Hawaiian Electric Industries · NYSE:HE
Hawaiian Electric Industries — Siebert Williams Shank West Coast Utilities Conference (March 2020)
41 slides from Hawaiian Electric Industries's conference presentation, Mar 18, 2020
Slide 1: Hawaiian Electric Industries, Inc.
Hawaiian Electric Industries, Inc. Siebert Williams Shank West Coast Utilities Conference March 18, 2020
Slide 2: Forward looking statements
Forward looking statements Cautionary statements and risk factors that may affect future results This presentation includes forward-looking statements within the meaning of the federal securities laws. Actual results could differ materially from such forward-looking statements. The factors that coul
Slide 3: A catalyst for a better Hawaii
HAWAIIAN ELECTRIC INDUSTRIES A catalyst for a better Hawaii
Slide 4: HEI overview
HEI overview Hawaii's largest corporation with a diversified platform supplying energy, providing financial services to Hawaii communities and investing in a sustainable future Kauai 3 Oahu 34 6 Molokai 1 Maui Utility Lanai 6 service territory 1 Hawaii Bank 5 branches 1 Pacific Current projects 64%
Slide 5: ESG is in our DNA, and our core strategies
ESG is in our DNA, and our core strategies Strength of our companies is inextricably linked to the health of our environment, economy and communities Focused on achieving state’s 100% renewable energy and carbon neutrality goals in a way that is reliable, resilient and affordable for customers Embed
Slide 6: Full year 2019 financial performance
Full year 2019 financial performance Net Income (GAAP) Diluted EPS (GAAP) Consolidated LTM ROE ($ in millions) $217.9 $1.99 $201.8 $1.85 $89.0 $0.81 $82.5 $0.76 9.8% Full 9.5% year $156.8 $1.32 $1.43 $143.7 ($24.4) ($27.9) ($0.22) ($0.26) $0.61 $66.3 $0.45 $49.6 $0.26 $28.2 $21.8 $0.20 Q4 $45.4 $0.4
Slide 7: 2019 highlights
2019 highlights WHAT WE ACCOMPLISHED Achieved consolidated EPS growth of 8% Improved utility and consolidated ROE Hawaiian Electric continued to deliver on key priorities of its five-year transformation plan Hawaiian Electric named 2019 “Utility of the Year” by Utility Dive American Saving
Slide 8: Track record of delivering exceptional value
Track record of delivering exceptional value Outperformed utility index and the S&P 500 over 1- and 3-year periods1 Strong consolidated investment grade balance sheet provides access to competitively priced growth capital Efficient capital structure and growing dividends from subsidiaries limit need
Slide 9: Coronavirus update
Coronavirus update Well-positioned to address potential impacts Hawaii’s economy is driven by a diversity of sectors, although tourism is a substantial component • Over 80% of Hawaii’s jobs are from outside of the hospitality and leisure sectors • However, recent forecasts estimate full year 2020 vi
Slide 10: Advancing Hawaii’s clean energy transition
HAWAIIAN ELECTRIC Advancing Hawaii’s clean energy transition
Slide 11: Committed to ambitious renewable energy goals
Committed to ambitious renewable energy goals Strong progress and on track to meet or exceed next milestone Hawaii’s 100% by 2045 RPS goal is among the most On course to meet or exceed 2020 target of 30% ambitious in the nation 35% 30% (1) 27% 27% 28% 26% 25% 23% 21% 20% 18% 15% 14% 12% 9% 10% 10% 1
Slide 12: Key elements of clean energy transformation
Key elements of clean energy transformation Foundational Plans in Place Key Initiatives Underway Power Supply Improvement Plan Aggressively procuring utility-scale renewable energy Long-range plan outlining Growing distributed energy resources scenarios and generation needs for achieving 100% RPS Im
Slide 13: Renewable energy is key to customer affordability in Hawaii
Renewable energy is key to customer affordability in Hawaii UTILITY FOSSIL FUEL CONTRACTED RENEWABLE ENERGY COST1 ENERGY COST Significant reduction in cost of utility-scale renewables Subject to volatile oil prices Energy Cost Pre-2016 PPAs 2016 – 2018 PPAs Innovative new PPAs Oil ($/kWh) 2018+ 0.30
Slide 14: Aggressively pursuing utility-scale renewables
Aggressively pursuing utility-scale renewables Record procurement initiatives underway • Launched among largest renewable procurement efforts ever undertaken by a US utility If approved and ‒ Challenging the market to deliver cost-effective projects for up completed on time, to 900 MW renewable ener
Slide 15: Encouraging rooftop PV, customer-sited resources
Encouraging rooftop PV, customer-sited resources Providing management and infrastructure to integrate, and programs to incentivize DER Our service territory has the nation’s highest Cumulative residential PV installations penetration of rooftop solar; 19% of residential (in megawatts) customers have
Slide 16: Renewable energy projects—status update
Renewable energy projects—status update Near-term renewable projects represent diverse resource mix, contribute significantly to RPS Near term (2019 – 2022) projects by technology (MW)1,2 Near term (2019 – 2022) projects by status (MW)1,2 Geothermal Proposed, 46 MW Awaiting 2019 Solar completed Appr
Slide 17: Renewables, reliability and resilience drive capital investment
Renewables, reliability and resilience drive capital investment Annual investment of ~2x depreciation to transform grid, integrate more renewables CAPITAL EXPENDITURES FORECAST RATE BASE FORECAST ($ in millions) ($ in millions) 4-Year CAGR ~4-6%1 $600 $3,730- $4,010 $4,000 $450 $350-450 $350-$450 $4
Slide 18: Guiding principles Goals and outcomes
Phase 1 PBR D&O established conceptual framework Conceptual framework established PBR structure • A customer-centric approach, including Revenue adjustment mechanisms Guiding principles immediate “day 1” savings Maintain revenue decoupling and existing cost trackers • Administrative efficiency to
Slide 19: Regulatory evolution: Performance-based regulation (PBR)
Regulatory evolution: Performance-based regulation (PBR) Potential changes Current Mechanisms under PBR 3-year rate case cycle 5-year rate Multi-year rate plans with interim adjustments plan Sales decoupling Provides predictable revenue stream by fixing net revenues at level approved in last rate ca
Slide 20: Serving and investing in Hawaii’s families, businesses and communities
AMERICAN SAVINGS BANK Serving and investing in Hawaii’s families, businesses and communities
Slide 21: American Savings Bank: Efficient source of funding from consistent performance
American Savings Bank: Efficient source of funding from consistent performance • One of Hawaii’s largest financial institutions – full-service community bank with ~$7.2 billion in assets and 49 branches across the state • Consistent profitability with growth opportunities in attractive Hawaii bankin
Slide 22: Net interest margin
Net interest margin Full year 2019 NIM 3.85%; above-peer NIM driven by low-cost funding ASSET YIELD (%) NET INTEREST MARGIN (%) 5.0 4.00 4.5 4.0 4.22 4.29 4.11 4.11 3.75 3.5 4.00 3.0 4Q18 1Q19 2Q19 3Q19 4Q19 3.50 3.99 3.95 COST OF FUNDS (%) 3.82 3.82 3.74 1.2 3.25 0.8 0.4 3.00 0.28 0.31 0.30 0.30 0.
Slide 23: Quality balance sheet and capital efficiency
Quality balance sheet and capital efficiency ASB1 PEER BANKS2 Average yield on earning assets 4.14% Median of avg. yield on earning assets 4.53% Average cost of funds 0.29% Median of avg. cost of funds 1.05% Return on avg. equity3 13.5% Return on avg. equity 10.6% 100% of Core Deposits Core Loans Lo
Slide 24: Low-risk loan mix
Low-risk loan mix TOTAL LOANS AT 12/31/19: $5.1B1 HELOC 21% Residential 1-4 Consumer 43% 5% Residential Commercial construction & lot markets 13% loans 1% Commercial real Commercial estate 16% construction 1% 1 Before deferred fees, discounts and allowance for loan losses. 24
Slide 25: Pursuing opportunities in Hawaii’s sustainable infrastructure market
PACIFIC CURRENT Pursuing opportunities in Hawaii’s sustainable infrastructure market
Slide 26: Pacific Current recent initiatives highlight focus on sustainability
Pacific Current recent initiatives highlight focus on sustainability • Contract to provide locally-produced biofuels for Hamakua Energy facility advances Hawaii Island energy independence and energy security, supports local economy • 5 solar + storage projects with University of Hawaii continue thro
Slide 27: Financial outlook
Financial outlook
Slide 28: HEI 2020 EPS guidance
HEI 2020 EPS guidance (As of February 13, 2020)1 HEI EPS: $1.90 - $2.10 PER SHARE UTILITY EPS: $1.46 - $1.54 BANK EPS: $0.73 - $0.80 KEY ASSUMPTIONS: KEY ASSUMPTIONS: • No change to decoupling or recovery • Low to mid-single digit earning asset mechanisms growth • No material impact from PIM penalti
Slide 29: Appendices
Appendices HEI Catalyst for a better Hawai'i _———_a
Slide 30: HEI financing outlook 2020
HEI financing outlook 2020 (As of February 13, 2020)1 2020 HOLDING COMPANY SOURCES & USES OF Intend to maintain CAPITAL a consolidated ($ in millions) investment grade profile ~$210 ~$210 Holding Debt Issuance Utility capex Company ~$30 program equity Expense, ~$30 needs funded HEI Investments witho
Slide 31: Our Board of Directors
Our Board of Directors Knowledgeable, engaged leaders committed to Hawaii and advancing our strategy Jeff Watanabe Celeste Connors Richard Dahl Adm. Thomas Peggy Fowler Chairman, HEI Executive Director, Chairman, Former Fargo Former President & Hawaii Green President & CEO, Former Commander, CEO, Po
Slide 32: Hawaii’s economy is driven by diverse factors
Hawaii’s economy is driven by diverse factors Federal defense spending, tourism from diverse economies drive economic stability JOBS BY INDUSTRY (%)1 TOURISM BY SOURCE2 Natural All other resources, Professional & 1% mining & business Canada construction services 6% Exposure to a diverse 5% 13% range
Slide 33: Oil is the primary driver of rates in Hawaii
Oil is the primary driver of rates in Hawaii BREAKDOWN OF HAWAIIAN ELECTRIC RATES1 (typical residential bill) Fuel ¢/kWh Purchased Energy Fossil Fuels 40 Revenue Taxes Purchased Energy Renewables February 2020 PPAC Expenses 31.8 31.5 $161.90 30.9 All Other 29.1 29.8 30 27.4 27.2 24.3 24.3 13.5 12.1
Slide 34: 2019 Utility LTM ROE improved over prior year
2019 Utility LTM ROE improved over prior year 2019 CONSOLIDATED UTILITY ROE 10 0.4 0.2 0.3 0.1 0.2 8 0.2 0.4 0.1 0.8 6 ROE (%) 9.5 8.2 4 7.8 2 1 2 3 4 5 6 7 8 9 0 Allowed ERP ROE Non-recoverable carrying charge rateCustomer on RAM balance Revenue Benefit lower Adjustments than Depreciation ROEtoless
Slide 35: PBR—Phase 2 continues collaborative approach from Phase I
PBR—Phase 2 continues collaborative approach from Phase I • Measured timeline shows PUC’s commitment to gradualism in implementing PBR • Collaborative format is focused on thoughtful process to minimize risk of unintended consequences • Annual revenue adjustment mechanism has potential to eliminate
Slide 36: PBR initial utility proposal
PBR initial utility proposal Filed August 14: offers ideas and encourages stakeholder discussion • 5-year rate period (provided an adequate Annual Revenue Adjustment formula and modified MPIR mechanism are approved) • Initial base rates set in next rate cases: HELCO 2019, HECO 2020, MECO 2021 test y
Slide 37: 2019 ASB peer group
2019 ASB peer group 1st Source Corporation SRCE First Busey Corporation BUSE OFG Bancorp OFG Ameris Bancorp ABCB First Commonwealth Financial Corporation FCF Oritani Financial Corp. ORIT Axos Financial, Inc. AX First Financial Bankshares, Inc. FFIN Pacific Premier Bancorp, Inc. PPBI BancFirst Corpor
Slide 38: Cautionary note regarding forward looking statements
Cautionary note regarding forward looking statements This presentation made by Hawaiian Electric Industries, Inc. (HEI) and Hawaiian Electric Company, Inc. (Hawaiian Electric) and their subsidiaries contain “forward-looking statements,” which include statements that are predictive in nature, depend
Slide 39: Cautionary note regarding forward looking statements
Cautionary note regarding forward looking statements • the ability of the Utilities to develop, implement and recover the costs of implementing the Utilities’ action plans included in their updated Power Supply Improvement Plans, Demand Response Portfolio Plan, Distributed Generation Interconnection
Slide 40: Cautionary note regarding forward looking statements
Cautionary note regarding forward looking statements • decisions by the PUC in rate cases and other proceedings (including the risks of delays in the timing of decisions, adverse changes in final decisions from interim decisions and the disallowance of project costs as a result of adverse regulatory
Slide 41: Corporate Headquarters Institutional Investor and Securities Analyst Inquiries
Institutional Investor Corporate Headquarters and Securities Analyst Inquiries Hawaiian Electric Industries, Inc. Please direct inquiries to: 1001 Bishop Street, Suite 2900 Julie Smolinski Honolulu, Hawaii 96813 Director, Investor Relations & Strategic Planning Telephone: 808-543-5662 Telephone: 808