HE Hawaiian Electric Industries 10-Q 2026-09-30 section summaries

HEI consolidated results

HEI’s third-quarter revenue growth accelerated, but operating income fell as utility costs rose and unusual investment and impairment items affected earnings. Nine-month operating income improved sharply, supported by wildfire-settlement accounting benefits.

($ millions, except per-share data)

Revenue grew 27.6% in Q3 and 18.1% in 9M. Q3 included a $64.146 million gain on sale and fair-value remeasurement of an investment, partly offset by a $50.736 million loss on subsidiary sales and impairment. The 9M period also included a $154 million wildfire-settlement remeasurement benefit. HEI’s effective tax rate for 9M was 15%, down from 25%, mainly reflecting a $15.9 million valuation-allowance release, R&D credits and deferred-tax amortization.

Segment results and utility revenue detail

($ millions; Q3 only, consistent with quarterly segment presentation)

The utility’s Q3 operating pressure reflected higher fuel-oil expense ($398.693 million vs. $240.547 million) and purchased-power expense ($218.477 million vs. $183.813 million). Net interest expense also increased. For 9M, utility revenue was $2,688.008 million vs. $2,268.276 million and operating income was $329.270 million vs. $203.274 million, including a $162.383 million credit to wildfire tort-related claims expense.

Q3 electric sales were residential $327.332 million vs. $261.780 million; commercial $312.578 million vs. $251.288 million; and large light and power $359.908 million vs. $278.484 million. Other electric sales were $5.301 million vs. $4.284 million.

Cash flow, balance sheet and financing

HEI’s negative operating cash flow reflected $518.750 million of settlement payments, higher receivables and fuel inventory, partly offset by higher payables. HEI repaid $150.760 million of long-term debt and issued none; Hawaiian Electric repaid $125 million. At September 30, HEI had $224.208 million of cash and cash equivalents, versus $501.778 million at year-end 2025. Hawaiian Electric cash was $175.970 million, down from $486.220 million.

HEI common shares outstanding increased from 172.620 million at December 31, 2025 to 172.728 million at September 30, 2026. HEI and its utilities reported compliance with applicable financial covenants. Revolving facilities were undrawn, with $850 million of consolidated HEI capacity.

Wildfire settlement, litigation and insurance

HEI and Hawaiian Electric are to contribute approximately $1.99 billion, including $75 million previously contributed, toward total defendant contributions of approximately $4.04 billion. They paid the first $479 million installment in April 2026 and made a $40 million prepayment toward the 2027 installment in September; another $40 million was paid in October. Remaining installments are due annually in April 2027–2029, with accelerated payments discounted at 5.5%. At September 30, the settlement liability was carried at present value: $376 million current and $903 million noncurrent. Q2 remeasurement reduced the liability and expense by $153.870 million; accretion expense was $18.010 million in Q3 and $35.724 million in 9M.

A $500 million holdback covers claims by plaintiffs who did not release their claims; approximately 70 opt-out plaintiffs remain. HEI believes the holdback will be sufficient, but excess losses could affect liquidity, results and covenant compliance and cannot currently be estimated. Settlement administration fees of $4.5 million were accrued. The Utilities recorded $79.1 million of deferred Maui wildfire and windstorm costs; deferral is authorized, but recovery requires a separate PUC application and is not assured.

The securities class action settlement is $47.8 million, offset by an insurance receivable; final court approval followed in October 2026. Remaining D&O coverage was approximately $71 million, with excess-liability and professional-liability coverage essentially exhausted. Hawaiian Electric had received more than $22 million of reimbursements under $500 million of property coverage; disputes with insurers continue.

Investment, impairment and capital plans

ASB’s September IPO reduced HEI’s ownership to 6.43%. HEI sold 2,253,264 shares for $33.9 million net proceeds and recorded an $18.3 million pretax realized gain; its remaining 4,181,538 shares were worth $74.8 million at September 30, generating a $45.9 million unrealized gain. HEI plans to sell the remaining shares in 2027 and use proceeds for settlement prepayments.

Mahipapa’s proposed sale ended after transaction obligations could not be resolved; hurricane damage took its 7.5-MW biomass facility offline, and its power purchase agreement ended October 1. HEI recorded a $50.7 million Q3 impairment and $54.5 million for 9M. Mahipapa filed for Chapter 7 bankruptcy in November; at September 30 it had about $2 million of long-lived assets and $49 million of long-term debt.

Major utility projects remain exposed to cost-recovery and execution risks. The Waiau repower estimate rose from $847 million to $1.16 billion, while approved recovery is currently estimated at $908 million; $102.9 million had been incurred. The $189.7 million grid-resilience program had incurred $51.5 million; wildfire mitigation recovery is capped at $350 million, with about $125 million incurred. The $82.1 million Waena battery project had incurred $66.4 million. Utilities’ rate-rebasing application seeks a $170 million annual revenue increase, with a PUC decision expected in April 2027.

HEI consolidated results

Revenue growth came primarily from the electric utility. Q3 operating income declined as weaker utility results outweighed improvement in All Other. Common-stock net income rose despite lower Q3 operating income, helped by investment-sale and fair-value remeasurement gains; offsets included asset impairments, settlement-related accretion, higher average debt and lower operating income. The 9M operating-income increase was driven largely by remeasurement of the wildfire settlement liability and improved All Other results. The 9M effective tax rate was 15% versus 25%; Q3 2026 included an 82% tax benefit versus a 22% tax expense in Q3 2025. Discrete valuation-allowance releases and R&D tax-credit claims contributed to the 2026 tax benefits.

Segment results

Utilities’ Q3 common-stock net income was $13M versus $37M; higher O&M, depreciation and a lower fuel-cost risk-sharing adjustment weighed on results, partly offset by higher ARA revenue. Fuel oil expense increased to $399M from $241M, purchased-power expense to $218M from $184M, and O&M to $182M from $162M. Average fuel-oil cost rose to $154.87 per barrel from $98.20. All Other’s net income was $21.962M versus a $6.241M loss, benefiting from investment gains and lower interest expense; lower Pacific Current sales reduced revenue, while reduced Pacific Current losses and the June 2026 integration improved operating results.

Cash flows, liquidity and capital

HEI’s consolidated cash use included the first wildfire settlement installment, capital expenditures and long-term debt repayment. Hawaiian Electric’s lower operating cash flow reflected higher fuel-stock payments and customer bills from higher fuel prices; investing outflow increased mainly with construction-related spending. Financing cash flow turned negative, in part because the prior-year period included debt issuance proceeds.

At September 30, 2026, HEI had $2.313B of long-term debt, net of current portion, and $1.802B of common equity (56% and 44% of capital), versus $2.410B and $1.606B (60% and 40%) at December 31, 2025. HEI reported $224M cash and $1.324B of total available liquidity. Hawaiian Electric had $801M available liquidity—$176M cash and $625M of undrawn facilities—and $2.058B of long-term debt, net, and $1.909B of common equity (52% and 48% of capital). Neither entity had revolving-credit borrowings outstanding. HEI’s dividend remains suspended; Hawaiian Electric paid HEI $11M per quarter in the first three quarters of 2026.

Wildfire obligations and financing

Since August 2023, HEI and subsidiaries have incurred approximately $2.28B of wildfire-related expenses, including the estimated tort settlement, One ‘Ohana Initiative contribution and $47.8M securities-class-action settlement. The tort settlement is payable in four annual installments of $479M. HEI paid the first in April 2026 and prepaid $40M toward the second in September, followed by another $40M on October 28. Hawaiian Electric had approximately $1.3B of wildfire settlement liabilities at present value, pre-tax, at September 30: $376M current and $903M noncurrent.

Wildfire-related items, net, were an $18.836M Q3 expense versus $4.527M, but a $119.884M 9M benefit versus a $14.212M expense. The 9M 2026 result included a $153.870M settlement remeasurement benefit, $35.724M of accretion expense, $7.643M of expenses and $9.381M of insurance recoveries. HEI had recovered remaining unpaid proceeds under excess and professional liability policies; approximately $71M of D&O coverage remained, net of retentions and expected recoveries.

The utilities sought PUC approval in October for approximately $531M aggregate principal of infrastructure-resilience bonds, covering up to approximately $500M of eligible costs and approximately $31M of estimated upfront financing costs. Repayment would come from a nonbypassable customer charge over up to 30 years. HEI is arranging financing for remaining settlement payments, but success is not assured; below-investment-grade ratings, rebuilding needs, inflation and fuel costs add funding pressure.

Utility operations, regulation and outlook

Hawaiian Electric serves about 95% of Hawaii’s population across five separate grids. Q3 electricity sales were 2,257 million kWh, up 1.0%, as less sunny weather reduced rooftop-solar and solar-water-heater output. For 9M, sales were 6,244 million kWh versus 6,231 million; period-end customer accounts rose to 476,286 from 474,038. Crude oil prices were up 39.7% year over year. Fuel and some purchased-energy costs are passed through, but payment/collection timing increases working-capital needs.

Kona Low storms and the 2026 hurricane season damaged infrastructure and caused outages; 9M related O&M costs were $23M, preliminarily estimated to be 75%–85% incremental. A deferral application preserves the ability to seek later recovery, subject to approval. Wildfire-safety settings and preventive power shutoffs can reduce ignition risk but also increase outage frequency and duration. The PUC-approved 2025–2027 Wildfire Mitigation Plan includes grid hardening, vegetation management, inspections and a Public Safety Power Shutoff program; the PUC approved an estimated $350M of EPRM cost recovery in June 2026.

The utilities’ authorized rate-making ROACE is 9.5%; the earnings-sharing mechanism remains suspended. For the 12 months ended September 30, 2026, rate-making ROACE was 10.98% at Hawaiian Electric, 5.83% at Hawaii Electric Light and 3.56% at Maui Electric. The utilities say customers will not bear the $1.9B of Maui windstorm and wildfire settlement payments. Maui Electric’s below-allowed returns particularly reflect maintenance and investment above amounts recovered in rates.

Renewable project delays, supply-chain inflation, federal tax-credit changes and tariffs threaten project economics and decarbonization targets. The utilities’ 70% generation-emissions-reduction goal by 2030 is now expected later; estimated 2025 emissions were 25% below the 2005 baseline, versus 27% below in 2024. They achieved a 36.8% renewable portfolio standard in 2025, against a 40% requirement for 2030. A PUC-approved grid-modernization application was revised to reduce estimated cost from $215.2M to $121.6M. HEI and Hawaiian Electric completed corporate integration in June 2026, with approximately $5.6M of incremental Q3 pretax costs.

Moody’s and S&P upgraded HEI during 2026, to Ba2 and BB-, respectively; Hawaiian Electric was rated Ba1 by Moody’s and BB- by S&P as of October 30. Ratings remain below investment grade, and S&P withdrew both entities’ short-term/commercial-paper ratings at their request because of limited market access.

For the quarter ended September 30, 2026, HEI and Hawaiian Electric reported no significant changes in their exposure to market risk. Further discussion is referenced in Part II, Item 7A, page 62 of their 2025 Form 10-K.

Controls and Procedures

Management of both HEI and Hawaiian Electric, including each company’s CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable-assurance level as of the end of the reporting period. Neither company reported any changes in internal control over financial reporting during Q3 2026 that materially affected, or were reasonably likely to materially affect, those controls.

This section does not describe specific risk factors or provide financial metrics. It directs readers to HEI’s and Hawaiian Electric’s 2025 Form 10-K (pages 14–26) and to this filing’s MD&A, “Quantitative and Qualitative Disclosures about Market Risk,” condensed consolidated financial statements, and forward-looking statements cautionary note for relevant risk disclosures.

Other Information

During Q3 2026, no HEI or Hawaiian Electric director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement.

On November 5, 2026, HEI elected Peter Ho as a director, with his term extending through the 2027 annual meeting, and appointed him to the Audit & Risk Committee. Ho will receive standard non-employee director compensation and a standard indemnity agreement.

The Board increased CFO Paul K. Ito’s annual base salary by 12.0%, from $517,900 to $580,000, retroactive to September 1, 2026. The increase recognized his dual CFO roles at HEI and Hawaiian Electric, which he has held since April 2026.