HEI - Hawaiian Electric Industries Inc.

11/06/2026 | Press release | Distributed by Public on 11/06/2026 15:10

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 2025 Form 10-K and should be read in conjunction with such discussion and the 2025 annual consolidated financial statements of HEI and Hawaiian Electric and notes thereto included in HEI's and Hawaiian Electric's 2025 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. For discussion of the impacts of inflation and other macro-economic factors impacting the Utilities, see also "Recent developments" in Hawaiian Electric's MD&A. See also "Economic conditions" below for further discussion of the economic impact of recent events, and Note 2 of the Condensed Consolidated Financial Statements for recent updates and disclosures relating to the Maui windstorm and wildfires.
RESULTS OF OPERATIONS
Three months ended September 30 %
(in thousands) 2026 2025 change
Primary reason(s)1
Revenues $ 1,008,710 $ 790,610 28 Increase in the electric utility segment, partly offset by a decrease in the all other segment.
Operating income 41,217 52,046 (21) Decrease in the electric utility segment, partly offset by an increase in the all other segment.
Net income for common stock 35,450 30,747 15 Higher net income related to gain on sale of investment and net unrealized gain on investment measured at fair value, partially offset by higher impairment losses on assets formerly classified as held for sale, higher interest expense due to the accretion related to the remeasuring of the remaining settlement liability (see Note 2 of the Condensed Consolidated Financial Statements) and higher average debt balances and lower operating income. Also see effective tax rate explanations below.
Nine months ended September 30 %
(in thousands) 2026 2025 change
Primary reason(s)1
Revenues $ 2,694,860 $ 2,281,072 18 Increase in the electric utility segment, partly offset by a decrease in the all other segment.
Operating income
298,808 168,213 78 Increase in the electric utility segment (primarily due to the adjustment related to remeasuring the remaining settlement liability (see Note 2 of the Condensed Consolidated Financial Statements)) and an increase in the all other segment.
Net income for common stock
189,100 83,503 126 Higher net income related to higher operating income, gain on sale of investment and net unrealized gain on investment measured at fair value, partially offset by higher impairment losses on assets formerly classified as held for sale, higher interest expense due to the accretion related to the remeasuring of the remaining settlement liability (see Note 2 of the Condensed Consolidated Financial Statements) and lower interest income due to the first installment payment of the tort-related settlement in April 2026. Also see effective tax rate explanations below.
1 Also, see the all other segment discussion below.
The Company's effective tax rates for the first nine months of 2026 and 2025 were 15% and 25%, respectively. For the third quarters of 2026 and 2025, the Company's effective tax rates were (82)% (tax benefit) and 22% tax expense, respectively. The lower effective tax rate for the first nine months of 2026, compared to the same period in 2025, was primarily due to discrete tax benefits recognized in 2026 from the valuation allowance release related to the gains on the ASB investment and research and development tax credit claims recognized; partially offset by the substantially higher pretax income related to the
remeasurement of the wildfire tort-related settlement liability to present value (net of accretion) and investment in ASB to fair market value, net of the impairment of Pacific Current assets. The lower effective tax rate for the third quarter of 2026, compared to the same period in 2025, was primarily due to discrete tax benefits recognized in third quarter of 2026 from the valuation allowance release related to the gains on the ASB investment, impairment of Pacific Current assets, accretion of the wildfire tort-related settlement liability, and research and development tax credit claims recognized.
Maui windstorm and wildfires related items, net. For the three and nine months ended September 30, 2026 and 2025, the Company's incremental items related to the Maui windstorm and wildfires as discussed in Note 2 of the Condensed Consolidated Financial Statements, were as follows:
Three months ended September 30, 2026 Nine months ended September 30, 2026
(in thousands) Electric utility
All other
HEI consolidated
Electric utility
All other
HEI consolidated
Maui windstorm and wildfires related expenses:
Legal expenses $ 1,028 $ (26) $ 1,002 $ 3,592 $ 2,642 $ 6,234
Other expense - 31 31 1,116 293 1,409
Total Maui windstorm and wildfires related expenses
1,028 5 1,033 4,708 2,935 7,643
Insurance recoveries1
(35) (172) (207) (8,866) (515) (9,381)
Settlement remeasurement2
- - - (153,870) - (153,870)
Accretion expense3
18,010 - 18,010 35,724 - 35,724
Total Maui windstorm and wildfires related items, net
$ 19,003 $ (167) $ 18,836 $ (122,304) $ 2,420 $ (119,884)
Three months ended September 30, 2025 Nine months ended September 30, 2025
(in thousands) Electric utility
All other
HEI consolidated
Electric utility
All other
HEI consolidated
Maui windstorm and wildfires related expenses:
Legal expenses $ 4,316 $ 1,478 $ 5,794 $ 12,469 $ 8,063 $ 20,532
Outside services expense
- - - - 135 135
Wildfire securities-related claims - 47,750 47,750 - 47,750 47,750
Other expense
5,791 101 5,892 17,278 401 17,679
Interest expense 131 267 398 2,543 756 3,299
Total Maui windstorm and wildfires related expenses
10,238 49,596 59,834 32,290 57,105 89,395
Insurance recoveries4
(430) (48,640) (49,070) 126 (53,500) (53,374)
Deferral treatment approved by the PUC5
(6,237) - (6,237) (21,809) - (21,809)
Total Maui windstorm and wildfires related expenses, net of insurance recoveries and approved deferral treatment
$ 3,571 $ 956 $ 4,527 $ 10,607 $ 3,605 $ 14,212
1 Includes $8.5 million recognized as an adjustment to the Wildfire tort-related claims for the nine months ended September 30, 2026.
2 Represents an adjustment related to remeasuring the remaining settlement liability at present value in accordance with Accounting Standards Codification Topic 835-30 Imputation of Interest.
3 Represents accretion expense related to remeasuring the remaining settlement liability, which is included in "Interest expense, net" and "Interest expense and other charges, net" in HEI's and the Utilities' Condensed Consolidated Statements of Income, respectively.
4 HEI consolidated includes insurance recovery related to the settlement of the securities class action of $47.8 million for the three and nine months ended September 30, 2025. Also includes adjustments related to costs that are no longer probable of recovery under the insurance policies. For the three and nine months ended September 30, 2025, HEI consolidated and Electric utility adjustments amount to $1.0 million and $7.6 million, respectively, of which, $0.5 million and $4.5 million were deferred to a regulatory asset, respectively, and are reported on line "Deferral treatment approved by the PUC."
5 Pursuant to the PUC order received on February 12, 2025, deferral accounting treatment limited to insurance premiums and outside services and legal costs associated with the asset-based lending facility credit agreement incurred in 2025 was granted. Applicable amounts were deferred to a regulatory asset. See "Risk Factors" in Item 1A. for further discussion of regulatory risks. See Note 2 of the Condensed Consolidated Financial Statements.
Note: The all other segment Maui windstorm and wildfires related expenses (legal, outside services and other) and insurance recoveries are included in "Expenses-Other" and interest expense is included in "Interest expense, net" on the HEI and Subsidiaries Condensed Consolidated Statements of Income. See Electric utility section below for more detail.
From August 8, 2023 through September 30, 2026, HEI and its subsidiaries have incurred approximately $2.28 billion of Maui windstorm and wildfires related expenses, including the Utilities' estimate of the losses related to a settlement of all wildfire tort-related legal claims and cross claims, the One 'Ohana Initiative contribution and $47.8 million related to the securities class action settlement. Certain of these costs are reimbursable under excess liability insurance, professional liability insurance and directors and officers liability insurance policies. As of September 30, 2026, HEI and its subsidiaries have recovered the remaining unpaid insurance claim proceeds owed under its excess liability and professional liability insurance policies, and approximately $71 million of insurance coverage is remaining under the directors and officers liability policy, after deducting applicable retention amounts and amounts expected to be recovered for incurred costs such as the securities class action settlement that is recognized as a receivable as of the quarter end.
On April 10, 2026, the last condition to the finalization of the tort settlement agreements and first installment payment was satisfied when the last insurer agreed to a stipulation withdrawing with prejudice the appeal of the December 30, 2025 summary judgment entered in favor of HEI, Hawaiian Electric and other defendants. As a result, the Company paid the first of its four equal annual $479 million installments pursuant to the settlement agreements. In addition, on September 16, 2026, HEI made a partial prepayment of $40 million towards the second annual installment due in April 2027. On October 28, 2026, HEI made another partial prepayment of $40 million towards the second installment amount due in April 2027.
Economic conditions.
Note: The statistical data in this section is from public third-party sources that management believes to be reliable (e.g., Board of Governors of the Federal Reserve System, Department of Business, Economic Development and Tourism, University of Hawaii Economic Research Organization (UHERO), U.S. Bureau of Labor Statistics, and U.S. Energy Information Administration).
In the third quarter of 2026, the average daily passenger count was 1.6% lower 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 traveler counts, including those from Japan, remaining at lower levels. In the third quarter, domestic passenger counts were 2.3% above 2019 levels, while international passenger counts (excluding Japan) remained 34.8% below 2019 levels. Due to the weak yen, Japanese visitors are 41.9% below 2019 levels.
Hawaii's preliminary seasonally adjusted unemployment rate in September 2026 was 2.8%, which was an increase from the September 2025 rate of 2.1%. The national unemployment rate in September 2026 was 4.2%, slightly lower than the September 2025 rate of 4.4%. According to a recent forecast by UHERO, issued on September 25, 2026, jobs in the State will decrease by 0.2% in 2026.
Hawaii's petroleum product prices are correlated to the crude oil price in international markets. The price of crude oil has increased 39.7% over the same quarter in the prior year.
At its September 16, 2026 meeting, the Federal Open Market Committee (FOMC) decided to raise the federal funds rate target range to 3.75% to 4.00%. The FOMC noted that while inflation remains elevated, domestic spending, productivity growth and capital investment are strong.
UHERO forecasts full year 2026 real GDP to increase 0.6%, real personal income to increase 1.1%, total visitor arrivals to decrease 0.7%, and an unemployment rate of 2.5% for the State. According to UHERO, Hawaii's economy has slowed due to the war-driven oil prices and an active storm season. Gradual relief is expected as energy prices ease and storm recovery proceeds.
See also "Recent Developments" in the "Electric utility" section below for further discussion of the economic impact of recent events.
All other segment. The all other business segment loss includes results of the stand-alone corporate operations of HEI, ASB Hawaii and Pacific Current, including the results of Hamakua Energy and the solar and battery energy storage system facilities up until the close of their respective sales in 2025, and GLST1 up until its termination on June 3, 2026.
Three months ended September 30
(in thousands) 2026 2025 Change Primary reason(s)
Revenues $ 1,606 $ 3,182 $ (1,576) Lower revenues primarily due to lower sales at Pacific Current subsidiaries.
Operating loss (6,956) (10,747) 3,791 Lower operating loss primarily due to the transfer of the majority of corporate general and administrative costs to the Utilities as part of the June 2026 integration to combine the companies.
Net income (loss) 21,962 (6,241) 28,203 Change in net income (loss) related to gain on sale of investment and net unrealized gain on investment measured at fair value and lower interest expense due to lower average debt balances, partly offset by higher impairment losses on assets formerly classified as held for sale and lower interest income due to the first installment payment of the tort-related settlement in April 2026. Also see effective tax rate explanations above.
Nine months ended September 30
(in thousands) 2026 2025 Change Primary reason(s)
Revenues $ 6,852 $ 12,796 $ (5,944)
Lower revenues primarily due to lower sales at Pacific Current1 subsidiaries.
Operating loss (30,462) (35,061) 4,599 Lower operating loss primarily due to lower Pacific Current losses and the transfer of the majority of corporate general and administrative costs to the Utilities as part of the June 2026 integration to combine the companies, partly offset by higher corporate consulting expense.
Net income (loss) 2,411 (40,451) 42,862 Change in net income (loss) related to gain on sale of investment and net unrealized gain on investment measured at fair value and lower interest expense due to lower average debt balances, partly offset by higher impairment losses on assets formerly classified as held for sale and lower interest income due to the first installment payment of the tort-related settlement in April 2026. Also see effective tax rate explanations above.
1 As a subsidiary of Hamakua Holdings, Hamakua Energy's sales to Hawaii Electric Light (a regulated affiliate) up until the close of its sale on March 10, 2025, are eliminated in consolidation.
The all other business segment loss includes results of the stand-alone corporate operations of HEI (including eliminations of intercompany transactions) and the results of HEI's subsidiaries, GLST1 (up until its termination on June 3, 2026), ASB Hawaii and Pacific Current. Significant investments of Pacific Current made through its subsidiaries include: Pacific Current's indirect subsidiary up until the close of its sale on March 10, 2025, Hamakua Energy, which owned a 60-MW combined cycle power plant on Hawaii Island that provides electricity to Hawaii Electric Light; Pacific Current's solar project subsidiaries up until the close of the Solar Asset Disposition effective August 1, 2025, including Mauo, which owned solar-plus-storage projects totaling 8.6 MW on five University of Hawaii campuses, Alenuihaha Developments, LLC, which owned a collection of renewable energy assets on Oahu and Kauai, and Ka'ie'ie Waho which owned a 6-MW solar photovoltaic system that provides renewable energy to Kauai Island Utility Cooperative; Pacific Current's subsidiary, Mahipapa, which owns a 7.5-MW nameplate biomass facility on Kauai; as well as eliminations of intercompany transactions.
In late February 2024, Hamakua Energy's combustion turbine and its leased combustion turbine unexpectedly sustained damages from contaminated fuel resulting in a plant shut down through June 2024. In addition, in March 2024, a fire, which was ignited from a vendor's welding activities during scheduled maintenance, destroyed the cooling tower at the Mahipapa facility on Kauai resulting in a plant shutdown through December 2024. The Company is currently working with its legal counsel on seeking recovery of its losses related to damages sustained to its plant facilities.
As part of HEI's comprehensive review of strategic options for certain assets of Pacific Current, in March 2025, Pacific Current closed on the sale of Hamakua Holdings, a then wholly owned subsidiary of Pacific Current and parent company of Hamakua Energy, to an unaffiliated third party. In addition, in August 2025, Pacific Current, through an indirect subsidiary, sold all of its membership interests in Mauo, Alenuihaha Developments, LLC, Kaʻieʻie Waho and Upena, LLC. On November 3, 2026, Mahipapa filed a voluntary petition for bankruptcy under Chapter 7 in the United States Bankruptcy Court for the District of Hawaii. See Note 3 of the Condensed Consolidated Financial Statements for more information.
FINANCIAL CONDITION
Liquidity and capital resources. See "Credit and Capital Market Risk" in Item 1A. Risk Factors in HEI's and Hawaiian Electric's 2025 Form 10-K and in Item 1A. Risk Factors below.
HEI's and the Utilities' future results of operations are subject to significant risks and uncertainties. Factors that could cause actual results to differ materially from expectations include, but are not limited to, access to lower-cost sources of capital, the ability to attract and retain key personnel, and pending or threatened litigation, including the wildfire-related litigation described above.
The Company remains focused on maintaining a strong and financially healthy enterprise and has taken additional measures to strengthen its financial position while continuing to provide reliable service to customers and support its long-term commitments to Hawaii and its communities. In September 2025, HEI and Hawaiian Electric each entered into a fourth amended and restated credit agreement with a syndicate of eight financial institutions, increasing each of their committed capacities to $300 million (see Note 5 of the Condensed Consolidated Financial Statements). As of September 30, 2026, neither HEI nor Hawaiian Electric had any borrowings outstanding under its revolving credit facility or any commercial paper outstanding.
In addition, in May 2024, Hawaiian Electric entered into an asset-based credit facility that allows borrowings of up to $250 million (see Note 5 of the Condensed Consolidated Financial Statements), and in September 2024, HEI registered with the SEC an at-the-market offering program under which HEI may offer and sell, from time to time at its sole discretion, its common stock, without par value, having an aggregate offering price of up to $250 million. To date, Hawaiian Electric has not drawn on its asset-based credit facility and HEI has not sold any common stock under its at-the-market offering program. Other proactive measures included suspending HEI's quarterly common stock dividend after payment of the second quarter dividend in September 2023, repaying outstanding revolving credit facility borrowings and reducing or eliminating discretionary costs.
As of September 30, 2026, HEI consolidated had $2.3 billion of long-term debt and Hawaiian Electric had accrued estimated wildfire liabilities, at present value, of approximately $1.3 billion (pre-tax), related to the settlement of the Maui windstorm and wildfire tort-related legal claims (see Note 2 of the Condensed Consolidated Financial Statements). On April 10, 2026, HEI and Hawaiian Electric paid the first $479 million of four equal annual installments of the wildfire settlement liability using proceeds from HEI's sale of 62.2 million shares of common stock in September 2024. In addition, on September 16, 2026, HEI made a partial prepayment of $40 million towards the second annual installment due in April 2027. As of September 30, 2026, Hawaiian Electric classified $376 million of the settlement as a current liability and $903 million as a noncurrent liability on HEI's and the Utilities' Condensed Consolidated Balance Sheets. On October 28, 2026, HEI made another partial prepayment of $40 million towards the second installment amount due in April 2027.
The following table provides the components of available liquidity as of September 30, 2026. See "Liquidity and capital resources" in Hawaiian Electric's MD&A below for components of its available liquidity under existing credit facilities as of September 30, 2026.
As of September 30, 2026
(in millions) Capacity Outstanding Undrawn
Electric utility
Total credit, excluding standing commitment letter with HEI1
$ 550 $ - $ 550
Total available credit - Electric utility
$ 550
All other
Unsecured revolving line of credit $ 300 $ - $ 300
At-the-market program 250 - 250
Total available credit and other liquidity - All other
$ 550 $ - $ 550
Consolidated cash and cash equivalents 224
Total available liquidity
$ 1,324
1 Pursuant to an HEI and Hawaiian Electric Intercompany Borrowing and Investment Policy, Hawaiian Electric may borrow up to $75 million under its standing commitment letter. Hawaiian Electric currently has no borrowings under this commitment. See Note 5 of the Condensed Consolidated Financial Statements for a description of the HEI and Hawaiian Electric Intercompany Borrowing and Investment Policy.
Management believes the Company's $224 million of cash and cash equivalents as of September 30, 2026, together with the available capacity under Hawaiian Electric's ABL Facility, HEI's and Hawaiian Electric's syndicated credit facilities and
HEI's registered at-the-market offering program, provides sufficient liquidity to meet the Company's financial obligations and sustain operations in the short term. If additional short-term liquidity is needed, Hawaiian Electric may reduce the pace of capital spending related to non-essential projects, manage O&M expenses, seek additional borrowings, and/or explore asset sales.
The Company expects long-term liquidity will continue to be impacted by the remaining wildfire settlement payments; the Company's below investment grade credit ratings, which may limit the Company from readily accessing low-cost unsecured, short-term borrowings and other sources of debt and equity financing on favorable terms; and higher working capital requirements resulting from inflation and elevated fuel prices. The Company is currently working with its financial advisors on a financing plan to raise the additional capital necessary to fund the remaining settlement payments for the wildfire tort claims. While management believes the Company will be able to raise the necessary capital, there is no assurance that management's plans will be successful. If unsuccessful, the Company may pursue other strategic alternatives. See further discussion in "Risk Factors" in Item 1A.
Credit ratings. On April 21, 2026 and July 22, 2026, Moody's and S&P, respectively, upgraded HEI's credit ratings. On August 11, 2026, S&P withdrew HEI's short-term and commercial paper ratings at the Company's request due to lack of access to the commercial paper market. As of October 30, 2026, the Fitch, Moody's, and S&P ratings of HEI were as follows:
Fitch Moody's S&P
From1
To
From1
To
From1
To
Long-term issuer default, long-term and issuer credit, respectively B+ B+ Ba3 Ba2 B+ BB-
Short-term issuer default, commercial paper and commercial paper, respectively B B NP NP B WR
Outlook Positive Positive Positive Stable Watch Positive Stable
1 As of December 31, 2025. In March 2026, S&P revised HEI's outlook to "Positive" from "CreditWatch Positive" and affirmed the "B+" issuer credit rating.
NP - Not Prime.
WR - Withdrawn rating.
Note: The above ratings reflect only the view, at the time the ratings are issued or affirmed, of the applicable rating agency, from whom an explanation of the significance of such ratings may be obtained. Such ratings are not recommendations to buy, sell or hold any securities; such ratings may be subject to revision or withdrawal at any time by the rating agencies; and each rating should be evaluated independently of any other rating.
HEI consolidated material cash requirements. Material cash requirements of HEI consolidated include: payments related to settlement of tort-related legal claims and cross claims; Utility-related capital expenditures (including capital expenditures related to wildfires and wildfire mitigations), labor and benefits costs, O&M expenses, fuel and purchase power costs, and debt and interest payments; HEI-related debt and interest payments; and HEI equity contributions to support Mahipapa, Pacific Current's subsidiary.
The consolidated capital structure of HEI was as follows:
(dollars in millions) September 30, 2026 December 31, 2025
Long-term debt, net, including current portion of long-term debt, net
$ 2,313 56 % $ 2,410 60 %
Common stock equity 1,802 44 1,606 40
$ 4,115 100 % $ 4,016 100 %
HEI also periodically makes short-term loans to Hawaiian Electric to meet Hawaiian Electric's cash requirements, including the funding of loans by Hawaiian Electric to Hawaii Electric Light and Maui Electric, but no such short-term loans to Hawaiian Electric were outstanding as of September 30, 2026.
See Note 5 of the Condensed Consolidated Financial Statements for a brief description of the Company's loans.
There were no new issuances of common stock through the DRIP or the HEIRSP for the nine months ended September 30, 2026 and 2025.
For the first nine months of 2026, net cash used in operating activities of HEI consolidated was $231 million, which included the first installment of the settlement payment. Net cash used in investing activities for the same period was $363 million, primarily due to capital expenditures. Net cash used in financing activities for the same period was $162 million, primarily due to repayment of long-term debt.
Dividends. The payout ratios for the first nine months of 2026 and full year 2025 were nil. Each quarter, the HEI Board of Directors evaluates whether to declare a dividend and considers many factors in the evaluation including, but not limited to, the Company's results of operations, liquidity, the long-term prospects for the Company, current and expected future economic conditions, and capital investment alternatives. In August 2023, in consideration of 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 2023 dividend, and has not declared a cash dividend since that time. This action was intended to allow the Company to provide additional liquidity and allocate resources to reducing wildfire risk and rebuilding and restoring power and help ensure a strong future for the Utilities. In May 2025, after a temporary suspension of Hawaiian Electric's quarterly cash dividend to HEI that began with the second quarter 2024 dividend, the Hawaiian Electric Board of Directors approved a $10 million dividend for each quarter of 2025 and an $11 million dividend for each of the first, second and third quarters of 2026. This decision was made after considering several factors, including the continued progress of the Maui windstorm and wildfire settlement, the Utilities' results of operations and the Utilities' liquidity position.
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 42, 43, 61 and 62 of the MD&A included in Part II, Item 7 of HEI's and Hawaiian Electric's 2025 Form 10-K.
Following are discussions of the results of operations, liquidity and capital resources of the electric utility segment.
Electric utility
Recent developments. See also "Recent developments" in HEI's MD&A and Note 2 of the Condensed Consolidated Financial Statements, which includes disclosures relating to Maui windstorm and wildfires.
For the third quarter of 2026, the Utilities generated net income of approximately $13.5 million compared to $37.0 million for the same quarter of 2025. See "Results of operations" below for variance explanations.
In the third quarter of 2026, kWh sales volume increased 1.0% compared to the same period in 2025. The increase was primarily attributable to less sunny weather, which reduced production from rooftop solar and solar water heaters.
The price of crude oil has increased 39.7% over the same quarter in the prior year. 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 penalty/reward exposure annually). However, the Utilities expect cash flow impacts from the timing of the disbursements for fuel inventories and subsequent collection of accounts receivable, resulting in higher working capital requirements.
In September 2026, the Consumer Price Index (CPI) increased 3.7% over the last 12 months. In Hawaii, the September 2026 Urban Hawaii (Honolulu) CPI increased 5.2% over the last 12 months. Under the PBR Framework, inflation risk for the Utilities is partially mitigated by an Annual Revenue Adjustment (ARA), which is based on a formula that includes a compounded and non-compounded portion.
•The compounded portion of the ARA 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 Rate Adjustment Mechanism revenue in effect prior to the implementation of PBR, plus the prior adjustment year's compounded portion of the ARA. 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 2026 calendar year, the forecasted 2026 GDPPI was 2.58% (net of the 0.22% customer dividend), measured in October 2025, and became effective in rates on January 1, 2026. For the 2027 calendar year, the forecasted 2027 GDPPI was 2.58% (net of the 0.22% customer dividend), measured in October 2026, and is scheduled to become effective in rates on January 1, 2027, subject to the approval by the Public Utilities Commission of the State of Hawaii (PUC).
•The non-compounded portion of the ARA includes a subtractive component, representing the management audit savings commitment, or refund to customers, which was approved by the PUC to supplement the 0.22% customer dividend discussed above to make up the total customer dividend that will be applied to the ARA formula during the multi-year rate period (MRP).
Recent regulatory and legislative developments.
Storm response and restoration costs. Beginning in the first quarter of 2026, the Utilities' service territories experienced several severe weather events, including two Kona Low storms and an extraordinary period of tropical cyclone activity in the fall of 2026 involving Hurricanes Lala, Lowell and Nolo, that caused significant damage to the Utilities' electric infrastructure, widespread electric service interruptions and ongoing emergency response and restoration activities. These events resulted in state emergency declarations. On October 21, 2026, the Utilities filed an application with the PUC requesting approval to defer qualifying incremental O&M costs incurred in connection with response and restoration efforts related to the Kona Low storms and the 2026 hurricane season, including related incident-management and general support costs. The requested deferral periods extend from March 13 through December 31, 2026 for the Kona Low storms and from August 14 through December 31, 2026 for the 2026 hurricane season. The application does not request approval to recover the costs, but is intended to preserve the Utilities' ability to seek recovery through a separate application through the Z-factor mechanism. For the nine months ended September 30, 2026, the Utilities incurred $23 million of O&M costs related to these severe weather events. The Utilities are finalizing their assessment of the incremental portion of these costs and preliminarily estimate that approximately 75% to 85% of the total costs are incremental. The amount ultimately requested in the Utilities' deferral application may differ from this preliminary estimate and will be subject to PUC approval.
Act 191 (2025). Act 191 allows the State to "step-in" for the Utilities in the case of utility financial distress, providing payment assurance to project owners and addressing concerns regarding some independent power producers' ability to procure low-cost financing for new renewable energy and storage projects due to the Utilities' credit ratings. The Utilities entered into a Master Agency Agreement with the State and Step-In Agreements for certain power purchase agreements, effective on September 1, 2026. Act 191 supports the Utilities' ability to procure energy and gives IPP's assurance to bid on projects in order to provide customers and communities with safe, reliable and affordable clean energy.
Act 258 (2025). Act 258 directs the PUC to evaluate the viability of a wildfire recovery fund, establish an aggregate liability cap on economic damages from future wildfires and authorizes securitization to finance wildfire safety and resilience infrastructure improvements. Act 258 is intended to support the Utilities' financial stability and facilitate investment in wildfire mitigation and infrastructure resilience. On October 9, 2026, the Utilities filed an application with the PUC, requesting a financing order authorizing the issuance of approximately $531 million aggregate principal amount of infrastructure resilience bonds, reflecting up to approximately $500 million of infrastructure resilience costs, including carrying costs, and approximately $31 million of estimated upfront financing costs. The proposed costs include wildfire mitigation, grid modernization and related eligible operation and maintenance costs, certain of which remain subject to approval in separate PUC proceedings. The application proposes that the bonds would be issued by a bankruptcy-remote special-purpose entity and repaid through an irrevocable, nonbypassable Infrastructure Resilience Charge collected from customers over a period of up to 30 years. The proposed financing is subject to PUC approval, and the amount, timing, interest rates, customer charges, tax treatment, and other terms may differ from the amounts and assumptions included in the application.
Alternative re-basing. See "Regulatory proceedings" in Note 4 of the Condensed Consolidated Financial Statements.
Affiliate transactions. In June 2025, the Utilities submitted a request with the PUC to terminate or indefinitely suspend all or specific provisions of the Affiliate Transaction Requirements (ATRs). On October 31, 2025, following a September 2025 PUC order providing guidance on topics to be addressed in such a request, HEI and Hawaiian Electric filed a revised request. Beginning in 2024 and continuing into 2026, HEI has embarked on a strategy to divest all of its affiliated companies other than the Utilities, with the intent for the Utilities to be HEI's sole operating companies. In their filing, HEI and Hawaiian Electric described how termination or suspension of the ATRs would allow implementation of a corporate integration, under which all HEI employees would move to Hawaiian Electric, a few officer positions would manage and operate both HEI and Hawaiian Electric (dual-hatted executives), and the HEI and Hawaiian Electric boards of directors would be composed of a single set of individuals. On March 23, 2026, the PUC issued an order approving the indefinite suspension of the ATR provisions requested by HEI and Hawaiian Electric. The PUC's approval is subject to specified commitments, including HEI's divestment of all remaining Pacific Current and affiliated assets, a prohibition on pursuing new diversification activities, continued compliance with Hawaii Revised Statutes Section 269-19.5 governing affiliated interests, and ongoing cooperation with the PUC, including reporting obligations. Pursuant to those reporting requirements, HEI filed a report establishing a divestment timeline for remaining affiliate assets and is providing monthly progress reports to the PUC. The order also requires advance notice to the PUC and the Consumer Advocate prior to seeking any change in recovery of HEI-related expenses in future re-basing or rate proceedings. The PUC subsequently issued an order confirming that all ATR compliance filings and reporting are likewise suspended and closed the docket. HEI and Hawaiian Electric implemented the integration in June 2026. For the three months
ended September 30, 2026, HEI's integration costs incremental to Hawaiian Electric amounted to approximately $5.6 million (pretax).
System reliability. Since the August 2023 Maui windstorm and wildfires, the Utilities have implemented wildfire safety measures in areas identified as having higher wildfire risk across their service territories (Oahu, Maui County, and Hawaii Island). These measures include more sensitive protective settings that can interrupt service more quickly when potential faults are detected, blocking automatic reclosing in certain circumstances, and conducting visual patrols before restoring service. While these measures are intended to reduce wildfire ignition risk, they have increased, and may continue to increase, the frequency and duration of certain transmission and distribution outages and adversely affect Transmission and Distribution (T&D) System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI).
On January 10, 2025, the Utilities filed their 2025-2027 Wildfire Mitigation Plan (WMP), formerly referred to as the Wildfire Safety Strategy) with the PUC. The PUC approved the WMP on December 31, 2025 and directed the Utilities to submit a 2026-2027 WMP Update, which the Utilities filed on April 13, 2026. The WMP Update primarily reflects 1) maturation of the wildfire mitigation framework following the 2025-2027 WMP, 2) direct responses to the PUC's areas of continuous improvement identified in a decision and order, and 3) other non-substantive revisions for clarity. The Utilities continue to refine these measures and deploy reliability mitigations while prioritizing the safety of customers and communities during elevated wildfire conditions. Public Safety Power Shutoff events, if initiated, could also result in extended service interruptions. For additional information regarding the Public Safety Power Shutoff program, see "Wildfire safety measures" below.
Hawaii Island has two generators out of service for extended maintenance, one of which is expected to return to service in the fourth quarter of 2026. While these units are unavailable for maintenance, during certain periods there may be reductions in generation reserve margins and failure of other generators, which could risk generation shortfalls.
For a discussion regarding the impact of the Maui windstorm and wildfires on the Utilities' liquidity and capital resources, see discussion below under "Financial Condition-Liquidity and capital resources."
RESULTS OF OPERATIONS
Three months ended September 30 Increase
2026 2025 (decrease) (dollars in millions, except per barrel amounts)
$ 1,007 $ 787 $ 220
Revenues. Net increase largely due to:
$ 173
higher fuel oil prices and higher kWh generated1
38
higher purchased power energy cost and higher PPAC revenues, partially offset by lower kWh purchased1, 2
8 higher revenue from ARA
2 higher Performance Incentive Mechanisms revenue
1 higher MPIR/EPRM revenue
(2) lower fuel cost risk-sharing adjustment
399 241 158
Fuel oil expense1. Net increase largely due to higher fuel oil prices, higher kWh generated, and worse fuel efficiency
218 184 34
Purchased power expense1, 2. Net increase largely due to higher purchased power energy cost, and the settlement of liquidated damages with IPPs in 2025, offset in part by lower kWh purchased
182 162 20
Operation and maintenance expenses. Net increase largely due to:
16 storm restoration and repairs and response cost
6 HEI integration costs
5 higher property and general liability insurance costs
4 higher employee benefits and incentive program costs
2 higher general claims
(2) lower IT system maintenance costs
(3)
lower wildfire mitigation program costs expensed3
(3) fewer generating facility overhauls performed
(4) write-off of preliminary engineering costs in 2025
160 138 22
Other expenses. Increase due to higher revenue taxes and higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency
48 63 (15)
Operating income. Decrease largely due to higher operation and maintenance expenses, lower fuel cost risk-sharing adjustment, and higher depreciation, offset in part by higher revenue from ARA
14 48 (34)
Income before income taxes. Decrease largely due to lower operating income and higher interest expense, primarily due to the accretion related to the remaining wildfire tort-related settlement liability (see Note 2 of the Condensed Consolidated Financial Statements) and interest on the 2025 Notes started in September 2025, offset in part by higher AFUDC related to increased capital expenditures
13 37 (24)
Net income for common stock. Decrease due to lower income before income taxes. See below for effective tax rate explanation
2,257 2,234 23
Kilowatthour sales (millions)4
$ 154.87 $ 98.20 $ 56.67 Average fuel oil cost per barrel
Nine months ended September 30 Increase
2026 2025 (decrease) (dollars in millions, except per barrel amounts)
$ 2,688 $ 2,268 $ 420
Revenues. Net increase largely due to:
$ 306
higher fuel oil prices and higher kWh generated1
89
higher purchased power energy cost and higher PPAC revenues, partially offset by lower kWh purchased1, 2
23 higher revenue from ARA
3 higher Performance Incentive Mechanisms revenue
3 higher MPIR/EPRM revenue
(4) lower fuel cost risk-sharing adjustment
972 690 282
Fuel oil expense1. Net increase due to higher fuel oil prices, higher kWh generated, and worse fuel efficiency
587 505 82
Purchased power expense1, 2. Net increase largely due to higher purchased power energy cost, the addition of Stage 1 renewable projects, and the settlement of liquidated damages with IPPs in 2025, offset in part by lower kWh purchased
511 463 48
Operation and maintenance expenses. Net increase largely due to:
23 storm restoration and repairs and response cost
19 higher generation and transmission and distribution operation and maintenance
12 higher property and general liability insurance costs
8 higher employee benefits and incentive program costs
6 HEI integration costs
3 higher general claims
(4) write-off of preliminary engineering costs in 2025
(19)
lower wildfire mitigation program costs expensed3
(162) - (162)
Wildfire tort-related claims. Decrease due to the remeasurement of the remaining wildfire tort-related settlement liability at present value and insurance recoveries (see Note 2 of the Condensed Consolidated Financial Statements)
451 407 44
Other expenses. Increase due to higher revenue taxes and higher depreciation expense due to increasing investments to integrate more renewable energy and improve customer reliability and system efficiency
329 203 126
Operating income. Increase largely due to the remeasurement of the wildfire tort-related claims, higher revenues from ARA, performance incentive mechanisms, and MPIR/EPRM, offset in part by higher operation and maintenance expenses, higher depreciation, and lower fuel cost risk-sharing adjustment
242 160 82
Income before income taxes. Increase largely due to higher operating income, higher AFUDC related to increased capital expenditures, and higher interest income earned, partially offset by higher interest expense, primarily due to the accretion related to the remeasurement of the remaining wildfire tort-related settlement liability at present value (see Note 2 of the Condensed Consolidated Financial Statements) and interest on the 2025 Notes started in September 2025
187 124 63
Net income for common stock. Increase due to higher income before income taxes. See below for effective tax rate explanation
6,244 6,231 13
Kilowatt-hour sales (millions)4
$ 132.00 $ 101.00 $ 31.00 Average fuel oil cost per barrel
476,286 474,038 2,248 Customer accounts (end of period)
1The rate schedules of the 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 Utilities currently contain Purchased Power Adjustment Clauses (PPACs) through which changes in purchased power expenses (except purchased energy costs) are passed on to customers.
3 Starting in the fourth quarter of 2025, certain Wildfire Mitigation Plan costs were deferred and continued to be deferred in 2026.
4 kWh sales were higher compared to the same quarter in prior year. The increase was primarily attributable to less sunny weather, which reduced production from rooftop solar and solar water heaters.
The Utilities' effective tax rates for the first nine months of 2026 and 2025 were 23% and 22%, respectively. For the third quarters of 2026 and 2025, the Utilities' effective tax rates were 3% and 23%, respectively. The higher effective tax rate for the first nine months of 2026, compared to the same period in 2025, was primarily due to discrete tax expense from higher pretax income related to the remeasurement of the wildfire tort-related settlement liability to present value (net of accretion); partially offset by the research and development tax credit claims recognized. The lower effective tax rate for the third quarter of 2026, compared to the same period in 2025, was primarily due to discrete tax benefits recognized in the third quarter of 2026 from the lower pretax income related to the accretion of wildfire tort-related settlement liability, and the research and development tax credit claims recognized.
Hawaiian Electric's consolidated return on average common equity (ROACE) was 13.4% and 12.8% for the twelve months ended September 30, 2026 and 2025, respectively.
For more information of the Utilities' incremental items related to the Maui windstorm and wildfires for the three and nine months ended September 30, 2026 and 2025, see "Results of operations-Maui windstorm and wildfires related items, net" in HEI's MD&A.
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 of Hawaii, other than Kauai, to approximately 95% of the State's population, and operate five separate grids. The Utilities' mission is to empower their communities and customers with safe, reliable, resilient, affordable, and clean energy. The goal is to create a safe, modern, resilient, flexible, and dynamic electric grid that protects Hawaii from impacts of climate dynamics, position the Utilities to achieve the expectations of their customers and communities and earn their trust, and achieve Hawaii's decarbonization goals that are aligned with the statutory goal of 100% renewable portfolio standard and net-negative carbon emissions by 2045.
Wildfire safety measures. In January 2025, the Utilities developed and filed with the PUC their 2025-2027 WMP, which identifies risk mitigation strategies to perform over the next three years across their service territories. The measures, including wildfire risk analysis, implementation of the Public Safety Power Shutoff (PSPS) program, grid design changes, and system hardening, have been integrated into the 2025-2027 WMP. The strategies and actions include additional operational changes, grid hardening work, enhanced inspections and vegetation management, and risk modeling to inform and prioritize hardening work and operational actions. On December 31, 2025, the PUC approved the Utilities' 2025-2027 WMP and directed the Utilities to submit a WMP Update bi-annually. On April 13, 2026, the Utilities submitted their 2026-2027 WMP Update to the PUC. On June 25, 2026, the PUC approved the Utilities' request for Exceptional Project Recovery Mechanism (EPRM) cost recovery estimated at $350 million. See also "Utility projects" in Note 4 of the Condensed Consolidated Financial Statements.
The PSPS program calls for the Utilities to preventatively de-energize circuits in areas identified as high fire risk during certain weather conditions. The PSPS program launched on July 1, 2024 has been used when it is needed, to protect customers, communities and employees. Since the July 2024 implementation, the Utilities have continued to mature the PSPS program as it has gained experience executing the program along with public safety partners, communities, and residents. For example, the Utilities now have an in-house meteorologist and a 24/7 watch office that monitor hazardous conditions through additional strategically placed weather stations to enhance their forecasting capability and an artificial intelligence wildfire detection camera for situational awareness of localized hazardous conditions. The PSPS protocols 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 risk to the public arising from 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 evolving climate dynamics 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.
Climate action plan. 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 independent power producers (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 have slowed the pace of progress toward reducing greenhouse gas emissions. Also, see the "Developments in renewable energy efforts-New renewable PPAs" section below. The One Big Beautiful Act signed into law on July 4, 2025 may impact the ability of recently selected and new wind and solar projects to qualify for federal tax credits. Any loss in renewable energy tax credits could lead to project risk for new wind and solar projects in development and will likely result in higher prices for new renewable projects, which rely on such incentives to provide clean, affordable energy. Further, new tariffs imposed on equipment and materials used in the construction of renewable facilities will have an impact on pricing of new renewable projects. As a result of these challenges and the downgrade of Hawaiian Electric's credit ratings after the Maui windstorm and wildfires, 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 RPS goals and expect to meet or exceed the State of Hawaii's 2030 RPS goals. The Utilities estimate that 2025 carbon emissions were approximately 25% below the 2005 baseline, compared with approximately 27% below the baseline in 2024, reflecting an increase in emissions year over year due to higher customer electricity usage. This represented an increase in emissions compared to the 27% reduction in 2024 due to higher customer electric usage. As renewable energy replaces fossil fuel generation, carbon emissions are expected to continue to decline over time.
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 impacted by federal policies, key elements of the 2030 plan have already been completed or remain on track to be completed by 2030, including the closure of AES Hawaii, Inc., the State's last coal-fired IPP plant, increasing rooftop solar capacity 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.
State of Hawaii laws and policies. In January 2025, the State of Hawaii issued two key policy documents and an alternative fuel study. The PUC issued its 2024 Inclinations on the Future of Energy in Hawaii (2024 PUC Inclinations). The 2024 PUC Inclinations are intended to provide a guide for the completion of energy infrastructure upgrades for public safety, reliability and resiliency. This includes among other items, strategic hardening, diversification and enhancements of transmission and distribution systems, expedited replacement of older fossil fired generation, streamlined interconnection for renewable utility scale and distributed energy resources, including a specific goal to limit fossil fuel generation to no more than 40% on each island by 2030, software and hardware improvement to prevent cybersecurity threats, creation of resilience hubs, and integration of electric, gas, and renewable resources to support continuity of energy, telecommunications, water and wastewater services. The 2024 PUC Inclinations specifically state that "Strategic ownership of new generation (by the Utilities) may be beneficial, especially when such ownership stabilizes utility finances, benefits from low-interest federal loans or advances other objectives such as operational accountability, resilience and public safety."
Governor Josh Green issued Executive Order No. 25-01, Accelerating Hawaii's Transition Toward 100 Percent Renewable Energy (EO 25-01). EO 25-01 sets forth collective actions to accelerate the State's decarbonization, stabilize and reduce energy costs, lower the State's carbon footprint, strengthen energy security, and gain access to capital for the energy transition. Among other actions, EO 25-01 calls for 100% renewable electricity production in the counties of Hawaii and Maui by 2035 and achieving a 70% reduction of Oahu's greenhouse gas emissions reductions from the electricity sector by 2035, using 2005 as a baseline, calls for the maximization of distributed solar energy paired with energy storage, including the installation of 50,000 new distributed energy resources by 2030, accelerating permitting tied to renewable energy, approving interconnection, and addressing energy burdens on low- and moderate-income residents.
The Hawaii State Energy Office's Alternative Fuel, Repowering and Energy Transition Study (Alternative Fuel Study) expresses concern about the speed of the transition to renewable energy and cites the continued reliance on imported oil as a driver of high bills and intense carbon emissions. The report makes a case for the use of liquefied natural gas on Oahu to replace low sulfur fuel oil during the transition to 100% renewable energy, and names several entities as potential investors that could help speed the transition. On October 6, 2025, the Office of the Governor of the State of Hawaii, JERA Co., Inc. (JERA Co.), Japan's largest power producer, and its U.S. subsidiary, JERA Americas Inc. (JERA Americas), signed a non-binding Strategic Partnering Agreement that establishes a framework for long-term collaboration to support Hawaii's decarbonization goals and energy transition. The Strategic Partnering Agreement supports the implementation of the Hawaii State Energy Office's Alternative Fuel Study to pursue fuel diversification, including liquified natural gas, to reduce near-term reliance on oil. On March 17, 2026, JERA Co. provided a proposal to the State of Hawaii to modernize Oahu's energy system to accelerate the replacement of oil-fired generation with new energy assets, including an approximately 500-MW hybrid combined-cycle and simple-cycle power facility supported by offshore liquefied natural gas import infrastructure. On July 17, 2026, JERA Americas filed a notice of intent with the PUC to file a Certificate of Public Convenience and Necessity (CPCN) for the development, ownership, and operation of a new, proposed regulated power generation company (GenCo) and associated
utility-scale generation facilities on Oahu totaling 500 MW. In the notice, JERA Americas stated that it intends to file the CPCN application in the first quarter of 2027. JERA Americas' notice indicated that its proposal is not intended to replace Hawaiian Electric's role as the retail utility or system operator, or to displace Hawaiian Electric's continued ownership and operation of existing generation resources, but is intended to provide regulated wholesale generation service within the existing integrated electric system. Hawaiian Electric believes that any significant new generation resource serving Oahu customers should be evaluated through a transparent, competitive procurement process designed to ensure that customers receive the best overall value and that all qualified market participants have an opportunity to compete. Hawaiian Electric believes that competition, together with oversight by the PUC and input from all stakeholders pursuant to the State's competitive bidding framework, provides an effective mechanism to evaluate project costs, reliability benefits, operational characteristics, commercial viability, and customer impacts. Accordingly, on July 17, 2026, Hawaiian Electric filed a request with the PUC to open a new proceeding and establish an expedited process for approval of a request for proposals (RFP) for approximately 500 MW of fuel-flexible firm generation capacity on Oahu. Hawaiian Electric proposed that the RFP be administered concurrently with its Integrated Grid Planning (IGP) procurement process and that proposals received through the respective procurements be evaluated through a single integrated portfolio assessment to identify the resources that provide the greatest overall benefit to customers. On August 5, 2026 the PUC issued a letter responding to the Utilities' July 17 request, with the PUC noting that a demonstration of need for the additional 500 MW of fuel-flexible firm generation would be required, and without demonstrating need, it is not reasonable and in the public interest to open a docket or otherwise expedite review and approval of Hawaiian Electric's Firm RFP request at this time. The timing, scope, and outcome of the PUC's consideration of any future proceeding relating to JERA Americas' proposed CPCN application, remain uncertain.
The Utilities are engaged in planning activities designed to support the State's energy policy objectives, including the transition to a more affordable, reliable, and sustainable energy system. These planning efforts evaluate a range of resource, fuel, and technology options and are informed by state energy policy guidance and stakeholder input. Importantly, the 2024 PUC Inclinations, EO 25-01, and Alternative Fuel Study all recognize that to achieve the State's ambitious goals is a collective effort that will require government agencies, electric utilities, and private stakeholders to work together, acknowledging that each of these groups has an important role to play. The 2024 PUC Inclinations for example state: "Energy utilities, government agencies and private stakeholders must embrace an ethos of collective responsibility to confront and effectively mitigate the vulnerabilities revealed by Lahaina's heartbreaking tragedy, the COVID pandemic, ongoing global unrest, cybersecurity threats and the overarching climate crisis." The PUC later states: "The Commission does not expect energy utilities to accelerate their transformation without regulatory assistance and third-party resources." All three documents also recognize the progress made to date towards the State's renewable energy goals. The Utilities remain committed to working with all stakeholders to support the State's energy policy objectives and reach Hawaii's ambitious renewable energy goals.
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%. 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 2025, 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 2025, the Utilities achieved a 36.8% RPS accruing a reward of $1.9 million based on $10/MWh in exceedance of 35.0% RPS. In 2026, the Utilities are eligible for a reward of $10/MWh in exceedance of 36.0% 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 their 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 distributed energy resources 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, such as the annual revenue adjustment to provide annual changes in utility revenues, including inflationary adjustments, and the EPRM, 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 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 first cycle of the IGP was accepted by the PUC on March 7, 2024, and 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. 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. On January 2, 2026, the PUC opened the Second Cycle of the Integrated Grid Plan to continue to plan for future resources needed on the Utilities' systems.
Demand response programs. Pursuant to PUC orders, the Utilities are developing an integrated Demand Response 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.
In 2022, the Utilities were approved to expand the Energy Demand Response Program (EDRP) on the islands of Maui and Oahu, which provides approximately 8 MW and 43 MW on Maui and Oahu, respectively. The PUC approved the cost recovery of the additional incentives for both Oahu and Maui through the Demand Side Management Surcharge.
During the time that EDRP was available, Bring Your Own Device Level 1 was launched on April 1, 2025, to succeed EDRP, which closed on July 1, 2024, on Oahu. The Bring Your Own Device Level 1 later evolved into Bring Your Own Device Plus, which began on May 15, 2025. Enrollment for the Bring Your Own Device Plus program will be available until total enrolled program capacity reaches 50 MW statewide, 3 MW of which is currently provided statewide.
Grid modernization. The overall goal of the Grid Modernization Strategy (GMS) 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 resiliency, reliability, distributed energy resources and renewable energy integration.
After the Utilities were unsuccessful in securing federal funding for the project under the Infrastructure Investment and Jobs Act in 2024, the Utilities filed an amended PUC application for the second phase of Grid Modernization on September 21, 2026. The amended application proposes the establishment of a Distribution Operations Platform and other project components in place of an Advanced Distribution Management System and reduces the estimated total project costs from $215.2 million to $121.6 million, subject to PUC approval.
Investigation on the establishment of wheeling. On July 1, 2024, the PUC issued an order to institute a proceeding to investigate the establishment of electricity wheeling policies and procedures for the electric utilities for the State of Hawaii. The PUC stated that it intended to address matters using lessons learned in the initial three docket phases to explore implementation of an intragovernmental wheeling policy and an evaluation of retail wheeling in subsequent phases, as appropriate.
On August 29, 2025, the PUC issued an order dividing the proceeding into two tracks, Track A, focused on retail wheeling, and Track B, focused on an intragovernmental credit share program that was the subject of the prior procedural schedule in the docket.
On October 22, 2025, the Utilities filed feedback on the PUC's proposed Track B, Intragovernmental Shared Credit Program. The Utilities support the program but emphasize that careful program design is necessary to ensure technical feasibility, administrative efficiency, and fairness for all customers. The Utilities agree that the program could support the development of renewable energy zones by unlocking government lands for renewable projects and enabling proactive transmission planning.
On November 10, 2025, the Utilities filed their Track A Retail Wheeling Straw Proposal. The Utilities' Straw Proposal provides an overview for the application process, a discussion of technical standards for grid interconnection and monitoring, provisions for metering and monitoring and a discussion of pricing mechanisms in the tariff structure and how to appropriately allocate wheeling costs. The Consumer Advocate and stakeholders provided comments on the Utilities' Straw Proposal by January 20, 2026. The Utilities filed responses to the comments of the Consumer Advocate and stakeholders on March 6, 2026. On April 7, 2026, the PUC held a technical conference and stakeholder workshop where the Utilities provided a presentation on the Track A Retail Wheeling Straw Proposal and addressed the various comments and questions raised by the PUC, Consumer Advocate, and stakeholders in the proceeding.
On July 29, 2026, the PUC issued an order providing guidance on the proposed Track A retail wheeling program and addressing procedural matters. The order established an Oahu-only Retail Wheeling Pilot Program framework intended to satisfy Act 266 by January 1, 2027, and directed the Utilities to file an updated Track A proposal, draft tariff, and proposed pilot framework by August 19, 2026. The updated proposal must address, among other things, cost allocation, customer protections, technical standards, reporting requirements, and considerations for future program enhancements and expansion. The PUC directed the Utilities to include an Oahu-only pilot proposal, with a recommended two- to five-year duration, a plan for data collection and reporting on billing impacts, lost utility revenues and developer profits, opportunities for stakeholder feedback, annual performance monitoring, and recommendations for future expansion. In addition, the order provided staff guidance that the updated proposal should address refinements to the application and interconnection processes, a draft wheeling agreement and consumer protection disclosures, necessary revisions to Rule 14H and interconnection requirements, wheeling fee and administrative metering fee methodologies, curtailment clarification, and sample bill credit and wheeling fee calculations. The PUC further adopted a statement of issues for Track A focused on whether the updated proposal and draft tariff comply with Act 266, and whether the proposed application process, technical standards, pricing mechanism, proposed allocation of wheeling costs, and proposed pilot framework are reasonable and in the public interest. The order also adopted a supplemental Track A procedural schedule to govern the remainder of Track A unless otherwise ordered by the PUC.
On September 2, 2026, the Utilities filed their updated proposal for Track A retail wheeling. The updated proposal establishes a 10 MW retail wheeling pilot on Oahu, supported by corresponding utility-scale storage intended to maintain grid reliability and minimize impacts to non-participating customers. The Consumer Advocate and other parties to the proceeding filed statements of position on the updated proposal, and the Utilities filed their reply statement of position on October 30, 2026. The Utilities stated that the updated proposal is intended to implement Act 266 through a measured pilot designed to facilitate additional renewable energy development while addressing grid reliability and potential cost impacts to non-participating customers. The Utilities also identified minimum requirements that would apply if wheeling generators were permitted to operate prior to implementation of the utility-scale storage resource and stated that such operation could result in cost shifting and operational risks. In their reply statement of position, the Utilities continued to support approval of the proposed storage and cost recovery framework.
The PUC issued an order on September 3, 2026 proposing an updated intragovernmental shared credit program, referred to as the Public Power Program, and established a procedural schedule for Track B of the proceeding. The order directed parties to the proceeding to respond to the PUC's proposal within 45 days. Parties filed responses on October 19, 2026. On October 22, 2026, the PUC extended the response deadline to October 26, 2026, for all parties that had not yet responded. Parties that had not yet responded to the PUC's proposal filed their responses on October 26, 2026.
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. On July 17, 2026, the Utilities filed their application for approval of their re-basing proposal. See "Regulatory proceedings" in Note 4 of the Condensed Consolidated Financial Statements for a discussion of re-basing, PBR Framework and 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 (i.e., above 12.5% or below 6.5%). 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.
On August 31, 2023, the PUC issued an order temporarily suspending the Earnings Sharing Mechanism (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. In accordance with the order, the ESM remains suspended and there is no earnings sharing adjustment for 2026 as of September 30, 2026.
Actual and PUC-allowed returns, as of September 30, 2026, were as follows:
Ratio (%)
Rate-making
Return on rate base (RORB)1
Book ROACE2
Rate-making ROACE3
Twelve months ended
September 30, 2026
Hawaiian Electric Hawaii Electric Light Maui Electric Hawaiian Electric Hawaii Electric Light Maui Electric Hawaiian Electric Hawaii Electric Light Maui Electric
Utility returns 8.21 5.40 4.41 19.68 8.58 5.31 10.98 5.83 3.56
PUC-allowed returns 7.37 7.52 7.43 9.50 9.50 9.50 9.50 9.50 9.50
Difference 0.84 (2.12) (3.02) 10.18 (0.92) (4.19) 1.48 (3.67) (5.94)
1 Based on recorded operating income and average rate base, both adjusted for items not included in determining electric rates.
2 Based on recorded net income divided by average common equity.
3 Based on recorded net income adjusted to remove items not included in determining electric rates, divided by rate making equity.
Rate-making calculations remove the impacts of the Settlement Agreements and eliminate the balances for the asset-based lending facility (ABL Facility) on a stand-alone company basis. The Utilities have stated that customers will not be impacted by payments related to the Settlement Agreements for the Maui windstorm and wildfires, which totals $1.9 billion (see Note 2 of the Condensed Consolidated Financial Statements). The ABL Facility contains certain intercompany costs related to the ABL Facility that are eliminated on a consolidated basis, and these transactions are eliminated on a stand-alone company basis for rate-making. Therefore, the rate-making returns were adjusted to exclude these impacts.
The gap between PUC-allowed ROACEs and the ROACEs achieved is generally due to the exclusion of certain expenses from rates (for example, incentive compensation and charitable contributions), and depreciation, other 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 Rate Adjustment Mechanism revenue and ARA revenues). Maui Electric's returns are lower than authorized levels due to higher sustained maintenance and investments than what is recovered in current rates.
Developments in renewable energy efforts. The Utilities continue to procure renewable energy ambitiously. The Utilities' renewable energy goals depend, in large part, on the success of renewable projects developed and operated by independent power producers. 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.
•Under a request for proposal process governed by the PUC and monitored by independent observers, the Utilities issued Stage 2 Renewable Request for Proposals (RFPs) for Oahu, Maui and Hawaii Island and Grid Services RFP on August 22, 2019. Of the 11 PPAs filed by the Utilities, 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. 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 approved of all three amendments. To date, two Stage 2 projects have reached commercial operations. See also "Purchase commitments" in Note 4 of the Condensed Consolidated Financial Statements. Separately, the PUC approved the Utilities' Waena Battery Energy Storage System project under Stage 2. See "Utility projects" in Note 4 of the Condensed Consolidated Financial Statements.
A summary of the remaining four approved Stage 2 PPAs and the self-build project 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 lump sum payment (in millions)
PPAs
Hawaiian Electric 3 79 79 / 443
5/17/241, 6/7/24 & 9/1/241
20 & 25 $ 31.4
Hawaiian Electric 1
N/A
185 / 565 12/19/23 20 24
Self-build
Maui Electric 1 40 / 160 11/30/26 -
Total 5 79 304
/
1,168 $ 55.4
1 Project delays have resulted in guaranteed commercial operations date being missed.
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.
Tariffed renewable resources.
•As of September 30, 2026, there were approximately 755 MW, 162 MW, and 167 MW of installed distributed renewable solar energy technologies 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, Interim Smart Export, Smart Distributed Energy Resources - Export, Smart Distributed Energy Resources - Non-Export, and Community-Based Renewable Energy. As of September 30, 2026, an estimated 45% of single-family homes on the islands of Oahu, Hawaii and Maui have installed private rooftop solar systems, and approximately 25% of the Utilities' total customers have solar systems.
•The Utilities' feed-in tariff program is designed to encourage the addition of more renewable energy projects in Hawaii. As of September 30, 2026, 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 August 23, 2024, the Utilities issued an RFP for biodiesel fuel supply commencing February 1, 2026. Proposals were due on September 30, 2024, and the Utilities have completed negotiations with two suppliers and submitted an application to the PUC on April 3, 2025. On June 2, 2025, the Utilities and Pacific Biodiesel Technologies, LLC (PBT) signed an agreement for supply of biodiesel commencing February 1, 2026, which was approved by the PUC on January 14, 2026. On May 18, 2026, the Utilities and Par Hawaii Refining, LLC (PAR Hawaii) signed an agreement for supply of renewable diesel, which will become effective upon PUC approval.
•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 2027.
•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 2027 and will continue with no volume purchase requirements.
Requests for renewable proposals, expressions of interest, and information.
•The Hawaii Island Stage 3 RFP, seeking 65 MW of renewable firm capacity and 325 gigawatt-hours (GWh) of renewable dispatchable energy annually, 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. As of September 30, 2026, the Utilities have 12 active Stage 3 projects, including one self-build project. The Utilities obtained PUC approval for three solar-plus BESS projects with a combined capacity of 166 MW as of September 30, 2026. Additionally, in the third quarter of 2026, the Utilities executed a renewable firm capacity contract with Kalaeloa Partners L.P. for 208 MW of capacity on Oahu, which is the largest PPA under the Stage 3 RFP. The Utilities continue to advance the remaining selected projects through negotiations and execution and the PUC approval process.
On March 28, 2025, the Utilities filed an application to the PUC for their self-build project - Waiau repower project. See "Utility projects" in Note 4 of the Condensed Consolidated Financial Statements.
A summary of the Stage 3 PPAs and self-build project is as follows:
Utilities Number of contracts Total renewable energy size (MW) BESS Size (MW/MWh) Firm Generation (MW)
PPAs
Hawaiian Electric 4 126 510 307
Hawaii Electric Light 3 86 374 60
Maui Electric 4 90 240 40
Self-build project
Hawaiian Electric 1 - - 253
Total 12 302 1,124 660
•On August 19, 2024, the PUC opened a docket for the Utilities' Integrated Grid Planning RFP (IGP RFP). On August 26, 2024, the Utilities filed their draft IGP RFP for Oahu and Hawaii Island. The Oahu portion of the IGP RFP seeks 750 GWh per year of energy and 350 MW of grid forming resources by November 1, 2030, and 81 MW of renewable firm capacity by December 2033. The Hawaii Island portion of the IGP RFP seeks 435 GWh per year of energy and 115 MW of grid forming resources by November 1, 2030, and 30 MW of renewable firm capacity by December 2032. On August 18, 2025, the Utilities filed a request with the PUC for approval to not offer utility-owned sites to other potential bidders. On September 9, 2025, the Consumer Advocate filed a response indicating it did not object to the Utilities' request and a party to the docket filed a response requesting that the PUC consider the broader market impacts that limiting available sites would have on the available interconnection capacity and market competitiveness. On December 12, 2025, and on February 6, 2026, the Utilities filed their responses to additional PUC information requests. On June 17, 2026, the PUC approved the IGP RFP with minor modifications. The Utilities filed their final IGP RFP on July 17, 2026. The IGP RFP was issued in August 2026. On August 31, 2026, the Utilities held a virtual technical conference. The deadline for submitting Preliminary Interconnection Report Meeting requests was September 18, 2026.
•On July 17, 2026, the Utilities also filed a letter requesting the PUC open a new proceeding for 500 MW of fuel-flexible firm generation on Oahu with an expedited timeline that would allow for issuance of the RFP by the end of 2026. The Utilities stated that a transparent, competitive RFP process supports customer affordability considerations and could accommodate technologies that may not fit within the framework of the ongoing IGP RFP process. On August 5, 2026 the PUC issued a letter responding to the Utilities' July 17 request, with the PUC noting that a demonstration of need for the additional 500 MW of fuel-flexible firm generation would be required, and without demonstrating need, it is not reasonable and in the public interest to open a docket or otherwise expedite review and approval of Hawaiian Electric's Firm RFP request at this time.
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.
State legislation. Act 301 (2025) appropriates funds to address the State of Hawaii's share in the settlement of claims related to the Maui wildfire and windstorm tort litigation settlement and provides a resolution to those affected by the Maui windstorm and wildfires and provides assurance for a global settlement to move forward.
Act 266 (2025), among other things, authorizes wheeling of renewable energy and requires the PUC to establish policies and procedures to implement wheeling of renewable electricity for a capacity of not more than two megawatts, as well as microgrid service tariffs, by January 1, 2027. Act 266 also requires the PUC to establish an installation goal for new customer-sited distributed energy resources and establish tariffs to achieve the installation goal and for grid service programs, microgrids, and community-based renewable energy. The Utilities are currently assessing the potential impact related to wheeling as the PUC works to establish the provisions and terms for the implementation of wheeling in compliance with Act 266. For more information on wheeling, see discussion in "Investigation on the establishment of wheeling" above.
Federal legislation. The One Big Beautiful Act signed into law on July 4, 2025 by the President may impact the ability of the Utilities' recently selected and new wind and solar projects to qualify for federal tax credits. Federal regulations continue to be developed, so the complete scope of potential impacts remains unknown at this time. Any loss in renewable energy tax
credits could lead to project risk for new wind and solar projects in development and will likely result in higher prices for such projects, developers of which rely extensively on federal tax credits to finance such projects. It is also possible that the sunsetting of these tax credits will impact the supply chain for projects throughout the U.S. as developers rush to meet the four-year safe harbor timeline.
Trade policies. U.S. trade policies continue to evolve as existing tariff programs are modified and new measures are implemented. The impact on the Utilities from trade policies imposed by the U.S. or its trading partners remains uncertain at this time. The Utilities estimated that the majority of the Utilities' capital goods are purchased domestically at this time. However, the Utilities and their independent power producers procure capital goods that flow through global supply chains and may include raw materials, sub-components, or components sourced or assembled outside the U.S. Utility capital costs and the cost of power procured from independent power producers may increase due to new trade policies and changes in trade policy from the U.S. and its trading partners, based on the amount of foreign content of capital goods. It is also possible that trade policies could impact commodities and raw materials costs, leading to inflation of utility capital costs indirectly through the broader supply chain. Utility-scale battery projects planned by both Hawaiian Electric and independent power producers may see significant cost increases or supply chain challenges, as the majority of battery components are currently manufactured in, or have significant supply chain exposure to, the People's Republic of China. The Utilities continue to assess the potential impact of evolving trade policies.
Federal grant. On August 7, 2024, the Utilities received a notification from the U.S. Department of Energy that their climate adaption transmission and distribution resilience program application for $95 million in federal funds was officially awarded. On July 16, 2026, the Utilities received a notification of an award modification from the DOE that updated certain terms and conditions including the removal of the scope related to community benefits plans and the associated funding for those deliverables. As a result, the federal share total was reduced from $95 million to $92.6 million. See "Utility projects" in Note 4 of the Condensed Consolidated Financial Statements for additional discussions. There is no assurance that the federal government will reimburse in a timely manner or may dispute reimbursement.
Fuel contracts. On February 1, 2022, the Utilities and PAR Hawaii entered into a fuel supply contract (Supply Agreement) commencing January 1, 2023, which was approved by the PUC on December 1, 2022. On August 14, 2024, the Utilities entered into a second amendment of the Supply Agreement, extending the term by an additional three years through January 31, 2029 and creating savings in fuel costs. The second amendment became effective on June 18, 2025, upon the issuance of the PUC's final decision and order.
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 accounted for at least 25% of Hawaii's supply. To help ensure adequate fuel supply, the Utilities entered into a backup fuel supply contract with Vitol Inc. (Vitol), effective December 1, 2022 through June 30, 2023, with annual extensions if mutually agreed by both parties. The fuel supply contract has been extended through June 30, 2027. On December 1, 2022, the PUC issued a final decision and order approving the Vitol backup fuels supply contract, and costs incurred under the contract are recovered through the Utilities' respective ECRCs.
Fuel barge contract. On July 8, 2026, the Utilities entered into a ten-year contract with Sause Bros., Inc. for inter-island fuel transportation, which is expected to commence on April 1, 2027, pending PUC approval.
FINANCIAL CONDITION
Liquidity and capital resources. The Utilities' future results of operations are subject to significant risks and uncertainties. Factors that could cause actual results to differ materially from expectations include, but are not limited to, access to capital, ability to attract and retain key personnel, and pending or threatened litigation, including the wildfire-related litigation described above.
Hawaiian Electric remains focused on operating a strong, financially healthy enterprise that supports a thriving future for Hawaii. While the fundamentals of their business remain strong, the Utilities have taken prudent, measured actions to strengthen their financial position while continuing to provide reliable service to their customers and reinforcing their long-term commitment to serving the community. In September 2025, HEI and Hawaiian Electric each entered into a fourth amended and restated credit agreement with a syndicate of eight financial institutions, increasing each of their committed capacities to $300 million (see Note 5 of the Condensed Consolidated Financial Statements) and in May 2024, the Utilities entered into an asset-based credit facility that allows borrowings of up to $250 million (see Note 5 of the Condensed Consolidated Financial Statements). As of September 30, 2026, there were no outstanding borrowings under the credit agreements or asset-based credit facility. Other measures include re-prioritizing capital spending and reducing certain O&M, issuing unsecured debt, and conducting asset sales, among others. In October 2026, the Utilities filed a request with the PUC for approval to issue securitized bonds to finance $500 million of wildfire mitigation and other resilience work.
The following table provides the components of Hawaiian Electric's available liquidity under existing facilities.
As of September 30, 2026
(in millions)
Capacity
Outstanding
Undrawn
Unsecured revolving line of credit $ 300 $ - $ 300
ABL Facility 250 - 250
Borrowing from HEI - standing commitment letter 75 - 75
Total credit $ 625 $ - $ 625
Cash and cash equivalents 176
Total available liquidity from cash and under existing facilities $ 801
As of September 30, 2026, Hawaii Electric Light and Maui Electric had short-term borrowings from Hawaiian Electric in the amount of nil and $45.5 million, respectively, and had long-term intercompany loans from Hawaiian Electric in the amount of $25 million and $90 million, respectively.
See Note 5 of the Condensed Consolidated Financial Statements for a brief description of Hawaiian Electric's loans.
Management believes that HEI's and the Utilities' current cash and cash equivalents balances, as of September 30, 2026, amounting to $47.9 million and $176.0 million, respectively, the available capacity on Hawaiian Electric's ABL Facility and revolving line of credit (see Note 5 of the Condensed Consolidated Financial Statements), and the additional liquidity from HEI's at-the-market offering program, provide sufficient liquidity to fund operations and satisfy their other obligations for the short term.
On April 10, 2026, the final condition to payment under the Settlement Agreements was satisfied when the December 30, 2025 judgment obtained by HEI and Hawaiian Electric on the subrogation claims brought by insurers became final and unappealable. Accordingly, on April 10, 2026, HEI and Hawaiian Electric paid the first of four equal annual $479 million installments. And subsequently on September 16, 2026, HEI made a partial prepayment of $40 million towards the second annual installment due in April 2027. On October 28, 2026, HEI made another partial prepayment of $40 million towards the second installment amount due in April 2027. See Note 2 of the Condensed Consolidated Financial Statements for additional information.
The rebuilding of Lahaina will be a community-led effort and will occur over an extended period of time. The cost of rebuilding Maui Electric's 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 of lines in high-risk locations will be significantly more expensive than using overhead lines and will thus result in increased costs.
The price of crude oil has increased 39.7% over the same quarter in the prior year, which has moderately impacted the Utilities' liquidity. The Utilities have a fuel pass-through mechanism with limited fuel cost-risk sharing. However, the Utilities expect cash flow impacts from the timing of the disbursements for fuel inventories and subsequent collection of accounts receivable, resulting in higher working capital requirements.
Hawaiian Electric utilizes cash on hand to support normal operations and will draw on its revolving line of credit or ABL Facility, as needed, to supplement any operational needs. 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 utilize long-term debt, borrowings of the proceeds of special purpose revenue bonds issued by the State of Hawaii Department of Budget and Finance, the issuance of privately placed unsecured senior notes bearing taxable interest, and high yield capital markets, 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 lower cost sources of capital.
As of September 30, 2026, the Utilities are in compliance with all applicable financial covenants and expect to continue to be in compliance with all the financial covenants in the next 12 months. The Utilities' liquidity has improved, but continues to be impacted from the downgrades of their credit ratings, which result in higher credit spreads compared to investment grade credit spreads. However, the Utilities cannot predict the future effects on the Utilities' ability to access additional capital or the future impacts on the Utilities' financial position, results of operations, and cash flows.
Credit ratings. On April 21, 2026 and July 22, 2026, Moody's and S&P, respectively, upgraded the credit ratings of Hawaiian Electric. On August 11, 2026, S&P withdrew its 'B' short-term and commercial paper rating at Hawaiian Electric's
request due to the lack of access to the commercial paper market. As of October 30, 2026, the Fitch, Moody's, and S&P ratings of Hawaiian Electric were as follows:
Fitch Moody's S&P
From1
To
From1
To
From1
To
Long-term issuer default, long-term and issuer credit, respectively BB- BB- Ba2 Ba1 B+ BB-
Short-term issuer default, commercial paper and commercial paper, respectively B B NP NP B
WR3
Senior unsecured debt/special purpose revenue bonds BB BB Ba2 Ba1 * *
Cumulative preferred stock (selected series) * *
WR2
WR2
* *
Outlook Positive Positive Positive Stable Watch Positive Stable
1 As of December 31, 2025. In March 2026, S&P revised Hawaiian Electric's outlook to "Positive" from "CreditWatch Positive" and reaffirmed the "B+" issuer credit rating.
2 Rating withdrawn due to preferred stock redemption in the fourth quarter of 2025.
3 Rating withdrawn due to lack of access to the commercial paper market.
* Not rated.
NP - Not Prime.
WR - Withdrawn rating.
Note: The above ratings reflect only the view, at the time the ratings are issued or affirmed, of the applicable rating agency, from whom an explanation of the significance of such ratings may be obtained. Such ratings are not recommendations to buy, sell or hold any securities; such ratings may be subject to revision or withdrawal at any time by the rating agencies; and each rating should be evaluated independently of any other rating.
Taxable debt. On July 24, 2025, the Utilities received PUC approval to issue during the three-year period of 2025 through 2027, unsecured obligations bearing taxable interest (Hawaiian Electric up to $900 million, Hawaii Electric Light up to $115 million and Maui Electric up to $150 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 September 18, 2025, Hawaiian Electric issued $500 million in unsecured senior notes with an interest rate of 6.00% (2025 Notes). A portion of the proceeds was used to repay the outstanding balance of the Utilities' revolving and term loan facilities and the remaining proceeds are intended to be used to 1) finance capital expenditures, 2) repay long-term debt and short-term debt used to finance or refinance capital expenditures, and 3) reimburse funds used for the payment of capital expenditures. The 2025 Notes will mature on October 1, 2033.
On November 3, 2025, Hawaiian Electric made long-term intercompany loans to Hawaii Electric Light and Maui Electric in the amount of $25 million and $90 million, respectively. The interest rate and term of the loans are the same as Hawaiian Electric's 2025 Notes. The long-term intercompany loans are eliminated in the total consolidated Hawaiian Electric amounts. See summary table below for remaining authorized amounts as of September 30, 2026 for each respective utility.
(in millions) Hawaiian Electric Hawaii Electric Light Maui Electric
Total "up to" amounts of taxable debt authorized from 2025 through 2027 $ 900 $ 115 $ 150
Less: taxable debt executed on September 18, 2025/ long-term intercompany loans 500 25 90
Remaining authorized amounts $ 400 $ 90 $ 60
As of September 30, 2026, the Utilities have $2.06 billion of long-term debt, of which nil is due or expected to be repaid within 12 months.
Equity. On October 28, 2025, the Utilities received PUC approval to issue and sell each utility's common stock over a three-year period from January 1, 2025 through December 31, 2027 (Hawaiian Electric sale/s to HEI of up to $210 million, Hawaii Electric Light sale/s to Hawaiian Electric of up to $70 million, and Maui Electric sale/s to Hawaiian Electric of up to $145 million) and the purchase of Hawaii Electric Light and Maui Electric common stock by Hawaiian Electric. As of September 30, 2026, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $210 million, $70 million, and $79 million, respectively, of remaining common stock authorization.
Securitization. Act 258 authorizes the PUC to approve securitization financing for certain utility costs. On October 9, 2026, the Utilities filed for PUC approval to request a financing order authorizing the issuance of approximately $531 million aggregate principal amount of infrastructure resilience bonds, reflecting up to approximately $500 million of infrastructure
resilience costs, including carrying costs, and approximately $31 million of estimated upfront financing costs. The proposed costs include wildfire mitigation, grid modernization and related eligible operation and maintenance costs, certain of which remain subject to approval in separate PUC proceedings. Securitization is expected to result in lower financing costs than traditional financing alternatives available to the Utilities. See "Recent regulatory and legislative developments" section above for more information.
Cash flows. The following table reflects the changes in cash flows for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025:
Nine months ended September 30
(in thousands) 2026 2025 Change
Net cash provided by operating activities $ 254,092 $ 320,003 $ (65,911)
Net cash used in investing activities (396,791) (247,682) (149,109)
Net cash provided by (used in) financing activities (167,551) 247,402 (414,953)
Net cash provided by operating activities. The decrease in net cash provided by operating activities was primarily driven by higher cash paid for fuel oil stock, and higher customer bills due to higher fuel oil prices.
Net cash used in investing activities. The increase in net cash used in investing activities was primarily driven by an increase in capital expenditures related to construction activities.
Net cash provided by (used in) financing activities. The decrease in net cash provided by financing activities was largely driven by proceeds from the issuance of long-term debt in 2025, partially offset by debt repayments.
Material cash requirements. Material cash requirements of the Utilities include payments related to settlement of tort-related legal claims and cross claims to the extent HEI does not make such payments, O&M expenses, labor and benefits 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.
Hawaiian Electric's consolidated capital structure was as follows:
(dollars in millions) September 30, 2026 December 31, 2025
Long-term debt, net, including current portion of long-term debt, net
$ 2,058 52% $ 2,183 58 %
Common stock equity 1,909 48 1,583 42
$ 3,967 100% $ 3,766 100 %
Note: Columns may not foot due to rounding.
The Utilities' credit rating downgrades related to the Maui windstorm and wildfires will continue to limit their ability to readily access low-cost sources of capital. Through the sale of common stock in September 2024, HEI raised sufficient cash to pay for the first installment of the settlement of wildfire tort claims and paid for the first installment on April 10, 2026. HEI is currently working with its financial advisors on a financing plan to raise the additional capital required to fund the remaining settlement payments for the wildfire tort claims. While management believes that HEI will be able to raise the necessary capital, there is no assurance that management's plans will be successful. The 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' financing plan, 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.
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