HAWAIIAN ELECTRIC INDUSTRIES INC - FORM 8-K - EX-99 - EXHIBIT 99

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8-K - 8-K - HAWAIIAN ELECTRIC INDUSTRIES INC	heiheform8-k2x13x20use.htm

HEI Exhibit 99

NEWS RELEASE

February 13, 2020



Contact:	Julie R. Smolinski	Telephone: (808) 543-7300
	Director, Investor Relations & Strategic Planning	E-mail: ir@hei.com

HEI REPORTS 2019 RESULTS

Full Year Net Income and Diluted Earnings Per Share (EPS)¹ Grew 8%

Quarterly Dividend Increase to $0.33 Per Share

2019 Highlights:


•	Solid consolidated earnings with net income growth from both the utility and bank


•	Hawaiian Electric² delivered on strategic priorities:


◦	Achieved 28% of electricity sales from renewable sources; on track to meet or exceed goal of 30% in 2020


◦	Integrated nation’s highest level of rooftop solar penetration, at 19% of residential customers


◦	Completed 20 megawatt West Loch Solar project, contributing to 21% increase in solar capacity in 2019


◦	Secured lowest cost renewables to date for Hawaii customers


◦	Launched one of the largest U.S. utility renewables procurement efforts, seeking 900 megawatts of new renewables, over 500 gigawatt-hours of storage, and over 200 megawatts of grid services


◦	Completed “One Company” initiative, restructuring functions across all three utilities to improve operational efficiency


◦	Named 2019 “Utility of the Year” by Utility Dive


•	American Savings Bank achieved solid results despite lower interest rate environment


◦	Maintained net interest margin above peers, driven by low cost of funds


◦	Completed move to new campus and sales of former properties, realized expected one-time net gain of $5.5 million³


◦	Efficiency ratio improved to 57.8% from 59.4%


◦	Grew total loans by $277 million, or 5.7% to $5.1 billion

_____________


¹	Unless otherwise indicated, throughout this release earnings per share (EPS) refers to diluted earnings per share.


²	Hawaiian Electric, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Hawaii


	Electric Light Company, Inc. on Hawaii Island, and Maui Electric Company, Limited, serving Maui County. Over the past few years, the three utilities have been restructuring functions across the islands to improve efficiency. As of January 1, 2020 the three utilities now operate under one brand, “Hawaiian Electric.”


³	The after-tax gain on sale of properties and the after-tax campus transition costs for 2019 were $7.9 million and $2.4 million, respectively, and $7.9 million and $0.2 million for the fourth quarter of 2019, respectively.

HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported 2019 year-end consolidated net income for common stock of $217.9 million and EPS of $1.99 compared to $201.8 million and EPS of $1.85 for 2018, representing net income and EPS growth of 8%.

For the fourth quarter of 2019, consolidated net income for common stock was $66.3 million and EPS was $0.61 compared to $49.6 million and EPS of $0.45 for the fourth quarter of 2018.

“HEI’s fourth quarter and 2019 earnings reflect continued solid performance across our companies,” said Constance H. Lau, president and CEO of HEI. “With another year of strong consolidated performance in 2019, and continued confidence in our future prospects, we announced a 3% increase in our dividend yesterday.”

“In addition to strong financial performance, in 2019 we made significant strides on key initiatives. Our utility launched one of the nation’s largest-ever renewable procurement efforts, which will add significantly to our renewable energy mix once completed. And we’re proud that Hawaiian Electric was named “Utility of the Year” by Utility Dive, a prominent industry publication, for advancing many initiatives that are transforming the power sector today, including renewable energy, electric vehicles, and performance-based regulation,” said Lau.

“American Savings Bank completed the sale of two former properties and moved into its state-of-the-art campus, and achieved strong loan growth and an above-peer net interest margin despite the challenging interest rate environment for banks,” said Lau.

HAWAIIAN ELECTRIC EARNINGS

Full Year Results:

Hawaiian Electric’s full-year 2019 net income was $156.8 million, compared to $143.7 million in 2018. The increase over the prior year was primarily driven by the following after-tax items:


•	$24 million revenue increase from recovery under the rate adjustment mechanism (RAM) and from rate increases to support investments to integrate more renewable energy, improve customer reliability and increase system efficiency;


•	$11 million revenue increase from recovery of the Schofield generation project under the major project interim recovery (MPIR) mechanism;


•	$2 million additional revenue earned under performance incentives for procuring low-cost renewable energy and for better reliability and call center performance; and


•	$2 million lower interest expense due to debt refinancing.

_________________

Note: Amounts indicated as after-tax in this earnings release are based upon adjusting items using the current year composite statutory tax rates of 25.75% for the utilities and 26.79% for the bank.

These items were partially offset by the following after-tax items:

•

$15 million higher operations and maintenance (O&M) expenses compared to 2018, primarily due to higher outside services for system support (asset management, energy management, enterprise resource and grid modernization systems); higher overhaul and maintenance expenses for generating facilities; and the reset of employee pension costs included in rates on Oahu and in Maui county as part of rate case decisions;


•	$9 million higher depreciation expense due to increasing investments to integrate more renewable energy, improve customer reliability and increase system efficiency; and


•	$5 million lower net income versus 2018 due to favorable tax adjustments in 2018.

Fourth Quarter Results:

Fourth quarter 2019 net income of $45.4 million was $10 million higher than in the fourth quarter of 2018, primarily driven by the following after-tax items:


•	$6 million lower O&M expenses in the fourth quarter of 2019 versus the fourth quarter of 2018, due to one-time write-offs in 2018, higher enterprise resource system project costs in 2018, and lower generation station maintenance expense in 2019;


•	$3 million revenue increase resulting from rate increases and recovery under the RAM;


•	$2 million revenue increase from recovery of the Schofield generation project under the MPIR mechanism; and


•	$2 million additional revenue earned under performance incentives due to better reliability and call center performance.

These items were partially offset by the following after-tax items:


•	$2 million from lower pole attachment fee revenues; and


•	$2 million from higher depreciation expense due to increasing investments to integrate more renewable energy, improve customer reliability and increase system efficiency.

AMERICAN SAVINGS BANK EARNINGS

Full Year Results:

American’s full-year 2019 net income was $89.0 million compared to $82.5 million in 2018. Net interest income was $248.1 million compared to $242.7 million in 2018, primarily due to loan growth and stable net interest margin from the previous year. Noninterest income was $16.7 million higher than 2018, primarily due to the $10.8 million pre-tax gain from sales of former properties and mortgage banking income. This was partially offset by $8.7 million higher provision for loan losses due in part to additional

loan loss reserves for the consumer loan portfolio and borrower-specific circumstances requiring additional reserves on loans within the commercial and commercial real estate portfolios. Noninterest expense for the year was $8.0 million higher than 2018 primarily due to higher compensation and benefit expense, as well as higher occupancy costs related to American’s move to its new campus.

Loans were $5.1 billion at December 31, 2019, an increase of $277 million or 5.7% from December 31, 2018. Total deposits were $6.3 billion at December 31, 2019, an increase of $113 million or 1.8% from December 31, 2018. The average cost of funds was 0.29%, up from 0.25% the prior year.

American’s return on average equity⁴of 13.5%, was consistent with full year 2018. The bank’s return on average assets was 1.25% compared to 1.20% in 2018.

Fourth Quarter Results:

American’s fourth quarter 2019 net income was $28.2 million compared to $22.9 million in the third, or linked quarter and $21.8 million in the prior year quarter. The increase in net income compared to the linked and prior year quarters was driven by higher noninterest income, largely related to the sales of former properties, offset by higher provision expense, lower net interest income, and higher noninterest expense.

American’s fourth quarter of 2019 return on average equity⁴ was 16.5%, compared to 13.8% in the linked quarter and 14.1% in the fourth quarter of 2018. Return on average assets was 1.58% compared to 1.29% in the linked quarter and 1.25% in the same quarter last year.

Please refer to American’s news release issued on January 30, 2020 for additional information on American.

HOLDING AND OTHER COMPANIES

The holding and other companies’ net loss was $27.9 million in 2019 compared to $24.4 million in 2018. The higher net loss for 2019 was primarily driven by higher interest expense associated with long-term debt issued in the fourth quarter of 2018. The fourth quarter net loss of $7.3 million was comparable to the prior year quarter.

BOARD INCREASES QUARTERLY DIVIDEND

On February 12, 2020, HEI announced that the Board of Directors increased HEI’s quarterly cash dividend from $0.32 per share to $0.33 per share, payable on March 10, 2020, to shareholders of record at the close of business on February 26, 2020 (ex-dividend date is February 25, 2020). The revised quarterly dividend amount is equivalent to an annual rate of $1.32 per share. Dividends have been paid

_________________


⁴	Bank return on average equity calculated using weighted average daily common equity.

uninterrupted since 1901. At the indicated annual dividend rate and based on the closing price per share on February 11, 2020 of $48.14, HEI’s dividend yield is 2.7%.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

HEI will conduct a webcast and conference call to review its fourth quarter 2019 earnings and 2020 EPS guidance on Thursday, February 13, 2020, at 11:15 a.m. Hawaii time (4:15 p.m. Eastern time).

Interested parties within the United States may listen to the conference by calling (844) 834-0652 and international parties may listen to the conference by calling (412) 317-5198 or by accessing the webcast on HEI’s website at www.hei.com under the “Investor Relations” section, sub-heading “News and Events.” HEI and Hawaiian Electric intend to continue to use HEI’s website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI’s website in the Investor Relations section.

Accordingly, investors should routinely monitor the Investor Relations section of HEI’s website at www.hei.com in addition to following HEI’s, Hawaiian Electric’s and American’s press releases, HEI’s and Hawaiian Electric’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. The information on HEI’s website is not incorporated by reference in this document or in HEI’s and Hawaiian Electric’s SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI’s and Hawaiian Electric’s SEC filings.

An online replay of the February 13, 2020 webcast will be available on HEI’s website beginning about two hours after the event. Audio replays of the conference call will also be available approximately two hours after the event through February 27, 2020, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10136945.

HEI supplies power to approximately 95% of Hawaii’s population through its electric utility, Hawaiian Electric; provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii’s largest financial institutions; and helps advance Hawaii’s clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current, LLC.

FORWARD-LOOKING STATEMENTS

This release may contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as

“will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business, and international, national and local economic, environmental, political and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” discussions (which are incorporated by reference herein) set forth in HEI’s and Hawaiian Electric’s Annual Report on Form 10-K for the year ended December 31, 2018 and HEI’s and Hawaiian Electric’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and HEI’s other periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the release, report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

###

Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME DATA (Unaudited)

	Three months ended December 31						Years ended December 31
(in thousands, except per share amounts)	2019			2018			2019			2018
Revenues
Electric utility	$	645,333		$	680,563		$	2,545,942		$	2,546,525
Bank	80,630			81,256			328,570			314,275
Other	3			(169		)	89			49
Total revenues	725,966			761,650			2,874,601			2,860,849
Expenses
Electric utility	575,002			619,451			2,291,564			2,304,864
Bank (includes $10.8 million gain on sales of properties in 2019)	45,403			52,089			217,008			206,040
Other	4,766			5,506			17,355			16,589
Total expenses	625,171			677,046			2,525,927			2,527,493
Operating income (loss)
Electric utility	70,331			61,112			254,378			241,661
Bank	35,227			29,167			111,562			108,235
Other	(4,763		)	(5,675		)	(17,266		)	(16,540		)
Total operating income	100,795			84,604			348,674			333,356
Retirement defined benefits expense—other than service costs	(634		)	(1,289		)	(2,806		)	(5,962		)
Interest expense, net—other than on deposit liabilities and other bank borrowings	(21,818		)	(22,635		)	(90,899		)	(88,677		)
Allowance for borrowed funds used during construction	988			1,052			4,453			4,867
Allowance for equity funds used during construction	2,652			2,638			11,987			10,877
Income before income taxes	81,983			64,370			271,409			254,461
Income taxes	15,247			14,324			51,637			50,797
Net income	66,736			50,046			219,772			203,664
Preferred stock dividends of subsidiaries	473			473			1,890			1,890
Net income for common stock	$	66,263		$	49,573		$	217,882		$	201,774
Basic earnings per common share	$	0.61		$	0.46		$	2.00		$	1.85
Diluted earnings per common share	$	0.61		$	0.45		$	1.99		$	1.85
Dividends declared per common share	$	0.32		$	0.31		$	1.28		$	1.24
Weighted-average number of common shares outstanding	108,973			108,879			108,949			108,855
Weighted-average shares assuming dilution	109,405			109,132			109,407			109,146
Net income (loss) for common stock by segment
Electric utility	$	45,361		$	35,297		$	156,840		$	143,653
Bank	28,230			21,767			88,973			82,509
Other	(7,328		)	(7,491		)	(27,931		)	(24,388		)
Net income for common stock	$	66,263		$	49,573		$	217,882		$	201,774
Comprehensive income attributable to Hawaiian Electric Industries, Inc.	$	70,597		$	62,091		$	248,453		$	193,105
Return on average common equity (twelve months ended)							9.8		%	9.5		%

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME DATA

(Unaudited)



	Three months ended December 31						Years ended December 31
($ in thousands, except per barrel amounts)	2019			2018			2019			2018
Revenues	$	645,333		$	680,563		$	2,545,942		$	2,546,525
Expenses
Fuel oil	179,387			215,292			720,709			760,528
Purchased power	160,920			161,069			633,256			639,307
Other operation and maintenance	119,932			127,686			481,737			461,491
Depreciation	53,936			51,816			215,731			203,626
Taxes, other than income taxes	60,827			63,588			240,131			239,912
Total expenses	575,002			619,451			2,291,564			2,304,864
Operating income	70,331			61,112			254,378			241,661
Allowance for equity funds used during construction	2,652			2,638			11,987			10,877
Retirement defined benefits expense—other than service costs	(709		)	(697		)	(2,836		)	(3,631		)
Interest expense and other charges, net	(16,897		)	(18,526		)	(70,842		)	(73,348		)
Allowance for borrowed funds used during construction	988			1,052			4,453			4,867
Income before income taxes	56,365			45,579			197,140			180,426
Income taxes	10,505			9,783			38,305			34,778
Net income	45,860			35,796			158,835			145,648
Preferred stock dividends of subsidiaries	229			229			915			915
Net income attributable to Hawaiian Electric	45,631			35,567			157,920			144,733
Preferred stock dividends of Hawaiian Electric	270			270			1,080			1,080
Net income for common stock	$	45,361		$	35,297		$	156,840		$	143,653
Comprehensive income attributable to Hawaiian Electric	$	43,910		$	36,530		$	155,462		$	144,971
OTHER ELECTRIC UTILITY INFORMATION
Kilowatthour sales (millions)
Hawaiian Electric	1,723			1,671			6,563			6,526
Hawaii Electric Light	272			268			1,050			1,064
Maui Electric	296			281			1,127			1,099
	2,291			2,220			8,740			8,689
Average fuel oil cost per barrel	$	78.04		$	97.27		$	82.17		$	87.90
Return on average common equity (twelve months ended)¹							7.8		%	7.6		%

This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings

with the SEC.

¹ Simple average.

American Savings Bank, F.S.B.

STATEMENTS OF INCOME DATA

(Unaudited)



	Three months ended								Years ended December 31
($ in thousands)	December 31, 2019			September 30, 2019			December 31, 2018		2019		2018
Interest and dividend income
Interest and fees on loans	$	57,892		$	59,260		$	57,145	$	233,632	$	220,463
Interest and dividends on investment securities	7,160			7,599			10,632		32,922		37,762
Total interest and dividend income	65,052			66,859			67,777		266,554		258,225
Interest expense
Interest on deposit liabilities	3,907			4,384			4,115		16,830		13,991
Interest on other borrowings	249			422			255		1,610		1,548
Total interest expense	4,156			4,806			4,370		18,440		15,539
Net interest income	60,896			62,053			63,407		248,114		242,686
Provision for loan losses	5,607			3,315			2,408		23,480		14,745
Net interest income after provision for loan losses	55,289			58,738			60,999		224,634		227,941
Noninterest income
Fees from other financial services	4,830			5,085			4,996		19,275		18,937
Fee income on deposit liabilities	5,475			5,320			5,530		20,877		21,311
Fee income on other financial products	1,378			1,706			1,977		6,507		7,052
Bank-owned life insurance	1,378			1,660			390		7,687		5,057
Mortgage banking income	1,863			1,490			94		4,943		1,493
Gain on sale of real estate	10,762			—			—		10,762		—
Gains on sale of investment securities, net	—			653			—		653		—
Other income, net	654			428			492		2,074		2,200
Total noninterest income	26,340			16,342			13,479		72,778		56,050
Noninterest expense
Compensation and employee benefits	26,383			25,364			26,340		103,009		98,387
Occupancy	5,429			5,694			4,236		21,272		17,073
Data processing	3,953			3,763			3,681		15,306		14,268
Services	2,378			2,829			2,287		10,239		10,847
Equipment	2,344			2,163			1,801		8,760		7,186
Office supplies, printing and postage	1,192			1,297			1,580		5,512		6,134
Marketing	1,035			1,142			844		4,490		3,567
FDIC insurance	(45		)	(5		)	635		1,204		2,713
Other expense	3,537			3,676			4,341		15,586		17,238
Total noninterest expense	46,206			45,923			45,745		185,378		177,413
Income before income taxes	35,423			29,157			28,733		112,034		106,578
Income taxes	7,193			6,269			6,966		23,061		24,069
Net income	$	28,230		$	22,888		$	21,767	$	88,973	$	82,509
Comprehensive income	$	33,300		$	26,697		$	35,446	$	118,379	$	75,390
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets	1.58			1.29			1.25		1.25		1.20
Return on average equity	16.45			13.75			14.08		13.48		13.51
Return on average tangible common equity	18.69			15.68			16.23		15.39		15.61
Net interest margin	3.74			3.82			3.95		3.85		3.83
Efficiency ratio	52.97			58.58			59.50		57.77		59.39
Net charge-offs to average loans outstanding	0.41			0.69			0.37		0.45		0.34
As of period end
Nonaccrual loans to loans receivable held for investment	0.58			0.63			0.56
Allowance for loan losses to loans outstanding	1.04			1.04			1.08
Tangible common equity to tangible assets	8.6			8.4			8.0
Tier-1 leverage ratio	9.1			8.8			8.7
Total capital ratio	14.3			14.0			13.9
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)	$	9.0		$	14.0		$	14.0	$	56.0	$	50.0

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

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