Good afternoon and welcome to the Q1 2022 Hawaiian Electric Industries Inc. Earnings Conference Call. My name is Sam and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions] At this time I'd now like to turn the call over to our host, Julie Smolinski, VP Investor Relations and Corporate Sustainability. Julie?

Thank you, Sam. Welcome everyone to HEI's first quarter 2022 earnings call. Joining me today are Scott Seu, HEI President and CEO; Greg Hazelton, HEI Executive Vice President and CFO; Shelee Kimura, Hawaiian Electric President and CEO; Ann Teranishi, American Savings Bank President and CEO; and other members of senior management. Our press release and our presentation for this call are available on the Investor Relations section of our website. During today's call, we'll be using certain non-GAAP financial measures to describe our operating performance. Our presentation contains reconciliations of these measures to the equivalent GAAP measures. As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings, and in the Investor Relations section of our website. Now, Scott will begin with his remarks.

Greetings everyone. Thank you for joining us today. We're pleased with our consolidated first quarter earnings, which represent a 7% increase over the prior year. Each of our businesses contributed to these solid results. The utility is executing well under the new performance-based regulation framework. While it had higher operations and maintenance expenses in the first quarter, those were offset by other items that Greg will address and we're on track with our full year plan. The utility remains focused on delivering customer value, while progressing ambitious climate change action goals. The bank's results reflect good execution in an improving banking environment. Earning asset yields are starting to improve with rising interest rates, credit quality remains solid as our state's economy strengthens, and the bank is managing expenses well amid its digital transformation. Our first quarter results also benefited from the sale of an investment in an electric vehicle charging company, EverCharge, that Pacific Current has partnered with to expand access to charging stations in Hawaii. The partnership with EverCharge will continue. Overall, the first quarter represents a strong start for 2022. Turning to the utility. During the first quarter, the utility worked hard to manage the impacts of inflation and supply chain pressures including higher fuel prices which are impacting our customers. These dynamics underscore the importance of our focus on affordability, efficiency, and providing customers options to manage their bills. Rising fuel costs also highlight the need to continue working together as a state to rapidly reduce our dependence on imported fossil fuels. Like the rest of the industry we're seeing impacts to renewable energy and storage projects from inflationary conditions and supply chain and other challenges. While some projects have been delayed and some are no longer moving forward, we've also had successes including the acceleration of…

Thank you, Scott. Hawaii's economy has been improving as COVID-19 has become less disruptive and tourism has strengthened. Hawaii's indoor mask mandate and domestic travel restrictions expired in late March. Domestic visitor arrivals have remained strong and in the end March were nearly 10% above the same month in the pre-pandemic times, although international visitor arrivals are still down sharply. Japan is traditionally our strongest source of international visitors and we're just starting to see Japanese tourism pick up. Travelers from Japan are projected to reach 40% of 2019 levels by year-end and reach or exceed pre-pandemic levels next year. Hawaii unemployment has continued to steadily improve. It was 4.1% in March down from 6.6% in March of last year and down markedly from the peak of nearly 24% in April 2020, although we still lagged the national average of 3.6% today. Hawaii's housing market remains very strong. The March median sale price for single-family homes was up 21% from last year and the condo market median sale price up 14%. Overall, while we're watching inflation and supply chain dynamics closely, we have a positive outlook for Hawaii's economy. Turning to our financial performance. We are pleased with our consolidated first quarter results with consolidated net income and EPS growth of 7%. The utility is executing well in its first full year under PBR and the bank is starting to see benefits from rising interest rates and the improving economy. Pacific Current contributed a nonrecurring $0.06 after-tax gain from the sale of its investment in EverCharge, an electric vehicle charging company that it has partnered -- has a partnership with to provide expanded access to charging stations here in Hawaii. As Scott noted, that partnership will continue. Consolidated last 12 months return on equity improved 90 basis points versus the…

Thank you, Greg. As you've noted, this is your last earnings call as our CFO; perhaps not as a shareholder, as a shareholder you can be on a future earnings call. So we've greatly valued your leadership Greg over all these years. You've contributed so much to our corporation, finance, strategy, risk and now ESG. So we are truly excited and we wish you well, as you go on to your next exciting career adventure. Now you are still with us through the end of June and we really appreciate that. I appreciate that to allow for our transition here. But notwithstanding that we still have you for a few more weeks I'll close with this, because I highly doubt that your future opportunity will close with a few Hawaiian wishes here. As we say here in Hawaii, Greg, first off [Foreign Language], which means our wholehearted gratitude to you. [Foreign Language], which we want you to take good care be well. And then finally of course [Foreign Language], which means we will see you later. This is not completely goodbye. So with that we look forward to your questions.

Thank you. We will now begin the Q&A session. [Operator Instructions] Our first question comes from the line of Julien Dumoulin-Smith of Bank of America. Julien, you may proceed with your question.

Hi, good afternoon, team. Thank you all for the time and Greg I wish you all the best here and I'm sure we'll be connecting with you shortly, regardless. So in fact actually maybe the first question, let's just go for that. Any thoughts on the CFO search here any comments or preferences for internal or external and when we may get a bit more clarity on that front? And again maybe that's not to you Greg, but to the wider team. But again I wish you the best.

Hi, Julien, this is Scott. Well for one thing for sure this will be an orderly transition. So I'm working with input from our Board as well as the senior management team in terms of the process. We will be seeking the best CFO for the team here to take us forward. I won't go into much detail other than to say we will be going through an orderly process and considering a variety of – a number of candidates both internal as well as external.

All right. Fair enough. I'm keen to see you guys bring up here. You've got quite a – you've got to preserve quite a legacy here. Maybe secondly and more substantively, has there been an increase in late payments and non-payments in recent months just in light of this elevated fuel cost environment? And how does this shift generation dynamics in the state and conversations that both could be constructive and more difficult?

Hi, Julien, this is Shelee. So on the high bills and how that's impacting us in terms of collections we're actually seeing an improving trend in collections relative through the pandemic period. So through the second half of last year and continuing through this year we're actually seeing improved collections. We've also stepped up our collection efforts as well now that we're out of the pandemic period. The other part of your question was? Sorry I've forgotten the next part.

Yeah. Just what is the opportunity that exist, right? Given the elevated price curve in theory this could make economic a host of different opportunities back to you whether in the form of owned opportunities and/or contracted?

Got it. Yeah. So, I mean we started this clean energy transition in large part because of the volatility of oil prices and exposure that we as a state and we as a company and our customers have because of that. So, it just reinforces the importance of the path that we're on to accelerate the renewable transition that we have and to increase, and I guess confirm our resolve for doing that not just for ourselves but others in our state.

Got it. Excellent. And then just Greg, maybe a quick one here if you don't mind. Just when you talked about net interest margins here, you talked about that remaining relatively stable despite the backdrop that we're in today. Can you talk about how that might annualize here, especially as you think about those PPP fees roll off here into subsequent periods? What that kind of grossing up number might eventually transition to here as you roll out of some of those bad guys year-over-year? And then maybe how this maybe fits in with your expectations I think for the full year of having four rate hikes as part of your at least guidance assumptions?

Yeah. And as I mentioned earlier, we believe we're on track with our guidance maybe to the upper -- towards the upper half of the range overall. And we have reaffirmed the guidance ranges around that particular component. What we're seeing is some volatility on a quarterly basis because of the PPP fee recognition dynamics. But maybe Dane, why don't -- Dane or Ann feel free to elaborate on the dynamics overall?

Yes. So, this is Dane Teruya, CFO. We do expect net interest income to be slightly higher in 2022 compared to the prior year period. Like Greg mentioned, we are seeing the benefits of the higher rate environment and that -- but that's having an offset of the lower PPP fees that we actually realized in the prior year. So, we're thinking, it's slightly higher. But obviously, we're watching the environment to see if that actually comes to fruition.

So we are -- we do have an asset-sensitive balance sheet. And over time, we'll see the benefits of that pricing through.

Yes. Correct. All right. Indeed. Okay. Noted. And best of luck again, and we’ll hopefully see you in talking again soon.

Sounds good. Thanks Julien.

Thanks Julien.

Thank you, Julien. [Operator Instructions] And there are no additional questions waiting at this time, so I'll hand the call back over to Julie and the management team for closing remarks.

Thank you everyone for joining us today. And certainly, if you have any additional questions after the call, please reach out. Our Investor Relations information is available on our website. And we'll see a number of you in New York later this week. Thank you everyone, and have a great rest of the week. Thank you, Greg, and the rest of the team here. Take care.

That concludes the Q1 2022 Hawaiian Electric Industries earnings conference call. Thank you all for your participation. You may now disconnect your lines.