A cleaner utility, still paying for wildfire
- HEI is now mostly a regulated electric utility after selling its bank and nearly all Pacific Current assets.
- The utility supplies power across five island grids and serves about 95% of Hawaii's population.
- The first $479 million wildfire settlement payment is done, but $1.3 billion remains to fund.
- The company filed for a $170 million base rate increase phased over two years.
- High oil prices are expected to cause the maximum FCRS penalty in 2026, which hurts near-term earnings.
- The common dividend is suspended for the foreseeable future while the company preserves cash.
Less legal fog, more funding risk
HEI has moved from a survival story to a hard financing story. The last insurer appeal tied to the wildfire tort settlement was withdrawn in April 2026. HEI then made the first $479 million payment. The remaining liability was remeasured down to $1.3 billion, leaving a smaller but still massive future payment plan to finance.
The bull case is that HEI can raise that capital without crushing common shareholders. Credit news is moving the right way, including an S&P upgrade to BB- in July 2026. The company is also seeking a $170 million base rate increase to improve earnings and plans to use securitization for wildfire mitigation costs, removing some pressure from ratepayers.
The bear case is that the next financing is too expensive or too dilutive. The dividend is suspended for the foreseeable future, so income investors have little reason to rush back. High fuel costs also matter because HEI expects the maximum penalty under its fuel cost risk sharing mechanism in 2026. That mechanism makes the utility absorb some fuel cost pain instead of passing all of it to customers.
The next year is about three main decisions: how HEI funds the next settlement payment, whether the PUC approves the $170 million base rate increase by April 2027, and how smoothly the new securitization process works.
A utility tied to island costs
HEI is a holding company. Its main business is Hawaiian Electric, a regulated utility that generates, buys, transmits, and delivers electricity. The utility serves about 95% of Hawaii's population across five separate island grids.
Regulated utilities earn money by investing in power plants, wires, and grid equipment, then asking the regulator to let them recover those costs from customer bills with a fair return. That makes earnings steadier than many businesses, but it also means the PUC controls the pace of recovery.
HEI is simplifying. It sold its banking business in late 2024. It also sold nearly all of Pacific Current's non-regulated clean energy and infrastructure investments during 2025. The goal is to become a cleaner electric utility holding company, not a mix of a bank, utility, and side investments.
The weak point is cash. HEI depends on dividends from utility subsidiaries, and those dividends can face regulatory limits. At the same time, the company needs capital for wildfire settlement payments, grid hardening, renewable energy, and ongoing projects.
Power, wires, and the transition
Electric generation
Hawaiian Electric generates electricity for island customers. The Waiau repowering project is a major example of the spending needed to keep the system reliable.
Purchased power
The utility also buys power from other producers. That helps supply the grid, but fuel and contract costs still affect customer bills and earnings rules.
Transmission and distribution
Wires, substations, and local delivery networks are the core regulated assets. They are essential, but they need heavy maintenance across separate island grids.
Grid modernization
HEI must spend on grid upgrades, wildfire mitigation, and resilience. These projects can grow the rate base if regulators allow timely cost recovery.
Renewable energy transition
Hawaii has a state goal of 100% renewable energy by 2045. That creates a long runway for investment, but it also raises affordability and execution risk.
Pacific Current wind-down
Pacific Current is now small and being wound down. HEI sold nearly all of its investments in 2025, with one remaining operating subsidiary in the process of being sold.
Almost all electric utility
The mix is based on 2025 continuing operations. Electric Utility accounted for about 99% of consolidated revenue from continuing operations, while All Other is mainly corporate costs and the Pacific Current wind-down.
What could still break
Settlement financing costs too much
High impact · Medium oddsHEI paid the first $479 million wildfire settlement installment, but about $1.3 billion remains. Management expects to raise more capital, but the final mix of debt, equity, or equity-linked securities is still unknown. If the deal is too costly, existing shareholders may carry much of the burden.
Rate rebasing is cut back
High impact · Medium oddsHEI filed a proposal for a $170 million base rate increase phased over 2027 and 2028. The PUC may be cautious because customers are already facing high energy costs. If the increase is reduced or delayed, earnings recovery would be weaker.
Fuel prices hit earnings and customers
Medium impact · High oddsManagement expects the maximum FCRS penalty in 2026 because oil prices are high. FCRS is a fuel cost sharing rule, so the utility can lose earnings when fuel costs move sharply against it. Higher bills also make it harder for regulators to approve new rate increases.
Wildfire and grid hardening spend outruns recovery
High impact · Medium oddsHawaii's wildfire risk did not disappear after the settlement. HEI needs to spend on mitigation, inspections, and grid hardening. The company plans to use Act 258 securitization for these costs, but delays or friction in that process could pressure cash flows.
Dividend investors stay away
Medium impact · High oddsHEI has suspended its common dividend for the foreseeable future. That is sensible while cash is needed for settlement payments and investment, but it changes the stock's buyer base. A long suspension can keep the valuation lower than a normal regulated utility.
In one breath
Is Hawaiian Electric still a bank and utility company?
No. HEI sold American Savings Bank in late 2024. It is now mainly a regulated electric utility holding company, with Pacific Current assets being wound down.
Has HEI finished paying the Maui wildfire settlement?
No. The first $479 million payment was made after insurer appeals were withdrawn. About $1.3 billion remains to be financed through later installments.
Why is the dividend suspended?
The company is preserving cash for wildfire settlement payments and utility investment. Management has said the common dividend is suspended for the foreseeable future.
What is the main upside case for HE stock?
The upside case is that HEI funds the settlement on acceptable terms and gets fair regulatory recovery for major projects. If that happens, investors may value it more like a focused regulated utility again.
