Hawaiian Electric Co. has asked state regulators to allow the utility to defer some $22 million in costs related to the Covid-19 pandemic, including the expenses related to uncollectible electric bills from customers suffering economic loss from the coronavirus, part of the company’s plan to free up liquidity for the remainder of this year.
Constance Lau, president and CEO of parent Hawaiian Electric Industries (NYSE: HE), told analysts during a first-quarter-earnings call on Tuesday that the state’s stay-at-home order implemented in late March has had a direct impact in the amount of electricity customers consumed, which is impacting HECO’s balance sheet.
The Hawaiian Electric subsidiary reported first-quarter income of $23.9 million, compared to $32.1 million for the same quarter in 2019. Parent HEI reported net income for the first quarter of $33.4 million, or 31 cents per diluted share, compared to net income of $45.7 million, or 42 cents per diluted share, for the same quarter in 2019.
“During this COVID period, we do expect higher bad-debt expense and lower kilowatt-hour sales, and indeed in the last week of March, we saw lower loads — 7% lower on Oahu and Hawaii Island and 14% lower on Maui,” Lau told analysts.
HECO’s application for approval to defer the Covid-related expenses was filed with the PUC on April 22 and asked for a decision by June 30.
The application said Hawaiian Electric expects to “incur significant costs in [its] response to the public health emergency, including bad debt expense resulting from higher-than-average levels of write-offs of uncollectible accounts association with the suspension of disconnects and non-collection of late-payment fees to assist customers facing extreme economic pressures.”
HECO said it also expects “to incur increased financing costs, sequestration costs for mission-critical employees, increased sanitation and decontamination costs and other costs that cannot currently be reasonably estimated or predicted given the extraordinary nature of this event.”
Meanwhile, an interim decision order from the Hawaii Public Utilities Commission on the utility’s rate increase request of $77.5 million, or about 4.12%, that was filed in August was also pushed back to October from July, Constance Lau, president and CEO parent Hawaiian Electric Industries (NYSE: HE), told analysts during a first-quarter-earnings call on Tuesday.
“However, we recognize how difficult the current economic environment is for customers,” Gregory Hazleton, HEI’s chief financial officer, told analysts. “And we recognize that we did not receive an increase in the Hawaii Electric Light interim last year. And that some of our peers are now are not being granted increases by the regulators.
“We're tightening our belts, like everyone in our community, to find expenses to offset and expense offsets for any future for any lower revenue increase while maintaining our utility earnings outlook,” he said.
Hazleton also told analysts that Hawaiian Electric has added credit capacity of $75 million through a new revolver “and launched and priced $160 million private placement, $95 million of which was used to free up credit capacity on its revolver. The private placement also included a $50 million green-bond portion.”
HECO is also refinancing a 364-day term loan to extend the “maturity into 2021, freeing up liquidity in 2020, when the customer challenges due to Covid will likely have the most impact,” Hazleton said. “With these transactions, we will have increased liquidity at the utility by over three times.”
Lau also noted in her comments that the PUC asked for a management audit to be conducted by an outside consultant.
“That's been a constructive process, and the audit report is still expected in May,” Lau said.
HEI held a virtual annual meeting later Tuesday, at which Chairman Jeff Watanabe was set to retire.