Hawaiian Electric Industries, Inc.

Good afternoon. Thank you for attending today's Q2 2022 Hawaiian Electric Industries Inc. Earnings Conference Call. My name is Tamiya and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. It is now my pleasure to pass the conference over to our host, Julie Smolenski, Vice President, investor relations, and corporate sustainability. Please proceed.

Thank you, Tamiya. Welcome, everyone, to HEI's second quarter 2022 earnings call. Joining me today are Scott Hsu, HEI President and CEO, Paul Ito, Interim HEI CFO, Shelly Kimura, Hawaiian Electric President and CEO, Ann Teranishi, American Savings Bank President and CEO, and other members of senior management. Our press release and our presentation for this call are available in the Investor Relations section of our website. As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings, and in the Investor Relations section of our website. Now, Scott will begin with his remarks.

Aloha kākou. Greetings, everyone. Thank you for joining us today. We're pleased with our consolidated second quarter earnings of $52.5 million and earnings per share of 48 cents. Our earnings reflect solid results at the utility, which continues to perform well under the performance-based regulation framework. While we've continued to see the higher O&M expenses we mentioned on last quarter's call, and which we'll discuss further shortly, we expect to remain within our utility guidance range for the year, albeit within the lower half of the range. The bank had a good quarter as well, benefiting from strong loan growth and the higher rate environment. With the bank's loan growth, the quarter also saw a return to a more normalized provision expense following five consecutive quarters of negative provision. While this reduced the bank's results versus the prior year and linked quarters, this was consistent with dynamics anticipated for this year. Overall, we are reaffirming our consolidated guidance range for the year. Taking a closer look at recent utility developments, together with government agencies, regulators, developers, and other stakeholders, we're making great strides in our clean energy transition. We're approaching a major milestone, the end of coal in Hawaii, a key action in our climate change action plan. The retirement of the state's last coal plant is on track for September 1st. The state's largest solar plus storage project came online July 31st. Two more solar plus storage projects are slated to come online in the next few months, and the Commission recently approved the last Stage 2 solar plus storage PPA that was awaiting decision. The Commission also asked us to consider adding solar to our proposed battery storage project on Maui. and we're working on a proposal to do so. In addition, the Commission indicated it may reconsider our proposed Hawaii Island battery storage project that it previously denied after we learn whether we've secured Infrastructure Investment and Jobs Act, or IIJA, funding for that project. Renewable capacity approved by the PUC under Stage 1 and 2 RFPs that remain active totals nearly 575 megawatts, with 2,250 megawatt hours of battery energy storage. We are continuing to seek more clean energy resources, issuing our draft Stage 3 RFPs for O'ahu, Hawaii Island, and Maui, totaling 1,600 gigawatt hours annually of variable renewable dispatchable energy and between 540 and 740 megawatts of renewable firm capacity. we are working to grow customer resources as well. Our expanded smart meter deployment continues with smart meters now in place for more than 20% of customers. And we now have greater flexibility under a recent commission decision to manage costs within the cost recovery mechanism for that program, as well as seek recovery of additional O&M associated with the increased deployment. Finally, our state's RPS law has been updated and is now based on renewable generation as a percent of total generation, rather than a percent of sales, consistent with our RPSA performance incentive mechanism, or PIM. The effect of this formula change is that actual results will be lower while the RPS targets remain unchanged. However, all of our plans are designed to exceed the RPSA targets, so we remain confident we'll meet our RPS goals. Ensuring reliability and resilience for our customers throughout this transition is a key priority. We've purposely accelerated overhauls and maintenance on our generating units to meet electricity needs and enhance reliability as the coal plant approaches retirement. This, along with inflation, has impacted our O&M the past two quarters, and we expect similar dynamics the rest of the year. Strengthening our resilience to the impacts of climate change is also critical. Last month, we filed a five-year plan with the Commission that, if approved, will allow us to harden our grids while limiting customer bill impact to less than a dollar a month. Last month, the Commission issued an order in the Performance-Based Regulation, or PBR docket, creating three new performance incentives covering generation reliability, cost management, and timely completion of interconnection studies, and extending the timeframe for the grid services incentive. We propose that the new PIMS be effective January 1, 2023, and our request is pending PUC approval. The outcome reflects the collaborative efforts of the PBR Working Group, which the Commission has designated as a forum for refining and developing further proposed performance incentives going forward. We know our customers are feeling financially challenged as inflation and high fuel costs continue to pressure household expenses. Due to current high oil costs, we also expect a temporary increase in customer rates when the AES coal plant retires. We have comprehensive efforts underway to help customers manage their utility bills. This includes offering flexible payment plans, connecting customers to government and nonprofit utility assistance programs, encouraging electricity conservation, energy efficiency, and participation in our DER programs, transitioning away from fossil fuel generation to utility-scale fixed-rate solar and storage, and continuing to look for ways to improve our cost structure, such as through a cost-saving employee retirement program redesign we recently implemented. Turning to the bank, ASB continues to perform very well and maintains its high quality position, including its low risk profile, solid credit quality, and low cost funding base. The bank's results for the second quarter are consistent with dynamics we anticipated this year. Loan growth was strong during the quarter across most of the bank's portfolio. We did see a return to more normalized provision expense to accommodate that growth. reducing bank earnings compared to the prior year and linked quarters. We continue to see healthy activity in our loan pipeline. The rising rate environment drove margin expense in the second quarter, and the Federal Reserve's additional rate increase last month is expected to spur further expansion. I'm sorry, the rising rate environment drove margin expansion in the second quarter and the Federal Reserve's additional rate increase last month is expected to spur further expansion. Our bank's digital transformation remains on track. We recently upgraded to Zelle for person-to-person payments and continue to invest in our digital transformation, including in customer relationship capabilities and data management. Now I'll hand the call over to Paul, who is serving as our interim CFO, until we complete our process to fill the CFO position.