Tourism, market
zap HEI in quarterHawaiian Electric's net drops
30.4% in the second quarter
Hawaiian Electric Industries Inc., hurt by a tourism slowdown, increased retirement expenses and a compressed interest rate spread, said yesterday net income fell 30.4 percent in the second quarter.
The state's main utility, which also owns American Savings Bank, posted net income of $21.9 million, or 59 cents a share, compared with $31.5 million, or 86 cents a share, a year ago.
Excluding a loss of $3.9 million from discontinued operations, HEI's net income was down 18.1 percent to $25.8 million, or 69 cents a share, from $31.5 million, or 86 cents a share.
HEI's total revenues rose 9.7 percent to $448.8 million from $409 million.
"Several factors worked against more positive second-quarter results, including the effects of a weak Japanese economy and fear of terrorism and SARS on tourism, increased retirement benefits expense resulting from poor stock market performance in 2000 through 2002, and a tightening interest rate spread caused by the lowest interest rates in 45 years," said Robert Clarke, HEI chairman, president and chief executive officer.
Losses from discontinued international power operations were primarily due to a $3.2 million after-tax writedown of HEI's investment in CEPALCO, a Philippine electricity distribution company.
CEPALCO's reduced value resulted from a deteriorating political and economic environment that hurt the electric power industry in the Philippines and CEPALCO's financial performance. HEI discontinued its international operations in the third quarter of 2001, but is still seeking a buyer for CEPALCO.
Meanwhile, HEI's electric utility revenues were up 15.2 percent to $354.5 million from $307.7 million while the utility's net income from continued operations fell 22.2 percent to $18.6 million from $23.9 million. The majority of that drop in net income -- $3.9 million -- was the result of increased retirement benefits due to the bear market.
"On the bright side, kilowatthour sales in the second quarter were up 1.2 percent compared to the same quarter in 2002 due to slightly warmer weather and increased commercial usage on the Big Island and Maui," Clarke said.
American Savings Bank's second-quarter net income fell 8.9 percent to $13.5 million -- the same income level as the first quarter -- from $14.8 million a year ago due to the tough interest-rate environment.
Bank revenues declined 9.2 percent to $92.7 million from $102.1 million.
The net interest rate spread, which is the difference between what the bank pays depositors and what it brings in from loans, slipped to 3.02 percent from 3.31 percent.
HEI also said that high prepayments of mortgage-related securities, due to record refinancings, significantly lowered the yield on those assets, but that the decrease in yields was partially offset by lower interest expense.
Other positive factors during the second quarter included a lower provision for loan losses due to low delinquencies, increased fee income from other financial services and gain on sales of securities.
