EX-99 2 exhibit9902-14x17.htm EXHIBIT 99 Exhibit


HEI Exhibit 99
heicatalyst2a01.jpg NEWS RELEASE
February 14, 2017
Contact:
Clifford H. Chen
Telephone: (808) 543-7300
 
Treasurer, Manager, Investor
E-mail: ir@hei.com
 
Relations & Strategic Planning
 
 
 
 
                                    
HAWAIIAN ELECTRIC INDUSTRIES REPORTS 2016 YEAR END
& FOURTH QUARTER EARNINGS

2016 Net Income of $248.3 Million and Core Net Income1 of $190.1 Million;
2016 Diluted Earnings Per Share (EPS) of $2.29 and Core EPS1 of $1.75;
Fourth Quarter Net Income of $44.6 Million; EPS of $0.41;
Board Declares Dividend of $0.31 Per Share

Selected 2016 Highlights:
•
Consolidated Reported net income of $248.3 million in 2016 vs $159.9 million in 2015, up 55% largely due to the merger and spin-off related items;
Core net income1 of $190.1 million in 2016 vs $175.7 million in 2015, up 8%
•
Consolidated Reported EPS of $2.29 in 2016 vs $1.50 in 2015, up 53%;
Consolidated Core EPS1 of $1.75 in 2016 vs $1.65 in 2015, up 6%
•
Consolidated Reported ROE of 12.4%; Consolidated Core ROE1 of 9.5%
◦
Utility ROE of 8.1%
◦
Bank ROE of 10.1% 2 
•
Continued legacy of delivering value for customers and Hawaii:
•
Record 25% of electricity on Hawaiian Electric’s grid was from renewable sources3 
•
Moving closer to achieving Hawaii’s 2020 renewable portfolio standard target of 30%
◦
Avoided-oil equivalent of 2.2 million barrels which would have cost our state more than $119 million4 in imported oil in 2016
◦
Led the nation in the integration of customer-sited solar: by the end of 2016, an estimated 26% of single-family homes on the islands we serve (up from 23% at the end of 2015) and approximately 15% of our total customers have solar systems
◦
29% of single family homes have installed or have been approved to install PV systems
_________________
1 Non-GAAP measure that excludes merger and spin-off-related income and costs after-tax including costs related to the terminated LNG contract which required PUC approval of the merger with NextEra Energy, Inc. See the “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation.
2 
Calculated using net income divided by average GAAP common equity, simple average method.
3
Based upon preliminary Renewable Portfolio Standard information as of 12/31/16.
4
Estimate based on the 2016 average price per barrel of $53.49 and as compared to 2008 oil usage levels.



Hawaiian Electric Industries, Inc.
February 14, 2017
Page 2

•
Utility other operations and maintenance (O&M) expense5 decreased 2% from the 2015 level
•
Bank provided approximately $1.8 billion of credit to consumers and businesses and originated over 3,500 mortgages
•
Bank named one of Hawaii Business “Best Places to Work” for the 7th consecutive year; American Banker “Best Banks to Work For” list for the 4th consecutive year and only Hawaii bank to make the national list
•
Bank implemented a new e-Banking platform making banking easier for customers
•
Consolidated company contributed more than 22,000 volunteer hours and more than $2 million of charitable contributions to community organizations
•
History of uninterrupted dividends since 1901
•
HEI remains an independent public company following our terminated merger with NextEra Energy and cancelled spin-off of American Savings Bank

HONOLULU - Hawaiian Electric Industries, Inc. (NYSE - HE) (HEI) today reported 2016
year-end consolidated net income for common stock of $248.3 million and diluted earnings per share (EPS) of $2.29 compared to $159.9 million and EPS of $1.50 for 2015. For the fourth quarter of 2016, consolidated net income for common stock was $44.6 million and EPS of $0.41 compared to $42.3 million and EPS of $0.39 for the fourth quarter of 2015. The financial results for 2016 include the one-time increase to net income of $58.2 million due to the terminated merger with NextEra Energy, Inc., the related terminated liquefied natural gas (LNG) contract and the associated cancelled spin-off of ASB Hawaii, Inc., as compared to $15.8 million net expense in 2015. Excluding these items, core earnings1 for 2016 were $190.1 million and core EPS1 of $1.75 compared to $175.7 million and $1.65 respectively for 2015. The financial results for the fourth quarter of 2015 included $2.2 million net expense for the terminated merger with NextEra Energy, Inc. and the related cancelled spin-off of ASB Hawaii, Inc. Excluding these items, core earnings1 for the fourth quarter of 2016 were $44.6 million and core EPS of $0.41 compared to $44.5 million and EPS of $0.41 for the fourth quarter of 2015.
“Following the termination of our proposed merger with NextEra Energy, HEI and its operating subsidiaries, Hawaiian Electric, Maui Electric, Hawaii Electric Light and American Savings Bank, have moved forward strongly as an independent public company, delivering a consolidated core return on

_________________

5 
Excludes net income neutral expenses covered by surcharges or by third parties and merger-related costs including the terminated LNG contract costs which required PUC approval of the merger with NextEra Energy, Inc. See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP measures” and the related reconciliation.



Hawaiian Electric Industries, Inc.
February 14, 2017
Page 3

equity1 of 9.5% for 2016. HEI’s unique combination of companies continues to provide essential electricity and banking services for Hawaii and invest in the growth of Hawaii’s economy,” said Constance Lau, HEI president and chief executive officer.
“In 2016, Hawaiian Electric and its subsidiaries invested $318 million, over twice the utility’s earnings, in the modernization and improvement of Hawaii’s electric grids, and we achieved an energy portfolio powered by 25% renewable resources3 in 2016. While advancing towards our 100% goal for 2045, we remained focused on increasing customer value. In 2016, Hawaiian Electric management worked hard to reduce overall operation and maintenance expenses from 2015 levels. Our activities at the utility are focused on creating, at reasonable cost and working with third party energy developers and producers, the renewable energy platform of the future for the benefit of all of Hawaii, while also maintaining the service and reliability that our customers have come to expect,” added Lau.
“American Savings Bank closed 2016 with a strong fourth quarter and achieved important strategic objectives including the successful implementation of their new e-banking platform. We plan to build upon the bank’s success in the coming years with the building of its new headquarters. The bank is well positioned to continue to grow in 2017, as it works continually to improve efficiency and customer experience,” said Lau.

HAWAIIAN ELECTRIC COMPANY EARNINGS CONSISTENT WITH EXPECTATIONS
Full Year Results:
Hawaiian Electric Company’s6 full-year 2016 net income was $142.3 million compared to $135.7 million in 2015. Excluding after-tax costs related to the terminated merger with NextEra Energy, Inc. and the related terminated LNG contract totaling $2.2 million and $0.5 million in 2016 and 2015, respectively, Hawaiian Electric Company’s core net income was $144.5 million in 2016 and $136.2 million in 2015. The $8.3 million core net income increase from the prior year was primarily driven by the following after-tax items:
_________________

Note: Amounts indicated as “after-tax” in this earnings release are based upon adjusting items for the composite statutory tax rates of 39% for the utilities and 40% for the bank.

6 
Hawaiian Electric Company, unless otherwise defined, refers to the three utilities, Hawaiian Electric Company, Inc. on Oahu, Maui Electric Company, Limited, and Hawaii Electric Light Company, Inc.




Hawaiian Electric Industries, Inc.
February 14, 2017
Page 4

•
$8 million higher net revenues7 primarily due to recovery of costs for clean energy, reliability and system efficiency investments; and
•
$6 million lower O&M expenses5 compared to 2015 which included a regulatory decision denying recovery of enterprise resource planning software costs and additional reserves for environmental costs.
These items were partially offset by $6 million higher depreciation expense as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency.
Fourth Quarter Results:
Fourth quarter 2016 net income of $34.1 million was $1.1 million higher than the fourth quarter of 2015 primarily driven by $2 million (after-tax) higher net revenues in 2016 attributable to the recovery of costs for clean energy, reliability and system efficiency investments partially offset by $1 million (after-tax) higher depreciation expense in the fourth quarter of 2016 as a result of increasing investments for the integration of more renewable energy, improved customer reliability and greater system efficiency.

AMERICAN SAVINGS BANK: SOLID FINANCIAL PERFORMANCE
Full Year Results:
American Savings Bank’s (American) full-year 2016 net income was $57.3 million compared to $54.7 million in 2015. The $2.5 million increase from the prior year was primarily driven by the following after-tax items:
•
$11 million higher net interest income driven mainly by commercial real estate and consumer loan and investment portfolio growth; partially offset by
_________________

7 
Net revenues represent the after-tax impact of “Revenues” less the following expenses which are largely pass through items in revenues: “fuel oil,” “purchased power” and “taxes, other than income taxes” as shown on the Hawaiian Electric Company, Inc. and Subsidiaries’ Consolidated Statements of Income.





Hawaiian Electric Industries, Inc.
February 14, 2017
Page 5

•
$6 million higher provision for loan losses largely related to commercial real estate and consumer lending activities; and
•
$2 million higher noninterest expense primarily due to costs related to the conversion and upgrade of American’s e-banking platform.
American achieved loan growth of 2.6% in 2016 primarily driven by commercial real estate and consumer loans that also helped to improve net interest margin. At the same time, American strategically reduced exposure to shared national credits by $93 million or 2.0% of total loans.
Total deposits were $5.5 billion at December 31, 2016, an increase of $524 million or 10.4% from December 31, 2015. Core deposits increased $342 million or 7.5% from December 31, 2015. The average cost of funds was 0.23% for the full year 2016, up 1 basis point from the prior year.
Overall, American’s return on average equity for the full year remained solid at 9.90% in 2016 compared to 9.93% in 2015, and the return on average assets for the full year was 0.92% in 2016 compared to 0.95% in 2015.

Fourth Quarter Results:
Fourth quarter 2016 net income of $16.2 million was $1.1 million higher than the third, or linked quarter and $1.3 million higher than the fourth quarter of 2015.
Compared to the linked quarter of 2016, the $1.1 million increase in the fourth quarter of 2016 was primarily driven by the following on an after-tax basis:
•
$3 million lower provision for loan losses primarily due to reserves for specific commercial credits in the third quarter of 2016; and
•
$1 million higher net interest income driven mainly by higher yields in the commercial real estate and commercial markets loan portfolios and investment portfolio growth.
These increases were partially offset by the following on an after-tax basis:
•
$1 million lower noninterest income primarily due to the gain on sale of real estate and higher mortgage banking income in the third quarter of 2016; and
•
$1 million higher noninterest expense.



Hawaiian Electric Industries, Inc.
February 14, 2017
Page 6

Compared to the fourth quarter of 2015, the $1.3 million higher net income in the fourth quarter of 2016 was primarily driven by $3 million (after-tax) higher net interest income mainly due to higher yields and growth in the commercial real estate and consumer loan portfolios, partially offset by $1 million (after-tax) higher noninterest expense.
American’s fourth quarter of 2016 return on average equity was 11.1%, up from 10.4% in the linked quarter and 10.7% in the fourth quarter of 2015. Return on average assets was 1.02% for the fourth quarter of 2016, compared to 0.97% from the linked quarter and 1.01% in the same quarter last year.
Please refer to American’s news release issued on January 30, 2017, for additional information on American.

HOLDING AND OTHER COMPANIES
The holding and other companies’ net income was $48.7 million in 2016 compared to a net loss of $30.6 million in 2015. Excluding one-time merger-related items of $60.3 million net income in 2016 and $15.2 million net expenses in 2015, the holding and other companies’ adjusted net losses in 2016 and 2015 were $11.7 million and $15.4 million, respectively. The holding company’s adjusted 2016 results included favorable tax adjustments as HEI moved out of a federal net operating loss position, enabling the recognition of tax benefits of approximately $4 million.
Fourth quarter net losses were $5.7 million in 2016 compared to $5.6 million in the fourth quarter of 2015. Excluding after-tax costs related to the terminated merger with NextEra Energy, Inc. and the cancelled spin-off of ASB Hawaii, Inc. of $1.9 million in the fourth quarter of 2015, the holding and other companies’ net losses in 2016 and 2015 were $5.7 million and $3.8 million, respectively. The higher net loss was primarily driven by an adjustment to tax benefits of approximately $2 million in the fourth quarter of 2016.

BOARD DECLARES QUARTERLY DIVIDEND
On February 13, 2017, the board of directors maintained HEI’s quarterly cash dividend of $0.31 cents per share, payable on March 10, 2017, to shareholders of record at the close of business on



Hawaiian Electric Industries, Inc.
February 14, 2017
Page 7
February 24, 2017 (ex-dividend date is February 22, 2017). The cumulative 2016 dividend is $1.24 per share.
Dividends have been paid uninterrupted since 1901. At the indicated annual dividend rate and the closing price per share on February 13, 2017 of $33.68, HEI’s dividend yield is 3.7%.

WEBCAST AND CONFERENCE CALL
HEI TO ANNOUNCE 2017 EPS GUIDANCE IN EARNINGS CONFERENCE CALL
Hawaiian Electric Industries, Inc. will conduct a webcast and conference call to review its 2016 earnings on Tuesday, February 14, 2017, at 10:00 a.m. Hawaii time (3:00 p.m. Eastern time). HEI will announce 2017 EPS guidance during the scheduled webcast and conference call.
Interested parties within the United States may listen to the conference by calling (888) 317-6016 and international parties may listen to the conference by calling (412) 317-6016 or by accessing the webcast on HEI’s website under the heading “Investor Relations.”  HEI and Hawaiian Electric Company intend to continue to use HEI’s website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI’s website in the Investor Relations section. Accordingly, investors should routinely monitor such portions of HEI’s website, in addition to following HEI’s, Hawaiian Electric Company’s and American’s press releases, HEI’s and Hawaiian Electric Company’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. The information on HEI’s website is not incorporated by reference in this document or in HEI’s and Hawaiian Electric Company’s SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI’s and Hawaiian Electric Company’s SEC filings.
An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the conference call will also be available approximately two hours after the event through February 28, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10097589.
HEI supplies power to approximately 95% of Hawaii’s population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company,



Hawaiian Electric Industries, Inc.
February 14, 2017
Page 8
Limited and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, one of Hawaii’s largest financial institutions.

NON-GAAP MEASURES
See “Explanation of HEI’s Use of Certain Unaudited Non-GAAP Measures” and related reconciliations on pages 15 to 16 of this release.

FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.
Forward-looking statements in this release should be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” discussions (which are incorporated by reference herein) set forth in HEI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric Company, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
###




Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three months ended December 31
 
Years ended December 31
(in thousands, except per share amounts)
 
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
 
Electric utility
 
$
544,668

 
$
555,434

 
$
2,094,368

 
$
2,335,166

Bank
 
72,627

 
68,511

 
285,924

 
267,733

Other
 
100

 
87

 
362

 
83

Total revenues
 
617,395

 
624,032

 
2,380,654

 
2,602,982

Expenses
 
 
 
 
 
 
 
 
Electric utility
 
476,024

 
487,772

 
1,809,900

 
2,061,050

Bank
 
47,820

 
45,858

 
198,572

 
183,921

Other
 
5,124

 
7,180

 
24,007

 
35,458

Total expenses
 
528,968

 
540,810

 
2,032,479

 
2,280,429

Operating income (loss)
 
 
 
 
 
 
 
 
Electric utility
 
68,644

 
67,662

 
284,468

 
274,116

Bank
 
24,807

 
22,653

 
87,352

 
83,812

Other
 
(5,024
)
 
(7,093
)
 
(23,645
)
 
(35,375
)
Total operating income
 
88,427

 
83,222

 
348,175

 
322,553

Merger termination fee
 
—

 
—

 
90,000

 
—

Interest expense, net—other than on deposit liabilities and other bank borrowings
 
(19,011
)
 
(19,915
)
 
(75,803
)
 
(77,150
)
Allowance for borrowed funds used during construction
 
868

 
539

 
3,144

 
2,457

Allowance for equity funds used during construction
 
2,315

 
1,562

 
8,325

 
6,928

Income before income taxes
 
72,599

 
65,408

 
373,841

 
254,788

Income taxes
 
27,492

 
22,615

 
123,695

 
93,021

Net income
 
45,107

 
42,793

 
250,146

 
161,767

Preferred stock dividends of subsidiaries
 
473

 
473

 
1,890

 
1,890

Net income for common stock
 
$
44,634

 
$
42,320

 
$
248,256

 
$
159,877

Basic earnings per common share
 
$
0.41

 
$
0.39

 
$
2.30

 
$
1.50

Diluted earnings per common share
 
$
0.41

 
$
0.39

 
$
2.29

 
$
1.50

Dividends per common share
 
$
0.31

 
$
0.31

 
$
1.24

 
$
1.24

Weighted-average number of common shares outstanding
 
108,553

 
107,460

 
108,102

 
106,418

Adjusted weighted-average shares
 
108,769

 
107,797

 
108,309

 
106,721

Net income (loss) for common stock by segment
 
 
 
 
 
 
 
 
Electric utility
 
$
34,119

 
$
32,993

 
$
142,317

 
$
135,714

Bank
 
16,217

 
14,953

 
57,279

 
54,730

Other
 
(5,702
)
 
(5,626
)
 
48,660

 
(30,567
)
Net income for common stock
 
$
44,634

 
$
42,320

 
$
248,256

 
$
159,877

Comprehensive income attributable to Hawaiian Electric Industries, Inc.
 
$
118,471

 
$
38,075

 
$
241,389

 
$
160,993

Return on average common equity (twelve months ended)1
 
 
 
 
 
12.4
%
 
8.6
%
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.
1 On a core basis, 2016 and 2015 returns on average common equity were 9.5% and 9.4%.  See reconciliation of GAAP to non-GAAP measures.

9


Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31
 
2016
 
2015
(dollars in thousands)
 
 
 
 
Assets
 
 

 
 

Cash and cash equivalents
 
$
278,452

 
$
300,478

Accounts receivable and unbilled revenues, net
 
237,950

 
242,766

Available-for-sale investment securities, at fair value
 
1,105,182

 
820,648

Stock in Federal Home Loan Bank, at cost
 
11,218

 
10,678

Loans receivable held for investment, net
 
4,683,160

 
4,565,781

Loans held for sale, at lower of cost or fair value
 
18,817

 
4,631

Property, plant and equipment, net of accumulated depreciation of $2,444,348 and $2,339,319 at the respective dates
 
4,603,465

 
4,377,658

Regulatory assets
 
957,451

 
896,731

Other
 
447,621

 
480,457

Goodwill
 
82,190

 
82,190

Total assets
 
$
12,425,506

 
$
11,782,018

Liabilities and shareholders’ equity
 
 

 
 

Liabilities
 
 

 
 

Accounts payable
 
$
143,279

 
$
138,523

Interest and dividends payable
 
25,225

 
26,042

Deposit liabilities
 
5,548,929

 
5,025,254

Short-term borrowings—other than bank
 
—

 
103,063

Other bank borrowings
 
192,618

 
328,582

Long-term debt, net—other than bank
 
1,619,019

 
1,578,368

Deferred income taxes
 
728,806

 
680,877

Regulatory liabilities
 
410,693

 
371,543

Contributions in aid of construction
 
543,525

 
506,087

Defined benefit pension and other postretirement benefit plans liability
 
638,854

 
589,918

Other
 
473,512

 
471,828

Total liabilities
 
10,324,460

 
9,820,085

Preferred stock of subsidiaries - not subject to mandatory redemption
 
34,293

 
34,293

Shareholders’ equity
 
 

 
 

Preferred stock, no par value, authorized 10,000,000 shares; issued: none
 
—

 
—

Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 108,583,413 shares and 107,460,406 shares at the respective dates
 
1,660,910

 
1,629,136

Retained earnings
 
438,972

 
324,766

Accumulated other comprehensive loss, net of tax benefits
 
(33,129
)
 
(26,262
)
Total shareholders’ equity
 
2,066,753

 
1,927,640

Total liabilities and shareholders’ equity
 
$
12,425,506

 
$
11,782,018

The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which was adopted in first quarter 2016.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.


10


Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three months ended December 31
 
Years ended December 31
(dollars in thousands, except per barrel amounts)
 
2016
 
2015
 
2016
 
2015
Revenues
 
$
544,668

 
$
555,434

 
$
2,094,368

 
$
2,335,166

Expenses
 
 
 
 
 
 
 
 
Fuel oil
 
120,441

 
135,930

 
454,704

 
654,600

Purchased power
 
150,073

 
148,287

 
562,740

 
594,096

Other operation and maintenance
 
107,273

 
106,570

 
405,533

 
413,089

Depreciation
 
46,761

 
44,540

 
187,061

 
177,380

Taxes, other than income taxes
 
51,476

 
52,445

 
199,862

 
221,885

Total expenses
 
476,024

 
487,772

 
1,809,900

 
2,061,050

Operating income
 
68,644

 
67,662

 
284,468

 
274,116

Allowance for equity funds used during construction
 
2,315

 
1,562

 
8,325

 
6,928

Interest expense and other charges, net
 
(17,090
)
 
(17,200
)
 
(66,824
)
 
(66,370
)
Allowance for borrowed funds used during construction
 
868

 
539

 
3,144

 
2,457

Income before income taxes
 
54,737

 
52,563

 
229,113

 
217,131

Income taxes
 
20,119

 
19,071

 
84,801

 
79,422

Net income
 
34,618

 
33,492

 
144,312

 
137,709

Preferred stock dividends of subsidiaries
 
229

 
229

 
915

 
915

Net income attributable to Hawaiian Electric
 
34,389

 
33,263

 
143,397

 
136,794

Preferred stock dividends of Hawaiian Electric
 
270

 
270

 
1,080

 
1,080

Net income for common stock
 
$
34,119

 
$
32,993

 
$
142,317

 
$
135,714

Comprehensive income attributable to Hawaiian Electric
 
$
32,460

 
$
33,862

 
$
141,070

 
$
136,594

OTHER ELECTRIC UTILITY INFORMATION
 
 
 
 
 
 
 
 
Kilowatthour sales (millions)
 
 
 
 
 
 
 
 
   Hawaiian Electric
 
1,678

 
1,738

 
6,660

 
6,754

   Hawaii Electric Light
 
272

 
273

 
1,067

 
1,065

   Maui Electric
 
282

 
290

 
1,118

 
1,138

 
 
2,232

 
2,301

 
8,845

 
8,957

Wet-bulb temperature (Oahu average; degrees Fahrenheit)
 
68.9

 
71.9

 
69.6

 
70.6

Cooling degree days (Oahu)
 
1,151

 
1,395

 
4,788

 
5,082

Average fuel oil cost per barrel
 
$
57.90

 
$
61.59

 
$
53.49

 
$
74.71

 
 
 
 
 
 
 
 
 
Twelve months ended December 31
 
 
 
 
 
2016
 
2015
Return on average common equity (%) (simple average)
 
 
 
 
 
 
 
 
   Hawaiian Electric
 
 
 
 
 
8.26

 
8.02

   Hawaii Electric Light
 
 
 
 
 
7.28

 
7.22

   Maui Electric
 
 
 
 
 
8.08

 
8.52

   Hawaiian Electric Consolidated1
 
 
 
 
 
8.07

 
7.96

This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.
1 On a core basis, 2016 and 2015 returns on average common equity were 8.2% and 8.0%.  See reconciliation of GAAP to non-GAAP measures.



11


Hawaiian Electric Company, Inc. (Hawaiian Electric) and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31
 
2016
 
2015
(dollars in thousands, except par value)
 
 
 
 
Assets
 
 

 
 

Property, plant and equipment
 
 
 
 
Utility property, plant and equipment
 
 

 
 

Land
 
$
53,153

 
$
52,792

Plant and equipment
 
6,605,732

 
6,315,698

Less accumulated depreciation
 
(2,369,282
)
 
(2,266,004
)
Construction in progress
 
211,742

 
175,309

Utility property, plant and equipment, net
 
4,501,345

 
4,277,795

Nonutility property, plant and equipment, less accumulated depreciation of $1,232 and $1,229 at respective dates
 
7,407

 
7,272

Total property, plant and equipment, net
 
4,508,752

 
4,285,067

Current assets
 
 
 
 

Cash and cash equivalents
 
74,286

 
24,449

Customer accounts receivable, net
 
123,688

 
132,778

Accrued unbilled revenues, net
 
91,693

 
84,509

Other accounts receivable, net
 
5,233

 
10,408

Fuel oil stock, at average cost
 
66,430

 
71,216

Materials and supplies, at average cost
 
53,679

 
54,429

Prepayments and other
 
23,100

 
36,640

Regulatory assets
 
66,032

 
72,231

Total current assets
 
504,141

 
486,660

Other long-term assets
 
 

 
 

Regulatory assets
 
891,419

 
824,500

Unamortized debt expense
 
208

 
497

Other
 
70,908

 
75,486

Total other long-term assets
 
962,535

 
900,483

Total assets
 
$
5,975,428

 
$
5,672,210

Capitalization and liabilities
 
 

 
 

Capitalization
 
 

 
 

Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 16,019,785 and 15,805,327 shares)
 
$
106,818

 
$
105,388

Premium on capital stock
 
601,491

 
578,930

Retained earnings
 
1,091,800

 
1,043,082

Accumulated other comprehensive income (loss), net of income taxes
 
(322
)
 
925

Common stock equity
 
1,799,787

 
1,728,325

Cumulative preferred stock — not subject to mandatory redemption
 
34,293

 
34,293

Long-term debt, net
 
1,319,260

 
1,278,702

Total capitalization
 
3,153,340

 
3,041,320

Current liabilities
 
 

 
 

Accounts payable
 
117,814

 
114,846

Interest and preferred dividends payable
 
22,838

 
23,111

Taxes accrued
 
172,730

 
191,084

Regulatory liabilities
 
3,762

 
2,204

Other
 
55,221

 
54,079

Total current liabilities
 
372,365

 
385,324

Deferred credits and other liabilities
 
 

 
 

Deferred income taxes
 
733,659

 
654,806

Regulatory liabilities
 
406,931

 
369,339

Unamortized tax credits
 
88,961

 
84,214

Defined benefit pension and other postretirement benefit plans liability
 
599,726

 
552,974

Other
 
76,921

 
78,146

Total deferred credits and other liabilities
 
1,906,198

 
1,739,479

Contributions in aid of construction
 
543,525

 
506,087

Total capitalization and liabilities
 
$
5,975,428

 
$
5,672,210

The Consolidated Balance Sheet as of December 31, 2015 reflects the retrospective application of ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which was adopted in first quarter 2016.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in Hawaiian Electric filings with the SEC.

12


American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
 
 
Three months ended 
 
Years ended December 31,
(in thousands)
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
2016
 
2015
Interest and dividend income
 
 

 
 

 
 

 
 
 
 
Interest and fees on loans
 
$
51,203

 
$
50,444

 
$
47,136

 
$
199,774

 
$
184,782

Interest and dividends on investment securities
 
4,965

 
4,759

 
4,550

 
19,184

 
15,120

Total interest and dividend income
 
56,168

 
55,203

 
51,686

 
218,958

 
199,902

Interest expense
 
 
 
 

 
 
 
 
 
 
Interest on deposit liabilities
 
2,013

 
1,871

 
1,467

 
7,167

 
5,348

Interest on other borrowings
 
1,172

 
1,464

 
1,510

 
5,588

 
5,978

Total interest expense
 
3,185

 
3,335

 
2,977

 
12,755

 
11,326

Net interest income
 
52,983

 
51,868

 
48,709

 
206,203

 
188,576

Provision for loan losses
 
1,497

 
5,747

 
839

 
16,763

 
6,275

Net interest income after provision for loan losses
 
51,486

 
46,121

 
47,870

 
189,440

 
182,301

Noninterest income
 
 
 
 

 
 
 
 
 
 
Fees from other financial services
 
5,585

 
5,599

 
5,667

 
22,384

 
22,211

Fee income on deposit liabilities
 
5,714

 
5,627

 
5,746

 
21,759

 
22,368

Fee income on other financial products
 
2,144

 
2,151

 
2,006

 
8,707

 
8,094

Bank-owned life insurance
 
1,017

 
1,616

 
1,016

 
4,637

 
4,078

Mortgage banking income
 
1,529

 
2,347

 
1,003

 
6,625

 
6,330

Gains on sale of investment securities, net
 
—

 
—

 
—

 
598

 
—

Other income, net
 
470

 
1,165

 
1,387

 
2,256

 
4,750

Total noninterest income
 
16,459

 
18,505

 
16,825

 
66,966

 
67,831

Noninterest expense
 
 
 
 

 
 
 
 
 
 
Compensation and employee benefits
 
22,920

 
22,844

 
23,705

 
90,117

 
90,518

Occupancy
 
4,077

 
3,991

 
4,115

 
16,321

 
16,365

Data processing
 
3,431

 
3,150

 
3,002

 
13,030

 
12,103

Services
 
2,961

 
2,427

 
2,474

 
11,054

 
10,204

Equipment
 
1,745

 
1,759

 
1,578

 
6,938

 
6,577

Office supplies, printing and postage
 
1,644

 
1,483

 
1,452

 
6,075

 
5,749

Marketing
 
982

 
747

 
844

 
3,489

 
3,463

FDIC insurance
 
839

 
907

 
881

 
3,543

 
3,274

Other expense
 
4,539

 
4,591

 
3,991

 
18,487

 
18,067

Total noninterest expense
 
43,138

 
41,899

 
42,042

 
169,054

 
166,320

Income before income taxes
 
24,807

 
22,727

 
22,653

 
87,352

 
83,812

Income taxes
 
8,590

 
7,623

 
7,700

 
30,073

 
29,082

Net income
 
$
16,217

 
$
15,104

 
$
14,953

 
$
57,279

 
$
54,730

Comprehensive income
 
$
2,540

 
$
13,176

 
$
9,477

 
$
52,077

 
$
54,017

OTHER BANK INFORMATION (annualized %, except as of period end)
 
 
 
 
 
 
 
 
Return on average assets
 
1.02

 
0.97

 
1.01

 
0.92

 
0.95

Return on average equity
 
11.09

 
10.36

 
10.66

 
9.90

 
9.93

Return on average tangible common equity
 
12.90

 
12.06

 
12.48

 
11.53

 
11.68

Net interest margin
 
3.59

 
3.57

 
3.55

 
3.59

 
3.53

Efficiency ratio
 
62.12

 
59.54

 
64.15

 
61.89

 
64.87

Net charge-offs (recoveries) to average loans outstanding
 
0.40

 
0.20

 
(0.08
)
 
0.24

 
0.04

As of period end
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans to loans receivable held for investment
 
0.49

 
1.11

 
1.00

 
 
 
 
Allowance for loan losses to loans outstanding
 
1.17

 
1.24

 
1.08

 
 
 
 
Tangible common equity to tangible assets
 
7.82

 
8.03

 
8.05

 
 
 
 
Tier-1 leverage ratio
 
8.6

 
8.6

 
8.8

 
 
 
 
Total capital ratio
 
13.4

 
13.3

 
13.3

 
 
 
 
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
 
$
9.0

 
$
9.0

 
$
7.5

 
$
36.0

 
$
30.0

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

13


American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
December 31
2016
 
2015
 
(in thousands)
 
 

 
 
 

Assets
 
 

 
 
 

Cash and due from banks
 
$
137,083

 
 
$
127,201

Interest-bearing deposits
 
52,128

 
 
93,680

Restricted cash
 
1,764

 
 
—

Available-for-sale investment securities, at fair value
 
1,105,182

 
 
820,648

Stock in Federal Home Loan Bank, at cost
 
11,218

 
 
10,678

Loans receivable held for investment
 
4,738,693

 
 
4,615,819

Allowance for loan losses
 
(55,533
)
 
 
(50,038
)
Net loans
 
4,683,160

 
 
4,565,781

Loans held for sale, at lower of cost or fair value
 
18,817

 
 
4,631

Other
 
329,815

 
 
309,946

Goodwill
 
82,190

 
 
82,190

Total assets
 
$
6,421,357

 
 
$
6,014,755

Liabilities and shareholder’s equity
 
 
 
 
 
Deposit liabilities–noninterest-bearing
 
$
1,639,051

 
 
$
1,520,374

Deposit liabilities–interest-bearing
 
3,909,878

 
 
3,504,880

Other borrowings
 
192,618

 
 
328,582

Other
 
101,635

 
 
101,029

Total liabilities
 
5,843,182

 
 
5,454,865

Common stock
 
1

 
 
1

Additional paid in capital
 
342,704

 
 
340,496

Retained earnings
 
257,943

 
 
236,664

Accumulated other comprehensive loss, net of tax benefits
 
 
 
 
 
     Net unrealized losses on securities
$
(7,931
)
 

$
(1,872
)
 
 
     Retirement benefit plans
(14,542
)
(22,473
)
(15,399
)
 
(17,271
)
Total shareholder’s equity
 
578,175

 
 
559,890

Total liabilities and shareholder’s equity
 
$
6,421,357

 
 
$
6,014,755


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.


14


EXPLANATION OF HEI’S USE OF CERTAIN UNAUDITED NON-GAAP MEASURES
HEI and Hawaiian Electric Company management use certain non-GAAP measures to evaluate the performance of HEI and the utility. Management believes these non-GAAP measures provide useful information and are a better indicator of the companies’ core operating activities. Core earnings and other financial measures as presented here may not be comparable to similarly titled measures used by other companies. The accompanying tables provide a reconciliation of reported GAAP1 earnings to non-GAAP core earnings and the adjusted return on average common equity (ROACE) for HEI and the utility.
The reconciling adjustments from GAAP earnings to core earnings are limited to the fees, reimbursements, costs and associated taxes related to the terminated merger between HEI and NextEra Energy, Inc., and the cancelled spin-off of ASB Hawaii, Inc., and the terminated liquefied natural gas (LNG) contract which required the Hawaii Public Utilities Commission approval of the merger with NextEra Energy, Inc. For more information on the transactions, see HEI’s Form 8-K filed on July 18, 2016 and HEI’s Form 8-K filed on July 19, 2016. Management does not consider these items to be representative of the company’s fundamental core earnings.
The accompanying table also provides the calculation of utility GAAP O&M adjusted for costs related to the terminated merger discussed above. “O&M-related net income neutral items” which are O&M expenses covered by specific surcharges or by third parties have also been excluded. These “O&M-related net income neutral items” are grossed-up in revenue and expense and do not impact net income.
RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES
 
Hawaiian Electric Industries, Inc. and Subsidiaries (HEI)
Unaudited
Three months ended December 31
 
Years ended December 31
($ in millions, except per share amounts)
2016
2015
 
2016
2015
HEI CONSOLIDATED (INCOME) EXPENSES RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY AND CANCELLED SPIN-OFF OF ASB HAWAII
 
 
 
 
 
Pre-tax (income) expenses
$
—

$
2.5

 
$
(84.9
)
$
18.2

Current income taxes (benefits)
—

(0.3
)
 
24.7

(2.4
)
After-tax (income) expenses
$
—

$
2.2

 
$
(60.3
)
$
15.8

HEI CONSOLIDATED LNG CONTRACT COSTS2 
 
 
 
 
 
Pre-tax expenses
$
—

$
—

 
$
3.4

$
—

Current income taxes (benefits)
—

—

 
(1.3
)
—

After-tax (income) expenses
$
—

$
—

 
$
2.1

$
—

HEI CONSOLIDATED NET INCOME
 
 
 
 
 
GAAP (as reported)
$
44.6

$
42.3

 
$
248.3

$
159.9

Excluding special items (after-tax):
 
 
 
 
 
(Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii
—

2.2

 
(60.3
)
15.8

Costs related to the terminated LNG contract2
—

—

 
2.1

—

Non-GAAP (core) net income
$
44.6

$
44.5

 
$
190.1

$
175.7

HEI CONSOLIDATED DILUTED EARNINGS PER COMMON SHARE
 
 
 
 
GAAP (as reported)
$
0.41

$
0.39

 
$
2.29

$
1.50

Excluding special items (after-tax):
 
 
 
 
 
(Income) expenses related to the terminated merger with NextEra Energy and cancelled spin-off of ASB Hawaii
—

0.02

 
(0.56
)
0.15

Costs related to the terminated LNG contract2
—

—

 
0.02

—

Non-GAAP (core) diluted earnings per common share
$
0.41

$
0.41

 
$
1.75

$
1.65

 
 
 
 
Years ended December 31
 
 
 
 
2016
2015
HEI CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)
 
 
 
Based on GAAP
 
 
 
12.4
%
8.6
%
Based on non-GAAP (core)3
 
 
 
9.5
%
9.4
%
 
 
 
 
 
 
Note: Columns may not foot due to rounding
 
 
 
 
 
1  Accounting principles generally accepted in the United States of America
 
 
 
 
 
2  The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing
3  Calculated as core net income divided by average GAAP common equity

15


RECONCILIATION OF GAAP1 TO NON-GAAP MEASURES
 
Hawaiian Electric Company, Inc. and Subsidiaries
Unaudited
Three months ended December 31
 
Years ended December 31
($ in millions)
2016
2015
 
2016
2015
HAWAIIAN ELECTRIC CONSOLIDATED COSTS RELATED TO THE TERMINATED MERGER WITH NEXTERA ENERGY
 
 
 
 
 
Pre-tax expenses
$
—

$
0.4

 
$
0.1

$
0.8

Current income taxes (benefits)
—

(0.2
)
 
—

(0.3
)
After-tax expenses
$
—

$
0.2

 
$
0.1

$
0.5

HAWAIIAN ELECTRIC CONSOLIDATED LNG CONTRACT COSTS2
 
 
 
 
Pre-tax expenses
$
—

$
—

 
$
3.4

$
—

Current income taxes (benefits)
—

—

 
(1.3
)
—

After-tax expenses
$
—

$
—

 
$
2.1

$
—

HAWAIIAN ELECTRIC CONSOLIDATED NET INCOME
 
 
 
 
 
GAAP (as reported)
$
34.1

$
33.0

 
$
142.3

$
135.7

Excluding special items (after-tax):
 
 
 
 
 
Costs related to the terminated merger with NextEra Energy
—

0.2

 
0.1

0.5

Costs related to the terminated LNG contract2
—

—

 
2.1

—

Non-GAAP (core) net income
$
34.1

$
33.2

 
$
144.5

$
136.2

 
 
 
 
 
 
 
 
 
 
Years ended December 31
 
 
 
 
2016
2015
HAWAIIAN ELECTRIC CONSOLIDATED RETURN ON AVERAGE COMMON EQUITY (ROACE) (simple average)
 
 
 
 
 
Based on GAAP
 
 
 
8.07
%
7.96
%
Based on non-GAAP (core)3
 
 
 
8.19
%
7.99
%
 
 
 
 
 
 
 
Three months ended December 31
 
Years ended December 31
($ in millions)
2016
2015
 
2016
2015
HAWAIIAN ELECTRIC CONSOLIDATED OTHER OPERATION AND MAINTENANCE (O&M) EXPENSE
 
 
 
 
 
GAAP (as reported)
$
107.3

$
106.6

 
$
405.5

$
413.1

Excluding O&M-related net income neutral items4
1.3

1.6

 
5.9

7.0

Excluding costs related to the terminated merger with NextEra Energy
—

0.4

 
0.1

0.8

Excluding costs related to the terminated LNG contract2
—

—

 
3.4

—

Non-GAAP (Adjusted other O&M expense)
$
106.0

$
104.6

 
$
396.2

$
405.3

Note: Columns may not foot due to rounding
 
 
 
1  Accounting principles generally accepted in the United States of America
 
 
 
 
 
2  The LNG contract was terminated as it was conditioned on the merger with NextEra Energy closing
3  Calculated as core net income divided by average GAAP common equity
4  Expenses covered by surcharges or by third parties recorded in revenues
 
 
 
 
 


16