DEF 14A: Hawaiian Electric Industries Faces Shareholder Vote on Executive Pay and Governance Amid Maui Wildfire Recovery

Hawaiian Electric Industries (HEI) is holding its annual shareholder meeting to address key proposals, including executive compensation and board structure, following the devastating Maui wildfires.

Summary

• Hawaiian Electric Industries (HEI) is convening its 2024 Annual Meeting of Shareholders, marking its first such meeting since the 2023 Maui wildfires.
• Shareholders will vote on the election of seven directors, an advisory vote on executive compensation, approval of the HEI Equity and Incentive Plan, and ratification of the appointment of Deloitte & Touche LLP as the independent auditor.
• The HEI Board emphasizes its commitment to supporting Maui's recovery and ensuring the company's long-term financial strength.
• The company's major operating companies, Hawaiian Electric and American Savings Bank, are playing essential roles in the state's recovery efforts.
• Hawaiian Electric is advancing its Wildfire Safety Strategy and implementing a $190 million resilience program to strengthen the grid.
• The utility generated 33% of its electricity from renewable resources in 2023, with plans to achieve net-zero carbon emissions from power generation by 2045 or sooner.
• American Savings Bank has provided loan accommodations and other services to support impacted customers and has maintained a strong liquidity and capital position.
• HEI's 2023 net income was $199.2 million, with earnings per share of $1.81.
• The Board recommends shareholders vote FOR all proposals.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While it highlights the company's efforts to support Maui's recovery and transition to renewable energy, it also acknowledges financial challenges and the impact of the wildfires. The negative TSR and delayed emissions goals temper the positive aspects.

Positives

• HEI is actively supporting Maui's recovery through financial commitments and infrastructure rebuilding.
• Hawaiian Electric is making progress in renewable energy generation and grid resilience.
• American Savings Bank has maintained a strong financial position and is supporting customers affected by the wildfires.
• The company's governance highlights include an independent Board Chair and diverse board membership.
• The executive compensation program is designed to incentivize value creation for customers, employees, communities, and shareholders.

Negatives

• HEI suspended its quarterly dividend, impacting community members who rely on it as a source of income.
• The utility now expects to reach its interim goal of 70% reduction in GHG emissions from power generation later than its original 2030 target date.
• HEI's 2023 net income decreased compared to 2022 ($241M) and 2021 ($246M).
• HEI's Total Shareholder Return was negative in 2023 (-64.6)%, 3-year (-55.2)%, 5-year (-53.8)%, and 10-year (-20.6)%

Risks

• Hawaii faces a unique and growing range of risks from extreme weather, including wildfires, hurricanes, floods, and storm surges.
• The company faces operational, climate, regulatory, legal, credit, interest rate, competitive, liquidity, capital, cybersecurity, strategic, and reputational risks.
• The company's financial challenges may impact its ability to reinvest in operating companies and support dividends to shareholders.

Future Outlook

The company intends to continue supporting Maui's recovery, strengthening its utility grids, and increasing its reliance on renewable energy sources.

Management Comments

• Our teams continue to dedicate themselves to support Maui in recovery and rebuilding, deliver the energy and financial services that empower our state, and ensure our companies have the financial strength to serve our customers and communities for the long term Scott W.H. Seu, President and Chief Executive Officer
• The Boards of Directors of HEI and our operating companies are committed to providing strong oversight as we work in partnership with others to support our communities in building a brighter future for Hawaii HEI Board of Directors

Industry Context

The announcement reflects the increasing focus on climate risk management and renewable energy transition within the utility industry, particularly in regions vulnerable to extreme weather events.

Comparison to Industry Standards

• HEI's renewable energy generation of 33% in 2023 is comparable to other utilities with aggressive renewable energy goals, such as Portland General Electric, which has been recognized for its renewable power sales.
• The $190 million grid resilience program is similar to investments being made by other utilities like Edison International to modernize their infrastructure and mitigate wildfire risks.
• HEI's executive compensation program, with its emphasis on performance-based pay and long-term incentives, aligns with best practices in the utility industry, as demonstrated by peer companies in the Edison Electric Institute (EEI) Index.

Related Party Transactions

• ASB has made loans and extensions of credit to directors and executive officers, members of their immediate families and affiliated entities in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and which did not involve more than the normal risk of collectability or present other unfavorable features.

Stakeholder Impact

• Shareholders are impacted by the suspension of the quarterly dividend and the company's financial performance.
• Employees are affected by the company's compensation policies and the focus on safety and human capital management.
• Customers in Maui are impacted by the company's recovery efforts and grid resilience program.
• Communities across Hawaii are impacted by the company's commitment to renewable energy and environmental sustainability.

Next Steps

• Shareholders will vote on the proposals at the Annual Meeting on May 13, 2024.
• Hawaiian Electric will continue to implement its Wildfire Safety Strategy and grid resilience program.
• The utility will continue contract negotiations for its Stage 3 RFP.

Key Dates

Keywords

Hawaiian Electric Industries, HEI, Maui wildfires, Annual Meeting, Executive compensation, Board of Directors, Renewable energy, Grid resilience, American Savings Bank, Financial performance, Corporate governance