HAWAIIAN ELECTRIC INDUSTRIES INC

• Also, see segment discussions which follow.

NM - Not meaningful.

The Company’s effective tax rates for the second quarter and first six months of 2024 were 26% tax benefit and for the second quarter and first six months of 2023 were 21% tax expense. The effective tax rates for the second quarter and for the first six months of 2024 was higher than the comparable period due to the substantial pre-tax loss resulting from the Utilities’ accrual of the loss contingencies related to the tort-related claims because the impact of permanent items had a smaller impact on the effective rate.

For the three and six months ended June 30, 2024, the Company’s incremental expenses related to the Maui windstorm and wildfires described in Note 2 of the Condensed Consolidated Financial Statements, were as follows:

1 Related to the PUC’s order, received on December 27, 2023, approving deferred accounting treatment for the Utilities’ incremental non-labor expenses related to the August 2023 Maui windstorm and wildfires. Amounts were reclassified to a regulatory asset. See Note 2 of the Condensed Consolidated Financial Statements.

2 Represents the Utilities’ best estimate of the losses related to a proposed settlement of all wildfire tort-related legal claims and cross claims as of June 30, 2024. See Note 2 of the Condensed Consolidated Financial Statements.

3 Includes $2.8 million and $9.5 million pursuant to an agreement to settle indemnification claims asserted by the State of Hawaii, for the three and six months ended June 30, 2024, respectively. See Note 2 of the Condensed Consolidated Financial Statements.

Note: Other segment Maui windstorm and wildfires related expenses - legal, outside services and other are included in “Expenses-Other” and interest expense is included “Interest expense, net—other than on deposit liabilities and other bank borrowings” on the HEI and subsidiaries Condensed Consolidated Statements of Income. See Electric utility and Bank sections below for more detail.

Since the Maui windstorm and wildfires on August 8, 2023 through June 30, 2024, HEI and its subsidiaries have incurred approximately $1.9 billion of Maui windstorm and wildfires expenses, including the Utilities’ best estimate of the losses related to a proposed settlement of all wildfire tort-related legal claims and cross claims and the One ‘Ohana Initiative contribution. Certain of these costs are reimbursable under excess liability insurance, professional liability and directors and officers liability insurance policies. As of June 30, 2024, HEI and its subsidiaries have approximately $41 million, $25 million and $133 million of insurance coverage remaining under the excess liability, professional liability and directors and officers liability policies, respectively, after deducting applicable retention amounts and estimated insurance recoveries, including the One ‘Ohana

Initiative contribution.

With the Company accruing its best estimate of the losses related to a proposed settlement of all wildfire tort-related legal claims and cross claims as of June 30, 2024, the Company still expects the Electric utility and HEI to continue to incur primarily legal expenditures in connection with the Maui windstorm and wildfires; however, the Company has partially mitigated the financial impact through insurance recoveries as well as the Utilities obtaining deferral treatment for incremental non-labor expense. At ASB, the lessening of loss uncertainties related to the Maui windstorm and wildfires have had a positive impact on its provision for credit losses, improving loss rates and lower loan portfolio balances.

Economic conditions.

Note: The statistical data in this section is from public third-party sources that management believes to be reliable (e.g., Department of Business, Economic Development and Tourism (DBEDT), University of Hawaii Economic Research Organization (UHERO), U.S. Bureau of Labor Statistics, Department of Labor and Industrial Relations (DLIR), Hawaii Tourism Authority (HTA), Honolulu Board of REALTORS® and national and local news media).

In the second quarter, the average daily passenger count was 1.7% lower than the comparable period in the prior year. The recovery in total passenger counts from the low levels in 2020, which occurred under COVID-19 restrictions, thus far has been driven by domestic travelers, with international travelers, primarily Japan, remaining at lower levels. In the second quarter, international visitor arrivals (excluding Japan) have continued to increase at a modest pace, but is still 23.9% below 2019 levels. Due to the weak yen, Japanese visitors are 44% below 2019 levels.

Hawaii’s seasonally adjusted unemployment rate in June 2024 was 2.9%, which was higher compared to the June 2023 rate of 2.8%. The national unemployment rate in June 2024 was 4.1% compared to 3.6% in June 2023. According to the most recent forecast by UHERO, issued on May 10, 2024, job growth in the state will decrease to 0.8% for 2024 and 1.0% for 2025. The Maui windstorm and wildfires destroyed a majority of the businesses in Lahaina, but initial visitor recovery after the wildfires has proven to be somewhat stronger than initially expected. The labor market recovery on Maui was also stronger than expected, reflecting faster employment recovery and anticipated outflows from the labor force as some residents relocate off island. Accordingly, unemployment on Maui is predicted to average 5.6% in 2024, slightly receding to 4.6% by 2026.

Hawaii real estate activity through June 2024, as indicated by Oahu’s home resale market, resulted in an increase in the median sales price of 3.9% for condominiums and an increase of 6.7% for single-family homes compared to the same period in 2023, with the June median single-family home price of $1,120,000, below the record $1,153,500 set in May 2022. The number of closed sales decreased 24.5% for condominiums and increased 4.0% for single-family residential homes through the second quarter of 2024 compared to 2023.

Hawaii’s petroleum product prices relate to the crude oil in international markets. The price of crude oilhas decreased about 6% over the same quarter in the prior year. While the fuel costs are below 2023’s peak, they remain elevated.

At its June 12, 2024 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range of 5.25% - 5.50%. The FOMC is still assessing plans to adjust its stance on monetary policy depending on the economic outlook to achieve maximum employment and inflation at the rate of 2 percent over the long run. The Federal Reserve stated that it will continue to reduce its holdings of Treasury securities and agency mortgage-backed securities.

UHERO forecasts full year 2024 real GDP growth of 1.5%, an increase in total visitor arrivals of 1.9%, an increase in real personal income of 0.9%, and an unemployment rate of 3.1%. The Maui visitor industry has been recovering faster than anticipated and international visitors to the state are gradually returning. Hawaii has seen strong visitor spending at the end of 2023, however real visitor spending is expected to soften, before stabilizing in 2025. The 2024 U.S. economy continues to expand supported by strong consumer spending, healthy job markets and progress on reducing inflation, which will help bring inflation into the Fed’s target range and achieve a “soft landing”.

See also “Recent Developments” in the “Electric utility” and “Bank” sections below for further discussion of the economic impact of recent events.

“Other” segment.

1 Hamakua Energy’s sales to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.

The “other” business segment loss includes results of the stand-alone corporate operations of HEI (including eliminations of intercompany transactions) and ASB Hawaii, Inc. (ASB Hawaii), as well as the results of Pacific Current, a direct subsidiary of HEI focused on investing in clean energy and sustainable infrastructure projects; Pacific Current’s indirect subsidiary, Hamakua Energy, which owns a 60 MW combined cycle power plant on Hawaii Island that provides electricity to Hawaii Electric Light; Pacific Current’s subsidiaries, Mauo, LLC (Mauo), which owns solar-plus-storage projects totaling 8.6 MW on five University of Hawaii campuses, Mahipapa, which owns a 7.5 MW nameplate biomass facility on Kauai, Alenuihaha Developments, LLC, which owns a collection of renewable energy assets on Oahu and Kauai, Ka‘ie‘ie Waho Company, LLC, which owns a 6 MW solar photovoltaic system that provides renewable energy to Kauai Island Utility Cooperative, and Ka‘aipua‘a, LLC, which is constructing a wastewater treatment and energy recovery facility on Hawaii Island; as well as eliminations of intercompany transactions.

In late February 2024, Hamakua Energy’s first combustion turbine (CT1) and its leased combustion turbine (leased CT) unexpectedly sustained damages resulting in a plant shut down on Hawaii Island. The Company is currently conducting an investigation into the root cause of the damages. Upon inspection of CT1, it was determined that the unit was not serviceable. Due to the generation capacity shortfall on Hawaii Island (refer to “System reliability” in“Recent developments” of the

Hawaiian Electric’s MD&A below), and the extensive timeline and cost to overhaul CT1, management decided to retire and replace CT1. Due to the age of the unit, the net book value is immaterial. In April 2024, Hamakua Energy purchased a new combustion turbine and installed the unit in May 2024 at a total cost of approximately $8.3 million. The new CT1 was placed into service in June 2024. Pursuant to the lease pool program agreement, the leased CT was returned to the lessor. A new leased CT has been delivered and is expected to be placed into service in the third quarter of 2024. Hamakua Energy’s second combustion turbine (CT2) is currently in a scheduled overhaul which has incurred delays due to supply shortages. The CT2 overhaul is expected to be completed and the unit placed back into service in the fourth quarter of 2024.

In March 2024, a fire destroyed the cooling tower at the Mahipapa facility on Kauai. The fire was ignited from a vendor’s welding activities being performed on the cooling tower during its scheduled maintenance. As a result, the plant is currently shut down while repairs are being performed. Mahipapa recorded an impairment loss of $3.5 million in March 2024. The Company expects to complete its repairs and bring the facility back online in the third quarter of 2024. Mahipapa is currently working with its legal counsel and insurance company on seeking reimbursement of its losses related to damages sustained to its plant facilities.

Liquidity and capital resources. See “Credit and Capital Market Risk” in Item 1A. Risk Factors in HEI’s and Hawaiian Electric’s 2023 Form 10-K and in Item 1A. Risk Factors below.

In June 2024, the Utilities accrued estimated wildfire liabilities totaling approximately $1.71 billion (pre-tax) that are considered probable, related to the settlement of the Maui windstorm and wildfire tort-related legal claims (see Note 2 of the Condensed Consolidated Financial Statements). For the three and six months ended June 30, 2024, HEI and its subsidiaries incurred net losses of approximately $1.30 billion and $1.25 billion, respectively.

HEI and the Utilities’ future results of operations involve significant risks and uncertainties. Factors that could affect HEI’s and the Utilities’ future operating results and could cause actual results to vary materially from expectations include, but are not limited to, access to capital, ability to attract and retain key personnel, and pending or threatened litigation (including recent litigation noted above).

Management believes HEI and the Utilities’ current combined cash balance at June 30, 2024 of $213.1 million and the available capacity on the Utilities’ ABL facility will not be sufficient to fund its planned expenditures, which includes estimated payments to settle wildfire claims, through at least August 2025.

These conditions raise substantial doubt about HEI’s and the Utilities’ ability to continue as a going concern within one year after the date that financial statements are issued. The ability to continue as a going concern is dependent primarily upon the Company’s ability to raise the capital necessary to fund the contribution to the settlement of wildfire tort claims while also meeting their obligations to repay their liabilities arising from normal business operations when they become due. The accompanying consolidated financial statements have been prepared on a basis which assumes HEI and the Utilities are a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from any uncertainty related to HEI’s and the Utilities’ ability to continue as a going concern. Such adjustments could be material.

HEI and the Utilities are currently working with their financial advisors on a financing plan to raise the capital necessary to fund the contribution to the settlement of wildfire tort claims. The Company expects to finance the settlement payments over time through a mix of debt, common equity, equity-linked securities or other potential options. While management believes the Company will be able to raise the necessary capital, there is no assurance that management’s plans will be successful. If the financing plans are unsuccessful, the Company may need to consider other strategic alternatives. See further discussion in Part II. Other Information—Item 1A. Risk Factors.

At the end of the quarter, HEI and Hawaiian Electric had no commercial paper outstanding. As of June 30, 2024, ASB’s unused FHLB borrowing capacity was approximately $1.5 billion and ASB had unpledged investment securities of $1.0 billion that were available to be used as collateral for additional borrowing capacity. At both June 30, 2024 and December 31, 2023, the total amount of available borrowing capacity (net of commercial paper outstanding) under the Company’s committed lines of credit was nil. As of June 30, 2024, HEI consolidated has $2.8 billion of long-term debt, net - other than bank, of which $59 million is due within 12 months and $284 million is due within 24 months.

As of June 30, 2024, HEI’s cash and cash equivalents balance, excluding its subsidiaries, was $124 million, compared to $127 million as of March 31, 2024 and $137 million as of December 31, 2023. The Company believes that its cash and cash equivalents and expected operating cash flow from operations would not be sufficient to meet the Company’s cash requirements in the next 12 months following the issuance of the financial statements. This is primarily due to the estimated liability to settle wildfire claims; the result of the August 2023 downgrades of their credit ratings to below investment grade which prevents the Company from accessing unsecured, short-term borrowings and continues to restrict access to the capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms; extended plant shutdowns at Pacific Current’s Mahipapa facility; and higher working capital requirements resulting from inflation and elevated fuel prices. The Company is currently working with its financial advisors on a financing plan to raise the capital necessary to fund the contribution to the settlement of wildfire tort claims. While management believes the Company will be able to raise the necessary capital, there is no assurance that management’s plans will be successful.

For the Utilities, while fuel prices have moderated from their highs in 2022, they remain elevated and have increased the cost of carrying fuel inventory and higher customer accounts receivable balances as fuel is consumed and billed to customers. While the accounts receivable balance has decreased since December 2023, it remains elevated coming out of the pandemic and has led to higher bad debt expense and higher write-offs in 2023 and year-to-date 2024, following the end of the moratorium on disconnections. The higher bad debt expense is expected to continue until the Utilities return to pre-pandemic collection practices, along with a decrease in volume, for delinquent accounts. The Maui windstorm and wildfires have not and are not anticipated to materially impact accounts receivable, however, it will lead to higher bad debt expense. As of June 30, 2024, approximately $13.8 million of the Utilities’ accounts receivables were over 30 days past due. Of the over 30 days past due amounts, approximately 36% were on payment plans. In addition to the cash flow impact from delayed collection of accounts receivable, lower kWh sales relative to the level of kWh sales approved in the last rate case generally result in delayed timing of cash flows, resulting in higher working capital requirements (see “Recent Developments” in the Electric utility section below).

If further liquidity is deemed necessary in the short term, the Utilities could also reduce the pace of capital spending related to non-essential projects, manage O&M expenses, seek borrowings on a secured basis, and explore asset sales.

At ASB, liquidity remains at satisfactory levels. ASB’s cash and cash equivalents was $335 million as of June 30, 2024, compared to $435 million as of December 31, 2023. ASB remains well above the “well capitalized” level under the FDIC Improvement Act prompt correction action capital category, and while the Hawaii economic outlook remains stable, there are emerging risks from potential continued turmoil in the banking industry, inflation, higher interest rates and the tightening of monetary policy that increase the risk of a recession, which could create increased uncertainty regarding the impact on loan performance and the allowance for credit losses (see “Recent Developments” in the Bank section below).

HEI Consolidated material cash requirements. Material cash requirements of HEI Consolidated include: payments related to settlement of tort-related legal claims and cross claims, Utility related capital expenditures (including capital expenditures related to wildfires and wildfire mitigations), labor and benefit costs, O&M expenses, legal and consulting costs related to the Maui windstorm and wildfires, fuel and purchase power costs, and debt and interest payments; Bank related investments in loans; HEI related labor and benefits costs, debt and interest payments and legal and consulting costs related to the Maui windstorm and wildfires and HEI equity contributions to support Pacific Current’s sustainable infrastructure investments.

The substantial doubt about the Company’s ability to continue as a going concern and the Company’s credit rating downgrades related to the Maui windstorm and wildfires will continue to adversely impact its ability to access capital markets and other sources of debt and equity financing, if at all, in a timely manner and on acceptable terms The Company is currently working with its financial advisors on a financing plan to raise the capital required to settle its wildfire claims. While management believes the Company will be able to raise the necessary capital, there is no assurance that management’s plans will be successful. Further, the suspension of dividends from its subsidiaries, the economic impact of higher fuel prices, inflation, higher interest rates, tightening of monetary policy and geopolitical situations, create significant uncertainty, and the Company cannot predict the extent or duration of these conditions, the future effects that these conditions will have on the Company’s financing plan, cost of capital and its ability to access additional capital, or the future impacts on the Company’s financial position, results of operations, and cash flows.

The consolidated capital structure of HEI (excluding deposit liabilities and other bank borrowings) was as follows:

On March 12, 2024, S&P revised HEI’s outlook to “Negative” from “Watch Negative” and affirmed the “B-” issuer credit rating. The downgrades of HEI’s credit ratings will continue to adversely impact its ability to access capital markets and other sources of debt financing, if at all, in a timely manner and on acceptable terms.

There were no new issuances of common stock through the Dividend Reinvestment Program (DRIP), HEIRSP or the ASB 401(k) Plan in the six months ended June 30, 2024 and 2023.

For the first six months of 2024, net cash provided by operating activities of HEI consolidated was $193 million. Net cash provided by investing activities for the same period was $34 million, primarily due to ASB’s net decrease in loans held for investment, proceeds of sale of commercial loans and ASB’s receipt of investment security repayments and maturities, partly offset by capital expenditures and purchase of FHLB stock, net of redemption. Net cash used in financing activities during this period was $355 million primarily due to net decreases in ASB’s other bank borrowings and deposit liabilities.

Dividends. The payout ratios for the first six months of 2024 and full year 2023 were nil and 59%, respectively. The HEI Board of Directors evaluates the dividend quarterly and considers many factors in the evaluation including, but not limited to, the Company’s results of operations, the long-term prospects for the Company, current and expected future economic conditions, and capital investment alternatives. In August 2023, due to the potential impact from the Maui windstorm and wildfires, the HEI Board of Directors voted to suspend the quarterly cash dividend, starting after the second quarter dividend. This action is intended to allow the Company to provide additional liquidity and allocate cash to rebuilding and restoring power and help ensure a strong future for the Utilities and Bank. The ASB Board of Directors determined to suspend its quarterly cash dividends to HEI, starting after the second quarter 2023 dividend, to help ensure maximum possible Bank liquidity and capital. The Hawaiian Electric Board of Directors determined it would suspend its quarterly dividends to HEI, starting with the second quarter 2024 dividend, which would have been paid in the third quarter of 2024. The decision of the Hawaiian Electric Board of Directors to suspend its dividend to HEI was based upon the size of the proposed settlement of wildfire tort litigation and the fact that, although HEI and the Utilities are working with their financial advisors on a plan to fund the settlement, no definitive funding plan currently exists, all of which raise substantial doubt as to Hawaiian Electric’s and HEI’s ability to continue as a going concern.

MATERIAL ESTIMATES AND CRITICAL ACCOUNTING POLICIES

In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ significantly from those estimates.

In accordance with SEC Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” management has identified the accounting policies it believes to be the most critical to the Company’s financial statements—that is, management believes that these policies are both the most important to the portrayal of the Company’s results of operations and financial condition, and currently require management’s most difficult, subjective or complex judgments.

For information about these material estimates and critical accounting policies, in addition to the critical policy discussed below, see pages 48 to 50, 67, and 80 to 81 of the MD&A included in Part II, Item 7 of HEI’s and Hawaiian Electric’s 2023 Form 10-K.

Following are discussions of the results of operations, liquidity and capital resources of the electric utility and bank segments.