Welcome to the Q4 2009 Hawaiian Electric Industries, Inc. earnings conference call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session towards the end of the conference. (Operator Instructions). I would now like to turn the call over to your host for today, Ms. Shelee Kimura, Manager of Investor Relations and Strategic Planning.

Welcome everyone to Hawaiian Electric Industries 2009 yearend earnings release conference call. I’m Shelee Kimura and joining me today are Connie Lau, HEI President and Chief Executive Officer; Jim Ajello, HEI Senior Financial Vice President, Treasurer and Chief Financial Officer; Dick Rosenblum, Hawaiian Electric Company President and Chief Executive Officer; and Tim Schools, American Savings Bank President as well as other members of senior management. Connie will begin with an overview of 2009 and our strategic accomplishments and then Jim will take you through an update of the Hawaii economy and financial highlights. Connie will close with key investment points before opening it up for Q&A. In today's presentation, management will be using non-GAAP financial measures to describe the banks operating performance. Our press release and a slide accompanying this webcast which are posted on our investor relations website, contain additional disclosures regarding these non-GAAP measures including reconciliation of these measures to the equivalent GAAP measure. Forward-looking statements will also be made on today's call. Please reference the accompanying disclosure to the webcast slides located on our website located at www.HEI.com. Lastly, you will notice that yesterday's press release referenced GAAP earnings excluding losses from specific strategic transactions that management elected to execute at the bank for long-term performance benefit. As shown here, GAAP earnings were $83 million or $0.91 per share in 2009 and $90.3 million or $1.07 per share in 2008. In 2009, excluding the $19.3 million or $0.21 per share after tax loss related to the previously disclosed liquidation of the private issue mortgage related securities, adjusted earnings were $102.3 million or $1.12 per share. In 2008, excluding the after-tax impact of the bank's previously disclosed balance sheet restructuring charge of $35.6 million, net income was $125.9 million or $1.49 per share. Management believes that these are significant transactions which we do not expect to recur in the future. As a result, throughout this call we will discuss earnings excluding the impacts of these transactions at the bank. I'll now turn the call over to Connie Lau.

As you can see from the information we released yesterday we had a good quarter and a solid year considering the unprecedented economic challenges we faced at all companies and lower and later than expected rate release at the utility. Fourth quarter earnings were $0.36 per share compared to $0.16 per share in the fourth quarter of 2008. Full year earnings were $1.12 per year compared to $1.49 per share in 2008. Given the headwinds we faced, we are pleased that we were able to preserve 2009 earnings through aggressive cost control and efficiency efforts across all companies. At the same time, we were able to continue to move forward on our key strategic initiatives, positioning us for improved performance in the future. At the outset of 2009, we anticipated a challenging year. We expected tough economic conditions and aggressive customer conservation efforts to reduce kilowatt hour sales at the utilities and we expected credit expenses to be elevated at the bank. We also expected that O&M would be higher for the year and that utility earnings would be lower in the first half of the year as we awaited rate relief in the second half. At the utility, we ended the year with kilowatt hour sales down 2.5% compared to last year and while we received much needed rate relief, lower and later than expected responded promptly by competing and deferring spending to offset lower revenue. At the bank, we were impacted by the economic recession that dipped deeper than most anticipated. We experienced higher preserving for loan losses and other than temporary impairment or OTTI charges on our securities. Fortunately, ongoing progress on the banks performance improvement projects provided additional cost savings to partially offset the negative impacts of the credit cycle and we strengthened our capital ratios…

First the economic backdrop; Hawaii saw continuing contraction in 2009 with weakness in one of our largest industries and one of our largest utility customer segments; tourism. You can see from this slide that we have experienced a significant decline in tourism since it peaked in 2007. However, arrivals appear to have stabilized near the 2002, 2003 level with an increase of 1.7% in the second half of the year over 2008. Hawaii unemployment is low at 6.9% in December 2009 compared with the national average of 10%. This statistic is for Hawaii as a whole. Oahu is relatively stronger which stands at 5.9% than the neighbor islands. For all of 2009, the median home sales price declined 8% and volume declined 6%. January 2010 Oahu home sales were just released and are very encouraging. Oahu home sales volumes increased by 33% and the median price rose to 11% to $597,000 compared to January 2009. This slide shows local economist's expectations for peak economic indicators gradual recovery expected to begin in 2010. We predict the impacts of Hawaii's weak economic conditions on electric sales and bank credit related provisions to persist but modestly improve over the course of the year. Turning to our financial results, HEI earned $102.3 million or $1.12 per share in 2009 compared to $125.9 million or $1.49 per share in 2008. Both operating company’s earnings were down for the year reflecting the impacts of the economic crisis and lower and later than expected bait relief at the utility. Although earnings were down for the year, earnings were up in the fourth quarter. In 2009, HEI earned $33 million or $0.36 per share compared to $13.9 million or $0.16 per share for the fourth quarter of 2008. Both operating company’s earnings reflected growth over 2008. At the…

We continue to see the opportunities for investment and improved returns in our company as multifold. At our utility, we continue to pursue a comprehensive redesign of our regulatory model to ensure a financially viable utility strong enough to attract the capital necessary to execute our state's public policy of reducing Hawaii dependence on imported oil. We expect to narrow the gap between our earned and allowed rates of return as the model is implemented over the next two years. In addition, we expect rate base to grow over time as we strengthen our system to accept increasing renewable generation and increase equipment replacement rate to address our aging infrastructure. The core business is performing very well and strengthening every day. Our bank has a low risk profile and a simple business model. Given our profitability improvements to date and expectations over the next year, the bank is close to finalizing a business model whereby we can achieve pretax pre-provision income of $120 million to $130 million per year on the current asset base. This would be an improvement in the range of 30% to 40% over the equivalent run rate for the first quarter of 2008. This estimate is subject to no material changes in the yield curve which could affect net interest income. We expect to realize this value in earnings as the Hawaii economy and credit environment improve. Both operating companies are well along in implementing their strategies and are strongly positioned to benefit when the Hawaii economy recovers. I will now open the call up to questions and ask Jim, Dick, and Tim and also Tayne, our CFO at the utility to join me in answering your question.

(Operator Instructions) Your first question comes from Paul Patterson – Glenrock Associates. Paul Patterson – Glenrock Associates: I wanted to ask you about a couple of things. First of all, O&M at the utility, I think you guys are saying it's an 11% increase. What's driving that?

The increase in the O&M in 2009 is really related to bringing on CT-1 and also increases that we implemented in the replacement of our aging infrastructure. So it's really very much the same story we've had all along Paul. Paul Patterson – Glenrock Associates: I thought you guys were expecting an increase in O&M by up to 11%? Paul Patterson – Glenrock Associates: Yes, that's correct. Let me ask Tayne are Dick to go over the O&M numbers because it is somewhat confusing because of the DSM impacts and if you recall the DSM programs were transferred over to the third party administrator in the beginning of 2009 so that makes some of the numbers a little more difficult to explain. So, either Dick or Tim, Tayne?

I wanted to clarify your question, you're asking about the increase ‘09 versus ‘08 or are you asking about - Paul Patterson – Glenrock Associates: No, 2010 drivers on slide 26, you guys said that O&M levels are expected to be up 11%, 16% excluding DSM.

That's correct. Okay so, in addition to what Connie mentioned about the full cost of CT-1 and higher O&M for aging infrastructure, the other thing that's happening is we had some costs that were deferred in 2009 as part of our cost reduction measure that we will need to incur in 2010 so that's also a driver of our increase in 2010. Paul Patterson – Glenrock Associates: How much of that would you say, because it's sort of a large jump here, how much would you say is because it's been deferred?

Yeah and let me just break in here Tayne. It might be helpful to Paul if you would give him some proportions as to what relates to things like the deferred overhauls or short term initiatives that we don't expect to continue.

In general, if you take a look at the cost reduction measures, the large majority of those measures are not sustainable. Roughly two-thirds of those costs are deferral in nature such as some of our overhaul work that was deferred as a result of lower operating hours as we saw lower sales. We also deferred some of our software project work and we have a total IT strategy that we're looking at going forward and that's part of the increase as well. In addition, we also used very judicious use of our overtime hours in 2009 and that will also come back in 2010. The overtime hours that I'm speaking of is we reduced hours in our call center and those hours will come back in 2010. Paul Patterson – Glenrock Associates: Now, with respect to the decoupling case, I know there's a statutory time frame, I know you guys are awaiting it but it does seem like it's taking some time here. Do we have any sort of flavor as to when we might see this finely be, I mean you've got a settlement and everything else, it seems like it's taking a little bit longer than one would think.

First of all Paul, the decoupling docket doesn't have a statutory timeline. The only statutory deadlines are on the rate cases for interim decisions. But we believe that everything has been filed with the commission now and so it's just a matter of them coming out with a decision and we are expecting the decision for decoupling as well as CT-1 very shortly. Both decisions are, or both dockets are ready for decision by the commission but they really need to go through their process to ensure that they are comfortable with the dockets before they issue the decision. Paul Patterson – Glenrock Associates: Then on the non-interest expense, the $140 to $145 million run rate, you guys have some expenses that you've mentioned here in terms of the Fiserv and what have you, I guess the implementation expenses I guess of about $2.3 million. But is there anything else we should be thinking about here? I mean are we winding down now to the point where when we look at the bank it should be I guess for 2010 about $140 to $145 or are we still going to be incurring some expenses other than the $2.3 million one that you guys mentioned?

You know as Jim said in the remarks, we believe that apples-to-apples would be at the $140 to $145 run rate as of the end of 2010 which is when the performance improvement project was always intended to complete but we are beginning to build a mortgage banking line of business that would have commission expense associated with that that may bump up the reported GAAP numbers when you actually see them within 2010 or 2011. Paul Patterson – Glenrock Associates: So when we're looking at this, so we're going to see still some more expenses? You guys were around $160 something million on a non-adjusted basis and about $152 million on an adjusted basis. So should we think that it would be I mean when we look at this, other than the $2.3 million that you're mentioning for implementation, is there anything else we should be thinking about?

No and I'll let Tim comment in just a moment but I should also mention that as Jim did in the prepared, remarks that although you might see non-interest expense go up because of the commission expense from mortgage banking, you would also see revenues go up as well because obviously we wouldn't be paying commission if we weren't getting revenue from building that line of business as well. But let me give Tim a chance to comment on the run rate.

Anytime we're doing a big change like this in 18 months, it's hard to sort of get at stuff because we're spending money to make money. Our current run rate, you know we have to show certain things for the quarter and everything, our current run rate is about $145 right now. So as Jim said, we'll have another $6 million coming in when we convert from Metavante to Fiserv. So that's sort of the underlying core run rate right now. Then on top of that you need to lay - this year we have about $2.3 million at least to convert and finish the Fiserv and then there is still likely some potential for some real estate buyout cost and some level of severance. It's hard to determine and we don't have a set number. We started with 338,000 of sort of non-branch space square feet and we estimate that we need about 140,000 square feet. So as we whittle that down to the appropriate number, we need to buyout the leases. I just had a presentation given to me about two weeks ago that if we, you know it takes a while to get there right, we have to move people around. But if we can get down to our 140,000 square feet, it's about a onetime expense of $3 million to break all those leases but it saves $1.75 million a year going forward. So it's an 18 month payback. We don't have a lot of those types of projects left but as Connie and Jim said we should be done all that kind of stuff by the end of this year.

Your next question comes from Robert Bohlen – KBW. Robert Bohlen – KBW: I have another question for Tim, if I'm looking at the balance sheet and I'm trying to figure out where do you stand on asset sensitivity as short term interest rates move, it looks like your borrowings are down significantly year-over-year and your security portfolio's down pretty significantly, you have a big cash drag. But I guess, how nimble can you be to reinvest that cash when rates start to, when short rates start moving up by kind of year end or early next year?

Well good question. In general, just in isolation ASB would generally have more interest rate risk than a typical commercial bank. So I would imagine as an example in our market that our interest rate risk, it's not magnitudes higher but, I would imagine that our interest rate risk is modestly more higher than like a first line in a bank of Hawaii. That's due to our heritage of being a thrift and we've got say 47% of our loans in 30 year fixed rate mortgages. So it's a trade off, that benefits us on a credit risk side and it hurts you a little bit on the interest risk side. We've done a lot of stuff over the last year to improve our interest rate risk. We look at it two ways, we look at sort of an economic value of equity where you discount the value of your asset and your liabilities and you sort of get a net present value position and then you shock that on rates and does that net present value go up are down. Then we look at the impact of just changes in net interest income. Both measures have come in a lot over the last 12 months and we've gotten a lot of compliments from the OTS on doing that. So what we've done is a couple things one is, tremendous core deposit growth over the last year, replacing wholesale funds, that's number one. Number two, is I think our 30 year fixed rate mortgages peaked at about $3 billion, I don't remember the number. It's at about $2.4 billion now so we've drastically reduced our 30 year fixed rate assets and then the third thing is that our cash levels have increased significantly. We need probably $100 million of general…

On our securities portfolio? Robert Bohlen – KBW: Yes.

It's low. It's like two years. It's low and it's all pretty much now in agency mortgage backed securities.

Your next question comes from [Chen Bokuda – Capital]. [Chen Bokuda – Capital]: Just a quick question on the potential cap ex for the HELCO utilities from the inter island wind projects that you were mentioning earlier.

Your full question is how much capital expenditure is in there for the wind projects? [Chen Bokuda – Capital]: I guess in your cap ex forecast that you laid out there 2014, you said that any spending related to the inter island wind project was excluded? [Chen Bokuda – Capital]: Yes. [Chen Bokuda – Capital]: I'm just trying to get a gauge of what the potential cap ex is from the project itself.

Right now the anticipation is that the wind projects will be PPAs so we would not have any cap ex associated with them. The cable itself is anticipated to be a state infrastructure project because the state can get we anticipate far better financing and therefore lower customer cost than we could. So, at least for those two pieces, we do not anticipate any cap ex at the utility. It is possible that we could step in in some position on the cable if we view that as in our customer's interest and an attractive investment for the utility. But it's far too early to see that today.

Dick, I think there's also the transmission facility that we would, the part of the project that we would be responsible for [Chen] is taking the power from the cable then integrating it into our system and that's where our capital expenditures would go in. Maybe Dick can help you with some very rough estimates on that. It's pretty far out at this time.

Yes, Connie is exactly correct. The integration side of it would involve both transmission upgrades as well as potentially some capital investment elsewhere including in our generating assets in the system. But we do not yet have sufficient identification of those to have a forecast of how large those investments might be.

[Chen], I think the way that we view it is that, now we're talking about 2015 and out, is that that's part of the major benefit that we see to the whole Hawaii clean initiative for us is that by the time we get out in that time frame, and by then we should have all the pieces of this new regulatory model in place that that actually creates great investment opportunity for us as we do improve in our system in order to take those renewable resources. But currently, no number is in the capital plan today. [Chen Bokuda – Capital]: Right and I know we're looking a few years out now but any sort of spending related to this would be covered under the clean energy surcharge if my understanding is correct and that does not require rate cases, s that right?

That's correct. What it requires is that we file for approval of each project for inclusion in the renewable energy infrastructure surcharge. [Chen Bokuda – Capital]: So you would have a pre-approval process and then once you start spending on the project you would get more immediate returns on your capital.

Well the timing is not necessarily pre-approval for example, as we said in the remarks, the commission approved deferral of the cost of the big wind study and when those studies are complete, we would be anticipating filing for now surcharging them through the clean energy infrastructure surcharge. So we’re incurring costs and deferring them

Your next question comes from Michael Goldenberg – Luminous Management. Michael Goldenberg – Luminous Management: I had a question on the decoupling process so you and the CA have reached an agreement on all three points of the coupling? Is that correct?

Yes, there is a joint proposal.

Now given that last time during HELCO settlement commission still went ahead and decided for themselves what's appropriate and what's not, do you feel like a commission will be taking the decoupling order as a whole or they're likely to take each one of the three major points by itself and rule whether each one of them makes sense or not? And if that's the case, how would you rank them from what you believe to be the least riskiest and the most safe and likely to be adopted to one that's more likely to get some scrutiny in you from the commission?

Ah, Michael I love your question. You know, I wish I could always anticipate what the commission would do and that's a very difficult thing because it really is what’s in their purview to study all the elements and then make independent decisions. So let me just with that prefatory comment ask Tayne or Dick if they have some comments on this issue.

I believe the commission understands the importance of all three pieces decoupling. Having said that, the commission needs to make its own decision. I would expect them to make their own decision and in the fine detail, some parts of what was proposed certainly might change. I wouldn't attempt to handicap what might change. Michael Goldenberg – Luminous Management: Well, would you at least be willing to venture and say whether commissions likely to look at it as one proposal or three individual ones?

My anticipation is that it will be a single decision but certainly they could do something different than I anticipate.

With no further questions in the queue, I would now like to turn the call back over to Shelee Kimura for final remarks.

Thank you for joining us today. If you have additional questions, please call me at 808-543-7384. Aloha everyone.