Hawaiian Electric Industries Reports 2013 Year-End & Fourth Quarter Earnings

2013 Net Income of $161.5 Million; Diluted Earnings Per Share (EPS) of $1.62 Fourth Quarter Net Income of $39.0 Million; EPS of $0.39

News Release from HEI, HONOLULU, Feb. 18, 2014

Selected 2013 Highlights:

• Core net income1 of $161.5 million in 2013 vs $163.1 million in 2012; Reported net income of $161.5 million in 2013 vs $138.7 million in 2012
• Core EPS1 of $1.62 in 2013 vs $1.68 in 2012; Reported EPS of $1.62 in 2013 vs $1.42 in 2012
• ROE of  9.7% -- 8.0% utility; 11.4% bank 
• Successfully accessed the capital markets to fund ongoing utility investments in local infrastructure to modernize the electric grid
  • Executed $180 million equity forward sale agreement in March 2013
  • Refinanced $216 million of debt at lower interest rates
• Continued investments by local shareholders: Of the shareholders who disclose residence, over a third are Hawaii based, representing at least 25% of total HEI ownership
• Continued 113-year history of continuous dividends: Through HEI's dividend reinvestment program, shareholders invested $42 million in HEI by reinvesting their dividends and buying more stock    
• Continued legacy of delivering value for customers and Hawaii:
  • Record 18% of electricity used by Hawaiian Electric customers was from renewable sources
    • Surpassed Hawaii's 2015 renewable portfolio standard of 15%
    • Avoided-oil equivalent of 2.9 million barrels which would have cost our state approximately $350 million2 in imported oil in 2013
    • Led the nation by far in the integration of customer-sited solar: 10% of Oahu customers using rooftop solar by the end of 2013
    • Bank continued clean energy financing for rooftop solar vendors
    • Integrated two new lower-cost utility-scale solar projects on Oahu
    • Reached milestone to deactivate Honolulu Power Plant (January 2014)
    • Leveraging collaborative partnerships and over $20 million in grant funding to seek clean energy solutions for Hawaii
  • Utility proposals to the Hawaii Public Utilities Commission for 259 MW renewables priced ~30% lower than current rates3
  • Utility operating expenses managed to inflationary increases while expanding strategic initiatives
  • Bank provided over $2 billion in new credit and refinancings to customers
  • Contributed over ten thousand volunteer hours and over $2 million of charitable contributions to community organizations

Hawaiian Electric Industries, Inc.(NYSE - HE) (HEI) today reported 2013 year-end consolidated net income for common stock of $161.5 million, or diluted earnings per share (EPS) of $1.62.  For the fourth quarter of 2013, consolidated net income for common stock was $39.0 million, or $0.39 EPS.  The comparison to prior year results is shown on a core earnings basis1 in the table below.  Core earnings exclude a $24 million after-tax write-down in the fourth quarter of 2012 related to a settlement agreement between Hawaiian Electric Company4 and the Hawaii Consumer Advocate which was subsequently approved by the Hawaii Public Utilities Commission.

"While earnings per share were down 4% due to earnings declines at both American Savings Bank and Hawaiian Electric Company, we continued to deliver a competitive 9.7% return on equity for the year.  HEI's unique combination of companies continues to provide us with the financial resources to efficiently invest in our Hawaii-based companies," said Constance Lau, HEI president and chief executive officer.  "Our utility continued to invest in the modernization of our electric grid to ensure reliability and safety for our customers as we integrate more renewable energy.  These investments helped us exceed Hawaii's 2015 Renewable Portfolio Standard of 15%, meeting 18% of customers' electricity needs with renewable sources in 2013.  Ten percent of Oahu customers now have customer-sited solar, far more than any other utility.  At the same time, we are focused on reducing costs for our customers with proposed utility-scale solar and wind projects priced 30% lower than the current cost of generation.  We also are working with other stakeholders on the viability and benefits of bringing liquefied natural gas to Hawaii as a cleaner, lower-cost alternative to oil while we continue to aggressively pursue more renewable generation sources to displace fossil fuels."

"Our bank exceeded its loan growth goals while maintaining its targeted portfolio mix, gained market share in home lending, improved credit quality, and provided dividends to HEI while maintaining healthy capital levels.  Overall, we are pleased that we were able to achieve many of our goals in a challenging and dynamic year," said Lau.

HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS

The utility's full-year and fourth quarter 2013 net income was $122.9 million and $32.0 million, respectively.  The comparison to the prior year is shown on a core earnings basis in the chart below.

Full Year Results:

Core earnings declined by $0.8 million as additional recovery of costs was slightly less than the total increases in costs, primarily driven by higher customer service investments, lower cost recovery at Maui Electric due to its 2012 final rate case decision, and lower fuel efficiency performance on Oahu due to efforts to run units at lower levels.  These impacts were partially offset by a net favorable income tax adjustment in 2013.

Operations and maintenance (O&M) expenses5 (pretax) were $3 million or approximately 0.9% higher compared to the prior year and below inflationary levels.  The increases were primarily due to higher customer service costs (discussed above) partially offset by lower expenses for substation and overhead line maintenance and lower overhaul expenses.

Fourth Quarter Results:

The $3.3 million core earnings improvement from the prior year quarter was primarily driven by lower O&M expenses5.  Additional recovery of costs was offset by increases in depreciation resulting from infrastructure investments to modernize the grid and ensure reliability, and lower allowance for funds used during construction.

O&M expenses (pretax) were $6 million lower due to lower overhaul and substation maintenance costs in the fourth quarter of 2013.         

AMERICAN SAVINGS BANK:   SOLID PERFORMANCE AND LOAN GROWTH
Full Year Results:

American Savings Bank's (American) net income for 2013 was $57.5 million compared to $58.6 million in 2012.  Lower 2013 earnings compared to the prior year reflected the challenging regulatory and interest rate environment.  The primary drivers impacting net income for the year were (on an after-tax basis): $2 million lower net interest income as lower yields on loans continued to more than offset the favorable contributions of loan growth; $2 million lower noninterest income due to lower mortgage banking income and lower interchange fees as a result of the Durbin Amendment which became effective in July 2013 for American, offsetting all the increases in other fee income and the premium on the sale of the credit card portfolio; $4 million higher noninterest expense primarily driven by higher loan and investment product volumes to customers, sales and performance related incentives, and benefit cost increases; and $7 million lower provision for loan losses resulting from continued improvement in credit quality, coupled with higher recoveries from previously charged-off loans and release of reserves related to the sale of the credit card portfolio. 

Overall, American's return on average equity for the full year remained solid at 11.4% in 2013 compared to 11.7% in 2012 and the return on average assets was 1.13% in 2013 compared to 1.18% in 2012.

Fourth Quarter Results:

Fourth quarter 2013 net income of $12.2 million was $3.1 million lower than the linked quarter and $2.2 million lower than the same quarter of 2012.

Compared to the linked quarter of 2013, the $3.1 million net income decline was primarily driven by (on an after-tax basis): $2 million lower noninterest income mainly due to the gain on the strategic sale of the credit card portfolio recorded in the third quarter of 2013; and $1 million higher noninterest expense, largely attributable to the timing of certain performance-related compensation expenses.

Compared to the same quarter of 2012, net income declined by $2.2 million primarily driven by (on an after-tax basis): $4 million lower noninterest income primarily due to lower gains on sales of loans of new residential mortgages as the refinancing market contracted dramatically since mid-2013 and lower interchange fees; and $2 million lower provision for loan losses.

American's fourth quarter 2013 return on average equity was 9.6%, down from 12.1% in the linked quarter and 11.3% in the same quarter last year.  Return on average assets was 0.94% for the fourth quarter of 2013, compared to 1.20% from the linked quarter and 1.15% in the same quarter last year.

Also refer to the American news release issued on January 30, 2014.

HOLDING AND OTHER COMPANIES

The holding and other companies' net losses were $18.9 million in 2013 compared to $19.3 million in 2012.  Fourth quarter net losses were $5.2 million in 2013 compared to $4.8 million in the fourth quarter 2012.

WEBCAST AND CONFERENCE CALL

HEI TO ANNOUNCE 2014 EPS GUIDANCE IN EARNINGS CONFERENCE CALL

Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its 2013 earnings on Tuesday, February 18, 2014, at 12:00 noon Hawaii time (5:00 p.m. Eastern time).  HEI will announce 2014 EPS guidance during the scheduled webcast and conference call.

Interested parties may listen to the conference by calling (877) 415-3182 and entering passcode:  61297681, 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 and will remain on HEI's website for 12 months.  Replays of the conference call will also be available approximately two hours after the event through March 4, 2014, by dialing (888) 286-8010, passcode: 22850388.

HEI supplies power to approximately 450,000 customers or 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 16 to 17 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 strategies or prospects or possible future actions are also forward-looking statements.  Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things.  These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the "Forward-Looking Statements" and "Risk Factors" discussions (which are incorporated by reference herein) set forth in HEI's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 and HEI's future periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements.  These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made.  Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

1  Non-GAAP measure which excludes the fourth quarter after-tax partial write-off of certain utility assets of$24.4 million in 2012.  See the included tables for GAAP to Non-GAAP reconciliations and "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and related reconciliation.
2  Estimate based on 2013 average price per barrel of $125.
3 Based on October 2013 on-peak avoided cost of oil generation.
4 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.
5 Excludes net income neutral expenses covered by surcharges or by third parties of $8 million and $6 million for the full year in 2013 and 2012, respectively, and $3 million and $2 million in the fourth quarter of 2013 and 2012, respectively. See "Explanation of HEI's Use of Certain Unaudited Non-GAAP Measures" and the related reconciliation.
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.

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