Hawaiian Electric Industries, Inc.

Good afternoon, and thank you for attending today's Q3 2022 Hawaiian Electric Industries, Inc. Earnings Conference Call. My name is Austin, and I shall 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'd like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Julie Zmolinski, Vice President of Investor Relations and Corporate Sustainability. Julie, please go ahead.

Thank you, Austin. Welcome, everyone, to HEI's third 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, Anne Teranishi, American Savings Bank president and CEO, and other members of senior management. Our earnings release and our presentation for this call are available in the investor relations section of our website. As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings, and in the investor relations section of our website. Now, Scott will begin with his remarks.

Aloha kākou. Greetings, everyone. Thank you for joining us today. I'll give an overview of our results and outlook, update you on the Hawaii economy and our businesses, and then turn the call over to Paul to further discuss our financials. We're pleased with our consolidated third quarter earnings of $62.1 million and earnings per share of 57 cents, which reflect good performance and the benefits of our combination of companies. The utilities performance was steady. and we were able to offset some of the pressures we've seen related to inflation, interest rates, O&M, and fuel costs. Our utility outlook for the year has improved since our last webcast. We now expect the utility to end the year closer to the midpoint of its guidance range, better than the lower end that we had forecast last quarter. The bank had another strong quarter, continuing to demonstrate its strength in a rising rate environment. bank results have benefited from higher interest rates, strong loan growth, and continued favorable credit trends. Given year-to-date performance and expected continued positive trends the rest of the year, we're raising our bank 2022 guidance range to 72 cents to 76 cents. We're increasing the bottom end of our consolidated 2022 EPS guidance range by 8 cents, with our updated range now $2.08 to $2.20 for the year. Turning to the economy, Hawaii's economy has continued to show signs of strength, and we believe it remains well positioned to weather broader economic headwinds. Hawaii's unemployment rate was down to 3.5% in September, on par with the national average. Unemployment here has fared comparatively well during downturns. performing better than the national average during the financial crisis. The housing market continues to perform well. While we've seen slower sales activity with higher interest rates, prices remain strong. The median O'ahu single-family home price rose to $1.1 million in September, up from the prior year. Tight supply and robust demand have long characterized our housing market. helping Hawaii housing fare well relative to the U.S. mainland in recessions and contributing to the strong credit quality of our predominantly real estate secured bank loan portfolio. Tourism arrivals have recovered to 96% of pre-pandemic levels as of September, primarily due to a strong recovery in domestic travel, and visitor spending in September was 18.5% above 2019 levels. With the lifting of Japan's COVID travel restrictions last month, we anticipate strengthening arrivals from that important market, even with the lower yen. This will provide an offset to softening of domestic arrivals that could result from a potential U.S. mainland recession. Given projected improvement in Japan travel and continued strong federal government spending in Hawaii, the University of Hawaii Economic Research Organization forecast that if there were a recession on the mainland, impacts in Hawaii would be milder, with expected positive Hawaii GDP growth in 2023. Turning to the utility. We are pleased with the utility's execution on a number of critical fronts to help customers manage their bills, provide reliable, resilient service, advance our climate change action plan, and manage costs. In Hawaii, there continues to be strong alignment between public policy, our regulatory framework, and our utilities climate change action plan. Our clean energy transition is one of the most powerful ways to reduce exposure to fuel price spikes, stabilize customer bills, and cut greenhouse gas emissions, all while maintaining a healthy utility. We continue pressing forward on all fronts. We're bringing on new utility scale renewable generation at contracted prices below the current cost of oil. A few highlights. The state's largest solar plus storage project is now online, generating energy at less than half the cost of oil. Three more solar plus storage projects are slated to come online in early 2023, with several others in 2024. A large battery storage project is also expected to go into service on Oahu by mid-2023. We have over 400 megawatts of renewable capacity and over 2 gigawatt hours of battery storage approved and active under Stage 1 and 2 RFPs, and we're continuing to seek more. We're filing our final draft Stage 3 RFP for Hawaii Island today. and, if accepted by the PUC, target launching it before year end. Our O'ahu and Maui Stage 3 RFP drafts are under PUC review. Together, our Stage 3 RFPs seek an additional 1,600 gigawatt hours annually of variable renewable dispatchable energy, and between 540 and 740 megawatts of renewable firm capacity. We also continue to expand customer resources and programs. Rooftop solar continues to grow, and there's strong interest in our battery bonus program, which received 1,400 applications, totaling 10.9 megawatts in September alone. We're advancing EV charging as well, recently launching our charge-up commercial make ready commercial charging infrastructure pilot, and our public charging expansion proposal is under PUC review. And last month, the PUC issued an order that would establish more aggressive time-based rate structures with the goals of making greater use of available renewable energy, reducing peak system demand, and benefiting customers. While the unique economic environment has brought cost headwinds this year, we've been able to significantly mitigate those pressures and control O&M expense increases to about half the rate of inflation. We're also focused on managing cost increases within the annual revenue adjustment, or ARA, long term. Under PBR, the inflation factor is set based on the October GDPPI forecast, which is 3.9% for 2023. Therefore, the net increase in our ARA allowance next year will be 3.68%, or 3.9% minus the 22 basis point customer dividend. Our work helping customers through flexible payment plans and connecting those in need with additional resources has led to positive trends in customer payments, and we're continuing those efforts. Overall, the utility is executing well. We continue to see the PBR framework as positive and are optimistic about the opportunities it provides the utility. Turning to the bank, ASB has continued its strong performance. benefiting from the rising interest rate environment and strong loan growth, and maintaining its high quality position, including its low risk profile, solid credit quality, and low cost funding base. Our bank digital transformation continues to progress. Our combination of ASB and Hawaiian Electric continues to demonstrate stability across economic cycles, and we're seeing that again today. While high interest rates tend to pressure utilities' cost of debt, They benefit bank earnings contributing to overall earning stability. The bank continues to deliver solid dividends to the holding company, supporting our external dividend and limiting equity needs over time. Before I hand the call over to Paul, just a quick update on our CFO search. We've been steadily working through our recruitment process and have been able to interview a number of strong candidates. I anticipate finalizing our selection within the next several weeks. Now, Paul will further discuss the financials.