Good day, everyone, and welcome to the Hawaiian Electric Industries Third Quarter 2023 Earnings Call. Today’s call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Mateo Garcia, Director of Investor Relations. Please go ahead, sir.

Thank you. Welcome everyone to HEI’s third quarter 2023 earnings call. Joining me today are Scott Seu, HEI President and CEO; Scott Deghetto, HEI’s Executive Vice President, CFO and Treasurer; Shelee Kimura, Hawaiian Electric President and CEO; Ann Teranishi, American Savings Bank President and CEO; and other members of senior management. Our earnings release and our presentation for this call are available in the Investor Relations section of our website. 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. Today’s presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today’s presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. Now, Scott Seu will begin with his remarks.

Aloha kakou. Welcome everyone. Given the August wildfires that impacted our customers and communities, our discussion today will be different from our usual earnings calls. I’ll start with an overview of what we’re doing across our companies to reinforce our commitment to serving our communities for the long term. Shelee Kimura will then provide an update from the utility on our response and rebuilding efforts. Scott Deghetto, who started as HEI’s CFO on October 1, will then walk you through the quarter’s financials and provide an update on our guidance. It’s been three months since the tragedy of the August 8 wildfires forever altered the lives of so many of Maui’s and Hawaii’s residents. The tragedy is still fresh for us, and the scale of the loss is difficult for our hearts and minds to process. We have friends, family, neighbors, and employees on Maui who have experienced loss and pain on a scale that no one ever should. One of Hawaii’s greatest strengths is our ability to work together. We have a concept here, which we call Laulima, meaning many hands working together, and that is what it will take for our state to get through this and emerge in a position of strength. Yesterday, Governor Josh Green announced the multi-phase initiative to support Maui’s recovery, protect our communities against future extreme weather events, and ensure that as a state we can attract the capital needed to keep our communities safe and our state on the path to a sustainable future. The first phase is focused on providing financial support for families who have lost a loved one and those who are severely injured in the Maui fire. Payment will be offered on an expedited basis, providing an alternative to a lengthy legal process and the costs associated with…

Thank you, Scott. Aloha everyone. I'll start by echoing Scott that our hearts beat for the many people who have been affected by this horrible tragedy on Maui. I have spent much of my time over the last several months on Maui and have seen the devastation in Lahaina firsthand. I know I speak for the entire Hawaiian Electric Team when I say that we will stand with the Maui Community to help recover and rebuild for however long it takes. Since August 8th over 400 employees have been assisting on the ground alongside first responders, FEMA and other federal, state and county agencies to assist in the recovery efforts. Our team has shown unwavering dedication in helping our communities on Maui. Power has now been restored to 99% of customers who lost electricity in West Maui and upcountry Maui. Collaborating with the state, Maui County, Maui Emergency Management and other county officials on the path forward for Lahaina and Maui is a critical priority for us. As an example, Maui Emergency Management Officials have asked us to start replacing poles and other electrical equipment that was damaged in and around Lahaina. This involves installing temporary poles, transformers, power lines and other equipment that enables us to provide safe and reliable power, while long-term community driven plans are developed for Lahaina and its future energy needs. We have been keeping our utility regulators well informed on restoration efforts and as Scott mentioned we have filed a request to defer expenses related to the wildfires. We expect to work in coordination with the PUC as we continue our restoration work and further strengthen our grid's resilience to impacts from climate change and extreme weather. The risk of wildfires was only one of a number of Hawaii's unique mix of risks identified…

Thank you, Shelee. I'll start with our results for the quarter on Slide 6. We earned consolidated net income of $41.1 million and EPS of $0.37 for the third quarter. This included $20.4 million or $0.19 per share of wildfire related expenses, and excluding those expenses core net income and EPS of $61.5 million and $0.56 compared to $62.1 million and EPS of $0.57 for the third quarter of last year. Utility net income included $10.4 million of windstorm and wildfire related impacts. Bank net income included $6.3 million and holding company and other segment net income included $3.8 million. Our consolidated last 12 months core ROE remains healthy at 10.4% excluding wildfire impacts. This is down slightly from 10.5% last year, due primarily to last year's gain on sale recorded at Pacific Current and this year's higher holding company loss and lower bank earnings. Utility Core ROE was up 20 basis points to 8.3% excluding wildfire impacts, and Bank Core ROE on an LTM basis was up 220 basis points to 16.4% excluding wildfire impacts. The higher bank ROE reflects the impacts of higher interest rates to bank AOCI, which reduces shareholders equity. On Slide 7, we show major variances across the enterprise compared to the third quarter of last year. On the utility side, we saw higher ARA and MPIR revenues, higher fossil fuel cost risk sharing revenues, and higher AFUDC from increased CapEx. These were offset by $17 million in higher O&M, $10 million of which was related to the Maui windstorm and wildfires. These expenses included legal, outside services and consultant costs. The remaining $7 million O&M increase was due to higher transmission and distribution expenses, higher customer support costs, and higher overhaul costs. On the bank side, lower net income was primarily due to variances…

Thank you. [Operator Instructions] We'll take our first question from Mike Lonegan with Evercore.

Yes. Hi. Thanks for taking my. Obviously, you spoke about the runway you have with your liquidity position. You said you're reexamining and updating your capital program to harden the grid. You talked about resiliency. I was just wondering, how should we think about your maintenance level of spending? Is that like the ARA approved level? And what would be on top of that that you're planning in terms of capital spending?

Hey, Mike, this is Scott Seu. I'm going to ask Shelee if she can comment on or actually, I'm sorry. I'm going to ask Paul Ito, Hawaiian Electric CFO, if he can comment on that.

Yes. So Mike thanks for the question. So our typical maintenance spend is somewhere in the range of $300 million a year, as you know, we're prioritizing spend on. We've always been spending on resilience and wildfire, but obviously, we're going to be accelerating some of that. We also mentioned that we have IIJA funding that will be part of the mix as we go forward here. We're currently in the process of establishing our 2024 CapEx budget, so I don't have anything to report at this time. Typically, our budget process runs through the end of the year and then we report to the Board next year. But again, we will be prioritizing wildfire related type investments and we think it's the right thing to do. We've been doing it, but we're just going to start accelerating that program.

Great. Thank you. And then I have one follow-up. Again, it looks like you have some runway with liquidity. Just wondering, is there anything you could say about whether you're pursuing asset sales, like if the bank is a candidate or on a smaller scale, Pacific Current. And then if you are doing that, any anticipated challenges to closing such a transaction?

Yes, Mike, it's Scott Deghetto. At this point, we just are not going to speculate on any of those potential options.

Okay, great. Thank you very much.

We'll take our next question from Julien Dumoulin-Smith with Bank of America.

Excellent. Hey, thank you guys very much for the time. Best wishes to you and the employees and the impacted customers here, and welcome, Scott, as well. Look, just coming back to the core plan here, obviously you talked about prioritizing spend and accelerating some of the CapEx. Can you talk about just where you stand today, given the pro forma cash balances, what your cash flow profile looks like through the course of the next year given that outsized spend? Can you give us any kind of further clarity on just sort of status quo with that accelerated spend? How long that cash could last, given without tapping capital markets or debt capital markets further? Again, I get that's a difficult question, but I just wanted to ask it here at the outset, whatever you can offer.

Yes. And I think, Julien, at the end of the third quarter, as we previously said, the holding company and utility had $127 million and $275 million of cash on hand, respectively. We believe that that provides us with a good level of runway at this particular point in time.

Excellent. And then when you think about state's actions, obviously when everything is moving everything already here. Can you comment it all about any potential backstop elements or other wildfire related avenues being pursued by the state that could help bolster and backstop your liquidity and your ability to invest here, if you will?

Yes. Julien, at this stage it is still early. There's a lot more discussions to be had, including with the state. One of the things that we have mentioned or was mentioned in the announcement of the – by the Governor yesterday was working together to see what can be done here in Hawaii to provide greater coverage, looking at various options which would not only provide for the resilience of Hawaii, but also make sure that the customers are protected and the businesses in Hawaii remain financially strong. So there’s a lot more details still being to be worked.

Got it. And if I can be a little bit more specific here, when do you expect wildfire reports here and what’s the statute of limitations to get those in as well, right, in terms of some of the liabilities?

Julien, just to clarify, are you asking about utility filing wildfire mitigation plans?

Well, I was thinking more in the context of wildfire reports on just the status of the actual the Lahaina fire specifically, right, in terms of the documentation around those that fire and then separately the statute of limitations for liabilities. So when we’ll see that statute expire if you will.

So Julien, this is Shelee Kimura. We plan to file with the PUC report about the August 8 incident. I don’t have a timing on that. That work is still ongoing. But that’s about all I can say right now.

And there’s no specific statute that you’d be looking to in terms of when claims need to be filed by, so that’s ambiguous still.

Yes, Julien, we’ll have – I think that’s – it’s a legal question, I’m sorry. We will have to get back to you on that one, but in general, again, as I talked about earlier, the pathway forward using the court system that will play out. And like I mentioned, the first trial is not scheduled till October of next year. There will be continuing discussions for sure between parties, but that’s about all I can say right now.

Got it. All right. Fair enough guys. I’ll leave it there. Thank you so much. You guys take care.

Yes. Thank you.

[Operator Instructions] We’ll take our next question from Paul Patterson with Glenrock Associates.

Hey guys. Just wanted to follow up on Julien’s questions and I apologize, if I missed this. What is the total amount in the suits that’s being sought from those 65 or so suits that have been filed, what are the damages that they’re asking for?

Yes. Hi Paul. This is Scott. At this time, there are no specified monetary amounts in the lawsuits.

Okay. And then with respect to the program which you guys are funding $75 million, the insurance companies are filing $75 million, where does that leave your insurance coverage for the remaining, how does – let me put this way, after including that, what is the level of insurance coverage that you guys have liability that could be applied potentially for the damages?

Yes. So we have $165 million of liability insurance. So if you just simply take the $75 million and subtract it, from the $165 million that would leave $90 million of additional coverage.

Okay. And with respect to the program where this alternative to litigation program, when would people, what is the cutoff period for people to apply under that methodology?

Yes. The details are still being worked on that Paul, the Governor’s statement indicated that once you get through more details of the program design and the launch, that participants could perhaps start to receive their compensation second quarter of next year.

Okay. And then the 10-Q timing, I apologize that you guys did mention that. I guess it’s delayed. When is the ETA on the 10-Q?

Yes. We would expect that early next week. And the reason really was due to the Governor’s announcement yesterday.

Okay, great. Much appreciated and hang in there guys.

Thank you, Paul.

Thank you.

And there are no further questions at this time. I’d like to turn the call back over to Scott Seu for any additional or closing remarks.

Thank you. As we’ve said before, our overarching objective is to remain a strong financially healthy enterprise. Hawaiian Electric, American Savings Bank played very critical roles here in Hawaii, and it’s important that they continue their service to our customers communities and to Hawaii. The utilities focused on working with the Governor and other parties to uplift the people of Lahaina and Maui and to do what’s needed to make all of Hawaii stronger and more resilient against extreme weather events. American Savings Bank is strong and secure and continues to serve its customer as well. So with that, I just want to thank all of you, mahalo to all of you for joining us today.

Thank you. And that does conclude today’s presentation. Thank you for your participation and you may now disconnect.