Hawaiian Electric Industries, Inc.
Business Overview: Hawaiian Electric Industries, Inc. (NYSE: HE)
Executive Summary
Hawaiian Electric Industries, Inc. (HEI) is a Honolulu-based holding company whose principal asset is Hawaiian Electric Company, Inc., the regulated electric utility that, together with its subsidiaries Hawaii Electric Light Company and Maui Electric Company, serves roughly 95% of Hawaii's population across five separate, non-interconnected island grids (Oahu, Hawaii Island, Maui, Lanai, and Molokai). Because the grids cannot share power with each other or with any mainland grid, each must carry higher reserve margins than a typical mainland utility — a structural feature of operating a utility on a chain of islands rather than a continental grid.
HEI matters for two very different reasons today. First, it is effectively Hawaii's only vertically integrated electric utility of scale, a textbook regulated-monopoly franchise. Second, it is the company at the center of the August 2023 Lahaina and Upcountry Maui wildfires, one of the deadliest wildfire disasters in modern U.S. history, which has pushed HEI into multibillion-dollar tort settlement obligations, a strategic divestment of its non-utility businesses (including its 90.1% sale of American Savings Bank in December 2024), and a sustained focus on wildfire mitigation and balance-sheet repair.
HEI has one reportable segment, Electric utility, which generated roughly 99% of 2025 consolidated revenue and about 137% of consolidated income from continuing operations (non-utility corporate costs are a net drag, grouped in "All Other").
1. Core Business Model & How They Work
HEI's model is the classic regulated-utility flow: generate or buy power, deliver it over a franchise grid, and earn a regulator-approved return on the capital invested to do so.
Fuel oil, purchased ➡️ Generation (owned ➡️ Transmission & ➡️ Billed revenue
power (Kalaeloa, steam/combustion distribution over (rates set via
HPOWER waste-to- turbines, diesel, 5 separate island PUC-approved
energy, PGV one combined-cycle grids) performance-based
geothermal) unit) + firm PPAs regulation)The Public Utilities Commission of the State of Hawaii (PUC) sets rates under a Performance-Based Regulation (PBR) framework adopted in 2020: a five-year multi-year rate plan, an annual revenue adjustment, a revenue-decoupling balancing account, and performance incentive mechanisms, with an authorized return on average common equity of 9.5% (plus/minus a 300-basis-point dead band) under the Earnings Sharing Mechanism. Fuel and purchased-power costs flow through separate rate clauses rather than sitting in HEI's margin directly.
2. Business Structure
Hawaiian Electric Industries, Inc. (HEI)
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------------------------------------------------
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Electric Utility (~99% of revenue) "All Other"
| (corporate + legacy
---------------------------- non-utility wind-down)
| | | |
Hawaiian Hawaii Electric Maui Electric Pacific Current, LLC
Electric Light Co. Company (clean-energy investor;
Co. (Oahu) (Hawaii Island) (Maui, Lanai, divesting remaining assets —
~$2.14B of Hamakua Holdings sold
utility revenue Molokai) 3/2025; solar/storage
assets sold 8/2025)
|
American Savings Bank
(90.1% sold Dec. 2024;
HEI retains ~9.9%,
no longer consolidated)HEI is deliberately shrinking down to a pure-play regulated utility. The divestitures of Pacific Current's remaining clean-energy assets and the sale of its controlling stake in American Savings Bank both reflect a strategic decision to simplify the balance sheet and free up capital and management focus for wildfire-settlement funding and utility operations.
3. Key Operating Assets
| Asset / Program | Category | What It Does | Why It Matters |
|---|---|---|---|
| Five island grids (Oahu, Hawaii, Maui, Lanai, Molokai) | Core infrastructure | Independent, non-interconnected transmission & distribution systems delivering ~$3.02B of 2025 electric sales revenue to ~474,000 customer accounts. | The isolation that makes Hawaii expensive to serve is also what makes the franchise nearly impossible for a rival to replicate — there is no realistic second grid to build. |
| ~1,977 MW net generating & firm purchased capability | Generation | Oil-fired steam units, combustion turbines, diesel engines, one combined-cycle unit, plus firm PPAs, against ~1,447 MW net peak demand. | A still fuel-oil-heavy generation mix (about 73% of 2026-expected net energy) leaves HEI exposed to imported-fuel cost swings that get passed through to customers via rate clauses. |
| Firm capacity PPAs (Kalaeloa 208 MW, HPOWER waste-to-energy 68.5 MW, PGV geothermal 34.6 MW) | Contracted supply | Long-term purchased power that supplements owned generation without requiring HEI to fund the capital itself. | Diversifies generation away from pure oil-fired steam, but also means HEI depends on counterparty performance for a meaningful slice of capacity. |
| Renewable Portfolio Standard compliance (36.8% in 2025 vs. 40% required by 2030) | Regulatory program | Tracks progress toward Hawaii's statutory clean-energy mandates. | Falling behind the 2030 RPS target, and behind its own 2030 carbon-reduction goal (about 25% achieved vs. a 70% target, down from 27% in 2024), creates regulatory and reputational risk layered on top of the wildfire liability. |
| Customer-sited (behind-the-meter) solar — ~1,857 GWh generated in 2025 | Distributed energy | Rooftop solar owned by customers, not HEI. | Represents a structural, slow-moving competitive substitute to utility-delivered electricity even though HEI itself retains the monopoly grid. |
4. Competitive Landscape
Hawaiian Electric does not compete for customers the way an unregulated business does — it holds an effective franchise monopoly across its five island grids, and the PUC, not a market, decides most of its economics. The company's own 10-K points readers to its MD&A rather than a competition section in Item 1, which itself signals how limited direct competition is. The more useful framing is the slow-moving competitive and risk substitutes HEI actually faces:
- Customer-sited (behind-the-meter) solar and storage — the single largest real substitute for utility-delivered power, growing steadily (1,857 GWh in 2025) and structurally eroding utility sales volume over time even without challenging HEI's grid monopoly.
- Fuel-oil dependence versus renewables — Hawaii's electricity is among the most expensive in the U.S. because the Utilities still rely heavily on imported fuel oil; this is less a competitor than a persistent cost and policy pressure pushing customers toward self-generation.
- Peer mainland and island utilities facing wildfire liability (most visibly PG&E Corporation after California's 2017–2018 wildfires) — not a market competitor, but the most relevant comparison for how HEI's wildfire settlement, credit profile, and capital-raising needs are likely to evolve.
High regulatory/franchise protection
|
HAWAIIAN ELECTRIC
(five-island regulated monopoly grid,
near-zero direct competition for
grid-delivered power)
|
Low customer substitution -----+----- High customer substitution
(grid is the only practical (behind-the-meter solar
option today) + storage, growing
steadily each year)
|
Low regulatory/franchise protection5. Strategic Strengths & Risks
Strengths
- Structural natural monopoly: Five separate, non-interconnected island grids serving ~95% of Hawaii's population are, as a practical matter, un-duplicable — no competitor is going to build a second grid to Oahu or Maui.
- Regulatory revenue protection: The PBR framework's revenue-decoupling balancing account and annual revenue adjustment insulate HEI's revenue from pure sales-volume swings (e.g., from efficiency gains or rooftop solar adoption) in a way an unregulated company doesn't get.
- Portfolio simplification underway: Divesting Pacific Current's remaining assets and selling down American Savings Bank concentrates HEI on its core, rate-regulated utility business and frees capital for wildfire-settlement funding.
Risks
- Maui wildfire liability: The August 2023 Lahaina and Upcountry wildfires produced tort settlement agreements under which HEI is a major contributor (reported publicly at roughly $2 billion of a multibillion-dollar aggregate settlement), funded in part through a special-purpose vehicle (GLST1, LLC, in which HEI holds a 40% interest) handling settlement installment payments. The 10-K's own forward-looking disclosures flag the possibility of liabilities above the settled amounts, added regulatory penalties, and the need to raise further capital — with language raising the possibility of going-concern doubt.
- Fossil-fuel and fuel-cost exposure: Roughly 73% of expected 2026 net energy still comes from fuel oil, an imported, price-volatile input, even as the company is behind on its own decarbonization timeline.
- Falling behind clean-energy targets: The 2030 carbon-reduction target (70% cut vs. 2005) sits at only ~25% achieved (down from 27% the prior year), and the 2025 Renewable Portfolio Standard of 36.8% trails the 2030 statutory requirement of 40% — both increase the odds of future regulatory or legislative pressure.
- Affiliate and regulatory complexity: The PUC must approve any change in control of HEI, and separate Affiliate Transaction Requirements currently restrict how utility and HEI corporate employees can be shared — HEI is actively asking the PUC to relax these, with a decision pending as of early 2026.
- Reduced diversification: With American Savings Bank largely divested and Pacific Current winding down, HEI's earnings are now almost entirely tied to a single regulated-utility business operating in a wildfire-exposed, fuel-import-dependent island environment.
6. Financial Overview
| Metric | FY2025 | Strategic Context |
|---|---|---|
| Electric sales revenue | ~$3.02B across ~474,000 customer accounts | Nearly all of HEI's consolidated revenue now comes from the regulated utility following the ASB and Pacific Current divestitures. |
| Utility share of consolidated income | ~137% of consolidated income from continuing operations | Non-utility "All Other" corporate costs are a net drag, underscoring why HEI is simplifying down to a utility pure-play. |
| Net generating capacity vs. peak demand | ~1,977 MW capability vs. ~1,447 MW peak demand | A meaningful reserve margin, required because the five grids cannot share power with each other if one has an outage or shortfall. |
| Renewable Portfolio Standard | 36.8% (2025) vs. 40% required by 2030 | A regulatory metric directly tied to future compliance costs and legislative risk if the gap doesn't close. |
| Federal government customer exposure | ~11% of 2025 operating revenue | A concentrated, but generally low-credit-risk, customer category (military/federal installations across the islands). |
| Employees | 2,675 total (2,622 at the Utilities) | About half the utility workforce is under an IBEW Local 1260 contract running through October 2027, a near-term labor-cost and negotiation variable. |
7. Summary Conclusion
Hawaiian Electric Industries is, at its core, one of the cleanest examples of a structural natural-monopoly utility in the U.S. market — five island grids that are, practically speaking, un-competable — wrapped around a genuinely severe, self-inflicted tail risk: its role in the 2023 Maui wildfires and the multibillion-dollar settlement obligations that followed. Management's response has been to simplify the company down to its regulated-utility core, selling its bank stake and winding down its non-utility clean-energy investments to concentrate capital on utility operations and wildfire-settlement funding. The business model's durability is not in question; what remains genuinely uncertain is whether the settlement and regulatory costs from the wildfires, layered onto a fuel-oil-dependent generation fleet that is falling behind its own decarbonization targets, can be absorbed without further credit, equity, or rate pressure on a company whose core franchise is otherwise about as defensible as a utility's gets.