Hawaiian Electric executives are calling for a “whole-of-society approach” to address wildfire risks facing the investor-owned utility, which is named in more than 100 lawsuits alleging the company started blazes that burned down most of Lahaina and killed at least 101 people in August.
The utility holding company Hawaiian Electric Industries Inc., which also owns American Savings Bank, remains financially healthy, with plenty of cash on hand and a pending initiative to raise more if needed, Scott DeGhetto, the company’s executive vice president, chief financial officer and treasurer, said during a conference call with investors on Tuesday.
The holding company had about $137 million in cash at the end of the year, and the utility subsidiary has $106 million, DeGhetto said. Plus the company is looking to access some $200 million to $250 million more through a new credit account collateralized by accounts receivable, or money that customers owe the company.
The description of this substantial “cash runway” comes as Hawaiian Electric faces a potential financial crisis after the Maui wildfires. Similarly devastating fires and ensuing lawsuits in Northern California drove Pacific Gas and Electric Corp. into bankruptcy in 2019. And there’s been widespread speculation that Hawaiian Electric could suffer the same fate, as the company’s stock price and bond rating have tanked.
Hawaiian Electric spent $138.4 million on wildfire-related expenses for the year ended Dec. 31, the company reported Tuesday. That included $34.9 million in legal fees.
But the expenses were offset by insurance recovery of some $104.6 million for the year. Plus, the company has been allowed to defer some $14.7 million in wildfire-related costs to a later date for accounting purposes, which has also lessened the financial sting for now.
As a result, wildfire-related expenses for the year, excluding insurance recovery and cost deferrals, amounted to $19.1 million for the year.
Still, the company faces massive potential liabilities. More than 140 insurance companies spanning several countries and a dozen U.S. states recently joined the stampede of lawsuits against the utility seeking reimbursement for claims already paid out to policyholders for property damage claims.
The insurers have paid out more than $1 billion in property claims alone, according to the Hawaii Insurance Division. Hawaiian Electric’s market value as of Tuesday was $1.4 billion.
Meanwhile, state officials have responded with a number of steps to help one of the state’s oldest and most prestigious corporations, which provides electricity to some 460,000 customers statewide.
Gov. Josh Green has helped assemble a $175 million settlement fund to pay up to $1.5 million each to people injured or families of people killed to settle lawsuits. The Maui Recovery Fund, part of Green’s One Ohana initiative, is expected to begin accepting applications in March. Hawaiian Electric has contributed $75 million in liability insurance proceeds to the fund, which has received additional money from the state, Maui County, Hawaiian Telcom, Spectrum and Kamehameha Schools, which are also defendants in various suits.
A second fund, not yet established, would pay property owners and businesses harmed by the fires.
Utility Customers Could Face A New Fee To Mitigate Wildfire Risk
Lawmakers, meanwhile, have proposed measures that will allow the utility to raise additional money by issuing bonds financed by new fees charged to customers. Securitized by utility customers, such bonds are considered low risk and thus carry lower interest rates than other corporate bonds. The idea is they’re better for ratepayers in the long run than other bonds.
The bills, which the company drafted, explain, “public utilities must raise the capital to fund near-term costs and expenses to develop and implement effective plans for wildfire risk mitigation, contribute to disaster relief funds, and, as necessary, fund litigation and settlements.”
Hawaiian Electric’s president and chief executive, Scott Seu, repeatedly returned to the theme of unity during the company’s conference call with investors. He invoked Green’s One Ohana plan on several occasions.
“One ‘Ohana Provides Constructive Framework for Resolution and Long-term Solutions,” one of Seu’s presentation slides said.
“Under One ‘Ohana, many parties are working together to find solutions to help the families most impacted by the fires, reduce the risk of catastrophic wildfires and provide economic stabilization for the state,” Seu said.
The settlement fund, for instance, “will help with healing and help everyone move forward,” Seu said at another point.
Regulators and intervenors in the regulatory process are also allowing things to move forward. Hawaiian Electric had a big win this month when the Hawaii Public Utilities Commission approved a $190 million grid resilience plan, which includes $95 million in support funding from the U.S. Department of Energy.
Still, numerous questions remained unanswered. The company could not say how much wildfire mitigation measures will cost in the end, for instance. Whether the bills designed to help the company will pass also remains uncertain. And it’s unknown where exactly the money for the second settlement fund, for property damage claims, will come from.
Still, Seu expressed optimism, continuing the theme of unity as the call closed. He mentioned the governor, lawmakers and “the community,” and said, “We will chart a path forward together.”
Hawaiian Electric shares closed at $13.11, down 3.9% for the day, and far below the 52-week high of $43.09.
Civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.
