Good day. My name is Brianna, and I will be your conference operator. I would like to welcome everyone to the Hawaiian Electric Industries Inc. First Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. All lines have been muted to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. I will now turn today's call over to Mateo Garcia, Director of Investor Relations. Please go ahead.

Thank you. Welcome, everyone, to HEI's first quarter 2024 earnings call. Joining me today are Scott Seu, HEI's President and CEO; Scott Deghetto, HEI's Executive Vice President, CFO, and Treasurer; Shelee Kimura, Hawaiian Electric President and CEO; Ann Teranishi, American Savings Bank President and CEO; and other members of senior management. Our earnings release and our presentation for this call are available in the Investor Relations section of our website. As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings, and in the Investor Relations section of our website. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. Now, Scott Seu will begin with his remarks.

Aloha kakou. Welcome everyone. For today's call, I'll start with key updates regarding the Maui wildfires, followed by operational updates, and then Scott Deghetto will walk you through our first quarter financial results before we open it up for questions. We continue to work diligently with key stakeholders to help our community recover from the devastating impacts of the Maui wildfires. Last quarter, we discussed Governor Josh Green's One 'Ohana Initiative, which is intended to help the families most impacted by the fires heal and to help our state move forward. The first phase of One 'Ohana launched on March 1 and has seen a steady uptick. 58 total registrations have been received thus far, including 43 from families of decedents and 15 from injured survivors. On April 29th, Governor Green announced that the registration deadline has now been extended to May 31. The governor has said that the deadline for completed claims forms will be July 1. Hawaii's annual legislative session concluded in early May, and last week, the Governor signed into law Senate Bill 582, which sets aside critical funding to help address the ongoing Maui Wildfire recovery efforts, including the state's contribution to the $175 million One ‘Ohana fund. Although we are disappointed that we ran out of time in this legislative session to pass legislation supporting the key priorities we laid out on our last earnings call, our state's lawmakers and leadership remain highly engaged in determining how to design wildfire legislation that makes sense for Hawaii, our customers, and our company. Legislation that creates a framework to reduce wildfire risk is critical to ensure Hawaii can attract low-cost capital, which ultimately lowers the cost to customers of needed investments. Our state's leadership recognizes this, and last week, Governor Green announced the formation of a new climate advisory team that will play a critical role in drafting comprehensive climate resilience policy. As one of those first projects, the advisory team will recommend steps to create a fund to mitigate the impacts of climate change and to develop a fair and comprehensive structure to resolve claims related to future disasters in our state. The governor has expressed the fund's necessity for stabilizing the insurance market and addressing the financial burdens arising from the increased impacts of climate change. We'll continue to work constructively with Governor Green, our regulators, and other parties to advance solutions that help keep Hawaii safe and will stabilize our energy future in the face of increasingly severe weather events. Last month, we saw the publication of two key reports, one from the County of Maui's Department of Fire and Public Safety and the other from Hawaii State Attorney General. Both the fire department's after-action report and the Attorney General's Lahaina fire comprehensive timeline report were consistent with our understanding of the events that took place on August 8th, namely that a morning fire appears to have been caused by power lines that fell in high winds. The Maui County Fire Department responded to this fire, reported that it was 100% contained, and later declared it extinguished. A second afternoon fire began in the same area later that day after Hawaiian Electric's power lines in West Maui had been de-energized for more than six hours. Neither of the reports released last month focuses on the cause of the Maui Wildfires. The cause of the afternoon fire that devastated Lahaina has still not been determined and is the focus of a separate investigation being conducted by the Bureau of Alcohol, Tobacco, and Firearms. Turning to an update on litigation. As of May 9th, HEI and Hawaiian Electric Company have each been named as a defendant in approximately 400 lawsuits by plaintiffs claiming losses related to the August 8th windstorm and wildfires. Subrogation claims from about 160 different insurers with exposure in Maui have also been filed. The Maui Circuit Court has set a September 9, 2024 trial date for six cases concerning the fires in upcountry Maui. As a reminder, those fires were separate from the fires that occurred in Lahaina. The upcountry fires occurred in the Olinda and Kula areas of Maui, over 35 miles from Lahaina. Fortunately, there were no fatalities in the upcountry fires and relatively few structures damaged in comparison to the Lahaina fires. The Maui Circuit Court has also set a November 18, 2024 trial date for four of the Lahaina cases filed. No trial dates have been set in cases pending in the Oahu Circuit Court or in Federal Court. Turning to operational updates. On Slide 4, the utility continues to advance wildfire mitigation and resilience efforts. In the first few months of this year, we progressed applications for federal funding to help limit the cost of these investments to customers. In February, Hawaiian Electric received PUC approval for its five-year $190 million grid resilience plan, enabling the utility to move forward with finalizing $95 million in Department of Energy Infrastructure Investment and Jobs Act funding by matching it with $95 million in rate recovery. In addition, the utility is pursuing $450 million of matching federal funding for $900 million of projects addressing wildfire-focused grid resilience, grid modernization, and grid innovation projects. While pursuing these longer-term projects, the utility continues to take immediate action to address wildfire risk. Over 35% of the utility's 2024 capital budget, nearly $120 million, is dedicated to wildfire mitigation work. The utility is implementing enhanced wildfire operational strategies and practices, which will include a public safety power shutoff program as a last resort. Investments are also being made to improve situational awareness through advanced technologies, including cameras utilizing artificial intelligence. The utility also continues to progress grid hardening work. These interim wildfire safety measures are part of the utility's longer-term wildfire safety strategy, which is being developed collaboratively with our communities and other stakeholders, and which we expect to begin implementing in 2025. Turning to the bank. ASB continues to perform well, and in the first quarter, the bank saw the benefits of the strategic actions undertaken in the fourth quarter of 2023. As you'll recall, last quarter, the bank sold low-yielding securities and reduced high-cost deposits with proceeds. We saw the benefits from that balance sheet repositioning this quarter as ASB's cost of funds decreased and net interest margin expanded, leading to improved profitability compared to last quarter. The bank also released a portion of the reserves initially taken following the wildfires on Maui, reflecting Maui's resilient economy and better-than-expected outlook. ASB's loyal and long-tenure deposit base remains stable. As of March 31, 86% of deposits were FDIC insured or fully collateralized. Customer deposits are safe and there is no risk to deposits as a result of legal claims related to the wildfires. I will now turn the call over to Scott Deghetto, who will discuss our financial results.

Thank you, Scott. I'll start with the results for the quarter on Slide 6. We earned consolidated net income of $42.1 million and EPS of $0.38 in the first quarter. This included $7.2 million after tax or about $0.07 per share of wildfire-related expenses net of insurance recoveries and deferrals. Excluding these expenses, core net income and EPS were $49.3 million and $0.45 per share compared to $54.7 million and $0.50 per share in the first quarter of 2023. Utility net income included $5 million of wildfire-related impacts, net of $7.4 million in insurance recoveries and $5.9 million of deferred costs. The holding company and other segments included $2.3 million of wildfire expenses net of $1.9 million in insurance recoveries. Net wildfire costs were immaterial to bank net income. The decrease in utility net income was driven by higher O&M expenses due to increased wildfire mitigation and other wildfire-related costs. Bank net income benefited from higher net interest margin resulting from the strategic balance sheet repositioning executed last quarter and also benefited from the reserve release that Scott mentioned. On a consolidated basis, core ROE remains healthy at 9.5% excluding wildfire impacts. This is down from 10% ROE in the first quarter of last year due primarily to lower utility and other segment earnings, partially offset by higher bank earnings. Utility core ROE was down 20 basis points to 8% excluding wildfire impacts and Bancorp ROE was up 7 basis points to about 15.6%. The approximately $0.07 decrease in the utility's EPS contribution was driven by an $0.11 increase in O&M expenses. $0.05 of the increase was wildfire-related, primarily driven by the settlement of indemnification claims asserted by the state. The remaining O&M increase included higher insurance costs and higher vegetation management costs. Earnings were also driven lower by penalties from worse heat rate performance. These items were partially offset by increased revenues, primarily from the annual revenue adjustment and major project interim recovery mechanisms as well as increased AFUDC and higher interest income. The approximately $0.02 increase in ASB's EPS contribution was driven by $0.02 of higher non-interest income and $0.02 of lower provision, partially offset by $0.02 of lower net interest income. Holding company and other segment expenses were higher by about $0.07 per share primarily from $0.03 per share of lower Pacific current net income and $0.02 per share of wildfire expenses as well as a small impact from tax rate adjustments. Lower Pacific current net income was mostly driven by a $2.6 million after-tax write-off from a fire at Pacific Current's biomass generating facility on Kauai. The fire was started by a contractor performing maintenance on the facility. Turning to our liquidity on Slide 8, we continue to prudently manage our liquidity as we work through the timing and impacts of litigation related to the Maui wildfires. As of the end of the first quarter, the holding company and the utility had $127 million and $130 million of cash on hand respectively. We continue to explore additional sources of liquidity, and the utility accounts receivable financing facility we discussed last quarter is awaiting PUC approval. The PUC issued a procedural schedule for the accounts receivable facility docket earlier this week, and a decision in order is scheduled for June 24. Once approved, we expect the facility to provide up to $250 million of additional liquidity. At that, let's open up the call to questions.

Our first question comes from Michael Lonegan with Evercore.

So as you mentioned, the fire department report and the AG's investigation report are consistent with what you've been saying making the distinction between a morning fire and an afternoon fire. Just wondering, in the event, if the ATF's report were to link the afternoon fire to your company, just how you are thinking about your approach or your options that you have to that situation?

Hey, Mike. This is Scott. Yes, we're not going to speculate on what the findings of the ATF report will be. Once that report comes out, we'll obviously review it very carefully and then make that determination, but we can't speculate right now.

And then secondly from me, press reports have indicated that you may be pursuing a sale of American Savings Bank. Just wondering if there's anything you could share on that.

Yes. Hey, Mike. It's Scott Deghetto. My comments are consistent with what we said in the past. We continue to not speculate on any strategic transactions or alternatives.

And then just quickly, lastly from me, obviously making progress with the first One Ohana fund. Just wondering if you have a sense for when the second fund for property owners and businesses could be launched and how it might be funded and different clients are making the contribution to that as well?

Yes, Mike. The only thing we can say is that those discussions are in progress. We can't really say when or provide any details. Those discussions involve many different parties, and we absolutely just in general, we feel that it provides to the extent it can provide an attractive alternative to folks to reach closure as opposed to litigation, then it's worthy of our support.

Our next question comes from Jonathan Reeder with Wells Fargo.

Hey, good morning team. I was hoping you could just kind of expand a little bit on why you think the legislation did not have either the key piece of the legislation during the regular session? And then would you say the prospects of, like, a special session being convened to do so or kind of eliminated by the establishment of the CAT team? And then would deferring the passage of potential legislation to 2025, would that be too late to provide the clarity and assistance that you all need?

Yes. Hi, Jonathan. This is Scott. So, yes, while we are obviously disappointed that we ran out of time to get the legislature passed. We actually feel that we were able to make pretty significant progress across all fronts in terms of the key bills and issues, making it all the way to conference committee. What that really indicated was that there was a high degree of engagement and really a lot of good discussion with legislators in terms of the importance of the three initiatives that we were really promoting. And again, so that was the wildfire mitigation work, securitization, and then the establishment of a going forward disaster recovery fund. What we heard in our discussions and all the way up to the very end was there is a lot of understanding that was built over the course of the session of the importance of these measures. What happened though was, there was still a desire for further details. I think it was reported broadly that, with respect to securitization and the wildfire mitigation plans, there was a request by some legislators for more specific information about what those plans would be, what would be the cost impacts on customers and so on. The Climate Advisory team that the Governor stood up will be very helpful to keep those discussions going in the interim before next year's session. I think it will position everybody, including the legislature, better to be able to make these critical decisions and move forward. Whether or not we have a special session even before then is up to the legislature themselves. But I think it's very positive that we're going to continue to engage with the key decision makers in the interim.

Got you. That makes sense. I guess the One 'Ohana initiative, at least the first phase, how does that level of participation compare to your expectations? Do you expect it will move materially higher, given the deadline was recently pushed back?

I think the way that we think about it is that, for everybody who has registered, that is one more family that will not have to go through the lengthy and unpredictable litigation process. It's a good number. Of course, we are hopeful that, it will continue to get steady uptake and we will see where we are, and the governor and others will determine May 31, whether it gets further extended or at that point, if that's where it stops. But overall, I think we're happy that there are at least a number, a fair degree of interest coming from the families.

And then, in terms of them being like firmly committed to it, remind me, is it like the end date like July, which I think currently is July 1st, for the completed forms? Is that when like you're definitely in or can people that have submitted forms still change their mind?

Yes. It's voluntary participation. At any time a family can decide to opt out, even if they registered or started the process. I think that's an important component. We wanted to make sure that families really have the optionality.

Okay, gotcha. Shifting gears a little bit and I may have missed it, if Scott mentioned, I apologize. But can you talk about the financial applications from issues at the Hamakua energy being completely out of service since late February, including like the impact on Pacific current earnings, the impact on potentially any utility earnings from the higher power costs or the CapEx to replace one of the generators, just stuff like that?

Yes. In terms of Hamakua, we were hoping to get Hamakua and there's two units there, there's a CT1, CT2, they're both 30 megs. We're looking to get CT1 back in the next couple of weeks. What I would tell you is, when the plant is not running, yes, they're not generating revenues, but they're also not burning fuel. There is a component obviously of O&M that continues to run through. But we're in the process of doing a root-cause analysis in terms of what happened there. We currently believe it's tied to fuel issues and we'll keep you posted on that.

And then I think I heard you say that that a $117 million that's being spent at the utility this year for wildfire-related stuff is 40% of the budget. So that implies like $300 million for 2024 utility CapEx. Is that right?

So roughly, yes, essentially, as we mentioned previously, our CapEx forecast historically for 2024, we're forecasting toward the lower end of that range. So that's in the right ballpark.

The lower end of that $320 million to $430 million range that was last put out or?

That's right.

Any update in terms of the timing of the ATF report or that's still just completely in their hands?

Yes. It's still our understanding that they intend to release the report prior to the one-year anniversary of the fire. So that would be prior to August.

Our next question comes from Paul Patterson with Glenrock Associates.

With respect to American Savings, what is the tax book, what's it valued on a tax basis? Do you have that also? Do you guys have that available?

Yes, Paul. Let me ask if Dean Teruya, our Bank CFO can respond to that.

On the tax basis, it's roughly around $680 million.

And then with respect to the, I apologize if I missed this, the liabilities associated with all these losses, do we have an estimate of what these claims obviously they're just claims but what they stand out now?

No, Paul, we continue to not have that. There are a lot of complications in terms of determining what that might be, including the resolution of the claims or determination of liability. So plaintiffs would have to prove the degree that Hawaiian Electric acted negligently and was the proximate cause of the damages. So, again, we're not through that process. We've not concluded that a loss is probable and reasonably estimable. So that's why we have continued to not have, we have not taken any reserve.

I guess what I was just wondering is it sort of an aggregate amount and I realize that's not what that necessarily would be reflective of what would actually come about. But I'm just wondering with all these lawsuits, is there some sort of aggregate amount that if you add them all up and obviously they're not going to be added on, but I'm just sort of curious as to what I mean, is it, am I correct that it's 560 roughly speaking, lawsuits that have been filed so far?

Well, as we said earlier, there's been about 400 tort claims and 160 or so in terms of the subrogation claims. So it's hard for us to really try and just do a very simple math and come up with a total aggregate amount.

Then I guess, other questions I think have pretty much been answered. In terms of the, we don't have a sense whether or not they're going to be going for a special session, I guess. Is that just to follow-up on I forgot who asked it, but it sounds like there may be one, but it also sounds to me that maybe you were looking towards next year about the securitization of wildfire mitigation legislation?

Yes. I think the best way to answer that, Paul, is that we are not the decision makers for the legislature in determining if they're going to have a special session. We are gearing up for the next session. I think that's absolutely a true statement. And if we happen to have a special session before then, then better yet.

This will conclude our question-and-answer session. I will now turn the call back to Scott Seu for closing remarks.

Thank you everybody for joining our call. We greatly appreciate your interest in HEI and, of course, your support, and our hearts continue to go out to our communities here, especially on Maui. So thank you all.

This will conclude today's conference call. Thank you all for your participation. You may now disconnect.