Hawaiian Electric Industries · NYSE:HE

Hawaiian Electric Industries — Q1 2017 Earnings Presentation

49 slides from Hawaiian Electric Industries's earnings presentation, May 5, 2017

1. Slide 1: 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

2. Slide 2: Cautionary Note Regarding Forward-Looking Statements (continued)

   • the risks associated with increasing reliance on renewable energy, including the availability and cost of non-fossil fuel supplies for renewable energy generation and the operational impacts of adding intermittent sources of renewable energy to the electric grid; • the growing risk that energy pro

3. Slide 3: First Quarter 2017 Financial Results and Outlook

   Hawaiian Electric Industries, Inc. First Quarter 2017 Financial Results and Outlook May 5, 2017

4. Slide 4: YTD 2017 Highlights

   YTD 2017 Highlights  First quarter financial results in line with full year expectations  Awaiting Hawaii Public Utilities  Excellent deposit growth and higher Commission decision on Power net interest income and margins Supply Improvement Plan update  Improved operating efficiency which will he

5. Slide 5: Recent utility developments

   Recent utility developments Power Supply Improvement Plan (PSIP) Update  Awaiting PUC Decision (Docket No. 2014-0183) Hawaii Electric Light 2016  April 24, 2017: filed a procedural schedule jointly with the Consumer Advocate  April 28, 2017: Consumer Advocate statement of position filed Rate Case

6. Slide 6: Hawaii's economy continues to grow

   Hawaii’s economy continues to grow Year-over-year March 2017 YTD March 2017 change Tourism Arrivals +2.1% +3.1% Expenditures +12.3% +10.4% Unemployment • March 2017 – Hawaii: 2.7%; U.S.: 4.5% • YTD March 2017 Oahu single family home sales up 3.5% Real Estate • Oahu median single family home price fo

7. Slide 7: Consolidated 1Q Earnings

   Consolidated 1Q Earnings Core EPS1 (Diluted) (in millions) Core Net Income1 $0.50 $50 $35 $0.33 $3 $34 $0.03 $0.31 $25 $21 $0.24 $0.20 GAAP GAAP $32 $0.30 $0.15 $13 $16 $0.12 ($0.05) ($0.03) ($6) ($3) ($0.20) ($20) 2016 2017 2016 2017 Utility Bank Holding Co. & Other Core Earnings Adjustment Note: C

8. Slide 8: HEI ROE

   HEI ROE Consolidated HEI ROE Twelve Months Ended March 31, 12.5% (GAAP) 9.1% (Core) 8.4% 9.4% (GAAP) (Core) 2016 2017 Core Earnings Adjustment GAAP 2016 2017 Utility 7.9% 7.8% Bank 9.7% 10.4% See the reconciliation of GAAP to Non-GAAP (Core) measures in this presentation. Note: All ROEs calculated u

9. Slide 9: 1Q17 utility financial highlights

   1Q17 utility financial highlights (in millions) Utility core net income Key utility core earnings drivers, after-tax 1Q17 fav/(unfav) vs 1Q16 Expiration of 2013 settlement agreement (7)(a) Hawaii Electric Light and Maui Electric higher RAM revenues 1 $26.7 Other 1 $21.5 Net revenues* (5) Operation &

10. Slide 10: Utility ROE

    Utility ROE Consolidated Utility ROE Twelve Months Ended March 31, 7.9% 7.9% (core) (core) 7.9% 7.8% (GAAP) (GAAP) 2016 2017 GAAP Consolidated Utility Hawaiian Electric Hawaii Electric Light Maui Electric 2016 7.9% 7.8% 7.3% 8.5% 2017 7.8% 7.9% 7.5% 8.1% 1 Allowed 9.8% 10.0% 10.0% 9.0% Note: Last ba

11. Slide 11: 1Q17 bank financial highlights

    1Q17 bank financial highlights (in millions) Bank net income Key bank earnings drivers, after-tax 1Q17 vs 1Q17 vs fav/(unfav) 4Q16 1Q16 Net interest income 1 3 Provision for loan losses (1) 1 Noninterest income (1) -- $16.2 $15.8 Noninterest expense 1 -- $12.7 1Q16 4Q16 1Q17 9

12. Slide 12: Bank 1Q17 performance

    Bank 1Q17 performance Return on assets (%) Net interest margin (%) 1.19 1.07 ~3.5 - 3.6 3.68 0.98 3.42 3.47 ~0.90 Target ASB Peers YTD Target ASB Peers YTD 1Q17 1Q17 ASB Target ASB QTD Annualized Peers1 High Performing Peers2 Source for peer data: SNL Financial (based upon data available as of May 3

13. Slide 13: Net interest margin

    Net interest margin 4.50 Asset yield % 4.00 4.00 Net interest margin (NIM) % 3.50 3.84 3.81 3.80 3.80 3.88 3.00 3.50 1Q16 2Q16 3Q16 4Q16 1Q17 0.80 3.68 3.62 Liability cost % 3.58 3.57 3.59 0.40 3.00 1Q16 2Q16 3Q16 4Q16 1Q17 0.23 0.23 0.24 0.22 0.20 0.00 1Q16 2Q16 3Q16 4Q16 1Q17 1 2 ASB Peers High Pe

14. Slide 14: Revenue growth driven primarily by net interest income

    Revenue growth driven primarily by net interest income ($ in millions) Total loans $4,648 $4,760 $4,740 $4,744 $4,730 Net interest income and noninterest income 1Q16 2Q16 3Q16 4Q16 1Q17 $70.4 $69.4 $69.9 $65.8 $67.6 $16.6 $18.5 $16.4 $15.1 $15.4 Total deposits $5,549 $5,675 $5,140 $5,232 $5,381 $54.

15. Slide 15: Credit quality improving: significant reductions in nonaccrual loans

    Credit quality improving: significant reductions in nonaccrual loans ($ in millions) Nonaccrual loans2 1.02% 1.11% 1.01% Net charge-offs1 0.40% 0.56% 0.52% 0.51% 0.51% 0.49% 0.52% 0.50% 0.49% 0.46% 0.41% 0.29% 0.21% $52.6 0.15% 0.20% $48.3 $46.9 0.11% 0.08% 0.06% 0.06% 0.08% 0.07% 0.04% 0.06% 0.04%

16. Slide 16: Quality balance sheet

    Quality balance sheet  Overall loan-to-deposit ratio of 83%  100% of ASB loans funded with low-cost core deposits Peer Banks1 ASB 12/31/16 (%) 03/31/17 (%) Core Deposits Loans Loans 62 71 Core Deposits 72 77 Certificates of Deposit 16 Investment Investment Certificates Securities Securities Other

17. Slide 17: HEI 2017 EPS guidance

    HEI 2017 EPS guidance (as of May 5, 2017) HEI EPS: $1.55 - $1.70 per share No new equity issuances through 2018 Utility EPS: $1.17 - $1.27 Bank EPS: $0.53 - $0.56 Key Assumptions: Key Assumptions:  Decoupling model: March 2015 Decision & Order  Net interest income: lower mid-single digit loan grow

18. Slide 18: HEI remains a strong company well-positioned to achieve its goals

     HEI remains a strong company that is well-positioned to achieve its goals of providing long-term value for our customers, community, employees and shareholders  Hawaiian Electric Company  Expanding our renewable energy portfolio to reach 100% RPS goal by 2045  Modernizing grid to increase resil

19. Slide 19: Hawaiian Electric Industries, Inc.

    Hawaiian Electric Industries, Inc.

20. Slide 20: Appendices

    Appendices [EXE] Catalyst for a better Hawai‘i ——— a 18

21. Slide 21: Clean energy and reliability projects drive capital investments

    Clean energy and reliability projects drive capital investments (in millions) Year End Rate Base Forecast $3,500 = Top of Range = Bottom of Range $3,300 $3,250 $3,150 $2,980 $3,000 $3,200 $3,070 $2,750 $2,920 $2,833 $2,500 2016 2016 2017 2017 2018 2018 2019 2019 Rate Base Growth 3% 3-5% 5-7% 3-6% Ca

22. Slide 22: 2016 consolidated utility ROE lag

    2016 consolidated utility ROE lag 0.2 0.2 0.1 0.4 0.2 0.7 0.2 9.8 9.3 0.5 9.3 8.1 1 2 3 4 5 6 7 8 Allowed Non-recoverable Short term RAM Revenue ROE less Plant Adds O&M in excess No return on Interest rate Others, net Actual ROE items (ie. interest accrual delay items 1, 2, 3 Over of test pension as

23. Slide 23: Renewable energy can be cost competitive in Hawaii

    Renewable energy can be cost competitive in Hawaii depending on oil price volatility Utility fossil fuel energy cost Contracted renewable energy cost Significant reduction in cost of utilty-scale Subject to volatile oil prices 0.40 renewables* 0.35 2016+ PPAs Pre-2016 Subject to PPAs PUC approval 0.

24. Slide 24: Impact of loss of January RAM revenue recognition method

    2017 Impact of Loss of January 1 RAM Revenue Recognition Method Calendar Year Method – Beginning January 2017 • Background: Per the Settlement Agreement with the 10 $40M RAM Revenues Consumer Advocate approved by the Public Utilities 8 9 9 9 9 9 9 Commission in 2013, Hawaiian Electric was allowed to

25. Slide 25: RAM Accrual Schedules

    RAM Accrual Schedules Current Calendar Year Subsequent Calendar Year J F M A M J J A S O N D J F M A M J J A S O N D Original RAM Accrual Prior Year RAM Current Year RAM Subsequent Year RAM Schedule* Calendar Year 2017 Calendar Year 2018 J F M A M J J A S O N D J F M A M J J A S O N D 2018 RAM Oahu

26. Slide 26: National leader in renewable energy integration and distributed generation

    National leader in renewable energy integration and distributed generation Rapid growth of renewables and Committed to achieving Hawaii’s 100% distributed generation renewable goal by 2045 2016 Renewable Portfolio Standard1 MW 1,200 Consolidated Oahu Maui County Hawaii Island 1,000 26% 19% 37% 54% 8

27. Slide 27: Components of decoupling

    Components of decoupling Hawaii PUC Docket No. 2008 - 0274 Hawaii PUC Docket No. for the decoupling review: 2013 - 0141 Components 1. Sales Delinks utility revenues from electricity usage decoupling  GAAP revenue = revenue approved in the last rate case (interim or final) via a Revenue Balancing 

28. Slide 28: Components of decoupling

    Components of decoupling Hawaii PUC Docket No. 2008 - 0274 Hawaii PUC Docket No. for the decoupling review: 2013 - 0141 Components 2. RAM Revenue Lesser of: Adjustment  2a - RAM Revenue Adjustment based on the RAM provisions in place prior to Order No. 32735* -or- Allowed  2b - RAM Revenue Adjustm

29. Slide 29: Components of decoupling

    Components of decoupling Hawaii PUC Docket No. 2008 - 0274 Hawaii PUC Docket No. for the decoupling review: 2013 - 0141 Components 2a. RAM Revenue RAM for Rate Base – Component 2 Adjustment  Change in rate base compared to test year levels in last rate case, for certain items including annual Deter

30. Slide 30: Components of decoupling

    Components of decoupling Hawaii PUC Docket No. 2008 - 0274 Hawaii PUC Docket No. For the decoupling review: 2013 - 0141 Components 2b. RAM Revenue Cumulative RAM for 2016 RAM Revenue Adjustment – Adjustment  Prior year RAM Cap Target Revenues times GDPPI (2.0% for 2017) + prior year RAM Cap Cap Rev

31. Slide 31: Hawaii's oil situation

    Hawaii’s oil situation Low Sulfur Fuel Oil vs. Crude Oil Price per bbl March 2011 to March 2017 $145 $125 HAWAII OIL PRICES $105 HAWAII OIL PRICES HAWAII OIL PRICES HAWAII OIL PRICES $85 $65 CRUDE OIL PRICES $45 CRUDE OIL PRICES $25 Hawaii oil prices based on Hawaiian Electric low sulfur fuel oil in

32. Slide 32: Oil is the primary driver of rates in Hawaii

    Oil is the primary driver of rates in Hawaii Fuel Breakdown of Hawaiian Electric Rates 1 Purchased Energy Fossil Fuels Typical Revenue Taxes 40 Residential Purchased Energy Renewables Bill PPAC Expenses December All Other Typical 2012 35 $163.64 Residential Bill 31.8 31.5 Typical May 30.9 Residentia

33. Slide 33: Plant Additions – Baseline by company & Major Projects

    Plant Additions – Baseline by company & Consolidated Major Projects (in millions) Major projects = PUC approved projects > $2.5 million $500 5-year (2012-2016) historical average baseline projects: $390 $371 HE: $229 $350 $21 HL: 48 $55 $33 ME: 42 $26 $299 $283 $48 $50 $2 Total $319 $59 $28 $13 $46

34. Slide 34: Power supply improvement plan (PSIP) update

    Power supply improvement plan (PSIP) update Hawaii PUC Docket No. 2014-0183 (update submitted December 23, 2016)  Accelerates achievement of key milestones, including reaching a 48% Renewable Portfolio Standard1 by 2020; mandated goal is 30%  Anticipates reaching 100% Renewable Portfolio Standard1

35. Slide 35: 2017 Oahu Energy Snapshot

    Hawaiian 2017 Oahu Energy Snapshot: Electric Growing the renewable energy portfolio Companies 2017 Distributed Generation: 308 MW 2020 ESTIMATED RENEWABLE PORTFOLIO STANDARD (RPS) 48% This map shows existing and planned generating facilities in our service area and the maximum potential power in meg

36. Slide 36: Hawaiian Electric Rate Case: 2017 Test Year

    Hawaiian Electric Rate Case: 2017 Test Year Hawaii PUC Docket No. 2016-0328 Application (12/16/16) Amount requested $106.4M (6.9% increase over revenues at current effective rates) 1 Deprec. & amort. expenses $130.7M Return on average common equity 10.60% with mechanisms Common equity capitalization

37. Slide 37: Hawaii Electric Light Rate Case: 2016 Test Year

    Hawaii Electric Light Rate Case: 2016 Test Year Hawaii PUC Docket No. 2015-0170 Application (9/19/16) Amount requested $19.3M (6.5% increase over revenues at current effective rates) 1 Deprec. & amort. expenses $37.8M Return on average common equity 10.60% with mechanisms Common equity capitalizatio

38. Slide 38: Hawaiian Electric Rate Case: 2011 Test Year

    Hawaiian Electric Rate Case: 2011 Test Year Hawaii PUC Docket No. 2010-0080 Application Interim D&O Adjusted Interim Final D&O (7/30/10) (eff.7/26/11) D&O (eff.5/21/12) (eff.9/1/12) Base Request $74M (4.3% increase) $53.2M2 $58.8M2,3 $58.1M4 New Programs $40M (3.1% increase) (3.4% increase) (3.4% in

39. Slide 39: Hawaii Electric Light Rate Case: 2010 Test Year

    Hawaii Electric Light Rate Case: 2010 Test Year Hawaii PUC Docket No. 2009-0164 Application Interim D&O Adj Interim D&O3 Final D&O4 (12/9/09) (eff.1/14/11) (eff.1/1/12) (eff.4/9/12) $20.9M1 $6.0M2 $5.2M2 $4.5M2) Amount requested (6% increase) (1.7% increase) (1.5% increase) (1.3% increase) Deprec. &

40. Slide 40: Maui Electric Rate Case: 2012 Test Year

    Maui Electric Rate Case: 2012 Test Year Hawaii PUC Docket No. 2011-0092 Application Interim D&O Final D&O (7/22/11) (eff.6/1/12) (eff.8/1/13) $27.5M1 $13.1M3 $5.3M4 Base Request (6.7% increase) (3.2% increase) (1.3% increase) $19.8M $19.7M $19.7M Depr. & amort. expenses without mechanisms with mecha

41. Slide 41: Low-risk loan mix

    Low-risk loan mix Strong overall asset quality Total loans at 03/31/17 - $4.7B1 Commercial construction $131 (3%) Commercial real estate $790 (17%) Commercial markets $661 (14%) Residential 1-4 $2,058 (44%) Residential Construction & Lot Loans $31 (<1%) Consumer $192 (4%) HELOC $867 (18%) Note: $ in

42. Slide 42: ASB peer group – 2017

    ASB peer group – 2017 * 1st Source Corporation SRCE First Bancorp FBNC Opus Bank OPB Ameris Bancorp ABCB First Busey Corporation BUSE * Oritani Financial Corp. ORIT BancFirst Corporation BANF First Commonwealth Financial Corporation FCF Pacific Premier Bancorp, Inc. PPBI Berkshire Hills Bancorp, Inc

43. Slide 43: HEI financing outlook 2017

    HEI financing outlook 2017 2017 holding company sources & uses of capital (in millions)* ~$355M ~$355M Other HC Exp. $15  Expect to maintain strong capital structure above 50% Debt Maturities consolidated common equity $125 to total capitalization in 2017 Debt Issuance $235  HEI investments in Uti

44. Slide 44: Continued favorable outlook for Hawaii's economy

    Continued favorable outlook for Hawaii’s economy Year-over-year % 2016 2017E 2018E change Tourism Visitor Arrivals +3.1% +1.9% +1.1% 2016 2017E 2018E Unemployment Rate (%) Hawaii +3.0% +2.8% +2.9% 2016 2017E 2018E Real personal income Hawaii +2.4% +1.6% +1.5% 2016 2017E 2018E Real State GDP Hawaii +

45. Slide 45: Visitor expenditures

    YTD Hawaii visitor arrivals up 3.1% and visitor expenditures up 10.4% 1400 30.0% Year vs. Year % Change Year vs. Year % Change 1200 15.0% Visitor arrivals (in thousands) 1000 0.0% 800 Monthly Visitor Arrivals -15.0% 600 -30.0% Yr-Yr% Change Visitor Arrivals 400 -45.0% Mar-14 Mar-15 Mar-16 Mar-17 235

46. Slide 46: Hawaii unemployment rate remains low at 2.7%

    Hawaii unemployment rate remains low at 2.7% 12 Seasonally adjusted 8 Hawaii US: 4.5% U.S. Hawai‘i: 2.7% 4 0 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 12 Not seasonally Not seasonally adjusted Honolulu County adjusted Hawaii County: 3.1% 8 Maui County Kauai County:

47. Slide 47: Hawaii real estate (Mar 2008 – Mar 2017)

    Hawaii real estate (Mar 2008 – Mar 2017) Oahu Number of Sales and Median Sales Price $800,000 400 Number of sales $600,000 300 Median price $400,000 200 $200,000 100 $0 0 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Number of Sales Median Sales Price Median Sales Price Oahu,

48. Slide 48: Explanation of HEI's use of certain unaudited non-GAAP measures

    EXPLANATION OF HEI’S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of HEI and the utility. Management believes these non-GAAP measures provide useful information and are a better indicator of the comp

49. Slide 49: Reconciliation of GAAP to Non-GAAP Measures

    RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES Hawaiian Electric Company, Inc. and Subsidiaries Unaudited Three months ended March 31 ($ in millions) 2017 2016 HAWAIIAN ELECTRIC CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY Pre-tax expenses $ — $ 0.1 Current income tax benefi

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