Hawaiian Electric Industries Inc. pegged losses from estimated accrual of liabilities stemming from one of the worst wildfires in US history at $1.7 billion and issued a going-concern warning.
Hawaiian Electric said last week that it had agreed to pay almost $2 billion as part of a $4 billion settlement to resolve hundreds of lawsuits over wildfires in Maui that killed dozens of people and destroyed the historic town of Lahaina last year.
The utility owner is the latest to be stung by huge financial losses resulting from wildfires caused by their equipment, raising investor concerns about the financial viability of electric companies operating in high fire risk areas. PG&E Corp. sought bankruptcy protection in 2019 after its power lines caused devastating wildfires in California and Berkshire Hathaway Inc.’s PacifiCorp has been saddled with hundreds of millions in liability costs tied to wildfires in Oregon in 2020.
Hawaiian Electric executives on an earnings call late Friday said payments from fire claims will come in four equal installments, with the first made no earlier than mid-2025. The company said it is required to disclose a going concern risk in its financial statements until it can develop a plan to pay for the settlement obligations.
Hawaiian Electric intends to finance the settlement though a mix of debt, common equity, equity-linked securities or other potential options, Chief Financial Officer Scott De Ghetto said during the call. The utility doesn’t intend to raise customer bills to pay for the expenses, Chief Executive Officer Scott Seu said.
“We feel that this settlement agreement represents significant progress,” Seu said. “It’s a very large accomplishment as it brings certainty and creates a path forward for us.”
The fires damaged or destroyed about 2,200 structures, the majority of them homes, and killed 102 people. The capital cost of the disaster was estimated at $5.5 billion, according to a damage assessment released last year. No official cause of the fire has been determined.
Hawaiian Electric’s shares fell 1% in late trading Friday following the release of second-quarter earnings.
Top photo: Employees of the Hawaiian Electric restore electric poles in the aftermath of the Maui wildfires in Lahaina, Hawaii in Aug. 2023. Photographer: Yuki Iwamura/AFP/Getty Images.
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