HAWAIIAN ELECTRIC CO 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 third quarter of 2026, the Utilities generated net income of approximately $13.5 million compared to $37.0 million for the same quarter of 2025. See “Results of operations” below for variance explanations.

In thethird quarter of 2026, kWh sales volume increased 1.0% compared to the same period in 2025. The increase was primarily attributable to less sunny weather, which reduced production from rooftop solar and solar water heaters.

The price of crude oil has increased 39.7% 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). However, the Utilities expect cash flow impacts from the timing of the disbursements for fuel inventories and subsequent collection of accounts receivable, resulting in higher working capital requirements.

In September 2026, the Consumer Price Index (CPI) increased 3.7% over the last 12 months. In Hawaii, the September 2026 Urban Hawaii (Honolulu) CPI increased 5.2% over the last 12 months. Under the PBR Framework, inflation risk for the Utilities is partially mitigated by an Annual Revenue Adjustment (ARA), which is based on a formula that includes a compounded and non-compounded portion.

•The compounded portion of the ARA 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 Rate Adjustment Mechanism revenue in effect prior to the implementation of PBR, plus the prior adjustment year’s compounded portion of the ARA. 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 2026 calendar year, the forecasted 2026 GDPPI was 2.58% (net of the 0.22% customer dividend), measured in October 2025, and became effective in rates on January 1, 2026. For the 2027 calendar year, the forecasted 2027 GDPPI was 2.58% (net of the 0.22% customer dividend), measured in October 2026, and is scheduled to become effective in rates on January 1, 2027, subject to the approval by the Public Utilities Commission of the State of Hawaii (PUC).

•The non-compounded portion of the ARA includes a subtractive component, representing the management audit savings commitment, or refund to customers, which was approved by the PUC to supplement the 0.22% customer dividend discussed above to make up the total customer dividend that will be applied to the ARA formula during the multi-year rate period (MRP).

Recent regulatory and legislative developments.

Storm response and restoration costs. Beginning in the first quarter of 2026, the Utilities’ service territories experienced several severe weather events, including two Kona Low storms and an extraordinary period of tropical cyclone activity in the fall of 2026 involving Hurricanes Lala, Lowell and Nolo, that caused significant damage to the Utilities’ electric infrastructure, widespread electric service interruptions and ongoing emergency response and restoration activities. These events resulted in state emergency declarations. On October 21, 2026, the Utilities filed an application with the PUC requesting approval to defer qualifying incremental O&M costs incurred in connection with response and restoration efforts related to the Kona Low storms and the 2026 hurricane season, including related incident-management and general support costs. The requested deferral periods extend from March 13 through December 31, 2026 for the Kona Low storms and from August 14 through December 31, 2026 for the 2026 hurricane season. The application does not request approval to recover the costs, but is intended to preserve the Utilities’ ability to seek recovery through a separate application through the Z-factor mechanism. For the nine months ended September 30, 2026, the Utilities incurred $23 million of O&M costs related to these severe weather events. The Utilities are finalizing their assessment of the incremental portion of these costs and preliminarily estimate that approximately 75% to 85% of the total costs are incremental. The amount ultimately requested in the Utilities’ deferral application may differ from this preliminary estimate and will be subject to PUC approval.

Act 191 (2025). Act 191 allows the State to “step-in” for the Utilities in the case of utility financial distress, providing payment assurance to project owners and addressing concerns regarding some independent power producers’ ability to procure low-cost financing for new renewable energy and storage projects due to the Utilities’ credit ratings. The Utilities entered into a Master Agency Agreement with the State and Step-In Agreements for certain power purchase agreements, effective on September 1, 2026. Act 191 supports the Utilities’ ability to procure energy and gives IPP’s assurance to bid on projects in order to provide customers and communities with safe, reliable and affordable clean energy.

Act 258 (2025). Act 258 directs the PUC to evaluate the viability of a wildfire recovery fund, establish an aggregate liability cap on economic damages from future wildfires and authorizes securitization to finance wildfire safety and resilience infrastructure improvements. Act 258 is intended to support the Utilities’ financial stability and facilitate investment in wildfire mitigation and infrastructure resilience. On October 9, 2026, the Utilities filed an application with the PUC, requesting a financing order authorizing the issuance of approximately $531 million aggregate principal amount of infrastructure resilience bonds, reflecting up to approximately $500 million of infrastructure resilience costs, including carrying costs, and approximately $31 million of estimated upfront financing costs. The proposed costs include wildfire mitigation, grid modernization and related eligible operation and maintenance costs, certain of which remain subject to approval in separate PUC proceedings. The application proposes that the bonds would be issued by a bankruptcy-remote special-purpose entity and repaid through an irrevocable, nonbypassable Infrastructure Resilience Charge collected from customers over a period of up to 30 years. The proposed financing is subject to PUC approval, and the amount, timing, interest rates, customer charges, tax treatment, and other terms may differ from the amounts and assumptions included in the application.

Alternative re-basing. See “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements.

Affiliate transactions. In June 2025, the Utilities submitted a request with the PUC to terminate or indefinitely suspend all or specific provisions of the Affiliate Transaction Requirements (ATRs). On October 31, 2025, following a September 2025 PUC order providing guidance on topics to be addressed in such a request, HEI and Hawaiian Electric filed a revised request. Beginning in 2024 and continuing into 2026, HEI has embarked on a strategy to divest all of its affiliated companies other than the Utilities, with the intent for the Utilities to be HEI’s sole operating companies. In their filing, HEI and Hawaiian Electric described how termination or suspension of the ATRs would allow implementation of a corporate integration, under which all HEI employees would move to Hawaiian Electric, a few officer positions would manage and operate both HEI and Hawaiian Electric (dual-hatted executives), and the HEI and Hawaiian Electric boards of directors would be composed of a single set of individuals. On March 23, 2026, the PUC issued an order approving the indefinite suspension of the ATR provisions requested by HEI and Hawaiian Electric. The PUC’s approval is subject to specified commitments, including HEI’s divestment of all remaining Pacific Current and affiliated assets, a prohibition on pursuing new diversification activities, continued compliance with Hawaii Revised Statutes Section 269-19.5 governing affiliated interests, and ongoing cooperation with the PUC, including reporting obligations. Pursuant to those reporting requirements, HEI filed a report establishing a divestment timeline for remaining affiliate assets and is providing monthly progress reports to the PUC. The order also requires advance notice to the PUC and the Consumer Advocate prior to seeking any change in recovery of HEI-related expenses in future re-basing or rate proceedings. The PUC subsequently issued an order confirming that all ATR compliance filings and reporting are likewise suspended and closed the docket. HEI and Hawaiian Electric implemented the integration in June 2026. For the three months ended September 30, 2026, HEI’s integration costs incremental to Hawaiian Electric amounted to approximately $5.6 million (pretax).

System reliability. Since the August 2023 Maui windstorm and wildfires, the Utilities have implemented wildfire safety measures in areas identified as having higher wildfire risk across their service territories (Oahu, Maui County, and Hawaii Island). These measures include more sensitive protective settings that can interrupt service more quickly when potential faults are detected, blocking automatic reclosing in certain circumstances, and conducting visual patrols before restoring service. While these measures are intended to reduce wildfire ignition risk, they have increased, and may continue to increase, the frequency and duration of certain transmission and distribution outages and adversely affect Transmission and Distribution (T&D) System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI).

On January 10, 2025, the Utilities filed their 2025-2027 Wildfire Mitigation Plan (WMP), formerly referred to as the Wildfire Safety Strategy) with the PUC. The PUC approved the WMP on December 31, 2025 and directed the Utilities to submit a 2026-2027 WMP Update, which the Utilities filed on April 13, 2026. The WMP Update primarily reflects 1) maturation of the wildfire mitigation framework following the 2025-2027 WMP, 2) direct responses to the PUC’s areas of continuous improvement identified in a decision and order, and 3) other non-substantive revisions for clarity. The Utilities continue to refine these measures and deploy reliability mitigations while prioritizing the safety of customers and communities during elevated wildfire conditions. Public Safety Power Shutoff events, if initiated, could also result in extended service interruptions. For additional information regarding the Public Safety Power Shutoff program, see “Wildfire safety measures” below.

Hawaii Island has two generators out of service for extended maintenance, one of which is expected to return to service in the fourth quarter of 2026. While these units are unavailable for maintenance, during certain periods there may be reductions in generation reserve margins and failure of other generators, which could risk generation shortfalls.

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