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Hawaiian Electric Industries Reports First Quarter 2016 Earnings

HONOLULU, May 4, 2016 /PRNewswire/ -- Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported consolidated net income for common stock for the first quarter of 2016 of $32.4 million and diluted earnings per share (EPS) of $0.30 compared to $31.9 million and EPS of $0.31 for the first quarter of 2015. Excluding after-tax costs associated with the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii, Inc. of $1.6 million and $4.7 million in the first quarter of 2016 and 2015, respectively, core earnings [1] for the first quarter of 2016 were $33.9 million and core EPS [1] of $0.31 compared to $36.6 million and $0.35, respectively for the first quarter of 2015.

"Hawaii continues to be a national leader in clean energy, with Hawaiian Electric achieving over 23 percent renewable energy in 2015 across the five island electric grids we serve. Recently, our utilities filed updated energy plans charting a course to achieve our state's goal of 100 percent renewable energy by 2045, the most ambitious energy goal in the country. A 100% renewable energy future is an exciting prospect, and we look forward to collaborating with others to make it happen," said Constance H. Lau, HEI president and chief executive officer.

"In the near term, it's critical for our utilities to continue executing initial action plans that lay the foundation for Hawaii's renewable future, including modernizing the power grid and plans for smart meters and other smart grid technologies; pursuing energy storage to support renewable energy integration; increasing customer options to manage energy use; and supporting electrification of transportation to help reduce reliance on fossil fuels for our cars and other vehicles."




1 Non-GAAP measure which excludes merger-related and spin-off costs after-tax. See the "Explanation of HEI's Use of Certain Unaudited Non-GAAP measures" and the related reconciliation.

"American Savings Bank continued to deliver solid results with excellent deposit growth and higher net interest income and margins in a strong Hawaii economy. American's solid results enabled it to pay dividends of $9.0 million to HEI in the quarter while maintaining healthy capital levels," added Lau.

"With regard to our bank spin and utility merger transactions, our bank accomplished an important step towards its planned spin-off by filing its updated Form 10 with the Securities and Exchange Commission on April 1st. And both NextEra Energy and the Hawaiian Electric companies just filed their post-evidentiary hearing reply briefs with the Hawaii Public Utilities Commission on May 2 [nd] which was the final step before the PUC can render its decision. We continue to believe that the right partner for Hawaiian Electric is NextEra Energy, which brings a powerful combination of renewable energy experience, operational and technological know-how and financial strength necessary for achieving Hawaii's 100 percent renewable energy goal."

HAWAIIAN ELECTRIC COMPANY EARNINGS

Hawaiian Electric Company's [2] net income for the first quarter of 2016 was $25.4 million compared to $26.9 million in the first quarter of 2015. The $1.5 million net income decline was mainly the result of higher depreciation expense as a result of increasing investments for improved customer reliability and greater system efficiency, and the integration of more renewable energy.

Operations and maintenance expenses were relatively flat compared to the prior year quarter. The first quarter of 2016 included higher than expected power supply improvement plan and liquefied natural gas consulting expenses compared to the first quarter of 2015 which included higher storm repair costs, bad debt reserves for one customer account and costs related to the damage to a combined heat and power generating unit.




Note: Amounts indicated as "after-tax" in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.


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

AMERICAN SAVINGS BANK EARNINGS

American Savings Bank's (American) net income for the first quarter of 2016 was $12.7 million compared to $15.0 million in the fourth (or linked) quarter of 2015 and $13.5 million in the first quarter of 2015. First quarter 2016 net income was $2.3 million lower than the linked quarter primarily driven by the following on an after-tax basis:

  • $2 million higher provision for loan losses mainly due to growth in lending in commercial real estate and a commercial credit charge-off in the first quarter of 2016 compared to lower provisioning during the fourth quarter of 2015 attributable to net recoveries on previously charged-off loans; and
  • $1 million lower noninterest income compared to the fourth quarter of 2015, which included gains from the sale of mortgage serving rights.

These were partially offset by $1 million (after-tax) higher net interest income primarily attributable to loan and investment portfolio growth and higher yields on interest-earning assets in the first quarter of 2016.

Compared to the first quarter of 2015, net income declined by $0.8 million primarily driven by the following on an after-tax basis:

  • $2 million higher provision for loan losses mainly driven by commercial real estate loan growth and a commercial credit charge-off in the first quarter of 2016; and
  • $1 million higher noninterest expense primarily due to investment in our electronic banking platform and higher compensation expense.

These were offset by $3 million (after-tax) higher net interest income in the first quarter of 2016 due to loan and investment portfolio growth and higher yields on interest-earning assets.

Loan growth was 2.2% annualized in the first quarter of 2016 driven largely by increases in commercial real estate and consumer loans. American continues to expect to meet its target of mid-single digit loan growth for the full year.

Total deposits were $5.1 billion at March 31, 2016, up $115 million or 9.1% annualized from December 31, 2015, primarily driven by the 6.5% annualized increase in low-cost core deposits. Average cost of funds remained low at 0.23% for the first quarter of 2016, 1 basis point higher than the linked quarter and the prior year quarter.

Overall, American achieved solid profitability in the first quarter of 2016 with a return on average equity of 8.9% and a return on average assets of 0.84%.

For additional information, refer to the American news release issued on April 29, 2016.

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $5.7 million in the first quarter of 2016 compared to $8.5 million in the first quarter of 2015. Excluding after-tax costs of $1.5 million associated with the pending merger with NextEra Energy, Inc. and the spin-off of ASB Hawaii, Inc. in the first quarter of 2016 and $4.4 million in the first quarter of 2015, the holding and other companies' net losses in 2016 and 2015 were $4.2 million and $4.0 million, respectively.

BOARD DECLARES QUARTERLY DIVIDEND

On May 3, 2016, the board of directors maintained HEI's quarterly cash dividend of $0.31 cents per share, payable on June 15, 2016, to shareholders of record at the close of business on May 31, 2016 (ex-dividend date is May 26, 2016). The dividend is equivalent to an annual rate of $1.24 per share.

Dividends have been paid continuously since 1901. At the indicated annual dividend rate and the closing share price on May 3, 2016 of $32.74, HEI's yield is 3.8%.

WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND EPS GUIDANCE

Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its first quarter of 2016 earnings on Wednesday, May 4, 2016, at 8:00 a.m.Hawaii time (2:00 p.m. Eastern time).

Interested parties within the United States may listen to the conference by calling (888) 311-8190 and entering passcode: 70436517. International parties may listen to the conference by calling (330) 863-3378 and entering passcode: 70436517 or by accessing the webcast on HEI's website at www.hei.com under the heading "Investor Relations." HEI and Hawaiian Electric Company intend to continue to use HEI's website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI's website in the Investor Relations section. Accordingly, investors should routinely monitor such portions of HEI's website, in addition to following HEI's, Hawaiian Electric Company's and American's press releases, HEI's and Hawaiian Electric Company's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts. The information on HEI's website is not incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI's and Hawaiian Electric Company's SEC filings.

An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through May 18, 2016, by dialing (855) 859-2056 or (404) 537-3406 and entering passcode: 70436517.

HEI supplies power to approximately 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, one of Hawaii's largest financial institutions.

NON-GAAP MEASURES

See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliations on pages 13 and 14 of this release.

FORWARD-LOOKING STATEMENTS

This release may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "expects," "anticipates," "intends," "plans," "believes," "predicts," "estimates" or similar expressions. In addition, any statements concerning future financial performance, ongoing business...


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