HAWAIIAN ELECTRIC INDUSTRIES INC

Electric utility

Recent developments. See also “Recent developments,” in HEI’s MD&A and Note 2 of the Condensed Consolidated Financial Statements which includes disclosures relating to Maui windstorm and wildfires.

For the three months ended March 31, 2025, the Utilities generated net income of approximately $47.8 million compared to $39.2 million for the same quarter of 2024. See “Results of operations” below for variance explanations.

In thefirst quarter of 2025, kWh sales volume increased 3.1% compared to the same period in 2024. The increase reflects warmer, more humid weather as well as the continuing economic recovery since the Maui windstorm and wildfires and increased pumping loads as Maui consumption increased 7.7% in thefirst quarter of 2025 compared to the same period in 2024.

The price of crude oil has decreased about 8.3% over the same quarter in the prior year. The Utilities are able to pass through fuel costs to customers and have limited fuel cost exposure through a 2% fuel cost-risk sharing mechanism (approximately $3.7 million maximum penalty/reward exposure annually).

In March 2025, the Consumer Price Index (CPI) increased 2.4% over the last 12 months. In Hawaii, the March 2025 Urban Hawaii (Honolulu) CPI increased 2.6% over the last 12 months. Under the PBR framework, inflation risk for the Utilities is partially mitigated by an Annual Rate Adjustment (ARA), which is based on a formula that includes a compounded and non-compounded portion.

•The compounded portion of the ARA adjustment includes an adjustment for the annual change in inflation based on the estimated change in Gross Domestic Product Price Index (GDPPI) for the upcoming year, less a predetermined annual productivity factor (currently set at zero), less a 0.22% customer dividend, applied to a basis equal to test year target revenues plus the RAM Revenue adjustments in effect prior to the implementation of PBR, plus the prior adjustment year’s compounded portion of the ARA adjustment. The inflation factor percentage is the consensus projection of annual percentage change in GDPPI for the following calendar year published by Blue Chip Economic Indicators each October. For the 2024 calendar year, the forecasted 2024 GDPPI was 2.18% (net of the 0.22% customer dividend), measured in October 2023, and became effective in rates on January 1, 2024. For the 2025 calendar year, the forecasted 2025 GDPPI was 1.98% (net of the 0.22% customer dividend), measured in October 2024, and became effective in rates on January 1, 2025.

•The non-compounded portion of the ARA adjustment includes a subtractive component, representing the management audit savings commitment, or refund to customers, which was approved by the PUC for the years 2021 through 2025.

Customer accounts receivable decreased in 2025 by $8 million, or 4%, with the number of accounts past due greater than 30 days decreasing by 7% since December 31, 2024. The decrease in accounts receivables was primarily driven by receipt of government arrears balance and higher cash receipts associated with increased disconnection efforts. See “Financial Condition—Liquidity and capital resources” for additional information. However, accounts receivable balances remain elevated compared to pre-pandemic levels as the Utilities did not revert to pre-pandemic collection practices and the moratorium on disconnections on Maui continues.

System reliability. Since the August 2023 Maui windstorm and wildfires, the Utilities have developed a set of Interim Wildfire Safety Measures to mitigate the risk of wildfires in areas identified as having higher risk of wildfire in all service territories (Oahu, Maui County, and Hawaii Island). These interim measures represent actions the Utilities have performed in 2024. On January 10, 2025, the Utilities filed its 2025-2027 Wildfire Safety Strategy, which outlines its plans to reduce wildfire risk throughout its service territories over the next three years. In the near term, it is anticipated that these measures will result in disruptions to service and negatively impact T&D SAIDI and SAIFI. While the Utilities work to refine these measures over time to mitigate customer impacts, the Utilities are currently focused on taking immediate steps to keep island communities safe during extreme weather events. For a discussion regarding the launch of the Public Safety Power Shutoff program, see discussion below under “Wildfire Safety Measures.”

Hawaii Island has two generators out of service for extended maintenance. While these units are unavailable for maintenance, during certain periods there may be reductions in generation reserve margins and failure of other generators could risk generation shortfalls.

Regulatory and legislative developments.

Federal grant. On November 15, 2021, former President Biden signed into law the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), which includes approximately $550 billion of new federal spending to be allocated over the next five years through various programs. The funding is expected to help the State of Hawaii achieve its sustainability goals, including renewable energy, resilience, and decarbonization, while also prioritizing economic development, equity and affordability. The Utilities have been pursuing potential grant funding of projects under various programs as primary applicant as well as in partnership with other organizations. On August 7, 2024, the Utilities received a notification from the U.S. Department of Energy that their Climate Adaption Transmission and Distribution Resilience Program (Resilience Program) application for $95 million in federal funds under IIJA was officially awarded. See “Utility projects” in Note 4 of the Condensed Consolidated Financial Statements for additional discussions.

In January 2025, President Trump issued multiple Executive Orders that impact both IIJA and IRA funding. Executive Order 14154 entitled Unleashing American Energy ordered to immediately pause disbursement of funds appropriated through IIJA and IRA grants, which may potentially lead to project delays and economic uncertainty. The Executive Orders entitled Ending Radical and Wasteful Government DEI Programs and Preferencing resulted in the federal contracting officer ordering recipients to cease all diversity, equity and inclusion and community benefits plan activities funded by federal grants as of January 28, 2025, which could potentially impact the Utilities’ existing community benefits agreements with some third parties and commitments included in the Resilience Program project costs. The Utilities are still evaluating the potential impact as a result of the two Executive Orders mentioned above and continue to monitor for impacts of any new Executive Orders.

Trade policies. In addition, impacts to the Utilities from trade policies imposed by the U.S. or its trading partners are uncertain at this time. In 2024, the Utilities estimate that more than 90% of the Utilities’ capital goods were domestically sourced. However, the Utilities and their independent power producers procure capital goods that flow through global supply chains and may include raw materials, sub-components, or components sourced or assembled outside the U.S. Utility capital costs and the cost of power procured from independent power producers may increase due to new trade policies and changes in trade policy from the U.S. and its trading partners, based on the amount of foreign content of capital goods. It is also possible that trade policies could impact commodities and raw materials costs, leading to inflation of utility capital costs indirectly through the broader supply chain. Utility-scale battery projects planned by both Hawaiian Electric and independent power producers may see significant cost increases or supply chain challenges, as the majority of battery components are currently manufactured in, or have significant supply chain exposure to, the People’s Republic of China. The Utilities are still assessing the potential impact of the trade policies.

Legislation bills. During the 2025 Legislative Session, the Hawaii State legislature passed 1) Senate Bill 897, which directs the PUC to establish an aggregate liability cap on economic damages from future wildfires and authorizes securitization to finance wildfire safety improvements, 2) Senate Bill 1501, which allows the State to “step-in” for the Utilities in the case of utility financial distress, ensuring project owners receive payment, and 3) House Bill 1001, which appropriates funds to address the State of Hawaii’s settlement of claims related to the Maui wildfire and windstorm tort litigation settlement. The three legislative bills could help support the Utilities’ financial stability to move forward and the Utilities’ ability to procure energy in order to provide customers and communities with safe, reliable and affordable clean energy. The three legislative bills are pending Governor Green’s final approval before they can be signed into law.

For a discussion regarding the impact of the Maui windstorm and wildfires on the Utilities’ liquidity and capital resources, see discussion under “Financial Condition–Liquidity and capital resources.”