Hello, and welcome to the Fourth Quarter 2024 Hawaiian Electric Industries, Inc. Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Mateo Garcia, Director of Investor Relations. You may begin.

Thank you. Welcome everyone to Hawaiian Electric Industries, Inc.'s fourth quarter and full year 2024 earnings call. Joining me today are Scott Seu, Hawaiian Electric Industries, Inc. President and CEO; Scott DeGhetto, Hawaiian Electric Industries, Inc. Executive Vice President, CFO and Treasurer; Shelee Kimura, Hawaiian Electric 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.

Welcome everyone. Today's call, I'll start with an overview of the important accomplishments we made over the past year and touch on our priorities going forward. I'll then turn it over to Scott DeGhetto, who will discuss the financial implications of recent announcements and walk through our financial results. We'll then open it up for questions. The past year was pivotal in the history of our company, and I'm proud of what we've been able to accomplish. Since August of 2023, we've told you that our objective is to remain a strong financially healthy enterprise best positioned to serve the communities in which we operate. This objective has guided us throughout the past eighteen months as we've taken prudent measured actions to maintain our financial strength in the wake of the Maui wildfires. In November 2024, we came together with other parties to sign final settlement agreements in the Maui wildfire tort litigation. We did so on an expedited basis, significantly enhancing clarity for our company's path ahead. This milestone accomplishment was the culmination of months of negotiations, and once fully approved by the court, the settlement will provide an accelerated path to recovery for those impacted by the fires. Throughout the year, we took numerous actions to bolster our liquidity and ensure Hawaiian Electric Industries, Inc. is in the strongest possible financial position as we work toward finalizing the settlement.

The successful equity offering we closed in September resulted in $558 million in net proceeds, fully funding our first payment under the settlement. We also strengthened our liquidity by putting in place a $250 million ATM program at the holding company and a $250 million accounts receivable-backed credit facility at the utility. With these collective actions, we ended 2024 in the strongest liquidity position in our company's history. In late December, we completed the strategic review process for American Savings Bank. This transaction was the result of a deliberate and thoughtful process involving numerous potential buyers. After evaluating a range of factors, including transaction certainty, proceeds, regulatory considerations, and potential stakeholder impacts, our board concluded that selling the bank to a group of independent investors was the best step forward. Our sale of 90.1% of our bank simplifies Hawaiian Electric Industries, Inc.'s strategy, regulatory position, and allows us to focus on our core utility business. The proceeds will be used to reduce holding company debt, strengthening our balance sheet, and increasing financial flexibility going forward. Following the Maui wildfires, we also said that the utility would quickly implement enhanced wildfire safety measures. While working closely with the community and other stakeholders, to develop an updated long-term wildfire safety strategy. In 2024, the utility implemented impactful measures on an expedited basis and just last month submitted its updated long-term wildfire safety strategy which I'll discuss in more detail shortly. I'd add that the achievements made to progress the utility's wildfire safety strategy were made while continuing to progress another key strategic initiative, integrating increasing amounts of renewables on the utilities grid. The utility achieved a 36% renewable portfolio standard in 2024, up from 33% in 2023. This keeps Hawaiian Electric on track to reach an interim goal of 40% RPS by…

Thank you, Scott. Turning to slide seven, I'll first touch briefly on the previously announced ASB transaction. At the end of 2024, we closed on the sale of 90.1% of ASB for $405 million based on a total valuation of $450 million. We are pleased to have completed this transaction in the timeline that we did with simultaneous signing and closing. The structure allowed us to avoid lengthy and uncertain regulatory reviews. The net proceeds of approximately $380 million will be used to pay down holding company debt. ASB's 2024 results are presented as discontinued operations in the consolidated financial statements. For the full year 2024, the net loss from discontinued operations totaled $103 million compared to net income of $53 million in 2023. The $103 million loss includes a net loss on the sale transaction of approximately $116 million, which is net of a $2.4 million tax benefit. Excluding wildfire expenses, the goodwill impairment recorded in the second quarter, and the net loss recorded due to the sale transaction, ASB's core net income for 2024 was $79 million. The remainder of my comments on the quarter's results will focus on our continuing operations. For the full year 2024, we generated a loss from continuing operations of $1.3 billion. The results include wildfire settlement accruals of $1.9 billion pretax as well as the impacts of other Maui wildfire-related expenses. The results also include the $35 million asset impairment in the third quarter. Excluding these items, consolidated core net income was $124 million compared to $152 million in 2023. Utility core net income was $181 million compared to $195 million in 2023. The decrease in utility core net income was driven by higher O&M expenses, which included increased wildfire prevention-related expenses such as vegetation management. Holding company core net loss was $56 million compared to $43 million in 2023. The higher core net loss was driven by lower Pacific current net income due to outages of both the Hamakua and Mahipapa generating facilities. Turning to our liquidity on the next slide. As of the end of the fourth quarter, the holding company and the utility had $184 million of unrestricted cash on hand, respectively. The holding company cash balance includes the approximately $380 million from the ASB sale that will be used to retire debt. In addition, $479 million has been set aside in a wholly-owned subsidiary created for the specific purpose of holding the first installment payment pursuant to the Maui wildfire settlement. This is included in restricted cash on the balance sheet. Looking ahead, we will continue to prudently manage our liquidity as we work through finalizing the settlement and as we formulate financing plans for future settlement payments and utility capital expenditure needs. With that, let's open up the call to questions.

Thank you. If you would like to ask a question, you. Your first question comes from Michael Lonegan with Evercore. Your line is open.

Hi. Thanks for taking my question.

Hi, Michael.

Hi. Did the Hawaii Supreme Court issue their ruling that the insurers can't bring, you know, their separate legal action against the defendant? Was just wondering if you could talk about, you know, your confidence level that the settlement will proceed forward without any more interference from the insurance companies, whether the case, you know, be appealed to the US Supreme Court, you know, or if the insurers, you know, try to make, you know, other arguments, you know, maybe they try to say the settlement was reached in bad faith or, you know, pursue another avenue to disrupt it.

Yeah. No. Thanks for the question, Michael. So, you know, the bottom line upfront, the conclusion of the Hawaii Supreme Court decision, that was a very positive and a major step towards finalizing the settlement agreement. So we're really, really pleased with the outcome. We are awaiting the written order to come from the Supreme Court, which will probably be issued in the coming weeks. At some point, we'll move to dismiss the subrogation insurance claims, taking into account the Hawaii Supreme Court ruling. No. I can't really say when we would time that motion. We're still considering the timing on that motion. Next steps going forward to finalize settlement through the court would be we expect the class and individual plaintiffs to announce their agreement on how they're allocating the aggregate settlement amount between the class fund and the individual fund. And after that occurs, then the class will move for preliminary approval. And once that's granted, begin the notice process. After that, there's gonna be an opportunity for claimants to opt out or object to the class settlement, obtain good faith settlement determinations, and final class approval. So in terms of timing, we expect preliminary approval in the second quarter, objection and opt-out deadlines to be in the third quarter, and the approval hearing to be in the fourth quarter of 2025. Of course, you know, timing of all of this could shift. So, you know, but let me get back to the overall outcome and confidence level. So obviously, this is the outcome we're hoping for. And it's just a matter of working through the process now.

Got it. Thanks. And then on CapEx, you know, you highlighted you're gonna invest nearly $400 million in wildfire safety over the next few years. I think, you know, you previously said, you know, your maintenance capital is about $300 million a year. Just wondered if you could share what your total investment level, you know, we should expect over the next few years and what, you know, rate-based growth that could drive and then and then also how we should think about your FFO to debt target as you finance the settlement payment.

Okay, Michael. I'm gonna have Paul Ito, Hawaiian Electric CFO, respond to your question.

Hey, Michael. Thanks for the question. So right now, we are currently refining our three-year capital forecast in light of the recently filed wildfire safety strategy. And in addition, we're preparing for a potential rate case. And this refinement process includes, number one, prioritizing the projects, and then number two, assessing the availability and cost of resources both internal and external. So subject to the foregoing caveats, over the three years, we do expect an increasing level of potential CapEx. For 2025, we're targeting to be moderately higher than 2024, probably in the $350 to $375 million range. In 2026 and 2027, we do have additional opportunities for CapEx. So as you mentioned, our baseline CapEx would be the first layer. That's again, in the $300 million range. We talked about the wildfire safety strategy in terms of $400 million roughly over the three years. But in addition to that, we also have approved EPRM projects that we would start work on. There are a number of those projects. The largest ones include our fly out repowering project. It's a 163-megawatt repowering. We have our Waianae Best project, army privatization, and some resilience work. But in aggregate, if you take all of those together, these projects would generally add roughly, call it, $150 million to $175 million in 2026. And then somewhere in the range of $200 million to $250 million in 2027. So, again, subject to, you know, resource availability, but, you know, in broad strokes, that's the level of CapEx that we're forecasting. In addition to that, we do have some additional EPRN projects that are not approved. Of course, subject to, you know, approval by the PUC. So again, rough estimates, but I think it gives you a general sense of our CapEx plan going forward. And then I'll turn it over to Scott to talk about the FFO to debt question.

Yeah. On the FFO side, we're not gonna give you, like, a specific target. Other than to say we're gonna target investment-grade credit ratings. And so, you know, I think you understand, you know, what that means from an FFO to debt perspective. And, you know, if you look historically where we were, we tended to be, I think, higher than the peers and, you know, we're just gonna try and, you know, stay in the allowed ranges, you know, from all three of the agencies. Again, to maintain or at least target an investment-grade rating.

Got it. Thanks. And then lastly for me, you know, in the Hawaii legislative session, you know, I know it's early. You know, with some concerns about customer bills, there's an amended version of House Bill 982 that proposes that, you know, about roughly half of the $1 billion wildfire insurance fund will be financed by shareholders, with the other half, you know, by customers through securitization. Was just wondering, based on your plans to finalize finance, the settlement with a combination of debt and equity and your goal to return to investment grade. You know, in a scenario such as this, you know, where you have to finance $500 plus million, you know, from on behalf of investors. How, you know, obviously, large relative to the size of your company. Would you think about financing it? Anything you can share there?

Yeah, Michael, like I said in my earlier comments, it is very early in the process, and there's a lot of debate going on. I'll note that in the most recent version of that bill, the actual amounts that would possibly be coming from shareholders was blanked out. So to me, it's an indication that it is early in the process. I think it's fair to say that everybody, including the utility, is very focused on impacts on customers. We'll just have to see how this plays out.

Great. Thanks for taking my question.

Thanks, Michael.

Your next question comes from Julien Dumoulin-Smith of Jefferies. Your line is open.

Hey. Good afternoon, team. Thank you guys very much for the time. I appreciate it.

Thanks, Julien. Hi.

Hey. Afternoon. Hey. Just wanted to pick up on that last point there. I just wanted to understand how you guys are thinking about framing the wildfire legislation maybe for perhaps, firstly, building stakeholder support. We got a crossover date coming up here in the next handful of weeks. Can you speak to a little bit about your successes thus far on that front? I'll note, for instance, the senator who seemingly prevented this bill last time from coming out of a committee has sponsored the new iteration. I find that notable. And then separately, obviously, last quarter, you didn't have the settlement in hand. And so presumably, that should have unlocked a separate set of pathways and stakeholders. But be very curious to see how you would set expectations both. What the major building blocks are that are viable, and then b, process and what we should be expecting on these upcoming crossover dates. I think the first one's on March 6th if I got it right.

Yeah. So the way I think about it, Julien, is yeah, there has been a lot of positive momentum, especially when we compare against where we were last year, last session. Right? A year ago, we didn't know what the outcome of the settlement would be. We weren't quite sure in terms of our overall, you know, how quickly we could move through the litigation process and so on. So where we are today is in a much more positive stance, and there's a lot more clarity. So with that, that's provided the basis for these discussions to resume in the legislature. And, yes, there are always gonna be some pretty tough questions coming about in terms of how do we manage impacts on customers, you know, how do we balance the needs of our customers, our shareholders, while we still are moving towards strengthening the financial positioning of the company that we can continue to provide service. So those are all swirling around during these legislative discussions right now. The way that I will always remind people is that we fully expect that we have to have these discussions where we are right now in the process at the legislature. Yes. It was very, I think it was a very positive sign that our state senator was willing to reintroduce the bill. And again, it's to tee up the discussion, to debate the issues. I think it was very positive when you read the introductions to those bills in terms of the recognition why establishment of something like a wildfire recovery fund is good policy and will provide benefits for customers, for the company, and the state of Hawaii. So, you know, I think that what we'd expect is that there's gonna be continued ongoing debate. And we'll be participating in that. There are certain elements of the legislation that are very important to us. You know, in order to have the benefits of balancing the risk to customers as well as to shareholders, we'll just be part of that process, and you know, I'm just very, very pleased in terms of, like I said earlier, the fact that we are in the mix, we have these bills going forward, and we're having to debate.

And maybe just as a follow-up, if we can address securitization directly. I mean, obviously, the rating agencies have taken a fairly hard line on the subject. I mean, can you speak a little bit to the prospects of getting something that would suffice with the agencies here and maybe speak to that issue a little bit further both in terms of the prospects and in process here in the legislature as well as to the nuance of exactly what is being prescribed by the agencies at this point in time.

We can get another Yeah. Well, let me comment first on in with the perspective of the legislative discussions regarding securitization. I think, given all the discussion that started last session and have that continued to this year, I think there is a fairly good understanding now of why securitization makes a lot of sense in terms of being able to secure lower-cost financing, which ultimately goes towards benefiting our customers. So I think that's a positive. As far as the second part of your question, what are the expectations of the rating agencies? I'll have Scott DeGhetto comment on that.

Yeah. I think that the agencies, all three of them, want to see some sort of backstop fund among other things. To enhance ratings, again, to Scott's earlier point, I think it's too early in the process from a legislative process standpoint to determine where that's gonna shake out. You know? And if we get it, it's obviously credit positive. Or if we get some sort of bill that resembles, you know, what's been introduced in the legislature, it'll be credit positive. And, you know, if we don't, we'll just continue to work with the rating agencies and develop a plan to get to investment grade, you know, as best we possibly can. Again, I think it's just too soon to speculate.

Yep. That absolutely. And just in terms of creating a pathway here, for funding, I know that you said a second ago it was blanked out in the 982 about, you know, any shareholder funding. But, you know, can you speak to, I mean, Scott, you've been very diligent thus far in managing the company through this difficult period. In terms of ensuring an ongoing access to capital, more specifically, a cash flow positive backdrop. For the core company. If you think about the financing need, what, you know, providing a clear latitude through the near and medium terms to find resolution here. Out of this all.

Yeah. And, again, we haven't given any direct guidance in terms of how we'll fund the balance of the settlement payments as we've said on previous calls. You know, but as we go forward, we're continuously looking at the capital markets. We have, in my opinion, strong access that was demonstrated by the equity deal that was done in September, which, you know, was well oversubscribed. The utility, you know, refunded the $50 million maturity that they had coming due in January, they did that prior to the end of the year. We've had a number of firms reach out to us on refinancing the $50 million that comes due at Hawaiian Electric Industries, Inc. in December. And we're receiving, you know, inbounds, you know, quite regularly on what's going on in the capital markets or access both to the debt and the equity markets. So I feel very confident about our access going forward. And, again, we've prefunded that payment approximately, you know, a year in advance. And so we really have a lot of time to continue to develop our thoughts around how we'll finance the balance of those payments.

Right. Let me ask that maybe more directly here. There's no equity raised contemplated at least in the medium term for what I can tell based on what you would need. Barring any changes like the legislature.

Yeah. The answer to that question is yes. We don't have any, and we don't have any anticipated drawdowns or use on the ATM facility either.

Thank you so much for that clarity. I really appreciate you being great about it. Thank you so much.

Thanks, Julien.

This concludes the question and answer session. I'll turn the call to Scott Seu for closing remarks.

To everybody for calling in today. So in closing, 2024 was a year of really significant achievements in the face of unprecedented challenges facing our company. I really feel that we've made rapid progress towards rebuilding the financial strength of our enterprise. And, again, just want to highlight that with the recent favorable Supreme Court decision, we're well positioned to navigate the path ahead. Again, I want to thank our shareholders, a great many of whom are our neighbors here in Hawaii, for your continued investment in Hawaiian Electric Industries, Inc. We greatly appreciate your support as we continue to help our communities move forward.

This concludes today's conference call. Thank you for joining. You may now disconnect.