Hawaiian Electric Industries 10Q 2024 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Exact Name of Registrant as Specified in Its Charter	Commission File Number	I.R.S. Employer Identification No.
HAWAIIAN ELECTRIC INDUSTRIES, INC.	1-8503	99-0208097
and Principal Subsidiary
HAWAIIAN ELECTRIC COMPANY, INC.	1-4955	99-0040500

State of Hawaii

(State or other jurisdiction of incorporation or organization)

Hawaiian Electric Industries, Inc. – 1001 Bishop Street, Suite 2900, Honolulu, Hawaii 96813

Hawaiian Electric Company, Inc. – 1099 Alakea Street, Suite 2200, Honolulu, Hawaii 96813

(Address of principal executive offices and zip code)

Hawaiian Electric Industries, Inc. – (808) 543-5662

Hawaiian Electric Company, Inc. – (808) 543-7771

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)


Registrant	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Hawaiian Electric Industries, Inc.	Common Stock, Without Par Value	HE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Hawaiian Electric Industries, Inc.

Yes

☒

☐

Hawaiian Electric Company, Inc.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Hawaiian Electric Industries, Inc.

Yes

☒

☐

Hawaiian Electric Company, Inc.

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Hawaiian Electric Industries, Inc.:

Hawaiian Electric Company, Inc.:

Large accelerated filer

☒

Smaller reporting company

☐

Large accelerated filer

☐

Smaller reporting company

☐

Accelerated filer

☐

Emerging growth company

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Non-accelerated filer

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Hawaiian Electric Industries, Inc.

☐

Hawaiian Electric Company, Inc.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Hawaiian Electric Industries, Inc.

Yes

☐

☒

Hawaiian Electric Company, Inc.

Yes

☐

☒

Securities registered pursuant to 12(b) of the Act:

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.


Class of Common Stock	Outstanding May 3, 2024
Hawaiian Electric Industries, Inc. (Without Par Value)	110,302,667	Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value)	17,854,278	Shares (not publicly traded)

Hawaiian Electric Industries, Inc. (HEI) is the sole holder of Hawaiian Electric Company, Inc. (Hawaiian Electric) common stock.

This combined Form 10-Q is separately filed by HEI and Hawaiian Electric. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to the other registrant, except that information relating to Hawaiian Electric is also attributed to HEI.

Hawaiian Electric Industries, Inc. and Subsidiaries

Hawaiian Electric Company, Inc. and Subsidiaries

Form 10-Q—Quarter ended March 31, 2024

TABLE OF CONTENTS


Page No.
ii	Glossary of Terms
iv	Cautionary Note Regarding Forward-Looking Statements

	PART I. FINANCIAL INFORMATION
1	Item 1.	Financial Statements
		Hawaiian Electric Industries, Inc. and Subsidiaries
1		Condensed Consolidated Statements of Income (unaudited) - three months ended March 31, 2024 and 2023
2		Condensed Consolidated Statements of Comprehensive Income (unaudited) - three months ended March 31, 2024 and 2023
3		Condensed Consolidated Balance Sheets (unaudited) - March 31, 2024 and December 31, 2023
4		Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) - three months ended March 31, 2024 and 2023
5		Condensed Consolidated Statements of Cash Flows (unaudited) - three months ended March 31, 2024 and 2023
		Hawaiian Electric Company, Inc. and Subsidiaries
7		Condensed Consolidated Statements of Income (unaudited) - three months ended March 31, 2024 and 2023
7		Condensed Consolidated Statements of Comprehensive Income (unaudited) - three months ended March 31, 2024 and 2023
8		Condensed Consolidated Balance Sheets (unaudited) - March 31, 2024 and December 31, 2023
10		Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited) - three months ended March 31, 2024 and 2023
11		Condensed Consolidated Statements of Cash Flows (unaudited) - three months ended March 31, 2024 and 2023
12		Notes to Condensed Consolidated Financial Statements (unaudited)
59	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
59		HEI consolidated
67		Electric Utility
82		Bank
88	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
89	Item 4.	Controls and Procedures

	PART II.	OTHER INFORMATION
90	Item 1.	Legal Proceedings
90	Item 1A.	Risk Factors
90	Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

91	Item 6.	Exhibits
92	Signatures

Hawaiian Electric Industries, Inc. and Subsidiaries

Hawaiian Electric Company, Inc. and Subsidiaries

Form 10-Q—Quarter ended March 31, 2024

GLOSSARY OF TERMS


Terms						Definitions
ABR						Alternate Base Rate
ACL						Allowance for credit losses, which is the current credit loss standard, requires recording the allowance based on the expected loss model
AES Hawaii						AES Hawaii, Inc.



AOCI						Accumulated other comprehensive income/(loss)
ARA						Annual revenue adjustment
ASB						American Savings Bank, F.S.B., a wholly owned subsidiary of ASB Hawaii, Inc.
ASB Hawaii						ASB Hawaii, Inc., a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.

ASU						Accounting Standards Update

CBRE						Community-based renewable energy
Company						Hawaiian Electric Industries, Inc. and its direct and indirect subsidiaries, including, without limitation, Hawaiian Electric Company, Inc. and its subsidiaries (listed under Hawaiian Electric); ASB Hawaii, Inc. and its subsidiary, American Savings Bank, F.S.B. and Pacific Current, LLC and its subsidiaries (listed under Pacific Current).
Consumer Advocate						Division of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
CSSM						Collective Shared Savings Mechanism
D&O						Decision and order from the PUC

DER						Distributed energy resources

DRIP						HEI Dividend Reinvestment and Stock Purchase Plan


ECRC						Energy cost recovery clause
EIP						2010 Equity and Incentive Plan, as amended
EPA						Environmental Protection Agency — federal
EPRM						Exceptional Project Recovery Mechanism
EPS						Earnings per share


ESM						Earnings Sharing Mechanism
EVE						Economic value of equity
Exchange Act						Securities Exchange Act of 1934

FDIC						Federal Deposit Insurance Corporation
federal						U.S. Government
FHLB						Federal Home Loan Bank
FHLMC						Federal Home Loan Mortgage Corporation
Fitch						Fitch Ratings, Inc.
FNMA						Federal National Mortgage Association
FRB						Federal Reserve Board
GAAP						Accounting principles generally accepted in the United States of America
GHG						Greenhouse gas
GNMA						Government National Mortgage Association
GSPA						Grid Services Purchase Agreement
Hamakua Energy						Hamakua Energy, LLC, an indirect subsidiary of Pacific Current
Hawaii Electric Light						Hawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.
Hawaiian Electric						Hawaiian Electric Company, Inc., an electric utility subsidiary of Hawaiian Electric Industries, Inc. and parent company of Hawaii Electric Light Company, Inc., Maui Electric Company, Limited, Renewable Hawaii, Inc. and HE AR INTER LLC
HEI						Hawaiian Electric Industries, Inc., direct parent company of Hawaiian Electric Company, Inc., ASB Hawaii, Inc. and Pacific Current, LLC.

GLOSSARY OF TERMS, continued


Terms						Definitions
HEIRSP						Hawaiian Electric Industries Retirement Savings Plan
HELOC						Home equity line of credit
HPOWER						City and County of Honolulu with respect to a power purchase agreement for a refuse-fired plant
IIJA						Infrastructure Investment and Jobs Act
IPP						Independent power producer
IRLCs						Interest rate lock commitments
IWSM						Interim Wildfire Safety Measures
Kalaeloa						Kalaeloa Partners, L.P.
kWh						Kilowatthour/s (as applicable)

LMI						Low-to-moderate income
LTIP						Long-term incentive plan
Mahipapa						Mahipapa, LLC, a subsidiary of Pacific Current
Maui Electric						Maui Electric Company, Limited, an electric utility subsidiary of Hawaiian Electric Company, Inc.
Maui windstorm and wildfires						The fires in the West Maui (Lahaina) and Upcountry Maui areas that caused fatalities and widespread property damage in Lahaina on August 8, 2023
Mauo						Mauo, LLC, a subsidiary of Pacific Current
MFD						County of Maui Department of Fire and Public Safety
Moody’s						Moody’s Investors Service’s
MPIR						Major Project Interim Recovery

MRP						Multi-year rate period
MSRs						Mortgage servicing rights
MW						Megawatt/s (as applicable)
NII						Net interest income
NPBC						Net periodic benefit costs
NPPC						Net periodic pension costs
O&M						Other operation and maintenance
OCC						Office of the Comptroller of the Currency
OPEB						Postretirement benefits other than pensions
Pacific Current						Pacific Current, LLC, a wholly owned subsidiary of HEI and parent company of Hamakua Holdings, LLC, Mauo, LLC, Alenuihaha Developments, LLC, Kaʻieʻie Waho Company, LLC, Kaʻaipuaʻa, LLC, Upena, LLC and Mahipapa, LLC
PBR						Performance-based regulation

PIMs						Performance incentive mechanisms
PPA						Power purchase agreement
PPAC						Purchased power adjustment clause
PSPS						Public Safety Power Shutoff
PUC						Public Utilities Commission of the State of Hawaii
PV						Photovoltaic
RAM						Revenue adjustment mechanism
RBA						Revenue balancing account

RFP						Request for proposals
ROACE						Return on average common equity
RORB						Return on rate base
RPS						Renewable portfolio standards
S&P						S&P Global Ratings
SBA						Small Business Administration
SEC						Securities and Exchange Commission
See						Means the referenced material is incorporated by reference

SOFR						Secured Overnight Financing Rate
TDR						Troubled debt restructuring

Utilities						Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited
VIEs						Variable interest entities

iii

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and other presentations 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 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 (collectively, the Company), the performance of the industries in which they do business and economic, political and market factors, among other things. These forward-looking statements are not guarantees of future performance and actual results and financial condition may differ materially from those indicated in the forward-looking statements.

Risks, uncertainties and other important factors that could cause actual results to differ materially from those described in forward-looking statements and from historical results include, but are not limited to, the following:

•the impact of the Maui windstorm and wildfires including the potential liabilities from the many lawsuits filed against the Company and potential regulatory penalties which may result in significant costs that may be unrecoverable (or not reimbursed on a timely basis) through insurance and/or rates;

•an increase in insurance premiums and the inability to fully recover premiums through rates or the potential inability to obtain wildfire and general liability insurance coverage at reasonable rates, if available at all;

•the uncertainties surrounding the Company’s access to capital and credit markets due to the uncertainties associated with the costs related to the Maui windstorm and wildfires;

•extreme weather events, including windstorms and other natural disasters, particularly those driven or exacerbated by climate change, which could increase the risk of the Utilities’ equipment being damaged, becoming inoperable or contributing to a wildfire;

•the material reduction or extended delay in dividends or other distributions from one or more operating subsidiaries to HEI;

•further downgrades by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and their impact on results of financing efforts;

•the risks of suffering losses and incurring liabilities that are uninsured (e.g., damages to the Utilities’ transmission and distribution system and losses from business interruption) or underinsured (e.g., losses not covered as a result of insurance deductibles or other exclusions or exceeding policy limits), and the risks associated with the operation of transmission and distribution assets and power generation facilities, including public and employee safety issues, and assets causing or contributing to wildfires;

•international, national and local economic and political conditions—including the state of the Hawaii tourism, defense and construction industries; the strength or weakness of the Hawaii and continental U.S. real estate markets (including the fair value and/or the actual performance of collateral underlying loans held by ASB, which could result in higher loan loss provisions and write-offs); decisions concerning the extent of the presence of the federal government and military in Hawaii; the implications and potential impacts of future federal government shutdowns, including the impact to our customers’ ability to pay their electric bills and/or bank loans and the impact on the state of Hawaii economy; the implications and potential impacts of U.S. and foreign capital and credit market conditions and federal, state and international responses to those conditions; the potential impacts of global and local developments (including global economic conditions and uncertainties, unrest, terrorist acts, wars, conflicts, political protests, deadly virus epidemic or other crisis); the effects of changes that have or may occur in U.S. policy, such as with respect to immigration and trade; and pandemics;

•the ability to adequately address risks and capitalize on opportunities related to our environmental, social and governance priority areas, which include safety, reliability and resilience, including relating to wildfires and other extreme weather events, decarbonization, economic health and affordability, secure digitalization, diversity, equity and inclusion, employee engagement, and climate-related risks and opportunities;

•citizen activism, including civil unrest, especially in times of severe economic depression and social divisiveness, which could negatively impact customers and employees, impair the ability of the Company and the Utilities to operate and maintain their facilities in an effective and safe manner, and citizen or stakeholder activism that could delay the construction, increase project costs or preclude the completion of third-party or Utility projects that are required to meet electricity demand, resilience and reliability objectives and renewable portfolio standards (RPS) and other climate-related goals;

•the effects of future actions or inaction of the U.S. government or related agencies, including those related to the U.S. debt ceiling or budget funding, monetary policy, trade policy and tariffs, energy and environmental policy, and other policy and regulatory changes advanced or proposed by President Biden and his administration;

•weather, natural disasters (e.g., hurricanes, earthquakes, tsunamis, lightning strikes, lava flows and the increasing effects of climate change, such as more severe storms, flooding, droughts, heat waves, and rising sea levels) and wildfires, including their impact on the resilience and reliability and cost of the Company’s and Utilities’ operations, collateral underlying ASB loans and the economy;

•the timing, speed and extent of changes in interest rates and the shape of the yield curve, which could result in lower portfolio yields and net interest margin, or higher borrowing costs;

•changes in interest rates and market liquidity, as well as the magnitude of such changes, which may reduce interest margins, impact funding sources, alter valuations and affect the ability to originate and distribute financial products in the primary and secondary markets;

•the continued ability of the Company and the Utilities to access the credit and capital markets (e.g., to obtain commercial paper and other short-term and long-term debt financing, including lines of credit, and, in the case of HEI, to issue common stock) under volatile and challenging market conditions, and the potential higher cost of such financings, if available;

•the risks inherent in changes in the value of the Company’s pension and other retirement plan assets and ASB’s securities available for sale, and the risks inherent in changes in the value of the Company’s pension liabilities, including changes driven by interest rates and mortality improvements;

•changes in laws, regulations (including tax regulations), market conditions, interest rates and other factors that result in changes in assumptions used to calculate retirement benefits costs and funding requirements;

•increasing competition in the banking industry from traditional financial institutions as well as from non-traditional providers of financial services, including financial service subsidiaries of commercial and manufacturing companies (e.g., increased price competition for loans and deposits, or an outflow of deposits to alternative investments or platforms, which may have an adverse impact on ASB’s net interest margin and portfolio growth);

•the potential delay by the Public Utilities Commission of the State of Hawaii (PUC) in considering (and potential disapproval of actual or proposed) renewable energy or resilience proposals, among others, and related costs; reliance by the Utilities on outside parties such as the state, independent power producers (IPPs) and developers; supply-chain challenges; and uncertainties surrounding technologies, solar power, wind power, biofuels, environmental assessments required to meet RPS and other climate-related goals; the impacts of implementation of the renewable energy and resilience proposals on future costs of electricity and potential penalties imposed by the PUC for delays in the commercial operations of renewable energy projects;

•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 Plan, Grid Modernization Plans, and business model changes, which have been and are continuing to be developed and updated in response to the orders issued by the PUC, the PUC’s April 2014 statement of its inclinations on the future of Hawaii’s electric utilities and the vision, business strategies and regulatory policy changes required to align the Utilities’ business model with customer interests and the state’s public policy goals, and subsequent orders of the PUC;

•the ability of the Utilities to recover undepreciated cost of fossil fuel generating units, if they are required to be retired before the end of their expected useful life;

•capacity and supply constraints or difficulties, especially if generating units (utility-owned or IPP-owned) fail or measures such as demand-side management, distributed generation, combined heat and power or other firm capacity supply-side resources fall short of achieving their forecasted benefits or are otherwise insufficient to reduce or meet peak demand;

•high and/or volatile fuel prices, which increases working capital requirements and customer bills, or delivery of adequate fuel by suppliers (including as a result of the Russia-Ukraine war and conflict in the Middle East), which could affect the reliability of utility operations, and the continued availability to the electric utilities of their energy cost recovery clauses (ECRCs);

•the continued availability to the electric utilities or modifications of other cost recovery mechanisms, including the purchased power adjustment clauses (PPACs), annual revenue adjustment (ARA) and pension and postretirement benefits other than pensions (OPEB) tracking mechanisms, and the continued decoupling of revenues from sales to mitigate the effects of declining kilowatt-hour sales;

•the ability of the Utilities to recover increasing or additional costs and earn a reasonable return on capital investments not covered by the ARA, while providing the customer dividend required by performance-based regulation (PBR);

•the impact from the PUC’s implementation of PBR for the Utilities pursuant to Act 005, Session Laws 2018, including the potential addition of new performance incentive mechanisms (PIMs), third-party proposals adopted by the PUC in its implementation of PBR, and the implications of not achieving performance incentive goals;

•the impact of fuel price levels and volatility on customer satisfaction and political and regulatory support for the Utilities;

•unfavorable changes in economic conditions, such as sustained inflation, higher interest rates or recession, may negatively impact the ability of the Company’s customers to pay their utility bills or loan payments, reduce loan production, and increase operating costs of the Utilities or Bank that cannot be passed on to, or recovered, from customers;

•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 and related cost impacts of adding intermittent sources of renewable energy to the electric grid;

•the growing risk that energy production from renewable generating resources may be curtailed and the interconnection of additional resources will be constrained as more generating resources are added to the Utilities’ electric systems and as customers reduce their energy usage;

•the ability of IPPs to deliver the firm capacity anticipated in their power purchase agreements (PPAs);

•the potential that, as IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units to ensure the availability of their units;

•the ability of the Utilities to negotiate, periodically, favorable agreements for significant resources such as fuel supply contracts and collective bargaining agreements and avoid or mitigate labor disputes and work stoppages;

•new technological developments that could affect the operations and prospects of the Utilities and ASB or their competitors such as the commercial development of energy storage and microgrids and banking through alternative channels, including use of digital currencies, which could include a central bank digital currency;

•cybersecurity risks and the potential for cyber incidents, including potential incidents at HEI, its subsidiaries (including at ASB branches and electric utility plants), its third-party service providers, contractors and customers with whom they have shared data (IPPs, distributed energy resources (DER) aggregators and customers enrolled under DER programs) and incidents at data processing centers used, to the extent not prevented by intrusion detection and prevention systems, anti-virus software, firewalls and other general IT controls;

•failure to achieve remaining cost savings commitment related to the management audit committed savings of $33 million over the 2021 to 2025 multi-year rate period (MRP);

•federal, state, county and international governmental and regulatory actions, such as existing, new and changes in laws, rules and regulations applicable to HEI, the Utilities and ASB (including changes in taxation and tax rates, increases in capital requirements, regulatory policy changes, environmental laws and regulations (including resulting compliance costs and risks of fines and penalties and/or liabilities), the regulation of greenhouse gas emissions, governmental fees and assessments (such as Federal Deposit Insurance Corporation assessments), and potential carbon pricing or “cap and trade” legislation that may fundamentally alter costs to produce electricity and accelerate the move to renewable generation);

•developments in laws, regulations and policies governing protections for historic, archaeological and cultural sites, and plant and animal species and habitats, as well as developments in the implementation and enforcement of such laws, regulations and policies;

•discovery of conditions that may be attributable to historical chemical releases, including any necessary investigation and remediation, and any associated enforcement, litigation or regulatory oversight;

•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 audit reports or otherwise);

•decisions by the PUC and by other agencies and courts on land use, environmental and other permitting issues (such as required corrective actions, restrictions and penalties that may arise, such as with respect to environmental conditions or RPS);

•potential enforcement actions by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC) and/or other governmental authorities (such as consent orders, required corrective actions, restrictions and penalties that may arise, for example, with respect to compliance deficiencies under existing or new banking and consumer protection laws and regulations or with respect to capital adequacy);

•the risks associated with the geographic concentration of HEI’s businesses and ASB’s loans, ASB’s concentration in a single product type (i.e., first mortgages) and ASB’s significant credit relationships (i.e., concentrations of large loans and/or credit lines with certain customers);

•changes in accounting principles applicable to HEI and its subsidiaries, including the adoption of new U.S. accounting standards, the potential discontinuance of regulatory accounting related to PBR or other regulatory changes, the effects of potentially required consolidation of variable interest entities (VIEs), or required finance lease or on-balance-sheet operating lease accounting for PPAs with IPPs;

•faster than expected loan prepayments that can cause a decrease in net interest income and portfolio yields, an acceleration of the amortization of premiums on loans and investments and the impairment of mortgage-servicing assets of ASB;

•changes in ASB’s loan portfolio credit profile and asset quality and/or mix, which may increase or decrease the required level of provision for credit losses, allowance for credit losses (ACL) and charge-offs;

•changes in ASB’s deposit levels, cost or mix which may have an adverse impact on ASB’s cost of funds;

•the final outcome of tax positions taken by HEI and its subsidiaries;

•the ability of the Company’s non-regulated subsidiary, Pacific Current, LLC (Pacific Current), to achieve its performance and growth objectives, which in turn could affect its ability to service its non-recourse debt;

•the Company’s reliance on third parties and the risk of their non-performance; and

•other risks or uncertainties described elsewhere in this report and in other reports (e.g., “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K) previously and subsequently filed by HEI and/or Hawaiian Electric with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, ASB, Pacific Current and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether written or oral and whether as a result of new information, future events or otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)


	Three months ended March 31
(in thousands, except per share amounts)		2024		2023
Revenues
Electric utility		$	788,578	$	830,361
Bank		105,144		93,857
Other		3,436		4,019
Total revenues		897,158		928,237
Expenses
Electric utility		725,223		754,486
Bank		79,612		70,337
Other		15,904		9,896
Total expenses		820,739		834,719
Operating income (loss)
Electric utility		63,355		75,875
Bank		25,532		23,520
Other		(12,468)		(5,877)
Total operating income		76,419		93,518
Retirement defined benefits credit—other than service costs		1,282		1,152
Interest expense, net—other than on deposit liabilities and other bank borrowings		(31,591)		(28,798)
Allowance for borrowed funds used during construction		1,386		1,131
Allowance for equity funds used during construction		3,640		3,301
Interest income		3,133		—

Income before income taxes		54,269		70,304
Income taxes		11,674		15,110
Net income		42,595		55,194
Preferred stock dividends of subsidiaries		473		473
Net income for common stock		$	42,122	$	54,721
Basic earnings per common share		$	0.38	$	0.50
Diluted earnings per common share		$	0.38	$	0.50

Weighted-average number of common shares outstanding		110,218		109,514
Net effect of potentially dilutive shares (share-based compensation programs)		258		311
Weighted-average shares assuming dilution		110,476		109,825

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)


	Three months ended March 31
(in thousands)		2024		2023
Net income for common stock		$	42,122	$	54,721
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of taxes of $(4,975) and $6,079, respectively		(13,589)		16,605

Amortization of unrealized holding losses on held-to-maturity securities, net of taxes of $1,129 and $1,346, respectively		3,086		3,677
Derivatives qualifying as cash flow hedges:
Unrealized interest rate hedging gains (losses) arising during the period, net of taxes of $256 and $65, respectively		740		186
Reclassification adjustment to net income, net of taxes of $(16) and $(17), respectively		(48)		(48)
Retirement benefit plans:
Adjustment for amortization of prior service credit and net gains recognized during the period in net periodic benefit cost, net of taxes of $(154) and $(122), respectively		(449)		(357)
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $159 and $147, respectively		459		425
Other comprehensive income (loss), net of taxes		(9,801)		20,488
Comprehensive income attributable to Hawaiian Electric Industries, Inc.		$	32,321	$	75,209

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)


(dollars in thousands)	March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	485,192	$	679,546
Restricted cash	17,531		15,028
Accounts receivable and unbilled revenues, net	469,298		575,176
Available-for-sale investment securities, at fair value	1,091,889		1,136,439
Held-to-maturity investment securities, at amortized cost	1,191,074		1,201,314
Stock in Federal Home Loan Bank, at cost	32,489		14,728
Loans held for investment, net	6,045,665		6,106,438
Loans held for sale, at lower of cost or fair value	2,923		15,168
Property, plant and equipment, net of accumulated depreciation of $3,374,016 and $3,317,759 at March 31, 2024 and December 31, 2023, respectively	6,183,503		6,150,126
Operating lease right-of-use assets	91,182		94,905

Regulatory assets	315,067		294,804
Other	915,205		877,959
Goodwill	82,190		82,190
Total assets	$	16,923,208	$	17,243,821
Liabilities and shareholders’ equity
Liabilities
Accounts payable	$	248,806	$	247,462
Interest and dividends payable	61,452		51,206
Deposit liabilities	8,005,064		8,145,778

Other bank borrowings	593,000		750,000
Long-term debt, net—other than bank	2,837,875		2,842,429
Deferred income taxes	299,012		297,954
Operating lease liabilities	99,611		103,900
Finance lease liabilities	350,290		339,040
Regulatory liabilities	1,159,811		1,150,690

Defined benefit pension and other postretirement benefit plans liability	84,554		82,879
Other	772,060		853,349
Total liabilities	14,511,535		14,864,687
Preferred stock of subsidiaries - not subject to mandatory redemption	34,293		34,293
Commitments and contingencies (Notes 2, 4 and 5)
Shareholders’ equity
Preferred stock, no par value, authorized 10,000,000 shares; issued: none	—		—
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 110,302,667 shares and 110,151,798 shares at March 31, 2024 and December 31, 2023, respectively	1,707,689		1,707,471
Retained earnings	968,842		926,720
Accumulated other comprehensive loss, net of tax benefits	(299,151)		(289,350)
Total shareholders’ equity	2,377,380		2,344,841
Total liabilities and shareholders’ equity	$	16,923,208	$	17,243,821

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited)


	Common stock			Retained		Accumulated other comprehensive
(in thousands)	Shares	Amount		Earnings		income (loss)		Total
Balance, December 31, 2023	110,152	$	1,707,471	$	926,720	$	(289,350)	$	2,344,841
Net income for common stock	—	—		42,122		—		42,122
Other comprehensive loss, net of tax benefits	—	—		—		(9,801)		(9,801)
Share-based expenses and other, net	151	218		—		—		218

Balance, March 31, 2024	110,303	$	1,707,689	$	968,842	$	(299,151)	$	2,377,380











Balance, December 31, 2022	109,471	$	1,692,697	$	845,830	$	(336,028)	$	2,202,499
Net income for common stock	—	—		54,721		—		54,721
Other comprehensive income, net of taxes	—	—		—		20,488		20,488
Share-based expenses and other, net	101	(307)		—		—		(307)
Common stock dividends (36¢ per share)	—	—		(39,446)		—		(39,446)
Balance, March 31, 2023	109,572	$	1,692,390	$	861,105	$	(315,540)	$	2,237,955

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


	Three months ended March 31
(in thousands)	2024		2023
Cash flows from operating activities
Net income	$	42,595	$	55,194
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	68,757		66,508
Other amortization	12,093		10,362
Provision for credit losses	(2,159)		1,175
Loans originated, held for sale	(25,318)		(5,450)
Proceeds from sale of loans, held for sale	26,450		5,662

Gain on sale of loans, net	(425)		(130)
Deferred income tax expense (benefit)	1,826		(1,076)
Share-based compensation expense	1,288		2,031
Allowance for equity funds used during construction	(3,640)		(3,301)
Other	2,091		(988)
Changes in assets and liabilities
Decrease in accounts receivable and unbilled revenues, net	138,369		82,423
Decrease (increase) in fuel oil stock	(14,025)		33,429
Increase in materials and supplies	(1,329)		(4,548)
Increase in regulatory assets	(17,178)		(8,898)
Increase in regulatory liabilities	2,909		11,551
Increase in accounts, interest and dividends payable	8,462		24,748
Change in prepaid and accrued income taxes, tax credits and utility revenue taxes	(11,628)		(47,305)
Decrease in defined benefit pension and other postretirement benefit plans liability	(930)		(1,950)
Change in other assets and liabilities	(103,589)		(38,485)
Net cash provided by operating activities	124,619		180,952
Cash flows from investing activities

Principal repayments on available-for-sale investment securities	25,615		32,484


Proceeds from repayments or maturities of held-to-maturity investment securities	13,752		17,938
Purchase of stock from Federal Home Loan Bank	(21,856)		(35,960)
Redemption of stock from Federal Home Loan Bank	4,095		52,520
Net decrease (increase) in loans held for investment	42,853		(68,871)

Proceeds from sale of commercial loans	31,067		—
Purchase of loans held for investment	—		(13,012)
Capital expenditures	(99,550)		(124,297)

Contributions to low income housing investments	—		(418)

Other	(1,568)		2,148
Net cash used in investing activities	(5,592)		(137,468)

(continued)

Hawaiian Electric Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited) (continued)


	Three months ended March 31
(in thousands)	2024		2023
Cash flows from financing activities
Net increase (decrease) in deposit liabilities	(140,714)		60,905
Net decrease in short-term borrowings with original maturities of three months or less	—		(88,666)
Net increase (decrease) in other bank borrowings with original maturities of three months or less	73,000		(564,430)
Proceeds from issuance of short-term debt	—		65,000

Proceeds from issuance of other bank borrowings	320,000		550,000
Repayment of other bank borrowings	(550,000)		—
Proceeds from issuance of long-term debt	4,673		150,000
Repayment of long-term debt	(8,268)		(53,878)
Withheld shares for employee taxes on vested share-based compensation	(1,070)		(2,338)

Common stock dividends	—		(39,446)
Preferred stock dividends of subsidiaries	(473)		(473)
Other	(8,026)		(5,535)
Net cash provided by (used in) financing activities	(310,878)		71,139
Net increase (decrease) in cash, cash equivalents and restricted cash	(191,851)		114,623
Cash, cash equivalents and restricted cash, beginning of period	694,574		204,927
Cash, cash equivalents and restricted cash, end of period	502,723		319,550
Less: Restricted cash	(17,531)		(4,216)
Cash and cash equivalents, end of period	$	485,192	$	315,334

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)


	Three months ended March 31
(in thousands)		2024		2023
Revenues		$	788,578	$	830,361
Expenses
Fuel oil		284,296		334,097
Purchased power		159,817		152,761
Other operation and maintenance		143,890		128,316
Depreciation		62,812		60,927
Taxes, other than income taxes		74,408		78,385
Total expenses		725,223		754,486
Operating income		63,355		75,875
Allowance for equity funds used during construction		3,640		3,301
Retirement defined benefits credit—other than service costs		1,072		1,047
Interest expense and other charges, net		(19,985)		(20,246)
Allowance for borrowed funds used during construction		1,386		1,131
Interest income		1,432		—
Income before income taxes		50,900		61,108
Income taxes		11,180		13,600
Net income		39,720		47,508
Preferred stock dividends of subsidiaries		229		229
Net income attributable to Hawaiian Electric		39,491		47,279
Preferred stock dividends of Hawaiian Electric		270		270
Net income for common stock		$	39,221	$	47,009

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

HEI owns all of the common stock of Hawaiian Electric. Therefore, per share data with respect to shares of common stock of Hawaiian Electric are not meaningful.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)


	Three months ended March 31
(in thousands)		2024		2023
Net income for common stock		$	39,221	$	47,009
Other comprehensive loss, net of taxes:



Retirement benefit plans:
Adjustment for amortization of prior service credit and net gains recognized during the period in net periodic benefit cost, net of taxes of $(176) and $(163), respectively		(508)		(470)
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $159 and $147, respectively		459		425
Other comprehensive loss, net of taxes		(49)		(45)
Comprehensive income attributable to Hawaiian Electric Company, Inc.		$	39,172	$	46,964

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)


(dollars in thousands, except par value)	March 31, 2024		December 31, 2023
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	52,019	$	52,098
Plant and equipment	8,302,449		8,232,810
Right-of-use assets - finance lease	354,401		342,174
Less accumulated depreciation	(3,249,089)		(3,197,514)
Construction in progress	330,743		320,223
Utility property, plant and equipment, net	5,790,523		5,749,791
Nonutility property, plant and equipment, less accumulated depreciation of $41 and $40 as of March 31, 2024 and December 31, 2023, respectively	6,941		6,942
Total property, plant and equipment, net	5,797,464		5,756,733
Current assets
Cash and cash equivalents	129,754		106,077
Restricted cash	2,000		2,000
Customer accounts receivable, net	209,999		244,309
Accrued unbilled revenues, net	171,455		185,644
Other accounts receivable, net	38,025		111,519
Fuel oil stock, at average cost	161,433		148,237
Materials and supplies, at average cost	115,719		114,433
Prepayments and other	72,025		58,491
Regulatory assets	82,503		68,453
Total current assets	982,913		1,039,163
Other long-term assets
Operating lease right-of-use assets	68,217		71,877
Regulatory assets	232,564		226,351
Other	193,704		189,430
Total other long-term assets	494,485		487,658
Total assets	$	7,274,862	$	7,283,554

(continued)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited) (continued)


(dollars in thousands, except par value)	March 31, 2024		December 31, 2023
Capitalization and liabilities
Capitalization
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 17,854,278 shares at March 31, 2024 and December 31, 2023)	$	119,048	$	119,048
Premium on capital stock	810,955		810,955
Retained earnings	1,502,479		1,476,258
Accumulated other comprehensive income, net of taxes-retirement benefit plans	2,800		2,849
Common stock equity	2,435,282		2,409,110
Cumulative preferred stock — not subject to mandatory redemption	34,293		34,293
Long-term debt, net	1,886,028		1,934,277
Total capitalization	4,355,603		4,377,680
Commitments and contingencies (Notes 2 and 4)
Current liabilities
Current portion of operating lease liabilities	16,234		16,617
Current portion of long-term debt, net	46,931		—


Accounts payable	198,636		191,040
Interest and preferred dividends payable	43,926		22,882
Taxes accrued, including revenue taxes	282,446		291,942
Regulatory liabilities	26,149		36,559
Other	108,006		171,436
Total current liabilities	722,328		730,476
Deferred credits and other liabilities
Operating lease liabilities	58,399		62,098
Finance lease liabilities	341,141		330,978
Deferred income taxes	403,761		399,001
Regulatory liabilities	1,133,662		1,114,131
Unamortized tax credits	81,771		84,312
Defined benefit pension liability	62,331		60,671
Other	115,866		124,207
Total deferred credits and other liabilities	2,196,931		2,175,398
Total capitalization and liabilities	$	7,274,862	$	7,283,554

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited)


	Common stock			Premium on capital		Retained		Accumulated other comprehensive
(in thousands)	Shares	Amount		stock		earnings		income		Total
Balance, December 31, 2023	17,854	$	119,048	$	810,955	$	1,476,258	$	2,849	$	2,409,110
Net income for common stock	—	—		—		39,221		—		39,221
Other comprehensive loss, net of taxes	—	—		—		—		(49)		(49)
Common stock dividends	—	—		—		(13,000)		—		(13,000)

Balance, March 31, 2024	17,854	$	119,048	$	810,955	$	1,502,479	$	2,800	$	2,435,282








Balance, December 31, 2022	17,854	$	119,048	$	810,955	$	1,411,306	$	2,861	$	2,344,170
Net income for common stock	—	—		—		47,009		—		47,009
Other comprehensive loss, net of taxes	—	—		—		—		(45)		(45)
Common stock dividends	—	—		—		(32,250)		—		(32,250)

Balance, March 31, 2023	17,854	$	119,048	$	810,955	$	1,426,065	$	2,816	$	2,358,884

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


	Three months ended March 31
(in thousands)	2024		2023
Cash flows from operating activities
Net income	$	39,720	$	47,508
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	62,812		60,927
Other amortization	7,566		6,530
Deferred income tax expense (benefit)	1,943		(3,659)

State refundable credit	(2,941)		(2,874)
Bad debt expense	1,526		1,539
Allowance for equity funds used during construction	(3,640)		(3,301)

Other	15		350
Changes in assets and liabilities
Decrease in accounts receivable	115,359		60,939
Decrease in accrued unbilled revenues	14,216		22,659
Decrease (increase) in fuel oil stock	(13,196)		33,947
Increase in materials and supplies	(1,286)		(4,525)
Increase in regulatory assets	(17,178)		(8,898)
Increase in regulatory liabilities	2,909		11,551
Increase in accounts payable	28,811		6,588
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(11,230)		(45,392)
Decrease in defined benefit pension and other postretirement benefit plans liability	(287)		(1,837)
Change in other assets and liabilities	(97,918)		(12,697)
Net cash provided by operating activities	127,201		169,355
Cash flows from investing activities
Capital expenditures	(98,032)		(122,139)
Other	(1,641)		1,545
Net cash used in investing activities	(99,673)		(120,594)
Cash flows from financing activities
Common stock dividends	—		(32,250)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(499)		(499)


Proceeds from issuance of long-term debt	—		150,000

Net decrease in short-term borrowings from non-affiliates and affiliates with original maturities of three months or less	—		(87,967)
Payments of obligations under finance leases	(1,800)		(575)
Other	(1,552)		(690)
Net cash provided by (used in) financing activities	(3,851)		28,019
Net increase in cash, cash equivalents and restricted cash	23,677		76,780
Cash, cash equivalents and restricted cash, beginning of period	108,077		39,242
Cash, cash equivalents and restricted cash, end of period	131,754		116,022
Less: Restricted cash	(2,000)		—
Cash and cash equivalents, end of period	$	129,754	$	116,022

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2023 Form 10-K.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 · Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to SEC Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In preparing the unaudited condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses for the period. Actual results could differ significantly from those estimates. The accompanying unaudited condensed consolidated financial statements and the following notes should be read in conjunction with the audited consolidated financial statements and the notes thereto in HEI’s and Hawaiian Electric’s Form 10-K for the year ended December 31, 2023.

In the opinion of HEI’s and Hawaiian Electric’s management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments required by GAAP to fairly state consolidated HEI’s and Hawaiian Electric’s financial positions as of March 31, 2024 and December 31, 2023 and the results of their operations and cash flows for the three months ended March 31, 2024 and 2023. All such adjustments are of a normal recurring nature, unless otherwise disclosed below or in other referenced material. Results of operations for interim periods are not necessarily indicative of results for the full year.

Recent accounting pronouncements.

Segment Reporting. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through enhanced disclosure requirements of significant segment expenses. These amendments are effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. These amendments apply on a retrospective basis. The Company is currently evaluating the impact of this amendment on the Company’s consolidated financial statements.

Income Taxes. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. The amendments are effective for annual periods beginning after December 15, 2024. These amendments apply on a prospective basis with a retrospective option. Early adoption is permitted. The Company is currently evaluating the impact of this amendment on the Company’s consolidated financial statements.

Climate-related disclosures. In March 2024, the Securities and Exchange Commission (SEC) issued final climate-related disclosure rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (climate disclosure rules). The rules will require annual disclosure of material greenhouse gas emissions as well as disclosure of governance, risk management and strategy related to material climate-related risks. In addition, the rules require (i) financial statement impacts of severe weather events and other natural conditions; (ii) a roll forward of carbon offset and renewable energy credit balances if material to the Company’s plan to achieve climate-related targets or goals; and (iii) material impacts on estimates and assumptions in the financial statements. The disclosure requirements will begin phasing in for annual periods beginning with calendar year 2025. The Company is currently evaluating the final rule to determine its impact on the Company’s consolidated financial statements. In April 2024, the SEC voluntarily stayed implementation of its climate disclosure rules pending completion of judicial review by the Court of Appeals for the Eighth Circuit.

Note 2 · Maui windstorm and wildfires

On August 8, 2023, a number of brush fires in the West Maui (Lahaina) and Upcountry Maui areas caused widespread property damage, including damage to property of the Utilities, and 101 confirmed fatalities in Lahaina at this time (the Maui windstorm and wildfires). The Maui windstorm and wildfires were fueled by extreme winds and drought-like conditions in those parts of Maui.

The circumstances surrounding the Maui windstorm and wildfires are currently the subject of several investigations.

Restoration costs and recoveries. The Utilities are continuing restoration work to rebuild portions of the electric system in Lahaina to ensure safe and reliable power to all West Maui customers. Ongoing restoration efforts include the rebuilding of transmission and distribution lines along former routes in the Lahaina area with the installation of new interim steel poles and electrical equipment. To date, power has been restored to all customers that can have power restored in Lahaina and the rest of West Maui.

On December 27, 2023, the Public Utilities Commission of the State of Hawaii (PUC) issued an order authorizing deferred accounting treatment for the Utilities’ incremental non-labor expenses related to the Maui windstorm and wildfires. The

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

deferred accounting treatment applies to certain non-labor expenses incurred from August 8, 2023 through December 31, 2024 that are not already a part of the base rates. The approval pertains only to deferred cost treatment; any cost recovery of deferred costs will be the subject of a separate application(s). As of March 31, 2024, the Utilities have deferred $22.6 million of certain incremental costs related to the Maui windstorm and wildfires to a regulatory asset.

While the Utilities plan to seek recovery of damage to covered electrical infrastructure under their property insurance programs, the timing and amount of any insurance recoveries are not determinable at this time and as such, an insurance receivable has not been recorded as of the date of this filing. The Company’s property insurance has a total policy limit of $500 million with a $1 million retention for damages related to Utility-owned non-generating assets, including overhead transmission and distribution assets within 1,000 feet of such assets. The Utilities believe capital expenditures related to restoration that are not covered by insurance will be managed under their current regulatory mechanisms, the recovery of which would be subject to PUC approval.

ASB’s Lahaina branch, including most of its contents and automated teller machine, was destroyed in the fire. The Bank leased the property of its Lahaina location.

Third-party claims and other proceedings.

Tort-related legal claims. As of May 9, 2024, HEI and the Utilities have each been named in approximately 400 lawsuits related to the Maui windstorm and wildfires. These civil and class action lawsuits have been filed in the Maui and Oahu Circuit Courts against HEI, the Utilities, and other defendants, including the County of Maui, the State of Hawaii and related state entities, private landowners and developers, telecommunications companies, and oil companies (collectively “tort-related legal claims”). One class action is pending in federal court, while the remainder of the cases are pending in Maui and Oahu Circuit Courts. Most of these lawsuits allege that the defendants were responsible for, and/or negligent in failing to prevent or respond to the wildfires that led to the property destruction and loss of life. Other claims include, among other things, personal injury, wrongful death, emotional distress and inverse condemnation. One lawsuit asserting similar theories and claims was filed by the County of Maui against HEI and the Utilities, and three other lawsuits were filed by approximately 160 subrogation insurers against HEI, the Utilities, a private landowner, and telecommunications companies. One lawsuit that names HEI, the Utilities, and other defendants also alleges that oil companies contributed to the burning of fossil fuels and caused climate change that led to the Lahaina fire. Additional lawsuits may be filed against the Company and other defendants in the future. The plaintiffs seek to recover damages and other costs, including punitive damages.

On March 22, 2024, the Maui Circuit Court set trial dates in six cases concerning the fires in the Upcountry Maui areas for September 9, 2024. On May 3, 2024, the Maui Circuit Court set trial dates in four cases concerning the Lahaina fire for November 18, 2024. Mediation discussions have commenced. No trial dates have been set in cases pending in the Oahu Circuit Court or in federal court.

While the investigations into the circumstances surrounding the Maui windstorm and wildfires are ongoing, various unaffiliated third parties have published estimates of the total economic damage generally ranging from $3.8 billion to $6 billion. These estimates have not been validated by the Company, and they represent gross numbers that do not take into account causation or liability nor attempt to allocate responsibility among the various defendants. As such, these estimates are not intended to provide a range of a reasonably possible loss under ASC Topic 450-20, “Loss Contingencies” attributable to the Company arising from the Maui windstorm and wildfires. In addition, on November 6, 2023, the Hawaii Insurance Division of the State of Hawaii Department of Commerce and Consumer Affairs released preliminary data on Maui windstorm and wildfires claims, and the Hawaii Insurance Division has subsequently provided updated data to include estimated losses for commercial property and business interruption. Through March 31, 2024, the data collected from over 200 insurers indicated estimated total insured losses of $3.1 billion for residential, commercial, personal, and other property, and business interruption. The estimated total losses for insured claims related to residential property includes homeowners insurance, dwelling-fire landlord, condominium unit owner, renters insurance, and other residential property. The estimated total losses do not account for uninsured or underinsured property losses, interest, attorneys’ fees, fire suppression and clean-up costs, evacuation costs, personal injury or wrongful death damages, medical expenses or other costs, such as potential punitive damages, fines or penalties. It is uncertain whether the insured claims reported to the Hawaii Insurance Division are complete, and together with property damage claims unaccounted for, as mentioned above, the total amount of property damage claims could be materially higher than the amount reported by the Hawaii Insurance Division. The Hawaii Insurance Division did not state whether it intends to provide updated information in the future.

The Company is actively working with the State of Hawaii and others in the community on solutions for Maui’s recovery, including the compensation of those who suffered losses in the Maui windstorm and wildfires and who are currently named as plaintiffs in the various cases. On November 8, 2023, Hawaii Governor Josh Green announced the One ‘Ohana Initiative (the One ‘Ohana Initiative) as a collective path forward to recovery from the Maui windstorm and wildfires. The One ‘Ohana Initiative is a new humanitarian aid fund of $175 million, with the objective to compensate, in an expedited manner, those who

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

have lost loved ones and those who have suffered severe injuries in the Maui windstorm and wildfires. The One ‘Ohana Initiative provides an alternative to a lengthy and expensive legal process. Beneficiaries who have lost loved ones are anticipated to receive payments of $1.5 million per decedent, and those who suffered severe injuries are expected to share in a specially allocated pool of compensation. In exchange for receiving such a payment, beneficiaries will be required to waive their ability to pursue legal claims for wrongful death and severe injuries. Hawaiian Electric fully supports this humanitarian initiative and has contributed $75 million. The Governor announced that other parties, including the State of Hawaii, the County of Maui, and Kamehameha Schools have all agreed to contribute to the fund. Hawaiian Electric’s contribution to the Initiative was less than half of the total, and Hawaiian Electric's insurance carriers funded its share of the contributions to the fund. Hawaiian Electric’s contribution is reflective of its commitment to join with community partners to provide solutions to promote Maui’s recovery. Hawaiian Electric’s commitment to contribute to the One ‘Ohana Initiative is not an admission of guilt or reflection of fault or liability related to the wildfires. Under the One ‘Ohana Initiative, all claimants (except families of missing persons) must submit a completed registration form and registrants who meet the Fund’s eligibility requirements will then be required to complete and submit a claim form. As of May 8, 2024, 12 claim forms and 43 registration forms have been received that relate to death claims and two claim forms and 15 registration forms have been received that relate to physical injury claims.

The One ‘Ohana Initiative contemplates additional phases, including a process to potentially resolve remaining tort-related legal claims, as well as seeking legislation to reduce wildfire risk and provide financial support to help ensure a strong energy future for all of Hawaii. While the Utilities plan to participate in a process with the State and community partners to explore solutions to support Maui’s recovery and compensate victims for damages, as noted above, the Utilities are unable to reasonably estimate any additional potential loss, or range of loss. The Company believes it is reasonably possible that a loss will be incurred in excess of the $75 million contribution to the One ‘Ohana Initiative and is unable to predict the ultimate outcome or reasonably estimate a range of possible loss from these actions at this time.

The Company intends to vigorously defend against the litigation if necessary. There is no assurance that the Company will be successful in the defense of the litigation or that insurance will be available or adequate to fund any potential settlements, judgments, or costs associated with the litigation or contributions to any potential additional phases of the One ‘Ohana Initiative. If additional liabilities were to be incurred, the loss could be material to the Company’s results of operations, financial positions and cash flows. If any such losses were to be sufficiently high, the Company may not have liquidity or the ability to access liquidity at levels necessary to satisfy such losses.

Securities class action and shareholder lawsuits. On August 24, 2023, a putative securities class action captioned Bhangal v. Hawaiian Electric Industries, Inc., et al., No.: 3:23-cv-04332-JSC was filed in the United States District Court for the Northern District of California. The lawsuit alleges violations of the Securities Exchange Act of 1934 (the Exchange Act) and Rule 10b-5 promulgated thereunder against HEI and certain of its current and former officers, and Section 20(a) of the Exchange Act against certain of HEI’s current and former officers. Plaintiff broadly alleges that HEI and certain of its current and former officers made materially false and misleading statements or omissions regarding HEI’s wildfire prevention and safety protocols and related matters. Plaintiff seeks unspecified monetary damages. On December 7, 2023, the court appointed Daniel Warren as lead plaintiff and Pomerantz LLP as lead plaintiff’s counsel and on January 9, 2024, the court set a briefing schedule requiring defendants to respond to the amended complaint no later than May 7, 2024. On March 8, 2024, the lead plaintiff filed an amended complaint. The Company has filed a motion to dismiss that complaint and intends to vigorously defend against this action. There is no assurance that the Company will be successful in the defense of the litigation or that insurance will be available or adequate to fund any potential settlement or judgment or the litigation costs of the action. The Company does not believe that a loss is probable and any potential loss or range of loss is not reasonably estimable.

On September 11, 2023, a putative shareholder derivative action captioned Rice v. Connors, et al., No. 1CCV-23-0001181 was filed in the Circuit Court of the First Circuit, State of Hawaii. On December 6, 2023, the case was removed to the United States District Court for the District of Hawaii and captioned Rice v. Connors, et al., No. 1:23-cv-00577-JAO-BMK. On March 14, 2024, the United States District Court remanded the case to the Circuit Court of the First Circuit, State of Hawaii. This action is purportedly brought by a shareholder on behalf of nominal defendants HEI and Hawaiian Electric against certain current and former officers and directors of HEI and Hawaiian Electric. Plaintiff asserts Hawaii state law breach of fiduciary duty, abuse of control, corporate waste and unjust enrichment claims allegedly arising in connection with the Maui windstorm and wildfires that occurred in August 2023 and certain of HEI’s prior public disclosures. Plaintiff seeks, on behalf of HEI and Hawaiian Electric, compensatory and punitive damages, restitution and equitable relief in the form of changes to HEI’s corporate governance, policies and culture. Pursuant to a schedule agreed upon by the parties and ordered by the United States District Court, defendants are not required to respond to plaintiff’s amended complaint until after the pending motions to remand in the tort litigation are resolved. While the Company has obligations to indemnify and/or advance the defendants’ legal fees and costs in connection with this lawsuit, any monetary recovery in the derivative litigation should accrue to the Company. The Company is unable to predict the ultimate outcome and is unable to make a reasonable estimate of the amount or range of loss, if any, that could result from any unfavorable outcome.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Three putative shareholder derivative actions were filed in the United States District Court for the Northern District of California between December 26, 2023 and February 8, 2024, including:

Kallaus v. Johns, et al., No. 3:23-cv-06627 (the “Kallaus Action”), Cole v. Johns, et al., No. 3:24-cv-00598 (the “Cole Action”), and Tai v. Seu, et al., No. 3:24-cv-01198 (the “Tai Action”). On March 19, 2024, upon stipulation by the parties, the court consolidated the Kallaus Action, the Cole Action, and the Tai Action under the caption In Re Hawaiian Electric Industries, Inc. and Hawaiian Electric Company, Inc. Derivative Litigation, No. 3:23-cv-06627 (the “Consolidated Derivative Actions”). The Consolidated Derivative Actions are purportedly brought by shareholders of HEI on behalf of nominal defendants HEI and Hawaiian Electric against certain current and former officers and directors of HEI and Hawaiian Electric. Plaintiffs purport to assert both Hawaii state law and federal securities law claims. Plaintiffs assert state law breach of fiduciary duty, corporate waste, and unjust enrichment claims purportedly arising from the Maui windstorm and wildfires that occurred in August 2023 and certain public disclosures. Plaintiffs also assert claims for contribution under Sections 10(b) and 21D of the Exchange Act against certain of HEI’s current and former directors and officers, and claims for violation of Section 14(a) of the Exchange Act against certain of HEI’s current and former directors. Plaintiffs generally allege that HEI and certain of its current and former officers made materially false and misleading statements or omissions regarding HEI’s wildfire prevention and safety protocols and related matters. Plaintiffs also broadly claim HEI proxy statements were materially false and misleading for similar reasons. Plaintiffs seek, on behalf of HEI and Hawaiian Electric, unspecified monetary and punitive damages, and equitable relief in the form of changes to HEI’s corporate governance and internal procedures. While the Company has certain obligations to indemnify and/or advance the defendants’ legal fees and costs in connection with this lawsuit, any monetary recovery in the Consolidated Derivative Actions should accrue to the Company. The Company is unable to predict the ultimate outcome and is unable to make a reasonable estimate of the amount or range of loss, if any, that could result from any unfavorable outcome.

On April 8, 2024, a putative shareholder derivative action captioned Assad v. Seu, et al., No. 1:24-cv-00164 was filed in the United States District Court for the District of Hawaii. This action is purportedly brought by a shareholder on behalf of nominal defendants HEI and against certain current and former officers and directors of HEI and Hawaiian Electric. Plaintiff purports to assert Hawaii state law claims for breach of fiduciary duty, corporate waste, and unjust enrichment allegedly arising from the Maui windstorm and wildfires that occurred in August 2023 and certain public disclosures. Plaintiff generally alleges that HEI and certain of its current and former officers made materially false and misleading statements or omissions regarding HEI’s wildfire prevention and safety protocols and related matters. Plaintiff seeks, on behalf of HEI, compensatory damages, restitution and equitable relief in the form of changes to HEI’s corporate governance, policies and culture. While the Company has obligations to indemnify and/or advance the defendants’ legal fees and costs in connection with this lawsuit, any monetary recovery in the derivative litigation should accrue to the Company. The Company is unable to predict the ultimate outcome and is unable to make a reasonable estimate of the amount or range of loss, if any, that could result from any unfavorable outcome.

Maui windstorm and wildfires costs. Legal costs in connection with the litigation and loss contingencies are expensed as incurred. The Company has $165 million of excess liability insurance for third party claims, including claims related to wildfires, with a retention of $0.3 million, and $145 million directors and officers liability insurance to cover claims related to the shareholder and derivative lawsuits, with a retention of $1.0 million. As of March 31, 2024, the Company’s and Utilities’ insurance receivable totaled $28.7 million and $22.1 million, respectively, under the policies.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

See table below for the incremental expenses related to the Maui windstorm and wildfires.


	Year ended December 31, 2023				Three months ended March 31, 2024
(in thousands)	Electric utility		HEI Consolidated		Electric utility		HEI Consolidated
Maui windstorm and wildfires related expenses:

Legal expenses	$	24,737	$	34,876	$	10,735	$	15,027


One ‘Ohana Initiative contribution	75,000		75,000		—		—
Other expense	15,071		28,507		13,832		15,091

Total Maui windstorm and wildfires related expenses	114,808		138,383		24,567		30,118
Insurance recoveries	(98,613)		(104,580)		(9,969)		(12,577)
Deferral treatment approved by the PUC1	(14,692)		(14,692)		(7,898)		(7,898)
Total Maui windstorm and wildfires related expenses, net of insurance recoveries and approved deferral treatment	$	1,503	$	19,111	$	6,700	$	9,643

1 Related to the PUC’s order, received on December 27, 2023, approving deferred accounting treatment for the Utilities’ incremental non-labor expenses related to the August 2023 Maui windstorm and wildfires. Amounts were reclassified to a regulatory asset.

On May 4, 2024, HEI and the Utilities reached an agreement to settle indemnification claims asserted by the State of Hawaii without any admission of fault or responsibility. Under the terms of the agreement, HEI and the Utilities agreed to contribute up to $18.4 million through the end of 2024 related to the costs of the professional advisors engaged by the State of Hawaii to advise on a variety of matters related to the Maui windstorm and wildfires. Under certain circumstances, HEI and the Utilities have the unilateral right to terminate the agreement and stop paying the costs for future periods. As of March 31, 2024, a total of $6.7 million of such costs were accrued and reflected in Maui windstorm and wildfires related expenses-Other expense in the table above. HEI and the Utilities are seeking insurance recoveries for such costs; however, the timing and amount of any insurance recoveries are not determinable at this time.

In addition, the Utilities incurred $5.6 million of total capital costs related to the Maui windstorm and wildfires for the three months ended March 31, 2024.

Note 3 · Segment financial information


(in thousands)	Electric utility		Bank		Other		Total









Three months ended March 31, 2024
Revenues	$	788,578	$	105,144	$	3,436	$	897,158


Income (loss) before income taxes	$	50,900	$	25,813	$	(22,444)	$	54,269
Income taxes (benefit)	11,180		4,879		(4,385)		11,674
Net income (loss)	39,720		20,934		(18,059)		42,595
Preferred stock dividends of subsidiaries	499		—		(26)		473
Net income (loss) for common stock	$	39,221	$	20,934	$	(18,033)	$	42,122
Total assets (at March 31, 2024)	$	7,274,862	$	9,360,229	$	288,117	$	16,923,208









Three months ended March 31, 2023


Revenues	$	830,361	$	93,857	$	4,019	$	928,237
Income (loss) before income taxes	$	61,108	$	23,707	$	(14,511)	$	70,304
Income taxes (benefit)	13,600		5,145		(3,635)		15,110
Net income (loss)	47,508		18,562		(10,876)		55,194
Preferred stock dividends of subsidiaries	499		—		(26)		473
Net income (loss) for common stock	$	47,009	$	18,562	$	(10,850)	$	54,721
Total assets (at December 31, 2023)	$	7,283,554	$	9,673,192	$	287,075	$	17,243,821

Intercompany electricity sales of the Utilities to ASB and “other” segments are not eliminated because those segments would need to purchase electricity from another source if it were not provided by the Utilities and the profit on such sales is nominal.

Sales from Hamakua Energy, LLC (Hamakua Energy) to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 4 · Electric utility segment

Unconsolidated variable interest entities.

Power purchase agreements. As of March 31, 2024, the Utilities had four power purchase agreements (PPAs) for firm capacity and other PPAs with independent power producers (IPPs) and Schedule Q providers (i.e., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which are currently required to be consolidated as VIEs.

Pursuant to the current accounting standards for VIEs, the Utilities are deemed to have a variable interest in Kalaeloa Partners, L.P. (Kalaeloa) and Hamakua Energy by reason of the provisions of the PPA that the Utilities have with the two IPPs. However, management has concluded that the Utilities are not the primary beneficiary of Kalaeloa and Hamakua Energy because the Utilities do not have the power to direct the activities that most significantly impact the two IPPs’ economic performance nor the obligation to absorb their expected losses, if any, that could potentially be significant to the IPPs. Thus, the Utilities have not consolidated Kalaeloa and Hamakua Energy in its condensed consolidated financial statements. However, Hamakua Energy is an indirect subsidiary of Pacific Current and is consolidated in HEI’s condensed consolidated financial statements.

For the other PPAs with IPPs, the Utilities have concluded that the consolidation of the IPPs was not required because either the Utilities do not have variable interests in the IPPs due to the absence of an obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the IPP was considered a “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. The consolidation of any significant IPP could have a material effect on the unaudited condensed consolidated financial statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. If the Utilities determine they are required to consolidate the financial statements of such an IPP and the consolidation has a material effect, the Utilities would retrospectively apply accounting standards for VIEs to the IPP.

Commitments and contingencies.

Contingencies. The Utilities are subject in the normal course of business to legal, regulatory and environmental proceedings. Excluding the potential liabilities from the Maui windstorm and wildfires, management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, the Utilities cannot rule out the possibility that such outcomes could have a material effect on the results of operations or liquidity for a particular reporting period in the future. The Utilities record loss contingencies when the outcome of such proceedings is probable and when the amount of the loss is reasonably estimable. The Utilities also evaluate, on a continuous basis, whether developments in such proceedings could cause these assessments or estimates to change. Assessment regarding future events is required when evaluating whether a loss is probable or reasonably possible, and as to whether such loss or a range of such loss is estimable. Management is often unable to estimate a reasonably possible loss, or a range of loss, particularly in cases in which: (i) the damages sought are indeterminate or the basis for the damages claimed is not clear; (ii) proceedings are in early stages; (iii) discovery is not complete; (iv) the matters involve novel or unsettled legal theories; (v) significant facts are in dispute; (vi) a large number of parties are represented (including circumstances in which it is uncertain how liability, if any, would be shared among multiple defendants); (vii) a lower court or administrative agency’s decision or ruling has been appealed; and/or (vii) a wide range of potential outcomes exist. In such cases, there may be considerable uncertainty regarding the timing or ultimate resolution, including any possible loss, fine, penalty, or business impact.

August 2023 Maui windstorm and wildfires. See Note 2.

Hu Honua Bioenergy, LLC (Hu Honua). In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. Under the terms of the PPA, the Hu Honua plant was scheduled to be in service in 2016. However, Hu Honua encountered construction and litigation delays, which resulted in the termination of the original PPA. Following the termination, Hu Honua filed a lawsuit in the U.S. District Court for the District of Hawaii. The parties reached a settlement that was conditioned on the PUC’s timely, non-appealable final approval of an amended and restated PPA dated May 9, 2017. On May 23, 2022, following a contested case hearing, the PUC issued a decision and order denying the amended and restated PPA, based on, among other things, findings that: (1) the project will result in significant greenhouse gas (GHG) emissions, (2) Hu Honua’s proposed carbon commitment to sequester more GHG emissions than produced by the project are speculative and unsupported, (3) the amended and restated PPA is likely to result in high costs to customers through its relatively high cost of electricity and through potential displacement of other, lower cost, renewable resources, and (4) based on the foregoing, approving the amended and restated PPA is not prudent or in the public interest. On June 2, 2022, Hawaii Electric Light and Hu Honua filed their separate motions for reconsideration, which were denied by the PUC on June 24, 2022. On June 29, 2022, Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s May 23, 2022 decision and

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

order denying the amended and restated PPA. On March 13, 2023, the Hawaii Supreme Court affirmed the PUC’s decision denying the amended and restated PPA between Hu Honua and Hawaii Electric Light and entered its judgment on appeal on April 12, 2023. On June 7, 2023, Hu Honua filed a status report with the U.S. District Court for the District of Hawaii, stating, among other things, that because settlement of the underlying federal lawsuit was contingent on timely, non-appealable, final approval of the amended and restated PPA by the PUC, that the Hawaii Supreme Court’s opinion made fulfillment of the condition impossible, and therefore the settlement agreement between the Hawaiian Electric defendants (HEI, Hawaiian Electric, and Hawaii Electric Light) and Hu Honua is null and void and of no further effect. On November 16, 2023, Hu Honua filed its Motion for Leave to File Third Amended and Supplemental Complaint and for Permissive Joinder with the U.S. District Court for the District of Hawaii, asking the court to grant it leave to file a Third Amended and Supplemental Complaint, which would amend its claims and add three new proposed defendants. The hearing on this motion took place on February 14, 2024. The court issued a decision and order on the motion on April 2, 2024, which was consistent with Hawaii Electric Light's position, only allowing amendments that were agreed to and not allowing Hu Honua to add new claims or parties, effectively leaving Hu Honua with its previously-pled breach of contract and antitrust claims. Hu Honua filed its objection to the order on April 16, 2024 and the Hawaiian Electric defendants filed their response to the objection on April 30, 2024.

Molokai New Energy Partners (MNEP). In July 2018, the PUC approved Maui Electric’s PPA with MNEP to purchase solar energy from a photovoltaic (PV) plus battery storage project. The 4.88 MW PV and 3 MW Battery Energy Storage System (BESS) project was to deliver no more than 2.64 MW at any time to the Molokai system. On March 25, 2020, MNEP filed a complaint in the United Stated District Court for the District of Hawaii against Maui Electric claiming breach of contract. On June 3, 2020, Maui Electric provided a Notice of Default and Termination of the PPA to MNEP terminating the PPA with an effective date of July 10, 2020. Thereafter, MNEP filed an amended complaint to include claims relating to the termination and Hawaiian Electric filed its answer to the amended complaint on September 11, 2020, disputing the facts presented by MNEP and all claims within the original and amended complaint. Currently, the discovery phase is ongoing.

Environmental regulation. The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances.

Hawaiian Electric, Hawaii Electric Light and Maui Electric, like other utilities, periodically encounter petroleum or other chemical releases associated with current or previous operations. The Utilities report and take action on these releases when and as required by applicable law and regulations. The Utilities believe the costs of responding to such releases identified to date will not have a material effect, individually or in the aggregate, on Hawaiian Electric’s consolidated results of operations, financial condition or liquidity.

Former Molokai Electric Company generation site. In 1989, Maui Electric acquired Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983 but continued to operate at the Site under a lease until 1985 and left the property in 1987. The Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. In cooperation with the State of Hawaii Department of Health and EPA, Maui Electric further investigated the Site and the adjacent parcel to determine the extent of impacts of polychlorinated biphenyls (PCBs), residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $2.5 million as of March 31, 2024, representing the probable and reasonably estimable undiscounted cost for remediation of the Site and the adjacent parcel based on presently available information; however, final costs of remediation will depend on the cleanup approach implemented.

Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party under CERCLA responsible for the costs of investigation and cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. Hawaiian Electric was also required by the EPA to assess potential sources and extent of PCB contamination onshore at Waiau Power Plant.

As of March 31, 2024, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $9.6 million. The reserve balance represents the probable and reasonably estimable undiscounted cost for the onshore and offshore investigation and remediation. The final remediation costs will depend on the actual onshore and offshore cleanup costs.

Kapolei pipeline. James Campbell Company (JCC) through its wholly owned subsidiary, Aina Nui Corporation discovered petroleum contamination in ground water during construction of a project in Kapolei in late 2022 and incurred approximately $0.8 million in remediation costs. JCC made a joint demand for these costs in June 2023 to the two companies, including Hawaiian Electric, that have pipelines in the area of the contamination. This demand was updated in April 2024 to

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

$1.4 million to incorporate additional costs. It has not been determined whether the nature of the contamination is consistent with what was in the Utilities’ pipelines or is wholly or partially the responsibility of the other pipeline owner and whether the costs were properly incurred. At this time, the parties are engaging in settlement discussions and the Utilities are unable to determine the ultimate outcome or the amount of any possible loss.

Endangered Species Act. The Utilities received a sixty-day notice under the federal Endangered Species Act, from Earthjustice on behalf of the American Bird Conservancy and Conservation Council for Hawaii in early February 2024. The sixty-day notice is the pre-cursor to a citizen’s suit under the Endangered Species Act. The notice alleges that the Utilities are out of compliance with the Act due to alleged impacts on endangered seabirds caused by the Utilities’ powerlines, street lights and facility lights on Maui and Lanai. The Utilities are already in the process of drafting a Habitat Conservation Plan and will be applying for associated state and federal permits. The notice asserts that the scope of the plan should be broader and that additional interim measures are required while the plan and permits are pending. At this time, the parties are engaging in settlement discussions and the Utilities are unable to determine the ultimate outcome or the amount of any possible loss.

Commitments.

Purchase commitments. In the ordinary course of business, the Utilities enter into various agreements to purchase power and lease fuel barge. As of December 31, 2023, the Utilities estimated future purchase obligations of $1.7 billion. See Note 4 of the Notes to the Consolidated Financial Statements in Item 8 of the 2023 Form 10-K.

On March 28, 2024, AES West Oahu Solar project reached commercial operations, which has a capacity of 12.5 MW with 50 MWh batteries and total annual payment of $3.2 million. The battery portion of the PPA was recorded as a finance lease liability with corresponding right-of-use asset of $12.2 million during the first quarter of 2024. As of March 31, 2024, a total of five Stage 1 and Stage 2 renewable projects provide the Utilities of 117.5 MW, with 1,035 MWh batteries.

Purchases from all IPPs were as follows:


	Three months ended March 31
(in millions)		2024		2023
Kalaeloa		$	66	$	67

HPOWER		17		18
Puna Geothermal Venture		13		8
Hamakua Energy		11		20
Kapolei Energy Storage		6		—
Wind IPPs		30		24
Solar IPPs		15		14
Other IPPs 1		2		2
Total IPPs		$	160	$	153

1 Includes hydro power and other PPAs.

Utility projects. Many public utility projects require PUC approval and various permits from other governmental agencies. Difficulties in obtaining, or the inability to obtain, the necessary approvals or permits or community support can result in significantly increased project costs or even cancellation of projects. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, or if PUC-imposed caps on project costs are expected to be exceeded, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.

Waena Switchyard/Synchronous Condenser Project. In October 2020, to support efforts to increase renewable energy generation and reduce fossil fuel consumption by deactivating current generating units, Maui Electric filed a PUC application to construct a switchyard, which includes the extension of two 69 kV transmission lines and the relocation of another 69 kV transmission line; and the conversion of two generating units to synchronous condensers at Kahului Power Plant in central Maui. In November 2021, the PUC approved Maui Electric’s request to commit funds estimated at $38.8 million for the project, and to recover capital expenditures for the project under Exceptional Project Recovery Mechanism (EPRM) not to exceed $38.8 million, which shall be further reduced to reflect the total project cost exclusive of overhead costs not directly attributable to the project. The Waena Switchyard was placed in service on October 25, 2023. Maui Electric petitioned and received from the State of Hawaii Department of Health a one-year extension to the mandatory retirement of Kahului Power Plant. Although Maui Electric intends to retire the plant by the end of 2027, there is now flexibility to operate the units until the end of 2028. The conversion of the two generating units will be performed after the retirement of Kahului Power Plant Units 3 and 4.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

In approving the project, the PUC recognized that the project will facilitate the ability to accommodate increased renewable energy, as contemplated under the EPRM guidelines. As of March 31, 2024, $25.3 million has been incurred for the project.

Waena Battery Energy Storage System Project. In September 2020, Maui Electric filed a PUC application to purchase and install a 40 MW BESS at its Waena Site in Central Maui. In December 2023, the PUC approved Maui Electric’s request to commit funds estimated at $82.1 million, for the purchase and installation of the project, and to recover costs for the project under EPRM. Project costs incurred as of March 31, 2024 amount to $0.6 million.

Climate Adaptation Transmission and Distribution Resilience Program. The Utilities maintain that improving resiliency of the electric grid is an urgent matter and recognizes that climate change is making Hawaii increasingly vulnerable to sever weather events. On January 31, 2024, the PUC approved the Utilities’ request to commit an estimated $189.7 million in funds for the Climate Adaptation Transmission and Distribution Resilience Program, over a project period of five years. The project is to focus on, among other things, system hardening in wildfire risk areas to prevent ignition and to enable quicker response, video camera and weather monitors in wildfire risk areas and to add situational awareness, and strengthening transmission lines.

The project costs to be recovered through EPRM is subject to a cap of $95 million and any amount in excess will be subject to the PUC’s further review. On October 17, 2023, the Utilities received a notification from the U.S. Department of Energy that its application for $95 million in federal funds under the Infrastructure Investment and Jobs Act (IIJA) has been selected for negotiations. Currently, the negotiation is ongoing. Project costs incurred as of March 31, 2024 amount to $1.5 million.

Regulatory proceedings.

Decoupling. Decoupling is a regulatory model that is intended to provide the Utilities with financial stability and facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. Decoupling delinks the utility’s revenues from the utility’s sales, removing the disincentive to promote energy efficiency and accept more renewable energy. Decoupling continues under the PBR Framework.

Performance-based regulation framework. On December 23, 2020, the PUC issued a decision and order (PBR D&O) establishing the PBR Framework to govern the Utilities. The PBR Framework incorporates an annual revenue adjustment (ARA) and a suite of new regulatory mechanisms in addition to previously established regulatory mechanisms. Under the PBR Framework, the decoupling mechanism (i.e., the Revenue Balancing Account (RBA)) established by the previous regulatory framework will continue. The existing cost recovery mechanisms continued as previously implemented (e.g., the Energy Cost Recovery Clause, Purchased Power Adjustment Clause (PPAC), Demand-Side Management surcharge, Renewable Energy Infrastructure Program, Demand Response Adjustment Clause, Pension and Other Post-Employment Benefits (OPEB) tracking mechanisms). In addition to annual revenues provided by the ARA, the Utilities may seek relief for extraordinary projects or programs through the Exceptional Project Recovery Mechanism (EPRM) (formerly known as the Major Project Interim Recovery adjustment mechanism) and earn financial rewards for exemplary performance as provided through a portfolio of Performance Incentive Mechanisms (PIMs) and Shared Savings Mechanisms (SSMs). The PBR Framework incorporates a variety of additional performance mechanisms, including Scorecards, Reported Metrics, and an expedited Pilot Process. The PBR Framework also contains a number of safeguards, including a symmetric Earnings Sharing Mechanism (ESM) which protects the Utilities and customers from excessive earnings or losses, as measured by the Utilities’ achieved rate-making ROACE and a Re-Opener mechanism, under which the PUC will open an examination, at its discretion, to determine if adjustments or modifications to specific PBR mechanisms are appropriate. The PBR Framework became fully effective on June 1, 2021.

On June 17, 2022, the PUC issued a decision and order (June 2022 D&O) establishing additional PIMs under the PBR Framework for the Utilities. The June 2022 D&O approved two PIMs, a SSM, and extended the timeframe for an existing PIM. Specifically, the PUC approved (1) a (penalty-only) generation-caused interruption reliability PIM, (2) a (penalty/reward) interconnection requirements study PIM, (3) a (reward-only) Collective Shared Savings Mechanism (CSSM), and (4) a modification and extension of the existing Interim Grid Services PIM (reward-only). On November 23, 2022, the PUC approved the Utilities’ proposed tariffs to implement the aforementioned PIMs with an effective date of January 1, 2023.

In addition, the June 2022 D&O instructed the Utilities to prepare and submit: a detailed fossil fuel retirement report (FF Retirement Report) outlining necessary steps to safely and reliably retire certain existing fossil fuel power plants during the first multi-year rate period (MRP); and a functional integration plan (FIP) for distributed energy resources (DER) to increase transparency into the Utilities’ plans and progress for utilizing cost-effective grid services from DERs and ensure that the necessary functionalities and requisite technologies are in place to do so. The PUC also instructed the PBR Working Group to continue its ongoing collaborative efforts to consider other potential new incentive mechanisms and to address other issues raised during the proceeding. On March 30, 2023, the PUC held a PBR Working Group coordination meeting to initiate

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

subgroups on the Long-Term Grid Services PIM, modification/evaluation of existing PIMs, and comprehensive PBR Framework review priority topics.

In accordance with the June 2022 D&O, the Utilities filed their FIP on September 30, 2022, Long-Term Grid Services PIM proposal on July 3, 2023, and FF Retirement Report on April 12, 2024.

On October 16, 2023, the Utilities filed a request for limited suspension of the Transmission and Distribution (T&D) System Average Interruption Duration Index (SAIDI) PIM, the T&D System Average Interruption Frequency Index (SAIFI) PIM, and the target heat rate provision of Maui Electric Maui Division’s Energy Cost Recovery Clause (ECRC) tariff starting from August 8, 2023. On December 28, 2023, the PUC issued an order granting a temporary suspension of Maui Electric’s T&D SAIDI and SAIFI PIMs and Maui Electric Maui Division’s target heat rate provision from August 8, 2023 through June 30, 2024, which the tariffs became effective on January 1, 2024.

On November 3, 2023, the Utilities, Ulupono Initiative LLC, and the County of Hawaii filed a stipulation on proposed modifications to the RPS-A, Call Center, AMI Utilization, and interconnection requirements study PIMs. On February 8, 2024, the PUC issued a procedural schedule to govern review of the proposals in the stipulation, which provides for a D&O on the stipulation by June 30, 2024.

On December 26, 2023, the PUC issued an order (1) confirming that the Interim Grid Services PIM will sunset on December 31, 2023, (2) extending the Interconnection Approval PIM through December 31, 2024, and (3) determining that it will continue examination of the Long-Term Grid Services PIM into 2024 as part of a broader examination that addresses barriers to the utilization of DERs to meet grid needs.

On April 1, 2024, the Utilities filed a request for partial temporary suspension and modification of the T&D SAIDI and T&D SAIFI PIMs. Specifically, the Utilities requested to suspend the T&D SAIDI and T&D SAIFI PIMs for wildfire risk circuits from January 1, 2024 to December 31, 2025. The Utilities also proposed that circuits not identified as wildfire risk circuits would continue to be subject to the existing PIMs on a prorated basis. On April 26, 2024, the PUC issued a procedural schedule to govern review of the request, a D&O is requested by December 16, 2024.

Annual revenue adjustment mechanism. The PBR Framework established a five-year MRP during which there will be no general rate cases. Target revenues will be adjusted according to an index-driven ARA based on (i) an inflation factor, (ii) a predetermined X-factor to encompass productivity, which is set at zero, (iii) a Z-factor to account for exceptional circumstances not in the Utilities’ control and (iv) a customer dividend consisting of a negative adjustment of 0.22% of adjusted revenue requirements compounded annually and a flow through of the “pre-PBR” savings commitment from the management audit recommendations developed in a prior docket at a rate of $6.6 million per year from 2021 to 2025. The ARA mechanism replaced the previous revenue adjustment mechanism (RAM). RAM revenue adjustments approved by the PUC in 2020 will continue to be included in the RBA provision’s target revenue and RBA rate adjustment to the extent such adjustments are not included in base rate unless modified with PUC approval. The implementation of the ARA occurred on June 1, 2021.

Earnings sharing mechanism. The PBR Framework established a symmetrical ESM for achieved rate-making ROACE outside of a 300 basis points deadband above or below the current authorized ROACE of 9.5% for each of the Utilities. There is a 50/50 sharing between customers and Utilities for the achieved rate-making ROACE falling within 150 basis points outside of the deadband in either direction, and a 90/10 sharing for any further difference. A reopening or review of the PBR terms may be triggered if the Utilities credit rating outlook indicates a potential credit downgrade below investment grade status, or if its achieved rate-making ROACE enters the outer most tier of the ESM.

On August 31, 2023, the PUC issued an order temporarily suspending the ESM until further notice. The intent of the order is to address the unintended consequence of customers potentially bearing the costs associated with the Maui windstorm and wildfires through the operation of the ESM without prior PUC review.

Exceptional project recovery mechanism. Prior to the implementation of the PBR Framework, the PUC established the Major Project Interim Recovery (MPIR) adjustment mechanism and MPIR Guidelines. The MPIR mechanism provides the opportunity to recover revenues for net costs of approved eligible projects placed in service between general rate cases. In establishing the PBR Framework, the MPIR Guidelines were terminated and replaced with the EPRM Guidelines. Although the MPIR Guidelines were terminated and replaced by the EPRM Guidelines, the MPIR mechanism will continue within the PBR Framework to provide recovery of project costs previously approved for recovery under the MPIR. The established EPRM Guidelines permit the Utilities to include the full amount of approved costs in the EPRM for recovery in the first year the project goes into service, pro-rated for the portion of the year the project is in service. Deferred and O&M expense projects are also eligible for EPRM recovery under the EPRM Guidelines. EPRM recoverable costs will be limited to the lesser of actual incurred project costs or PUC‑approved amounts, net of savings.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

As of March 31, 2024, the Utilities annualized MPIR and EPRM revenue amounts totaled $33.1 million, including revenue taxes, for the Schofield Generating Station ($16.5 million), West Loch PV project ($3.3 million), Grid Modernization Strategy (GMS) Phase 1 project ($11.2 million for all three utilities), Waiawa UFLS project ($0.1 million) and Waena Switchyard/Synchronous project ($2.0 million) that included the 2023 return on project amount (based on approved amounts) in rate base, depreciation and incremental O&M expenses. The PUC approved the Utilities’ recovery of the annualized 2023 MPIR amounts for the Schofield Generating Station, West Loch PV, GMS Phase 1, and Waiawa UFLS projects effective June 1, 2023 and for the Waena Switchyard project effective January 1, 2024 through the RBA rate adjustment.

As of March 31, 2024, the PUC approved four EPRM applications for projects totaling $218.5 million to the extent the project costs are not included in rates. Currently, the Utilities are seeking EPRM recovery for three projects with total project costs up to $215.9 million, subject to PUC approval.

Pilot process. As part of the PBR Framework, the PUC approved a pilot process to foster innovation by establishing an expedited implementation process for pilots that tests new technologies, programs, business models, and other arrangements (Pilot Process). Under the Pilot Process, the Utilities submit specific pilot proposals (Pilot Notices) that are within the scope of the approved Workplan to the PUC for their expedited review. The PUC will strive to issue an order addressing a proposed pilot within 45 days of the filing date of a Pilot Notice. If the PUC does not take affirmative action on a Pilot Notice by the end of the 45-day period, the Pilot Notice shall be considered approved as submitted. The PUC may modify the pilot as originally proposed, and the Utilities shall have 15 days to notify the PUC whether the Utilities accept the modification, propose further modification, or withdraw the Pilot Notice. The PUC may also, where necessary, suspend the Pilot Notice for further investigation.

The approved Pilot Process includes a cost recovery process that generally allows the Utilities to defer and recover total annual expenditures of approved pilot projects net of revenues, subject to an annual cap of $10 million, over 12 months beginning June 1 of the year following pilot implementation through the RBA rate adjustment, although the PUC may determine on a case-by-case basis that a particular project’s deferred costs should be amortized over a period greater than 12 months.

On March 11, 2024, the Utilities filed their annual Pilot Update report covering pilot projects that were active during 2023, including reporting on pilot projects that were initiated prior to the commencement of the Pilot Process. The Pilot Update reported on approximately $3.0 million of 2023 recorded pilot project costs including revenue taxes for the Utilities. The 2023 recorded pilot project costs were included in the Utilities’ proposed adjustments to target revenue in the 2024 spring revenue report filed on March 28, 2024.

Performance incentive mechanisms. The following PIMs and SSMs were approved by the PUC and are applicable for the 2023 evaluation period and through March 31, 2024.

•Service Quality performance incentives (ongoing). Service Quality performance incentives are measured on a calendar-year basis. The PIM tariff requires the performance targets, deadbands and the amount of maximum financial incentives used to determine the PIM financial incentive levels for each of the PIMs to remain constant in interim periods, unless otherwise amended by order of the PUC.

•Service Reliability Performance measured by Transmission and Distribution-caused System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one standard deviation. The maximum penalty for each performance index is 20 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $6.4 million for calendar year 2023 - for both indices in total for the three utilities). On December 28, 2023, the PUC issued an order granting a temporary suspension of Maui Electric’s T&D SAIDI and SAIFI PIMs from August 8, 2023 through June 30, 2024. For the 2023 evaluation period, the Utilities incurred $3.7 million in penalties.

•Call Center Performance measured by the percentage of calls answered within 30 seconds. Target performance is based on the annual average performance for each utility for the most recent eight quarters with a deadband of 3% above and below the target. The maximum penalty or reward is 8 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties or rewards of approximately $1.4 million - in total for the three utilities).

•Phase 1 RFP PIM. Procurement of low-cost variable renewable resources through the RFP process in 2018 is measured by comparison of the procurement price to target prices. The first portion of the incentive was earned upon PUC approval of the PPAs. Based on the seven PPAs approved in 2019, the Utilities recognized $1.7 million in 2019 with the remaining award to be recognized in the year following the in-service date of the projects prorated in

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

proportion to the actual amount of energy utilized, which is estimated to occur from 2023 to 2025. Based on the in-service date of two projects, the Utilities earned the second portion of the incentive of approximately $0.1 million (for Hawaiian Electric) in rewards in both 2023 and 2024.

•Renewable portfolio standard (RPS) - A PIM that provides a financial reward for accelerating the achievement of RPS goals. The Utilities may earn a reward for the amount of system generation above the interpolated statutory RPS goal at $20/MWh in 2021 and 2022, $15/MWh in 2023, and $10/MWh for the remainder of the MRP. Penalties are already prescribed in the RPS as $20/MWh for failing to meet RPS targets in 2030, 2040 and 2045. The evaluation period commenced on January 1, 2021. In 2023, the Utilities earned $0.4 million in rewards.

•Interim Grid Services - A PIM that provides financial rewards on a $/kW basis for the acquisition of eligible grid services. The June 2022 D&O modified and extended the Interim Grid Services PIM through December 31, 2023 and increased the incentive rate for the acquisition of load reduction grid services. During the PIM performance period, newly acquired committed capacity in the Oahu Scheduled Dispatch Program (SDP), the Oahu Fast DR program (up to the 7 MW cap), and the Maui SDP program shall qualify for the incentive. The Utilities can earn a maximum reward of $1.5 million from 2021 through 2023. In 2023, the Utilities earned $1.1 million in rewards. The Interim Grid Services PIM sunset on December 31, 2023. The PUC intends to replace the Interim Grid Services PIM with a Long-Term PIM that incents DER grid service utilization. Review and development of the Long-Term DER Utilization PIM continues in 2024.

•Interconnection Approval PIM that provides financial rewards and penalties for interconnection times for DER systems <100 kW in size. The Utilities can earn a total annual maximum reward of $3.0 million or a total annual maximum penalty of $0.9 million. In 2023, the Utilities earned $3.0 million in rewards.

•Low-to-Moderate Income (LMI) Energy Efficiency PIM that provides financial rewards for collaboration between the Utilities and the third-party Public Benefits Fee Administrator to deliver energy savings for low- and moderate-income customers. The Utilities can earn a total annual maximum reward of $2.0 million. The PIM will initially have a duration of three years and be subject to an annual review. The evaluation period is based on Hawaii Energy’s program year with the initial evaluation year being the period of July 1, 2021 through June 30, 2022. For the 2022 program year (July 1, 2022 through June 30, 2023), the Utilities received the third-party Public Benefits Fee Administrator’s verified data in April 2024, which reflected $0.01 million in estimated rewards.

•Advanced Metering Infrastructure Utilization PIM that provides financial rewards for leveraging grid modernization investments and engaging customers beyond what is already planned in the Phase 1 Grid Modernization program. The Utilities can earn a total annual maximum reward of $2.0 million. The PIM will initially have a duration of three years after which it will be re-evaluated. The evaluation period commenced on January 1, 2021. The Advanced Metering Infrastructure Utilization PIM sunset on December 31, 2023. A proposed modification to the PIM was filed with the PUC and is currently under review.

•Generation-caused System Average Interruption Duration and Frequency Indexes PIMs to incentivize achievement of generation-based reliability targets, measured by Generation System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one standard deviation. The maximum penalty for each performance index is 3 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $1 million - for both indices in total for the three utilities).

•An interconnection requirements study PIM to incentivize the timely completion of the IRS process for large-scale renewable energy projects (rewards and penalties) measured by the number of months between final model checkout and delivery of IRS results to the developer. Target performance is ten months with an asymmetrical deadband of two-months for penalties and no deadband for rewards. The maximum penalty and reward will depend on the specifics of the upcoming procurement.

•A CSSM to incentivize cost control over the Utilities’ fuel, purchased power, and EPRM/MPIR costs (collectively, non-ARA costs). This is a reward only incentive where the Utilities retain 20% share of savings when non-ARA costs in a performance year are lower than target year non-ARA costs, which are adjusted for changes in fuel prices, inflation, and system generation from a base year (calendar year 2021). The CSSM does not have a potential penalty and does not have a cap for maximum reward.

For the 2024 evaluation period, as of March 31, 2024, the Utilities accrued $0.1 million for Phase 1 RFP PIM. For the 2023 evaluation period, the Utilities earned $0.9 million ($1.2 million for Hawaiian Electric, $(0.6) million for Hawaii Electric Light and $0.3 million for Maui Electric) in rewards net of penalties. The net rewards related to 2023 and for the period through March 2024 were reflected in the 2024 PIMs annual report and 2024 spring revenue report filings.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Annual review cycle. PBR D&O established an annual review cycle for revenue adjustments under the PBR Framework, including the biannual submission of the revenue reports. The Utilities filed the 2024 spring revenue report on March 28, 2024, which is subject to PUC approval. The filing reflected ARA revenues for recovery of the COVID-19 related deferred costs through the Z-factor and the accelerated return of the Enterprise Resource Planning system benefits savings to Hawaii Electric Light and Maui Electric customers as part of the customer dividend, as follows. (See discussion under “Regulatory assets and liabilities” below).


(in millions)	Hawaiian Electric		Hawaii Electric Light		Maui Electric		Total


Recovery of COVID-19 related costs	$	2.2	$	0.5	$	0.5	$	3.2
Return of ERP benefit liability	—		(1.3)		(1.9)		(3.2)
Net 2024 ARA revenues	$	2.2	$	(0.8)	$	(1.4)	$	—

Note: Columns may not foot due to rounding.

The net incremental amounts between the 2023 fall and 2024 spring revenue reports are shown in the following table. The amounts are to be collected (refunded) from June 1, 2024 through May 31, 2025 under the RBA rate tariffs, which were included in the 2024 spring revenue report filing.


(in millions)	Hawaiian Electric		Hawaii Electric Light		Maui Electric		Total
Incremental RAM revenues and ARA revenues	$	2.2	$	(0.8)	$	(1.4)	$	—

Incremental PIMs (net)	(1.3)		(1.1)		(0.2)		(2.6)
Incremental MPIR/EPRM revenue adjustment	3.0		0.7		1.2		4.9
Incremental Pilot Process cost recovery	1.9		0.3		0.5		2.7




Net incremental amount to be collected under the RBA rate tariffs	$	5.8	$	(0.9)	$	0.1	$	5.0

Note: Columns may not foot due to rounding.

Regulatory assets and liabilities.

Regulatory asset related to retirement of Honolulu generating units 8 and 9. On December 22, 2023, the PUC issued a decision and order approving the Utilities’ request to establish a regulatory asset for the remaining net book value of the fossil fuel generating units for both Honolulu units 8 and 9 assets that retired on December 31, 2023, and amortize the regulatory asset over approximately nine years. The PUC also ruled that the Utilities may seek to include the regulatory asset in rate base and seek to recover the amortization expense and a return on the unamortized balance of the regulatory asset in the next rate case or rate re-setting proceeding. As of March 31, 2024, the Utilities have recorded $29.1 million in regulatory assets for the remaining net book value of Honolulu generating units 8 and 9.

Regulatory assets for Maui windstorm and wildfires related costs. On December 27, 2023, the PUC issued an order authorizing deferred accounting treatment for the Utilities’ incremental non-labor expenses under specific cost categories related to the August 2023 Maui windstorm and wildfires. The deferred accounting treatment applies to certain non-labor expenses incurred from August 8, 2023 through December 31, 2024 that are not already a part of base rates. The approval pertains to deferred cost treatment. The requests for cost recovery of deferred costs will be the subject of a separate application at which time the PUC will evaluate whether such costs were prudently incurred and reasonable and determine the extent to which such costs will be eligible for recovery, and the period over which recovery will occur. If the PUC denies recovery of any deferred costs, such costs would be charged to expense in the period that those costs are no longer considered probable of recovery.

As of March 31, 2024, the Utilities have recorded $22.6 million in regulatory assets for the incremental costs incurred related to the Maui windstorm and wildfires event.

Regulatory liabilities for Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM). The ERP/EAM Implementation Project went live in October 2018. Hawaii Electric Light and Hawaiian Electric began to incorporate their portion of the deferred project costs in rate base and started the amortization over a 12-year period in January 2020 and November 2020, respectively. The PUC required a minimum of $246 million ERP/EAM project-related benefit to be delivered to customers over the system’s 12-year service life.

In February 2019, the PUC approved a methodology for passing the future cost saving benefits of the ERP/EAM system to customers developed by the Utilities in collaboration with the Consumer Advocate. The Utilities filed a benefits clarification document on June 10, 2019, reflecting $150 million in future net other operation and maintenance (O&M) expense reductions and cost avoidance, and $96 million in capital cost reductions and tax savings over the 12-year service life. To the extent the

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

reduction in O&M expense relates to amounts reflected in electric rates, the Utilities would reduce future rates for such amounts. In October 2019, the PUC approved the Utilities and the Consumer Advocate’s Stipulated Performance Metrics and Tracking Mechanism. As part of the settlement agreement approved in the Hawaiian Electric 2020 test year rate case, the regulatory liability for Hawaiian Electric will be amortized over five years, beginning in November 2020, and the O&M benefits for Hawaiian Electric was considered flowed through to customers. On December 29, 2023, the PUC approved the Utilities’ proposal to accelerate flow-through of the ERP benefits savings currently tracked in regulatory liability accounts to Hawaii Electric Light and Maui Electric customers as part of the customer dividend in the ARA, to mitigate the impact of the Utilities’ recovery of the COVID-19 related costs on customers. See “Regulatory assets for COVID-19 related costs” section below.

As of March 31, 2024, the Utilities’ regulatory liability was $12.9 million ($2.2 million for Hawaiian Electric, $4.3 million for Hawaii Electric Light and $6.4 million for Maui Electric) for the O&M expense savings that are being amortized or to be included in future rates. At the PUC’s direction, the Utilities have been filing Annual Enterprise System Benefits (AESB) report on the achieved benefits savings. The most recent AESB report was filed on February 13, 2024 for the period January 1 through December 31, 2023.

Regulatory assets for COVID-19 related costs. On December 29, 2023, the PUC issued a decision and order (December 2023 D&O) approving the Utilities’ request to recover the COVID-19 related deferred costs up to $8.8 million evenly over a three-year recovery period from 2024 through 2026 through the Z-factor in the ARA. Following the Utilities’ motion for clarification or in the alternative partial reconsideration of the December 2023 D&O, on February 27, 2024, the PUC issued an order clarifying the December 2023 D&O and approving, among other things, the Utilities’ requests to base the recovery on the recorded balances as of December 31, 2023 and to modify the recovery period to begin June 1, 2024 and end May 31, 2027. As of March 31, 2024, the Utilities have recorded $8.6 million in regulatory assets for deferral of COVID-19 related costs.

Regulatory assets for suspension of disconnections related costs. Based on the circumstances related to the Maui windstorm and wildfires, on August 31, 2023 and subsequently on October 13, 2023, the PUC issued orders directing all regulated utilities located on, or providing utility service on Maui, including the Utilities, among other things, (i) to suspend disconnections of services and associated disconnection fees beginning from August 8, 2023, through the end of the emergency relief period established by the Governor’s Emergency Proclamations related to the Maui windstorm and wildfires, which currently continues through July 2, 2024 (Suspension Period); (ii) to suspend any and all rules and provisions of individual utility tariffs that prevent or condition re-connection of disconnected customers during the Suspension Period; (iii) not to charge customers interest on past due payments or impose any late payment fees through the Suspension Period; (iv) to establish regulatory assets to record costs directly related to the suspension of disconnections, and to record receipt of governmental aid and donation-based aid, loans or grants, and/or all other assistance measures, and any cost savings realized; and (v) to file a notice with the PUC regarding any upcoming application or other request pursuant to HRS Sections 269-16.3, -17, -17.5, -18, -19, or -19.5 and/or regarding any significant financial change to the Maui utility, at least 60 days prior to filing such application or other request with the PUC. The orders also discourage the filing of emergency or general rate increases in response to the emergency situation. In future proceedings, the PUC will assess the utility’s request for recovery of these regulatory assets including whether it is reasonable and necessary, the appropriate period of recovery for the approved amount of regulatory assets, any amount of carrying costs thereon, any savings directly attributable to suspension of disconnects, and other related matters. As of March 31, 2024, the Utilities have recorded $1.0 million in regulatory assets for the incremental costs incurred due to the suspension of disconnections.

Condensed consolidating financial information. Condensed consolidating financial information for Hawaiian Electric and its subsidiaries are presented for the three months ended March 31, 2024 and 2023, and as of March 31, 2024 and December 31, 2023.

Hawaiian Electric unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric, and (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder. Hawaiian Electric is also obligated, after the satisfaction of its obligations on its own preferred stock, to make dividend, redemption and liquidation payments on Hawaii Electric Light’s and Maui Electric’s preferred stock if the respective subsidiary is unable to make such payments.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Three months ended March 31, 2024


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Revenues	$	564,180	117,609	106,789	—	—	$	788,578
Expenses
Fuel oil	210,199		31,185	42,912	—	—	284,296
Purchased power	117,518		32,056	10,243	—	—	159,817
Other operation and maintenance	90,884		24,590	28,416	—	—	143,890
Depreciation	42,004		10,964	9,844	—	—	62,812
Taxes, other than income taxes	53,409		10,957	10,042	—	—	74,408

Total expenses	514,014		109,752	101,457	—	—	725,223
Operating income	50,166		7,857	5,332	—	—	63,355
Allowance for equity funds used during construction	2,821		349	470	—	—	3,640
Equity in earnings of subsidiaries	6,024		—	—	—	(6,024)	—
Retirement defined benefits credit (expense)—other than service costs	927		168	(23)	—	—	1,072
Interest expense and other charges, net	(14,292)		(2,914)	(4,231)	—	1,452	(19,985)
Allowance for borrowed funds used during construction	1,079		107	200	—	—	1,386
Interest Income	2,663		155	66	—	(1,452)	1,432
Income before income taxes	49,388		5,722	1,814	—	(6,024)	50,900
Income taxes	9,897		1,198	85	—	—	11,180
Net income	39,491		4,524	1,729	—	(6,024)	39,720
Preferred stock dividends of subsidiaries	—		134	95	—	—	229
Net income attributable to Hawaiian Electric	39,491		4,390	1,634	—	(6,024)	39,491
Preferred stock dividends of Hawaiian Electric	270		—	—	—	—	270
Net income for common stock	$	39,221	4,390	1,634	—	(6,024)	$	39,221

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended March 31, 2024


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Net income for common stock	$	39,221	4,390	1,634	—	(6,024)	$	39,221
Other comprehensive loss, net of taxes:
Retirement benefit plans:
Adjustment for amortization of net gains recognized during the period in net periodic benefit cost, net of taxes	(508)		(38)	(59)	—	97	(508)
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	459		35	49	—	(84)	459
Other comprehensive loss, net of taxes	(49)		(3)	(10)	—	13	(49)
Comprehensive income attributable to common shareholder	$	39,172	4,387	1,624	—	(6,011)	$	39,172

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Three months ended March 31, 2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Revenues	$	601,530	115,288	113,673	—	(130)	$	830,361
Expenses
Fuel oil	253,827		27,760	52,510	—	—	334,097
Purchased power	110,279		34,086	8,396	—	—	152,761
Other operation and maintenance	83,233		21,350	23,733	—	—	128,316
Depreciation	41,038		10,635	9,254	—	—	60,927
Taxes, other than income taxes	56,953		10,737	10,695	—	—	78,385

Total expenses	545,330		104,568	104,588	—	—	754,486
Operating income	56,200		10,720	9,085	—	(130)	75,875
Allowance for equity funds used during construction	2,640		284	377	—	—	3,301
Equity in earnings of subsidiaries	11,541		—	—	—	(11,541)	—
Retirement defined benefits credit (expense)—other than service costs	904		169	(26)	—	—	1,047
Interest expense and other charges, net	(14,557)		(2,831)	(2,988)	—	130	(20,246)
Allowance for borrowed funds used during construction	918		91	122	—	—	1,131

Income before income taxes	57,646		8,433	6,570	—	(11,541)	61,108
Income taxes	10,367		1,909	1,324	—	—	13,600
Net income	47,279		6,524	5,246	—	(11,541)	47,508
Preferred stock dividends of subsidiaries	—		134	95	—	—	229
Net income attributable to Hawaiian Electric	47,279		6,390	5,151	—	(11,541)	47,279
Preferred stock dividends of Hawaiian Electric	270		—	—	—	—	270
Net income for common stock	$	47,009	6,390	5,151	—	(11,541)	$	47,009

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended March 31, 2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Net income for common stock	$	47,009	6,390	5,151	—	(11,541)	$	47,009
Other comprehensive loss, net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net gains recognized during the period in net periodic benefit cost, net of taxes	(470)		(56)	(63)	—	119	(470)
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	425		50	57	—	(107)	425
Other comprehensive loss, net of taxes	(45)		(6)	(6)	—	12	(45)
Comprehensive income attributable to common shareholder	$	46,964	6,384	5,145	—	(11,529)	$	46,964

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

March 31, 2024


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsi- diaries	Consoli- dating adjustments	Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	42,860	5,645	3,514	—	—	$	52,019
Plant and equipment	5,442,481		1,470,238	1,389,730	—	—	8,302,449
Right-of-use assets - finance lease	318,326		36,075	—	—	—	354,401
Less accumulated depreciation	(1,962,980)		(673,926)	(612,183)	—	—	(3,249,089)
Construction in progress	249,111		36,013	45,619	—	—	330,743
Utility property, plant and equipment, net	4,089,798		874,045	826,680	—	—	5,790,523
Nonutility property, plant and equipment, less accumulated depreciation	5,294		115	1,532	—	—	6,941
Total property, plant and equipment, net	4,095,092		874,160	828,212	—	—	5,797,464
Investment in wholly owned subsidiaries, at equity	728,222		—	—	—	(728,222)	—
Current assets
Cash and cash equivalents	111,200		11,146	7,331	77	—	129,754
Restricted cash	2,000		—	—	—	—	2,000
Advances to affiliates	93,000		—	—	—	(93,000)	—
Customer accounts receivable, net	148,241		32,461	29,297	—	—	209,999
Accrued unbilled revenues, net	124,691		24,052	22,712	—	—	171,455
Other accounts receivable, net	47,107		7,619	21,606	—	(38,307)	38,025
Fuel oil stock, at average cost	121,468		15,596	24,369	—	—	161,433
Materials and supplies, at average cost	65,457		14,470	35,792	—	—	115,719
Prepayments and other	52,174		6,713	14,572	—	(1,434)	72,025
Regulatory assets	69,284		6,484	6,735	—	—	82,503
Total current assets	834,622		118,541	162,414	77	(132,741)	982,913
Other long-term assets
Operating lease right-of-use assets	33,628		25,733	8,856	—	—	68,217
Regulatory assets	194,038		14,050	24,476	—	—	232,564
Other	138,076		36,846	33,266	—	(14,484)	193,704
Total other long-term assets	365,742		76,629	66,598	—	(14,484)	494,485
Total assets	$	6,023,678	1,069,330	1,057,224	77	(875,447)	$	7,274,862
Capitalization and liabilities
Capitalization
Common stock equity	$	2,435,282	364,177	363,968	77	(728,222)	$	2,435,282
Cumulative preferred stock—not subject to mandatory redemption	22,293		7,000	5,000	—	—	34,293
Long-term debt, net	1,385,625		244,251	256,152	—	—	1,886,028
Total capitalization	3,843,200		615,428	625,120	77	(728,222)	4,355,603
Current liabilities
Current portion of operating lease liabilities	6,298		7,098	2,838	—	—	16,234
Current portion of long-term debt	39,941		4,992	1,998	—	—	46,931

Short-term borrowings from affiliate	—		—	93,000	—	(93,000)	—
Accounts payable	139,015		28,690	30,931	—	—	198,636
Interest and preferred dividends payable	35,795		3,808	4,870	—	(547)	43,926
Taxes accrued, including revenue taxes	219,385		34,955	29,540	—	(1,434)	282,446
Regulatory liabilities	11,488		8,353	6,308	—	—	26,149
Other	81,609		27,837	36,320	—	(37,760)	108,006
Total current liabilities	533,531		115,733	205,805	—	(132,741)	722,328
Deferred credits and other liabilities
Operating lease liabilities	33,090		18,989	6,320	—	—	58,399
Finance lease liabilities	306,262		34,879	—	—	—	341,141
Deferred income taxes	283,734		51,699	68,328	—	—	403,761
Regulatory liabilities	817,663		202,178	113,821	—	—	1,133,662
Unamortized tax credits	59,188		11,351	11,232	—	—	81,771
Defined benefit pension and other postretirement benefit plans liability	76,815		—	—	—	(14,484)	62,331
Other	70,195		19,073	26,598	—	—	115,866
Total deferred credits and other liabilities	1,646,947		338,169	226,299	—	(14,484)	2,196,931
Total capitalization and liabilities	$	6,023,678	1,069,330	1,057,224	77	(875,447)	$	7,274,862

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

December 31, 2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsi-diary	Consoli- dating adjustments	Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	42,859	5,645	3,594	—	—	$	52,098
Plant and equipment	5,398,281		1,459,639	1,374,890	—	—	8,232,810
Finance lease right-of-use assets	306,099		36,075	—	—	—	342,174
Less accumulated depreciation	(1,925,660)		(666,581)	(605,273)	—	—	(3,197,514)
Construction in progress	247,836		33,488	38,899	—	—	320,223
Utility property, plant and equipment, net	4,069,415		868,266	812,110	—	—	5,749,791
Nonutility property, plant and equipment, less accumulated depreciation	5,295		115	1,532	—	—	6,942
Total property, plant and equipment, net	4,074,710		868,381	813,642	—	—	5,756,733
Investment in wholly owned subsidiaries, at equity	722,211		—	—	—	(722,211)	—
Current assets
Cash and cash equivalents	89,755		10,658	5,587	77	—	106,077
Restricted cash	2,000		—	—	—	—	2,000
Advances to affiliates	70,500		—	—	—	(70,500)	—
Customer accounts receivable, net	172,747		38,216	33,346	—	—	244,309
Accrued unbilled revenues, net	136,367		25,102	24,175	—	—	185,644
Other accounts receivable, net	143,160		13,318	32,521	—	(77,480)	111,519
Fuel oil stock, at average cost	108,228		17,968	22,041	—	—	148,237
Materials and supplies, at average cost	64,334		14,397	35,702	—	—	114,433
Prepayments and other	40,767		7,724	11,638	—	(1,638)	58,491
Regulatory assets	58,920		5,771	3,762	—	—	68,453
Total current assets	886,778		133,154	168,772	77	(149,618)	1,039,163
Other long-term assets
Operating lease right-of-use assets	34,856		27,470	9,551	—	—	71,877
Regulatory assets	189,417		13,575	23,359	—	—	226,351
Other	134,033		36,439	33,129	—	(14,171)	189,430
Total other long-term assets	358,306		77,484	66,039	—	(14,171)	487,658
Total assets	$	6,042,005	1,079,019	1,048,453	77	(886,000)	$	7,283,554
Capitalization and liabilities
Capitalization
Common stock equity	$	2,409,110	359,790	362,344	77	(722,211)	$	2,409,110
Cumulative preferred stock—not subject to mandatory redemption	22,293		7,000	5,000	—	—	34,293
Long-term debt, net	1,426,516		249,339	258,422	—	—	1,934,277
Total capitalization	3,857,919		616,129	625,766	77	(722,211)	4,377,680
Current liabilities
Current portion of operating lease liabilities	6,788		7,025	2,804	—	—	16,617


Short-term borrowings-affiliate	—		—	70,500	—	(70,500)	—
Accounts payable	136,102		29,418	25,520	—	—	191,040
Interest and preferred dividends payable	17,085		3,098	3,074	—	(375)	22,882
Taxes accrued, including revenue taxes	211,840		43,932	37,808	—	(1,638)	291,942
Regulatory liabilities	20,013		8,508	8,038	—	—	36,559
Other	165,131		33,240	50,170	—	(77,105)	171,436
Total current liabilities	556,959		125,221	197,914	—	(149,618)	730,476
Deferred credits and other liabilities
Operating lease liabilities	34,262		20,792	7,044	—	—	62,098
Finance lease liabilities	295,935		35,043	—	—	—	330,978
Deferred income taxes	280,029		51,661	67,311	—	—	399,001
Regulatory liabilities	803,404		199,173	111,554	—	—	1,114,131
Unamortized tax credits	61,130		11,650	11,532	—	—	84,312
Defined benefit pension and other postretirement benefit plans liability	74,842		—	—	—	(14,171)	60,671
Other	77,525		19,350	27,332		—	124,207
Total deferred credits and other liabilities	1,627,127		337,669	224,773	—	(14,171)	2,175,398
Total capitalization and liabilities	$	6,042,005	1,079,019	1,048,453	77	(886,000)	$	7,283,554

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Three months ended March 31, 2024


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated
Balance, December 31, 2023	$	2,409,110	359,790	362,344	77	(722,211)	$	2,409,110
Net income for common stock	39,221		4,390	1,634	—	(6,024)	39,221
Other comprehensive loss, net of taxes	(49)		(3)	(10)	—	13	(49)
Common stock dividends	(13,000)		—	—	—	—	(13,000)


Balance, March 31, 2024	$	2,435,282	364,177	363,968	77	(728,222)	$	2,435,282

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Three months ended March 31, 2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated
Balance, December 31, 2022	$	2,344,170	344,720	357,036	77	(701,833)	$	2,344,170
Net income for common stock	47,009		6,390	5,151	—	(11,541)	47,009
Other comprehensive loss, net of taxes	(45)		(6)	(6)	—	12	(45)
Common stock dividends	(32,250)		(4,475)	(3,675)	—	8,150	(32,250)
Balance, March 31, 2023	$	2,358,884	346,629	358,506	77	(705,212)	$	2,358,884

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Three months ended March 31, 2024


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiaries	Consolidating adjustments	Hawaiian Electric Consolidated























Net cash provided by operating activities	$	103,556	15,965	7,680	—	—	$	127,201
Cash flows from investing activities
Capital expenditures	(55,261)		(14,954)	(27,817)	—	—	(98,032)

Advances to affiliates	(22,500)		—	—	—	22,500	—
Other	(1,093)		(240)	(308)	—	—	(1,641)
Net cash used in investing activities	(78,854)		(15,194)	(28,125)	—	22,500	(99,673)
Cash flows from financing activities

Preferred stock dividends of Hawaiian Electric and subsidiaries	(499)		—	—	—	—	(499)




Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	—		—	22,500	—	(22,500)	—
Payments of obligations under finance leases	(1,646)		(154)	—			(1,800)
Other	(1,112)		(129)	(311)	—	—	(1,552)
Net cash provided by (used in) financing activities	(3,257)		(283)	22,189	—	(22,500)	(3,851)
Net increase in cash, cash equivalents and restricted cash	21,445		488	1,744	—	—	23,677
Cash, cash equivalents and restricted cash, beginning of period	91,755		10,658	5,587	77	—	108,077
Cash, cash equivalents and restricted cash, end of period	113,200		11,146	7,331	77	—	131,754
Less: Restricted cash	(2,000)		—	—	—	—	(2,000)
Cash and cash equivalents, end of period	$	111,200	11,146	7,331	77	—	$	129,754

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Three months ended March 31, 2023


(in thousands)	Hawaiian Electric		Hawaii Electric Light	Maui Electric	Other subsidiary	Consolidating adjustments	Hawaiian Electric Consolidated























Net cash provided by operating activities	$	143,356	18,733	15,416	—	(8,150)	$	169,355
Cash flows from investing activities
Capital expenditures	(74,916)		(20,747)	(26,476)	—	—	(122,139)
Advances from affiliates	—		4,500	21,700	—	(26,200)	—
Other	1,094		153	298	—	—	1,545
Net cash used in investing activities	(73,822)		(16,094)	(4,478)	—	(26,200)	(120,594)
Cash flows from financing activities
Common stock dividends	(32,250)		(4,475)	(3,675)	—	8,150	(32,250)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(270)		(134)	(95)	—	—	(499)


Proceeds from issuance of long-term debt	100,000		25,000	25,000	—	—	150,000

Net decrease in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	(114,167)		—	—	—	26,200	(87,967)
Payments of obligations under finance leases	(575)		—	—	—	—	(575)
Other	(458)		(116)	(116)	—	—	(690)
Net cash provided by (used in) financing activities	(47,720)		20,275	21,114	—	34,350	28,019
Net increase in cash and cash equivalents	21,814		22,914	32,052	—	—	76,780
Cash and cash equivalents, beginning of period	27,579		5,092	6,494	77	—	39,242


Cash and cash equivalents, end of period	$	49,393	28,006	38,546	77	—	$	116,022

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 5 · Bank segment

Selected financial information

American Savings Bank, F.S.B.

Statements of Income and Comprehensive Income Data


	Three months ended March 31
(in thousands)		2024		2023
Interest and dividend income
Interest and fees on loans		$	72,971	$	64,842
Interest and dividends on investment securities		14,964		14,637
Total interest and dividend income		87,935		79,479
Interest expense
Interest on deposit liabilities		17,432		6,837
Interest on other borrowings		8,154		7,721
Total interest expense		25,586		14,558
Net interest income		62,349		64,921
Provision for credit losses		(2,159)		1,175
Net interest income after provision for credit losses		64,508		63,746
Noninterest income
Fees from other financial services		4,874		4,679
Fee income on deposit liabilities		4,898		4,599
Fee income on other financial products		2,743		2,744
Bank-owned life insurance		3,584		1,425
Mortgage banking income		424		130


Other income, net		686		801
Total noninterest income		17,209		14,378
Noninterest expense
Compensation and employee benefits		32,459		30,204
Occupancy		5,063		5,588
Data processing		4,846		5,012
Services		4,151		2,595
Equipment		2,649		2,646
Office supplies, printing and postage		1,018		1,165
Marketing		776		1,016

Other expense		4,942		6,191
Total noninterest expense		55,904		54,417
Income before income taxes		25,813		23,707
Income taxes		4,879		5,145
Net income		20,934		18,562
Other comprehensive income (loss), net of taxes		(9,768)		18,430
Comprehensive income		$	11,166	$	36,992

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:


	Three months ended March 31
(in thousands)		2024		2023
Interest and dividend income		$	87,935	$	79,479
Noninterest income		17,209		14,378


*Revenues-Bank		105,144		93,857
Total interest expense		25,586		14,558
Provision for credit losses		(2,159)		1,175
Noninterest expense		55,904		54,417

Less: Retirement defined benefits credit—other than service costs		(281)		(187)
*Expenses-Bank		79,612		70,337
*Operating income-Bank		25,532		23,520
Add back: Retirement defined benefits credit—other than service costs		(281)		(187)

Income before income taxes		$	25,813	$	23,707

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

American Savings Bank, F.S.B.

Balance Sheets Data


(in thousands)	March 31, 2024				December 31, 2023
Assets
Cash and due from banks			$	126,259			$	184,383
Interest-bearing deposits			100,681				251,072
Cash and cash equivalents			226,940				435,455

Investment securities
Available-for-sale, at fair value			1,091,889				1,136,439
Held-to-maturity, at amortized cost (fair value of $1,074,735 and $1,103,668, at March 31, 2024 and December 31, 2023, respectively)			1,191,074				1,201,314
Stock in Federal Home Loan Bank, at cost			32,489				14,728
Loans held for investment			6,116,722				6,180,810
Allowance for credit losses			(71,057)				(74,372)
Net loans			6,045,665				6,106,438
Loans held for sale, at lower of cost or fair value			2,923				15,168
Other			687,059				681,460
Goodwill			82,190				82,190
Total assets			$	9,360,229			$	9,673,192
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing			$	2,557,240			$	2,599,762
Deposit liabilities—interest-bearing			5,447,824				5,546,016
Other borrowings			593,000				750,000
Other			220,570				247,563
Total liabilities			8,818,634				9,143,341

Common stock			1				1
Additional paid-in capital			358,645				358,067
Retained earnings			484,989				464,055
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(293,466)			$	(282,963)
Retirement benefit plans	(8,574)		(302,040)		(9,309)		(292,272)
Total shareholder’s equity			541,595				529,851
Total liabilities and shareholder’s equity			$	9,360,229			$	9,673,192

Other assets
Bank-owned life insurance			$	191,448			$	187,857
Premises and equipment, net			184,684				187,042
Accrued interest receivable			29,697				28,472
Mortgage-servicing rights			8,050				8,169
Low-income housing investments			108,314				112,234


Deferred tax asset			108,240				104,292

Other			56,626				53,394
			$	687,059			$	681,460
Other liabilities
Accrued expenses			$	114,289			$	115,231

Cashier’s checks			34,908				40,479
Advance payments by borrowers			5,559				10,107
Other			65,814				81,746
			$	220,570			$	247,563

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death.

Other borrowings consisted of FHLB advances and borrowings from the Federal Reserve Bank.

Investment securities. The major components of investment securities were as follows:


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Gross unrealized losses
									Less than 12 months					12 months or longer
(dollars in thousands)									Number of issues	Fair value		Amount		Number of issues	Fair value		Amount
March 31, 2024
Available-for-sale
U.S. Treasury and federal agency obligations	$	10,052	$	—	$	(415)	$	9,637	—	$	—	$	—	8	$	9,637	$	(415)
Mortgage-backed securities*	1,256,426		—		(221,292)		1,035,134		2	1,340		(17)		115	1,033,794		(221,275)
Corporate bonds	35,205		—		(2,304)		32,901		—	—		—		3	32,901		(2,304)
Mortgage revenue bonds	14,217		—		—		14,217		—	—		—		—	—		—
	$	1,315,900	$	—	$	(224,011)	$	1,091,889	2	$	1,340	$	(17)	126	$	1,076,332	$	(223,994)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,923	$	—	$	(7,830)	$	52,093	—	$	—	$	—	3	$	52,094	$	(7,830)
Mortgage-backed securities*	1,131,151		85		(108,594)		1,022,642		55	549,389		(18,604)		45	448,729		(89,990)
	$	1,191,074	$	85	$	(116,424)	$	1,074,735	55	$	549,389	$	(18,604)	48	$	500,823	$	(97,820)
December 31, 2023
Available-for-sale
U.S. Treasury and federal agency obligations	$	12,437	$	—	$	(427)	$	12,010	—	$	—	$	—	9	$	12,010	$	(427)
Mortgage-backed securities*	1,279,852		—		(202,684)		1,077,168		3	1,649		(22)		116	1,075,519		(202,662)
Corporate bonds	35,239		—		(2,336)		32,903		—	—		—		3	32,903		(2,336)
Mortgage revenue bonds	14,358		—		—		14,358		—	—		—		—	—		—
	$	1,341,886	$	—	$	(205,447)	$	1,136,439	3	$	1,649	$	(22)	128	$	1,120,432	$	(205,425)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,917	$	—	$	(7,135)	$	52,782	—	$	—	$	—	3	$	52,782	$	(7,135)
Mortgage-backed securities*	1,141,397		2,221		(92,732)		1,050,886		37	378,326		(7,610)		43	432,082		(85,122)
	$	1,201,314	$	2,221	$	(99,867)	$	1,103,668	37	$	378,326	$	(7,610)	46	$	484,864	$	(92,257)

* Issued or guaranteed by U.S. Government agencies or sponsored agencies

ASB does not believe that the investment securities that were in an unrealized loss position at March 31, 2024 and December 31, 2023, represent a credit loss. Total gross unrealized losses were primarily attributable to change in market conditions. On a quarterly basis the investment securities are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment portfolio continue to be rated investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and agency mortgage-backed securities are backed by the full faith and credit guaranty of the United States government, an agency of the government or a government-sponsored entity. ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB’s investment securities portfolio did not require an allowance for credit losses at March 31, 2024 and December 31, 2023.

U.S. Treasury, federal agency obligations, corporate bonds, and mortgage revenue bonds have contractual terms to maturity. Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.

The contractual maturities of investment securities were as follows:


March 31, 2024	Amortized cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	777	$	759
Due after one year through five years	44,480		41,779
Due after five years through ten years	14,217		14,217
Due after ten years	—		—
	59,474		56,755
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,256,426		1,035,134
Total available-for-sale securities	$	1,315,900	$	1,091,889
Held-to-maturity
Due in one year or less	$	—	$	—
Due after one year through five years	39,841		35,225
Due after five years through ten years	20,082		16,868
Due after ten years	—		—
	59,923		52,093
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,131,151		1,022,642
Total held-to-maturity securities	$	1,191,074	$	1,074,735

There were no sales of available-for-sale securities for the three months ended March 31, 2024 and 2023.

The components of loans were summarized as follows:


	March 31, 2024		December 31, 2023
(in thousands)
Real estate:
Residential 1-4 family	$	2,598,091	$	2,595,162
Commercial real estate	1,368,394		1,374,038
Home equity line of credit	996,049		1,017,207
Residential land	18,197		18,364
Commercial construction	185,857		172,405
Residential construction	17,756		17,843
Total real estate	5,184,344		5,195,019
Commercial	704,638		743,303
Consumer	256,273		272,256
Total loans	6,145,255		6,210,578
Less: Deferred fees and discounts	(28,533)		(29,768)
Allowance for credit losses	(71,057)		(74,372)
Total loans, net	$	6,045,665	$	6,106,438

ASB's policy is to require private mortgage insurance on all real estate loans when the loan-to-value ratio of the property exceeds 80% of the lower of the appraised value or purchase price at origination.

As of March 31, 2024, ASB had commitments to borrowers for loans and unused lines and letters of credit of $1.9 billion, of which, commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings were nil.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Allowance for credit losses. The allowance for credit losses (balances and changes) by portfolio segment were as follows:


(in thousands)	Residential 1-4 family		Commercial real estate		Home equity line of credit		Residential land		Commercial construction		Residential construction		Commercial loans		Consumer loans		Total














Three months ended March 31, 2024
Allowance for credit losses:
Beginning balance	$	7,435	$	22,185	$	7,778	$	621	$	3,603	$	43	$	9,122	$	23,585	$	74,372
Charge-offs	(842)		—		—		—		—		—		(114)		(2,719)		(3,675)
Recoveries	186		—		238		—		—		—		95		1,000		1,519
Provision	(373)		(1,851)		57		51		(202)		(2)		(1,489)		2,650		(1,159)
Ending balance	$	6,406	$	20,334	$	8,073	$	672	$	3,401	$	41	$	7,614	$	24,516	$	71,057
Three months ended March 31, 2023
Allowance for credit losses:
Beginning balance	$	6,270	$	21,898	$	6,125	$	717	$	1,195	$	46	$	12,426	$	23,539	$	72,216
Charge-offs	(809)		—		(63)		—		—		—		(227)		(2,323)		(3,422)
Recoveries	4		—		17		—		—		—		398		908		1,327
Provision	(853)		803		(26)		(97)		(460)		(18)		(661)		2,487		1,175
Ending balance	$	4,612	$	22,701	$	6,053	$	620	$	735	$	28	$	11,936	$	24,611	$	71,296

Allowance for loan commitments. The allowance for loan commitments by portfolio segment were as follows:


(in thousands)	Home equity line of credit		Commercial construction		Commercial loans		Total










Three months ended March 31, 2024
Allowance for loan commitments:
Beginning balance	$	600	$	4,300	$	200	$	5,100
Provision	—		(1,200)		200		(1,000)
Ending balance	$	600	$	3,100	$	400	$	4,100
Three months ended March 31, 2023
Allowance for loan commitments:
Beginning balance	$	400	$	2,600	$	1,400	$	4,400

Provision	—		—		—		—
Ending balance	$	400	$	2,600	$	1,400	$	4,400

Credit quality. ASB performs an internal loan review and grading on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of its lending policies and procedures. The objectives of the loan review and grading procedures are to identify, in a timely manner, existing or emerging credit trends so that appropriate steps can be initiated to manage risk and avoid or minimize future losses. Loans subject to grading include commercial, commercial real estate and commercial construction loans.

Each commercial and commercial real estate loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications: Pass, Special Mention, Substandard, Doubtful, and Loss. The AQR is a function of the probability of default model rating, the loss given default, and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. Pass exposures generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that ASB may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and has such little value that its continuance as a bankable asset is not warranted.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

The credit risk profile by vintage date based on payment activity or internally assigned grade for loans was as follows:


	Term Loans by Origination Year												Revolving Loans
(in thousands)	2024		2023		2022		2021		2020		Prior		Revolving		Converted to term loans		Total
March 31, 2024
Residential 1-4 family
Current	$	43,536	$	260,253	$	401,887	$	722,614	$	395,190	$	761,888	$	—	$	—	$	2,585,368
30-59 days past due	—		—		—		—		—		2,191		—		—		2,191
60-89 days past due	—		—		—		—		—		773		—		—		773
Greater than 89 days past due	—		—		1,928		1,893		1,129		4,809		—		—		9,759
	43,536		260,253		403,815		724,507		396,319		769,661		—		—		2,598,091


Home equity line of credit
Current	—		—		—		—		—		—		929,649		62,087		991,736
30-59 days past due	—		—		—		—		—		—		971		700		1,671
60-89 days past due	—		—		—		—		—		—		740		169		909
Greater than 89 days past due	—		—		—		—		—		—		1,418		315		1,733
	—		—		—		—		—		—		932,778		63,271		996,049


Residential land
Current	1,955		3,748		3,888		5,467		1,746		718		—		—		17,522
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		675		—		—		—		—		—		675
	1,955		3,748		4,563		5,467		1,746		718		—		—		18,197


Residential construction
Current	388		6,189		10,440		739		—		—		—		—		17,756
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	388		6,189		10,440		739		—		—		—		—		17,756


Consumer
Current	8,829		76,930		141,903		8,207		1,127		406		10,207		2,395		250,004
30-59 days past due	205		612		1,559		167		11		11		152		110		2,827
60-89 days past due	—		613		1,150		84		15		3		70		49		1,984
Greater than 89 days past due	—		369		681		68		26		10		90		214		1,458
	9,034		78,524		145,293		8,526		1,179		430		10,519		2,768		256,273


Commercial real estate
Pass	8,436		104,489		382,853		191,109		265,611		363,035		15,482		—		1,331,015
Special Mention	—		—		1,975		—		—		17,338		—		—		19,313
Substandard	—		—		—		1,527		—		13,991		—		—		15,518
Doubtful	—		—		—		—		—		2,548		—		—		2,548
	8,436		104,489		384,828		192,636		265,611		396,912		15,482		—		1,368,394


Commercial construction
Pass	—		55,494		39,399		26,545		1,333		—		63,086		—		185,857
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	—		55,494		39,399		26,545		1,333		—		63,086		—		185,857


Commercial
Pass	11,996		102,699		178,426		105,411		72,558		83,332		99,943		6,284		660,649
Special Mention	—		19,524		6,774		933		—		228		7,176		—		34,635
Substandard	—		—		2,869		1,790		—		3,182		1,276		139		9,256
Doubtful	—		—		—		—		98		—		—		—		98
	11,996		122,223		188,069		108,134		72,656		86,742		108,395		6,423		704,638


Total loans	$	75,345	$	630,920	$	1,176,407	$	1,066,554	$	738,844	$	1,254,463	$	1,130,260	$	72,462	$	6,145,255

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)


	Term Loans by Origination Year												Revolving Loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Converted to term loans		Total
December 31, 2023
Residential 1-4 family
Current	$	263,605	$	407,304	$	729,256	$	399,766	$	104,487	$	672,408	$	—	$	—	$	2,576,826
30-59 days past due	—		708		—		268		—		3,525		—		—		4,501
60-89 days past due	—		726		2,694		—		—		1,745		—		—		5,165
Greater than 89 days past due	—		2,519		871		1,129		489		3,662		—		—		8,670
	263,605		411,257		732,821		401,163		104,976		681,340		—		—		2,595,162


Home equity line of credit
Current	—		—		—		—		—		—		954,461		59,146		1,013,607
30-59 days past due	—		—		—		—		—		—		1,219		262		1,481
60-89 days past due	—		—		—		—		—		—		597		—		597
Greater than 89 days past due	—		—		—		—		—		—		1,111		411		1,522
	—		—		—		—		—		—		957,388		59,819		1,017,207


Residential land
Current	3,788		4,097		7,234		1,847		—		723		—		—		17,689
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		675		—		—		—		—		—		—		675
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	3,788		4,772		7,234		1,847		—		723		—		—		18,364


Residential construction
Current	5,369		10,984		1,490		—		—		—		—		—		17,843
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	5,369		10,984		1,490		—		—		—		—		—		17,843


Consumer
Current	87,686		153,239		9,852		1,654		451		200		10,663		2,779		266,524
30-59 days past due	805		1,314		176		29		24		—		56		163		2,567
60-89 days past due	385		886		114		41		21		—		60		69		1,576
Greater than 89 days past due	354		786		101		24		34		—		67		223		1,589
	89,230		156,225		10,243		1,748		530		200		10,846		3,234		272,256


Commercial real estate
Pass	104,368		384,144		180,986		267,458		65,625		307,367		15,482		—		1,325,430
Special Mention	—		1,975		11,159		—		14,110		3,008		—		—		30,252
Substandard	—		—		1,538		—		11,048		5,770		—		—		18,356
Doubtful	—		—		—		—		—		—		—		—		—
	104,368		386,119		193,683		267,458		90,783		316,145		15,482		—		1,374,038


Commercial construction
Pass	45,863		33,240		26,133		1,333		—		—		65,836		—		172,405
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	45,863		33,240		26,133		1,333		—		—		65,836		—		172,405


Commercial
Pass	124,667		199,796		106,669		73,976		37,580		80,012		87,206		6,250		716,156
Special Mention	1,860		6,989		951		—		250		—		7,352		—		17,402
Substandard	—		2,962		1,848		98		60		3,369		1,275		133		9,745
Doubtful	—		—		—		—		—		—		—		—		—
	126,527		209,747		109,468		74,074		37,890		83,381		95,833		6,383		743,303


Total loans	$	638,750	$	1,212,344	$	1,081,072	$	747,623	$	234,179	$	1,081,789	$	1,145,385	$	69,436	$	6,210,578

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Gross charge-offs by portfolio segment and vintage were as follows:


(in thousands)	2024		2023		2022		2021		2020		Prior		Total
Three months ended March 31, 2024
Residential 1-4 family	$	—	$	—	$	361	$	277	$	—	$	204	$	842
Commercial real estate	—		—		—		—		—		—		—
Home equity line of credit	—		—		—		—		—		—		—
Residential land	—		—		—		—		—		—		—
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	—		—		—		14		—		100		114
Consumer	166		937		1,342		127		36		111		2,719
Total	$	166	$	937	$	1,703	$	418	$	36	$	415	$	3,675


(in thousands)	2023		2022		2021		2020		2019		Prior		Total
Three months ended March 31, 2023
Residential 1-4 family	$	—	$	—	$	—	$	—	$	—	$	809	$	809
Commercial real estate	—		—		—		—		—		—		—
Home equity line of credit	—		—		43		—		—		20		63
Residential land	—		—		—		—		—		—		—
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	—		—		51		—		8		168		227
Consumer	189		1,524		319		57		176		58		2,323
Total	$	189	$	1,524	$	413	$	57	$	184	$	1,055	$	3,422

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Revolving loans converted to term loans during the three months ended March 31, 2024 in the commercial, home equity line of credit and consumer portfolios were $0.8 million, $6.5 million and $0.2 million, respectively. Revolving loans converted to term loans during the three months ended March 31, 2023 in the commercial, home equity line of credit and consumer portfolios were $1.2 million, $7.8 million and $1.1 million, respectively.

The credit risk profile based on payment activity for loans was as follows:


(in thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total financing receivables		Amortized cost> 90 days and accruing
March 31, 2024
Real estate:
Residential 1-4 family	$	2,191	$	773	$	9,759	$	12,723	$	2,585,368	$	2,598,091	$	425
Commercial real estate	—		—		11,048		11,048		1,357,346		1,368,394		—
Home equity line of credit	1,671		909		1,733		4,313		991,736		996,049		—
Residential land	—		—		675		675		17,522		18,197		—
Commercial construction	—		—		—		—		185,857		185,857		—
Residential construction	—		—		—		—		17,756		17,756		—
Commercial	72		—		139		211		704,427		704,638		—
Consumer	2,827		1,984		1,458		6,269		250,004		256,273		—
Total loans	$	6,761	$	3,666	$	24,812	$	35,239	$	6,110,016	$	6,145,255	$	425
December 31, 2023
Real estate:
Residential 1-4 family	$	4,501	$	5,165	$	8,670	$	18,336	$	2,576,826	$	2,595,162	$	425
Commercial real estate	—		—		11,048		11,048		1,362,990		1,374,038		—
Home equity line of credit	1,481		597		1,522		3,600		1,013,607		1,017,207		—
Residential land	—		675		—		675		17,689		18,364		—
Commercial construction	—		—		—		—		172,405		172,405		—
Residential construction	—		—		—		—		17,843		17,843		—
Commercial	163		135		244		542		742,761		743,303		—
Consumer	2,567		1,576		1,589		5,732		266,524		272,256		—
Total loans	$	8,712	$	8,148	$	23,073	$	39,933	$	6,170,645	$	6,210,578	$	425

The credit risk profile based on nonaccrual loans were as follows:


(in thousands)	March 31, 2024						December 31, 2023
	With a related ACL		Without a related ACL		Total		With a related ACL		Without a related ACL		Total
Real estate:
Residential 1-4 family	$	8,758	$	5,225	$	13,983	$	7,755	$	2,190	$	9,945
Commercial real estate	11,048		—		11,048		11,048		—		11,048
Home equity line of credit	2,404		1,538		3,942		2,626		1,135		3,761
Residential land	675		—		675		780		—		780
Commercial construction	—		—		—		—		—		—
Residential construction	—		—		—		—		—		—
Commercial	238		188		426		133		301		434
Consumer	2,516		—		2,516		2,458		—		2,458
Total	$	25,639	$	6,951	$	32,590	$	24,800	$	3,626	$	28,426

ASB did not recognize interest on nonaccrual loans for the three months ended March 31, 2024 and 2023.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Modifications Made to Borrowers Experiencing Financial Difficulty. The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point for the estimate of the allowance for credit losses is historical loan information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. ASB uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the time of the modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

Modifications may include interest rate reductions, interest only payments for an extended period of time, protracted terms such as amortization and maturity beyond the customary length of time found in the normal marketplace, and other actions intended to minimize economic loss and to provide alternatives to foreclosure or repossession of collateral.

Loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 were as follows:


(in thousands)	Term extension		Payment delay		Combination payment delay & term extension		Total		% of total class of loans
Real estate loans
Residential 1-4 family	$	266	$	3,311	$	—	$	3,577	0.14	%
Commercial real estate	—		—		1,975		1,975		0.14	%
Home equity line of credit	—		447		—		447		0.04	%
Residential land	—		675		—		675		3.71	%
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	266	$	4,433	$	1,975	$	6,674	0.11	%

Financial effect of loan modifications during the three months ended March 31, 2024 for borrowers experiencing financial difficulty were as follows:


	Weighted average
	Term extension (in months)	Payment delay (in months)
Real estate loans
Residential 1-4 family	156	9
Commercial real estate	9	9
Home equity line of credit	—	9
Residential land	—	9
Commercial construction	—	—
Residential construction	—	—
Commercial	—	—
Consumer	—	—

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Credit risk profile based on payment activity for loans modified during the three months ended March 31, 2024 were as follows:


(in thousands)	Current		30-59 days past due		60-89 days past due		90 days or more past due		Total
Real estate loans
Residential 1-4 family	$	266	$	—	$	—	$	3,311	$	3,577
Commercial real estate	1,975		—		—		—		1,975
Home equity line of credit	447		—		—		—		447
Residential land	—		—		—		675		675
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	2,688	$	—	$	—	$	3,986	$	6,674

During the three months ended March 31, 2024, there were no loan modifications made to borrowers experiencing financial difficulty that defaulted.

Collateral-dependent loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral. Loans considered collateral-dependent were as follows:


	Amortized cost
(in thousands)	March 31, 2024		December 31, 2023		Collateral type
Real estate:
Residential 1-4 family	$	5,731	$	2,272	Residential real estate property
Commercial real estate	11,048		11,048		Commercial real estate property
Home equity line of credit	1,674		1,135		Residential real estate property

Total real estate	18,453		14,455
Commercial	286		301		Business assets
Total	$	18,739	$	14,756

ASB had $4.8 million and $3.4 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at March 31, 2024 and December 31, 2023, respectively.

Mortgage servicing rights (MSRs). In its mortgage banking business, ASB sells residential mortgage loans to government-sponsored entities and other parties, who may issue securities backed by pools of such loans. ASB retains no beneficial interests in these loans other than the servicing rights of certain loans sold.

ASB received proceeds from the sale of residential mortgages of $26.4 million and $5.7 million for the three months ended March 31, 2024 and 2023, respectively, and recognized gains on such sales of $0.4 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.

There were no repurchased mortgage loans for the three months ended March 31, 2024 and 2023.

Mortgage servicing fees, a component of other income, net, were $0.9 million for the three months ended March 31, 2024 and 2023.

Changes in the carrying value of MSRs were as follows:


(in thousands)	Gross carrying amount		Accumulated amortization		Valuation allowance		Net carrying amount
March 31, 2024	$	17,939	$	(9,889)	$	—	$	8,050
December 31, 2023	18,241		(10,072)		—		8,169

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Changes related to MSRs were as follows:


	Three months ended March 31
(in thousands)		2024		2023
Mortgage servicing rights
Beginning balance		$	8,169	$	9,047
Amount capitalized		198		51
Amortization		(317)		(353)
Other-than-temporary impairment		—		—
Carrying amount before valuation allowance		8,050		8,745
Valuation allowance for mortgage servicing rights
Beginning balance		—		—
Provision		—		—
Other-than-temporary impairment		—		—
Ending balance		—		—
Net carrying value of mortgage servicing rights		$	8,050	$	8,745

ASB capitalizes MSRs acquired upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the MSRs to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the MSRs.

ASB uses a present value cash flow model to estimate the fair value of MSRs. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in “Revenues - bank” in the condensed consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable.

Key assumptions used in estimating the fair value of ASB’s MSRs used in the impairment analysis were as follows:


(dollars in thousands)	March 31, 2024			December 31, 2023
Unpaid principal balance	$	1,399,266		$	1,402,736
Weighted average note rate	3.52		%	3.47		%
Weighted average discount rate	10.00		%	10.00		%
Weighted average prepayment speed	6.13		%	5.71		%

The sensitivity analysis of fair value of MSRs to hypothetical adverse changes of 25 and 50 basis points in certain key assumptions was as follows:


(dollars in thousands)	March 31, 2024		December 31, 2023
Prepayment rate:
25 basis points adverse rate change	$	(125)	$	(90)
50 basis points adverse rate change	(274)		(204)
Discount rate:
25 basis points adverse rate change	(197)		(203)
50 basis points adverse rate change	(391)		(402)

The effect of a variation in certain assumptions on fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the changes in the fair value of MSRs typically is not linear.

Other borrowings. As of March 31, 2024 and December 31, 2023, ASB had $593.0 million and $200.0 million of FHLB advances outstanding, respectively, and borrowings with the Federal Reserve Bank of nil and $550.0 million, respectively. As of March 31, 2024, ASB was in compliance with all FHLB Advances, Pledge and Security Agreement requirements and all requirements to borrow at the Federal Reserve Discount Window Primary Credit Facility under 12 CFR 201.4(a) guidelines.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Derivative financial instruments. ASB enters into interest rate lock commitments (IRLCs) with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed securities to investors to hedge against the inherent interest rate and pricing risks associated with selling loans.

ASB enters into IRLCs for residential mortgage loans, which commit ASB to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose ASB to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

ASB enters into forward commitments to hedge the interest rate risk for rate locked mortgage applications in process and closed mortgage loans held for sale. These commitments are primarily forward sales of to-be-announced mortgage backed securities. Generally, when mortgage loans are closed, the forward commitment is liquidated and replaced with a mandatory delivery forward sale of the mortgage to a secondary market investor. In some cases, a best-efforts forward sale agreement is utilized as the forward commitment. These commitments are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

Changes in the fair value of IRLCs and forward commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

The notional amount and fair value of ASB’s derivative financial instruments were as follows:


	March 31, 2024				December 31, 2023
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	8,938	$	136	$	6,246	$	86
Forward commitments	6,900		(13)		5,500		(18)

ASB’s derivative financial instruments, their fair values and balance sheet location were as follows:


Derivative Financial Instruments Not Designated as Hedging Instruments 1	March 31, 2024				December 31, 2023
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	136	$	—	$	86	$	—
Forward commitments	1		14		—		18
	$	137	$	14	$	86	$	18

1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.

The following table presents ASB’s derivative financial instruments and the amount and location of the net gains or losses recognized in ASB’s statements of income:


Derivative Financial Instruments Not Designated as Hedging Instruments	Location of net gains (losses) recognized in the Statements of Income	Three months ended March 31
(in thousands)			2024		2023
Interest rate lock commitments	Mortgage banking income		$	50	$	17
Forward commitments	Mortgage banking income		5		(13)
			$	55	$	4

Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were $87.9 million at March 31, 2024 and December 31, 2023. These unfunded commitments were unconditional and legally binding and are recorded in other liabilities with a corresponding increase in other assets. As of March 31, 2024, ASB did not have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 6 · Credit agreements and changes in debt

On May 14, 2021, HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of nine financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Credit Facilities) to amend and restate their respective previously existing revolving unsecured credit agreements. The $175 million HEI Facility’s initial termination date was May 14, 2026. The $200 million Hawaiian Electric Facility’s initial termination date was May 13, 2022, but on February 18, 2022, the PUC approved Hawaiian Electric’s request to extend the term of the $200 million Hawaiian Electric Facility to May 14, 2026. In addition to extending the term, Hawaiian Electric also received PUC approval to exercise its options of two one-year extensions of the commitment termination date and to increase its aggregate revolving commitment amount from $200 million to $275 million, should there be a need.

On April 21, 2023, HEI and Hawaiian Electric executed Amendment No. 1 to the Credit Facilities (Amendment). The Amendment was executed to reflect the transition from the London Inter-Bank Offered Rate to the Term Secured Overnight Financing Rate (SOFR) as the benchmark interest rate for non-Alternate Base Rate (ABR) Loans under the Credit Facilities.

On May 14, 2023, HEI and Hawaiian Electric exercised their first of two, one-year extensions to the commitment termination date with eight of the nine financial institutions to extend the Credit Facilities to May 14, 2027. The committed capacities under the HEI Facility and Hawaiian Electric Facility are $175 million and $200 million, respectively, through May 14, 2026, and step down to approximately $157 million and $180 million, respectively, through May 14, 2027.

After multiple downgrades of the Companies’ credit ratings to ratings below investment grade by Fitch, Moody’s and S&P due to the Maui windstorm and wildfires, on August 15, 2023, HEI made an initial $2.5 million draw on its $175 million existing revolving credit facility to repay maturing commercial paper. By August 23, 2023, HEI drew its remaining and Hawaiian Electric drew its full committed capacity on their respective existing revolving credit facilities, totaling $175 million and $200 million, respectively. The draws were made to provide access to liquidity and support the Company’s restoration efforts on Maui. The cash proceeds were primarily invested in highly liquid short-term investments and used for general corporate purposes.

Under the HEI and Hawaiian Electric Intercompany Borrowing and Investment Policy effective January 1, 2020 (the Intercompany Borrowing Policy), HEI has committed to make revolving short-term loans to Hawaiian Electric pursuant to the terms set forth in the standing commitment letter dated December 8, 2023 (the 2023 Commitment Letter). For loans that mature on or before December 6, 2024, the 2023 Commitment Letter provides a borrowing limit of $75 million outstanding at any time and the applicable interest rate. Hawaiian Electric currently has no borrowings under the Intercompany Borrowing Policy and the 2023 Commitment Letter.

Changes in debt. As of March 31, 2024, the Company and Hawaiian Electric were in compliance with all applicable financial covenants.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 7 · Shareholders' equity

Accumulated other comprehensive income/(loss). Changes in the balances of each component of accumulated other comprehensive income/(loss) (AOCI) were as follows:


	HEI Consolidated								Hawaiian Electric Consolidated
(in thousands)	Net unrealized gains (losses) on securities		Unrealized gains (losses) on derivatives		Retirement benefit plans		AOCI		AOCI-Retirement benefit plans
Balance, December 31, 2023	$	(282,963)	$	1,638	$	(8,025)	$	(289,350)	$	2,849
Current period other comprehensive income (loss)	(10,503)		692		10		(9,801)		(49)
Balance, March 31, 2024	$	(293,466)	$	2,330	$	(8,015)	$	(299,151)	$	2,800
Balance, December 31, 2022	$	(328,904)	$	1,991	$	(9,115)	$	(336,028)	$	2,861
Current period other comprehensive income (loss)	20,282		138		68		20,488		(45)
Balance, March 31, 2023	$	(308,622)	$	2,129	$	(9,047)	$	(315,540)	$	2,816

Reclassifications out of AOCI were as follows:


		Amount reclassified from AOCI					Affected line item in the Statements of Income / Balance Sheets
	Three months ended March 31
(in thousands)			2024		2023

HEI consolidated


Amortization of unrealized holding losses on held-to-maturity securities			$	3,086	$	3,677	Bank revenues


Net realized gains on derivatives qualifying as cash flow hedges			(48)		(48)		Interest expense
Retirement benefit plans:
Amortization of prior service credit and net gains recognized during the period in net periodic benefit cost			(449)		(357)		See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets			459		425		See Note 9 for additional details
Total reclassifications			$	3,048	$	3,697
Hawaiian Electric consolidated


Retirement benefit plans:
Amortization of prior service credit and net gains recognized during the period in net periodic benefit cost			$	(508)	$	(470)	See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets			459		425		See Note 9 for additional details
Total reclassifications			$	(49)	$	(45)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 8 · Revenues

The following tables disaggregate revenues by major source, timing of revenue recognition, and segment:


	Three months ended March 31, 2024
(in thousands)		Electric utility		Bank		Other		Total
Revenues from contracts with customers
Electric energy sales - residential		$	241,522	$	—	$	—	$	241,522
Electric energy sales - commercial		241,768		—		—		241,768
Electric energy sales - large light and power		271,087		—		—		271,087
Electric energy sales - other		4,946		—		—		4,946
Bank fees		—		12,515		—		12,515
Other sales		—		—		3,306		3,306
Total revenues from contracts with customers		759,323		12,515		3,306		775,144
Revenues from other sources
Regulatory revenue		21,190		—		—		21,190
Bank interest and dividend income		—		87,935		—		87,935
Other bank noninterest income		—		4,694		—		4,694
Other		8,065		—		130		8,195
Total revenues from other sources		29,255		92,629		130		122,014
Total revenues		$	788,578	$	105,144	$	3,436	$	897,158
Timing of revenue recognition
Services/goods transferred at a point in time		$	—	$	12,515	$	—	$	12,515
Services/goods transferred over time		759,323		—		3,306		762,629
Total revenues from contracts with customers		$	759,323	$	12,515	$	3,306	$	775,144


	Three months ended March 31, 2023
(in thousands)		Electric utility		Bank		Other		Total
Revenues from contracts with customers
Electric energy sales - residential		$	255,550	$	—	$	—	$	255,550
Electric energy sales - commercial		254,470		—		—		254,470
Electric energy sales - large light and power		290,978		—		—		290,978
Electric energy sales - other		5,457		—		—		5,457
Bank fees		—		12,022		—		12,022
Other sales		—		—		3,907		3,907
Total revenues from contracts with customers		806,455		12,022		3,907		822,384
Revenues from other sources
Regulatory revenue		15,604		—		—		15,604
Bank interest and dividend income		—		79,479		—		79,479
Other bank noninterest income		—		2,356		—		2,356
Other		8,302		—		112		8,414
Total revenues from other sources		23,906		81,835		112		105,853
Total revenues		$	830,361	$	93,857	$	4,019	$	928,237
Timing of revenue recognition
Services/goods transferred at a point in time		$	—	$	12,022	$	—	$	12,022
Services/goods transferred over time		806,455		—		3,907		810,362
Total revenues from contracts with customers		$	806,455	$	12,022	$	3,907	$	822,384

There are no material contract assets or liabilities associated with revenues from contracts with customers existing at December 31, 2023 or as of March 31, 2024. Accounts receivable and unbilled revenues related to contracts with customers represent an unconditional right to consideration since all performance obligations have been satisfied. These amounts are disclosed as accounts receivable and unbilled revenues, net on HEI’s condensed consolidated balance sheets and customer accounts receivable, net and accrued unbilled revenues, net on Hawaiian Electric’s condensed consolidated balance sheets.

As of March 31, 2024, the Company had no material remaining performance obligations due to the nature of the Company’s contracts with its customers. For the Utilities, performance obligations are fulfilled as electricity is delivered to customers. For ASB, fees are recognized when a transaction is completed.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 9 · Retirement benefits

Defined benefit pension and other postretirement benefit plans information. The Company made no contributions to its pension and other postretirement benefit plans during the first three months of 2024, compared to $2 million ($2 million by the Utilities) in the first three months of 2023. The Company’s current estimate of total contributions to its pension and other postretirement benefit plans in 2024 is comparable to 2023 at $8 million ($8 million by the Utilities). In addition, in 2024, comparable to 2023, the Company expects to pay directly $3 million ($1 million by the Utilities) of benefits.

The components of net periodic pension costs (NPPC) and net periodic benefit costs (NPBC) for HEI consolidated and Hawaiian Electric consolidated were as follows:


	Three months ended March 31
		Pension benefits	Other benefits
(in thousands)			2024		2023		2024		2023
HEI consolidated
Service cost			$	11,264	$	11,396	$	281	$	344
Interest cost			26,506		25,621		1,867		2,157
Expected return on plan assets			(35,982)		(35,195)		(3,485)		(3,405)
Amortization of net prior period gain			—		—		—		(219)
Amortization of net actuarial (gain)/losses			111		188		(713)		(449)
Net periodic pension/benefit cost (return)			1,899		2,010		(2,050)		(1,572)
Impact of PUC D&Os			18,090		18,133		1,888		1,425
Net periodic pension/benefit cost (return) (adjusted for impact of PUC D&Os)			$	19,989	$	20,143	$	(162)	$	(147)
Hawaiian Electric consolidated
Service cost			$	10,916	$	11,019	$	278	$	340
Interest cost			24,627		23,698		1,779		2,063
Expected return on plan assets			(33,777)		(32,972)		(3,434)		(3,353)
Amortization of net prior period gain			—		—		—		(218)
Amortization of net actuarial (gain)/losses			12		19		(694)		(434)
Net periodic pension/benefit cost (return)			1,778		1,764		(2,071)		(1,602)
Impact of PUC D&Os			18,090		18,133		1,888		1,425
Net periodic pension/benefit cost (return) (adjusted for impact of PUC D&Os)			$	19,868	$	19,897	$	(183)	$	(177)

HEI consolidated recorded retirement benefits expense of $11 million ($11 million by the Utilities) in the first three months of both 2024 and 2023 and charged the remaining net periodic benefit cost primarily to electric utility plant.

The Utilities have implemented pension and OPEB tracking mechanisms under which all of their retirement benefit expenses (except for executive life and nonqualified pension plan expenses) determined in accordance with GAAP are recovered over time. Under the tracking mechanisms, any actual costs determined in accordance with GAAP that are over/under amounts allowed in rates are charged/credited to a regulatory asset/liability. The regulatory asset/liability for each utility will then be amortized over five years beginning with the respective utility’s next rate case.

Defined contribution plans information. For the first three months of 2024 and 2023, the Company’s expenses for its defined contribution plans under the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP) and the ASB 401(k) Plan were $3.0 million and $2.7 million, respectively, and cash contributions were $2.9 million and $2.7 million, respectively. For the first three months of 2024 and 2023, the Utilities’ expenses and cash contributions for its defined contribution plan under the HEIRSP were $1.8 million and $1.3 million, respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 10 · Share-based compensation

Under the 2010 Equity and Incentive Plan, as amended and restated effective March 1, 2014 (EIP), HEI can issue shares of common stock as incentive compensation to selected employees in the form of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares and other share-based and cash-based awards. The original 2010 Equity and Incentive Plan was amended and restated effective March 1, 2014 and an additional 1.5 million shares were added to the shares available for issuance under these programs.

As of March 31, 2024, approximately 2.5 million shares remained available for future issuance under the terms of the EIP, assuming recycling of shares withheld to satisfy statutory tax liabilities relating to EIP awards, including an estimated 0.9 million shares that could be issued upon the vesting of outstanding restricted stock units and the achievement of performance goals for awards outstanding under long-term incentive plans (assuming that such performance goals are achieved at maximum levels).

Under the 2011 Nonemployee Director Stock Plan (2011 Director Plan), HEI can issue shares of common stock as compensation to nonemployee directors of HEI, Hawaiian Electric and ASB. As of March 31, 2024, there were 168,177 shares remaining available for future issuance under the 2011 Director Plan.

Share-based compensation expense and the related income tax benefit were as follows:


	Three months ended March 31
(in millions)		2024		2023
HEI consolidated
Share-based compensation expense 1		$	1.3	$	2.0
Income tax benefit		0.1		0.3
Hawaiian Electric consolidated
Share-based compensation expense 1		0.4		0.7
Income tax benefit		—		0.1

1 For the three months ended March 31, 2024 and 2023, the Company has not capitalized any share-based compensation.

Stock awards. HEI granted HEI common stock to nonemployee directors under the 2011 Director Plan as follows:


	Three months ended March 31
(dollars in millions)		2024		2023
Shares granted		—		1,509
Fair value		$	—	$	0.1
Income tax benefit		—		—

The number of shares issued to each nonemployee director of HEI, Hawaiian Electric and ASB is determined based on the closing price of HEI common stock on the grant date.

Restricted stock units. Information about HEI’s grants of restricted stock units was as follows:


	Three months ended March 31
		2024	2023
			Shares		(1)		Shares		(1)
Outstanding, beginning of period			189,024		$	41.23	182,528		$	39.75
Granted			—		—		100,088		42.41
Vested			(97,050)		40.39		(80,077)		39.30
Forfeited			(1,071)		41.97		(406)		38.39
Outstanding, end of period			90,903		$	42.11	202,133		$	41.25
Total weighted-average grant-date fair value of shares granted (in millions)			$	—			$	4.2

(1) Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant.

For the three months ended March 31, 2024 and 2023, total restricted stock units and related dividends that vested had a fair value of $1.4 million and $3.6 million, respectively, and the related tax benefits were $0.3 million and $0.8 million, respectively.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

As of March 31, 2024, there was $3.4 million of total unrecognized compensation cost related to the nonvested restricted stock units. The cost is expected to be recognized over a weighted-average period of 1.6 years.

Long-term incentive plan payable in stock. The 2022-24, 2023-25 and 2024-26 long-term incentive plans (LTIP) provide for performance awards under the EIP of shares of HEI common stock based on the satisfaction of performance goals, including a market condition goal. The number of shares of HEI common stock that may be awarded is fixed on the date the grants are made, subject to the achievement of specified performance levels and calculated dividend equivalents. The potential payout varies from 0% to 200% of the number of target shares, depending on the achievement of the goals. The market condition goal is based on HEI’s total shareholder return (TSR) compared to the Peer Group (Edison Electric Institute Index (EEI Index) for the 2022-24 performance period, and compared to the Company's compensation peer group consisting of companies in the EEI Index and approved by the Company's Compensation and Human Capital Management Committee for the 2023-25 and 2024-26 performance periods), in each case over the relevant three-year period. The other performance condition goals relate to EPS growth, cumulative EPS, return on average common equity (ROACE), carbon emissions reduction, Hawaiian Electric’s net income growth, credit rating and public safety, ASB’s efficiency ratio and strategic initiatives and Pacific Current’s EBITDA growth and return on average invested capital.

LTIP linked to TSR. Information about HEI’s LTIP grants linked to TSR was as follows:


	Three months ended March 31
		2024	2023
			Shares		(1)		Shares		(1)
Outstanding, beginning of period			76,477		$	50.11	71,574		$	47.67
Granted			62,152		17.28		27,123		55.98
Vested (issued or unissued and cancelled)			(28,577)		41.12		(18,691)		48.62
Forfeited			(409)		55.63		—		—
Outstanding, end of period			109,643		$	33.82	80,006		$	50.27
Total weighted-average grant-date fair value of shares granted (in millions)			$	1.1			$	1.5

(1) Weighted-average grant-date fair value per share determined using a Monte Carlo simulation model.

The grant date fair values of the shares were determined using a Monte Carlo simulation model utilizing actual information for the common shares of HEI and the Peer Group for the period from the beginning of the performance period to the grant date and estimated future stock volatility of HEI and the Peer Group over the remaining three-year performance period. The expected stock volatility assumptions for HEI and the Peer Group were based on the three-year historic stock volatility. A dividend assumption is not required for the Monte Carlo simulation because the grant payout includes dividend equivalents and projected returns include the value of reinvested dividends.

The following table summarizes the assumptions used to determine the fair value of the LTIP awards linked to TSR and the resulting fair value of LTIP awards granted:


	2024		2023
Risk-free interest rate	4.25	%	4.19	%
Expected life in years	3		3
Expected volatility	52.5	%	33.1	%
Range of expected volatility for Peer Group	12.3% to 52.5%		28.7% to 38.8%
Grant-date fair value (per share)	$17.28		$55.98

There were no share-based LTIP awards linked to TSR with a vesting date in 2024 and 2023.

As of March 31, 2024, there was $2.1 million of total unrecognized compensation cost related to the nonvested performance awards payable in shares linked to TSR. The cost is expected to be recognized over a weighted-average period of 2.1 years.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

LTIP awards linked to other performance conditions. Information about HEI’s LTIP awards payable in shares linked to other performance conditions was as follows:


	Three months ended March 31
		2024	2023
			Shares		(1)		Shares		(1)
Outstanding, beginning of period			327,085		$	39.44	309,589		$	39.50
Granted			362,963		13.09		108,499		42.41
Vested			(113,118)		34.93		(62,778)		48.07
Increase above target (cancelled)			(546)		41.29		—		—
Forfeited			(1,640)		42.04		—		—
Outstanding, end of period			574,744		$	23.68	355,310		$	38.87
Total weighted-average grant-date fair value of shares granted (at target performance levels) (in millions)			$	4.8			$	4.6

(1) Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant.

For the three months ended March 31, 2024 and 2023, total vested LTIP awards linked to other performance conditions and related dividends had a fair value of $1.7 million and $2.9 million, respectively, and the related tax benefits were $0.4 million and $0.6 million, respectively.

As of March 31, 2024, there was $7.8 million of total unrecognized compensation cost related to the nonvested shares linked to performance conditions other than TSR. The cost is expected to be recognized over a weighted-average period of 2.2 years.

Note 11 · Income taxes

The Company’s and the Utilities’ effective tax rates (combined federal and state income tax rates) for the three months ended March 31, 2024 were 22%. These rates differed from the combined statutory rates, due primarily to the Utilities’ amortization of excess deferred income taxes related to the provision in the 2017 Tax Cuts and Jobs Act that lowered the federal income tax rate from 35% to 21%, the tax benefits derived from the low income housing tax credit investments and the non-taxability of the bank-owned life insurance income.

In August 2020, the Internal Revenue Service notified the Company that its 2017 and 2018 income tax returns would be examined. The Company was previously audited every year through 2011, at which time the IRS changed their internal policies regarding audit frequency. The audit is still in progress. The Company has not been notified of any material audit adjustments to date.

The Inflation Reduction Act of 2022 (IRA) was signed by President Biden on August 16, 2022. Key provisions under the IRA include a 15% corporate alternative minimum tax (CAMT) imposed on certain large corporations and a 1% excise tax on stock repurchases after December 31, 2022. Based on current interpretation of the law and current guidance available we do not believe HEI will be impacted by the CAMT or stock repurchase excise tax provisions.

The IRA also creates new tax credits and enhances others to stimulate investment in renewable energy sources. Certain provisions of the IRA became effective in tax year 2023. The Company is exploring clean energy tax incentives included in the IRA.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 12 · Cash flows


Three months ended March 31	2024		2023
(in millions)
Supplemental disclosures of cash flow information
HEI consolidated
Interest paid to non-affiliates, net of amounts capitalized	$	62	$	21
Income taxes paid (including refundable credits)	18		—

Hawaiian Electric consolidated
Interest paid to non-affiliates	14		6
Income taxes paid (including refundable credits)	21		3

Supplemental disclosures of noncash activities
HEI consolidated
Property, plant and equipment
Estimated fair value of noncash contributions in aid of construction (investing)	6		1
Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)	30		50

Right-of-use assets obtained in exchange for finance lease obligations (financing)	13		40

Right-of-use assets obtained in exchange for operating lease obligations (investing)	1		1


Common stock issued (gross) for director and executive/management compensation (financing)1	3		7

Obligations to fund low income housing investments (investing)	—		7
Loans transferred from held for investment to held for sale (investing)	20		—




Hawaiian Electric consolidated
Electric utility property, plant and equipment
Estimated fair value of noncash contributions in aid of construction (investing)	6		1
Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)	29		48

Right-of-use assets obtained in exchange for finance lease obligations (financing)	12		40


Common stock dividends payable (financing)	13		—

1 The amounts shown represent the market value of common stock issued for director and executive/management compensation and withheld to satisfy statutory tax liabilities.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Note 13 · Fair value measurements

Fair value measurement and disclosure valuation methodology. The following are descriptions of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not carried at fair value:

Investment securities. The fair value of ASB’s investment securities is determined quarterly through pricing obtained from independent third-party pricing services or from brokers not affiliated with the trade. Non-binding broker quotes are infrequent and generally occur for new securities that are settled close to the month-end pricing date. The third-party pricing vendors ASB uses for pricing its securities are reputable firms that provide pricing services on a global basis and have processes in place to ensure quality and control. The third-party pricing services use a variety of methods to determine the fair value of securities that fall under Level 2 of ASB’s fair value measurement hierarchy. Among the considerations are quoted prices for similar securities in an active market, yield spreads for similar trades, adjustments for liquidity, size, collateral characteristics, historic and generic prepayment speeds, and other observable market factors.

To enhance the robustness of the pricing process, ASB will on a quarterly basis compare its standard third-party vendor’s price with that of another third-party vendor. If the prices are within an acceptable tolerance range, the price of the standard vendor will be accepted. If the variance is beyond the tolerance range, an evaluation will be conducted by ASB and a challenge to the price may be made. Fair value in such cases will be based on the value that best reflects the data and observable characteristics of the security. In all cases, the fair value used will have been independently determined by a third-party pricing vendor or non-affiliated broker.

The fair value of the mortgage revenue bonds is estimated using a discounted cash flow model to calculate the present value of future principal and interest payments and, therefore is classified within Level 3 of the valuation hierarchy.

Loans held for sale. Residential and commercial loans are carried at the lower of cost or market and are valued using market observable pricing inputs, which are derived from third party loan sales and, therefore, are classified within Level 2 of the valuation hierarchy.

Loans held for investment. Fair value of loans held for investment is derived using a discounted cash flow approach which includes an evaluation of the underlying loan characteristics. The valuation model uses loan characteristics which includes product type, maturity dates and the underlying interest rate of the portfolio. This information is input into the valuation models along with various forecast valuation assumptions including prepayment forecasts, to determine the discount rate. These assumptions are derived from internal and third party sources. Since the valuation is derived from model-based techniques, ASB includes loans held for investment within Level 3 of the valuation hierarchy.

Collateral dependent loans. Collateral dependent loans have been adjusted to fair value. When a loan is identified as collateral dependent, the Company measures the impairment using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is generally estimated by obtaining external appraisals, but in some cases, the value of the collateral may be estimated as having little or no value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. If it is determined that the value of the collateral dependent loan is less than its recorded investment, the Company recognizes this impairment and adjusts the carrying value of the loan to fair value through the allowance for credit losses.

Real estate acquired in settlement of loans. Foreclosed assets are initially measured at fair value (less estimated costs to sell) and subsequently measured at the lower of the carrying value or fair value less selling costs. Fair values are generally based upon appraisals or independent market prices that are periodically updated subsequent to classification as real estate owned. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. ASB estimates the fair value of collateral-dependent loans and real estate owned using the sales comparison approach.

Mortgage servicing rights. MSRs are capitalized at fair value based on market data at the time of sale and accounted for in subsequent periods at the lower of amortized cost or fair value. MSRs are evaluated for impairment at each reporting date. ASB's MSRs are stratified based on predominant risk characteristics of the underlying loans including loan type and note rate. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Expected net income streams are estimated based on industry assumptions regarding prepayment expectations and income and expenses associated with servicing residential mortgage loans for others. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in “Revenues - bank” in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable. ASB compares the fair value of MSRs to an estimated value calculated by an independent third-party. The third-party relies on

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

both published and unpublished sources of market related assumptions and its own experience and expertise to arrive at a value. ASB uses the third-party value only to assess the reasonableness of its own estimate. ASB includes MSRs within Level 3 of the valuation hierarchy.

Time certificates. The fair value of fixed-maturity certificates of deposit was estimated by discounting the future cash flows using the rates currently offered for FHLB advances of similar remaining maturities. Deposit liabilities are classified in Level 2 of the valuation hierarchy.

Other borrowings. For advances, repurchase agreements and other bank borrowings, fair value is estimated using quantitative discounted cash flow models that require the use of interest rate inputs that are currently offered for advances, repurchase agreements and other bank borrowings of similar remaining maturities. The majority of market inputs are actively quoted and can be validated through external sources, including broker market transactions and third party pricing services.

Long-term debt—other than bank. Fair value of fixed-rate long-term debt—other than bank was obtained from third-party financial services providers based on the current rates offered for debt of the same or similar remaining maturities and from discounting the future cash flows using the current rates offered for debt of the same or similar risks, terms, and remaining maturities. The carrying amount of floating rate long-term debt—other than bank approximated fair value because of the short-term interest reset periods. Long-term debt—other than bank is classified in Level 2 of the valuation hierarchy.

Interest rate lock commitments (IRLCs). The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. IRLCs are classified as Level 2 measurements.

Forward sales commitments. To be announced (TBA) mortgage-backed securities forward commitments are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of ASB’s best efforts and mandatory delivery loan sale commitments are determined using quoted prices in the marketplace that are observable and are classified as Level 2 measurements.

Interest rate swaps. The Company measures its interest rate swaps at fair value. The fair values of the Company's interest rate swaps are based on the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs. The fair values of the Company's interest rate swaps are classified as a Level 2 measurements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

The following table presents the carrying or notional amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments.


			Estimated fair value
(in thousands)	Carrying or notional amount		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
March 31, 2024
Financial assets
HEI consolidated

Available-for-sale investment securities	$	1,091,889	$	—	$	1,077,672	$	14,217	$	1,091,889
Held-to-maturity investment securities	1,191,074		—		1,074,735		—		1,074,735

Loans, net	6,048,588		—		2,922		5,606,328		5,609,250
Mortgage servicing rights	8,050		—		—		18,430		18,430

Derivative assets	41,967		—		1,815		—		1,815


Financial liabilities
HEI consolidated
Deposit liabilities - time certificates	1,007,258		—		996,493		—		996,493

Other bank borrowings	593,000		—		591,244		—		591,244
Long-term debt, net—other than bank	2,837,875		—		2,145,625		—		2,145,625
Derivative liabilities	6,250		14		—		—		14
Hawaiian Electric consolidated

Long-term debt, net	1,932,959		—		1,392,483		—		1,392,483


December 31, 2023
Financial assets
HEI consolidated

Available-for-sale investment securities	$	1,136,439	$	—	$	1,122,081	$	14,358	$	1,136,439
Held-to-maturity investment securities	1,201,314		—		1,103,668		—		1,103,668

Loans, net	6,121,606		—		15,176		5,723,823		5,738,999
Mortgage servicing rights	8,169		—		—		18,722		18,722

Derivative assets	16,880		—		1,058		—		1,058


Financial liabilities
HEI consolidated
Deposit liabilities - time certificates	1,063,907		—		1,053,101		—		1,053,101

Other bank borrowings	750,000		—		747,508		—		747,508
Long-term debt, net—other than bank	2,842,429		—		2,133,225		—		2,133,225
Derivative liabilities	28,449		18		303		—		321
Hawaiian Electric consolidated

Long-term debt, net	1,934,277		—		1,385,025		—		1,385,025

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Fair value measurements on a recurring basis. Assets and liabilities measured at fair value on a recurring basis were as follows:


	March 31, 2024						December 31, 2023
	Fair value measurements using						Fair value measurements using
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Available-for-sale investment securities (bank segment)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	—	$	1,035,134	$	—	$	—	$	1,077,168	$	—
U.S. Treasury and federal agency obligations	—		9,637		—		—		12,010		—
Corporate bonds	—		32,901		—		—		32,903		—
Mortgage revenue bonds	—		—		14,217		—		—		14,358
	$	—	$	1,077,672	$	14,217	$	—	$	1,122,081	$	14,358
Derivative assets
Interest rate lock commitments (bank segment)1	$	—	$	136	$	—	$	—	$	86	$	—
Forward commitments (bank segment)1	—		1		—		—		—		—
Interest rate swap (Other segment)2	—		1,678		—		—		972		—
	$	—	$	1,815	$	—	$	—	$	1,058	$	—
Derivative liabilities

Forward commitments (bank segment)1	$	14	$	—	$	—	$	18	$	—	$	—

Interest rate swap (Other segment)2	—		—		—		—		303		—
	$	14	$	—	$	—	$	18	$	303	$	—

1 Derivatives are carried at fair value in other assets or other liabilities in the balance sheets with changes in value included in mortgage banking income.

2 Derivatives are included in other assets and other liabilities in the balance sheets.

There were no transfers of financial assets and liabilities between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2024 and 2023.

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:


	Three months ended March 31
Mortgage revenue bonds		2024		2023
(in thousands)
Beginning balance		$	14,358	$	14,902
Principal payments received		(141)		(136)
Purchases		—		—
Unrealized gain (loss) included in other comprehensive income		—		—
Ending balance		$	14,217	$	14,766

Mortgage revenue bonds are issued by the Department of Budget and Finance of the State of Hawaii. The Company estimates the fair value by using a discounted cash flow model to calculate the present value of estimated future principal and interest payments. The unobservable input used in the fair value measurement is the weighted average discount rate. As of March 31, 2024, the weighted average discount rate was 5.64%, which was derived by incorporating a credit spread over the one month SOFR. Significant increases (decreases) in the weighted average discount rate could result in a significantly lower (higher) fair value measurement.

Fair value measurements on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above. These measurements primarily result from assets carried at the lower of cost or fair value or from impairment of individual assets. As of March 31, 2024 and December 31, 2023, there were no financial instruments measured at fair value on a nonrecurring basis.

For the three months ended March 31, 2024 and 2023, there were no adjustments to fair value for ASB’s loans held for sale.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion updates “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in HEI’s and Hawaiian Electric’s 2023 Form 10-K and should be read in conjunction with such discussion and the 2023 annual consolidated financial statements of HEI and Hawaiian Electric and notes thereto included in HEI’s and Hawaiian Electric’s 2023 Form 10-K, as well as the quarterly condensed consolidated financial statements and notes thereto included in Item 1 of this Form 10-Q.

HEI consolidated

Recent developments. On August 8, 2023, a number of brush fires in the West Maui (Lahaina) and Upcountry Maui areas caused widespread property damage, including damage to property of the Utilities, and 101 confirmed fatalities in Lahaina at this time (the Maui windstorm and wildfires). The Maui windstorm and wildfires were fueled by extreme winds and drought-like conditions in those parts of Maui. According to the Maui Police Department’s Preliminary After-Action Report, in addition to the loss of life, over 3,450 acres burned and over 3,000 structures were destroyed in those areas. In Lahaina, a fire was reported at about 6:30 a.m. (the “Morning Fire”) and appears to have been caused by power lines that fell in high winds and spread into a field near Lahaina Intermediate School. The Maui Fire Department responded promptly to the Morning Fire, and according to the Fire Department’s public statement that morning, by 9 a.m. the Morning Fire was “100% contained.” The Maui fire chief subsequently reported that the Fire Department had determined that the Morning Fire was “extinguished” and left the scene. Shortly before 3 p.m. that day, while the power remained off, Utility crew members saw a small fire in the same field about 75 yards away from Lahainaluna Road. They immediately called 911 and reported the fire (the “Afternoon Fire”). At the time of the Afternoon Fire, the Company’s power lines in the area where that fire ignited were not energized and had not been energized for more than six hours. By the time the Maui Fire Department arrived back on the scene, it was not able to contain the Afternoon Fire and it spread out of control toward Lahaina. No determination as to the cause of the Afternoon Fire has been made. The Company believes that most of the property damage and all of the fatalities are from the Afternoon Fire.

The circumstances surrounding the Maui windstorm and wildfires are currently the subject of several investigations.

As of May 9, 2024, HEI and the Utilities have each been named in approximately 400 lawsuits related to the Maui windstorm and wildfires. These civil and class action lawsuits have been filed in the Maui and Oahu Circuit Courts against HEI, the Utilities, and other defendants, including the County of Maui, the State of Hawaii and related state entities, private landowners and developers, telecommunications companies, and oil companies (collectively “tort-related legal claims”). One class action is pending in federal court, while the remainder of the cases are pending in Maui and Oahu Circuit Courts. Most of these lawsuits allege that the defendants were responsible for, and/or negligent in failing to prevent or respond to the wildfires that led to the property destruction and loss of life. Other claims include, among other things, personal injury, wrongful death, emotional distress and inverse condemnation. One lawsuit asserting similar theories and claims was filed by the County of Maui against HEI and the Utilities, and three other lawsuits were filed by approximately 160 subrogation insurers against HEI, the Utilities, a private landowner, and telecommunications companies. One lawsuit that names HEI, the Utilities, and other defendants also alleges that oil companies contributed to the burning of fossil fuels and caused climate change that led to the Lahaina fire. Additional lawsuits may be filed against the Company and other defendants in the future. The plaintiffs seek to recover damages and other costs, including punitive damages. In addition to the tort-related legal claims, the Company is also involved in a securities class action and five shareholder lawsuits. See Note 2 of the Condensed Consolidated Financial Statements.

On April 16, 2024, the County of Maui Department of Fire and Public Safety (MFD) released its After-Action Report (AAR) on the Maui windstorm and wildfires, the purpose of which was to enable future enhancements to mitigate the impact of future similar major events. The AAR identified 17 issues that the MFD faced during the Maui windstorm and wildfires or needs to address and provided 111 recommendations to consider for addressing these challenges. The issues and recommendations focus on the MFD. Some of the key areas for improvement include addressing the lack of apparatus, personnel and fire stations and the need for mutual aid and communication programs. The AAR did not address the cause or origin of the fires.

On April 17, 2024, the Hawaii Attorney General released the first of three reports that it plans on releasing regarding its investigation into the Maui windstorm and wildfires (the first AG report). The first AG report chronologically details the major events and response efforts related to the Maui windstorm and wildfires, with a focus on the events concerning the Lahaina area between 2:55 p.m. on August 8, 2023, and 8:30 a.m. on August 9, 2023. It did not address the cause or origin of the fires. The second planned report is expected to analyze the timeline and facts of the Maui windstorm and wildfires and the third planned report is expected to provide recommendations to address future events.

In the 2024 Hawaii Legislative session, bills were proposed (1) to create a statewide wildfire relief fund to compensate participating property owners, insurers, and government entities for damages resulting from future catastrophic wildfires; (2) to

establish a process for the PUC to review and approve risk-based wildfire protection plans for electric utilities; and (3) to authorize the PUC to issue bonds securitized by future rate payments to pay for the risk-based wildfire protection plans and certain other costs related to catastrophic wildfires. The bills passed all committees and made it to the conference committee—the last stop in the Hawaii Legislature before the final reading—but they did not progress out of conference committee. Thereafter, Governor Josh Green announced the creation of a Hawaii Climate Advisory Team, which the Governor’s office stated in a news release would “recommend steps to create a durable fund to mitigate the impacts of dynamic climate change and to develop a fair and comprehensive structure to resolve claims related to future disasters” including “develop[ing] a customized go-forward fund structure and related claims settlement mechanics.” As to the wildfire mitigation plan and securitization bill, the Governor’s office stated in a letter that Hawaii’s “energy future and the stability and reliability of the utility is riding on this bill”; and later stated to news outlets that the Governor plans to continue negotiations and discussions with the goal of having the bill reintroduced at the next Hawaii legislative session in 2025.

In the first quarter of 2024, economic conditions in Hawaii remained stable with seasonally adjusted unemployment rate at 3.1% for March 2024 and total passenger counts higher by 0.2% for the first quarter 2024, as compared to the same quarter last year. While economic conditions remained stable during the quarter, the Utility’s kWh sales in the first quarter of 2024 were down by 1.5%, compared to the first quarter of 2023 due to a decrease in Maui sales from the Maui windstorm and wildfires and the continued adoption of energy efficiency measures and distributed energy resources. While the level of kWh sales does not affect Utility revenues due to decoupling, it may increase or decrease the price per kWh paid by customers. See “Decoupling” in Note 4 of the Condensed Consolidated Financial Statements for a discussion of the decoupling mechanism.

At the Bank, net interest margin for the first quarter of 2024 was 2.75% as compared to 2.63% for the prior quarter ended December 31, 2023. The increase was due to higher yields on earning assets as a result of the repayment of maturing higher costing liabilities using proceeds from the sale of $185 million of investment securities in the prior quarter ended December 31, 2023. However, net interest margin was lower as compared to the prior quarter ended March 31, 2023 of 2.85% primarily due to the higher interest rates as the Bank used higher costing other borrowings and term certificates to fund its loan growth.

ASB’s funding cost, which impacts its net interest margin, is driven by the mix of its funding sources, with the lowest cost source of funding provided by its core deposits. At March 31, 2024, ASB’s year-to-date average core deposits were down approximately 1.8% from year end 2023 balances, resulting in an increase in its overall cost of funds. Looking forward, ASB expects that its deposit base will remain relatively flat to down, given the higher interest rate environment, as well as inflationary pressures on customers that may drive increased spending. ASB also expects that the higher interest rate environment will continue to pressure funding costs and its deposit mix, which in turn will affect net interest income and net interest margin.

Since its peak in June 2022, monthly inflation rates have decreased as reflected in the U.S. Consumer Price Index (CPI). Although the inflation rate, as measured by CPI, has been cooling off from its 2022 peak, the rate is still at a moderately-high level of 3.5% as of March 31, 2024 and inflationary pressures are expected to continue over the near- to medium-term and have led to higher costs for O&M and capital projects and higher interest expense at the Utilities and HEI, as well as higher compensation and benefits cost at the Bank.

Short-term interest rates have also increased significantly as a result of the Federal Reserve’s ongoing rate increases to the federal funds target rate. The higher interest rate environment has impacted the fair value of the Bank’s investment portfolio, which declined and was recorded as an other comprehensive loss. Unrealized losses on held-to-maturity (HTM) securities are not recorded to other comprehensive loss because ASB has the positive intent and ability to hold the securities till maturity and recover its full investment. At March 31, 2024, the unrealized losses on HTM securities not recorded to other comprehensive losses was approximately $85 million after tax.

For further discussion of the impacts of inflation and other macro-economic factors impacting the Utilities and the Bank, see “Recent Developments” in the Electric utility and Bank sections below.

RESULTS OF OPERATIONS


	Three months ended March 31				%
(in thousands)	2024		2023		change	Primary reason(s)*
Revenues	$	897,158	$	928,237	(3)	Decreases for the electric utility and “other” segments, partly offset by increase for the bank segment.
Operating income	76,419		93,518		(18)	Decrease for the electric utility segment and higher operating loss for the “other” segment, partly offset by increase for the bank segment. See below for HEI Consolidated Maui windstorm and wildfires costs, net.
Net income for common stock	42,122		54,721		(23)	Lower net income for the electric utility segment and higher net loss for the “other” segment, partly offset by higher net income for the bank segment. See below for HEI Consolidated Maui windstorm and wildfires costs, net and effective tax rate explanation.

* Also, see segment discussions which follow.

The Company’s effective tax rates for the first three months of 2024 and 2023 were 22% and 21%, respectively. The effective tax rate was higher for the first three months of 2024 primarily due to an increase in excess taxes related to vesting of share-based awards and no dividend deduction due to suspension of dividends, partially offset by higher nontaxable bank owned life insurance in 2024.

For the three months ended March 31, 2024, the Company’s incremental expenses related to the Maui windstorm and wildfires described in Note 2 of the Condensed Consolidated Financial Statements, were as follows:


	Three months ended March 31, 2024
(in thousands)	Electric utility			Bank		Other segment		HEI Consolidated
Maui windstorm and wildfires related expenses:

Legal expenses	$	10,735		$	83	$	4,209	$	15,027
Outside services expense	784			1,625		338		2,747
Provision for credit losses	—			(1,500)		—		(1,500)
Other expense	9,141		2	(317)		195		9,019
Interest expense	3,907			—		918		4,825
Total Maui windstorm and wildfires related expenses	24,567			(109)		5,660		30,118
Insurance recoveries	(9,969)			—		(2,608)		(12,577)
Deferral treatment approved by the PUC1	(7,898)			—		—		(7,898)
Total Maui windstorm and wildfires related expenses, net of insurance recoveries and approved deferral treatment	$	6,700		$	(109)	$	3,052	$	9,643

2 Includes $6.7 million pursuant to an agreement to settle indemnification claims asserted by the State of Hawaii. See Note 2 of the Condensed Consolidated Financial Statements.

Note: Other segment Maui windstorm and wildfires related expenses - legal, outside services and other are included in “Expenses-Other” and interest expense is included “Interest expense, net—other than on deposit liabilities and other bank borrowings” on the HEI and subsidiaries Condensed Consolidated Statements of Income. See Electric utility and Bank sections below for more detail.

Since the Maui windstorm and wildfires on August 8, 2023 through March 31, 2024, HEI and its subsidiaries have incurred approximately $169 million of Maui windstorm and wildfires expenses, including the One ‘Ohana Initiative contribution. Certain of these costs are reimbursable under excess liability insurance and directors and officers liability insurance policies. As of March 31, 2024, HEI and its subsidiaries have approximately $58 million and $135 million of insurance coverage remaining under the excess liability and directors and officers liability policies, respectively, after deducting applicable retention amounts and estimated insurance recoveries, including the One ‘Ohana Initiative contribution. The Company is unable to determine whether the insurance coverage remaining under the excess liability and directors and officers liability policies are sufficient to

cover future costs.

The Company expects the Electric utility and HEI to continue to incur significant expenditures in connection with the Maui windstorm and wildfires; however, the Company has partially mitigated the financial impact through insurance recoveries as well as the Utilities obtaining deferral treatment for incremental non-labor expense.

Economic conditions.

Note: The statistical data in this section is from public third-party sources that management believes to be reliable (e.g., Department of Business, Economic Development and Tourism (DBEDT), University of Hawaii Economic Research Organization (UHERO), U.S. Bureau of Labor Statistics, Department of Labor and Industrial Relations (DLIR), Hawaii Tourism Authority (HTA), Honolulu Board of REALTORS® and national and local news media).

In the first quarter, the average daily passenger count was 0.2% higher than the comparable period in the prior year. The recovery in total passenger counts from the low levels in 2020, which occurred under COVID-19 restrictions, thus far has been driven by domestic travelers, with international travelers, primarily Japan, remaining at lower levels, but activity is increasing compared to 2022. In the first quarter, international visitor arrivals (excluding Japan) have continued to increase at a modest pace, but is still 14.9% below 2019 levels, whereas Japanese visitors are 44.7% below 2019 levels.

Hawaii’s seasonally adjusted unemployment rate in March 2024 was 3.1%, which was higher compared to the March 2023 rate of 2.9%. The national unemployment rate in March 2024 was 3.8% compared to 3.5% in March 2023. According to the most recent forecast by UHERO, issued on February 23, 2024, job growth in the state will decrease to 0.8% for 2024 and 0.9% for 2025. The Maui windstorm and wildfires destroyed a majority of the businesses in Lahaina, but initial visitor recovery after the wildfires has proven to be somewhat stronger than initially expected. The labor market recovery on Maui was also stronger than expected, reflecting faster employment recovery and anticipated outflows from the labor force as some residents relocate off island. Accordingly, unemployment on Maui is predicted to average 5% in 2024, receding to 3.1% by 2026.

Hawaii real estate activity through March 2024, as indicated by Oahu’s home resale market, resulted in a decrease in the median sales price of 6.7% for condominiums and an increase of 1.5% for single-family homes compared to the same period in 2023, with the March median single-family home price of $1,100,000, below the record $1,153,500 set in May 2022. The number of closed sales decreased 22.5% for condominiums and 2.5% for single-family residential homes through the first quarter of 2024 compared to 2023.

Hawaii’s petroleum product prices relate to the crude oil in international markets. The price of crude oil has decreased 13% over the same quarter in the prior year. While the fuel costs are below 2022’s peak, they remain elevated.

At its March 20, 2024 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range of 5.25% - 5.50%. The FOMC is still assessing plans to adjust their stance on monetary policy depending on the economic outlook to achieve maximum employment and inflation at the rate of 2 percent over the long run. The Federal Reserve stated that it will continue to reduce its holdings of Treasury securities and agency mortgage-backed securities.

UHERO forecasts full year 2024 real GDP growth of 1.5%, an increase in total visitor arrivals of 2.0%, an increase in real personal income of 1.6%, and an unemployment rate of 2.7%. The Maui visitor industry has been recovering faster than anticipated and visitors to the rest of the state have reached record levels. Hawaii has seen strong visitor spending at the end of 2023, however real visitor spending is expected to soften. The 2024 U.S. economy is off to a positive start due to strong consumer spending, healthy job markets and progress on reducing inflation, which will help bring inflation into the Fed’s target range and achieve a “soft landing”.

See also “Recent Developments” in the “Electric utility” and “Bank” sections below for further discussion of the economic impact of recent events.

“Other” segment.


	Three months ended March 31
(in thousands)		2024		2023		Primary reason(s)
Revenues		$	3,436	$	4,019	The revenues for the first three months of 2024 were lower than the comparable period in 2023 primarily due to lower sales at Pacific Current1 subsidiaries.
Operating loss		(12,468)		(5,877)		The first three months of 2024 and 2023 include $5.5 million and $1.1 million of operating loss, respectively, from Pacific Current1. The higher operating loss is primarily due to a $3.5 million impairment loss on assets damaged in a March 2024 fire at Mahipapa and lower Pacific Current asset performances mainly at Hamakua Energy as compared to the prior year period. Corporate expenses for the first three months of 2024 were $2.2 million higher than the same period in 2023, primarily due to $2.1 million of Maui windstorm and wildfires related costs, net of insurance recovery for the first three months of 2024.

Net loss		(18,033)		(10,850)		The net loss for the first three months of 2024 was higher than the net loss for the first three months of 2023 due to $1.4 million higher interest expense, net of interest income, primarily related to Corporate’s August 2023 draw on the revolving credit facility as compared to the prior year period, and the same factors cited for the change in operating loss above. Also see effective tax rate explanations above.

1 Hamakua Energy’s sales to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.

The “other” business segment loss includes results of the stand-alone corporate operations of HEI (including eliminations of intercompany transactions) and ASB Hawaii, Inc. (ASB Hawaii), as well as the results of Pacific Current, a direct subsidiary of HEI focused on investing in clean energy and sustainable infrastructure projects; Pacific Current’s indirect subsidiary, Hamakua Energy, which owns a 60 MW combined cycle power plant on Hawaii Island that provides electricity to Hawaii Electric Light; Pacific Current’s subsidiaries, Mauo, LLC (Mauo), which owns solar-plus-storage projects totaling 8.6 MW on five University of Hawaii campuses, Mahipapa, which owns a 7.5 MW nameplate biomass facility on Kauai, Alenuihaha Developments, LLC, which owns a collection of renewable energy assets on Oahu and Kauai, Ka‘ie‘ie Waho Company, LLC, which owns a 6 MW solar photovoltaic system that provides renewable energy to Kauai Island Utility Cooperative, and Ka‘aipua‘a, LLC, which is constructing a wastewater treatment and energy recovery facility on Hawaii Island; as well as eliminations of intercompany transactions.

In late February 2024, Hamakua Energy’s first combustion turbine (CT1) and its leased combustion turbine (leased CT) unexpectedly sustained damages resulting in a plant shut down on Hawaii Island. The Company is currently conducting an investigation into the root cause of the damages. Upon inspection of CT1, it was determined that the unit was not serviceable. Due to the generation capacity shortfall on Hawaii Island (refer to “System reliability” in “Recent developments” of the Hawaiian Electric’s MD&A below), and the extensive timeline and cost to overhaul CT1, management decided to retire and replace CT1. Due to the age of the unit, the net book value is immaterial. In April 2024, Hamakua Energy purchased a new combustion turbine and plans to install the unit in May 2024. Total capital cost of the unit, including installation, is expected to amount to approximately $8.3 million. Pursuant to the lease pool program agreement, the leased CT will be returned to the lessor for repairs. Hamakua Energy’s second combustion turbine (CT2) is currently in a scheduled overhaul which has incurred delays due to supply shortages. The CT2 overhaul is expected to be completed and the unit placed back into service in the third quarter of 2024.

In March 2024, a fire destroyed the cooling tower at the Mahipapa facility on Kauai. The fire was ignited from a vendor’s welding activities being performed on the cooling tower during its scheduled maintenance. As a result, the plant is currently shut down while repairs are being performed. Mahipapa recorded an impairment loss of $3.5 million in March 2024. The Company expects to complete its repairs and bring the facility back online in the third quarter of 2024.

FINANCIAL CONDITION

Liquidity and capital resources. See “Credit and Capital Market Risk” in Item 1A. Risk Factors in HEI’s and Hawaiian Electric’s 2023 Form 10-K and in Item 1A. Risk Factors below.

The downgrades of HEI’s and Hawaiian Electric’s credit ratings from the uncertainty facing the Company due to the litigation risks and ongoing investigations related to the Maui windstorm and wildfires impacted the Company’s ability to access capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms. While the fundamentals of its businesses remain strong, the Company took prudent and measured actions to reinforce its commitment to serving the community for the long term. In August 2023, HEI and Hawaiian Electric fully drew down $175 million and $200 million, respectively, on their existing revolving credit facilities. The cash proceeds were primarily invested in highly liquid short-term investments and used for general corporate purposes. The Company has taken additional prudent measures to strengthen its financial position while continuing to provide reliable service to its customers and reinforcing our commitment to serving the community for the long term. Some of these proactive measures include suspending the quarterly cash dividend on HEI’s common stock after payment of the second quarter dividend in September 2023 and reducing or eliminating discretionary costs. The Company is working with financial advisors to maximize liquidity and believes it has adequate cash to meet its financial obligations and sustain operations in the short term. The Company’s objective continues to be to operate a strong, financially healthy enterprise to empower a thriving future for Hawaii.

At the end of the quarter, HEI and Hawaiian Electric had no commercial paper outstanding. As of March 31, 2024, ASB’s unused FHLB borrowing capacity was approximately $1.4 billion and ASB had unpledged investment securities of $1.1 billion that were available to be used as collateral for additional borrowing capacity. At both March 31, 2024 and December 31, 2023, the total amount of available borrowing capacity (net of commercial paper outstanding) under the Company’s committed lines of credit was nil. As of March 31, 2024, HEI consolidated has $2.8 billion of long-term debt, net - other than bank, of which $60 million is due within 12 months and $122 million is due within 24 months.

As of March 31, 2024, HEI’s cash and cash equivalents balance, excluding its subsidiaries, was $127 million, compared to $137 million as of December 31, 2023. The Company believes that its cash and cash equivalents and expected operating cash flow from operations will be sufficient to meet the Company’s cash requirements in the short term based on its current business plans. However, the Company expects that HEI and the Utilities’ liquidity will continue to be impacted as a result of the August 2023 downgrades of their credit ratings to below investment grade which prevents the Company from accessing unsecured, short-term borrowings and will continue to have restricted access to the capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms while the resolution of the Maui windstorm and wildfires and the ongoing related lawsuits are pending. Additionally, extended plant shutdowns at Pacific Current’s Hamakua and Mahipapa facilities, higher working capital requirements resulting from inflation and elevated fuel prices, could also increase liquidity needs.

For the Utilities, while fuel prices have moderated from their highs in 2022, they remain elevated and have increased the cost of carrying fuel inventory and higher customer accounts receivable balances as fuel is consumed and billed to customers. While the accounts receivable balance has decreased since December 2023, it remains elevated coming out of the pandemic and has led to higher bad debt expense and higher write-offs in 2023 and year-to-date 2024, following the end of the moratorium on disconnections. The higher bad debt expense is expected to continue until the Utilities return to pre-pandemic collection practices, along with a decrease in volume, for delinquent accounts. The Maui windstorm and wildfires have not and are not anticipated to materially impact accounts receivable and higher bad debt expense. As of March 31, 2024, approximately $18.9 million of the Utilities’ accounts receivables were over 30 days past due. Of the over 30 days past due amounts, approximately 38% were on payment plans. In addition to the cash flow impact from delayed collection of accounts receivable, lower kWh sales relative to the level of kWh sales approved in the last rate case generally result in delayed timing of cash flows, resulting in higher working capital requirements (see “Recent Developments” in the Electric utility section below).

If further liquidity is deemed necessary in the short term, the Utilities could also reduce the pace of capital spending related to non-essential projects, manage O&M expenses, seek borrowings on a secured basis, and explore asset sales.

At ASB, liquidity remains at satisfactory levels. ASB’s cash and cash equivalents was $227 million as of March 31, 2024, compared to $435 million as of December 31, 2023. ASB remains well above the “well capitalized” level under the FDIC Improvement Act prompt correction action capital category, and while the Hawaii economic outlook remains stable, there are emerging risks from potential continued turmoil in the banking industry, inflation, higher interest rates and the tightening of monetary policy that increase the risk of a recession, which could create increased uncertainty regarding the impact on loan performance and the allowance for credit losses (see “Recent Developments” in the Bank section below).

HEI Consolidated material cash requirements. Material cash requirements of HEI Consolidated include: Utility related capital expenditures (including capital expenditures related to wildfires and wildfire mitigations), labor and benefit costs, O&M expenses, legal and consulting costs related to the Maui windstorm and wildfires, fuel and purchase power costs, and debt and

interest payments; Bank related investments in loans; HEI related labor and benefits costs, debt and interest payments and legal and consulting costs related to the Maui windstorm and wildfires and HEI equity contributions to support Pacific Current’s sustainable infrastructure investments.

Although the Company’s credit rating downgrades related to the Maui windstorm and wildfires will continue to adversely impact its ability to access capital markets and other sources of debt and equity financing, if at all, in a timely manner and on acceptable terms, the Company currently believes that its ability to generate cash, both internally from electric utility and banking operations and the existing cash fully drawn on its revolving credit facilities is adequate to maintain sufficient liquidity to fund its contractual obligations and commercial commitments, its forecasted capital expenditures and investments, its expected retirement benefit plan contributions and other material cash requirements in the shorter term. However, in the long-term, any material reduction or extended delay in dividends or other distributions from one or more operating subsidiaries to HEI and the potential damages and losses related to the Maui windstorm and wildfires and related lawsuits (see further information in Note 2 of the Condensed Consolidated Financial Statements), the economic impact of higher fuel prices, inflation, higher interest rates, tightening of monetary policy and geopolitical situations, create significant uncertainty, and the Company cannot predict the extent or duration of these conditions, the future effects that these conditions will have on the Company’s cost of capital and its ability to access additional capital, or the future impacts on the Company’s financial position, results of operations, and cash flows.

The consolidated capital structure of HEI (excluding deposit liabilities and other bank borrowings) was as follows:


(dollars in millions)	March 31, 2024				December 31, 2023

Long-term debt, net—other than bank	$	2,838	54	%	$	2,842	54	%
Preferred stock of subsidiaries	34		1		34		1
Common stock equity	2,377		45		2,345		45
	$	5,249	100	%	$	5,221	100	%

HEI’s commercial paper borrowings and line of credit facility were as follows:


	Average balance		Balance
(in millions)	Three months ended March 31, 2024		March 31, 2024		December 31, 2023
Commercial paper	$	—	$	—	$	—
Line of credit draws on revolving credit facility	175		175		175

Note: This table does not include Hawaiian Electric’s separate commercial paper issuances and line of credit facilities and draws, which are disclosed below under “Electric utility—Financial Condition—Liquidity and capital resources.” The maximum amount of HEI’s short-term commercial paper borrowings during the first three months of 2024 was nil. As of March 31, 2024, available committed capacity under HEI’s line of credit facility was nil.

On March 12, 2024, S&P revised HEI’s outlook to “Negative” from “Watch Negative” and affirmed the “B-” issuer credit rating.

There were no new issuances of common stock through the Dividend Reinvestment Program (DRIP), HEIRSP or the ASB 401(k) Plan in the three months ended March 31, 2024 and 2023.

For the first three months of 2024, net cash provided by operating activities of HEI consolidated was $125 million, primarily due to cash provided by the Utilities of $127 million—Utility customer cash receipts during the first quarter of 2024. Net cash used in investing activities for the same period was $6 million, primarily due to capital expenditures, purchase of FHLB stock, net of redemption, offset by ASB’s net decrease in loans held for investment, proceeds of sale of commercial loans and ASB’s receipt of investment security repayments and maturities. Net cash used in financing activities during this period was $311 million primarily due to net decreases in ASB’s other bank borrowings and deposit liabilities.

Dividends. The payout ratios for the first three months of 2024 and full year 2023 were nil and 59%, respectively. The HEI Board of Directors evaluates the dividend quarterly and considers many factors in the evaluation including, but not limited to, the Company’s results of operations, the long-term prospects for the Company, current and expected future economic conditions, and capital investment alternatives. In August 2023, due to the potential impact from the Maui windstorm and wildfires, the HEI Board of Directors voted to suspend the quarterly cash dividend, starting after the second quarter dividend. This action is intended to allow the Company to provide additional liquidity and allocate cash to rebuilding and restoring power and help ensure a strong future for the Utilities and Bank. The ASB Board of Directors determined to suspend its quarterly cash dividends to HEI, starting after the second quarter 2023 dividend, to help ensure maximum possible Bank liquidity and capital. The Hawaiian Electric Board of Directors reduced its fourth quarter 2023 dividend to HEI, from $32 million in the third

quarter, to $13 million, and recently declared a $13 million first quarter 2024 dividend to HEI, to allow the Utilities to devote more resources to restoration work on Maui and to make critical capital investments, including for wildfire mitigation. Future adverse events could cause dividends from the Utilities to be reduced or suspended. A material reduction, delay or suspension in dividends or other distributions from one or more of the operating subsidiaries to HEI for an extended period of time could have a material adverse effect on the Company’s financial condition and results of operation, barring other offsetting factors.

MATERIAL ESTIMATES AND CRITICAL ACCOUNTING POLICIES

In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ significantly from those estimates.

In accordance with SEC Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” management has identified the accounting policies it believes to be the most critical to the Company’s financial statements—that is, management believes that these policies are both the most important to the portrayal of the Company’s results of operations and financial condition, and currently require management’s most difficult, subjective or complex judgments.

For information about these material estimates and critical accounting policies, in addition to the critical policy discussed below, see pages 48 to 50, 67, and 80 to 81 of the MD&A included in Part II, Item 7 of HEI’s and Hawaiian Electric’s 2023 Form 10-K.

Following are discussions of the results of operations, liquidity and capital resources of the electric utility and bank segments.

Electric utility

Recent developments. See also “Recent developments,” which includes disclosures relating to Maui windstorm and wildfires in HEI’s MD&A.

In the first quarter of 2024, operation and maintenance expenses were higher by approximately $16 million, or 12%, as compared to the same period in 2023. The increase was mainly due to an agreement to settle indemnification claims asserted by the State of Hawaii, wildfire mitigation program expenditures related to inspections, higher property and general liability insurance costs, higher vegetation management expenses, consulting fees for grant management, and higher substation and meter operations corrective maintenance.

In the first quarter of 2024, kWh sales volume decreased 1.5% compared to the same period in 2023. Although electricity prices have decreased since the end of 2022, elevated prices in 2024 have continued to impact electricity consumption. Additionally, electricity sales are still being impacted by the Maui windstorm and wildfires. Maui consumption decreased 6.3% in the first quarter of 2024 compared to the same period in 2023. Additionally, the continued adoption of energy efficiency measures and distributed energy resources further contributed to the reduction of kWh sales.

Fuel prices have decreased 13% over the same quarter in the prior year. While the fuel costs are below 2022’s peak, they remain elevated. Although the Utilities are able to pass through fuel costs to customers and have limited fuel cost exposure through a 2% fuel cost-risk sharing mechanism (approximately $3.7 million maximum exposure annually), higher customer bills could reduce customers’ ability to pay timely or increase the risk of non-payment. In addition, the higher customer bills may lead the PUC to consider other actions to limit or delay any proposed increase in rates in order to mitigate the overall bill impact of rising fuel prices.

In March 2024, the consumer price index increased 3.5% over the last 12 months. In Hawaii, the March 2024 Urban Hawaii (Honolulu) Consumer Price Index (CPI) also increased 4.8% over the last 12 months. Under the PBR framework, inflation risk for the Utilities is partially mitigated by an Annual Rate Adjustment (ARA), which is based on a formula that includes a compounded and non-compounded portion.

•The compounded portion of the ARA adjustment includes an adjustment for the annual change in inflation based on the estimated change in Gross Domestic Product Price Index (GDPPI) for the upcoming year, less a predetermined annual productivity factor (currently set at zero), less a 0.22% customer dividend, applied to a basis equal to test year target revenues plus the RAM Revenue adjustments in effect prior to the implementation of PBR, plus the prior adjustment year’s compounded portion of the ARA adjustment. The inflation factor percentage is the consensus projection of annual percentage change in GDPPI for the following calendar year published by Blue Chip Economic Indicators each October. For the 2023 calendar year, the forecasted 2023 GDPPI was 3.68% (net of the 0.22% customer dividend), measured in October 2022, and became effective in rates on January 1, 2023. For the 2024 calendar year, the forecasted 2024 GDPPI was 2.18% (net of the 0.22% customer dividend), measured in October 2023, and became effective in rates on January 1, 2024.

•The non-compounded portion of the ARA adjustment includes a subtractive component, representing the management audit savings commitment, or refund to customers, which was approved by the PUC for the years 2021 through 2025.

Customer accounts receivable decreased in 2024 by $34 million, or 14% with the number of accounts past due greater than 30 days decreasing by 13% since December 31, 2023. The decrease in accounts receivables was primarily driven by receipt of government and other program assistance, higher cash receipts associated with increased disconnection efforts and a change in bill due date from 19 days to 15 days in March 2024, along with lower customer bills resulting from lower fuel prices. At this time, while accounts receivable balances continue to remain elevated compared to pre-pandemic levels, the decrease in accounts receivable balances since the beginning of the year has reduced working capital requirements and benefited the Utilities’ liquidity. See “Financial Condition—Liquidity and capital resources” for additional information.

System reliability. On March 25, 2024, the Utilities called on Hawaii Island customers to reduce or shift their electricity usage, and in certain instances initiated rolling outages due to a generation capacity shortfall. The situation was due to Hamakua Energy’s unexpected plant shutdown in late February 2024 and also due to the unavailability of generators that have experienced mechanical problems, were at reduced output, or were undergoing maintenance. During that time, generation margins were below targeted levels, especially when wind, solar and hydroelectric output were lower than forecasted. On April 24, 2024, the Utilities have lifted their request to conserve electricity as several of the Utilities’ large generators returned to service. See above in “HEI MD&A-“Other” segment” for discussion relating to Hamakua Energy’s unexpected plant shutdown.

Since the August 2023 Maui windstorm and wildfires, the Utilities have developed a set of Interim Wildfire Safety Measures (IWSM) to mitigate the risk of wildfires in areas identified as having higher risk of wildfire in all service territories (Oahu, Maui County, and Hawaii Island). These interim measures represent actions the Utilities either have already started, or will start in 2024, while the Utilities simultaneously work to develop a more comprehensive Wildfire Safety Strategy. In the

near term, it is anticipated that these measures will result in disruptions to service and negatively impact T&D SAIDI and SAIFI. While the Utilities work to refine these measures over time to mitigate customer impacts, the Utilities are currently focused on taking immediate steps to keep island communities safe during extreme weather events.

Regulatory developments. On November 15, 2021, President Biden signed into law the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), which includes approximately $550 billion of new federal spending to be allocated over the next five years through various programs. The funding will help the State of Hawaii achieve its sustainability goals, including renewable energy, resilience, and decarbonization, while also prioritizing economic development, equity and affordability. The Utilities are pursuing potential grant funding of projects under various programs as primary applicant as well as in partnership with other organizations. On October 17, 2023, the Utilities received a notification from the U.S. Department of Energy that its application for $95 million in federal funds under IIJA has been selected for negotiations. See “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements for additional discussions.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (IRA) that provides for $258 billion in energy-related provisions over a 10-year period. The provisions of the IRA are intended to, among other things, lower gasoline and electricity prices, incentivize clean energy investment and promote reductions in carbon emissions. The Utilities are exploring clean energy tax incentives included in the IRA that may further reduce the Utilities’ recovery under the EPRM and cost to customers.

The Utilities cannot predict the ultimate timing and success of securing funding from any federal government programs.

For a discussion regarding the impact of the Maui windstorm and wildfires on the Utilities’ liquidity and capital resources, see discussion under “Financial Condition–Liquidity and capital resources.”

RESULTS OF OPERATIONS


Three months ended March 31				Increase
2024		2023		(decrease)				(dollars in millions, except per barrel amounts)
$	789	$	830	$	(41)			Revenues. Net decrease largely due to:
						$	(58)	lower fuel oil prices and lower kWh generated1
						1		higher DSM revenue
						2		higher MPIR revenue
						6		higher revenue from ARA adjustments
						8		higher kWh purchased and higher PPAC revenues, partially offset by lower purchased power energy prices2


284		334		(50)				Fuel oil expense2. Net decrease largely due to lower fuel oil prices and lower kWh generated, offset in part by worse heat rate performance, contributed by the loss of generator units on Oahu and Hawaii Island
160		153		7				Purchased power expense1, 2. Net increase largely due to higher kWh purchased and higher capacity charges, along with the addition of Stage 1 and Stage 2 renewable projects, offset in part by lower purchased power energy prices
144		128		16				Operation and maintenance expenses. Net increase largely due to:
						7		the settlement of indemnification claims asserted by the State of Hawaii3
						3		wildfire mitigation program related to inspections
						2		higher property and general liability insurance costs
						1		higher vegetation management
						1		consulting fees for grant management

						1		higher substation and meter operations corrective maintenance
137		139		(2)				Other expenses. Decrease due to lower revenue taxes, partially offset by higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency
63		76		(13)				Operating income. Decrease largely due to higher operation and maintenance expenses along with higher depreciation expense, offset in part by higher ARA revenue
51		61		(10)				Income before income taxes. Decrease largely due to lower operating income, coupled with higher interest income and higher AFUDC related to increased capital expenditures
39		47		(8)				Net income for common stock. Decrease due to lower income before income taxes. See below for effective tax rate explanation
1,906		1,936		(30)				Kilowatthour sales (millions)4
$	121.84	$	139.88	$	(18.04)			Average fuel oil cost per barrel
471,775		472,257		(482)				Customer accounts (end of period)

1The rate schedules of the electric utilities currently contain energy cost recovery clauses (ECRCs) through which changes in fuel oil prices and certain components of purchased energy costs are passed on to customers.

2The rate schedules of the electric utilities currently contain PPACs through which changes in purchased power expenses (except purchased energy costs) are passed on to customers.

3Pursuant to an agreement to settle indemnification claims with the State of Hawaii. See Note 2 of the Condensed Consolidated Financial Statements.

4 kWh sales were lower compared to the same quarter in prior year. The decrease in sales can be attributed to elevated prices in 2024 which continued to impact electricity consumption and Maui windstorm and wildfires which resulted in widespread damage to the Lahaina community. In addition, the continued adoption of energy efficiency measures and distributed energy resources contributed to the reduction in kWh sales.

The Utilities’ effective tax rates for the first quarters of 2024 and 2023 were comparable at 22%.

Hawaiian Electric’s consolidated ROACE was 7.8% and 8.2% for the twelve months ended March 31, 2024 and March 31, 2023, respectively.

For more information of the Utilities’ incremental expenses related to the Maui windstorm and wildfires for the year ended

March 31, 2024, see “Results of operations—Maui windstorm and wildfires related expenses” in HEI’s MD&A.

The net book value (cost less accumulated depreciation) of utility property, plant and equipment (PPE) as of March 31, 2024 amounted to $5.5 billion, of which approximately 21% related to generation PPE, 64% related to transmission and distribution PPE, and 15% related to other PPE. Approximately 6% of the total net book value relates to generation PPE that has been deactivated or that the Utilities plan to deactivate or decommission by 2046.

See “Economic conditions” in the “HEI Consolidated” section above.

Executive overview and strategy. The Utilities provide electricity on all the principal islands in the state, other than Kauai, to approximately 95% of the state’s population, and operate five separate grids. The Utilities’ mission is to provide innovative energy leadership for Hawaii, to meet the needs and expectations of customers and communities, and to empower them with affordable, reliable and clean energy. The goal is to create a safe, modern, resilient, flexible, and dynamic electric grid that protects Hawaii from impacts of climate change and enables an optimal mix of distributed energy resources, such as private rooftop solar, demand response, and grid-scale resources to enable the creation of smart, sustainable, resilient communities and achieve its decarbonization goals that are aligned with the statutory goal of 100% renewable energy by 2045.

Performance-based regulations. On December 23, 2020, the PUC issued a D&O (PBR D&O) approving a new performance-based regulation framework (PBR Framework). See “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements.

Interim Wildfire Safety Measures. The Utilities first began developing a Wildfire Safety Strategy in 2019 and continue to adapt the plan to address the elevated risks in Hawaii. Since the Maui windstorm and wildfires, the Utilities have developed a set of Interim Wildfire Safety Measures to reduce the risk of wildfires associated with utility infrastructure in service territory areas identified as posing a higher wildfire risk. These interim measures represent actions the Utilities have either already started, or will start in 2024, while simultaneously working to develop a more comprehensive strategy. These actions include wildfire risk analysis, operation procedures and grid design changes, enhanced inspection and vegetation management plans, and system hardening.

One of the interim measures is the Public Safety Power Shutoff (PSPS) program, which the Utilities are developing plans to implement to preventatively de-energize circuits in areas identified as high fire risk during certain weather conditions. PSPS will be ready to use as early as July 2024 if and when it is needed as the last line of defense to protect customers, communities and employees. The initial PSPS protocols and operational procedures will represent an early-stage iteration, which will evolve over time as more analytical, forecast, and situational awareness capabilities and wildfire mitigations are deployed. De-energizing circuits in high wildfire risk areas will lead to extended interruptions for many customers, even if not in a high wildfire risk area. The Utilities will continue to work with key stakeholders in balancing the risk of utility-related wildfires with the public consequences of not having electricity.

Transition to a decarbonized and sustainable energy future. The Utilities are fully committed to leading and enabling pathways to a decarbonized and sustainable energy future for Hawaii. A sustainable energy future is one that focuses on delivering electricity safely, reliably and affordably, strengthening resilience and shifting away from fossil-fueled resources. The Utilities believe that a holistic approach to climate change is needed, working on both climate mitigation efforts along with climate adaptation efforts. Climate mitigation requires achieving the Utilities’ decarbonization and renewable energy commitments, facilitating and promoting beneficial electrification, and deploying carbon removal and offsets among other levers to reduce statewide emissions.

In the fourth quarter of 2021, the Utilities outlined their Climate Action Plan to cut carbon emissions from power generation 70% by 2030, compared to a 2005 baseline. The emissions covered by this goal include stack emissions from generation owned by Hawaiian Electric and IPPs who sell electricity to the Utilities. Since that time, delays and cancellations in the commercial operation of new renewable third-party generation resources and higher costs as a result of supply chain disruptions and inflationary pressures, as well as federal policies related to solar panel imports have slowed the pace of progress toward reducing GHG emissions. Also, see the “Developments in renewable energy efforts—New renewable PPAs” section below. The downgrade of Hawaiian Electric’s credit ratings after the Maui windstorm and wildfires is anticipated to be an additional impediment to completion of new renewable energy and storage projects. As a result of these challenges, the Utilities expect the planned 70% reduction in carbon emissions to be achieved later than the original 2030 target date. However, the Utilities will continue to replace significant amounts of fossil fuel generation with renewable energy between now and 2030 and expect to meet or exceed the State of Hawaii’s RPS goals.

Hawaiian Electric has also committed to achieving net zero carbon emissions from power generation by 2045 or sooner. While the timing of the Utilities’ carbon reduction goals will be adjusted, key elements of the 2030 plan have already been completed or remain on track to be completed by 2030, including the closure of the state’s last coal-fired IPP plant that occurred in September 2022, increasing rooftop solar by more than 50% over 2021 levels, retiring six fossil fuel generating

units, increasing grid-scale and customer-owned storage, expanding geothermal resources, and creating customer incentives for using clean, lower-cost energy at certain times of the day and using less fossil-fueled energy at night. The retirement of fossil-fueled generating units is consistent with state policy and supported by Hawaii State law.

On September 1, 2022, the last coal-fired IPP plant in the state, providing approximately 10% of Oahu’s generation, ceased operations, removing a significant source of GHG emissions from the Utilities’ generation mix. In advance of the retirement of the coal-fired IPP plant, the Utilities developed plans, including contingency plans, to ensure reliable service through the transition period. These plans include the anticipated addition of renewable energy/storage projects, reserve capacity from existing generation sources, the acceleration of maintenance work during periods with anticipated higher reserve levels, and multiple demand response/DER programs. For example, from the Stage 1 renewable RFP, a 39 megawatt (MW) solar-plus-storage project reached commercial operations in mid-2022 and a 36 MW Stage 1 solar-plus-storage project reached commercial operations in early 2023. From the Stage 2 renewable RFP, a 185 MW standalone storage facility reached commercial operations in December 2023. In addition, in April 2023, a 30 MW Stage 1 solar-plus-storage project on Hawaii Island reached commercial operations. An additional 12.5 MW Stage 1 solar-plus storage project on Oahu reached commercial operations on March 28, 2024.

Hawaii’s renewable portfolio standard law requires electric utilities to meet an RPS of 30%, 40%, 70% and 100% by December 31, 2020, 2030, 2040 and 2045, respectively. Hawaii law has also established a target of sequestering more atmospheric carbon and greenhouse gases than emitted within the state by 2045. The Utilities’ strategies and plans are fully aligned in meeting these targets (see also “Integrated Grid Planning” below).

The Utilities have made significant progress on the path to clean energy and have been successful in achieving RPS goals. To date the Utilities have met all of the statutory RPS goals, including exceeding the latest milestone RPS target of 30% for 2020, where it achieved an RPS of 34.5%. In July 2022, former Governor Ige signed Act 240 (H.B.2089), that amended the RPS calculation from renewable energy as a percentage of sales to renewable energy as a percentage of total generation. The amended RPS calculation results in a lower calculated percentage than the amount calculated under the previous methodology. For example, the 2022 RPS achieved under the revised RPS calculation was 31.8% versus 39.1% under the prior method. The change in the definition is effective from July 2022 forward and will require that the Utilities acquire more renewable energy than under the previous RPS calculation to comply with the RPS milestones; however, the Utilities expect to continue to meet the RPS milestones under the amended RPS law. (See “Developments in renewable energy efforts” below).

If the Utilities are not successful in meeting the RPS targets as mandated by law, the PUC could assess a penalty of $20 for every megawatt-hour (MWh) that an electric utility is deficient. Based on the level of total generation in 2023, a 1% shortfall in meeting the 2030 RPS requirement of 40% would translate into a penalty of approximately $2.1 million. The PUC has the discretion to reduce the penalty due to events or circumstances that are outside an electric utility’s reasonable control, to the extent the event or circumstance could not be reasonably foreseen and ameliorated. In addition to penalties under the RPS law, failure to meet the mandated RPS targets would be expected to result in a higher proportion of fossil fuel-based generation than if the RPS target had been achieved, which in turn would be expected to subject the Utilities to limited commodity fossil fuel price exposure under a fuel cost risk-sharing mechanism. The fuel cost risk-sharing mechanism apportions 2% of the fuel cost risk to the utilities (and 98% to ratepayers) and has a maximum exposure (or benefit) of $3.7 million. Conversely, the Utilities have incentives under PIMs that provide a financial reward for accelerating the achievement of renewable generation as a percentage of total generation, including customer supplied generation. In 2023, the Utilities achieved a 33.3% RPS earning a reward of $444,116 based on $15/MWh in exceedance of 33.0% RPS. In 2024, the Utilities are eligible for a reward of $10/MWh in exceedance of 34.0% RPS.

The Utilities are fully aligned with, and supportive of, state policy to achieve a decarbonized future and have made significant progress in reducing emissions through renewable energy and electrification. This alignment with state policy is reflected in management compensation programs and the Utilities’ long-range plans, which include aspirational targets in order to catalyze action and accelerate the transition away from fossil fuels throughout its operations at a pace more rapid than dictated by current law. The long-range plans, including aspirational targets, serve as guiding principles in the Utilities’ continued transformation, and are updated regularly to adapt to changing technology, costs, and other factors. While there is no financial penalty for failure to achieve the Utilities’ long-range aspirational objectives, the Utilities recognize that there are environmental and social costs from the continued use of fossil fuels.

The State of Hawaii’s policy is supported by the regulatory framework and includes a number of mechanisms designed to maintain the Utilities’ financial stability during the transition toward the State’s decarbonized future. Under the sales decoupling mechanism, the Utilities are allowed to recover from customers, target test year revenues, independent of the level of kWh sales, which have generally trended lower over time as privately-owned DER have been added to the grid and energy efficiency measures have been put into place. Other regulatory mechanisms under the PBR framework reduce some of the regulatory lag during the multi-year rate plan (MRP), such as the annual revenue adjustment to provide annual changes in utility revenues, including inflationary adjustments, and the exceptional project recovery mechanism, which allows the Utilities to

recover and earn on certain approved eligible projects placed into service. See “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements.

Integrated Grid Planning. Achieving high levels of renewable energy and a carbon free electric system will require modernizing the grid through coordinated energy system planning in partnership with local communities and stakeholders. To accomplish this, the Utilities are implementing an innovative systems approach to energy planning intended to yield the most cost-effective renewable energy and decarbonization pathways that incorporates customer and stakeholder input.

The Integrated Grid Planning (IGP) process utilizes an inclusive and transparent stakeholder engagement model to provide an avenue for interested parties to engage with the Utilities and contribute meaningful input throughout the IGP process. The IGP Stakeholder Council, Technical Advisory Panel and Working groups have been established and meet regularly to provide feedback and input on specific issues and process steps in the IGP. On March 7, 2024, the PUC accepted the Utilities’ final Integrated Grid Plan. The Integrated Grid Plan proposes actionable steps to decarbonize the electric grid on the State of Hawaii’s timeline, with a flexible framework that can adapt to future technologies. The Integrated Grid Plan is the culmination of more than five years of partnership with stakeholders and community members across the islands. Together, they forecasted future energy needs and identified strategies to meet Hawaii’s growing energy demand with 100% renewable resources.

Demand response programs. Pursuant to PUC orders, the Utilities are developing an integrated Demand Response (DR) Portfolio Plan that will enhance system operations and reduce costs to customers. The reduction in cost for the customer will take the form of either rates or incentive-based programs that will compensate customers for their participation individually, or by way of engagements with turnkey service providers that contract with the Utilities to aggregate and deliver various grid services on behalf of participating customers and their distributed assets.

On June 9, 2021, the PUC issued an order providing guidance to the third Grid Service RFP filed on February 23, 2021. The proposed Grid Service RFP focused only on Oahu and is seeking 132 MW of grid services with focus on capacity reduction (60 MW) similarly in response to the potential reserve shortfall from the AES coal plant retirement that occurred on September 1, 2022. The Utilities executed a Grid Services Purchase Agreement (GSPA) for a total grid services amount of 97.4 MW and filed with the PUC to request approval on March 16, 2022. On July 12, 2023, the PUC approved the GSPA with modifications. The Utilities amended the GSPA and filed with the PUC on December 29, 2023.

On June 8, 2021, the PUC approved the new program, Emergency Demand Response Program (EDRP), a battery storage incentive program to dispatch electricity between 6 p.m. to 8 p.m. daily from participating residential and commercial customers, to address the potential reserve shortfalls following the AES coal plant retirement. The Battery Bonus on Oahu is officially closed to new applications. As of March 31, 2024, the Utilities have received and approved applications totaling 46.79 MW on Oahu.

On March 30, 2022, the Utilities filed with the PUC to request expanding the EDRP for up to 15 MW on the island of Maui and received PUC approval on May 20, 2022. The EDRP on Maui became effective as of June 1, 2022. Subsequently on June 23, 2022, the PUC approved the cost recovery of the additional incentives for both Oahu and Maui through the Demand Side Management Surcharge. As of March 31, 2024, the Utilities have received and approved the applications totaling approximately 7.95 MW on Maui.

On October 31, 2022, the PUC issued an order, directing the Utilities to solicit comments from all interested parties and stakeholders on the Utilities’ Draft Grid Services RFP filed on June 30, 2022. The proposed Draft Grid Services RFP focused only on Maui and is seeking 15 MW of grid services. Hawaiian Electric issued the RFP on February 1, 2023 and bids were due on February 1, 2024. On February 23, 2024, Hawaiian Electric filed a letter to the PUC recommending to close the RFP as no bids were received. Hawaiian Electric will recommend issuing a revised RFP for PUC approval the first quarter of 2025.

Grid modernization. The overall goal of the Grid Modernization Strategy is to deploy modern grid investments at an appropriate priority, sequence and pace to cost-effectively maximize flexibility, minimize the risk of redundancy and obsolescence, deliver customer benefits and enable greater DER and renewable energy integration. Under the Grid Modernization Strategy, the Utilities expect that new technology will help increase adoption of private rooftop solar and make use of rapidly evolving products, including storage and advanced inverters. On March 25, 2019, the PUC approved a plan for the Utilities to implement Phase 1 of their Grid Modernization Strategy, which is the proportional deployment of advanced metering infrastructure (AMI). On February 28, 2022, the PUC expanded the scope of Phase 1 to the full service territory with a completion date set for the third quarter of 2024. The estimated cost of full deployment (including proportional deployment) is approximately $143 million in capital and deferred software cost and is expected to be incurred over five years. As of March 31, 2024, approximately $121 million of capital and deferred software cost has been incurred to date under Phase 1 and is currently being recovered under the MPIR mechanism until such costs are included in base rates. On June 24, 2022, the PUC approved with certain conditions the Utilities’ request to aggregate the per-meter and network cost caps and to recover O&M

costs associated with full-service territory AMI deployment under the MPIR mechanism. As of March 31, 2024, the Utilities have deployed about 407,000 advanced meters, servicing approximately 86% of total customers.

The Utilities filed an application with the PUC on September 30, 2019 for an Advanced Distribution Management System (ADMS) as part of Phase 2 of their Grid Modernization Strategy implementation. However, on December 30, 2019, the PUC suspended the Utilities’ application for the ADMS pending the Utilities’ filing of a supplemental application for the broad deployment of field devices. This supplement and update to the Grid Modernization Strategy Phase 2 field devices application was filed on March 31, 2021. A PUC order was issued on April 27, 2021, unsuspending and resuming consideration of the Phase 2 Application. The Utilities filed the reply statement of position on October 15, 2021, completing the discovery phase of the docket. On November 16, 2021, the PUC suspended the Utilities’ ADMS and Phase 2 field device application to focus the Utilities’ attention on completing Phase 1. The Utilities filed a Motion for Reconsideration with the PUC in response to the suspension, but the motion was denied. The PUC subsequently clarified that the Utilities may resume the Phase 2 docket no earlier than six months before Phase 1 is scheduled to be completed in the third quarter of 2024. Resumption of the Phase 2 proceeding would likely commence six months prior to the scheduled completion date selected by the PUC. On April 17, 2023, the Utilities filed a motion with the PUC, requesting the suspended docket to be reopened and to allow the Utilities to file an updated and supplemented application for updated project costs. The estimated cost for the implementation of Phase 2 over six years, which includes capital, deferred software costs and O&M costs, is $113 million. On May 3, 2023, the PUC granted the motion to resume the docket, and hosted a technical conference on the updated application on May 19, 2023. The Utilities filed the reply statement of position on September 28, 2023, completing the discovery phase of the docket. On January 19, 2024, the Utilities hosted a technical conference with the PUC.

Community-based renewable energy. In December 2017, the PUC adopted a community-based renewable energy (CBRE) program framework which allows customers who cannot, or chose not to, take advantage of private rooftop solar to receive the benefits of renewable energy to help offset their monthly electric bills and support clean energy for Hawaii. The program has two phases.

The first phase, which commenced in July 2018, totaling 8 MW of solar photovoltaic (PV) only with one credit rate for each island, closed on April 9, 2020. Two phase 1 projects (28.32 kW on Maui and 270 kW on Oahu) have been operational for three years and one Phase 1 project (3,000 kW on Oahu) achieved commercial operations on October 1, 2023. Two additional phase 1 projects achieved commercial operations on April 1, 2024 (Hawaii Island: 750kW and Molokai: 250kW).

The second phase, which commenced on April 9, 2020 and subsequently expanded on July 27, 2021, allows over 250 MW across all Hawaiian Electric service territories in two tranches for small (under 250 kW), mid-tier and large system sizes to encourage a variety of system sizes. To provide opportunities for low-to-moderate income (LMI) customers to participate in the program, 23 MW of capacity for dedicated-LMI projects were awarded on November 15, 2022 through three island specific RFPs for Oahu, Maui and Hawaii Island. LMI projects do not have a size cap nor do they decrease the 250 MW capacity available to other projects. One project has since been withdrawn by the selected CBRE developer and the remaining 20 MW of dedicated-LMI projects are expected to become operational in 2026.

The Utilities issued the CBRE Tranche 1 RFPs for Oahu, Maui and Hawaii on April 14, 2022. The RFPs closed on August 17, 2022, and proposals were evaluated. Tranche 1 projects, which are greater than or equal to 250 kW, were awarded on February 22, 2023. Two projects on Hawaii Island were subsequently withdrawn by the developer on October 18, 2023. The remaining Tranche 1 projects are expected to become operational in 2025 or 2026.

For Lanai, the Utilities combined the previously issued Variable Renewable Dispatchable Generation Paired with Energy Storage RFP and the CBRE RFP to optimize the benefits of procuring renewable energy, spur development and increase the likelihood of success of the CBRE Program on Lanai. See “Developments in renewable energy efforts–Requests for renewable proposals, expressions of interest, and information” for additional information.

One CBRE proposal for Lanai was selected but negotiations were terminated on June 15, 2022. With the concurrence of the Independent Observer, a replacement proposal was selected on July 1, 2022. On July 25, 2022, the Utilities announced the selection of a new developer for the Lanai CBRE RFP. On September 21, 2022, the Utilities were informed by Pulama Lanai of a project being planned on Lanai to remove the two large resorts from the grid, which represent approximately 40% of the load of the island and raises great uncertainty around the future energy needs for Lanai. On September 28, 2022, the Utilities notified the PUC that ongoing negotiations for the Lanai CBRE project would continue, but the Utilities did not execute a PPA at this time given the uncertainty due to the Pulama Lanai notification. The parties are currently exploring options to move forward with the project. On Molokai, proposals were only received from a single community co-op group. After evaluation of these proposals and with concurrence of the independent observer, the Utilities filed a letter on September 9, 2022, proposing to close the Molokai CBRE RFP and to work with the lone bidder to improve certain aspects of its two proposed projects outside of the RFP process for the benefit of the residents of Molokai. After successful negotiations, two contracts for solar plus storage

facilities were executed and on September 29, 2023, the Utilities filed two applications with the PUC requesting approval of the contracts. On January 8, 2024, the PUC approved the two contracts.

The Utilities CBRE Phase 2 Rule 29 became effective on March 10, 2022. The Utilities are currently accepting project applications for small CBRE projects less than 250 kW in size. The PUC reserved 45 MW as well as a small amount of unallocated capacity from Phase 1 for small projects in Phase 2 on Oahu, Maui and Hawaii Island. The Utilities have developed a CBRE Portal where Subscriber Organizations can apply for small project capacity and manage subscribers for all CBRE projects in the program. Customers can also use the CBRE Portal to solicit subscription quotes, compare, and subscribe to a project once the Subscriber Organization has added their project to the portal.

Microgrid services tariff proceeding. In enacting Act 200 of 2018, the Hawaii legislature found that Hawaii’s residents and businesses were vulnerable to disruptions in the islands’ energy systems caused by extreme weather events or other disasters, and stated its belief that the use of microgrids would build energy resiliency into Hawaii’s communities, thereby increasing public safety and security. The purpose of Act 200 was therefore to encourage and facilitate the development and use of microgrids through the establishment of a standard microgrid services tariff. In July 2018, pursuant to Act 200, the PUC opened a proceeding to investigate the establishment of a microgrid services tariff. In August 2019, the PUC issued an order prioritizing items for resolution in the docket and directed the Parties to establish working groups (the Working Group) to address issues identified by the PUC.

On May 27, 2021, the Utilities filed the Microgrid Service Tariff. On September 21, 2021, the PUC provided guidance for Phase 2 of the Microgrid Tariff proceeding, specifically identifying the objective for Phase 2 to promote self-sufficiency and resilience among microgrid project operators, as well as to further streamline the Microgrid Services Tariff where applicable. Furthermore, the PUC instructed Parties to recommend priority topics, along with supporting rationale to better inform the topics that will be discussed during this phase of the proceeding, which the parties submitted by October 21, 2021.

On April 1, 2022, the PUC established its Prioritized Issues for Resolution for Phase 2 of the Microgrid proceeding, which includes the following: 1) Microgrid Compensation and Grid Services; 2) Utility Compensation; 3) Customer Protection and Related Considerations; 4) Interconnection; and 5) Working Group coordination with related microgrid and resilience Initiatives at Hawaiian Electric and government agencies. Furthermore, the PUC established a procedural schedule to consist of quarterly status conference meetings with the PUC, a Phase 2 Working Group Report, draft of a revised Microgrid Service Tariff, Party comments to the proposed Microgrid Service Tariff, followed by a PUC D&O.

On June 30, 2022, the PUC provided further guidance to the Working Group to prioritize discussion of the microgrid types in the following order: 1) Hybrid Microgrid - Third Party Developer using Utility lines/infrastructure; 2) Hybrid Microgrid - Utility Project with Partners; and 3) Customer Microgrid. Additionally, the PUC instructed the Working Group to discuss microgrid compensation and continue the involvement of microgrid developers in working group meetings.

The Working Group met from April 2022 through October 2022 to discuss the PUC’s objectives and respond to the Phase 2 priority issues. On October 31, 2022, the PUC issued a guidance letter and advised that the Working Group propose a new timeline for the Report. The Utilities and the Consumer Advocate filed a joint letter with a revised timeline on November 10, 2022. On November 21, 2022, the PUC issued an order to suspend the Phase 2 procedural schedule while it reviews the joint letter.

Decoupling. See “Decoupling” in Note 4 of the Condensed Consolidated Financial Statements for a discussion of decoupling.

Regulated returns. As part of the PBR Framework’s annual review cycle, the Utilities track their rate-making ROACEs as calculated under the earnings sharing mechanism, which includes only items considered in establishing rates. At year-end, each utility’s rate-making ROACE is compared against its ROACE allowed by the PUC to determine whether earnings sharing has been triggered. The D&O in the PBR proceeding modified the earnings sharing mechanism to a symmetric arrangement. Effective with annual earnings for 2021, the earnings sharing will be triggered for achieved rate-making ROACE outside of a 300 basis points dead band above and below the current authorized rate-making ROACE of 9.5% for each of the Utilities. Earnings sharing credits or recoveries will be included in the biannual report (formally known as annual decoupling filing) to be filed with the PUC in the spring of the following year. Results for 2022 and 2021 did not trigger the earnings sharing mechanism for the Utilities.

Actual and PUC-allowed returns, as of March 31, 2024, were as follows:


%	Rate-making Return on rate base (RORB)*			ROACE**			Rate-making ROACE***
Twelve months ended March 31, 2024	Hawaiian Electric	Hawaii Electric Light	Maui Electric	Hawaiian Electric	Hawaii Electric Light	Maui Electric	Hawaiian Electric	Hawaii Electric Light	Maui Electric
Utility returns	7.18	6.42	4.09	8.74	7.46	3.54	9.19	7.92	3.62
PUC-allowed returns	7.37	7.52	7.43	9.50	9.50	9.50	9.50	9.50	9.50
Difference	(0.19)	(1.10)	(3.34)	(0.76)	(2.04)	(5.96)	(0.31)	(1.58)	(5.88)

* Based on recorded operating income and average rate base, both adjusted for items not included in determining electric rates.

** Recorded net income divided by average common equity.

*** ROACE adjusted to remove items not included by the PUC in establishing rates, such as incentive compensation.

The gap between PUC-allowed ROACEs and the ROACEs achieved is primarily due to the exclusion of certain expenses from rates (for example, incentive compensation and charitable contributions), and depreciation, O&M expense and return on rate base that are in excess of what is currently being recovered through rates (the last rate case plus authorized RAM adjustments and ARA revenues). Maui Electric’s lower returns are primarily due to higher labor and associated costs from the Maui windstorm and wildfires response, higher average common equity, and a higher rate base.

Regulatory proceedings. On December 23, 2020, the PBR D&O was issued, establishing the PBR Framework. The PBR Framework implemented a five-year multi-year rate period (MRP), during which there will be no general rate case applications. In the fourth year of the MRP, the PUC will comprehensively review the PBR Framework to determine if any modifications or revisions are appropriate. See also “Regulatory proceedings” in Note 4 of the Condensed Consolidated Financial Statements.

Developments in renewable energy efforts. The Utilities’ renewable energy goals depend, in large part, on the success of renewable projects developed and operated by independent power producers. Beginning in 2017, the Utilities embarked on an ambitious procurement effort, selecting multiple solar plus storage projects to help reach the Utilities renewable portfolio standards goals as well as to assist the Utilities in retiring fossil fuel generation. Several of the recently procured projects have experienced delays as a result of supply chain disruptions caused by impacts from the COVID-19 pandemic, solar product detentions at U.S. ports of entry ordered by the U.S. Customs and Border Protection agency, and unforeseen site conditions which resulted in unanticipated project costs or in some cases the inability to effectively use previously identified project sites. These impacts have resulted in five Stage 2 projects declared null and void by the independent power producers and one Stage 1 project and one Stage 2 project mutually terminating their PPAs with the Utilities. Projects have also indicated potential impacts from the investigation launched by the U.S. Department of Commerce on March 28, 2022, in response to a request by Auxin Solar Inc. in regard to solar panel imports. On June 6, 2022, President Biden created a bridge to temporarily facilitate U.S. solar deployers’ ability to source certain imported solar modules and cells free of certain duties for 24 months in order to ensure the U.S. has access to a sufficient supply of solar modules to meet electricity generation needs. The Utilities have negotiated amendments with several project developers regarding requests to increase previously approved prices and extend guaranteed commercial operations dates for those projects in order to ensure their viability given the impact of these recent market conditions. All of these amendments have been approved. Significant project delays or failures of these projects increase the risk of the Utilities not meeting the renewable portfolio standards or other climate related goals, eligibility for performance incentive mechanisms associated with the speed of increasing renewable generation, and the ability to retire fossil fuel units. Developments in the Utilities’ efforts to further their renewable energy strategy include renewable energy projects discussed in Note 4 of the Condensed Consolidated Financial Statements and the following:

New renewable PPAs.

•On December 31, 2019, Hawaii Electric Light and Puna Geothermal Ventures entered into an Amended and Restated Power Purchase Agreement (PGV ARPPA). The PGV ARPPA extends the term of the existing PPA by 25 years to 2052, expands the firm capacity of the facility to 46 MW and delinks the pricing for energy delivered from the facility from fossil fuel prices to reduce cost to customers. On March 16, 2022, the PUC issued a D&O, approving the PGV ARPPA, subject to conditions, that include requiring completion of a final environmental review prior to construction. On March 28, 2022, Puna Pono Alliance filed a Motion for Reconsideration seeking reconsideration, modification and/or vacation of the D&O. On June 6, the PUC denied Puna Pono’s Motion for Reconsideration. PGV notified the Utilities that changes in market conditions that transpired since the terms of the PGV ARPPA were negotiated impacted the financial viability of the Project, and that an amendment to the PGV ARPPA was necessary to mitigate the impacts. On March 27, 2023, the Utilities and PGV executed the First Amendment to the PGV ARPPA which increases the capacity payment and extends the GCOD. An application requesting approval of the First Amendment to the PGV ARPPA was filed on April 4, 2023. On June 13, 2023, PGV notified the Utilities of concerns of its ability to timely deliver on the terms of the ARPPA. PGV has been working to re-establish its capacity generation and has continued drilling and plans to drill additional wells, however, this process has taken longer than anticipated and PGV has become increasingly concerned about timely achieving the Contract Firm Capacity of 46 MW. In light of receiving this information and to allow the Utilities and PGV to determine the best path forward, on July 6, 2023 the Utilities asked the PUC to put the procedural schedule on hold for approval of the First Amendment to the PGV ARPPA. In order to address PGV’s concerns, the parties executed a Second Amendment to the PGV ARPPA, which among other things lowered the capacity needed to reach commercial operations and preserves the full contract capacity, effectuating a partial commissioning. On October 2, 2023 the Utilities filed a letter requesting the docket be reopened and seeking approval of the First and Second Amendments to the PGV ARPPA by the end of 2023. On December 29, 2023, the PUC issued a decision and order conditionally approving the First and Second Amendments to the PGV ARPPA. As directed, on January 12, 2024, the Utilities filed a supplemental brief explaining its request for cost recovery. A response from the PUC is still pending.

•Under a request for proposal process governed by the PUC and monitored by independent observers, in February 2018, the Utilities issued Stage 1 Renewable RFPs for 220 MW of renewable generation on Oahu, 50 MW of renewable generation on Hawaii Island, and 60 MW of renewable generation on Maui. To date, the Utilities filed seven requests with the PUC for approval of amendments related to previously-approved PPAs for changes in pricing and/or guaranteed commercial operations dates to support completion of the projects while maintaining system reliability. The PUC has approved all seven amendments. On March 28, 2024, AES Oahu Solar project reached commercial operations. See also “Purchase commitments” in Note 4 of the Condensed Consolidated Financial Statements. To date, four projects reached commercial operations.

A summary of the remaining seven PPAs is as follows:


Utilities	Number of contracts	Total photovoltaic size (MW)	BESS Size (MW/MWh)	Guaranteed commercial operation dates	Contract term (years)	Total projected annual payment (in millions)
Hawaiian Electric	4	139.5	139.5/558	7/31/22, 1/11/23, 3/28/24 & 10/31/24	20 & 25	$	34.0
Hawaii Electric Light	2	60	60/240	4/21/23 & 10/11/24	25	19.2
Maui Electric	1	60	60/240	5/31/24	25	13.2
Total	7	259.5	259.5/1038			$	66.4

The Utilities have received PUC approvals to recover the total projected annual payment of $66.4 million for the seven PPAs through the PPAC to the extent such costs are not included in base rates.

•In continuation of their February 2018 request for proposal process, the Utilities issued their Stage 2 Renewable RFPs for Oahu, Maui and Hawaii Island and Grid Services RFP on August 22, 2019. To date, the Utilities had filed 11 PPAs. Additionally, two GSPAs and two applications for commitments of funds for capital expenditures for approval of the utility self-build projects were filed with the PUC. Of the 11 filed PPAs, six PPAs were declared null and void by the independent power producers and one PPA was mutually terminated. The four remaining projects have received PUC approval. To date, the Utilities filed three requests with the PUC for approval of amendments related to previously-approved PPAs for changes in pricing and/or guaranteed commercial operations dates to support completion of the projects while maintaining system reliability. The PUC has approved all three amendments. The two GSPAs were approved by the PUC in December 2020. To date, one project reached commercial operations.

A summary of the remaining four approved Stage 2 PPAs, is as follows:


Utilities	Number of contracts	Total photovoltaic size (MW)	BESS Size (MW/MWh)			Guaranteed commercial operation dates	Contract term (years)	Total projected annual payment (in millions)
Hawaiian Electric	3	79	79	/	443	5/13/24, 5/17/24 & 9/1/24	20 & 25	$	31.4
Hawaiian Electric	1	N/A	185	/	565	12/19/23	20	24.0
Total	4	79	264	/	1,008			$	55.4

The total projected annual payment of $55.4 million for these PPAs will be recovered through the PPAC to the extent such costs are not included in base rates.

A summary of the GSPAs that were approved by PUC in December 2020 is as follows:


Utilities	Fast Frequency Response - 1 (MW)	Fast Frequency Response - 2 (MW)	Capacity - Load Build (MW)	Capacity - Load Reduction (MW)
Hawaiian Electric	—	26.7	14.5	19.4
Hawaii Electric Light	6.0	—	3.2	4.0
Maui Electric	6.1	—	1.9	4.7
Total	12.1	26.7	19.6	28.1

A summary of the utility self-build projects is as follows:

Utilities

Number of contracts

BESS Size (MW/MWh)

Guaranteed commercial operation dates

Hawaii Electric Light

12/12

12/30/22

Maui Electric

40/160

11/30/26

Total

52/172

* The utility Self-Build project was denied by the PUC on May 25, 2022 and the Utilities filed a motion for reconsideration with the PUC. On January 26, 2024, the PUC granted the Utilities’ November 15, 2023 request to suspend the docket to focus on identified priorities. The Utilities provided the PUC with an updated assessment of the project on April 30, 2024 and requested to withdraw the application because the need that was to be served by the project can now be met by Stage 3 RFP resources.

Tariffed renewable resources.

•As of March 31, 2024, there were approximately 621 MW, 140 MW and 148 MW of installed distributed renewable energy technologies (mainly PV) at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively, for tariff-based private customer generation programs, namely Standard Interconnection Agreement, Net Energy Metering, Net Energy Metering Plus, Customer Grid Supply, Customer Self Supply, Customer Grid Supply Plus and Interim Smart Export. As of March 31, 2024, an estimated 40% of single family homes on the islands of Oahu, Hawaii and Maui have installed private rooftop solar systems, and approximately 23% of the Utilities’ total customers have solar systems.

•The Utilities began accepting energy from feed-in tariff projects in 2011. As of March 31, 2024, there were 44 MW, 2 MW and 6 MW of installed feed-in tariff capacity from renewable energy technologies at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.

Biofuel sources.

•On June 30, 2021, the Utilities issued an RFP for all fuels, including biodiesel, for supply commencing January 1, 2023. The Utilities and Pacific Biodiesel Technologies, LLC (PBT) signed an agreement on December 13, 2021 for supply of biodiesel on all islands commencing January 1, 2023, which was approved by the PUC on December 1, 2022. Hawaiian Electric also has a spot buy contract with PBT to purchase additional quantities of biodiesel at or below the price of diesel. Some purchases of “at parity” biodiesel have been made under the spot purchase contract, which was extended through June 2025.

•Hawaiian Electric has a contingency supply contract with REG Marketing & Logistics Group, LLC to also supply biodiesel to any generating unit on Oahu in the event PBT is not able to supply necessary quantities. This contingency contract has been extended to November 2024, and will continue with no volume purchase requirements.

Requests for renewable proposals, expressions of interest, and information.

•On November 22, 2021, CBRE RFPs for Molokai and Lanai were opened. The RFP for Lanai sought a single PV paired with storage project, which included a 3 MW portion, reserved for CBRE. The Lanai RFP closed on February 14, 2022 and the Molokai RFP closed on March 1, 2022. A project was selected in the Lanai RFP, but negotiations were terminated. On July 1, 2022, a replacement project was selected and negotiations commenced. The RFP for Molokai sought 2.75 MW of new PV paired with storage projects for CBRE generation. No projects were selected in the Molokai RFP. However, with the concurrence of the independent observer, the Utilities worked with the lone bidder outside of the RFP process and filed two PPAs with a total of 2.45 MW of PV paired with 11.1 MWh of battery energy storage on September 29, 2023.The PUC approved both PPAs on January 8, 2024. See “Transition to a decarbonized and sustainable energy future—Community-based renewable energy” for additional information.

•On March 17, 2022, the CBRE LMI RFPs for Oahu, Maui and Hawaii Island were opened and proposals were received. In November 2022, seven projects were selected consisting of one standalone PV project on Oahu, three paired PV with storage projects on Maui, and three paired PV with storage projects on Hawaii Island. One project on Maui was subsequently withdrawn by the developer on April 11, 2024. The Utilities opened the CBRE Tranche 1 RFPs for Oahu, Maui and Hawaii Island on April 14, 2022. In March 2023, five projects were selected consisting of one paired PV with storage project on Oahu and four standalone PV projects on Hawaii Island. Two projects on Hawaii Island were subsequently withdrawn by the developer on October 18, 2023. See “Transition to a decarbonized and sustainable energy future—Community-based renewable energy” for additional information.

•The Hawaii Island Stage 3 RFP, seeking 325 gigawatt-hours (GWh) per year of energy and 65 MW of renewable firm capacity, was issued on November 21, 2022. Proposals were received on April 20, 2023. The Stage 3 RFPs for Oahu and Maui opened for bids on January 20, 2023. For Oahu, the Utilities sought 500 to 700 MW of renewable firm capacity, and at least 965 GWh of renewable dispatchable energy annually. For Maui, the Utilities sought at least 40 MW of renewable firm capacity, and at least 425 GWh of renewable dispatchable energy annually. For the Oahu and Hawaii Island RFPs, as well as for the variable generation portion of the Maui RFP. Proposals for the firm generation portion of the Maui Stage 3 RFP were received on August 17, 2023, and Priority List selections were announced on October 9, 2023. 15 proposals were selected to the Final Award Group on December 8, 2023. Seven projects were selected on Oahu (three solar plus storage and four firm renewable) totaling 413 GWh of variable generation, 594 MW of firm generation, and 990 MWh of storage; four projects were selected on Maui (three solar plus storage and one wind) totaling 324 GWh of variable generation, and 320 MWh of storage; and four projects were selected on Hawaii Island (three solar plus storage and one firm renewable) totaling 512 GWh of variable generation, 60 MW of firm generation, and 834 MWh of storage. One project totaling 40 MW of firm renewable generation was selected to the Maui Firm Final Award Group on February 2, 2024. Negotiations are ongoing.

Legislation and regulation. Congress and the Hawaii legislature periodically consider legislation that could have positive or negative effects on the Utilities and their customers. Also see “Environmental regulation” in Note 4 of the Condensed Consolidated Financial Statements.

Fuel contracts. On June 30, 2021, the Utilities issued two RFPs for all fuels for supply commencing January 1, 2023. On February 1, 2022, the Utilities and PAR Hawaii Refining, LLC (PAR Hawaii) entered into a fuel supply contract commencing January 1, 2023. On December 1, 2022, the PUC issued a decision and order (D&O) approving the PAR Hawaii fuels contract and recovery of associated costs through ECRC.

On March 3, 2022, as part of economic sanctions amid the Russia-Ukraine war, PAR Hawaii announced that it was suspending all purchases of Russian crude oil, which accounts for at least 25% of Hawaii’s supply. The Utilities are taking additional measure to ensure adequate supply of fuel by entering into a backup fuel supply contract with Vitol Inc. (Vitol) commencing on December 1, 2022 through June 30, 2025 with annual extensions if mutually agreed by both parties. The PUC issued the final D&O approving the Vitol backup fuels supply contract on December 1, 2022 and the costs incurred under the contract with Vitol are recovered in the Utilities’ respective ECRCs.

FINANCIAL CONDITION

Liquidity and capital resources.

As of March 31, 2024, Hawaiian Electric had no commercial paper outstanding, $200 million outstanding on its revolving credit facility and no remaining available borrowing capacity under the Utilities’ committed line of credit. The cash proceeds were invested in highly liquid short-term investments, and as of March 31, 2024, the Utilities’ cash and cash equivalents balance was $130 million, compared to $106 million as of December 31, 2023.

Hawaiian Electric’s objective continues to be to operate a strong, financially healthy enterprise to empower a thriving future for Hawaii. While the fundamentals of its business remain strong, the Utilities took prudent and measured actions to

strengthen their financial position while continuing to provide reliable service to its customers and reinforcing its commitment to serving the community for the long term. The Utilities are working with financial advisors to maximize available liquidity and believe they have adequate cash to meet their financial obligations and sustain operations in the short term. Longer term, the Utilities are evaluating other sources of liquidity that could include securitization, re-prioritizing capital spending and reducing O&M, issuing secured debt, and conducting asset sales, among others.

Accounts receivable balances remain elevated coming out of the pandemic and has led to higher bad debt expense and higher write-offs in 2023 and year-to-date March 2024, following the end of the moratorium on disconnections. The higher bad debt expense is expected to continue until the Utilities return to pre-pandemic collection practices, along with a decrease in volume, for delinquent accounts. The Maui windstorm and wildfires have not and are not anticipated to materially impact accounts receivable and higher bad debt expense. As of March 31, 2024, approximately $18.9 million of the accounts receivables were over 30 days past due. Of the over 30 days past due amounts, approximately 38% were on payment plans. In addition to the cash flow impact from delayed collection of accounts receivable, lower kWh sales relative to the level of kWh sales approved in the last rate case generally result in delayed timing of cash flows, resulting in higher working capital requirements.

With the exception of Maui, the Utilities are continuing the disconnection process on a tiered basis, expanding the targeted balances, which is expected to reduce delinquent accounts receivable balances and accelerate cash collections. Service disconnections on Maui are suspended from August 8, 2023 to July 2, 2024; however, efforts are ongoing to educate and inform customers impacted by the Maui windstorm and wildfires on the availability of financial assistance to manage delinquencies accordingly. See also “Regulatory assets and liabilities” in Note 4 of the Condensed Consolidated Financial Statements.

The rebuilding of Lahaina will be a community-led effort and will occur over an extended period of time. The cost of rebuilding the electric utility infrastructure is not yet known, but could be significant because the infrastructure that may be required is expected to be different than what previously existed. For example, to mitigate wildfire risk, grid hardening strategies, such as undergrounding lines in high-risk locations, are expected to be employed.

Hawaiian Electric’s consolidated capital structure was as follows:


(dollars in millions)	March 31, 2024				December 31, 2023

Long-term debt, net	$	1,933	44	%	$	1,934	44	%
Preferred stock	34		1		34		1
Common stock equity	2,435		55		2,409		55
	$	4,402	100	%	$	4,377	100	%

Information about Hawaiian Electric’s commercial paper borrowings, borrowings from HEI and line of credit facility were as follows:


	Average balance		Balance
(in millions)	Three months ended March 31, 2024		March 31, 2024		December 31, 2023
Short-term borrowings1
Commercial paper	$	—	$	—	$	—
Borrowings from HEI2	—		—		—
Line of credit draws on revolving credit facility	200		200		200

1 The maximum amount of external short-term borrowings by Hawaiian Electric during the first three months of 2024 was approximately nil. At March 31, 2024, Hawaii Electric Light and Maui Electric had short-term borrowings from Hawaiian Electric of nil and $93.0 million, respectively, which intercompany borrowings are eliminated in consolidation.

2 Pursuant to a standing commitment letter from HEI allowing Hawaiian Electric to borrow up to a maximum amount of $75 million. See Note 6 of the Condensed Consolidated Financial Statements for additional information.

Prior to the Maui windstorm and wildfires, Hawaiian Electric utilized short-term debt, typically commercial paper, to support normal operations, to refinance short-term debt and for other temporary requirements. Hawaiian Electric may also borrow short-term from HEI for itself and on behalf of Hawaii Electric Light and Maui Electric, and Hawaiian Electric may borrow from or loan to Hawaii Electric Light and Maui Electric on a short-term basis. The intercompany borrowings among the Utilities, but not the borrowings from HEI, are eliminated in the consolidation of Hawaiian Electric’s financial statements. The Utilities also historically utilized long-term debt, borrowings of the proceeds of special purpose revenue bonds (SPRBs) issued by the State of Hawaii Department of Budget and Finance (DBF) and the issuance of privately placed unsecured senior notes bearing taxable interest, to finance the Utilities’ capital improvement projects, or to repay short-term borrowings used to finance such projects. The downgrades of Hawaiian Electric’s credit ratings will continue to adversely impact the Utilities’ ability to access capital markets and other sources of debt and equity financing, if at all, in a timely manner and on acceptable terms. The

Utilities are currently evaluating other sources of liquidity that could include securitization, re-prioritizing capital spending and reducing O&M, issuing secured debt, conducting asset sales, among others. On February 16, 2024, the Utilities filed an application to seek PUC approval to pursue additional financing through a secured asset-based (accounts receivable) credit facility, which could provide up to $250 million in liquidity.

Credit agreement. On August 23, 2023, Hawaiian Electric fully drew down $200 million on its existing revolving credit facilities. The cash proceeds were invested in highly liquid short-term investments and will be used for general corporate purposes. The $200 million line of credit facility remained fully drawn as of March 31, 2024. See Note 6 of the Condensed Consolidated Financial Statements for additional information.

Credit ratings. On March 12, 2024, S&P revised Hawaiian Electric’s outlook to “Negative” from “Watch Negative” and affirmed the “B-” issuer credit rating.

See “Credit and Capital Market Risk” in Item 1A. Risk Factors in HEI’s and Hawaiian Electric’s 2023 Form 10-K. The downgrades of Hawaiian Electric’s credit ratings will continue to adversely impact the Utilities’ ability to access capital markets and other sources of debt financing, if at all, in a timely manner and on acceptable terms. In addition, the downgrades of the Hawaiian Electric’s credit ratings triggered certain cash or payment requirements with the Utilities’ vendors. However, the Utilities believe additional vendor collateral or payment requirements will not have a material impact on the Utilities’ liquidity.

SPRBs. Special purpose revenue bonds (SPRBs) have been issued by the Department of Budget and Finance of the State of Hawaii (DBF) to finance (and refinance) capital improvement projects of Hawaiian Electric and its subsidiaries, but the sources of their repayment are the non-collateralized obligations of Hawaiian Electric and its subsidiaries under loan agreements and notes issued to the DBF, including Hawaiian Electric’s guarantees of its subsidiaries’ obligations.

On June 10, 2019, the Hawaii legislature authorized the issuance of up to $700 million of SPRBs ($400 million for Hawaiian Electric, $150 million for Hawaii Electric Light and $150 million for Maui Electric), with PUC approval, prior to June 30, 2024, to finance the Utilities’ multi-project capital improvement programs (2019 Legislative Authorization).

On February 9, 2021, the PUC approved the use of the expedited approval procedure to request the issuance and sale of the remaining/unused amount of SPRBs authorized by the 2019 Legislative Authorization (i.e., total not to exceed up to $400 million for Hawaiian Electric, up to $150 million for Hawaii Electric Light, and up to $150 million for Maui Electric) during the period January 1, 2023 through June 30, 2024. On January 31, 2023, the PUC approved the Utilities’ requests to issue the remaining unused amounts of the SPRBs during the period January 1, 2023 through June 30, 2024, and the certification and approval of supplemental projects eligible to be financed by the SPRB proceeds.

Taxable debt. On December 20, 2022, the Utilities received PUC approval to issue, over a four-year period from January 1, 2023 to December 31, 2026, unsecured obligations bearing taxable interest (Hawaiian Electric up to $230 million, Hawaii Electric Light up to $65 million and Maui Electric up to $105 million), to finance capital expenditures, repay long-term and/or short-term debt used to finance or refinance capital expenditures, and/or to reimburse funds used for payment of capital expenditures. Pursuant to the approval, on January 10, 2023, the Utilities executed through a private placement, $150 million in unsecured senior notes (2023 Notes). The 2023 Notes had a delayed draw feature and the Utilities drew down all the proceeds on February 9, 2023. See summary table below for remaining authorized amounts as of March 31, 2024 for each respective utility.


(in millions)	Hawaiian Electric		Hawaii Electric Light		Maui Electric
Total “up to” amounts of taxable debt authorized from 2023 through 2026	$	230	$	65	$	105
Less: taxable debt executed on January 10, 2023, but issued on February 9, 2023	100		25		25
Remaining authorized amounts	$	130	$	40	$	80

As of March 31, 2024, the Utilities have $1.9 billion of long-term debt, net, of which $47 million is due within 12 and 24 months.

Equity. On December 20, 2022, the Utilities received PUC approval to issue and sell each utility’s common stock over a four-year period from January 1, 2023 through December 31, 2026 (Hawaiian Electric’s sale/s to HEI of up to $75 million, Hawaii Electric Light sale/s to Hawaiian Electric of up to $25 million, and Maui Electric sale/s to Hawaiian Electric of up to $55 million) and the purchase of Hawaii Electric Light and Maui Electric common stock by Hawaiian Electric from 2023 through December 31, 2026. As of March 31, 2024, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $75 million, $25 million, and $55 million, respectively, of unused common stock authorization.

Cash flows. The following table reflects the changes in cash flows for the three months ended March 31, 2024 compared to the three months ended March 31, 2023:


	Three months ended March 31
(in thousands)	2024		2023		Change
Net cash provided by operating activities	$	127,201	$	169,355	$	(42,154)
Net cash used in investing activities	(99,673)		(120,594)		20,921
Net cash provided by (used in) financing activities	(3,851)		28,019		(31,870)

Net cash provided by operating activities. The decrease in net cash provided by operating activities was primarily driven by an increase in fuel oil stock due to more purchases and less consumption, as well as an increase in customer accounts receivable due to payment on a large delinquent commercial customer account in 2023.

Net cash used in investing activities. The decrease in net cash used in investing activities was primarily driven by a decrease in capital expenditures related to construction activities.

Net cash provided by financing activities. The decrease in net cash provided by financing activities was driven by lower net cash from long-term and short-term borrowings.

For a discussion of 2023 operating, investing and financing activities, please refer to the “Liquidity and capital resources” section in Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations—Electric utility,” in the Company’s 2023 Form 10-K.

Material cash requirements. Material cash requirements of the Utilities include O&M expenses, legal and consulting costs related to the Maui windstorm and wildfires (see further information in Note 2 of the Condensed Consolidated Financial Statements), labor and benefit costs, fuel and purchase power costs, debt and interest payments, operating and finance lease obligations, their forecasted capital expenditures (including capital expenditures related to wildfires and wildfire mitigations) and investments, their expected retirement benefit plan contributions and other short-term and long-term material cash requirements. The cash requirements for O&M, fuel and purchase power costs, debt and interest payments, and operating and finance lease obligations are generally funded through the collection of the Utilities’ revenue requirement established in the last rate case and other mechanisms established under the regulatory framework. The cash requirements for capital expenditures are generally funded through operating cash flows, the issuance of debt, and contributions of equity from HEI and generally recovered through the Utilities’ revenue requirement or other capital recovery mechanisms over time. Although the Utilities’ credit rating downgrades related to the Maui windstorm and wildfires will continue to adversely impact its ability to access capital markets and other sources of debt financing, if at all, in a timely manner and on acceptable terms, the Utilities currently believe that their ability to generate cash is adequate to maintain sufficient liquidity to fund their material cash requirements in the short term, which may include the use of additional financing from a secured asset-based (accounts receivable) credit facility. However, the potential damages and losses related to the Maui windstorm and wildfires and related lawsuits (see further information in Note 2 of the Condensed Consolidated Financial Statements), the economic impact of higher fuel prices, inflation, higher interest rates, tightening of monetary policy, and geopolitical situations, create significant uncertainty, and the Utilities cannot predict the extent or duration of these conditions, the future effects that these conditions will have on the Utilities’ cost of capital and their ability to access additional capital, or the future impacts on the Utilities’ financial position, results of operations, and cash flows.

Bank

Recent Developments. See also “Recent developments” in HEI’s MD&A.

In August 2023, ASB was impacted by wildfires on Maui which caused widespread property damage and fatalities. ASB’s outstanding credit exposure in Maui and the fire impacted zone of Lahaina as of March 31, 2024 was 12.1% and 0.6%, respectively, of the Bank’s total loan portfolio.

For the quarter ended March 31, 2024, ASB incurred additional expenses as a result of the Maui wildfires of $1.8 million, pretax, primarily consisting of professional services offset by negative provision for credit losses of $1.5 million and recovery of destroyed cash of $0.4 million.

The Hawaii economy remained stable in the first quarter of 2024 with an increase in average daily passenger counts as compared to the comparable period in the prior year and employment holding steady. The recovery in total passenger counts from the low levels in 2020 is largely due to domestic travelers. International visitors have gradually returned although still lagging behind pre-pandemic levels.

As of March 31, 2024, the Federal Open Market Committee federal funds rate target range remained unchanged at 5.25% - 5.50% in response to continued inflationary pressures in the economy. The interest rate environment has impacted ASB’s net interest margin as higher yields on earning assets were offset by an increase in yields on deposits and other borrowings. The higher interest rate environment has also reduced mortgage refinance and purchase activity, negatively impacting mortgage banking income. Additionally, the tight labor market and inflationary pressures have increased compensation and benefit expenses.

ASB’s loan portfolio decreased $65 million in 2024 as compared to the end of 2023 primarily due to payoffs and sale of commercial loans as well as reduced demand for home equity line of credit and consumer loan products.

For the quarter ended March 31, 2024, ASB recorded a negative provision for credit losses of $2.2 million due to the release of $1.5 million of credit loss reserves for loans that were impacted by Maui wildfires offset by additional credit loss reserves for the consumer loan portfolio. The provision for credit losses in future quarters will be dependent on future economic conditions and changes to borrower credit quality at that time.

At March 31, 2024, the investment securities portfolio balance decreased approximately $55 million from year end 2023 due to repayments and no purchases of investment securities in 2024. The change in interest rates during the three months ended March 31, 2024 resulted in higher unrealized losses in the available-for-sale investment securities portfolio, which also decreased the investment portfolio balance.

At March 31, 2024, ASB’s regulatory capital ratios were above the “well-capitalized” and regulatory requirements, including the conservation buffers. Approximately 86% of the Bank’s deposits are FDIC insured or fully collateralized. ASB has access to approximately $3 billion in funding sources to meet its liquidity needs.

ASB continues to maintain its low-risk profile, strong balance sheet and straightforward community banking business model.


	Three months ended March 31				Increase
(in millions)	2024		2023		(decrease)		Primary reason(s)
Interest and dividend income	$	88	$	79	$	9
							Average loan portfolio yields were 41 basis points higher—loan yields continued to increase in 2024 due to the interest rate environment as adjustable rate loan yields repriced with rising interest rates and new loan production yields were higher than the portfolio rates.
							Average loan portfolio balances increased $143 million—residential and commercial real estate loan portfolio average balances increased $119 million and $85 million, respectively, due to demand for these loan types. Commercial loan portfolio average balances decreased $47 million due to the payoffs and sale of commercial loans.
							Average investment securities portfolio balances decreased $403 million primarily due to repayments, no purchases in the quarter ended March 31, 2024 and sale of investment securities in the quarter ended December 31 2023.
							Average investment securities portfolio yields decreased 6 basis points.
Noninterest income	17		14		3
							Higher bank-owned life insurance income— higher returns from insurance policies.

Revenues	105		93		12		The increase in revenues for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to higher interest and dividend income and higher noninterest income.
Interest expense	26		15		11
							Interest expense on deposits and other borrowings increased in 2024 compared to 2023 due to an increase in term certificate and other borrowing balances which were required to fund the loan portfolio growth, higher yields due to the increase in the interest rate environment and a shift in deposit mix.
							Average core deposit balances decreased $466 million; average term certificate balances increased $315 million.
							Average deposit yields increased 53 basis points. The increase was primarily due to the increase in term certificate yields of 98 basis points and the shift in mix of deposits from low cost core deposits to term certificates.
							Average other borrowings increased $20 million and average yields increased 9 basis points.
Provision for credit losses	(2)		1		(3)
							2024 negative provision for credit losses primarily due to lower reserves for loans impacted by the Maui wildfires offset by additional credit loss reserves for the consumer loan portfolio.
							2024 negative provision for credit losses also included the release of $1.0 million of credit loss reserves for unfunded loan commitments.
							Delinquency rates have increased—from 0.22% at March 31, 2023 to 0.58% at March 31, 2024 primarily due to Maui-related loan accommodations and one commercial real estate loan in foreclosure.
							Net charge-off to average loans of 0.14% at March 31, 2024 remained the same as compared to the same period in 2023.
Noninterest expense	56		54		2
							The increase in noninterest expenses was primarily due to higher compensation and benefits expenses and expenses related to the Maui wildfires.
							Higher compensation and benefits expenses primarily due to fair value adjustments related to the deferred compensation plan.

Expenses	80		70		10		The increase in expenses for the three months ended March 31, 2024 compared to the same period in 2023 was due to higher interest expenses and higher noninterest expenses offset by lower provision for credit losses.


	Three months ended March 31		Increase
(in millions)	2024	2023	(decrease)	Primary reason(s)
Operating income	25	23	2	The increase in operating income for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to higher interest income, higher noninterest income and lower provision for credit losses partly offset by higher interest expenses and higher noninterest expenses.

Net income	21	19	2	Net income for the three months ended March 31, 2024 was higher than the same period in 2023 due to higher operating income.

ASB’s return on average assets, return on average equity and net interest margin were as follows:


	Three months ended March 31
(Annualized %)		2024	2023
Return on average assets		0.88	0.78
Return on average equity		15.64	15.51
Net interest margin		2.75	2.85

For the three months ended March 31, 2024 the Bank’s costs related to the Maui wildfires is as follows:


(in thousands)	Three months ended March 31, 2024

Bank Maui wildfires related cost:
Provision for credit losses	$	(1,500)
Professional services expenses	1,708
Other expenses1	(317)
Total Bank Maui wildfires related cost	$	(109)

1 Other expenses includes recovery of destroyed/loss cash of $0.4 million.

Note: Bank Maui wildfires related expenses - provision for credit losses is included in Provision for credit losses, professional services expenses are included in Noninterest expense-Services and other expenses are included in Noninterest expense-Other expense on the ASB Statements of Income and Comprehensive Income Data.


	Three months ended March 31
	2024					2023
(dollars in thousands)	Average balance		Interest income/ expense		Yield/ rate (%)	Average balance		Interest income/ expense		Yield/ rate (%)
Assets:
Interest-earning deposits	$	208,756	$	2,847	5.39	$	10,213	$	121	4.76
FHLB stock	17,403		267		6.16	30,089		426		5.74
Investment securities
Taxable	2,640,822		11,441		1.73	3,042,254		13,696		1.80
Non-taxable	66,850		518		3.08	68,278		498		2.92
Total investment securities	2,707,672		11,959		1.77	3,110,532		14,194		1.83
Loans
Residential 1-4 family	2,607,925		25,332		3.89	2,489,203		22,615		3.63
Commercial real estate	1,543,157		20,193		5.19	1,458,452		17,247		4.74
Home equity line of credit	1,011,358		10,754		4.28	1,021,294		9,028		3.59
Residential land	18,048		259		5.75	20,296		277		5.45
Commercial	738,138		10,965		5.93	784,733		10,397		5.33
Consumer	243,409		5,691		9.39	245,245		5,393		8.89
Total loans 1,2	6,162,035		73,194		4.75	6,019,223		64,957		4.34
Total interest-earning assets 3	9,095,866		88,267		3.88	9,170,057		79,698		3.49
Allowance for credit losses	(74,291)					(72,113)
Noninterest-earning assets	498,846					466,289
Total assets	$	9,520,421				$	9,564,233
Liabilities and shareholder’s equity:
Savings	$	2,724,806	$	1,128	0.17	$	3,143,103	$	222	0.03
Interest-bearing checking	1,397,772		3,116		0.89	1,332,214		630		0.19
Money market	313,396		2,821		3.61	197,026		586		1.21
Time certificates	1,055,179		10,367		3.94	739,683		5,399		2.96
Total interest-bearing deposits	5,491,153		17,432		1.27	5,412,026		6,837		0.51
Advances from Federal Home Loan Bank	259,406		2,961		4.51	502,222		5,870		4.68
Borrowings from Federal Reserve Bank	476,374		5,193		4.37	66,722		719		4.37
Securities sold under agreements to repurchase	—		—		—	146,368		1,132		3.14
Total interest-bearing liabilities	6,226,933		25,586		1.65	6,127,338		14,558		0.96
Noninterest bearing liabilities:
Deposits	2,515,250					2,745,317
Other	242,922					213,019
Shareholder’s equity	535,316					478,559
Total liabilities and shareholder’s equity	$	9,520,421				$	9,564,233
Net interest income			$	62,681				$	65,140
Net interest margin (%) 4					2.75					2.85

1 Includes loans held for sale, at lower of cost or fair value.

2 Includes recognition of net deferred loan fees of $0.6 million and $0.8 million for the three months ended March 31, 2024 and 2023, respectively, together with interest accrued prior to suspension of interest accrual on nonaccrual loans. Includes nonaccrual loans.

3 For the three months ended March 31, 2024 and 2023, the taxable-equivalent basis adjustments made to the table above were not material.

4 Defined as net interest income, on a fully taxable equivalent basis, as a percentage of average total interest-earning assets.

Earning assets, costing liabilities, contingencies and other factors. Earnings of ASB depend primarily on net interest income, which is the difference between interest earned on earning assets and interest paid on costing liabilities. The Federal Open Market Committee federal funds rate target range of 5.25% - 5.50% has been maintained at March 31, 2024 to combat

inflation. ASB’s net interest income and net interest margin has been impacted by the higher interest rates as the Bank has used higher costing other borrowings and term certificates to fund its loan growth.

Loans and mortgage-backed securities are ASB’s primary earning assets.

Loan portfolio. ASB’s loan volumes and yields are affected by market interest rates, competition, demand for financing, availability of funds and management’s responses to these factors. See Note 5 of the Condensed Consolidated Financial Statements for a composition of ASB’s loan portfolio.

Home equity — key credit statistics. The home equity line of credit (HELOC) portfolio makes up 16% of the total loan portfolio and is generally an interest-only revolving loan for a 10-year period, after which time the HELOC outstanding balance converts to a fully amortizing variable-rate term loan with a 20-year amortization period. Borrowers also have a “Fixed Rate Loan Option” to convert a part of their available line of credit into a 5, 7 or 10-year fully amortizing fixed-rate loan with level principal and interest payments. As of March 31, 2024, approximately 36% of the portfolio balances were amortizing loans under the Fixed Rate Loan Option. A HELOC loan is typically in a subordinate lien position to a borrower’s first mortgage loan, however, approximately 52% of ASB’s HELOC loan portfolio is in a first lien position.

Loan portfolio risk elements. See Note 5 of the Condensed Consolidated Financial Statements.

Investment securities. ASB’s investment portfolio was comprised as follows:


	March 31, 2024				December 31, 2023
(dollars in thousands)	Balance		% of total		Balance		% of total
U.S. Treasury and federal agency obligations	$	69,560	3	%	$	71,927	3	%
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	2,166,285		95		2,218,565		95
Corporate bonds	32,901		1		32,903		1
Mortgage revenue bonds	14,217		1		14,358		1
Total investment securities	$	2,282,963	100	%	$	2,337,753	100	%

Currently, ASB’s investment portfolio consists of U.S. Treasury and federal agency obligations, mortgage-backed securities, corporate bonds and mortgage revenue bonds. ASB owns mortgage-backed securities issued or guaranteed by the U.S. government agencies or sponsored agencies, including the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA) and Small Business Administration (SBA). Principal and interest on mortgage-backed securities issued by FNMA, FHLMC, GNMA and SBA are guaranteed by the issuer and, in the case of GNMA and SBA, backed by the full faith and credit of the U.S. government. U.S. Treasury securities are also backed by the full faith of the U.S. government.

Deposits and other borrowings. Deposits continue to be the largest source of funds for ASB and are affected by market interest rates, competition and management’s responses to these factors. In 2024, deposits decreased by $141 million, as an outflow of core deposits was replaced with time certificates. Core deposit retention will remain challenging in the current rising interest rate environment. Advances from the FHLB of Des Moines, securities sold under agreements to repurchase, borrowings from the Federal Reserve Bank and federal funds purchased continue to be additional sources of funds. As of March 31, 2024 ASB’s costing liabilities consisted of 93% deposits and 7% borrowings as compared to 92% deposits and 8% borrowings as of December 31, 2023. The weighted average cost of interest-bearing deposits for the first three months of 2024 and 2023 was1.27% and 0.51%, respectively. As of March 31, 2024 and December 31, 2023, ASB had approximately $1.4 billion and $1.6 billion of deposits that were uninsured or not collateralized, respectively.

Federal Home Loan Bank of Des Moines and Federal Reserve Bank. As of March 31, 2024 and December 31, 2023, ASB had $593 million and $200 million of advances outstanding at the FHLB of Des Moines, respectively. As of March 31, 2024, the unused borrowing capacity with the FHLB of Des Moines was $1.4 billion. As of March 31, 2024 and December 31, 2023, ASB had nil and $550 million of borrowings from the Federal Reserve Bank, respectively. The FHLB of Des Moines and Federal Reserve Bank are important sources of liquidity for ASB.

Contingencies. ASB is subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, ASB cannot rule out the possibility that such outcomes could have a material adverse effect on the results of operations or liquidity for a particular reporting period in the future.

Other factors. Interest rate risk is a significant risk of ASB’s operations and also represents a market risk factor affecting the fair value of ASB’s investment securities. Increases and decreases in prevailing interest rates generally translate into

decreases and increases in the fair value of the investment securities, respectively. In addition, changes in credit spreads also impact the fair values of the investment securities.

As of March 31, 2024, ASB had an unrealized loss, net of taxes, on available-for-sale investment securities in AOCI of $164.0 million compared to an unrealized loss, net of taxes, of $150.4 million as of December 31, 2023. See “Item 3. Quantitative and qualitative disclosures about market risk” for a discussion of ASB’s interest rate risk sensitivity.

During the first three months of 2024, ASB recorded a negative provision for credit losses of $1.2 million in the allowance for credit losses primarily due to the release of $1.5 million of credit loss reserves related to the Maui wildfires offset by additional credit loss reserves for the consumer loan portfolio. During the first three months of 2023, ASB recorded a provision for credit losses of $1.2 million in the allowance for credit losses for growth in the loan portfolio partly offset by the release of credit loss reserves for improved credit trends and lower credit loss rates.


	Three months ended March 31						Year ended December 31, 2023
(in thousands)	2024			2023
Allowance for credit losses, beginning of period	$	74,372		$	72,216		$	72,216

Provision for credit losses	(1,159)			1,175			9,657
Less: net charge-offs	2,156			2,095			7,501
Allowance for credit losses, end of period	$	71,057		$	71,296		$	74,372
Ratio of net charge-offs during the period to average loans outstanding (annualized)	0.14		%	0.14		%	0.12		%

ASB maintains a reserve for credit losses that consists of two components, the allowance for credit losses and an allowance for loan commitments (unfunded reserve). The level of the reserve for unfunded loan commitments is adjusted by recording an expense or recovery in provision for credit losses. For the three months ended March 31, 2024, ASB recorded a negative provision for credit losses for unfunded commitments of $1.0 million and no provision for credit losses for unfunded commitments for the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, the reserve for unfunded loan commitments was $4.1 million and $5.1 million, respectively.

Legislation and regulation. ASB is subject to extensive regulation, principally by the OCC and the FDIC. Depending on ASB’s level of regulatory capital and other considerations, these regulations could restrict the ability of ASB to compete with other institutions and to pay dividends to its shareholder. See the discussion below under “Liquidity and capital resources.”

FINANCIAL CONDITION

Liquidity and capital resources.


(dollars in millions)	March 31, 2024		December 31, 2023		% change
Total assets	$	9,360	$	9,673	(3)
Investment securities	2,283		2,338		(2)
Loans held for investment, net	6,046		6,106		(1)
Deposit liabilities	8,005		8,146		(2)
Other bank borrowings	593		750		(21)

As of March 31, 2024, ASB was one of Hawaii’s largest financial institutions based on assets of $9.4 billion and deposits of $8.0 billion.

As of March 31, 2024, ASB’s unused FHLB borrowing capacity was approximately $1.4 billion. As of March 31, 2024, ASB had commitments to borrowers for loans and unused lines and letters of credit of $1.9 billion, of which, commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings were nil. Management believes ASB’s current sources of funds will enable it to meet these obligations while maintaining liquidity at satisfactory levels.

For the three months ended March 31, 2024, net cash used by ASB’s operating activities was $1 million. Net cash provided by ASB’s investing activities during the same period was $95 million, primarily due to a net decrease in loans receivable of $43 million, receipt of investment security repayments and maturities of $39 million and proceeds from the sale of commercial loans of $31 million partly offset by a net increase in FHLB stock of $18 million. Net cash used by financing activities during this period was $302 million, primarily due to a net decrease in other borrowings of $157 million, decrease in deposit liabilities of $141 million and a net decrease in mortgage escrow deposits of $4 million.

For the three months ended March 31, 2023, net cash provided by ASB’s operating activities was $15 million. Net cash used during the same period by ASB’s investing activities was $16 million, primarily due to a net increase in loans receivable of $69 million, purchases of loans held for investment of $13 million and additions to premises and equipment of $1 million, partly offset by the receipt of investment security repayments and maturities of $50 million and a net decrease in FHLB stock of $17 million. Net cash provided by financing activities during this period was $28 million, primarily due to increases in deposit liabilities of $61 million partly offset by a net decrease in other borrowings of $14 million, a net decrease in mortgage escrow deposits of $4 million and $14 million in common stock dividends to HEI (through ASB Hawaii).

ASB believes that maintaining a satisfactory regulatory capital position provides a basis for public confidence, affords protection to depositors, helps to ensure continued access to capital markets on favorable terms and provides a foundation for growth. FDIC regulations restrict the ability of financial institutions that are not well-capitalized to compete on the same terms as well-capitalized institutions, such as by offering interest rates on deposits that are significantly higher than the rates offered by competing institutions. As of March 31, 2024, ASB was well-capitalized (well-capitalized ratio requirements noted in parentheses) with a Tier-1 leverage ratio of 8.0% (5.0%), common equity Tier-1 ratio of 12.7% (6.5%), Tier-1 capital ratio of 12.7% (8.0%) and total capital ratio of 13.8% (10.0%). As of December 31, 2023, ASB was well-capitalized (well-capitalized ratio requirements noted in parentheses) with a Tier-1 leverage ratio of 7.7% (5.0%), common equity Tier-1 ratio of 12.3% (6.5%), Tier-1 capital ratio of 12.3% (8.0%) and total capital ratio of 13.4% (10.0%). All dividends are subject to review by the OCC and FRB and receipt of a letter from the FRB communicating the agencies’ non-objection to the payment of any dividend ASB proposes to declare and pay to HEI (through ASB Hawaii). As of March 31, 2024, ASB did not request a dividend distribution from the OCC and FRB and will reevaluate its ability to distribute excess capital next quarter.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company considers interest-rate risk (a non-trading market risk) to be a significant market risk for ASB as it could potentially have material impacts on the Company’s results of operations, financial condition and liquidity. For additional quantitative and qualitative information about the Company’s market risks, see HEI’s and Hawaiian Electric’s Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A of HEI’s 2023 Form 10-K (pages 81 to 83).

ASB’s interest-rate risk sensitivity measures as of March 31, 2024 and December 31, 2023 constitute “forward-looking statements” and were as follows:


Change in interest rates	Change in NII (gradual change in interest rates)				Change in EVE (instantaneous change in interest rates)
(basis points)	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
+300	1.5	%	2.1	%	3.1	%	2.7	%
+200	1.0		1.4		2.7		2.5
+100	0.5		0.7		1.8		1.7
-100	(0.8)		(1.0)		(2.5)		(2.3)
-200	(1.8)		(2.2)		(5.9)		(5.4)
-300	(2.8)		(3.5)		(10.5)		(10.3)

ASB’s net interest income (NII) sensitivity profile was less asset sensitive as of March 31, 2024 compared to December 31, 2023 primarily driven by lower cash balances, partially offset by maturing borrowings from the Federal Reserve Bank that were replaced with one-year FHLB advances.

Economic value of equity (EVE) sensitivity increased as of March 31, 2024 compared to December 31, 2023 due to higher seasonal mortgage prepayment expectations, partially offset by lower deposit duration.

The computation of the prospective effects of hypothetical interest rate changes on the NII sensitivity and the percentage change in EVE is based on numerous assumptions, including relative levels of market interest rates, loan prepayments, balance changes and pricing strategies, and should not be relied upon as indications of actual results. To the extent market conditions and other factors vary from the assumptions used in the simulation analysis, actual results may differ materially from the simulation results. NII sensitivity analysis measures the change in ASB’s twelve-month, pretax NII in alternate interest rate scenarios, and is intended to help management identify potential exposures in ASB’s current balance sheet and formulate appropriate strategies for managing interest rate risk. The simulation does not contemplate any actions that ASB management might undertake in response to changes in interest rates. Further, the changes in NII vary in the twelve-month simulation period and are not necessarily evenly distributed over the period. These analyses are for analytical purposes only and do not represent management’s views of future market movements, the level of future earnings or the timing of any changes in earnings within the twelve month analysis horizon. The actual impact of changes in interest rates on NII will depend on the magnitude and speed with which rates change, actual changes in ASB’s balance sheet and management’s responses to the changes in interest rates.

Item 4. Controls and Procedures

HEI:

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Management, including the Company’s Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report, at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Hawaiian Electric:

Disclosure Controls and Procedures

Hawaiian Electric maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by Hawaiian Electric in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to Hawaiian Electric’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was performed under the supervision and with the participation of Hawaiian Electric’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Hawaiian Electric’s disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Management, including Hawaiian Electric’s Chief Executive Officer and Chief Financial Officer, concluded that Hawaiian Electric’s disclosure controls and procedures were effective, as of the end of the period covered by this report, at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, Hawaiian Electric’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The descriptions of legal proceedings (including judicial proceedings and proceedings before the PUC and environmental and other administrative agencies) in HEI’s and Hawaiian Electric’s 2023 Form 10-K (see “Part I. Item 3. Legal Proceedings” and proceedings referred to therein) and this Form 10-Q (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 2, 4 and 5 of the Condensed Consolidated Financial Statements) are incorporated by reference in this Item 1. With regard to any pending legal proceeding, alternative dispute resolution, such as mediation or settlement, may be pursued where appropriate, with such efforts typically maintained in confidence unless and until a resolution is achieved. Certain HEI subsidiaries (including Hawaiian Electric and its subsidiaries, ASB and Pacific Current and its subsidiaries) may also be involved in ordinary routine PUC proceedings, environmental proceedings and litigation incidental to their respective businesses.

Item 1A. Risk Factors

For information about Risk Factors, see pages 20 to 33 of HEI’s and Hawaiian Electric’s 2023 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk” and the Condensed Consolidated Financial Statements herein. Also, see “Cautionary Note Regarding Forward-Looking Statements” on pages iv through vi herein and as supplemented below.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

(c) Purchases of HEI common shares were made on the open market during the first quarter of 2024 to satisfy the requirements of certain plans as follows:

ISSUER PURCHASES OF EQUITY SECURITIES


Period*	Total Number of Shares Purchased **	Average Price Paid per Share **	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to 31, 2024	36,473	$13.90	—	NA
February 1 to 29, 2024	21,802	$12.87	—	NA
March 1 to 31, 2024	28,397	$11.48	—	NA

NA - Not applicable.

* Trades (total number of shares purchased) are reflected in the month in which the order is placed.

**The purchases were made to satisfy the requirements of the DRIP, the HEIRSP and the ASB 401(k) Plan for shares purchased for cash or by the reinvestment of dividends by participants under those plans and none of the purchases were made under publicly announced repurchase plans or programs. Average prices per share are calculated exclusive of any commissions payable to the brokers making the purchases for the DRIP, the HEIRSP and the ASB 401(k) Plan. Of the “Total number of shares purchased,” 15,978 of the 36,473 shares, 2,419 of the 21,802 shares and 10,696 of the 28,397 shares were purchased for the DRIP; 17,583 of the 36,473 shares, 16,123 of the 21,802 shares and 14,922 of the 28,397 shares were purchased for the HEIRSP; and the remainder was purchased for the ASB 401(k) Plan. The repurchased shares were issued for the accounts of the participants under registration statements registering the shares issued under these plans.

Item 6. Exhibits



H EI Exhibit 4.1						Personalized Planning and Advice Amendment effective April 1, 2024 to Master Trust Agreement (dated September 4, 2012) between HEI and ASB and Fidelity Management Trust Company

HEI Exhibit 4.2						Letter Amendment effective April 30, 2024 to Master Trust Agreement (dated September 4, 2012) between HEI and ASB and Fidelity Management Trust Company

HEI Exhibit 31.1						Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Scott W. H. Seu (HEI Chief Executive Officer)

HEI Exhibit 31.2						Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Scott T. DeGhetto (HEI Chief Financial Officer)

HEI Exhibit 32.1						HEI Certification Pursuant to 18 U.S.C. Section 1350

HEI Exhibit 101.INS						XBRL Instance Document - the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

HEI Exhibit 101.SCH						Inline XBRL Taxonomy Extension Schema Document

HEI Exhibit 101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

HEI Exhibit 101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

HEI Exhibit 101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

HEI Exhibit 101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

HEI Exhibit 104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



Hawaiian Electric Exhibit 31.3						Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Shelee M. T. Kimura (Hawaiian Electric Chief Executive Officer)

Hawaiian Electric Exhibit 31.4						Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Paul K. Ito (Hawaiian Electric Chief Financial Officer)

Hawaiian Electric Exhibit 32.2						Hawaiian Electric Certification Pursuant to 18 U.S.C. Section 1350

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. The signature of the undersigned companies shall be deemed to relate only to matters having reference to such companies and any subsidiaries thereof.

HAWAIIAN ELECTRIC INDUSTRIES, INC.

HAWAIIAN ELECTRIC COMPANY, INC.

(Registrant)

/s/ Scott W. H. Seu

/s/ Shelee M. T. Kimura

Scott W. H. Seu

Shelee M. T. Kimura

President and Chief Executive Officer

(Principal Executive Officer of HEI)

(Principal Executive Officer of Hawaiian Electric)

/s/ Scott T. DeGhetto

/s/ Paul K. Ito

Scott T. DeGhetto

Paul K. Ito

Executive Vice President,

Senior Vice President,

Chief Financial Officer and Treasurer

(Principal Financial Officer of HEI)

(Principal Financial Officer of Hawaiian Electric)

Date: May 10, 2024

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Hawaiian Electric Industries (HE) 10-Q2024 Q1 Quarterly report

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