Tax charge gives HEI a lift


POSTED: Friday, August 07, 2009

Hawaiian Electric Industries Inc.'s net income more than tripled in the second quarter, but earnings would have been down about 62 percent from the year-earlier period if the company had not taken a $35.6 million restructuring charge during that time frame.

The owner of the state's dominant utility and of American Savings Bank said yesterday the performance of its companies continue to be affected by difficult economic conditions and delayed regulatory action.

“;We continue to work hard to position our company to weather this economic storm and emerge with stronger, improved performance,”; said Connie Lau, HEI president and chief executive officer.

HEI posted net income of

$15.5 million, or 17 cents a share, compared with $5.1 million, or 6 cents a share, a year ago. The consensus forecast of three analysts was 22 cents a share.

In the second quarter of 2008, the company had after-tax charges of $35.6 million, or 42 cents a share, that were related to the restructuring of American Savings' balance sheet. Excluding those charges, HEI would have had net income in that quarter of $40.7 million, or 48 cents a share.

Revenue last quarter plunged 32.1 percent to $525.9 million from $774.1 million.

On Monday, HEI subsidiary Hawaiian Electric Co. implemented a 4.7 percent interim rate increase on Oahu customers that will generate $61.1 million annually in revenue for the company. The state Public Utilities Commission, which approved the interim relief, is still reviewing HECO's entire request for a 6.7 percent rate increase worth $86.8 million in annual revenue. A PUC evidentiary hearing to consider the remaining amount is scheduled for Oct. 26.





        Second-quarter net

        $15.5 million

Year-earlier net
        $5.1 million


“;Our utility is making investments in critical reliability projects and has sought timely cost recovery and return on those investments,”; Lau said. “;Further rate relief, regulatory reforms and inclusion of major capital additions into rates are possible near year-end and are necessary for the utility to achieve industry-typical returns.”;

The utility's net income fell 43.5 percent to $15.5 million from $27.4 million a year ago due to lower electric sales and an 11 percent year-over-year increase in operations and maintenance expenses. Revenue decreased 34.8 percent to $447.8 million from $686.6 million. Kilowatt-hour sales fell 3.1 percent from a year ago and hurt the utility's net income by about $3.4 million.

American Savings posted a profit of $4 million last quarter after taking a net loss of $18.1 million in the year-earlier quarter that included the $35.6 million in after-tax charges. The restructuring of the bank's balance sheet returned $55 million of capital to HEI.

The bank's net interest income, reflecting the difference between what American Savings pays depositors and what it brings in from loans, decreased 4.2 percent to $50.4 million from $52.6 million on a smaller average balance sheet due to the year-ago restructuring. Its net interest margin improved to 4.16 percent from 3.36 percent, primarily due to the balance sheet restructuring.

Noninterest income, which includes fees and service charges, jumped 781 percent to $13 million from $1.5 million due to one-time special items in each quarter.

American Savings also set aside $13.5 million for potential loan losses last quarter, compared with $8.3 million in the first quarter and $1.2 million in the year-earlier period.

“;While the provision for loan losses has increased, the bank's performance improvement initiative is progressing well, helping offset the increased provision in the near term and improve the bank's long-term fundamental earnings power once we are through this credit cycle,”; Lau said.

Separately, HEI maintained its dividend at 31 cents a share. It will be payable Sept. 10 to shareholders of record at the close of business on Aug. 24.