Hawaiian Electric Industries, Inc.

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. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. Now, Scott Hsu will begin with his remarks.

Aloha kakou. Welcome, everyone. For today's call, I'll start with an overview of the important accomplishments we've made over the past year and touch on our priorities going forward. I'll then turn it over to Scott DeGhetto, who will discuss the financial implications of recent announcements and walk through our financial results. We'll then open it up for questions. The past year was pivotal in the history of our company, and I'm proud of what we've been able to accomplish. Since August of 2023, we've told you that our objective is to remain a strong, financially healthy enterprise, best positioned to serve the communities in which we operate. This objective has guided us throughout the past 18 months as we've taken prudent measured actions to maintain our financial strength in the wake of the Maui wildfires. In November 2024, we came together with other parties to sign final settlement agreements in the Maui wildfire tort litigation. We did so on an expedited basis, significantly enhancing clarity for our company's path ahead. This milestone accomplishment was the culmination of months of negotiations, and once fully approved by the court, the settlement will provide an accelerated path to recovery for those impacted by the fires. Throughout the year, we took numerous actions to bolster our liquidity and ensure HEI is in the strongest possible financial position as we work toward finalizing the settlement. The successful equity offering we closed in September resulted in $558 million in net proceeds, fully funding our first payment under the settlement. We also strengthened our liquidity by putting in place a $250 million ATM program at the holding company and a $250 million accounts receivable-backed credit facility at the utility. With these collective actions, we ended 2024 in the strongest liquidity position in our company's history. In late December, we completed the strategic review process for American Savings Bank. This transaction was the result of a deliberate and thoughtful process involving numerous potential buyers. After evaluating a range of factors, including transaction certainty, proceeds, regulatory considerations, and potential stakeholder impacts, our board concluded that selling the bank to a group of independent investors was the best step forward. Our sale of 90.1% of our bank simplifies HEI strategy and regulatory position and allows us to focus on our core utility business. The proceeds will be used to reduce holding company debt, strengthening our balance sheet, and increasing financial flexibility going forward. Following the Maui wildfires, we also said that the utility would quickly implement enhanced wildfire safety measures while working closely with the community and other stakeholders to develop an updated long-term wildfire safety strategy. In 2024, the utility implemented impactful measures on an expedited basis and just last month submitted its updated long-term wildfire safety strategy, which I'll discuss in more detail shortly. I'd add that the achievements made to progress the utility's wildfire safety strategy were made while continuing to progress another key strategic initiative. integrating increasing amounts of renewables on the utility's grid. The utility achieved a 36% renewable portfolio standard in 2024, up from 33% in 2023. This keeps Hawaiian Electric on track to reach its interim goal of 40% RPS by 2030. The utility was able to achieve this milestone while reducing customer rates, and the average residential bill decreased 7% in 2024. And finally, our utility is continuing its efforts at the Hawaii State Legislature to pursue creation of a wildfire recovery fund and a mechanism to support independent power producer financing of clean energy projects. I'd emphasize that it's still early in the legislative process, and our legislature is juggling a number of complicated issues this year. However, I'm pleased at the high level of engagement among so many in Hawaii to address these critical issues. Turning to the next slide, we remain deeply committed to advancing wildfire mitigation efforts. And since launching an expanded wildfire safety strategy in the wake of the Maui wildfires, the utility has rapidly advanced efforts to reduce the risk of wildfires. In 2024 alone, the utility invested approximately $120 million to make wildfire safety improvements. In 2024, our utility launched the Public Safety Power Shutoff Program, tested and replaced thousands of utility poles, upgraded miles of overhead power lines, cleared intrusive vegetation near electrical equipment, and installed weather stations and AI-assisted high-definition video cameras across our service territories. These initiatives reflect our ongoing dedication to supporting Hawaii's resilience and safety in the face of increasingly severe weather events. I'm pleased that we were able to make such substantial strides in 2024 to reduce the risk of wildfires ignited by utility equipment. In January, the utility filed an updated wildfire safety strategy with the PUC. The updated strategy builds on the immediate actions taken in response to the August 2023 wildfires and establishes a three-year action plan for 2025 through 2027. The cost of the plan is estimated at about 450 million dollars. With approximately 400 million dollars expected to be capital expenditures. The ultimate objective of the plan is to identify and implement measures that can accomplish the greatest risk reduction while balancing affordability and reliability for our communities. The utilities approach to accomplish this is detailed on slide 5. I'd note that implementation of the wildfire safety strategy will be an evolving process, which will include annual updates to the PUC and ongoing assessments of wildfire risk, mitigation measures, and environmental conditions. Lastly, I'll note that on February 6, the Hawaii Supreme Court heard oral arguments in the proceeding to resolve the outstanding issues with insurers who filed subrogation claims related to the 2023 Maui wildfires. Just a few days later, on February 10, the Court issued a unanimous decision in our favor. The Court's decision aligns with our position on key questions that arose from insurers' challenges to the settlement. It clarifies that, once the settlement becomes final, insurers seeking to recover amounts paid to settling plaintiffs cannot separately sue defendants. We're pleased that the Court's decision aligns with our arguments and was issued on an accelerated timeline. The decision helps move the settlement forward, bringing increased certainty to those who suffered loss in the Maui wildfires, while providing more clarity for our company's path toward reestablishing financial stability. This was a key step in finalizing the settlement, and the Second Circuit Court in Maui can now consider the settlement agreements for final judicial approval. We expect our first payment obligation under the settlement to become due late this year or early next. In summary, with our simpler, more focused business model, strong liquidity position, and measures in place to protect against the risk of catastrophic weather events going forward, we believe we're well positioned to continue executing on our priorities. Looking ahead, we'll continue to focus on obtaining supportive legislation, finalizing and implementing the settlement agreement in the Maui Wildfire Tort Litigation, and ultimately returning to investment grade. With that, I'll now turn the call over to Scott Deghetto.

Thank you, Scott. Turning to slide seven, I'll first touch briefly on the previously announced ASB transaction. At the end of 2024, We closed on the sale of 90.1% of ASB for $405 million based on a total valuation of $450 million. We are pleased to have completed this transaction in the timeline that we did with simultaneous signing and closing. The structure allowed us to avoid lengthy and uncertain regulatory reviews. The net proceeds of approximately $380 million will be used to pay down holding company debt. ASB's 2024 results are presented as discontinued operations in the consolidated financial statements. For the full year 2024, the net loss from discontinued operations totaled $103 million compared to net income of $53 million in 2023. The $103 million loss includes a net loss on the sale transaction of approximately $116 million which is net of a $2.4 million tax benefit. Excluding wildfire expenses, the goodwill impairment recorded in the second quarter, and the net loss recorded due to the sale transaction, ASB's core net income for 2024 was $79 million. The remainder of my comments on the quarter's results will focus on our continuing operations. For the full year 2024, we generated a loss from continuing operations of $1.3 billion. The results include wildfire settlement accruals of $1.9 billion pre-tax, as well as the impacts of other Maui wildfire related expenses. The results also include the $35 million asset impairment recorded at Pacific Current in the third quarter. Excluding these items, consolidated core net income was $124 million compared to $152 million in 2023. Utility coordinate income was $181 million compared to $195 million in 2023. The decrease in utility coordinate income was driven by higher O&M expenses, which included increased wildfire prevention-related expenses, such as vegetation management. Holding company core net loss was $56 million compared to $43 million in 2023. The higher core net loss was driven by lower Pacific current net income due to outages at both the Hamakua and Mahi Papa generating facilities. Turning to our liquidity on the next slide. As of the end of the fourth quarter, the holding company and the utility had approximately $566 million and $184 million of unrestricted cash on hand, respectively. The holding company cash balance includes the approximately $380 million from the ASB sale that will be used to retire debt. In addition, $479 million has been set aside in a wholly owned subsidiary created for the specific purpose of holding the first installment payment pursuant to the Maui wildfire settlement. This is included in restricted cash on the balance sheet. Looking ahead, we will continue to prudently manage our liquidity as we work through finalizing the settlement and as we formulate financing plans for future settlement payments and utility capital expenditure needs. At that, let's open up the call to questions.