Good day. My name is Brianna, and I will be your conference operator. At this time, I would like to welcome everyone to the Hawaiian Electric Industries Inc. First Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. 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 will now turn today's call over to Mateo Garcia, Director of Investor Relations. Please go ahead.

Thank you. Welcome, everyone, to HEI's first quarter 2024 earnings call. Joining me today are Scott Seu, HEI's 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. For today's call, I'll start with key updates regarding the Maui wildfires, followed by operational updates, and then Scott Deghetto will walk you through our first quarter financial results before we open it up for questions. We continue to work in earnest with key stakeholders to help our community recover from the devastating impacts of the Maui wildfires. Last quarter, we discussed Governor Josh Green's One 'Ohana Initiative, which is intended to help the families most impacted by the fires heal and to help our state move forward. The first phase of One 'Ohana launched on March 1 and has seen a steady uptick. 58 total registrations have been received thus far, including 43 from families of decedents and 15 from injured survivors. On April 29th, Governor Green announced that the registration deadline has now been extended to May 31. The governor has said that the deadline for completed claims forms will be July 1. Hawaii's annual legislative session concluded in early May, and last week, the Governor signed into law Senate Bill 582, which sets aside critical funding to help address the ongoing Maui Wildfire recovery efforts, including the state's contribution to the $175 million One ‘Ohana fund. Although we are disappointed that we ran out of time in this legislative session to pass legislation supporting the key priorities we laid out on our last earnings call, our state's lawmakers and leadership remain highly engaged in determining how to design wildfire legislation that makes sense for Hawaii, our customers and our company. Legislation that creates a framework to reduce wildfire risk is critical to ensure Hawaii can attract low cost capital, which ultimately lowers the cost to customers of needed investments. Our state's leadership recognizes this, and last week, Governor Green announced the formation of…

Thank you, Scott. I'll start with the results for the quarter on Slide 6. We earned consolidated net income of $42.1 million and EPS of $0.38 in the first quarter. This included $7.2 million after tax or about $0.07 per share of wildfire related expenses net of insurance recoveries and deferrals. Excluding these expenses, core net income and EPS were $49.3 million and $0.45 per share compared to $54.7 million and $0.50 per share in the first quarter of 2023. Utility net income included $5 million of wildfire related impacts, net of $7.4 million of insurance recoveries and $5.9 million of deferred costs. The holding company and other segment included $2.3 million of wildfire expenses net of $1.9 million in insurance recoveries. Net wildfire costs were immaterial to bank net income. The decrease in utility net income was driven by higher O&M expenses due to increased wildfire mitigation and other wildfire-related costs. Bank net income benefited from higher net interest margin resulting from the strategic balance sheet repositioning executed last quarter and also benefited from the reserve release that Scott mentioned. On a consolidated basis, core ROE remains healthy at 9.5% excluding wildfire impacts. This is down from 10% ROE in the first quarter of last year due primarily to lower utility and other segment earnings, partially offset by higher bank earnings. Utility core ROE was down 20 basis points to 8% excluding wildfire impacts and Bancorp ROE was up 7 basis points to about 15.6%. The approximately $0.07 decrease in the utilities EPS contribution was driven by an $0.11 increase in O&M expenses. $0.05 of the increase was wildfire related primarily driven by the settlement of indemnification claims asserted by the state. The remaining O&M increase included higher insurance costs and higher vegetation management costs. Earnings were also driven…

[Operator Instructions] Our first question comes from Michael Lonegan with Evercore.

So as you mentioned, the fire department report and the AG's investigation report are consistent with what you've been saying making the distinction between a morning fire and an afternoon fire. Just wondering, in the event, if the ATF's report were to link the afternoon fire to your company, just how you are thinking about your approach or your options that you have to that situation?

Hey, Mike. This is Scott. Yes, we're not going to speculate on what the findings of the ATS report will be. Once that report comes out, we'll obviously review it very carefully and then make that determination, but we can't speculate right now.

And then secondly from me, press reports have indicated that you may be pursuing a sale of American Savings Bank. Just wondering if there's anything you could share on that.

Yes. Hey, Mike. It's Scott Deghetto. My comments are consistent with what we said in the past. We continue to not speculate on any strategic transactions or alternatives.

And then just quickly, lastly from me, obviously making progress with the first One Ohana fund. Just wondering if you have a sense for when the second fund for property owners and businesses could be launched and how it might be funded and different client are making the contribution to that as well?

Yes, Mike. The only thing we can say is that those discussions are in progress. We can't really say when or provide any details. Those discussions involve many different parties, and we absolutely just in general, we feel that it provides to the extent it can provide an attractive alternative to folks to reach closure as opposed to litigation, then it's worthy of our support.

Our next question comes from Jonathan Reeder with Wells Fargo.

Hey, good morning team. I was hoping you could just kind of expand a little bit on why you think the legislation did not have either the key piece of the legislation during the regular session? And then would you say the prospects of, like, a special session being convened to do so or kind of eliminated by the establishment of the CAT team? And then would deferring the passage of potential legislation to 2025, would that be too late to provide the clarity and assistance that you all need?

Yes. Hi, Jonathan. This is Scott. So, yes, while we are obviously disappointed that we ran out of time to get the legislature passed. We actually feel that we were able to make pretty significant progress across all fronts in terms of the key bills and issues, making it all the way to conference committee. What that really indicated was that there was a high degree of engagement and really a lot of good discussion with legislators in terms of the importance of the three initiatives that we were really promoting. And again, so that was the wildfire mitigation work, securitization and then establishment of a going forward disaster recovery fund. What we heard in our discussions and all the way up to the very end was there is a lot of understanding that was built over the course of the session of the importance of these measures. What happened though was, there was still a desire for further details. I think it was reported broadly that, with respect to securitization and the wildfire mitigation plans, there was a request by some legislators for more specific information about what those plans would be, what would be the cost impacts on customers and so on. The Climate Advisory team that the Governor stood up, will be very helpful to keep those discussions going in the interim before next year's session. I think it will position everybody, including the legislature better to be able to make these critical decisions and move forward. Whether or not we have a special session even before then is up to the legislature themselves. But I think, it's a very positive that we're going to continue to engage with the key decision makers in the interim.

Got you. That makes sense. I guess the One 'Ohana initiative, at least the first phase, how does that level of participation compare to your expectations? Do you expect it will move materially higher, given the deadline was recently pushed back?

I think the way that we think about it is that, for everybody who has registered, that is one more family that will not have to go through the lengthy and unpredictable litigation process. It's a good number. Of course, we are hopeful that, it will continue to get steady uptake and we will see where we are and the governor and others will determine May 31 whether it gets further extended or at that point if that's where it stops. But overall, I think we're happy that, there are at least a number, a fair degree of interest coming from the families.

And then, in terms of them being like firmly committed to it, remind me, is it like the end date like July, which I think currently is July 1st, for the completed forms? Is that when like you're definitely in or people that have submitted forms, can they still change their mind?

Yes. It's a voluntary participation. At any time a family can decided to opt out, even if they registered or started the process. I think that's an important component. We wanted to make sure that, families really have the optionality.

Okay, gotcha. Shifting gears a little bit and I may have missed it, if Scott mentioned, I apologize. But can you talk about the financial applications from issues at the Hamakua energy being completely out of service since like late February, including like the impact on Pacific current earnings, the impact on potentially any utility, earnings from like the higher power costs or the CapEx to replace one of the generators, just stuff like that?

Yes. In terms of Hamakua, we were hoping to get Hamakua and there's two units there, there's a CT1, CT2, they're both 30 megs. We're looking to get CT1 back in the next couple of weeks. What I would tell you is, when the plant is not running, yes, they're not generating revenues, but they're also not burning fuel. There is a component obviously of O&M that continues to run through. But we're in the process of doing a root-cause analysis in terms of what happened there. We currently believe its tied to fuel issue and we'll keep you posted on that.

And then I think I heard you say that that a $117 million that's being spent at the utility this year for, wildfire related stuff is 40% of the budget. So that implies like $300 million for 2024 utility CapEx. Is that right?

So roughly, yes, essentially as we mentioned previously, our CapEx forecast historically for 2024, we're forecasting toward the lower end of that range. So that's in the right ballpark.

The lower end of that $320 million to $430 million range that was last put out or?

That's right.

Any update in terms of like the timing of the ATF report or that's still just completely in their hands?

Yes. It's still our understanding that they intend to release the report prior to the 1 year anniversary of the fire. So that would be prior to August.

Our next question comes from Paul Patterson with Glenrock Associates.

With respect to American Savings, what is the tax book, what's it valued on a tax basis? Do you have that also? Do you guys have that available?

Yes, Paul. Let me ask if Dean Teruya, our Bank CFO can respond to that.

On the tax basis, it's roughly around $680 million.

And then with respect to the, I apologize if I missed this, the liabilities associated with all these losses, do we have an estimate of what these claims obviously they're just claims but what they stand out now?

No, Paul, we continue to not have that. There is a lot of complications in terms of determining what that might be, including the resolution of the claims or determination of liability. So plaintiffs would have to prove the degree that Hawaiian Electric acted negligently and was the proximate cause of the damages. So, again, we're not through that process. We've not concluded that a loss is probable and reasonably estimable. So that's why we have continued to not have, we have not taken any reserve.

I guess what I was just wondering is it sort of an aggregate amount and I realize that's not what that necessarily would be reflective of what would actually come about. But I'm just wondering with all these lawsuits, is there some sort of aggregate amount that if you add them all up and obviously they're not going to be added on, but I'm just sort of curious as to what I mean, is it, am I correct that it's 560 roughly speaking, lawsuits that have been filed so far?

Well, as we said earlier, there's been about 400 tort claims and 160 or so in terms of the subroclaims. So it's hard for us to really try and just do a very simple math and come up with a total aggregate amount.

Then I guess, other questions I think have pretty much been answered. In terms of the, we don't have a sense whether or not they're going to be going for a special session, I guess. Is that just to follow-up on I forgot who asked it, but it sounds like there may be one, but it also sounds to me that maybe you were looking towards next year about the securitization of wildfire mitigation legislation?

Yes. I think the best way to answer that Paul is that, we are not the decision makers for the ledge in terms of determining if they're going to have a special session. We are gearing up for the next session. I think that's absolutely a true statement. And if we happen to have a special session before then, then better yet.

This will conclude our question-and-answer session. I will now turn the call back to Scott Seu for closing remarks.

Thank you everybody for joining our call. We greatly appreciate your interest in HEI and of course your support and our hearts continue to go out to our communities here especially on Maui. So thank you all.

This will conclude today's conference call. Thank you all for your participation. You may now disconnect.