Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Hawaiian Electric Industries Incorporated Earnings Conference Call. My name is [Anne] and I will be your coordinator for today's call. As a reminder, this conference is being recorded for replay purposes.[Operator Instructions]. We will be facilitating a question-and-answer session following the presentation. I would now like to turn the presentation over to your host for today's call, Shelee Kimura, Manager Investor Relations and Strategic Planning. Please proceed.

Thank you, [Anne], and welcome to Hawaiian Electric Industries' 2012 yearend and fourth quarter earnings conference call. Joining me this morning 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's President and Chief Executive Officer; and Rich Wacker, American Savings Bank President and Chief Executive Officer; as well as other members of senior management. Connie will provide an overview of the quarter and an update on our strategies. Jim will then update you on Hawaii's economy, our results for the year and fourth quarter, and will provide 2013 earnings guidance. Then we will conclude with questions and answers. In today's presentation we will be using non-GAAP financial measures to describe the company's operating performance. Our press release and webcast presentation materials which are posted on our Investor Relations website contain additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the equivalent GAAP measures. Forward-looking statements will also be made on today's call. Actual results could differ materially from what is described in those statements. Please reference the forward-looking statements disclosure accompanying the webcast slides which provides additional information on important factors that could cause results to differ. The company undertakes no obligation to publicly update or revise any forward-looking statements including EPS guidance whether as a result of new information, future events or otherwise. I'll now turn the call over to our CEO, Connie Lau.

Thank you, Shelee, and aloha to everyone. As all of you know, HEI is both a bank holding company as well as a utility holding company. As such, we filed our financial report with our bank regulators last night, and thus the timing of our earnings release and this call are related to the timing of that filing. As shown on slide two, full year reported earnings were $1.42 per share in 2012, down from $1.44 per share in 2011. As we disclosed on January 29, our utilities entered into a comprehensive settlement agreement with the Hawaii Consumer Advocates and we've now submitted that agreement to the Hawaii Public Utilities Commission for approval. Our GAAP earnings include the $24 million after-tax write-down related to the agreement and described in the January 29 8-K. The agreement recognizes that the cost of oil remains stubbornly high in Hawaii, which is then felt by our customers in high electric bills as fuel makes up more than half of customer bills. This is especially felt on our neighbor islands which are served by our Maui and Hawaii Island utilities. If approved the PUC, the agreement would result in our Hawaii Island utilities' withdrawal of its 2013 rate case with its next rate case not until 2016. Maui Electric would not have another rate case until 2015. Moving to slide three, excluding the after-tax write-down of regulatory assets in 2012 and 2011, core earnings reflect a strong operating performance in the year. Core earnings per share were $1.68 compared to $1.50 from the prior year. This reflects the first year that all three utilities will be coupled under Hawaii's new regulatory model. This model was intended to make revenues more stable and predictable to provide the financial stability and health necessary to support the utility…

Thanks, Connie. As a backdrop to our results and outlook, I'll briefly comment on Hawaii's economy which is [expected to] improve. The tourism industry had the best year on record in 2012. 2012 visitor arrivals were up 9.6% and expenditures were up 18.7% compared to 2011. Visitor spending has grown year over year for 32 consecutive months and the 2013 outlook for the visitor industry remains positive. Local economists expect construction to begin to recover in 2013 due to an increase in non-residential and public sector projects. Statewide unemployment is at 5.2% in December, with Honolulu at 4.7%, the lowest level in four years and remains low compared to the national average of 7.8%. Overall, we expect continued improvement in the Hawaii economy with expectations of an expanding job [takes] as construction strengthens, tourism continues its healthy gains, and growth broadens to other segments. On slide 10, GAAP utility net income for 2012 of $99.3 million was essentially flat with $100 million in the prior year. However, core utility net income was $123.7 million in 2012 or $18 million higher than 2011. The increase was primarily driven by a recovery of cost from rate cases and decoupling, partially offset by higher O&M expenses. And looking at changes in utility revenues between periods, we focus on net revenues. The net revenues that are shown on this slide before the operating revenues net of fuel oil purchase power and taxes other than income taxes, for the year, net revenues after-tax were $28 million higher than last year, largely driven by, on an after-tax basis, $29 million related to the Oahu 2011 and Maui County 2012 rate cases which included sales decoupling, better generation efficiencies in Oahu which resulted in $5 million of earnings, and $1 million related to the revenue adjustment mechanism…

Thanks, Jim. In summary, we continue to make significant progress on our strategies in 2012. All three of the utilities are decoupled and they continue to focus on fulfilling their clean energy mandates for Hawaii. The bank continued to deliver solid results, and in this interest rate environment, we are focused on disciplined loan growth and positioning the bank for future growth when conditions improve. Turning to our quarterly dividend on February 6, the Board maintained a dividend of $0.31 per share payable on March 13 to shareholders of record on February 21. Our dividend yield remains attractive. As of yesterday's close, our dividend yield was 4.5%. We believe we are well-positioned to continue to deliver a unique investment combination of attractive and stable earnings growth with reduced risk and volatility and an above-average dividend yield. And with that, we look forward to hearing your questions.

[Operator Instructions]. And our first question comes from the line of Charles Fishman with Morningstar. Please proceed. Charles Fishman – Morningstar: Hi, good afternoon. CapEx, you are now taking a 40% discount, I think I heard you say, on the major projects. And how -- were you taking like a 20% discount before? Did I -- is my memory correct, or has something changed there? What's going on, I guess, is what I'm asking.

Yeah. You know, [previously], what we have done was to provide the amount for the major projects, and we had talked through with analysts what those projects were, and you really had to take a discount factor yourself. Now we actually have provided a discount factor, which is our best judgment as to how the actual expenditures might occur. But as you can tell, we also still have indicated that such things like generation in Hawaii are subject to competitive bidding and we may or may not win those bids. Charles Fishman – Morningstar: Okay. You were very clear on that before, but I guess, so really nothing has changed in your view, you're just presenting it probably a different way?

Yeah, we're just actually giving a discount factor now to kind of help folks out. Charles Fishman – Morningstar: Okay.

And Charles, this is Jim. You'll note from the prior period our maintenance capital, which is reflected on the blue section of the bars on slide 14, it's really not very different at all. It hovers between [340 15] and about $400 million. So that's the base of the program, and that really hasn't changed in the rolling five-year period. Charles Fishman – Morningstar: Okay. And then the O&M, holding company, earnings per share, as I -- per my modeling, I had been looking at roughly anywhere from $0.20 to $0.22 a share drag. And now for -- in '13 you're talking $0.18 and $0.19, is that really where your focus is on O&M, you know, your further costs?

No. The holding of the O&M is really at the utility. A lot of the reduction in the expense at the holding company comes from the refinancing of the debt to lower rate. Charles Fishman – Morningstar: Okay. And then at the utility where the O&M has been, I think you used the word restraint, as I recall, in the fourth quarter -- or at the third quarter call, you were talking about some of your expenses getting pushed into 2013 from 2012. So that includes -- you still feel, even with that occurring, you can hold the line with 2013 O&M at 2012 levels?

Yes, that is definitely our plan. Charles Fishman – Morningstar: Okay. Thank you.

Charles, this is Jim again. One more thing to understand, the holding company other segment expense, the number is lower, you're correct, and it in part reflects additional dilution from the dividend reinvestment plan. So that's another penny or so or two. Charles Fishman – Morningstar: Okay, got it. Thank you.

Thank you.

And our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed. Paul Patterson – Glenrock Associates: Good morning. How are you?

Hi, Paul. Paul Patterson – Glenrock Associates: So one is just basically on the equity issuance, you said it was going to be 12 to 24 months from now pretty much is what you were thinking, is that right?

That's correct, Paul. It's Jim. Paul Patterson – Glenrock Associates: And the size of it, I'm sorry, I got a little bit distracted here, what kind of size are you thinking of?

We actually didn't say the size. What we said was we'll maintain our capital structure the way it is, the equity ratio at 52%. And specifically what I said about timing was it will be, you know, within the next 12 to 24 months. I was a little emphasizing on the timing and I just gave you the capital structure levels, other than the DRIP. The DRIP you can assume will remain on and that will produce about $45 million. And we've had that DRIP on for quite sometime, and that's about a 2%, 2.5% dilution per annum. Paul Patterson – Glenrock Associates: But the guidance that you guys are giving doesn’t have any impact associated with the actual -- outside of the DRIP, any other equity issuance, correct?

That is correct, Paul. Right. Paul Patterson – Glenrock Associates: Okay.

Yeah. And that's really, Paul, because of the uncertainty on the timing of the secondary offering. Paul Patterson – Glenrock Associates: I got you. The -- with respect to -- there's discussion -- I mean I saw some stories on some legislation being introduced to review authorized ROEs. Could you elaborate a little bit on that, where it stands and what's sort of driving it?

We're going to bring Robbie Alm who's the EVP for Regulatory from the utilities to address that.

This is Robbie Alm. I think the legislature is responding as was noted I think in Connie's opening remarks to the high bills that people are still paying as a result of high oil prices, I think where you've seen legislation to look at every aspect of our utility structure and what alternatives might be. I think the reaction of actual legislative committees today has been to simply push those back to the Public Utilities Commission and ask them to take a good look at the utility, how it's functioning, and whether there are ways in which customer bills could be reduced in any way. To date there's little indication that the legislature will try to handle those kinds of issues at a legislative level. Paul Patterson – Glenrock Associates: Was there some discussion of ROEs or am I just imagining something here? Was there, maybe I'm confused, there's so much going on in the sector and what-have-you, but I thought there was a Republican legislature who was putting something forward with respect to returns. Am I wrong about that?

There was a bill introduced to that effect that got some attention. I don’t think we have current indications that that would move. And as I said, in all the other hearings, the ideas where the legislature would be specific and prescriptive to date than converted into we'd like to ask the PUC to look at various issues. Paul Patterson – Glenrock Associates: Which they already are looking at. I mean, I guess, what changes? Would there be a change, I guess? I'm not exactly clear about -- I mean, I think they look at this, right? So I mean, what is it that would be changing as a result of this?

I think, you know, I think what we're seeing is a legislative need based on how much the -- continuing high bills are affecting consumers to show a concern to their constituents and raise up the issues and sort of underline them and ask that they be looked at. Those issues are looked at anyway, but, you know, legislators I think have a feel of real responsibility to reflect to their constituents, that they heard what they want to say and heard that there's a -- that the high bills represent a tough issue for them, and that they are listening and are saying to the PUC, please take a look at this. Paul Patterson – Glenrock Associates: Okay, I got you. And I know you guys are also obviously very positive of this as well, and you are making -- taking efforts to lower costs and what-have-you, as you mentioned in the presentation. Can you give us a feel for how we should think customer bills or, you know, the initiatives that you're undertaking, how -- what kind of rate impact we should be thinking about potentially, obviously without getting into predicting the price of oil, just what you guys are sort of doing and how that -- what the outlook is, because on the one hand you've got capital expense and on the other hand you have lower fuel expenses perhaps. Just any sense as to what we should be thinking about that?

This is Dick Rosenblum. You actually can't have a discussion of customer bills without talking about the price of oil, and of course none of us can predict what the price of oil is going to be. Just to give you a feeling, 79% of our average rate is made up of fuel, purchased power, much of which is related to fuel costs and taxes, which are typically excise taxes on top of the fuel and the purchased power. So that is the bill. Paul Patterson – Glenrock Associates: Yes, sure. But I was thinking that maybe if we were just to hold that constant, how should we think about the other initiatives that you guys are undertaking? You see what I'm saying? In other words, give some sort of extent, that's what I was sort of -- I mean, I don’t -- if you can't go into it right now, that's okay. I didn't mean to -- but I was just wondering if there was any sense as to what we might see.

Absent those sorts of costs, our O&M and other increases have tended to be in the 1% to 3% a year change range. So, very, very small, totally dominated by other things. Of course, constraining O&M will help to keep those down to the very low end of that range, and we spend a lot of time really focusing on the operational efficiency. For instance, if we can improve the efficiency with which our power plan use oil, we can avoid burning the oil and make a significant impact on our customers' bills. So, you know, other than the external factors, most of what we're doing is trying to hold our costs constant or even slightly decreasing if we can increase efficiency enough.

So, Paul, that hasn't changed. You know, previously we used to talk about our portion of the bill, and by the time you look at our portion as compared to the total bill, you're looking at very modest increases of 1% to 3%. So that really has not changed. What has changed, as you noted, is that there is the concern of the high bills and so we have redoubled, tripled, quadrupled our efforts to really focus on that within our company both operationally and other strategies like the LNG. Paul Patterson – Glenrock Associates: Okay, great. And then I just -- about the bank, you mentioned that one of the goals is to gain market share in key strategic portfolios. I was wondering if you could give us a little flavor for that and what's sort of driving the gain on sales [stuff]? I think you guys are now predicting that that would decrease this year, just if you could give us a little bit more flavor on those two things.

Sure. This is Rich Wacker. As Connie mentioned in her comments, we grew last year in our commercial markets, commercial real estate, our home equity lines and then in our consumer lines, especially with our clean energy product that we have, all of those are areas where we think we can continue to add to the book. We have been the number one producer in home equity lines in our market, we were in the fourth quarter -- we've gain share in the residential in the fourth quarter, we were the number one locally-based producer of mortgages as well. Even though we didn't put all of them on the balance sheet, we've been able to do a very good job of originating per customer. This year we think we will actually -- we've gotten our book, the proportion of mortgages within our book to a little bit less than half the book. That's where we were targeting and that's where we want to be. So now as we grow the rest of the book, we will actually add mortgage volume into the book. And so that's where we think we are going to have a little bit less of the production to sell, therefore lower gains. So that's where the lower gains come from. Paul Patterson – Glenrock Associates: Okay.

And a slightly higher net gross rate on our asset growth. Paul Patterson – Glenrock Associates: And the higher non-interest expense spending on long-term growth initiatives, is that something that's going to be sort of a higher run rate going forward or is this something that's just sort of building up and that, you know, is it more of a bulge as opposed to sort of just an increasing number that we should be expecting sort of going forward, period?

There's both elements inside of it, there's a little of both. There are some things that are investments that we're making in order to take out cost in the future, so with respect to our facilities and some things there as we consolidate down to a fewer number of facilities, we got to spend a little money to get that done first. There's other things, for example, we introduced our mobile banking product last quarter, and that has a higher run rate of expense associated with it. Over time we'll see, as transactions migrate more and more online, probably some net costs. But in the short term, that's a new application in the new ongoing operating expense for us. But we think it does a good job of helping to move customers to it because it's got some unique features in our market and it's been very well-adopted. So there's those kind of things that are in there, you know, but we're quite thoughtful, I think, about how we are choosing to spend money, because it's tough out there with what's happening on the margin. So we're being very judicious about where we spend. Paul Patterson – Glenrock Associates: Okay, great. Thanks a lot, guys. Have a good weekend.

Thanks, Paul. You too.

[Operator Instructions]. And our next question comes from Charles Fishman with Morningstar. Please proceed. Charles Fishman – Morningstar: Just a quick follow-up. Utility, are your turbines set up in dual-fuel or can they be easily converted to gas, or at that point, if you did something like that, are you talking about a major amount of CapEx? And I realize that'd be out several years.

This is Dick Rosenblum. We have both combustion turbines and old -- currently oil-fired steam plants, none of them are currently multi-fuel. It is in our existing capital plan to convert all of them to multi-fuel to take advantage of LNG or diesel or whatever the lowest-cost fuel available is in the future. So that's already in the plan, it is not a major expense, and we're already embarked on that path. Charles Fishman – Morningstar: Okay. Thank you.

Ladies and gentlemen, with no further questions, this concludes today's question-and-answer session. I would now like to turn the call over to Shelee Kimura with -- for closing remarks. Sorry.

I was going to jump in for you there. But thanks, everyone, for joining us. I know it's late in the day before a long weekend. So, appreciate you folks joining us, and have a great long weekend. Give me a call if you folks have any questions. Thanks. Bye.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.