility operations may be significantly influenced by climate change .
Recent natural disasters such as the Kilauea eruption in 2018, Mauna Loa eruption in 2022, and the Maui windstorm and wildfires in 2023, resulted in disruption or destruction of electric utility operations. When these types of events occur, they can cause outages and property damage and require the Utilities to incur significant additional expenses that may not be recoverable.
Banking Regulatory Risk—Banking and related regulations could result in significant restrictions being imposed on ASB’s business or in a requirement that HEI divest ASB . ASB is subject to examination and comprehensive regulation by the Department of Treasury, the OCC and the FDIC, and is subject to reserve requirements established by the Board of Governors of the Federal Reserve System.
ASB is subject to examination and comprehensive regulation by the Department of Treasury, the OCC and the FDIC, and is subject to reserve requirements established by the Board of Governors of the Federal Reserve System. In addition, the FRB is responsible for regulating ASB’s holding companies, HEI and ASB Hawaii.
The Utilities rely upon their generating resources and purchased power from third parties to meet their customers’ energy requirements. The Utilities update their generation capacity evaluation each year to determine the Utilities’ ability to meet reasonably expected demands for service and provide reasonable reserves for emergencies and other unplanned events.
The Utilities update their generation capacity evaluation each year to determine the Utilities’ ability to meet reasonably expected demands for service and provide reasonable reserves for emergencies and other unplanned events. These evaluations are impacted by a variety of factors, including customer energy demand, energy conservation and efficiency initiatives, economic conditions, and weather patterns.
Any failure to meet customer energy requirements could negatively impact the satisfaction of the Utilities’ customers, which could have an adverse impact on the Utilities’ business, reputation and results of operations. Stakeholder Activism Risk—Electric utility and third-party purchased power projects may be significantly impacted by stakeholder activism .
Any failure to meet customer energy requirements could negatively impact the satisfaction of the Utilities’ customers, which could have an adverse impact on the Utilities’ business, reputation and results of operations. Related to the Maui windstorm and wildfires, the Utilities continue to expect potential generation shortfalls on Maui in 2024.
ASB generally does not obtain credit enhancements, such as mortgagor bankruptcy insurance, but does require standard hazard and hurricane insurance and may require flood insurance for certain properties. ASB is subject to the risks of borrower defaults and bankruptcies, special hazard losses not covered by the required insurance and the insurance company’s inability to pay claims on existing policies.
The aggregate damages and costs associated with the Maui windstorm and wildfires could significantly exceed the Company’s policy limits. ASB generally does not obtain credit enhancements, such as mortgagor bankruptcy insurance, but does require standard hazard and hurricane insurance and may require flood insurance for certain properties.
As of December 31, 2022 approximately 83% of ASB’s loan portfolio was comprised of loans primarily collateralized by real estate, most of which was concentrated in the State of Hawaii. During 2022, ASB’s home equity lines of credit (HELOC) increased 20% and the residential 1-4 family portfolios increased by 8%, comprising approximately 70% of total real estate loans.
As of December 31, 2023 approximately 84% of ASB’s loan portfolio was comprised of loans primarily collateralized by real estate, most of which was concentrated in the State of Hawaii. ASB’s financial results may be adversely affected by changes in prevailing economic conditions, either nationally or in the state.
Although ASB devotes significant resources to maintain and regularly upgrade its systems and processes that are designed to protect the security of ASB’s computer systems, software, networks and other technology assets and the confidentiality, integrity and availability of information belonging to ASB and its customers, there can be no assurance that such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately corrected by ASB or its vendors.
However there can be no assurance that failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately protected or recovered by ASB or its vendors.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeBusiness,” in HEI’s MD&A and in the Notes 3 and 4 of the Consolidated Financial Statements.
Biggest changeBusiness,” in HEI’s MD&A and in the Notes 2, 4 and 5 of the Consolidated Financial Statements.
The outcomes of litigation and administrative proceedings are necessarily uncertain and there is a risk that the outcome of such matters could have a material adverse effect on the financial position, results of operations or liquidity of HEI or one or more of its subsidiaries for a particular period in the future.
The outcomes of litigation and administrative proceedings are necessarily uncertain and there is a risk that the outcome of such matters could have a material adverse effect on the financial position, results of operations or liquidity of HEI or one or more of its subsidiaries for a particular period in the future. 36
ITEM 3. LEGAL PROCEEDINGS HEI and Hawaiian Electric: HEI and Hawaiian Electric (including their direct and indirect subsidiaries) may be involved in ordinary routine PUC proceedings, environmental proceedings and/or litigation incidental to their respective businesses. See the 33 descriptions of legal proceedings (including judicial proceedings and proceedings before the PUC and environmental and other administrative agencies) in “Item 1.
ITEM 3. LEGAL PROCEEDINGS HEI and Hawaiian Electric: HEI and Hawaiian Electric (including their direct and indirect subsidiaries) may be involved in ordinary routine PUC proceedings, environmental proceedings and/or litigation incidental to their respective businesses. See the descriptions of legal proceedings (including judicial proceedings and proceedings before the PUC and environmental and other administrative agencies) in “Item 1.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeIto 52 HEI Executive Vice President, Chief Financial Officer and Treasurer, since 1/23 · HEI Vice President - Tax, Controller and Treasurer and Interim Chief Financial Officer, 7/22 to 12/22 · HEI Vice President - Tax, Controller and Treasurer, 11/19 to 7/22 · HEI Vice President - Tax and Controller, 2/18 to 11/19 · Prior to joining the Company in 2018: Alexander & Baldwin, Senior Vice President, Chief Financial Officer and Treasurer 2012 - 2018 Kurt K.
Biggest changeDeGhetto 60 HEI Executive Vice President, Chief Financial Officer and Treasurer, since 10/23 · Prior to joining the Company in October 2023: Moelis & Company, Managing Director, Power, Utilities & Renewable Energy, 2011-2023. Kurt K.
Teranishi 48 ASB President and Chief Executive Officer since 5/21 ASB Director since 5/21 · ASB Executive Vice President, Operations, 2/18 to 5/21 · ASB Senior Vice President, Director of Operations, 1/17 to 1/18 · ASB Senior Vice President, Customer Experience, 5/14 to 1/17 · ASB Senior Vice President, Director of Retail Credit Management, 4/13 to 4/14 · ASB Senior Vice President, Director of Consumer Credit Management, 4/11 to 4/13 · ASB Senior Vice President, Director of Regulatory Compliance, 9/07 to 3/11 Family relationships; executive arrangements There are no family relationships between any HEI executive officer and any other HEI executive officer or any HEI director or director nominee.
Teranishi 49 ASB President and Chief Executive Officer since 5/21 ASB Director since 5/21 · ASB Executive Vice President, Operations, 2/18 to 5/21 · ASB Senior Vice President, Director of Operations, 1/17 to 1/18 · ASB Senior Vice President, Customer Experience, 5/14 to 1/17 · ASB Senior Vice President, Director of Retail Credit Management, 4/13 to 4/14 · ASB Senior Vice President, Director of Consumer Credit Management, 4/11 to 4/13 · ASB Senior Vice President, Director of Regulatory Compliance, 9/07 to 3/11 Family relationships; executive arrangements There are no family relationships between any HEI executive officer and any other HEI executive officer or any HEI director or director nominee.
Kimura 49 Hawaiian Electric President and Chief Executive Officer since 1/22 · Hawaiian Electric Senior Vice President, Customer Service and Public Affairs, 3/21 to 12/21 · Hawaiian Electric Senior Vice President, Customer Service, 2/19 to 3/21 · Hawaiian Electric Senior Vice President, Business Development & Strategic Planning, 1/17 to 2/19 · Hawaiian Electric Vice President, Corporate Planning & Business Development, 5/14 to 1/17 · HEI Director, Investor Relations, Strategic Planning & Budget, 11/09 to 5/14 · HEI Manager, Corporate Finance and Investments, 8/04 to 11/09 Ann C.
Kimura 50 Hawaiian Electric President and Chief Executive Officer since 1/22 · Hawaiian Electric Senior Vice President, Customer Service and Public Affairs, 3/21 to 12/21 · Hawaiian Electric Senior Vice President, Customer Service, 2/19 to 3/21 · Hawaiian Electric Senior Vice President, Business Development & Strategic Planning, 1/17 to 2/19 · Hawaiian Electric Vice President, Corporate Planning & Business Development, 5/14 to 1/17 · HEI Director, Investor Relations, Strategic Planning & Budget, 11/09 to 5/14 · HEI Manager, Corporate Finance and Investments, 8/04 to 11/09 Ann C.
Murao 53 HEI Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary since 1/20 · HEI Vice President - Legal & Administration and Corporate Secretary, 10/16 to 12/19 · HEI Associate General Counsel, 3/11 to 10/16 Shelee M. T.
Murao 54 HEI Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary since 1/20 · HEI Vice President - Legal & Administration and Corporate Secretary, 10/16 to 12/19 · HEI Associate General Counsel, 3/11 to 10/16 Shelee M. T.
Seu 57 HEI President and Chief Executive Officer since 1/22 HEI Director since 1/22 ASB Chair of the Board since 1/22 ASB Hawaii Director since 1/22 · Hawaiian Electric President and Chief Executive Officer, 2/20 to 12/21 · Hawaiian Electric Director, 2/20 to 12/21 · Hawaiian Electric Senior Vice President, Public Affairs, 1/17 to 2/20 · Hawaiian Electric Vice President, System Operation, 5/14 to 12/16 · Hawaiian Electric Vice President, Energy Resources and Operations, 1/13 to 4/14 · Hawaiian Electric Vice President, Energy Resources, 8/10 to 12/12 · Hawaiian Electric Manager, Resource Acquisition Department, 3/09 to 8/10 · Hawaiian Electric Manager, Energy Projects Department, 5/04 to 3/09 · Hawaiian Electric Manager, Customer Installations Department, 1/03 to 5/04 · Hawaiian Electric Manager, Environmental Department, 4/98 to 12/02 · Hawaiian Electric Principal Environmental Scientist, 1/97 to 4/98 · Hawaiian Electric Senior Environmental Scientist, 5/96 to 12/96 · Hawaiian Electric Environmental Scientist, 8/93 to 5/96 Paul K.
Seu 58 HEI President and Chief Executive Officer since 1/22 HEI Director since 1/22 ASB Director since 1/22, Chair 1/22 to 8/23 ASB Hawaii Director since 1/22 · Hawaiian Electric President and Chief Executive Officer, 2/20 to 12/21 · Hawaiian Electric Director, 2/20 to 12/21 · Hawaiian Electric Senior Vice President, Public Affairs, 1/17 to 2/20 · Hawaiian Electric Vice President, System Operation, 5/14 to 12/16 · Hawaiian Electric Vice President, Energy Resources and Operations, 1/13 to 4/14 · Hawaiian Electric Vice President, Energy Resources, 8/10 to 12/12 · Hawaiian Electric Manager, Resource Acquisition Department, 3/09 to 8/10 · Hawaiian Electric Manager, Energy Projects Department, 5/04 to 3/09 · Hawaiian Electric Manager, Customer Installations Department, 1/03 to 5/04 · Hawaiian Electric Manager, Environmental Department, 4/98 to 12/02 · Hawaiian Electric Principal Environmental Scientist, 1/97 to 4/98 · Hawaiian Electric Senior Environmental Scientist, 5/96 to 12/96 · Hawaiian Electric Environmental Scientist, 8/93 to 5/96 Scott T.
There are no arrangements or understandings between any HEI executive officer and any other person pursuant to which such executive officer was selected. 34 PART II
There are no arrangements or understandings between any HEI executive officer and any other person pursuant to which such executive officer was selected. 37 PART II ITEM 5.
Added
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES HEI: Certain of the information required by this item is disclosed in Note 15, “Regulatory restrictions on net assets” and “Equity compensation plan information” under “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Form 10-K.
Added
HEI’s common stock is traded on the New York Stock Exchange under the ticker symbol “HE.” As of February 15, 2024, HEI had 4,753 registered shareholders (i.e., holders of record of HEI common stock), 16,928 DRIP participants and total record shareholders of 21,681.
Added
The HEI Board of Directors evaluates the dividend quarterly and considers many factors in the evaluation including, but not limited to, the Company’s results of operations, the long-term prospects for the Company, and the current and expected future economic conditions.
Added
In August 2023, due to the potential impact from the Maui windstorm and wildfires, the HEI Board of Directors voted to suspend the quarterly cash dividend, starting after the second quarter of 2023 dividend.
Added
This action is intended to allow the Company to maximize liquidity and allocate cash to rebuilding and restoring power and help ensure a strong future for the Utility and Bank.
Added
Purchases of HEI common shares were made during the fourth quarter to satisfy the requirements of certain plans as follows: ISSUER PURCHASES OF EQUITY SECURITIES Period* Total Number of Shares Purchased ** Average Price Paid per Share ** Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1 to 31, 2023 22,544 $ 12.38 — NA November 1 to 30, 2023 10,401 12.93 — NA December 1 to 31, 2023 39,788 13.52 — NA Total 72,733 — NA NA Not applicable. * Trades (total number of shares purchased) are reflected in the month in which the order is placed. ** The purchases were made to satisfy the requirements of the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP), the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP), and the ASB 401(k) Plan for shares purchased for cash or by the reinvestment of dividends by participants under those plans and none of the purchases were made under publicly announced repurchase plans or programs.
Added
Average prices per share are calculated exclusive of any commissions payable to the brokers making the purchases for the DRIP, the HEIRSP and the ASB 401(k) Plan.
Added
Of the “Total number of shares purchased,” 2,194 of the 72,733 shares were purchased for the DRIP; 63,800 of the 72,733 shares were purchased for the HEIRSP; and the remaining of the 6,739 shares were purchased for the ASB 401(k) Plan.
Added
The repurchased shares were issued for the accounts of the participants under registration statements registering the shares issued under these plans. Hawaiian Electric: Since a corporate restructuring on July 1, 1983, all the common stock of Hawaiian Electric has been held solely by its parent, HEI, and is not publicly traded.
Added
Accordingly, information required with respect to “Market information” and “holders” is not applicable to Hawaiian Electric.
Added
The dividends declared and paid on Hawaiian Electric’s common stock for the quarters of 2023 and 2022 were as follows: Quarters ended 2023 2022 (in thousands) March 31 $ 32,250 $ 31,475 June 30 32,250 31,475 September 30 32,250 31,475 December 31 32,250 31,475 Total $ 129,000 $ 125,900 Also, see “Liquidity and capital resources” in HEI’s MD&A.
Added
See the discussion of regulatory and other restrictions on dividends or other distributions in Note 15 of the Consolidated Financial Statements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Removed
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES HEI: Certain of the information required by this item is disclosed in Note 14, “Regulatory restrictions on net assets” and “Equity compensation plan information” under “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Form 10-K.
Added
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers (e) On February 23, 2024, the Compensation and Human Capital Management Committee of Hawaiian Electric Industries, Inc.
Removed
HEI’s common stock is traded on the New York Stock Exchange under the ticker symbol “HE.” The total number of holders of record of HEI common stock (i.e., registered holders) as of February 13, 2023, was 4,990.
Added
(the “Company”) recommended board of director approval of three separate executive severance arrangements that provide benefits for the Company’s executive officers who are employed at each of the Company, Hawaiian Electric Company, Inc. (“Hawaiian Electric”), and American Savings Bank, F.S.B. (“American Savings”) and also recommended approval of a Retention Bonus Agreement between American Savings and Ann Teranishi (the “Retention Agreement”).
Removed
On February 10, 2023, the HEI Board of Directors approved a 1 cent increase in the quarterly dividend from $0.35 per share to $0.36 per share, starting with the dividend in the first quarter of 2023.
Added
On February 23, 2024, the Board of Directors of the Company approved the Hawaiian Electric Industries, Inc. Executive Severance Plan (the “HEI Plan”), the Board of Directors of Hawaiian Electric approved the Hawaiian Electric Company, Inc.
Removed
HEI currently expects to maintain the dividend at its present level; however, the HEI Board of Directors evaluates the dividend quarterly and considers many factors in the evaluation including, but not limited to, the Company’s results of operations, the long-term prospects for the Company, and the current and expected future economic conditions.
Added
Executive Severance Plan (the “Hawaiian Electric Plan”) and the Board of Directors of American Savings approved the Executive Severance Board Policy (the “American Savings Policy” and collectively, the “Severance Plans”) and the Retention Agreement. On February 23, 2024, American Savings and Ms. Teranishi each executed the Retention Agreement. The Severance Plans and Retention Agreement are described in more detail below.
Removed
Purchases of HEI common shares were made during the fourth quarter to satisfy the requirements of certain plans as follows: ISSUER PURCHASES OF EQUITY SECURITIES Period* Total Number of Shares Purchased ** Average Price Paid per Share ** Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1 to 31, 2022 19,933 $ 35.60 — NA November 1 to 30, 2022 12,776 38.70 — NA December 1 to 31, 2022 164,435 40.89 — NA Total 197,144 — NA NA Not applicable. * Trades (total number of shares purchased) are reflected in the month in which the order is placed. ** The purchases were made to satisfy the requirements of the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP), the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP), and the ASB 401(k) Plan for shares purchased for cash or by the reinvestment of dividends by participants under those plans and none of the purchases were made under publicly announced repurchase plans or programs.
Added
The HEI Plan and Hawaiian Electric Plan The HEI Plan and Hawaiian Electric Plan are substantially the same and provide for the payment of severance and other benefits to eligible executives in the event of a termination of employment by the respective company without cause or by the eligible executive for good reason, with each of cause and good reason as defined in the respective severance plan (each, an “HEI/Hawaiian Electric Qualifying Termination”), in each case in lieu of benefits provided by any other company severance arrangement, provided, however, that if the eligible executive is party to a change in control agreement, the severance plans will not apply to an HEI/Hawaiian Electric Qualifying Termination in the event of a change in control whereby benefits are provided to such eligible executive pursuant to such change in control agreement.
Removed
Average prices per share are calculated exclusive of any commissions payable to the brokers making the purchases for the DRIP, the HEIRSP and the ASB 401(k) Plan.
Added
In the event of an HEI/Hawaiian Electric Qualifying Termination and subject to employee confidentiality and non-disparagement obligations and execution of a general release of claims, the HEI Plan and Hawaiian Electric Plan each provide for, as it relates to HEI’s executive officers, the following payments and benefits: (i) a lump sum payment in an amount equal to two times the annualized base salary as of the date of termination for the CEO of the respective company, including currently Scott Seu at HEI and Shelee Kimura at Hawaiian Electric, and one and one-half times for Executive Vice Presidents and Senior Vice Presidents, including currently Scott DeGhetto and Kurt Murao at HEI, (ii) a lump sum payment in an amount equal to the 193 eligible employee’s pro-rata annual target bonus for the year of termination, (iii) accelerated pro-rata vesting of long-term equity or cash awards, with performance-based awards vesting at target, (iv) payment of the employer portion of any COBRA premium for a period of twenty-four months for Mr.
Removed
Of the “Total number of shares purchased,” 167,202 of the 197,144 shares were purchased for the DRIP; 23,976 of the 197,144 shares were purchased for the HEIRSP; and the remaining of the 5,966 shares were purchased for the ASB 401(k) Plan.
Added
Seu and Ms. Kimura and eighteen months for Messrs. DeGhetto and Murao, and (v) outplacement services for six months in an amount not to exceed $10,000.
Removed
The repurchased shares were issued for the accounts of the participants under registration statements registering the shares issued under these plans. Hawaiian Electric: Since a corporate restructuring on July 1, 1983, all the common stock of Hawaiian Electric has been held solely by its parent, HEI, and is not publicly traded.
Added
American Savings Policy The American Savings Policy provides for the payment of severance and other benefits to eligible executives in the event of a termination of employment by American Savings without cause or, in the event of a change in control of American Savings, by American Savings without cause or by the eligible executives for good reason, with each of cause and good reason as defined in the American Savings Policy (each, an “ASB Qualifying Termination”).
Removed
Accordingly, information required with respect to “Market information” and “holders” is not applicable to Hawaiian Electric.
Added
In the event of an ASB Qualifying Termination, the American Savings Policy provides the CEO of American Savings, currently Ann Teranishi, the following payments and benefits: (i) a lump sum payment in an amount equal to one and one-half times the highest annual base salary paid during the three years preceding the date of termination, (ii) continued participation in the company’s health benefit plans for a period of eighteen months, and (iii) in the case of an ASB Qualifying Termination within two years of the date of a change in control, accelerated vesting of restricted stock and restricted cash awards, provided that, where it is applicable, Ms.
Removed
The dividends declared and paid on Hawaiian Electric’s common stock for the quarters of 2022 and 2021 were as follows: Quarters ended 2022 2021 (in thousands) March 31 $ 31,475 $ 27,925 June 30 31,475 27,925 September 30 31,475 27,925 December 31 31,475 27,925 Total $ 125,900 $ 111,700 Also, see “Liquidity and capital resources” in HEI’s MD&A.
Added
Teranishi’s existing change in control agreement will govern the applicable severance benefits in lieu of those provided under the American Savings Policy. Retention Agreement The Retention Agreement provides that Ms. Teranishi shall receive retention bonus payments totaling one and one-half times Ms.
Removed
See the discussion of regulatory and other restrictions on dividends or other distributions in Note 14 of the Consolidated Financial Statements. ITEM 6. [RESERVED] 35
Added
Teranishi’s base salary as of January 1, 2024 (“Retention Bonus”) paid in five equal installments every six months beginning on March 15, 2024, subject to Ms. Teranishi continuing employment in good standing through each respective payment date, provided that if Ms.
Added
Teranishi’s employment is terminated (i) by American Savings for any reason other than for cause or (ii) following a change in control, other than (A) by American Savings for cause, (B) by reason of death or disability, or (C) by Ms.
Added
Teranishi without good reason (each as defined in the Retention Agreement), all outstanding Retention Bonus payments will be accelerated and paid as soon as practicable following the date of termination. In addition, in the event that Ms. Teranishi’s employment is involuntarily terminated without cause or she resigns for good reason, Ms.
Added
Teranishi will be awarded the benefits for which she is eligible under the American Savings Policy in accordance with the terms of that policy.
Added
The foregoing descriptions of the Severance Plans and Retention Agreement are qualified in their entirety by the full terms of the HEI Plan, Hawaiian Electric Plan, American Savings Policy and Retention Agreement, copies of which are attached to this Form 10-K as Exhibit 10.19, Exhibit 10.20, Exhibit 10.21 and Exhibit 10.22, respectively, and incorporated herein by reference. ITEM 9C.
Added
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS HEI and Hawaiian Electric: None PART III

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

309 edited+148 added−152 removed146 unchanged
Biggest changeThe following table provides a summary of average balances, including major categories of interest-earning assets and interest-bearing liabilities: 2022 2021 2020 (dollars in thousands) Average balance Interest income/ expense Yield/ rate (%) Average balance Interest income/ expense Yield/ rate (%) Average balance Interest income/ expense Yield/ rate (%) Assets: Interest-earning deposits $ 59,277 $ 500 0.84 $ 69,930 $ 93 0.13 $ 153,879 $ 241 0.16 FHLB stock 15,465 702 4.54 10,298 327 3.17 9,481 306 3.23 Investment securities Taxable 3,171,771 55,529 1.75 2,792,255 42,114 1.51 1,554,812 29,213 1.88 Non-taxable 69,099 1,662 2.40 54,646 1,177 2.15 32,080 974 3.04 Total investment securities 3,240,870 57,191 1.76 2,846,901 43,291 1.52 1,586,892 30,187 1.90 Loans Residential 1-4 family 2,353,764 83,016 3.53 2,189,680 78,672 3.59 2,180,013 85,769 3.93 Commercial real estate 1,294,777 49,152 3.80 1,157,987 38,255 3.30 954,836 34,596 3.62 Home equity line of credit 918,563 28,506 3.10 885,759 27,669 3.12 1,060,444 33,731 3.18 Residential land 21,442 1,309 6.10 18,227 924 5.07 13,799 754 5.46 Commercial 710,658 29,295 4.12 856,226 36,178 4.23 935,663 31,642 3.38 Consumer 161,722 16,898 10.45 135,609 17,284 12.75 215,994 27,728 12.84 Total loans 1,2 5,460,926 208,176 3.81 5,243,488 198,982 3.79 5,360,749 214,220 4.00 Total interest-earning assets 3 8,776,538 266,569 3.04 8,170,617 242,693 2.97 7,111,001 244,954 3.44 Allowance for credit losses (70,071) (86,691) (81,193) Noninterest-earning assets 567,106 742,174 762,746 Total Assets $ 9,273,573 $ 8,826,100 $ 7,792,554 Liabilities and Shareholder’s Equity: Savings $ 3,275,089 860 0.03 $ 3,069,615 802 0.03 $ 2,620,311 1,774 0.07 Interest-bearing checking 1,345,627 765 0.06 1,237,969 242 0.02 1,106,563 471 0.04 Money market 208,015 330 0.16 192,044 132 0.07 161,084 465 0.29 Time certificates 470,189 5,372 1.14 483,353 3,805 0.79 664,578 7,944 1.20 Total interest-bearing deposits 5,298,920 7,327 0.14 4,982,981 4,981 0.10 4,552,536 10,654 0.23 Advances from Federal Home Loan Bank 136,630 4,716 3.45 15,319 42 0.27 21,490 146 0.68 Securities sold under agreements to repurchase and federal funds purchased 127,170 1,258 0.99 88,405 17 0.02 76,360 314 0.41 Total interest-bearing liabilities 5,562,720 13,301 0.24 5,086,705 5,040 0.10 4,650,386 11,114 0.24 Noninterest bearing liabilities: Deposits 2,948,679 2,833,886 2,276,722 Other 193,942 169,967 155,589 Shareholder’s equity 568,232 735,542 709,857 Total Liabilities and Shareholder’s Equity $ 9,273,573 $ 8,826,100 $ 7,792,554 Net interest income $ 253,268 $ 237,653 $ 233,840 Net interest margin (%) 4 2.89 2.91 3.29 1 Includes loans held for sale, at lower of cost or fair value, of $4.0 million, $23.0 million and $20.5 million as of December 31, 2022, 2021 and 2020, respectively. 2 Includes recognition of net deferred loan fees of $5.3 million, $14.3 million and $4.9 million for 2022, 2021 and 2020 respectively, together with interest accrued prior to suspension of interest accrual on nonaccrual loans. 3 For 2022, 2021 and 2020, the taxable-equivalent basis adjustments made to the table above were not material. 4 Defined as net interest income, on a fully taxable equivalent basis, as a percentage of average total interest-earning assets. 69 The following table shows the effect on net interest income of (1) changes in interest rates (change in weighted-average interest rate multiplied by prior year average balance) and (2) changes in volume (change in average balance multiplied by prior period weighted-average interest rate).
Biggest changeThe following table provides a summary of average balances, including major categories of interest-earning assets and interest-bearing liabilities: 2023 2022 2021 (dollars in thousands) Average balance Interest income/ expense Yield/ rate (%) Average balance Interest income/ expense Yield/ rate (%) Average balance Interest income/ expense Yield/ rate (%) Assets: Interest-earning deposits $ 77,680 $ 4,201 5.41 $ 59,277 $ 500 0.84 $ 69,930 $ 93 0.13 FHLB stock 20,720 1,197 5.78 15,465 702 4.54 10,298 327 3.17 Investment securities Taxable 2,948,711 51,052 1.73 3,171,771 55,529 1.75 2,792,255 42,114 1.51 Non-taxable 68,118 2,082 3.06 69,099 1,662 2.40 54,646 1,177 2.15 Total investment securities 3,016,829 53,134 1.76 3,240,870 57,191 1.76 2,846,901 43,291 1.52 Loans Residential 1-4 family 2,542,572 94,866 3.73 2,353,764 83,016 3.53 2,189,680 78,672 3.59 Commercial real estate 1,508,256 76,014 5.04 1,294,777 49,152 3.80 1,157,987 38,255 3.30 Home equity line of credit 1,030,983 39,539 3.84 918,563 28,506 3.10 885,759 27,669 3.12 Residential land 20,077 1,090 5.43 21,442 1,309 6.10 18,227 924 5.07 Commercial 754,601 42,741 5.66 710,658 29,295 4.12 856,226 36,178 4.23 Consumer 258,149 23,150 8.97 161,722 16,898 10.45 135,609 17,284 12.75 Total loans 1,2 6,114,638 277,400 4.54 5,460,926 208,176 3.81 5,243,488 198,982 3.79 Total interest-earning assets 3 9,229,867 335,932 3.64 8,776,538 266,569 3.04 8,170,617 242,693 2.97 Allowance for credit losses (72,133) (70,071) (86,691) Noninterest-earning assets 464,669 567,106 742,174 Total Assets $ 9,622,403 $ 9,273,573 $ 8,826,100 Liabilities and Shareholder’s Equity: Savings $ 2,968,982 2,367 0.08 $ 3,275,089 860 0.03 $ 3,069,615 802 0.03 Interest-bearing checking 1,352,385 6,503 0.48 1,345,627 765 0.06 1,237,969 242 0.02 Money market 294,023 8,669 2.95 208,015 330 0.16 192,044 132 0.07 Time certificates 883,068 31,366 3.55 470,189 5,372 1.14 483,353 3,805 0.79 Total interest-bearing deposits 5,498,458 48,905 0.89 5,298,920 7,327 0.14 4,982,981 4,981 0.10 Advances from Federal Home Loan Bank 271,805 12,670 4.66 136,630 4,716 3.45 15,319 42 0.27 Borrowings from Federal Reserve Bank 435,288 19,050 4.68 — — — — — — Securities sold under agreements to repurchase and federal funds purchased 62,441 2,172 3.48 127,170 1,258 0.99 88,405 17 0.02 Total interest-bearing liabilities 6,267,992 82,797 1.32 5,562,720 13,301 0.24 5,086,705 5,040 0.10 Noninterest bearing liabilities: Deposits 2,648,843 2,948,679 2,833,886 Other 219,781 193,942 169,967 Shareholder’s equity 485,787 568,232 735,542 Total Liabilities and Shareholder’s Equity $ 9,622,403 $ 9,273,573 $ 8,826,100 Net interest income $ 253,135 $ 253,268 $ 237,653 Net interest margin (%) 4 2.74 2.89 2.91 1 Includes loans held for sale, at lower of cost or fair value, of $5.5 million, $4.0 million and $23.0 million as of December 31, 2023, 2022 and 2021, respectively. 2 Includes recognition of net deferred loan fees of 2.9 million, $5.3 million and $14.3 million for 2023, 2022 and 2021 respectively, together with interest accrued prior to suspension of interest accrual on nonaccrual loans. 3 For 2023, 2022 and 2021, the taxable-equivalent basis adjustments made to the table above were not material. 4 Defined as net interest income, on a fully taxable equivalent basis, as a percentage of average total interest-earning assets. 72 The following table shows the effect on net interest income of (1) changes in interest rates (change in weighted-average interest rate multiplied by prior year average balance) and (2) changes in volume (change in average balance multiplied by prior period weighted-average interest rate).
The Integrated Grid Planning (IGP) utilizes an inclusive and transparent Stakeholder Engagement model to provide an avenue for interested parties to engage with the Utilities and contribute meaningful input throughout the IGP process.
The Integrated Grid Planning (IGP) process utilizes an inclusive and transparent stakeholder engagement model to provide an avenue for interested parties to engage with the Utilities and contribute meaningful input throughout the IGP process.
In December 2017, the PUC adopted a community-based renewable energy (CBRE) program framework which allows customers who cannot, or chose not to, take advantage of private rooftop solar to receive the benefits of renewable energy to help offset their monthly electric bills and support clean energy for Hawaii. The program has two phases.
Community-based renewable energy . In December 2017, the PUC adopted a community-based renewable energy (CBRE) program framework which allows customers who cannot, or chose not to, take advantage of private rooftop solar to receive the benefits of renewable energy to help offset their monthly electric bills and support clean energy for Hawaii. The program has two phases.
Under the PBR framework, inflation risk for the Utilities is mitigated by an Annual Rate Adjustment (ARA), which is based on a formula that includes a compounded and non-compounded portion . • The compounded portion of the ARA adjustment includes an adjustment for inflation based on the estimated change in Gross Domestic Product Price Index (GDPPI) for the upcoming year, less a predetermined annual productivity factor (currently set at zero), less a 0.22% customer dividend, applied to a basis equal to test year target revenues plus the RAM Revenue adjustments in effect prior to the implementation of PBR, plus the prior adjustment year’s compounded portion of the ARA adjustment.
Under the PBR framework, inflation risk for the Utilities is partially mitigated by an Annual Rate Adjustment (ARA), which is based on a formula that includes a compounded and non-compounded portion . • The compounded portion of the ARA adjustment includes an adjustment for the annual change in inflation based on the estimated change in Gross Domestic Product Price Index (GDPPI) for the upcoming year, less a predetermined annual productivity factor (currently set at zero), less a 0.22% customer dividend, applied to a basis equal to test year target revenues plus the RAM Revenue adjustments in effect prior to the implementation of PBR, plus the prior adjustment year’s compounded portion of the ARA adjustment.
The financial retirement of the generating units described in the KES Decision and Order is contrary to the intent of Hawaii Revised Statutes §269-6(d), which encourages the recovery of stranded costs for the retirement of fossil fuel generation, and contrary to the regulatory compact under which in return for agreeing to commit capital necessary to allow utilities to meet their obligation to serve, utilities are assured recovery of their 57 investment and a fair opportunity to earn a reasonable return on the capital prudently committed to the business.
The financial retirement of the generating units described in the KES Decision and Order is contrary to the intent of Hawaii Revised Statutes §269-6(d), which encourages the recovery of stranded costs for the retirement of fossil fuel generation, and contrary to the regulatory compact under which in return for agreeing to commit capital necessary to allow utilities to meet their obligation to serve, utilities are assured recovery of their investment and a fair opportunity to earn a reasonable return on the capital prudently committed to the business.
In addition to delinquent loans, other significant lending risk elements include: (1) loans which accrue interest and are 90 days or more past due as to principal or interest, (2) loans accounted for on a nonaccrual basis (nonaccrual loans), and (3) loans 71 on which various concessions are made with respect to interest rate, maturity, or other terms due to the inability of the borrower to service the obligation under the original terms of the agreement (troubled debt restructured loans).
In addition to delinquent loans, other significant lending risk elements include: (1) loans which accrue interest and are 90 days or more past due as to principal or interest, (2) loans accounted for on a nonaccrual basis (nonaccrual loans), and (3) loans on which various concessions are made with respect to interest rate, maturity, or other terms due to the inability of the borrower to service the obligation under the original terms of the agreement (troubled debt restructured loans).
To provide opportunities for Low-to-Moderate Income (LMI) customers to participate in 49 the program, 23 MW of capacity for dedicated-LMI projects were awarded on November 15, 2022 through three island specific RFPs for Oahu, Maui and Hawaii Island. LMI projects do not have a size cap nor do they decrease the 250 MW capacity available to other projects.
To provide opportunities for low-to-moderate income (LMI) customers to participate in the program, 23 MW of capacity for dedicated-LMI projects were awarded on November 15, 2022 through three island specific RFPs for Oahu, Maui and Hawaii Island. LMI projects do not have a size cap nor do they decrease the 250 MW capacity available to other projects.
The table above does not include other categories of obligations and commitments, such as deferred taxes, certain trade payables, amounts that will become payable in future periods under collective bargaining and other employment agreements and employee benefit plans, and potential refunds of amounts collected from ratepayers (e.g., under the earnings sharing mechanism).
The table above does not include other categories of obligations and commitments, such as deferred taxes, certain trade payables, amounts that will become payable in future periods under collective bargaining and other employment agreements and employee benefit plans, and potential refunds of amounts collected from ratepayers (e.g., under the earnings sharing 45 mechanism).
Changes in obligations associated with the factors noted above may not be immediately recognized as costs on the income statement, but generally are recognized in future years over the remaining average service period of plan participants. The discount rate used to calculate the Company’s benefit obligations is a significant assumption that affects the Company’s benefit obligations.
Changes in obligations associated with the factors noted above may not be immediately recognized as costs on the income statement, but generally are recognized in future years over the remaining average service period of plan participants. 48 The discount rate used to calculate the Company’s benefit obligations is a significant assumption that affects the Company’s benefit obligations.
In April 2021, the PUC issued an Order directing the Utilities to establish regulatory liabilities for the difference between the on-peak avoided cost and the unit price included in the applications for approval of the renewable project PPAs, effective with the GCOD included in the applications (the earliest GCOD included in the applications is July 2021) or from the date of the Order for CBRE Phase 1 projects.
In April 2021, the PUC issued an Order directing the Utilities to establish regulatory liabilities for the difference between the on-peak avoided cost and the unit price included in the applications for approval of the renewable project PPAs, effective with the GCOD included in the applications (the earliest GCOD included in the 60 applications is July 2021) or from the date of the Order for CBRE Phase 1 projects.
These estimates do not reflect any premium or discount that could result if ASB were to sell its entire holdings of a particular financial instrument at one time. Because no active trading market exists for a portion of its financial instruments, fair value estimates cannot be determined with precision.
These estimates do not reflect any 80 premium or discount that could result if ASB were to sell its entire holdings of a particular financial instrument at one time. Because no active trading market exists for a portion of its financial instruments, fair value estimates cannot be determined with precision.
Costs may also be significantly affected by changes in key actuarial assumptions, including the expected return on plan assets, the discount rate and mortality. The Company’s accounting for 44 retirement benefits under the plans in which the employees of the Utilities participate is also adjusted to account for the impact of decisions by the PUC.
Costs may also be significantly affected by changes in key actuarial assumptions, including the expected return on plan assets, the discount rate and mortality. The Company’s accounting for retirement benefits under the plans in which the employees of the Utilities participate is also adjusted to account for the impact of decisions by the PUC.
Other than capital contributions from their parent company, intercompany services (and related intercompany payables and receivables), Hawaiian Electric’s periodic short-term borrowings from HEI (and related interest) and the payment of dividends 42 to HEI, the electric utility and bank segments are largely autonomous in their operating, investing and financing activities.
Other than capital contributions from their parent company, intercompany services (and related intercompany payables and receivables), Hawaiian Electric’s periodic short-term borrowings from HEI (and related interest) and the payment of dividends to HEI, the electric utility and bank segments are largely autonomous in their operating, investing and financing activities.
The Utilities filed an application with the PUC on September 30, 2019 for an Advanced Distribution Management System (ADMS) as part of Phase 2 of their Grid Modernization Strategy implementation. However, on December 30, 2019, the PUC suspended the Utilities’ application for the ADMS pending the Utilities’ filing of a supplemental application for the broad deployment of field devices.
The Utilities filed an application with the PUC on September 30, 2019 for an Advanced Distribution Management System (ADMS) as part of Phase 2 of their Grid Modernization Strategy implementation. However, on December 30, 2019, the PUC 53 suspended the Utilities’ application for the ADMS pending the Utilities’ filing of a supplemental application for the broad deployment of field devices.
The fair value estimates are generally 77 determined based on assumptions that market participants would use in pricing the asset or liability and are based on market data obtained from independent third party sources. However, in certain cases, ASB uses its own assumptions based on the best information available in certain circumstances.
The fair value estimates are generally determined based on assumptions that market participants would use in pricing the asset or liability and are based on market data obtained from independent third party sources. However, in certain cases, ASB uses its own assumptions based on the best information available in certain circumstances.
The cash requirements for O&M, fuel and purchase power costs, debt and interest payments, and operating lease obligations are generally funded through the collection of the Utilities’ revenue requirement established in the last rate case and other mechanisms established under the regulatory framework.
The cash requirements for O&M, fuel and purchase power costs, debt and interest payments, and operating and finance lease obligations are generally funded through the collection of the Utilities’ revenue requirement established in the last rate case and other mechanisms established under the regulatory framework.
This contingency contract has been extended to November 2024, and will continue with no volume purchase requirements. Requests for renewable proposals, expressions of interest, and information . • On November 22, 2021, CBRE RFPs for Molokai and Lanai were opened.
This contingency contract has been extended to November 2024, and will continue with no volume purchase requirements. 59 Requests for renewable proposals, expressions of interest, and information . • On November 22, 2021, CBRE RFPs for Molokai and Lanai were opened.
To the extent that advances exceed the amount of mortgage loan collateral pledged to the FHLB of Des Moines, the excess must be covered by qualified marketable securities held under the control of and at the FHLB of Des Moines or at an approved third-party custodian.
To the extent that 77 advances exceed the amount of mortgage loan collateral pledged to the FHLB of Des Moines, the excess must be covered by qualified marketable securities held under the control of and at the FHLB of Des Moines or at an approved third-party custodian.
The ARPPA extends the term of the existing PPA by 25 years to 2052, expands the firm capacity of the facility to 46 MW and delinks the pricing for energy delivered from the facility from fossil fuel prices to reduce cost to customers.
The PGV ARPPA extends the term of the existing PPA by 25 years to 2052, expands the firm capacity of the facility to 46 MW and delinks the pricing for energy delivered from the facility from fossil fuel prices to reduce cost to customers.
Key strategies to drive organic growth include: 1. deepening customer relationships through the redesign of branch-centric approaches as transactions and engagement migrate to other channels; 2. building out product and service offerings to open new segments; 64 3. online and remotely-assisted account opening capabilities as there is a much more rapid and pervasive adoption of online and mobile banking by Hawaii banking customers; and 4. prioritizing efficiency actions to gain earnings leverage on organic growth.
Key strategies to drive organic growth include: 1. deepening customer relationships through the redesign of branch-centric approaches as transactions and engagement migrate to other channels; 2. building out product and service offerings to open new segments; 67 3. online and remotely-assisted account opening capabilities as there is a much more rapid and pervasive adoption of online and mobile banking by Hawaii banking customers; and 4. prioritizing efficiency actions to gain earnings leverage on organic growth.
The PUC has the discretion to reduce the 47 penalty due to events or circumstances that are outside an electric utility’s reasonable control, to the extent the event or circumstance could not be reasonably foreseen and ameliorated.
The PUC has the discretion to reduce the penalty due to events or circumstances that are outside an electric utility’s reasonable control, to the extent the event or circumstance could not be reasonably foreseen and ameliorated.
On October 31, 2022, the PUC issued a guidance letter and advised that the Working Group propose a new timeline for the Report. The Utilities and the Consumer Advocate filed a joint letter with a revised timeline on November 10, 50 2022.
On October 31, 2022, the PUC issued a guidance letter and advised that the Working Group propose a new timeline for the Report. The Utilities and the Consumer Advocate filed a joint letter with a revised timeline on November 10, 2022.
Approximately 8% of the total net book value relates to generation PPE that has been deactivated or that the Utilities plan to deactivate or decommission. Regulatory proceedings. On December 23, 2020, the PBR D&O was issued, establishing the PBR Framework. The PBR Framework implemented a five-year multi-year rate period (MRP), during which there will be no general rate case applications.
Approximately 6% of the total net book value relates to generation PPE that has been deactivated or that the Utilities plan to deactivate or decommission. Regulatory proceedings. On December 23, 2020, the PBR D&O was issued, establishing the PBR Framework. The PBR Framework implemented a five-year multi-year rate period (MRP), during which there will be no general rate case applications.
Based upon ASB’s evaluation at December 31, 2022 and 2021, there was no indicated impairment as ASB expects to collect the contractual cash flows for these investments. See “Investment securities” in Note 1 of the Consolidated Financial Statements for a discussion of securities impairment assessment. As of December 31, 2022 and 2021, ASB did not have any private-issue mortgage-backed securities.
Based upon ASB’s evaluation at December 31, 2023 and 2022, there was no indicated impairment as ASB expects to collect the contractual cash flows for these investments. See “Investment securities” in Note 1 of the Consolidated Financial Statements for a discussion of securities impairment assessment. As of December 31, 2023 and 2022, ASB did not have any private-issue mortgage-backed securities.
The following table summarizes the current amortized cost of ASB’s investment portfolio (excluding stock of the FHLB of Des Moines, which has no contractual maturity) and weighted average yields as of December 31, 2022. Mortgage-backed securities are shown separately because they are typically paid in monthly installments over a number of years.
The following table summarizes the current amortized cost of ASB’s investment portfolio (excluding stock of the FHLB of Des Moines, which has no contractual maturity) and weighted average yields as of December 31, 2023. Mortgage-backed securities are shown separately because they are typically paid in monthly installments over a number of years.
The increase in the Utilities’ 2022 net income compared to 2021 was principally due to higher ARA revenues, which included the customer dividend delivered to customers, partially offset by higher operating expenses. See “Electric utility,” “Bank,” and “HEI Consolidated—Other segment” sections below for additional information on year-to-year fluctuations.
The increase in the Utilities’ 2023 net income compared to 2022 was principally due to higher ARA revenues, which included the customer dividend delivered to customers, partially offset by higher operating expenses. See “Electric utility,” “Bank,” and “HEI Consolidated—Other segment” sections below for additional information on year-to-year fluctuations.
Developments in the Utilities’ efforts to further their renewable energy strategy include renewable energy projects discussed in Note 3 of the Consolidated Financial Statements and the following: New renewable PPAs . • On November 16, 2021, Hawaii Electric Light and Hawi Renewable Development, LLC (HRD) entered into an Amended and Restated Power Purchase Agreement (ARPPA).
Developments in the Utilities’ efforts to further their renewable energy strategy include renewable energy projects discussed in Note 4 of the Consolidated Financial Statements and the following: New renewable PPAs . • On November 16, 2021, Hawaii Electric Light and Hawi Renewable Development, LLC (HRD) entered into an Amended and Restated Power Purchase Agreement (HRD ARPPA).
On March 16, 2022, the PUC issued a D&O, approving the ARPPA, subject to conditions, that include requiring completion of the final environmental review prior to construction. On March 28, 2022, Puna Pono Alliance filed a Motion for Reconsideration seeking reconsideration, modification and/or vacation of the D&O. On June 6, the PUC denied Puna Pono’s Motion for Reconsideration.
On March 16, 2022, the PUC issued a D&O, approving the PGV ARPPA, subject to conditions, that include requiring completion of a final environmental review prior to construction. 57 On March 28, 2022, Puna Pono Alliance filed a Motion for Reconsideration seeking reconsideration, modification and/or vacation of the D&O. On June 6, the PUC denied Puna Pono’s Motion for Reconsideration.
Subject to the timing and final outcome of the FRB’s SLHC intermediate holding company proposal, HEI anticipates that the capital requirements in the final rule will eventually be effective for HEI or ASB Hawaii as well. If the capital 75 requirements were currently applicable to HEI, management believes HEI would satisfy the capital requirements, including the capital conservation buffer.
Subject to the timing and final outcome of the FRB’s SLHC intermediate holding company proposal, HEI anticipates that the capital requirements in the final rule will eventually be effective for HEI or ASB Hawaii as well. If the capital requirements were currently applicable to HEI, management believes HEI would satisfy the capital requirements, including the 78 capital conservation buffer.
The Utilities have developed a CBRE Portal where Subscriber Organizations can apply for small project capacity and manage subscribers for all CBRE projects in the program. Customers can also use the CBRE Portal to solicit quotes, compare, and subscribe to a project once the Subscriber Organization has added their project to the portal. Microgrid services tariff proceeding .
The Utilities have developed a CBRE Portal where Subscriber Organizations can apply for small project capacity and manage subscribers for all CBRE 54 projects in the program. Customers can also use the CBRE Portal to solicit subscription quotes, compare, and subscribe to a project once the Subscriber Organization has added their project to the portal. Microgrid services tariff proceeding .
For a discussion of 2020 operating, investing and financing activities, please refer to the “ Liquidity and capital resources” section in Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations—Electric utility,” in the Company’s 2021 Form 10-K. Material cash requirements .
For a discussion of 2021 operating, investing and financing activities, please refer to the “ Liquidity and capital resources” section in Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations—Electric utility,” in the Company’s 2022 Form 10-K. Material cash requirements .
Less: gain on sale of real estate (2) — (2) Gain on sale of real estate, which is included in Noninterest income above and in the Bank’s statements of income and comprehensive income in Note 4 of the Consolidated Financial Statements, is included in Bank expenses in the consolidated statements of income, and accordingly, is reflected in operating expenses below as a separate line item and excluded from Revenues.
Less: gain on sale of real estate — (2) 2 Gain on sale of real estate, which is included in Noninterest income above and in the Bank’s statements of income and comprehensive income in Note 5 of the Consolidated Financial Statements, is included in Bank expenses in the consolidated statements of income, and accordingly, is reflected in operating expenses below as a separate line item and excluded from Revenues.
A HELOC loan is typically in a subordinate lien position to a borrower’s first mortgage loan, however, approximately 56% of ASB’s HELOC loan portfolio is in a first lien position. Loan portfolio risk elements. When a borrower fails to make a required payment on a loan and does not cure the delinquency promptly, the loan is classified as delinquent.
A HELOC loan is typically in a subordinate lien position to a borrower’s first mortgage loan, however, approximately 53% of ASB’s HELOC loan portfolio is in a first lien position. Loan portfolio risk elements. When a borrower fails to make a required payment on a loan and does not cure the delinquency promptly, the loan is classified as delinquent.
See the discussion below under “Liquidity and capital resources.” Also see “Federal Deposit Insurance Corporation assessment” in Note 4 of the Consolidated Financial Statements. Final Capital Rules . On July 2, 2013, the FRB finalized its rule implementing the Basel III regulatory capital framework.
See the discussion below under “Liquidity and capital resources.” Also see “Federal Deposit Insurance Corporation assessment” in Note 5 of the Consolidated Financial Statements. Final Capital Rules . On July 2, 2013, the FRB finalized its rule implementing the Basel III regulatory capital framework.
A major focus of HEI’s financial strategy is to grow core earnings/profitability at the Utilities, Bank and Pacific Current in a controlled risk manner and optimize operating, capital and tax efficiencies in order to support its dividend and deliver shareholder value.
A major focus of HEI’s financial strategy is to grow core earnings/profitability at the Utilities, Bank and Pacific Current in a controlled risk manner and optimize operating, capital and tax efficiencies in order to support its dividend and deliver shareholder value. Recent developments.
Earnings sharing credits or recoveries will be included in the biannual report (formally known as annual decoupling filing) to be filed with the PUC in the spring of the following year. Results for 2022, 2021, and 2020 did not trigger the earnings sharing mechanism for the Utilities.
Earnings sharing credits or recoveries will be included in the biannual report (formally known as annual decoupling filing) to be filed with the PUC in the spring of the following year. Results for 2023, 2022, and 2021 did not trigger the earnings sharing mechanism for the Utilities.
The Utilities are taking additional measure to ensure adequate supply of fuel by entering into a backup fuel supply contract with Vitol Inc. (Vitol) commencing on December 1, 2022 through June 30, 2023 with annual extensions if mutually agreed by both parties.
The Utilities are taking additional measure to ensure adequate supply of fuel by entering into a backup fuel supply contract with Vitol Inc. (Vitol) commencing on December 1, 2022 through June 30, 2024 with annual extensions if mutually agreed by both parties.
The HELOC portfolio makes up 17% of the total loan portfolio and is generally an interest-only revolving loan for a 10-year period, after which time the HELOC outstanding balance converts to a fully amortizing variable-rate term loan with a 20-year amortization period.
The HELOC portfolio makes up 16% of the total loan portfolio and is generally an interest-only revolving loan for a 10-year period, after which time the HELOC outstanding balance converts to a fully amortizing variable-rate term loan with a 20-year amortization period.
For a discussion of 2020 operating, investing and financing activities, please refer to the “Liquidity and capital resources” section in Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations—HEI Consolidated,” in the Company’s 2021 Form 10-K.
For a discussion of 2021 operating, investing and financing activities, please refer to the “Liquidity and capital resources” section in Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations—HEI Consolidated,” in the Company’s 2022 Form 10-K.
On November 21, 2022, the PUC issued an order to suspend the Phase 2 procedural schedule while it reviews the joint letter. Decoupling. See “Decoupling” in Note 3 of the Consolidated Financial Statements for a discussion of decoupling. Regulated returns .
On November 21, 2022, the PUC issued an order to suspend the Phase 2 procedural schedule while it reviews the joint letter. Decoupling. See “Decoupling” in Note 4 of the Consolidated Financial Statements for a discussion of decoupling. Regulated returns .
In the fourth year of the MRP, the PUC will comprehensively review the PBR Framework to determine if any modifications or revisions are appropriate. See also “Regulatory proceedings” in Note 3 of the Consolidated Financial Statements. Developments in renewable energy efforts.
In the fourth year of the MRP, the PUC will comprehensively review the PBR Framework to determine if any modifications or revisions are appropriate. See also “Regulatory proceedings” in Note 4 of the Consolidated Financial Statements. Developments in renewable energy efforts.
Contingencies and litigation . The Company is subject to proceedings (including PUC proceedings), lawsuits and other claims. Management assesses the likelihood of any adverse judgments in or outcomes of these matters as well as potential ranges of probable losses, including costs of investigation.
Contingencies and litigation . The Company is subject to proceedings (including PUC proceedings), lawsuits and other claims. Management assesses the likelihood of any adverse judgments in or outcomes of these matters as well as potential ranges of probable losses.
As of December 31, 2022, the fair value of the assets held in trusts to satisfy the obligations of the Utilities’ retirement benefit plans did not exceed the retirement benefit plans’ benefit obligation. Minimum funding requirements for retirement benefit plans have not been included in the table above.
As of December 31, 2023, the fair value of the assets held in trusts to satisfy the obligations of the Utilities’ retirement benefit plans did not exceed the retirement benefit plans’ benefit obligation. Minimum funding requirements for retirement benefit plans have not been included in the table above.
HEI also periodically makes short-term loans to Hawaiian Electric to meet Hawaiian Electric’s cash requirements, including the funding of loans by Hawaiian Electric to Hawaii Electric Light and Maui Electric, but no such short-term loans to Hawaiian Electric were outstanding as of December 31, 2022.
HEI also periodically makes short-term loans to Hawaiian Electric to meet Hawaiian Electric’s cash requirements, including the funding of loans by Hawaiian Electric to Hawaii Electric Light and Maui Electric, but no such short-term loans to Hawaiian Electric were outstanding as of December 31, 2023.
If the Utilities are not successful in meeting the RPS targets as mandated by law, the PUC could assess a penalty of $20 for every MWh that an electric utility is deficient.
If the Utilities are not successful in meeting the RPS targets as mandated by law, the PUC could assess a penalty of $20 for every megawatt-hour (MWh) that an electric utility is deficient.
ASB does not have any exposure to securities backed by subprime mortgages. See “Investment securities” in Note 4 of the Consolidated Financial Statements for a discussion of the allowance for credit losses for the investment securities portfolio.
ASB does not have any exposure to securities backed by subprime mortgages. See “Investment securities” in Note 5 of the Consolidated Financial Statements for a discussion of the allowance for credit losses for the investment securities portfolio.
Additional segment information is shown in Note 2 of the Consolidated Financial Statements. The discussion concerning Hawaiian Electric should be read in conjunction with its consolidated financial statements and accompanying notes. Electric utility Executive overview and strategy.
Additional segment information is shown in Note 3 of the Consolidated Financial Statements. The discussion concerning Hawaiian Electric should be read in conjunction with its consolidated financial statements and accompanying notes. Electric utility Executive overview and strategy.
If ASB is the successful bidder, the property is classified as real estate owned until it is sold. As of December 31, 2022 and 2021, ASB had $115,000 and nil, respectively, of real estate acquired in settlement of loans.
If ASB is the successful bidder, the property is classified as real estate owned until it is sold. As of December 31, 2023 and 2022, ASB had nil and $115,000, respectively, of real estate acquired in settlement of loans.
Forecasted HEI consolidated “net cash used in investing activities” (excluding “investing” cash flows from ASB) for 2023 through 2027 consists primarily of the net capital expenditures of the Utilities principally related to maintaining and modernizing the grid to allow for the integration of more renewable energy, improved customer reliability, greater system efficiency and enhanced resilience.
Forecasted HEI consolidated “net cash used in investing activities” (excluding “investing” cash flows from ASB) consists primarily of the net capital expenditures of the Utilities principally related to maintaining and modernizing the grid to allow for the integration of more renewable energy, improved customer reliability, greater system efficiency and enhanced resilience.
ASB owns mortgage-backed securities issued or guaranteed by the U.S. government agencies or sponsored agencies, including the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA) and Small Business Administration (SBA). The weighted-average yield on investments during 2022, 2021 and 2020 was 1.76%, 1.52% and 1.90%, respectively.
ASB owns mortgage-backed securities issued or guaranteed by the U.S. government agencies or sponsored agencies, including the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA) and Small Business Administration (SBA). The weighted-average yield on investments during 2023, 2022 and 2020 was 1.76%, 1.76% and 1.52%, respectively.
Management believes that the Company’s provision for tax contingencies is reasonable. However, the ultimate resolution of tax treatments disputed by governmental authorities may adversely affect the Company’s current and deferred income tax amounts. See Note 12 of the Consolidated Financial Statements. Following are discussions of the electric utility and bank segments.
Management believes that the Company’s provision for tax contingencies is reasonable. However, the ultimate resolution of tax treatments disputed by governmental authorities may adversely affect the Company’s current and deferred income tax amounts. 49 See Note 13 of the Consolidated Financial Statements. Following are discussions of the electric utility and bank segments.
After evaluation of these proposals and with concurrence of the independent observer, the Utilities filed a letter on September 9, 2022, proposing to close the Molokai CBRE RFP and to work with the lone bidder to improve certain aspects of its two proposed projects outside of the RFP process for the benefit of the residents of Molokai. Discussions are ongoing.
After evaluation of these proposals and with concurrence of the independent observer, the Utilities filed a letter on September 9, 2022, proposing to close the Molokai CBRE RFP and to work with the lone bidder to improve certain aspects of its two proposed projects outside of the RFP process for the benefit of the residents of Molokai.
To date the Utilities have met all of the statutory RPS goals, including exceeding the last milestone RPS target of 30% for 2020, where it achieved an RPS of 34.5%.
To date the Utilities have met all of the statutory RPS goals, including exceeding the latest milestone RPS target of 30% for 2020, where it achieved an RPS of 34.5%.
As of December 31, 2022, the fair value of the assets held in trusts to satisfy the obligations of the Company’s retirement benefit plans did not exceed the retirement benefit plans’ benefit obligation.
As of December 31, 2023, the fair value of the assets held in trusts to satisfy the obligations of the Company’s retirement benefit plans did not exceed the retirement benefit plans’ benefit obligation.
Based on the level of total generation in 2022, a 1% shortfall in meeting the 2030 RPS requirement of 40% would translate into a penalty of approximately $2.1 million.
Based on the level of total generation in 2023, a 1% shortfall in meeting the 2030 RPS requirement of 40% would translate into a penalty of approximately $2.1 million.
Borrowers also have a “Fixed Rate Loan Option” to convert a part of their available line of credit into a 5, 7 or 10-year fully amortizing fixed-rate loan with level principal and interest payments. As of December 31, 2022, approximately 39% of the portfolio balances were amortizing loans under the Fixed Rate Loan Option.
Borrowers also have a “Fixed Rate Loan Option” to convert a part of their available line of credit into a 5, 7 or 10-year fully amortizing fixed-rate loan with level principal and interest payments. As of December 31, 2023, approximately 37% of the portfolio balances were amortizing loans under the Fixed Rate Loan Option.
ASB did not maintain a portfolio of securities held for trading during 2022 and 2021. As of December 31, 2022 and 2021, ASB had $1.3 billion and $522.3 million, respectively, of investment securities that were purchased and classified as held-to-maturity. In October 2022, ASB transferred 66 available-for-sale investment securities with a fair value of $755 million to the held-to-maturity category.
ASB did not maintain a portfolio of securities held for trading during 2023 and 2022. As of December 31, 2023 and 2022, ASB had $1.2 billion and $1.3 billion, respectively, of investment securities that were purchased and classified as held-to-maturity. In October 2022, ASB transferred 66 available-for-sale investment securities with a fair value of $755 million to the held-to-maturity category.
FDIC regulations restrict the ability of financial institutions that are not well-capitalized to compete on the same terms as well-capitalized institutions, such as by offering interest rates on deposits that are significantly higher than the rates offered by competing institutions. As of December 31, 2022, ASB was well-capitalized (see Note 4 of the Consolidated Financial Statements for ASB’s capital ratios).
FDIC regulations restrict the ability of financial institutions that are not well-capitalized to compete on the same terms as well-capitalized institutions, such as by offering interest rates on deposits that are significantly higher than the rates offered by competing institutions. As of December 31, 2023, ASB was well-capitalized (see Note 5 of the Consolidated Financial Statements for ASB’s capital ratios).
Examples of nonrecurring uses of fair value include mortgage servicing rights accounted for by the amortization method, loan impairments for certain loans, real estate acquired in settlement of loans and goodwill. See “Investment securities” and “Derivative financial instruments” in Note 4 and Note 16 of the Consolidated Financial Statements for additional information regarding ASB’s fair value measurements.
Examples of nonrecurring uses of fair value include mortgage servicing rights accounted for by the amortization method, loan impairments for certain loans, real estate acquired in settlement of loans and goodwill. See “Investment securities” and “Derivative financial instruments” in Note 5 and Note 17 of the Consolidated Financial Statements for additional information regarding ASB’s fair value measurements.
On June 24, 2022, the PUC approved with certain conditions the Utilities’ request to aggregate the per-meter and network cost caps and to recover O&M costs associated with full-service territory AMI deployment under the MPIR mechanism. As of December 31, 2022, the Utilities have deployed about 193,000 advanced meters, servicing approximately 41% of total customers.
On June 24, 2022, the PUC approved with certain conditions the Utilities’ request to aggregate the per-meter and network cost caps and to recover O&M costs associated with full-service territory AMI deployment under the MPIR mechanism. As of December 31, 2023, the Utilities have deployed about 363,000 advanced meters, servicing approximately 77% of total customers.
The PUC subsequently clarified that the Utilities may resume the Phase 2 docket no earlier than six months before Phase 1 is scheduled to be completed in the third quarter of 2024. Resumption of the Phase 2 proceeding would likely commence six months prior to the scheduled completion date selected by the PUC. Community-based renewable energy .
The PUC subsequently clarified that the Utilities may resume the Phase 2 docket no earlier than six months before Phase 1 is scheduled to be completed in the third quarter of 2024. Resumption of the Phase 2 proceeding would likely commence six months prior to the scheduled completion date selected by the PUC.
The PUC also approved the use of the expedited approval procedure to request the issuance and sale of the remaining/unused amount of SPRBs authorized by the 2019 Legislative Authorization (i.e., total not to exceed up to $400 million for Hawaiian Electric, up to $150 million for Hawaii Electric Light, and up to $150 million for Maui Electric) during the period January 1, 2023 through June 30, 2024.
On February 9, 2021, the PUC approved the use of the expedited approval procedure to request the issuance and sale of the remaining/unused amount of SPRBs authorized by the 2019 Legislative Authorization (i.e., total not to exceed up to $400 million for Hawaiian Electric, up to $150 million for Hawaii Electric Light, and up to $150 million for Maui Electric) during the period January 1, 2023 through June 30, 2024.
With Tier 1 leverage, common equity, Tier 1 capital and total capital ratios of 7.8%, 12.2%, 12.2% and 13.1%, respectively as of December 31, 2022, ASB’s regulatory capital ratios exceeded the minimum regulatory capital requirements of 4.0%, 4.5%, 6.0% and 8.0%, respectively. See Bank - Regulation in HEI’s “Item 1.
With Tier 1 leverage, common equity, Tier 1 capital and total capital ratios of 7.7%, 12.3%, 12.3% and 13.4%, respectively as of December 31, 2023, ASB’s regulatory capital ratios exceeded the minimum regulatory capital requirements of 4.0%, 4.5%, 6.0% and 8.0%, respectively. See Bank - Regulation in HEI’s “Item 1.
As of December 31, 2022, approximately $72 million of capital and deferred software cost has been incurred to date under Phase 1 and is currently being recovered under the MPIR mechanism until such costs are included in base rates.
As of December 31, 2023, approximately $116 million of capital and deferred software cost has been incurred to date under Phase 1 and is currently being recovered under the MPIR mechanism until such costs are included in base rates.
Net cash used in investing activities : The increase in net cash used in investing activities was primarily driven by a increase in capital expenditures related to construction activities.
Net cash used in investing activities : The increase in net cash used in investing activities was primarily driven by an increase in capital expenditures related to construction activities.
For a discussion of ASB dividends, see “Common stock equity” in Note 4 of the Consolidated Financial Statements. 76 See “Commitments” in Note 4 of the Consolidated Financial Statements for a discussion of commitments and contingencies and off-balance sheet arrangements. Material estimates and critical accounting policies. Also see “Material estimates and critical accounting policies” for Consolidated HEI above.
For a discussion of ASB dividends, see “Common stock equity” in Note 5 of the Consolidated Financial Statements. See “Commitments” in Note 5 of the Consolidated Financial Statements for a discussion of commitments and contingencies and off-balance sheet arrangements. 79 Material estimates and critical accounting policies. Also see “Material estimates and critical accounting policies” for Consolidated HEI above.
For the 2023 calendar year, the forecasted 2023 GDPPI was 3.68% (net of the 0.22% customer dividend), measured in October 2022, and became effective in rates on January 1, 2023. • The non-compounded portion of the ARA adjustment includes a subtractive component, representing the management audit savings commitment, or refund to customers, which was approved by the PUC for the years 2021 through 2025.
For the 2024 calendar year, the forecasted 2024 GDPPI was 2.18% (net of the 0.22% customer dividend), measured in October 2023, and became effective in rates on January 1, 2024. • The non-compounded portion of the ARA adjustment includes a subtractive component, representing the management audit savings commitment, or refund to customers, which was approved by the PUC for the years 2021 through 2025.
In addition, the higher customer bills may lead the PUC to consider other actions to limit or delay any proposed increase in rates in order to mitigate the overall bill impact of rising fuel prices. In December 2022, the consumer price index moderated to 6.5% from a peak of 9.1% in June 2022.
In addition, the higher customer bills may lead the PUC to consider other actions to limit or delay any proposed increase in rates in order to mitigate the overall bill impact of rising fuel prices. In December 2023, the consumer price index moderated to 3.4% from a peak of 9.1% in June 2022.
The Utilities periodically utilize long-term debt, borrowings of the proceeds of special purpose revenue bonds (SPRBs) issued by the State of Hawaii Department of Budget and Finance (DBF) and the issuance of privately placed unsecured senior notes bearing taxable interest, to finance the Utilities’ capital improvement projects, or to repay short-term borrowings used to finance such projects.
The Utilities also historically utilized long-term debt, borrowings of the proceeds of special purpose revenue bonds (SPRBs) issued by the State of Hawaii Department of Budget and Finance (DBF) and the issuance of privately placed unsecured senior notes bearing taxable interest, to finance the Utilities’ capital improvement projects, or to repay short-term borrowings used to finance such projects.
ASB loans that were 90 days or more past due on which interest was being accrued as of December 31, 2022 and 2021 were immaterial or nil.
ASB loans that were 90 74 days or more past due on which interest was being accrued as of December 31, 2023 and 2022 were immaterial or nil.
As of December 31, 2022, ASB had commitments to borrowers for loans and unused lines and letters of credit of $2.1 billion, of which, commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings were nil.
As of December 31, 2023, ASB had commitments to borrowers for loans and unused lines and letters of credit of $1.8 billion, of which, commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings were nil.
The contracted consultant is also planning a second phase of the study, to be completed in 2023, which will include the assessment and recommendation of remaining issues listed in Act 201 that are not covered in Phase 1. • Also in April 2021, the PUC approved the Kapolei Energy Storage (KES) PPA (one of the PPAs as a result of the Stage 2 Renewable RFP process) (KES Decision and Order), subject to nine conditions, including the Utilities forgoing the second portion of the PIM rewards amounting up to $1.7 million for the Stage 1 RFP PPAs, removing grid constraints for the Utilities’ CBRE Phase 2 projects and for existing and new distributed energy programs, financial retirement of Hawaiian Electric generating units by specified dates and adjusting target revenues at the retirement dates for such retirements, and a requirement to charge the batteries in the project using significant levels of renewable energy generation.
The contracted consultant has completed a second phase of the study, dated December 28, 2023, which included the assessment and recommendation of remaining issues listed in Act 201 that were not covered in Phase 1. • Also in April 2021, the PUC approved the Kapolei Energy Storage (KES) PPA (one of the PPAs as a result of the Stage 2 Renewable RFP process) (KES Decision and Order), subject to nine conditions, including the Utilities forgoing the second portion of the PIM rewards amounting up to $1.7 million for the Stage 1 RFP PPAs, removing grid constraints for the Utilities’ CBRE Phase 2 projects and for existing and new distributed energy programs, financial retirement of Hawaiian Electric generating units by specified dates and adjusting target revenues at the retirement dates for such retirements, and a requirement to charge the batteries in the project using significant levels of renewable energy generation.
If economic conditions worsen from current levels or remain depressed for an extended period of time, it could have a material unfavorable impact on the Company’s financial position or results of operations. See also “Recent Developments” in the “Electric utility” and “Bank” sections below for further discussion of the economic impact caused by the pandemic. Liquidity and capital resources.
If economic conditions worsen from current levels or remain depressed for an extended period of time, it could have a material unfavorable impact on the Company’s financial position or results of operations. See also “Recent Developments” in the “Electric utility” and “Bank” sections below for further discussion of the economic impact of recent events. 43 Liquidity and capital resources.
The Company has also focused on ensuring that ESG considerations are appropriately integrated into governance structures, strategies and risk management. This includes: • Integration of Board oversight of important ESG matters into its existing governance structures and processes.
The Company has also focused on ensuring that sustainability considerations are appropriately integrated into governance structures, strategies and risk management. This includes: • Integration of Board oversight of important sustainability matters into its existing governance structures and processes across companies.
Less: gain on sale of investment securities, net — (1) 1 Gain on sale of investment securities, net, which is included in Noninterest income above and in the Bank’s statements of income and comprehensive income in Note 4 of the Consolidated Financial Statements, is classified as gain on sale of investment securities, net in the consolidated statements of income, and accordingly, is reflected below following operating income as a separate line item and excluded from Revenues.
Less: loss on sale of investment securities 15 — 15 Loss on sale of investment securities, which is included in Noninterest income above and in the Bank’s statements of income and comprehensive income in Note 5 of the Consolidated Financial Statements, is classified as gain on sale of investment securities, net in the consolidated statements of income, and accordingly, is reflected below following operating income as a separate line item and excluded from Revenues.
As of December 31, 2022, ASB had an unrealized loss, net of taxes, on available-for-sale investment securities (including securities pledged for repurchase agreements) in accumulated other comprehensive income (AOCI) of $181.9 million compared to an unrealized loss, net of taxes, of $32.0 million as of December 31, 2021. See “Quantitative and Qualitative Disclosures About Market Risk.” Legislation and regulation.
As of December 31, 2023, ASB had an unrealized loss, net of taxes, on available-for-sale investment securities (including securities pledged for repurchase agreements) in accumulated other comprehensive income (AOCI) of $150.4 million compared to an unrealized loss, net of taxes, of $181.9 million as of December 31, 2022. See “Quantitative and Qualitative Disclosures About Market Risk.” Legislation and regulation.
As of December 31, 2022, ASB’s unused FHLB borrowing capacity was approximately $1.6 billion and ASB had unpledged investment securities of $1.6 billion that were available to be used as collateral for additional borrowing capacity.
As of December 31, 2023, ASB’s unused FHLB borrowing capacity was approximately $1.9 billion and ASB had unpledged investment securities of $0.6 billion that were available to be used as collateral for additional borrowing capacity.
Financing activities provided net cash of $568 million in 2022 and $756 million in 2021. In 2022, net cash provided by financing activities included net increases in other short-term borrowings and proceeds from issuance of short-term and long-term debt and net increases in short-term borrowings, partly offset by repayment of long-term debt and payment of common and preferred stock dividends.
In 2022, net cash provided by financing activities included net increases in other short-term borrowings and proceeds from issuance of short-term and long-term debt and net increases in short-term borrowings, partly offset by repayment of long-term debt and payment of common and preferred stock dividends.
Changes in estimated costs, timing of decommissioning or other assumptions used in the calculation could cause material revision on the recorded liabilities. As of December 31, 2022 and December 31, 2021, the Utilities’ AROs totaled $11.5 million and $11.1 million, respectively. Bank Executive overview and strategy.
Changes in estimated costs, timing of decommissioning or other assumptions used in the calculation could cause material revision on the recorded liabilities. As of December 31, 2023 and December 31, 2022, the Utilities’ AROs totaled $12.0 million and $11.5 million, respectively. Bank Executive overview and strategy.
The Utilities may earn a reward for the amount of system generation above the interpolated statutory RPS goal at $20/MWh in 2022, $15/MWh in 2023, and $10/MWh for the remainder of the multi-year rate period.
The Utilities may earn a reward for the amount of renewable generation above the interpolated statutory RPS goal at $15/MWh in 2023 and $10/MWh for the remainder of the multi-year rate period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTo gain further insight into the interest rate risk profile, additional analysis is periodically performed in alternate scenarios including rate shifts of greater magnitude and changes in key balance sheet drivers. 79 ASB’s interest-rate risk sensitivity measures as of December 31, 2022 and 2021 constitute “forward-looking statements” and were as follows: Change in NII (gradual change in interest rates) Change in EVE (instantaneous change in interest rates) Change in interest rates (basis points) December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 +300 (0.1) % 5.6 % 5.1 % 15.5 % +200 0.0 4.0 3.8 11.7 +100 0.0 2.3 2.1 7.0 -100 (0.3) (2.5) (3.4) (12.6) ASB’s NII sensitivity profile became neutral as of December 31, 2022 compared to December 31, 2021, primarily driven by the shift in liability mix and the increase in market rates.
Biggest changeTo gain further insight into the interest rate risk profile, additional analysis is periodically performed in alternate scenarios including rate shifts of greater magnitude and changes in key balance sheet drivers. 82 ASB’s interest-rate risk sensitivity measures as of December 31, 2023 and 2022 constitute “forward-looking statements” and were as follows: Change in NII (gradual change in interest rates) Change in EVE (instantaneous change in interest rates) Change in interest rates (basis points) December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 +300 2.1 % (0.1) % 2.7 % 5.1 % +200 1.4 — 2.5 3.8 +100 0.7 — 1.7 2.1 -100 (1.0) (0.3) (2.3) (3.4) -200 (2.2) (0.9) (5.4) (7.8) -300 (3.5) (1.7) (10.3) (13.8) ASB’s NII risk profile was more asset sensitive as of December 31, 2023, compared to December 31, 2022, due to higher cash balances and additional floating-rate commercial loans.
The Utilities’ commodity price risk is substantially mitigated so long as they have their current ECRCs in their rate schedules, but have limited exposure through the fuel cost risk sharing mechanism, which apportions 2% of the fuel cost risk to the utilities 78 (and 98% to ratepayers) and has a maximum exposure (or benefit) of $3.7 million.
The Utilities’ commodity price risk is substantially mitigated so long as they have their current ECRCs in their rate schedules, but have limited exposure through the fuel cost risk-sharing mechanism, which apportions 2% of the fuel cost risk to the utilities (and 98% to ratepayers) and has a maximum exposure (or benefit) of $3.7 million.
Credit risk associated with the securities portfolio is mitigated through investment portfolio limits, experienced staff working with analytical tools, monthly fair value analysis and on-going monitoring and reporting such as investment watch reports and loss sensitivity analysis. See “Allowance for credit losses” in Item 7 above and in Note 4 of the Consolidated Financial Statements.
Credit risk associated with the securities portfolio is mitigated through investment portfolio limits, experienced staff working with analytical tools, monthly fair value analysis and on-going monitoring and reporting such as investment watch reports and loss sensitivity analysis. See “Allowance for credit losses” in Item 7 above and in Note 5 of the Consolidated Financial Statements.
The Company believes the electric utility and the “other” segment’s exposures to these two risks were not material as of December 31, 2022. Credit risk for ASB is the risk that borrowers or issuers of securities will not be able to repay their obligations to the Bank.
The Company believes the electric utility and the “other” segment’s exposures to these two risks were not material as of December 31, 2023. Credit risk for ASB is the risk that borrowers or issuers of securities will not be able to repay their obligations to the Bank.
See Note 4 of the Consolidated Financial Statements for a discussion of the use of rate lock commitments on loans held for sale and forward sale contracts to manage some interest rate risk associated with ASB’s residential loan sale program.
See Note 5 of the Consolidated Financial Statements for a discussion of the use of rate lock commitments on loans held for sale and forward sale contracts to manage some interest rate risk associated with ASB’s residential loan sale program.
The Company’s long-term debt, in the form of borrowings of proceeds of revenue bonds, privately-placed senior notes and bank term loans, is predominately at fixed rates (see Note 16 of the Consolidated Financial Statements for the fair value of long-term debt, net-other than bank). 80
The Company’s long-term debt, in the form of borrowings of proceeds of revenue bonds, privately-placed senior notes and bank term loans, is predominately at fixed rates (see Note 17 of the Consolidated Financial Statements for the fair value of long-term debt, net-other than bank). 83
The Company considers interest rate risk to be a very significant market risk as it could potentially have a significant effect on the Company’s results of operations, financial condition and liquidity, especially as it relates to ASB, but also as it may affect the discount rate used to determine retirement benefit liabilities and minimum contributions, the market value of retirement benefit plans’ assets, borrowing costs and the Utilities’ allowed rates of return.
The Company currently has no direct exposure to market risk from trading activities nor foreign currency exchange rate risk. 81 The Company considers interest rate risk to be a very significant market risk as it could potentially have a significant effect on the Company’s results of operations, financial condition and liquidity, especially as it relates to ASB, but also as it may affect the discount rate used to determine retirement benefit liabilities and minimum contributions, the market value of retirement benefit plans’ assets, borrowing costs and the Utilities’ allowed rates of return.
As of December 31, 2022, the Company was exposed to “other than bank” interest rate risk because of its periodic borrowing requirements, the impact of interest rates on the discount rate and the market value of plan assets used to determine retirement benefits expenses and obligations (see “Pension and other postretirement benefits obligations” in HEI’s MD&A and “Retirement benefits” in Notes 1 and 10 of the Consolidated Financial Statements) and the possible effect of interest rates on the electric utilities’ allowed rates of return.
As of December 31, 2023, the Company was exposed to “other than bank” interest rate risk because of its restricted access to capital markets and other sources of debt and equity financings, including the impact of interest rates on the revolving credit facility draws, the impact of interest rates on the discount rate and the market value of plan assets used to determine retirement benefits expenses and obligations (see “Pension and other postretirement benefits obligations” in HEI’s MD&A and “Retirement benefits” in Notes 1 and 11 of the Consolidated Financial Statements) and the possible effect of interest rates on the electric utilities’ allowed rates of return.
The Utilities currently have no hedges against its commodity price risk. The Company currently has no direct exposure to market risk from trading activities nor foreign currency exchange rate risk.
The Utilities currently have no hedges against its commodity price risk.
Other than these exposures, management believes its exposure to “other than bank” interest rate risk is not material.
Other than these exposures, management believes its exposure to “other than bank” interest rate risk is not material. However, continued restricted access to capital markets and other sources of debt and equity financings for an extended period of time may adversely impact the Company’s financial condition, liquidity, cash flows and results of operations.
Removed
The bank’s liability mix shifted with increased short-term borrowings due to temporary funding needs, driving lower NII sensitivity. In addition, the significant increase in market rates lowered prepayment expectations in the bank’s fixed-rate mortgage and mortgage-backed investment portfolios, further reducing asset sensitivity.
Added
EVE sensitivity was lower as of December 31, 2023, compared to December 31, 2022, due to a shift in ASB’s liability mix as longer duration core deposits were replaced by rate-sensitive deposits and shorter-term wholesale funding.
Removed
EVE sensitivity decreased as of December 31, 2022 compared to December 31, 2021 as the duration of liabilities shortened while the duration of assets lengthened. The bank’s liability mix shifted with increased short-term borrowings due to temporary funding needs, shortening the duration of liabilities and decreasing EVE sensitivity.
Removed
In addition, the significant increase in market rates led to lower prepayment expectations and lengthened the duration of the fixed-rate mortgage and mortgage-backed investment portfolios, further reducing asset sensitivity.

Other HE 10-K year-over-year comparisons