Hawaiian Electric Industries, Inc. (HE) Q2 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Hawaiian Electric Inc. Industries Earnings Conference Call. My name is Lizzy, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Shelee Kimura, Manager of Investor Relations and Strategic Planning.

Thank you, Lizzy, and welcome to Hawaiian Electric Industries second quarter earnings conference call. Joining me today are Connie Lau, HEI President and Chief Executive Officer; Jim Ajello, HEI Executive Vice President, Chief Financial Officer and Treasurer; Dick Rosenblum, Hawaiian Electric Company President and Chief Executive Officer; and Rich Wacker, American Savings Bank President and Chief Executive Officer, as well as other members of senior management. The webcast live and appendix for this call are located on our website at HEI.com under the headings Investor Relations, News and Events, and Presentations and Webcast. Forward-looking statements will be made on today's call. Please reference the accompanying disclosure to this webcast live. I'll now turn the call over to Connie Lau.

Thanks, Shelee, and aloha to everyone. First, I'll provide a few highlights and discuss our strategic progress. Jim will then provide more details on the economy and our results. Second quarter earnings were $0.28 per share compared to $0.31 per share in 2010. Year-to-date, earnings per share were down 5% over the same period last year as utility expenses increased to implement our clean energy and reliability strategies and our largest utility awaited rate relief. Now that interim rate relief has been granted and the HECO Oahu 2011 rate case, we expect our results to improve in the second half of the year. Resetting our base revenues and expenses for our largest utility in this interim decision was a critical step in narrowing the gap between our current under-earning situations and our allowed returns. We are continuing through the rate case process with several items pending for the review. Many of you have asked whether we will maintain our ROE goal for HECO Oahu of earning within 100 basis points of our allowed ROE in 2012. While it will be more difficult to achieve given recent regulatory outcome, at this time, we continue to maintain this target. At the bank, we continue to deliver solid performance even with the prolonged low interest rate environment and regulatory headwind on fee income. We achieved 3 consecutive quarters of loan growth and credit quality continue to improve. We are making progress on our strategies and commitments, and we believe we are well positioned to deliver attractive, risk-adjusted returns and earnings growth to our investors in 2011 and beyond. As shown on Slide 4, the utility continues to make progress on several fronts. HECO Oahu has now implemented both sales decoupling and RAM covering O&M and rate base. And the HECO 2011 rate case will now serve as the new base for these mechanisms for Oahu over the next 3 years based on the interim decision that we just received for Oahu. In accordance with our agreement to stagger rate cases for our 3 utilities, we filed a 2012 rate case for Maui Electric last month. We requested an increase of $27.5 million for a 6.7% increase in annual revenues within 11% allowed ROE. We will file a 2013 rate case for our Hawaii Island utility the next year, and then HECO Oahu will be back up again in 2014. On our clean energy strategies, our utilities are well on their way to meet or exceed our next RPS goal of 15% in 2015. We achieved the following just since the start of the second quarter. In June, the PUC approved the purchase of power from a second to 21-megawatt wind farm on Maui that is expected to start construction in early 2012. In July, HECO executed a contract for a supply of at least 250,000 gallons of biodiesel produced in Hawaii. All 3 of our utilities were again listed in the 2010 Solar Electric Power Association's top 10 electric utilities for the amount of solar power per customer. And recently, we hit the 20-megawatt mark for installed roof-top PV on Oahu. Finally, on July 1, new legislation went into effect that will allow the PUC to distribute the cost of renewable energy projects amongst all our utilities rather than just on the island the project is located. This will facilitate our state-wide effort to bring more new renewable generation onto our grids. I'm now moving to Slide 5. Moving to the bank, we are focused on organic growth of ASP's core franchise while maintaining our efficiency gains and high overall return. The bank is continuing to exceed the performance of its high-performing peers. Return on assets improved 9 basis points over the linked quarter to 1.24%. Net interest margin remained above 4%. Annualized noninterest expense was in line with our target and our efficiency ratio remained better than our high-performing peers. Annualized pretax pre-provision income was $105 million, consistent with the linked quarter. And we continue to see loan growth in commercial market, commercial real estate and home equity lines combined with of a forward [ph] rate of decrease in our mortgage portfolio as refinancings declined. Overall, our loan portfolio increased to 2.6% year-to-date, on track to meet our expectations for mid-single-digit loan growth for the full year. Lastly, on July 21, under the Dodd-Frank Act, the position in regulation of the bank was transferred from the Office of Thrift Supervision to the Office of the Comptroller of the Currency and the supervision and regulation of HEI as a thrift holding company moved to the Federal Reserve. We don't expect to these changes in supervision to change matter significantly for either entity. Jim will now provide additional detail and insight to our results and our outlook for 2011.

Thanks, Connie. I will first briefly address the Hawaii economy. Hawaii's tourism industry is a significant driver of Hawaii's economy continued to reflect a trend of positive growth from 2010. Year-to-date June, tourism continued its strong recovery with visitor arrivals up 4.7% and visitor expenditures up 18.4% as compared to last year. June 2011 was the 14th straight month of increases in visitor spending. Hawaii's visitor arrivals from Japan declined 9% year-to-date through June compared to the same period last year, but this decline was more than offset by the increase from all other markets, which was up 8%. The Hawaii Department of Business, Economic Development and Tourism expects 2011 visitor arrivals to increase by 3.8% from last year and visitor spending to increase 10.8% and believes visitor spending is currently on pace to reach the record level set in 2007. Some of the optimism surrounding the tourism recovery in the second half of 2011 revolves around the Asia-Pacific Economic Cooperation summit also known as APEC. Being held in Hawaii in November, APEC is estimated to bring in approximately 20,000 visitors to the islands. Hawaii's unemployment rate of 6% has come down 0.3% from the beginning of the year and continues to track significantly better than the national rate of 9.2% in June. Statewide residential home sales and median prices were down in June. Tighter inventory levels and mix of homes being sold and the elimination of the 2010 federal tax credit have often been sited of these factors in the softer sales in median prices. Overall, Hawaii's economic recovery is expected to strengthen as improvement spreads beyond the tourism sector over the remainder of 2011. Moving to Slide 7, at the utility, net income for the second quarter of 2011 was $17 million compared to $17.6 million in the second quarter of 2010. The various after-tax components of the $0.6 million net income decline are detailed here, and I will highlight just a few. O&M expense was up 6%, in line with our prior guidance for a full year increase of 7%. We had $2 million of unusual items that are unlikely to recur including a 2011 filling adjustment and 2010 fuel cost recovery of previously recognized biofuels costs. $1 million in lower fuel efficiency savings is attributable to the implementation of the heat rate deadband, which became effective with decoupling. This variance could fluctuate from quarter-to-quarter depending on how we operate our systems. The quarter benefited from several key developments, including $2 million in rate relief granted in our 2010 Hawaii Island and Maui rate cases and $2 million lower depreciation expense from the change in depreciation rates and methods for our Hawaii Island and Maui County utilities. Decoupling revenue for our Oahu utility including one month of the RAM, which commenced in June was essentially flat with second quarter 2010 revenue. At the bank, net income for the second quarter of 2011 was $15.2 million compared to $13.9 million in the linked quarter and $16.1 million in same quarter last year. The $1.3 million increase from the linked quarter included, on an after-tax basis, $1 million of lower provision for loan losses from continued improvement in credit quality and portfolio mix, $1 million in higher noninterest income from a nonrecurring insurance gain and higher fee income. These are partially offset by $1 million in higher noninterest expense. Now we'll look at the utility. Slide 9 reflects key earnings drivers for the remainder of the year. We expect HECO interim rate relief to improve earnings in the second half of the year. The interim decision include several items requiring additional review and consideration for the final decision. The timing and outcome of the resolution of the pending matters could impact our ability to narrow our ROE gap as well as improve earnings. Commission will review HECO's labor costs and the deferral of cost for yet to be completed projects for their final decision. PUC allowed the deferral of cost, depreciation expense and carrying charges for 2 projects totaling $75 million that were not approved in base rates pending an independent regulatory review. For accounting purposes, HECO will record the equity portion of the carrying charge when it is allowed in electric rates. We cannot predict the timing and outcome of these matters. With decoupling, HECO Oahu net revenues will be set to the 2011 rate case. 2011 RAMs that commenced in June have been incorporated into the HECO interim rates, which became effective on July 26. 2012 RAMs will be effective in June 2012. While the implementation of these mechanisms is very helpful, we hope to make them more compensatory in the future. Since HELCO and MECO continue to await decoupling implementation, we are updating our prior kilowatthour sales guidance for those 2 utilities. Based on year-to-date results, we now expect full kilowatthour sales to be flat as 2010. On O&M, we are lowering our original expectation for a 7% increase as a result of management actions we will have to implement to reduce costs relative to our original plan. The goal is to manage costs to levels that are consistent with our recent rate positions. As a result, we are targeting O&M to be flat for the year compared to the prior year. Consequently, in the second half of 2011, we expect a decline in O&M expenses compared to the same period last year. Our 2011 rate base growth is now expected to be 1% in 2011 instead of 2% previously guided. This is primarily due to changes in our estimates for the impact of bonus depreciation on rate base. Our 5% compounded annual growth rate over 5 years remains unchanged. Slide 10 shows our actual ROEs for the trailing 12 months. It also demonstrates the opportunity we have to repair our under-earning situation and narrow the gap between our earned values versus allowed ROEs. With the rate relief granted over the last several quarters, HELCO and MECO are showing improvement. Since HECO Oahu just implemented its 2011 interim rates in the third quarter, we expect to repair its severely earning -- under-earning situation going forward. Our goal for HECO Oahu will be more difficult to achieve than we originally anticipated but it remains unchanged. We continue to work towards achieving ROE within 100 basis points of our allowed of 10% for the calendar year 2012. In May 2011 RAM decision, which delays 2012 RAM implementation to June 2012 and the July interim rate case decision in order, which significantly reduced expense levels, requires us to pursue mitigating strategies to overcome these challenges. Now we'll look more closely at the bank performance metrics. On Slide 12, our net interest margin was 4.07% and remains well above our industry peers. Compared to prior periods, we recognized a lower level of deferred loan fees from both lower commercial loan prepayments and lower mortgage refinancings and growth in lower yielding assets such as commercial, variable rate loans and home equity loans continue to mix the overall asset yield down at present, which should provide a lift as interest rates rise. These impacts were partially offset by lower liability costs. As you can see here, our liability cost of 35 basis points is less than half that of our banking peer average. This is driven by our low-cost deposit base, a key differentiator for ASB and the Hawaii banking market versus the industry as a whole. Turning to Slide 13. The bank recorded $2.6 million of provision for loan losses in the second quarter. This was down $2 million from the linked quarter, consistent with the absence of any commercial loss, large commercial loss, continued modest asset quality improvement and faster run-off of our higher risk residential land loans portfolio. Turning to the bank's balance sheet on Slide 14. Here we show you asset and funding mix of our peer banks and ASB. We compared ASB's June 30, 2011, balance sheet to the last complete available data set for our peers at March 31, 2011. 96% of our loan portfolio was funded with low-cost core deposits, a significantly higher percentage than our peer banks of 81%. We are able to reduce our cost of funds further in the second quarter, as we reduced our higher costing CDs and grew our low-cost deposit to $3.5 billion, an increase of $53 million from the linked quarter and $223 million from the same quarter last year. We also increased total loans by $31 million from the linked quarter for a total loan balance of $3.6 billion. As Connie mentioned, this is the third consecutive quarter of loan growth in the bank. We remain well capitalized with a Tier 1 leverage ratio of 9.1%, tangible common equity to total assets of 8.5% and total risk-based capital ratio of 13.3%, all at June 30, 2011. At the same time, ASB continues to pay a healthy dividend to HEI. In the second quarter, ASB paid $14 million of dividends and expect to pay annual dividends of almost $60 million to HEI in 2011. Moving to credit quality on Slide 15. ASB's nonperforming assets ratio declined to 1.69%. The 13-basis point decline from the linked quarter was primarily due to decreases in the land loan and residential 1- to 4-family mortgages portfolio. Our primary credit risks continue to be in the 3 shrinking portfolios that we have described to you previously and are now down $100 million or 19% over the last year to $419 million in aggregate. These include $52 million of residential land loans, primarily on the neighbor islands, $281 million of neighbor island 1- to 4 mortgages produced from 2005 to 2007 and $86 million of the run-off portfolio of mainland residential loans purchased. On Slide 16, our net loan charge-off ratio of 45 basis points remains low and improved further over the linked quarter by 4 basis points. The allowance for loan and lease losses currently represents roughly 1.1% of outstanding loans, consistent with the linked quarter at $39.3 million. This is $1.5 million lower than the linked quarter at $40.8 million but higher than the prior year level of $37.1 million. Slide 17, you can see our focus remains on modest loan growth concentrated in adjustable rate products such as home equity lines of credit and commercial accounts. We're moderating the rate of decline in our fixed rate residential portfolio. We are on track for mid-single-digit loan growth for the year and continued modest decline in the net interest margin as lower yield assets are added to the portfolio. Our biggest operating challenge remains mitigating the impact of continuously evolving regulations on our noninterest income. Based on our experience to date and current implementation of the guidance, we now expect overdraft fee income to decline by approximately $9 million pretax total for the year from the $21 million recognized in 2010. This represents a $3 million decline expected in the second half of 2011 compared to the same period last year. One regulatory change that will not affect us relates to debit card interchange fees. Based on our asset base, American Savings Bank is exempt from the new cap established by the Federal Reserve Board on what fee issuers can charge per debit card transaction. While we are not directly impacted, it is too early to tell whether competitive market pressures will indirectly affect exempted banks. We also expect lower second half noninterest income when compared to the second half of 2010 as we do not expect the repeat of that period's residential mortgage refinancing loan and the associated gain on sale of those refinanced mortgages to the secondary market. As a result, the downward pressure of these 2 elements on our noninterest income, we now expect 2011 pretax pre-provision income to be in the range of $105 million to $110 million, just below our near-term performance target of $110 million to $120 million. We still expect our low-cost funding base, efficient cost structure and lower risk profile to continue to deliver strong results compared to the industry. Moving to Slide 19. Given HEI's outlook for our equity needs going forward, management decided to temporarily satisfy the demand for shares for our dividend reinvestment, retirement savings and other plans through open market purchases rather than new share issuances. We expect this to be effective in late August until the end of the year and should result in a reduction in common equity issued of approximately $20 million for the balance of 2011. Management will then evaluate the matter on a quarterly basis thereafter. Our projected equity needs have declined due to the timing of capital expenditures as a utility. In addition, we continue to maintain a solid capitalization ratio of 51% and strong liquidity positions. We have prefunded much of our $100 million senior notes that matures later this month, and we have $300 million of untapped credit facilities between HECO and HEI. Even with the switched open market purchases for DRIP, we expect short-term borrowings to be comfortably within our credit facility limits. And On August 1, Moody's reaffirmed HEI's current Baa2 senior unsecured debt rating and stable outlook. And that would be Baa1 for HECO and stable outlook. Under these assumptions, we do not require additional equity other than possibly through DRIP through the latter part of 2012. Now I'll turn it back to Connie.

Thanks, Jim. And finally on Slide 20, in summary, we continue to execute on our strategies. At our utility, we have seen meaningful regulatory progress to align our business with our clean energy goal. With the implementation of decoupling at our Oahu utility, interim rate relief granted in Oahu's 2011 rate case and the filing of MECO's 2012 rate case, we are making significant strides to narrow the gap to our allowed ROE. We continue to maintain our ROE goal for HECO Oahu to earn within 100 basis points of our allowed ROE in 2012. However, this goal will be more difficult to achieve than originally anticipated, and we are evaluating mitigating strategies to overcome this challenge. At the bank, with our focus on organic growth and maintaining our efficiency gain, we continue to deliver high-performing results despite the challenging interest rate and regulatory environment. We are on track to achieve mid-single-digit loan growth in 2011 and are focused on creating steady, profitable growth going forward. Turning to our dividend, our dividend yield remains attractive and is above the average for utility peers. As of yesterday's close, our dividend yield was 5.4% and with this morning's market correction, 5.5%. Overall, we continue to make progress on our strategies with solid opportunities to grow our business. We believe we are well positioned to continue to deliver attractive earnings growth, with reduced risk and volatility and an above average dividend yield. With that, we look forward to hearing your questions.

[Operator Instructions] And our first question will come from the line of Paul Patterson with Glenrock Associates.

Wanted to touch base with you on just a few items. One is, it looks like I guess, you're now betting on -- I'm sorry, planning on O&M growth rate of being basically flat in 2011 correct?

Correct.

And how should we think about that trending in 2012? And how should we think about your ability to control costs through that kind of time frame?

This is Dick Rosenblum. I think the way you ought to think about it is the way we think about it, which is that we're going to live within our means. So whatever our various regulatory mechanisms provide us is the level of spending we will attempt to achieve.

Okay. And is there anything in particular that you guys are doing now? I mean, is it a deferral sort of situation in terms of achieving these for 2011? Or is this something that you guys are instituting things that sort of on a run rate won't come back in the future, I guess?

We're not trying to do deferrals although there may be some of those primarily in response to external conditions. So if low growth remains low for instance, there's a certain amount of deferral of work we can do that would otherwise have been required by the loan growth. The heart of what we're doing is really focusing on the cost efficiency of what we do. So doing all the work but doing it cheaper, rebidding contracts, finding ways to increase internal efficiencies, reducing rework rates, sort of the standard spectrum of activities that one goes through to contain costs.

Okay, great. I wanted to also ask you about on the bank side, the asset yield. It seems that the asset yield is falling pretty significantly with respect to the liability cost. And it looks like you guys are probably replacing assets with lower yielding assets. Could you give us a little bit of flavor as to how we should think about that trend continuing? And what kind of type of loan activity is taking place?

Sure. This is Rich. Certainly that dynamic's true. the assets that we are originating are coming on at lower than the average yield in the book. We also have a dynamic where on a quarter-to-quarter comparison, you're seeing an impact of deferred loan fee recognition as Jim mentioned. Because in prior periods and prior year, we had higher rate of repayments on commercial loans, particularly with the dynamic this quarter that contributed a few basis points. We still think that we're going to be, for this year over 4% on our NIMs. We think that the repricings that we're seeing on the consumer side, on the HELOC book are giving us some benefit because we brought them on typically at 1% for the first year repricing to market, which is currently around 4.5%. And we are doing a pretty good job of holding those repricings and the assets associated with them as they come on. So we do expect that you'll continue to see a gradual mixing down of that NIM as we go but we feel pretty good about the pricing on the individual assets that we're bringing on. And as we've been describing to you in prior quarters, more of what we're bringing on are the variable-rate assets that when we get the uptick in interest rates eventually, we don't have that interest rate risk associated with them and we'll get the benefit in the rates up environment.

Okay. So when we're looking out, and of course, interest rates are kind of volatile here, but when we're looking out through 2012, if things stay sort of static, which I guess is a bit of the question in the market, how should we think about the asset yield as we get into next year?

I think you'll continue to see that gradual ticking down of the NIMs.

Okay. And then the $1 million in -- it sounds like you guys benefit from $1 million insurance and higher fees, and one of them seems like a nonrecurring item. And I would assume the higher fees were probably more ongoing. Could you break that down a little bit for us?

The $1 million was a bank on life insurance proceeds, and that is a nonrecurring item in this quarter.

Okay. And then the loan loss provisions, just the credit quality improved. Is that what happened specifically or was there anything else that we should be thinking about?

There's the general dynamic of every once in a while we've had a lumpy, we've described it as a lumpy quarter on the provisions in our commercial book if we have a larger exposure that has moved in and required some provisioning. We've had that in prior quarters. We didn't have that this time. In general, I think our non-performings, our overdues are all on a continuous modest decline. So we've had some general improvement there. And if there is a mix effect as we described because particularly some of higher risk books we've been running off more quickly, and we described the 3 parts of the portfolio. The land loan book was one that we're down already from the start of year, almost 25% as we continue to try to work that, those parts of the book off. So you'll get a benefit because lower asset's in the higher risk categories.

[Operator Instructions] And our next question will come from the line of Bryce Rowe with Robert W. Baird. Bryce Rowe - Robert W. Baird & Co. Incorporated: Just a couple more questions here on American Savings. Obviously, you guys are showing some loan growth against peers that are struggling to produce some loan growth. Can you talk about kind of the source of where the commercial loan growth, what the source of the commercial loan growth is? And then on the home equity growth, we had a point where you're still offering that same home equity product with the intro teaser rate.

Yes, on the home equity site we continue to promote our, what we call our equity express product, and we have good momentum on that, that we've been building up. Our branch staff are very comfortable selling it. We feel good about our underwriting criteria. The credit quality on it is quite good. And we do continue to offer the 1% for 12 months that bumps up after 12 months. As I mentioned in response to the previous question, we're seeing pretty good metrics as we hold those balances through the repricings, and that's given us on the consumer side some yield benefit as we go through that. And the next couple of quarters, we're going to see larger amounts going through that. In the market, we've seen our competitors come in and also promote home equity products. We continue to have, I think, a pretty strong position on that locally, and it continues to give us loan growth. On the commercial side, we're seeing a mix probably, we can get you the exact numbers but roughly half of our growth is coming out of the C&I portfolio split between -- I guess, it's about 2/3 is coming out of the C&I portfolio split between what we call our shared national credits and the domestic Hawaii credits. And we've had little bit of growth in our commercial real estate book as well. So we're trying to keep a good spread and diversification of the assets that we're growing over there. We're keeping good stability on our risk metrics. So we're not buying down the risk curve in order to get the growth. We're just continuing to hit the different pockets of the market. And try to get good priced assets that we can put on the book and hold. Bryce Rowe - Robert W. Baird & Co. Incorporated: Okay. And any -- without American Savings being hit by the Durbin Amendment and your 2 larger competitors on Hawaii having to deal with it, are you seeing any kind of competitive dynamic change with respect to deposit products, et cetera that you can take advantage of?

We'll watch that. We've continued to maintain our free checking as kind of our lead product into the market. That's continued to give us a good benefit on core deposit growth. The peers have not made a major shift in what their pricing strategies are though you do hear market feedback about additional fees coming in on that side, and we're watching to see if there's a window that we can take advantage of. But so far our basic proposition to our customers of free checking, good value and convenience continues to help us hold a good position on that.

[Operator Instructions] And our next question will come from the line of Jim Bellesa with D.A. Davidson. James Bellessa - D.A. Davidson & Co.: The description of the HECO gap in ROE said that there was challenges in closing that gap. What are those challenges?

Jim, I think as we mentioned with the RAMs coming out, we had anticipated that those would go into effect slightly earlier and it was June 1. And we also recently had the interim decision where there were significant reductions in the O&M. We still have some of the cost pending in the current rate case as we go into the finals. So we won't know on those. And then as we've described previously, there are other lags that our built in automatically into our current rate case process. James Bellessa - D.A. Davidson & Co.: Because there's more population on Oahu, is there any more political pushback that you're receiving there versus the other islands?

No, we're not seeing any difference. James Bellessa - D.A. Davidson & Co.: And then on the O&M discussion that you had, at what point can you no longer cut? You say you want to live within your budget but then, you have to maintain reliability, safety and good public relations in these things. What level can you no longer cut?

Well, this is Dick Rosenblum. It's really hard to answer that question in a numerical sort of way. It's easier to answer it in a principle sort of way, as long as the PUC is reducing things where we can reduce them. So they tell us, we're not going to give you any funding for X, we'll stop doing X. Those are very straightforward. The ones that are very difficult to deal with are where the PUC is reducing recovery in area where we have no control. An example is if they reduce recovery for benefits for our unionized workers, we're in a contract. Well, there's nothing we can do until that contract expires. So those are the ones that are very difficult to deal with, and so far, that has not occurred in our HECO Oahu rate case. We await the final because they have another bite at that apple. But as long as those sorts of changes don't come out of the commission, we are generally able to live within our means.

And our next question will come from the line of David Paz with Bank of America Merrill Lynch. David Paz - BofA/Merrill Lynch: Just had a question on utility CapEx year-to-date. I believe it's about $85 million. Is that correct?

Yes. David Paz - BofA/Merrill Lynch: Now and your target for the year is $300 million, so are we just looking at some timing issues for the utility CapEx?

David, this is Tayne. As we look at our CapEx, we're also reevaluating things like the costs for environmental controls, and there are some things that have been delayed. And so our CapEx is probably going to come in a little bit lower, which is why you're seeing the change in our rate base growth for 2011, more like 1% range versus 2%. David Paz - BofA/Merrill Lynch: Okay. Yes, so it's bonus D&A and lower CapEx.

Yes. And, David, I would add as Jim said in the remarks, that's another reason why we are moving to open market purchases in our DRIP and other stock plans, because we are actively managing the capital structure as against the CapEx. David Paz - BofA/Merrill Lynch: Got it. Okay. And roughly what's the split among strict to lease [ph] like the percentages on your annual CapEx projected, annual CapEx?

The split is roughly about 70% Oahu and about 15% each for the neighbor islands roughly speaking. David Paz - BofA/Merrill Lynch: Got it. Okay. Do you happen to have the equity balance at each utilities as of June 30, '11?

This is stated there in the -- This is Jim. They're in the Appendix slide. Each one of those tearsheets will provide you and I'll turn to one of the examples.

And while Jim's looking at that, also the CapEx as a planned addition to historically for the 3 utilities, you can see them on Slide 30.

Right. And so if you were to turn to 31, in fact the next Slide, you'll see the HECO rate case 2001 test year. On that queue, we provide the common equity capitalization. In this particular case, it's no different than the application of what's granted in interim D&O of 56.3%. And then if you proceed to the other utilities in back, in the appendix stack, you'll see that as well and we also -- Yes, the actual numbers are in the 10-Q. David Paz - BofA/Merrill Lynch: Okay. All right. And then just quickly on sales, I know you guys are assuming flat sales at HELCO and MECO for the year versus last year, and I believe those were at 2%, 1% respectively. And I understand your comments about the economy seems, while it still seems somewhat modest recovery and the insurance seems to be coming back. I guess, I'm just trying to tie those 2 together. I would expect still that maybe to stay at the level you had anticipated to be in a year if not better. Can you just expand on that again?

Yes, this is Dick Rosenblum. On the neighbor islands, we've just had remarkably cool weather in June and July. And just assuming normal weather for the rest of the year, they were sufficiently cool that -- we're almost the reverse of the mainland in this regard. It was sufficiently cool that it really dropped the sales. So it's all just weather.

And, David, just to confirm the prior guidance was 2% of MECO and 1% of HELCO. So you're correct on that. David Paz - BofA/Merrill Lynch: Okay. And just last question on the bank. Do you expect the $80 million of excess cash to come down this year? Is that maybe over time or the next year or 2?

It will come down a little bit even from next quarter, and we'll manage that. It's kind of something that we're looking at as you'd expect based on here's flows that we see and specific large customer planning. And so we'll see that start to tick down, but it's kind of a quarter-by-quarter thing, that you'll see a little bit of volatility. But you should start to see it come down from next quarter even.

And at this time, we have no questions in queue. I would like to turn the call back over to Shelee Kimura for any closing remarks.

Thank you everyone for joining us today. As always, call me if you have any follow-up questions and have a great day. Thanks.

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day, everyone.