Hawaiian Electric Industries (HE) Q3 2026 earnings review
Hawaiian Electric's profit fell, and new rates slip to May
Hawaii's main power company collected much more from customers and still earned less. Most of the extra revenue was fuel, which passes straight through to bills. Profit excluding one-offs fell to 13 cents a share from 19 cents, and three hurricanes took about $14 million of it.
| Revenue after fuel and purchased-power costs | $390 million +7% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $0.13 $0.19 a year ago |
| Fuel oil cost per barrel | $154.87 $98.20 a year ago |
| Revenue from the pending rate increase in 2027 | $83 million $125 million once a full year of new rates is in |
⚖️ Verdict: 🔴 Bearish
The case got worse: the rate increase meant to lift earnings from January now looks like a May event, which cuts next year's extra revenue by a third on the utility's own numbers. The good news is that HEI prepaid $80 million of April's settlement instalment and now expects to borrow, not issue stock.
The question now is what regulators grant, and when. One view: the full request arrives with new rates next spring and restores what inflation took. The other: the commission trims it because fuel has already raised bills. The revised schedule, expected within weeks, is the next signal.
🐂 Bull Case
HEI Prepaid $80 Million of April's Bill
HEI owes four yearly payments of $479 million to settle claims from the 2023 Maui wildfires, and the second falls due next April. Finance chief Paul Ito has already paid $80 million of it, in two instalments, and because early payments earn a discount the amount still owed drops by $82 million.
The money came from the bank HEI used to own. American Savings Bank listed its shares in September, and HEI sold about a third of its small stake for $33.9 million, booking an $18.3 million gain. Ito plans to sell the rest next year and prepay $100 million more.
That leaves under $300 million to raise, which Ito intends to cover with debt or convertible debt rather than new stock: "Our financing strategy will focus on minimizing shareholder dilution while building toward investment-grade credit metrics over the long term." He has not picked the instrument, so the risk has shrunk rather than gone.
What to watch: which instrument HEI picks before April, in a filing or on the February call. Debt or convertible debt confirms the plan; drawing on the $250 million stock programme instead would mean existing owners fund part of the payment.
The Utility Wants to Defer Its Storm Bill
Three hurricanes crossed Hawaii in August and September, and the repairs added about $14 million of expense, the company said. With earlier storms the bill reaches roughly $23 million, of which "approximately 75% to 85% of the total costs are incremental" and so eligible for recovery.
In October the utility asked regulators to park those costs on the balance sheet instead of charging them against profit, and wants an answer by December 15. Qualifying expenses would then reverse in the fourth quarter, Ito said, with a request to bill customers following in 2027.
What to watch: the deferral decision due by mid-December. "Approval to defer the costs would not by itself constitute approval of recovery." Strip the storms out and profit excluding one-offs would have edged above last year, by our math.
Hardened Lines Held Through Hurricane Lala
Hurricane Lala cut power to more than 40% of customer accounts in mid-August. Crews brought over 95% of them back within three days, and Seu credited pole upgrades and heavier tree trimming with limiting pole failures. Since the start of 2024 the utility has replaced or upgraded 5,072 poles.
Insurers have noticed. Seu said the price per million of commercial wildfire cover has "declined 52% since the Maui wildfires", which matters because insurance is the second-largest item inside the pending rate request.
What to watch: the commission's assessment of last year's mitigation-plan work, due from November 20. A clean assessment helps both the rate request and the bond application; findings against the utility would slow each of them.
🐻 Bear Case
New Rates Now Start in May, Not January
Hawaiian Electric asked regulators in July to raise base rates by 5.3%, "phased in over two years and aligned with inflation" in Seu's words, to cover costs it already carries. For earnings, the start date matters as much as the size.
That date has moved. Ito told investors the commission's tentative timetable points to "a final decision in order in mid- to late April 2027", so new rates would reach bills around the first of May. The utility had asked for December.
Four lost months are expensive, because the costs the increase covers already sit in the accounts. Every month without new rates is another month the utility earns below the return regulators consider fair.
- Revenue from the increase in 2027: $83 million, against a $125 million full-year rate
- Utility return on equity in 2027: 7.3%-7.8% on a May start, 8.3%-8.8% on full-year rates
- Return on equity earned in the year to September: 5.2%, against the 9.5% allowed
What to watch: the revised timetable, expected shortly, and the commission's January views on the regulatory framework. An interim decision before May recovers part of the lost revenue; a later order pushes the full step into 2028, with the April payment due first.
Fuel at $155 a Barrel Drained Cash
Hawaii burns imported oil for most of its electricity, and customers repay that cost through a separate charge. Oil cost the utility $154.87 a barrel against $98.20 a year earlier, which explains most of the revenue increase and none of the earnings.
The pass-through is not free. The utility pays its suppliers before customers pay their bills, so fuel stocks have risen 46% since December and money owed by customers is up about a quarter. Cash from operations over nine months came to $254 million, down from $320 million.
What to watch: the oil price and the bad-debt rate this quarter. Ito said the company has "not seen a meaningful increase in bad debt expense or write-offs this year". Should that change while bills stay high, regulators grow less willing to grant the increase.
Costs Outrun the Inflation Formula
Between rate cases the utility gets one annual revenue adjustment tied to a national inflation forecast, set at 2.58% for 2027. Its own costs climb faster. Operating and maintenance spending, excluding pension and items billed through surcharges, reached $158.9 million against $139.8 million a year ago.
Storms explain much of the quarter, though not the pattern. Across nine months the same measure rose 11%, driven by higher property and liability insurance, employee benefits and general claims. Honolulu consumer prices rose 5.2% over the year. Utility profit excluding one-offs dropped by nearly a third, to $27.6 million.
Measured against revenue after fuel and purchased power, the part of the bill the utility actually controls, these costs took 46.6% of the total against 44.6% a year earlier. That is a two-point shift in a business whose allowed return has not changed, and closing that gap is exactly what the rate request would do.
What to watch: fourth-quarter adjusted operating costs and the insurance evidence inside the rate case. Costs still rising at this pace would mean the $125 million request only catches up with the past, leaving the next five-year period to start behind again.
Risks This Quarter Didn't Answer
Four standing worries got no new numbers this quarter. Each sits on a regulatory or legislative calendar running well into 2027, and each could change how much the utility earns on its own investment. The one analyst on the call raised just one of them, the liability cap.
- Wildfire liability cap: Seu said draft rules would come "sometime in 2027", so exposure above the insurance the utility buys stays open.
- JERA's 500 MW power station: the Japanese producer applies for approval in early 2027, and neither executive mentioned the project.
- Waiau repower: regulators approved about $908 million against a $1.16 billion estimate, and the utility is "currently assessing the impact the change may have on the Waiau repower project" after a flood-zone change.
- Earnings outlook: the company stopped giving one in 2023 and tied its return to settlement finality, which arrived in April.
👓 Other Themes
Bond Plan Filed for $531 Million
In October the utility asked regulators to let it issue about $531 million of bonds, repaid through "an irrevocable, nonbypassable Infrastructure Resilience Charge collected from customers over a period of up to 30 years". The money covers wildfire and grid-modernisation work. Securitised spending earns no shareholder return, so approval would also shrink the 2027 capital plan.
The Last Non-Utility Asset Is Gone
HEI's final non-utility business, the 7.5-megawatt Mahipapa biomass plant on Kauai, has stopped. Hurricane Lowell damaged it in September, its sale collapsed, its contract with the Kauai co-operative ended on October 1, and it "filed a voluntary petition for bankruptcy under Chapter 7" on November 3. A $50.7 million write-down cut reported earnings, not cash.
💲 Other KPIs
Volumes rose 1.0% from a year ago, after a soft second quarter. Cloudier weather cut output from rooftop solar panels and solar water heaters, so customers drew more from the grid. Hawaii's rules separate utility revenue from volumes, so these swings matter far less than fuel prices do.
Unfinished plant has grown 73% since December. This is work paid for but not yet serving customers, so it earns a construction allowance rather than a return until it enters service. The Waena battery project and resilience work are the near-term entrants; the Waiau turbines arrive from 2029.
Down from $502 million at the end of December, after April's settlement payment and heavier construction. Total available liquidity of $1.32 billion exceeds last year's, because HEI has drawn neither its credit lines nor its stock programme. All three agencies still rate the company below investment grade.
🔮 Guidance
Unchanged. The utility still plans to spend $700-750 million this year, roughly double what it spent in 2025. Nine months in, it has put $399 million into the ground. The middle of the range therefore leaves about $326 million for the fourth quarter by our math, against $114 million in the same quarter last year.
Trimmed. Strip out the work the company wants bondholders to fund and the 2027 plan falls to $575-675 million. Approval of the bonds moves wildfire spending outside the asset base on which shareholders earn, so the forecast shrinks while the work goes ahead. The 2028 plan is larger again.
Cut by timing, not by request. The utility still seeks $170 million over two years. Ito now expects rates in May, bringing "8 months of the full year run rate of $125 million". Every month of delay costs roughly $10 million of revenue, by our math.
New. On a May start, the company's illustrative figures put the utility's return on equity excluding one-offs at 7.3% to 7.8% next year. It earned 5.2% in the twelve months to September. A full year of the new rates would give 8.3% to 8.8%, still short of the return regulators allow.
Raised and now filed. The application covers about $500 million of wildfire, grid and related costs plus roughly $31 million of issuance expenses. Spreading repayment over as long as three decades keeps the effect on monthly bills small, which is the point of using it rather than the normal recovery route. Regulators have not yet set a schedule.
Raised. The company now puts this year's contributions to pension and retiree health plans at $15 million, against $12 million paid last year. It had paid $10 million by the end of September. A tracking mechanism recovers these costs over time, so the increase shifts cash timing more than earnings.
❓ Key Questions
Which instrument funds the April payment?
Ito has committed to debt or convertible debt for the balance of about $300 million but has not named a security, a size or a date. The choice decides how much of the payment existing owners fund.
When do new rates actually reach bills?
The utility asked for an interim decision in December and rates from January. The tentative timetable now points to late April. The company is waiting for a revised one, and each month of delay costs it about $10 million of revenue.
How much of the storm bill will customers carry?
The deferral request only preserves the right to ask. Management has not said what share of the roughly $19 million of incremental cost it expects to recover, or when it will file for that recovery.
What does the flood zone do to Waiau?
Part of the site moved into a flood zone in June, and the company is still assessing the effect. It has already contracted the turbines, and about $247 million of estimated cost sits outside approved recovery.
When does the earnings outlook return?
The company stopped forecasting earnings in 2023 and linked the decision to settlement finality, which arrived in April. Neither executive addressed it this quarter, so investors must value the rate award themselves.