HEI net gains 5-fold in first quarter

The gain was above what analysts had expected for the period

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Hawaiian Electric Industries Inc.'s first-quarter profit grew fivefold to $34 million, or 41 cents per share, outpacing analysts' projections and bringing its earnings back to 2006 levels.

First-quarter net: $34.0 million Year-earlier net: $6.8 million

The gain comes in contrast to the same quarter last year, when the company of had net income of $6.8 million, or 8 cents a share. Then, however, HEI's Hawaiian Electric Co. utility subsidiary was awaiting a round of rate increases and wrote off $7 million after tax in connection with its Keahole power plant.

The company had net income of $32.3 million, or 40 cents per share, in the first quarter of 2006.

"After a tough first quarter last year due to the Keahole write-off and pending rate case decisions, we are now in a better position to earn a more reasonable return for our investors," said Constance H. Lau, HEI president and chief executive officer.

This year, HEI's first-quarter income beat analysts' projections of 33 cents a share.

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Electrical rate hikes helped boost Hawaiian Electric Industries Inc.'s earnings in the first quarter to $34 million, or 41 cents per share.

The gain represents a fivefold increase over to depressed levels of the same quarter last year, when net income was $6.8 million, or 8 cents per share. The company posted $32.3 million, or 40 cents per share, in 2006.

The year-earlier earnings of the company came as its utility subsidiary awaited its latest round of rate increases to recover and earn a return on investments and costs at all three of its electric utilities, said Constance H. Lau, HEI president and chief executive officer.

HEI wrote off $7 million after-tax of Keahole power plant expansion costs, which also contributed to its depressed earnings a year ago.

"After a tough first quarter last year due to the Keahole write-off and pending rate case decisions, we are now in a better position to earn a more reasonable return for our investors," she said.

HEI's profits beat a projection of 34 cents per share by James Bellessa, Jr., vice president and senior research analyst at D.A. Davidson & Co.

Other analysts polled by Bloomberg News averaged 33 cents a share.

The Hawaii Public Utilities Commission granted interim rate increases for HEI's three utilities: Hawaiian Electric Co. Inc., Hawaii Electric Light Co. Inc. on Big Island and Maui Electric Co. Ltd. for Maui, Lanai and Molokai, late last year.

In addition, HEI's electric utility recorded gains of $24.6 million, compared to $500,000 in the same period last year and $21 million in the 2006 first quarter.

Electric utility revenues were $624 million for the quarter ending March 31, compared to $448 million the year earlier, while expenses totaled $573 million and $435 million, respectively.

The company said kilowatt-hour sales were flat at 2.4 billion compared to the same quarter a year ago primarily due to conservation and management programs that offset the impact of slightly warmer temperatures.

Operations and maintenance expenses were up $4.7 million or 6 percent quarter-over-quarter, which is expected to continue due to additional planned production and transmission and distribution maintenance work, Lau said.

The utility also recorded $1.2 million in higher quarter-over-quarter depreciation expenses due to 2007 plant additions. Fuel costs in the quarter rose $90 million year-over-year to $250 million.

Earnings from American Savings Bank, the state's third largest financial institution based on assets, rose by $3 million to $14.6 million from $11.6 million in the quarter. Bank revenues totaled $106 million in the quarter, up from $104 million a year ago, while expenses were $82 million, com-pared to $86 million.

Net interest income in the first quarter was $50.5 million, up from $49.3 million in the first quarter of 2007.

Lower interest expense, primarily due to lower rates on deposits and borrowings, offset lower interest income primarily due to lower yields on loans, the company said.

Net interest margin expanded to 3.16 percent in the quarter, compared with 3.07 percent in the 2007 period.

The bank recorded a $900,000 provision for loan losses, due to loan growth as well as reclassification of commercial loans. No provision for loan losses was recorded a year earlier.

The bank hasn't seen a significant deterioration in the quality of its residential loan portfolio since the collapse of the subprime market, and its overall credit quality remains good, Lau said.

"Given the volatility in the financial and credit markets, we are especially pleased with the bank's solid first-quarter results," she said.

Non-interest income rose $1.9 million compared to the first quarter of 2007, while fee income from deposits was higher by $700,000 and fees from other financial services were higher by $300,000. The bank recorded a $900,000 gain on the sale of stock in a membership organization during the quarter.

Non-interest expense for the quarter was $2.7 million lower than the same period in 2007, primarily due to lower legal and litigation-related expenses.

Meanwhile, the holding and other companies' net losses were $5.2 million in the first quarter, compared to net losses of $5.3 million a year earlier.