Credit agreements

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Credit agreements

Credit agreements

On May 14, 2021, HEI and Hawaiian Electric (each a Company, and collectively the Companies) each entered into a separate agreement with a syndicate of nine financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Amended Facilities) to amend and restate their respective previously existing revolving unsecured credit agreements. The HEI Facility was increased to $175 million from $150 million and its term was extended to May 14, 2026. The $200 million Hawaiian Electric Facility has an initial term that expires on May 13, 2022, but its term will extend to May 14, 2026 upon approval by the PUC during the initial term, which approval has been requested. In addition to extending the term, Hawaiian Electric also requested PUC approval to exercise its options of two one-year extensions of the commitment termination date and to increase its aggregate revolving commitment amount from $200 million to $275 million, should there be a need.

None of the facilities are collateralized. As of June 30, 2021 and December 31, 2020, no amounts were outstanding under the Credit Facilities.

The Credit Facilities will be maintained to support each company’s respective short-term commercial paper program, but may be drawn on to meet each company’s respective working capital needs and general corporate purposes.

Under the Amended Facilities, draws would generally bear interest, based on each Company’s respective current long-term credit ratings, at the “Adjusted LIBO Rate,” as defined in the Amended Facilities, plus 137.5 and 125.0 basis points for HEI and Hawaiian Electric, respectively, and incur annual fees on undrawn commitments, excluding swingline borrowings, of 20.0 and 17.5 basis points for HEI and Hawaiian Electric, respectively. The Amended Facilities also include provisions to accommodate a transition from the London Interbank Offered Rate (LIBOR) to an alternative reference rate, based on the secured overnight financing rate administered by the Federal Reserve Bank of New York, upon the phase out of LIBOR as a reference rate.

Additionally, the Amended Facilities contain provisions for pricing adjustments in the event of a long-term ratings change based on the respective Facility’s ratings-based pricing grid, which includes the ratings by Fitch Ratings, Inc. (Fitch), Moody’s Investor Service’s (Moody’s) and Standard & Poor’s (S&P). The Amended Facilities do not contain clauses that would affect access to the Amended Facilities by reason of a ratings downgrade, nor do they have broad “material adverse change” clauses. In addition, the Amended Facilities contain provisions for potential annual pricing adjustments to the Eurodollar or Alternate Base Rate margin on draws and fees on undrawn commitments of up to +/-5 basis points and +/-1 basis point, respectively, based on performance against certain sustainability-linked metrics. The sustainability-linked metrics include achievement of renewable portfolio standards in excess of statutory requirements and increasing cumulative penetration of installed MWs of photovoltaic systems on residential rooftops.

The Amended Facilities also include updated terms and conditions customary for facilities of this type and contain customary conditions that must be met in order to draw on them, including compliance with covenants (such as covenants preventing HEI’s and Hawaiian Electric’s respective subsidiaries from entering into agreements that restrict the ability of such subsidiaries to pay dividends to, or to repay borrowings from, HEI or Hawaiian Electric, as applicable; and a covenant in Hawaiian Electric’s facility restricting Hawaiian Electric’s ability, as well as the ability of any of its subsidiaries, to guarantee additional indebtedness of the subsidiaries if such additional debt would cause the subsidiary’s “Consolidated Subsidiary Funded Debt to Capitalization Ratio” (as defined in the Hawaiian Electric Facility) to exceed 65%).

Under the HEI Facility, it is an event of default if HEI fails to maintain an unconsolidated “Capitalization Ratio” (funded debt) (as defined in the HEI Facility) of 50% or less or if HEI no longer owns Hawaiian Electric or ASB. Under the Hawaiian Electric Facility, it is an event of default if Hawaiian Electric fails to maintain a “Consolidated Capitalization Ratio” (equity) (as defined in the Hawaiian Electric Facility) of at least 35%, or if Hawaiian Electric is no longer owned by HEI.

Hawaiian Electric had a $75 million 364-day revolving credit agreement, under which no amounts had been drawn. On April 19, 2021, the revolving credit agreement terminated and was not renewed.