Hawaiian Electric Industries’ earnings up from 2Q11

Hawaiian Electric Industries’ (HEI; NYSE:HE) electric utilities invested $74m, two and a half times their earnings, in local infrastructure projects during 2Q12 to continue to modernize Hawaii’s electric grid, according to HEI president and CEO Connie Lau.

“HEI delivered consistent results in the first half of the year as we continued to invest in Hawaii’s economy and clean energy future,” Lau said during the company’s Aug. 3 second-quarter earnings call.

HEI reported consolidated net income for 2Q12 of $38.8m, or 40 cents diluted earnings per share (EPS), up from $27.1m, or 28 cents diluted EPS, from 2Q11 and up $0.5m from $38.3m, or 40 cents diluted EPS, in 1Q12.

“This increase from last year was largely driven by the recovery of costs for our Oahu utility, which commenced in July of last year,” Lau said.

HEI has three utilities under the umbrella of its primary subsidiary, Hawaiian Electric Company (HECO): Hawaiian Electric, which serves the island of Oahu; Maui Electric Company (MECO), which serves Maui; and Hawaii Electric Light Company (HELCO), which serves the Big Island. Together, they provide electricity to 95% of the state’s population.

HECO’s net income for 2Q12 was $29.4m, compared to $17m in 2Q11.

In addition to the utilities, HEI also owns American Savings Bank, and holding companies and other subsidiaries including HECO Capital Trust III, Renewable Hawaii, and Uluwehiokama Biofuels.

American Savings Bank’s net income for 2Q12 was $14.2m compared to $15.2m in 2Q11, while the holding and other companies’ net losses were $4.8m in 2Q12 compared to $5.1m in 2Q11.

Renewable energy a ‘critical priority’

The utilities’ adoption rate of additional renewable energy has continued to grow, Lau said.

“Through June 30, over 13% of our electric sales came from renewable sources, ahead of our projections,” she said.

In 2011, approximately 75.7% of the electricity supplied by the HECO utilities was generated from petroleum, 13.8% from coal, and 10.5% from renewable resources, according to the company’s website.

Since the end of 2010, close to 90% of the increase in the typical Oahu customer’s bill was due to the increase in the cost of oil. “With the ongoing impact of high oil prices on customer bills, our utilities’ rate of renewable integration remains a critical priority to help stabilize customer bills,” Lau added.

According to the Form 10-Q HEI filed with the U.S. Securities and Exchange Commission on Aug. 3, the HECO utilities are also working to integrate more renewable energy into their systems “from a variety of renewable energy sources, including solar, biomass, wind, ocean thermal energy conversion, wave and others.”

As well, “HECO plan[s] to integrate wind power into the Oahu electrical grid that would be imported via a yet-to-be-built undersea transmission cable system from a wind farm proposed to be built on the island of Lanai,” according to the 10-Q.

In addition, Lau said the company expects to launch a procurement process to obtain up to 200 MWs of energy from renewable energy developers for Oahu.

Regulatory milestone reached

During 2Q12, Lau said the Hawaiian Public Utilities Commission rendered over 50 decisions that affected HEI’s utilities, including the 2011 Oahu final decision and order, and Maui County’s 2012 interim decision and order, which fully decoupled the three utilities.

Going forward, each will go in for a rate case once every three years, Lau said, although the new regulatory model provides the utilities with annual revenue balancing account adjustments and rate adjustment mechanism adjustments between rate cases.