HAWAIIAN ELECTRIC CO INC

1 Also, see the all other segment discussion below.

The Company’s effective tax rates for the three months ended March 31, 2026 and 2025 were 21% and 19%, respectively. The increase in the effective tax rate was primarily due to the non-recurrence of a discrete tax benefit recognized in the prior-year period related to the sale of Hamakua Holdings. Excluding this discrete item, the effective tax rates for both periods were comparable.

Maui windstorm and wildfires related expenses, net. For the three months ended March 31, 2026 and 2025, 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 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 deferred 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.

Note: The all other segment Maui windstorm and wildfires related expenses (legal, outside services and other) and insurance recoveries 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, 2026, HEI and its subsidiaries have incurred approximately $2.27 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, the One ‘Ohana Initiative contribution and $47.8 million related to the securities class action settlement. Certain of these costs are reimbursable under excess liability insurance, professional liability insurance and directors and officers liability insurance policies. As of March 31, 2026, HEI and its subsidiaries have approximately $9 million, nil and $70 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, including the securities class action settlement, and recognized as a receivable as of the quarter end.

On April 10, 2026, the last condition to the finalization of the tort settlement agreements and first installment payment was satisfied when the last insurer agreed to a stipulation withdrawing with prejudice the appeal of the December 30, 2025 summary judgment entered in favor of HEI, Hawaiian Electric and other defendants. As a result, the Company paid the first of its four equal annual $479 million installments pursuant to the settlement agreements and has initiated efforts to recover the remaining unpaid insurance coverage under its excess liability policy.

Economic conditions.

Note: The statistical data in this section is from public third-party sources that management believes to be reliable (e.g., Board of Governors of the Federal Reserve System, Department of Business, Economic Development and Tourism, University of Hawaii Economic Research Organization (UHERO), U.S. Bureau of Labor Statistics, Honolulu Board of REALTORS®, and U.S. Energy Information Administration).

In the first quarter of 2026, the average daily passenger count was 2.7% 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, including Japanese travelers, remaining at lower levels. In the first quarter, international visitor arrivals (excluding Japan) remained 20.1% below 2019 levels. Due to the weak yen, Japanese visitors are 38.6% below 2019 levels.

Hawaii’s preliminary seasonally adjusted unemployment rate in February 2026 was 2.3%, which was a decrease from the February 2025 rate of 2.6%. The national unemployment rate in March 2026 was 4.3%, slightly higher than the March 2025 rate of 4.2%. According to a recent forecast by UHERO, issued on February 27, 2026, jobs in the State will increase by 0.2% in 2026.

Hawaii real estate activity through March 2026, as indicated by Oahu’s home resale market, resulted in no change in the median sales price for condominiums and an increase of 2.6% for single-family homes compared to the same period in 2025. The median single-family home price was $1,205,000 in February 2026 and $1,199,500 in March 2026, both exceeding the previous all-time high of $1,185,000, set in February 2025. The number of closed sales through March 2026 saw a 3.6% decrease for condominiums and a 10.9% increase for single-family residential homes compared to the same period in 2025.

Hawaii’s petroleum product prices are correlated to the crude oil price in international markets. The price of crude oilhas increased 5.8% over the same quarter in the prior year.

At its March 18, 2026 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range at 3.5% to 3.75%. The FOMC noted that uncertainty around the economic outlook remains elevated, and that the implications of developments in the Middle East for the U.S. economy are uncertain.

UHERO forecasts full year 2026 real GDP to increase 1.6%, real personal income to increase 0.9%, a decrease in total visitor arrivals of 0.6%, and an unemployment rate of 2.3% for the State. According to UHERO, Hawaii’s economy is gradually moving beyond a mild jobs recession in 2025 as payrolls have begun to edge upward, supported by a resilient U.S. economy and the local construction industry.

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 loss includes results of the stand-alone corporate operations of HEI, ASB Hawaii, GLST1 and Pacific Current, including the results of Hamakua Energy and the solar and battery energy storage system facilities up until the close of their respective sales in 2025.

1 As a subsidiary of Hamakua Holdings, 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 HEI’s subsidiaries, GLST1, ASB Hawaii and Pacific Current. Significant investments of Pacific Current made through its subsidiaries include: 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 solar project subsidiaries up until the close of the Solar Asset Disposition effective August 1, 2025, which includes Mauo, which owned solar-plus-storage projects totaling 8.6 MW on five University of Hawaii campuses, Alenuihaha Developments, LLC, which owned a collection of renewable energy assets on Oahu and Kauai, and Ka‘ie‘ie Waho Company, LLC, which owned a 6-MW solar photovoltaic system that provides renewable energy to Kauai Island Utility Cooperative; Pacific Current’s remaining operating subsidiary, Mahipapa, which owns a 7.5-MW nameplate biomass facility on Kauai; as well as eliminations of intercompany transactions.

In late February 2024, Hamakua Energy’s combustion turbine and its leased combustion turbine unexpectedly sustained damages from contaminated fuel resulting in a plant shut down through June 2024. In addition, in March 2024, a fire, which was ignited from a vendor’s welding activities during scheduled maintenance, destroyed the cooling tower at the Mahipapa facility on Kauai resulting in a plant shutdown through December 2024. The Company 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, in March 2025, Pacific Current closed on the sale of Hamakua Holdings, a then wholly owned subsidiary of Pacific Current and parent company of Hamakua Energy, to an unaffiliated third party. In addition, in August 2025, Pacific Current, through an indirect subsidiary, sold all of its membership interests in Mauo, LLC, Alenuihaha Developments, LLC, Kaʻieʻie Waho Company, LLC and Upena, LLC, and agreed to sell all of its membership interest in Mahipapa to an unaffiliated third party. See Note 3 of the Condensed Consolidated Financial Statements for more information.

FINANCIAL CONDITION

Liquidity and capital resources. See “Credit and Capital Market Risk” in Item 1A. Risk Factors in HEI’s and Hawaiian Electric’s 2025 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 lower cost sources of 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. In September 2025, HEI and Hawaiian Electric each entered into a fourth amended and restated credit agreement with a syndicate of eight financial institutions, increasing each of their committed capacities to $300 million (see Note 5 of the Condensed Consolidated Financial Statements). As of March 31, 2026, HEI and Hawaiian Electric had $15 million and nil, respectively, drawn on their revolving credit facilities and no commercial paper outstanding.

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, including the Utilities entering into an asset-based credit facility in May 2024 that allows the Utilities to borrow up to $250 million (see Note 5 of the Condensed Consolidated Financial Statements), and HEI registering with the SEC in September 2024 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. Additional proactive measures included suspending the quarterly cash dividend on HEI’s common stock after payment of the second quarter dividend in September 2023, repaying its revolving credit facilities and reducing or eliminating discretionary costs.

As of March 31, 2026, HEI consolidated had $2.4 billion of long-term debt, of which $125 million is due or expected to be repaid within 12 months. In addition, as of March 31, 2026, 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 the 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. 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. In November 2024, HEI transferred the first installment payment to GLST1, a wholly owned subsidiary created for the specific purpose of holding the first installment payment pursuant to the settlement of the Maui windstorm and wildfire tort-related legal claims (see Note 2 of the Condensed Consolidated Financial Statements). The cash for the first installment payment is classified as restricted cash on the Condensed Consolidated Balance Sheet as of March 31, 2026. On April 10, 2026, the final condition to payment occurred under settlement agreements and the first installment payment of $479 million was made.

The following table provides the components of available liquidity as of March 31, 2026. See “Liquidity and capital resources” in Hawaiian Electric’s MD&A below for components of its available liquidity under existing credit facilities as of March 31, 2026.

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.

Management believes with the Company’s cash and cash equivalents amount of $453 million and GLST1’s restricted cash amount of $479 million, both as of March 31, 2026, the available capacity on Hawaiian Electric’s ABL Facility, HEI’s and Hawaiian Electric’s increased borrowing capacities of their unsecured lines of credit, and additional liquidity under HEI’s registered at-the-market offering program, the Company has adequate cash to meet its financial obligations and sustain operations in the short term.

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 August 2023 downgrades of the Company’s credit ratings to below investment grade, which may limit the Company from readily accessing low-cost unsecured, short-term borrowings and other sources of debt and equity financing on favorable 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 payments for the 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. See further discussion in “Risk Factors” in Item 1A. If further liquidity is deemed necessary in the short term, Hawaiian Electric 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.

Credit ratings. On March 17, 2026, S&P revised HEI’s outlook to “Positive” from “Credit Watch Positive” and reaffirmed the “B+” issuer credit rating. On April 21, 2026, Moody’s upgraded HEI’s long-term issuer rating to “Ba2” from “Ba3,” and changed its outlook to “Stable” from “Positive.”

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, 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 remaining operating subsidiary.

The consolidated capital structure of HEI was as follows:

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, 2026.

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

There were no new issuances of common stock through the DRIP or the HEIRSP for the three months ended March 31, 2026 and 2025.

For the first three months of 2026, net cash provided by operating activities of HEI consolidated was $61 million. Net cash used in investing activities for the same period was $102 million, primarily due to capital expenditures. Net cash used in financing activities for the same period was $8 million, primarily due to repayment of long-term debt.

Dividends. The payout ratios for the first three months of 2026 and full year 2025 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 resources to reducing wildfire risk and 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 dividend for each quarter of 2025 and an $11 million dividend for the first quarter of 2026. 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, 43, 61 and 62 of the MD&A included in Part II, Item 7 of HEI’s and Hawaiian Electric’s 2025 Form 10-K.

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