10-K: Hawaiian Electric Rebounds in 2025, Addresses Wildfire Costs

Hawaiian Electric Industries reports a significant rebound in net income for 2025, driven by the resolution of wildfire-related claims and strategic divestitures, while facing ongoing challenges in renewable energy transition and capital access.

Summary

• Hawaiian Electric Industries (HEI) consolidated net income for common stock increased to $123.12 million in 2025, a significant improvement from a net loss of $(1,426.01) million in 2024.
• The Electric utility segment's net income was $168.22 million in 2025, compared to a net loss of $(1,226.36) million in 2024, which was primarily due to a $1.88 billion provision for wildfire tort-related claims.
• HEI has divested all non-utility affiliated companies in 2025, except for Mahipapa, which is in the process of being sold, as part of a strategy to focus on its Utilities as sole operating companies.
• HEI and Hawaiian Electric entered into settlement agreements for Maui wildfire tort-related legal claims, totaling $1.99 billion (HEI/Hawaiian Electric share), with the first of four annual installments of approximately $479 million expected in early 2026.
• HEI successfully raised approximately $557.7 million from a common stock offering in September 2024 to fund the first wildfire settlement installment.
• Credit ratings for both HEI and Hawaiian Electric were upgraded in May-June 2025 but remain below investment grade.
• The Utilities' kilowatt-hour (kWh) sales volume increased by 2.5% in 2025, attributed to warmer weather and ongoing economic recovery.
• The Utilities' carbon emissions reduction was approximately 25% as of December 31, 2025, an increase in emissions compared to the 27% reduction in 2024 due to higher customer electric usage. The 70% reduction target by 2030 is now expected to be achieved later than planned.
• The Public Utilities Commission (PUC) approved the Utilities' 2025-2027 Wildfire Safety Strategy (WSS) on December 31, 2025.
• HEI suspended its quarterly cash dividend after the second quarter of 2023, while Hawaiian Electric resumed quarterly dividends to HEI in Q1 2025 ($10 million per quarter).

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive filing. While the company has made significant progress in addressing the Maui wildfire liabilities through settlements and initial financing, and has returned to profitability, it still faces substantial financial obligations, ongoing challenges in its renewable energy transition, and restricted access to lower-cost capital due to its below-investment-grade credit ratings. The strategic divestiture of non-utility assets is a clear positive for focus.

Positives

• HEI's consolidated net income for common stock significantly improved to $123.12 million in 2025 from a substantial loss in 2024.
• The Electric utility segment returned to profitability with $168.22 million net income in 2025.
• Settlement agreements for Maui wildfire tort-related legal claims have been reached, providing clarity on a major liability.
• HEI successfully raised $557.7 million from a common stock offering in September 2024 to fund the first wildfire settlement installment.
• Credit ratings for both HEI and Hawaiian Electric were upgraded in May-June 2025, indicating improved financial stability, though still below investment grade.
• Increased borrowing capacities for HEI ($300 million) and Hawaiian Electric ($300 million) through amended credit facilities in September 2025.
• Utilities' kWh sales volume increased by 2.5% in 2025, reflecting economic recovery and warmer weather.
• The PUC approved the Utilities' 2025-2027 Wildfire Safety Strategy (WSS), outlining plans to reduce wildfire risk.
• The Utilities received a $95 million federal grant for the Climate Adaptation Transmission and Distribution Resilience Program.
• The Utilities achieved a 36.8% Renewable Portfolio Standard (RPS) in 2025, exceeding the 35.0% target and accruing a $1.9 million reward.
• Phase 1 deployment of 447,000 advanced meters under the Grid Modernization Strategy was completed.
• The PUC approved the Utilities' request to establish regulatory assets for the remaining net book value of retired fossil fuel generating units, allowing for future cost recovery.
• The second triennial audit of Affiliate Transaction Requirements (ATRs) compliance from January 2022 to December 2024 found no noncompliance findings.

Negatives

• HEI's consolidated net income for common stock in 2025 ($123.12 million) is still lower than 2023 levels ($199.24 million).
• The 70% carbon emissions reduction target by 2030 is expected to be achieved later than planned due to project delays, higher costs, supply chain disruptions, and federal policies.
• Credit ratings remain below investment grade, restricting access to lower-cost capital.
• HEI suspended its quarterly cash dividend after Q2 2023 and does not expect to pay dividends on common stock in the foreseeable future.
• The Maui wildfire tort litigation settlement requires substantial future payments ($1.99 billion from HEI/Hawaiian Electric), with remaining installments needing future financing.
• There is potential for further dilution to existing shareholders if HEI raises additional funds by issuing equity or equity-linked securities.
• Uncertainty remains regarding the resolution of subrogation claims from insurers, which is a condition for the wildfire settlement payments.
• Hawaii Island has two generators out of service for extended maintenance, risking generation shortfalls during peak demand.
• The 'One Big Beautiful Act' signed by President Trump in July 2025 may impact federal tax credits for wind and solar projects, potentially leading to higher prices for new renewable projects.
• New tariffs imposed on equipment and materials used in the construction of renewable facilities could increase project costs.
• The PUC dismissed the initial request to terminate or suspend Affiliate Transaction Requirements (ATRs) in September 2025, requiring a revised request.
• The estimated costs for the Utilities' proposed Waiau Repower Project increased from $847 million to $1.16 billion.
• The Utilities were unsuccessful in securing IIJA federal funding for Grid Modernization Strategy Phase 2 in 2024, requiring re-scoping and a new application.
• The Utilities' RPS was 36.8% in 2025, representing an increase in emissions compared to the 27% reduction in 2024 due to higher customer electric usage.

Risks

• Potential for further liabilities in excess of settlement amounts and regulatory penalties from the Maui windstorm and wildfires, leading to significant unrecoverable costs.
• Increased insurance premiums, inability to fully recover premiums through rates, or inability to obtain wildfire and general liability insurance coverage at reasonable rates.
• Inability to raise the necessary capital on reasonable terms for wildfire settlement payments, potentially leading to strategic alternatives like asset sales or bankruptcy.
• Potential for further dilution to existing shareholders if additional equity or equity-linked securities are issued to raise funds.
• Failure to execute financing plans could result in an event of default and acceleration of debt, potentially leading to filing for bankruptcy protection if waivers from lenders are not received.
• Extreme weather events, particularly those exacerbated by evolving climate dynamics, could increase the risk of equipment damage, inoperability, or contribution to wildfires.
• Future suspension, material reduction, or extended delay in dividends or other distributions from operating subsidiaries to HEI.
• Further downgrades by securities rating agencies in their ratings of HEI and Hawaiian Electric, impacting financing efforts and increasing the cost of capital.
• Risks of suffering losses and incurring liabilities that are uninsured or underinsured (e.g., transmission and distribution systems, business interruption).
• Impact of international, national, and local economic and political conditions (tourism, defense, real estate, federal government shutdowns, global unrest, pandemics) on customer ability to pay bills and operating costs.
• Inability to adequately address risks and capitalize on opportunities related to sustainability priority areas, including safety, reliability, resilience, decarbonization, economic health and affordability, secure digitalization, human capital management, employee engagement, and climate-related risks.
• Delays or preclusion of third-party or Utility projects due to citizen or stakeholder activism, increasing project costs.
• Effects of actions or inaction of the U.S. government or related agencies, including those related to the U.S. debt ceiling or budget funding, monetary policy, trade policy, energy and environmental policy.
• Timing, speed, and extent of changes in interest rates, leading to higher borrowing costs and changes in market liquidity.
• Potential delay or disapproval by the PUC of proposals related to wildfire safety, renewable energy, or grid resiliency, and related cost recovery.
• Reliance by the Utilities on outside parties such as the State, IPPs, and developers, and uncertainties surrounding technologies.
• Inability of the Utilities to recover undepreciated costs of fossil fuel generating units if they are required to be retired before the end of their expected useful life.
• Capacity and supply constraints or difficulties if generating units fail or demand-side management/supply-side resources fall short of achieving forecasted benefits.
• High and/or volatile fuel prices, increasing working capital requirements and customer bills.
• Continued availability or modifications of other cost recovery mechanisms, including purchased power adjustment clauses (PPACs), annual revenue adjustment (ARA), and pension and postretirement benefits other than pensions (OPEB) tracking mechanisms.
• Impact from the PUC's modification of the Performance-Based Regulation (PBR) framework, including potential changes to existing and/or addition of new performance incentive mechanisms (PIMs) and earnings sharing mechanisms (ESM).
• Growing risk that energy production from renewable generating resources may be curtailed and interconnection of additional resources will be constrained.
• Potential that, as IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units.
• New technological developments that could affect the operations and prospects of the Utilities or their competitors, such as energy storage and microgrids.
• Cyber or physical security incidents, including potential incidents at HEI, its subsidiaries, third-party service providers, contractors, and customers, leading to operational disruption, data misappropriation, or reputational harm.
• Failure to achieve remaining cost savings commitment related to management audit recommendations of $6.6 million per year during the multi-year rate period (MRP).
• Increased federal and state environmental regulation requiring an increasing commitment of resources and funds, and potentially resulting in construction delays or penalties and fines for non-compliance.
• Impact from the PUC's implementation of wheeling for the Utilities, including cost shifting and customer equity considerations, and potential increased competition.
• Developments in laws, regulations, and policies governing protections for historic, archaeological, and cultural sites, and plant and animal species and habitats.
• Discovery of conditions that may be attributable to historical chemical releases, including any necessary investigation and remediation.
• Decisions by the PUC in rate cases and other proceedings, including risks of delays, adverse changes in final decisions, and disallowance of project costs.
• Changes in accounting principles applicable to HEI and its subsidiaries, including the potential discontinuance of regulatory accounting.
• The final outcome of tax positions taken by HEI and its subsidiaries.
• The ability to effectively utilize federal and state net operating loss carryforwards.
• The ability to service the non-recourse debt of Mahipapa, LLC, if the Company is unable to complete its sale.
• The Utilities' operations are more vulnerable to service interruptions than mainland U.S. utilities due to isolated island systems and lack of interconnections.
• Increasing competition and technological advances could cause HEI's businesses to lose customers or render their operations obsolete.
• The Utilities may be adversely affected by not being able to attract and retain qualified personnel, particularly key executives.
• The Utilities may be adversely affected by new legislation, executive orders, or administrative actions, such as the 'One Big Beautiful Act' impacting federal tax credits for renewable projects.
• Changes to the Utilities' current business model to alternative models, such as co-ops or municipal, or to unbundle generation from transmission and distribution, could potentially cause the Utilities to lose their competitive advantages.

Future Outlook

The Utilities anticipate achieving their 70% carbon emissions reduction target later than the original 2030 date due to project delays, increased costs, supply chain disruptions, and federal policy impacts, but expect to meet or exceed the State of Hawaii's Renewable Portfolio Standard goals. Post-2030, carbon elimination will rely on continued use of proven renewable resources and the development of new technologies like offshore wind and green hydrogen. HEI management believes it can secure the necessary capital for remaining wildfire settlement payments, though no assurance is provided. The Utilities are pursuing an alternative non-rate case re-basing proposal for the next Multi-Year Rate Period (MRP2), aiming for implementation by January 2027, or will file a rate case in the second half of 2026 if unsuccessful. The company is committed to electrifying 100% of its class 1 vehicles by 2035 and will continue to mature its Public Safety Power Shutoff (PSPS) program.

Management Comments

• "Management believes the Companys cash and cash equivalents amount of $502 million and GLST1s restricted cash amount of $479 million, both as of December 31, 2025, the available capacity on Hawaiian Electrics asset-based lending facility (ABL Facility), additional liquidity under HEIs registered at-the-market offering program as well as expenditure reduction efforts effectively alleviate any conditions that may cause substantial doubt regarding HEIs and Utilities ability to continue as a going concern."
• "While management believes the Company will be able to raise the necessary capital, there is no assurance that managements plans will be successful."
• "The Utilities mission is to empower their communities and customers with safe, reliable, resilient, affordable, and clean energy."
• "The Utilities believe that a holistic approach to evolving climate dynamics is needed, working on both climate mitigation efforts along with climate adaptation efforts."
• "The Utilities are fully aligned with, and supportive of, state policy to achieve a decarbonized future and have made significant progress in reducing emissions through renewable energy and electrification."
• "The Utilities continue to seek prudent opportunities to develop, test, pilot, and implement technologies that align with their technical and business plans and support WSS, clean energy and decarbonized goals, while ensuring reliability and resilience as the Utilities adapt to evolving climate dynamics."

Industry Context

StockSavvy.ai notes that HEI's strategic shift to divest non-utility assets aligns with a broader industry trend among utilities to focus on core regulated operations, especially in the face of significant liabilities like those from the Maui wildfires. The ongoing challenges in achieving renewable energy targets and the impact of federal policy changes (e.g., 'One Big Beautiful Act') reflect broader industry headwinds in the clean energy transition, where supply chain disruptions, inflation, and financing costs are prevalent. The emphasis on grid modernization and wildfire safety is a critical and growing area for utilities, particularly those in climate-vulnerable regions, necessitating substantial capital investment and regulatory support.

Comparison to Industry Standards

• The Utilities' isolated electrical systems on Hawaiian islands necessitate higher reserve generation and cost structures compared to interconnected mainland U.S. utilities, which can share reserve capacity.
• The 2025 Renewable Portfolio Standard (RPS) of 36.8% demonstrates progress towards Hawaii's ambitious 100% renewable energy goal by 2045, which is more aggressive than many mainland U.S. states.
• The PUC's Performance-Based Regulation (PBR) Framework, including mechanisms like Annual Revenue Adjustment (ARA), Exceptional Project Recovery Mechanism (EPRM), Performance Incentive Mechanisms (PIMs), and Shared Savings Mechanisms (SSMs), represents a sophisticated regulatory approach designed to incentivize performance and manage costs during the energy transition, potentially offering more stability than traditional rate cases.
• The increase in estimated costs for the Waiau Repower Project from $847 million to $1.16 billion highlights the inflationary pressures and supply chain challenges impacting large-scale infrastructure projects across the utility sector, comparable to similar projects facing cost overruns in other regions.

Management Changes

Corporate Governance

Legal Proceedings

• **Maui Windstorm and Wildfires Tort-Related Legal Claims**: Multiple civil and class action lawsuits filed against HEI, the Utilities, and other defendants. Settlement Agreements effective November 1, 2024, obligate HEI and Hawaiian Electric to contribute $1.99 billion. The Class Settlement Agreement received final court approval on January 26, 2026, and appears final and unappealable as of February 26, 2026. Resolution of subrogation claims from insurers remains a condition for payment.
• **Insurer Litigation**: Two primary subrogation actions brought by various insurers. The court entered judgment in favor of the defendants on December 30, 2025, but certain plaintiff insurers have appealed these rulings.
• **Securities Class Action**: A putative securities class action filed August 24, 2023, alleging violations of the Securities Exchange Act. A binding term sheet was signed November 5, 2025, for a $47.8 million settlement payment by the Company, offset by an insurance reimbursement receivable. A preliminary court approval hearing was held February 26, 2026.
• **Shareholder Derivative Lawsuits**: Multiple putative shareholder derivative actions filed against current and former officers and directors. A binding term sheet was signed November 5, 2025, for a $100 million settlement funded by the Company's insurers, which will also fund the Securities Action settlement and plaintiffs' counsel fees. A preliminary court approval hearing is scheduled for March 9, 2026.
• **Hu Honua Bioenergy, LLC Litigation**: Ongoing litigation and negotiations regarding a Power Purchase Agreement (PPA). Federal antitrust claims were dismissed, and state claims were dismissed without prejudice. An appeal was filed in the federal Ninth Circuit court, and a state court scheduling conference is postponed to July 7, 2026.
• **Molokai New Energy Partners (MNEP) Breach of Contract**: A complaint filed March 25, 2020, by MNEP against Maui Electric. The trial is currently set to begin November 13, 2026.
• **Environmental Proceedings**: Ongoing investigatory and remedial actions at the former Molokai Electric Company generation site, with a reserve balance of $2.4 million for remediation. A reserve balance of $9.7 million is recorded for PCB contamination investigation and remediation at the Pearl Harbor Superfund Site.
• **Endangered Species Act Complaint**: A notice received in January 2024 regarding alleged impacts on endangered seabirds. A settlement agreement was approved November 12, 2024, for powerlines. A second complaint filed November 19, 2024, regarding street and facility lights, with a trial set for April 20, 2026.

Related Party Transactions

• HEI charged the Utilities $6.2 million for general management and administrative services in 2025.
• Hamakua Energy, an indirect subsidiary of HEI until its sale on March 10, 2025, sold energy and capacity to Hawaii Electric Light for $7 million in 2025.
• Hawaiian Electric's short-term borrowings from HEI totaled nil at December 31, 2025.
• Hawaiian Electric made long-term intercompany loans to Hawaii Electric Light ($25 million) and Maui Electric ($90 million) on November 3, 2025.

Stakeholder Impact

• **Shareholders**: HEI common stock dividends remain suspended, and there is potential for future dilution from capital raises. However, the clarity provided by the wildfire settlement agreements may reduce uncertainty.
• **Customers**: The Utilities' ability to recover costs through rates (e.g., for wildfire mitigation and Exceptional Project Recovery Mechanism projects) will impact customer bills. The Public Safety Power Shutoff (PSPS) program, implemented for wildfire safety, may lead to service disruptions for customers.
• **Employees**: A new three-year collective bargaining agreement was ratified for roughly half of the Utilities' workforce, providing a 3% general wage increase annually, double time for callouts, and a 1% incentive payment. The company is committed to fostering an inclusive culture, employee development, and safety.
• **Creditors**: Credit rating downgrades negatively impacted access to lower-cost capital, but increased borrowing capacities and successful debt issuance provide some stability. The resolution of wildfire liabilities is a positive for creditor confidence.
• **Suppliers/Independent Power Producers (IPPs)**: The 'One Big Beautiful Act' may impact federal tax credits for wind and solar projects, potentially leading to higher prices for new renewable projects. State legislation (Act 191) aims to ensure project owners receive payment despite utility financial distress, which could benefit IPPs.

Next Steps

• HEI and Hawaiian Electric will continue to work with financial advisors on a financing plan to raise additional capital for the remaining wildfire tort claims.
• The first installment of the Maui wildfire tort litigation settlement (approximately $479 million) is expected to be made no sooner than early 2026.
• The United States District Court for the Northern District of California will set a hearing date for the final approval of the Securities Action Stipulation of Settlement.
• The United States District Court for the District of Hawaii is scheduled to hold a hearing on March 9, 2026, to consider preliminary approval of the Derivative Litigation Settlement Agreement.
• The Utilities will continue to monitor for new executive orders and changes impacting federal funding for the Resilience Program.
• The Utilities are re-scoping Grid Modernization Strategy Phase 2 and plan to file an updated PUC application for updated project costs in the second quarter of 2026.
• The Utilities are exploring other options for procuring renewable energy on Lanai after a selected project's negotiations were terminated.
• The Utilities are still accepting project applications for small Community-Based Renewable Energy (CBRE) projects less than 250 kW.
• The PUC will resume Phase 6 of the Performance-Based Regulation (PBR) Framework Review (examination of modifications) following resolution of the alternative re-basing proposal.
• The Utilities are to file responses to comments on their Track A Retail Wheeling Straw Proposal by March 6, 2026.
• The Utilities will provide a 2026-2027 Wildfire Mitigation Plan Update and guidance for the 2028-2029 plan.
• The Utilities will continue to mature the Public Safety Power Shutoff (PSPS) program as they gain experience.
• The Utilities will continue to work with key stakeholders in balancing the risk of utility-related wildfires with the risk to the public arising from not having electricity.
• The Utilities will continue to assess the impact of the 'One Big Beautiful Act' and other trade policies on future reporting periods.
• The Utilities will continue to meet with the PBR working group to develop an alternative rate re-basing proposal, with a deadline for submission by March 6, 2026.
• The Utilities are to file a rate case in the second half of 2026, utilizing a 2027 test year, if a satisfactory non-rate case re-basing alternative cannot be achieved.
• Hawaiian Electric will proceed with implementing an alternative solution for stranded customers from a terminated Grid Services Purchase Agreement, pending PUC approval.
• The Utilities are engaging in discovery and settlement discussions for the Endangered Species Act complaint regarding street and facility lights, with a trial set for April 20, 2026.
• The Molokai New Energy Partners (MNEP) breach of contract trial is set to begin November 13, 2026.
• Hu Honua Bioenergy, LLC and Hawaii Electric Light are continuing negotiations for a potential Power Purchase Agreement (PPA), with an open-ended extension to respond to the State complaint.

Key Dates

Recommendation

The company has made substantial progress in addressing the significant financial overhang from the Maui wildfires through settlements and initial financing, which is a positive step towards stability. The return to profitability in the utility segment and credit rating upgrades are encouraging. However, HEI still faces considerable future settlement payments, ongoing challenges in its renewable energy transition, and its credit ratings remain below investment grade, limiting access to cheaper capital. The suspension of common stock dividends also impacts shareholder returns. Given the mix of positive developments and persistent risks, a 'Hold' recommendation is appropriate for investors to monitor the execution of financing plans and the progress on long-term strategic goals.

Keywords

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