HAWAIIAN ELECTRIC INDUSTRIES INC

1 Also, see the all other segment discussion below.

The Company’s effective tax rates for the first three months of 2025 and 2024 were 19% and 24%, respectively. The effective tax rate for the first three months of 2025 was lower than the comparable period in 2024 primarily due to the loss from the sale of Hamakua Holdings and a decrease in excess taxes related to vesting of share-based awards, partially offset by higher executive compensation limitations in 2025.

Maui windstorm and wildfires related expenses, net. For the three months ended March 31, 2025 and 2024, the Company’s incremental expenses related to the Maui windstorm and wildfires as discussed 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 incurred through December 31, 2024. Pursuant to the PUC order received on February 12, 2025, deferral accounting treatment limited to insurance premiums and outside services and legal costs associated with the asset-based lending facility credit agreement incurred in 2025 was granted. Applicable amounts were reclassified to a regulatory asset. See “Risk Factors” in Item 1A. for further discussion of regulatory risks. See Note 2 of the Condensed Consolidated Financial Statements.

2 Includes $6.7 million pursuant to an agreement to settle indemnification claims asserted by the State of Hawaii, for the three months ended March 31, 2024. See Note 2 of the Condensed Consolidated Financial Statements.

3 Excludes income related to discontinued operations amounting to $0.1 million for the three months ended March 31, 2024.

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

From August 8, 2023 through March 31, 2025, HEI and its subsidiaries have incurred approximately $2.2 billion of Maui windstorm and wildfires related expenses, including the Utilities’ estimate of the losses related to a 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 March 31, 2025, HEI and its subsidiaries have approximately $12 million, nil and $117 million of insurance coverage remaining under the excess liability, professional liability and directors and officers liability policies, respectively, after deducting applicable retention amounts, amounts that have been recovered under insurance policies (including the One ‘Ohana Initiative contribution), and amounts expected to be recovered for incurred costs and recognized as a receivable as of the quarter end.

With the Company accruing its losses related to a settlement of all wildfire tort-related legal claims and cross claims as of March 31, 2025, the Company expects the Electric utility and HEI to use the remaining $12 million of insurance coverage under its excess liability policy primarily for legal expenditures, in excess of amounts deferred, in connection with the Maui windstorm and wildfires.

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 first quarter, the average daily passenger count was 3.3% higher 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, including Japanese travelers, remaining at lower levels. In the first quarter, international visitor arrivals (excluding Japan) remained 17.9% below 2019 levels. Due to the weak yen, Japanese visitors are 41.2% below 2019 levels.

Hawaii’s seasonally adjusted unemployment rate in March 2025 was 2.9%, the same as the March 2024 rate. The national unemployment rate in March 2025 was 4.2% compared to 3.9% in March 2024. According to a recent forecast by UHERO, issued on February 28, 2025, jobs in the state will remain flat in 2025, though Maui is expected to see a 0.9% growth in jobs, driven by continued rebuilding following the 2023 wildfires.

Hawaii real estate activity through March 2025, as indicated by Oahu’s home resale market, resulted in an increase in the median sales price of 1.0% for condominiums and an increase of 7.5% for single-family homes compared to the same period in 2024. Median single-family home price prices set an all-time high in February 2025 at $1,185,000, exceeding the previous high of $1,153,500 set in May 2022. The number of closed sales through March 2025 saw a small 0.4% increase for condominiums and a 4.0% decrease for single-family residential homes compared to the same period in 2024.

Hawaii’s petroleum product prices relate to the crude oil in international markets. The price of crude oilhas decreased about 8.3% over the same quarter in the prior year.

At its March 18, 2025 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range at 4.25% - 4.5%. The FOMC noted increased uncertainty around the economic outlook, and their attention to risks on both sides of its dual mandate of achieving maximum employment and 2 percent inflation over the longer run. The Federal Reserve stated that it will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities, though the pace of those reductions is expected to slow in April 2025.

UHERO forecasts full year 2025 real GDP growth of 1.6%, an increase in total visitor arrivals of 2.6%, an increase in real personal income of 0.7%, and an unemployment rate of 3.4% for the state. According to UHERO, Hawaii’s economic growth is threatened by federal disruptions. In the near term, federal layoffs will fully offset expected growth in construction and the lift from local tax cuts. Thereafter, recession risks increase due to federal policies and actions, including trade policies, mass deportations, and spending cuts. In a May 2025 report, UHERO currently expects these expansive federal policy shifts will push Hawaii’s economy to enter into a mild recession in late 2025 and into 2026.

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

All Other segment. The “All Other” business segment net loss includes results of the stand-alone corporate operations of HEI, ASB Hawaii, GLST1, and Pacific Current.

1 Hamakua Energy’s sales to Hawaii Electric Light (a regulated affiliate) up until the close of its sale on March 10, 2025, are eliminated in consolidation.

The “all other” business segment loss includes results of the stand-alone corporate operations of HEI (including eliminations of intercompany transactions) and 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 up until the close of its sale on March 10, 2025, Hamakua Energy, which owned 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 combustion turbine (CT) and its leased combustion turbine (leased CT) unexpectedly sustained damages resulting in a plant shut down on Hawaii Island. As a result, in April 2024, Hamakua Energy purchased a new CT which was placed into service in June 2024. The leased CT was returned to the lessor and a new leased CT had been delivered and placed into service in September 2024 bringing Hamakua Energy back to full capacity. After conducting an investigation into the root cause of the damages, it was determined that contaminated fuel led to the turbine damages. Pacific Current is currently working with its legal counsel on seeking recovery of its losses related to damages sustained to its plant facilities.

As part of HEI’s comprehensive review of strategic options for certain assets of Pacific Current, on February 7, 2025, Pacific Current entered into a Securities Purchase Agreement to sell all the membership interests in Hamakua Holdings, a wholly owned subsidiary of Pacific Current and parent company of Hamakua Energy, to an unaffiliated third party. The sale transaction closed on March 10, 2025. As a result of the sale transaction, the Company recorded an after-tax loss on the sale amounting to $9.8 million as of March 31, 2025. The sale of Hamakua Holdings and its subsidiary, Hamakua Energy, does not preclude Pacific Current from seeking recovery of its losses related to the aforementioned damages to its plant facilities from the fuel supplier.

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 was shut down while repairs were being performed. Mahipapa completed repairs to its facility and commenced operations in early December 2024 and returned to full capacity in the first quarter of 2025. For the three months ended March 31, 2025, Mahipapa received insurance proceeds of $1.4 million under its business interruption policy. In addition to working with its insurance company, Mahipapa is currently working with its legal counsel on seeking reimbursement of its losses related to damages sustained to its plant facilities.

FINANCIAL CONDITION

Liquidity and capital resources. See “Credit and Capital Market Risk” in Item 1A. Risk Factors in HEI’s and Hawaiian Electric’s 2024 Form 10-K and in Item 1A. Risk Factors below.

HEI’s 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 wildfire related litigation noted above).

The Company’s objective continues to be to operate a strong, financially healthy enterprise to empower a thriving future for Hawaii. While the fundamentals of its businesses remain strong, the Company took prudent and measured actions to reinforce its commitment to serving the community for the long term. Subsequent to the Maui windstorm and wildfires, in August 2023, HEI and Hawaiian Electric fully drew down $175 million and $200 million, respectively, on their existing revolving credit facilities. The Company has taken additional prudent measures to strengthen its financial position while continuing to provide reliable service to its customers and reinforcing HEI’s commitment to serving the community for the long term such as entering into an asset-based credit facility that allows the Utilities to borrow up to $250 million and filing with the SEC an at-the-market offering program under which HEI may offer and sell up to $250 million of its common stock. Additional proactive measures included suspending the quarterly cash dividend on HEI’s common stock after payment of the second quarter dividend in September 2023 and reducing or eliminating discretionary costs.

As of March 31, 2025, the Utilities accrued estimated wildfire liabilities of approximately $1.92 billion (pre-tax), related to the settlement of the Maui windstorm and wildfire tort-related legal claims (see Note 2 of the Condensed Consolidated Financial Statements). HEI and Hawaiian Electric determined that making payments under the terms of the Settlement Agreements in four equal annual installments is the most viable option and have classified the first $479 million installment as a current liability based on expected timing of the payment and the remaining $1.44 billion as a noncurrent liability on the Company’s and Utilities’ Condensed Consolidated Balance Sheets. To finance the first installment payment, in September 2024, HEI completed the sale of 62.2 million shares of common stock in a registered offering, raising net proceeds of approximately $557.7 million and subsequently transferred the first payment into a new subsidiary, GLST1, which is restricted from disbursing such funds except in connection with the initial payment to the settlement funds.

As of March 31, 2025, the Company’s consolidated total available liquidity was approximately $1,232 million. The following table provides the components of available liquidity as of March 31, 2025. See “Liquidity and capital resources” in Hawaiian Electric’s MD&A below for components of its available credit.

1 Pursuant to an HEI and Hawaiian Electric Intercompany Borrowing and Investment Policy which provides Hawaiian Electric a borrowing commitment of $75 million. Hawaiian Electric currently has no borrowings under this policy. See Note 5 of the Condensed Consolidated Financial Statements for a description of the HEI and Hawaiian Electric Intercompany Borrowing and Investment Policy.

2 Additionally, as of March 31, 2025 the Electric Utilities had no commercial paper outstanding, and Hawaii Electric Light and Maui Electric had short-term borrowings from Hawaiian Electric of nil and $76.2 million, respectively, which intercompany borrowings are eliminated in consolidation.

As of March 31, 2025, HEI consolidated had $2.7 billion of long-term debt and short-term debt, of which $466 million is due or expected to be repaid within 12 months and $598 million is due within 24 months. On April 9, 2025, pursuant to a March 5, 2025 offer tendered to, and accepted by, each holder of its existing note purchase agreements, HEI repaid a ratable portion of each note using the net cash proceeds from the recent sale of ASB amounting to $384 million.

Management believes with the Company’s cash and cash equivalents amount of $629 million and GLST1’s restricted cash amount of $479 million, both as of March 31, 2025, the available capacity on Hawaiian Electric’s ABL Facility, additional liquidity under HEI’s registered at-the-market offering program as well as expenditure reduction efforts, the Company has adequate cash to meet its financial obligations and sustain operations in the short term, including available sufficient liquidity to fund the first installment of the settlement of wildfire tort claims expected to be made in early 2026 and its other cash obligations for the next 12 months following the issuance of its March 31, 2025 financial statements.

The Company expects that liquidity will continue to be impacted in the long term primarily due to the remaining liability payments to settle wildfire claims; the result of the August 2023 downgrades of their credit ratings to below investment grade which limits 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; and higher working capital requirements resulting from inflation and elevated fuel prices. Although the Company has raised sufficient cash to pay the first installment of the settlement of wildfire tort claims, the Company is currently working with its financial advisors on a financing plan to raise the additional capital necessary to fund the remaining 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. If the financing plans are unsuccessful, the Company may need to consider other strategic alternatives.

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 2024, it remains elevated as compared to pre-pandemic levels as the Utilities did not revert to pre-pandemic collection practices and the moratorium on disconnections on Maui continues. The Maui windstorm and wildfires have not and are not anticipated to materially impact accounts receivable, however, it has and will continue to lead to higher bad debt expense. As of March 31, 2025, approximately $15.9 million of the Utilities’ accounts receivables were over 30 days past due, which is a decrease of approximately 13% since December 2024. 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, Hawaiian Electric could also use its available capacity on its $250 million ABL Facility, 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.

Credit ratings. On March 7, 2025, S&P revised HEI’s outlook to “Positive” from “Negative.”

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 benefits 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; 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 consolidated capital structure of HEI was as follows:

Prior to the Maui windstorm and wildfires, HEI utilized short-term debt, typically commercial paper, to support normal operations, to refinance commercial paper, to retire long-term debt, to pay dividends and for other temporary requirements, including short-term financing needs of its subsidiaries. HEI also periodically makes short-term loans to Hawaiian Electric to meet Hawaiian Electric’s cash requirements, including the funding of loans by Hawaiian Electric to Hawaii Electric Light and Maui Electric, but no such short-term loans to Hawaiian Electric were outstanding as of March 31, 2025. Historically, HEI also periodically utilized unsecured long-term debt to fund investments in and loans to its subsidiaries to support their capital improvement or other requirements, to repay long-term and short-term indebtedness and for other corporate purposes. The downgrades of HEI’s and HECO’s credit ratings have negatively impacted each of HEI’s and Hawaiian Electric’s ability to access capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms. As of March 31, 2025, HEI and Hawaiian Electric had no commercial paper outstanding.

See Note 5 of the Condensed Consolidated Financial Statements for a brief description of the Company’s loans.

On September 25, 2024, HEI completed the sale of 62.2 million shares of common stock. The shares were issued under a registration statement registering up to $575 million of common stock. The net proceeds from the sale of common stock amounted to approximately $557.7 million and will be used to fund the Company’s contribution to the expected Maui wildfire tort litigation settlement and for general corporate purposes.

On September 19, 2024, HEI filed a shelf registration statement with the SEC for an at-the-market offering program under which HEI may offer and sell, from time to time at its sole discretion, its common stock, without par value, having an aggregate offering price of up to $250 million. To date, HEI has not sold any common stock under this program.

There were no new issuances of common stock through the HEI Dividend Reinvestment and Stock Purchase Plan or the Hawaiian Electric Industries Retirement Savings Plan in the three months ended March 31, 2025 and 2024.

For the first three months of 2025, net cash provided by operating activities of HEI consolidated was $50 million. Net cash used in investing activities for the same period was $78 million, primarily due to capital expenditures. Net cash used in financing activities during this period was $102 million, primarily due to repayment of long-term debt.

Dividends. The payout ratios for the first three months of 2025 and full year 2024 were nil. Each quarter, the HEI Board of Directors evaluates whether to declare a dividend and considers many factors in the evaluation including, but not limited to, the Company’s results of operations, liquidity, the long-term prospects for the Company, current and expected future economic conditions, and capital investment alternatives. In August 2023, in consideration of 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 2023 dividend, and has not declared a cash dividend since that time. This action was 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. In May 2025, after a temporary suspension of Hawaiian Electric’s quarterly cash dividend to HEI that began with the second quarter 2024 dividend, the Hawaiian Electric Board of Directors approved a $10 million quarterly dividend for the first quarter of 2025. This decision was made after considering several factors, including the continued progress of the Maui windstorm and wildfire settlement, the Utilities’ results of operations and the Utilities’ liquidity position.

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 42 to 44 and 63 of the MD&A included in Part II, Item 7 of HEI’s and Hawaiian Electric’s 2024 Form 10-K.

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