On Thursday, Evercore ISI maintained an In Line rating and a $9.00 stock price target for Hawaiian Electric (NYSE:HE), following the release of the Maui Fire Department's report on a recent wildfire. The report, which included findings from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), concluded that the initial blaze, referred to as the Morning Fire, was caused by a live powerline making contact with the ground. The subsequent and more destructive Afternoon Fire was identified as a rekindling of the Morning Fire.
The ATF report, which Evercore ISI focused on due to some discrepancies with the fire department's account, outlined two potential causes for the Afternoon Fire. It may have been sparked by a firebrand carried by strong winds or by burning debris moved during the creation of a firebreak in the haste to contain the Morning Fire. Both fires were classified as accidental by the ATF.
Despite these findings, Evercore ISI believes the report will not impact Hawaiian Electric's current settlement obligations. The utility company is responsible for approximately $2 billion, which is about half of the total settlement amount. This allocation reflects Hawaiian Electric's role in starting the Morning Fire, while the Afternoon Fire's devastation is attributed to inadequate preparation and response by multiple parties, as indicated in the Attorney General's reports.
The ATF's detailed analysis summarized its conclusions for the Morning Fire on page 65 of its report and for the Afternoon Fire on page 101. The investigation into the fires has been a point of scrutiny, with Hawaiian Electric's financial responsibility in the settlement being a significant concern for investors and analysts monitoring the company's stock.
In other recent news, Hawaiian Electric Industries (NYSE:HE) has successfully raised approximately $558 million from a stock offering, which is set to contribute towards a potential settlement in the Maui wildfire litigation and for general corporate purposes. The company is preparing to make its first settlement payment of roughly $478 million, a part of a larger $1.91 billion obligation, due mid-2025. The settlement is still under negotiation, with a final agreement yet to be signed.
Hawaiian Electric also announced a $500 million common stock offering, with additional options for underwriters to purchase $75 million more. Wells Fargo (NYSE:WFC) Securities and Barclays (LON:BARC) Capital are serving as the joint lead book-running managers, with Guggenheim Securities also participating in the offering.
The company has agreed to pay approximately $1.99 billion as part of a legal settlement related to the Maui wildfires, despite not admitting any legal liability. Payments are expected to commence from mid-2025, pending judicial review and approval. Hawaiian Electric reported a second-quarter net loss of $1.30 billion, largely due to a wildfire-related charge of $1.71 billion.
InvestingPro Insights
Recent InvestingPro data provides additional context to Hawaiian Electric's current financial situation. The company's market capitalization stands at $1.52 billion, reflecting the market's valuation in light of recent events. With a high dividend yield of 15.57%, Hawaiian Electric continues to pay significant dividends to shareholders, maintaining a 53-year streak of consecutive dividend payments. This could be seen as a positive sign for income-focused investors, despite the company's current challenges.
However, InvestingPro Tips highlight some concerning factors. The company operates with a significant debt burden and may have trouble making interest payments. This is particularly relevant given the potential settlement obligations discussed in the article. Moreover, the stock has experienced high price volatility and has fallen significantly over the last five years, with a one-month price total return of -20.19%.
On a more positive note, analysts predict that Hawaiian Electric will be profitable this year, which could provide some relief to investors concerned about the company's financial health. For those interested in a deeper analysis, InvestingPro offers 11 additional tips for Hawaiian Electric, providing a more comprehensive view of the company's prospects.
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