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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 FORM 10-Q
 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
 OR
              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Exact Name of Registrant as Specified in Its CharterCommission File NumberI.R.S. Employer Identification No.
HAWAIIAN ELECTRIC INDUSTRIES, INC. 1-8503 99-0208097
and Principal Subsidiary
HAWAIIAN ELECTRIC COMPANY, INC. 1-4955 99-0040500
State of Hawaii
(State or other jurisdiction of incorporation or organization)
 
Hawaiian Electric Industries, Inc. – 1001 Bishop Street, Suite 2900, Honolulu, Hawaii  96813
Hawaiian Electric Company, Inc. – 1001 Bishop Street, Suite, 2500, Honolulu, Hawaii  96813
(Address of principal executive offices and zip code)
 
Hawaiian Electric Industries, Inc. – (808) 543-5662
Hawaiian Electric Company, Inc. – (808) 543-7771
(Registrant’s telephone number, including area code) 
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Hawaiian Electric Industries, Inc. Common Stock, Without Par ValueHENew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Hawaiian Electric Industries, Inc.YesNo Hawaiian Electric Company, Inc. YesNo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Hawaiian Electric Industries, Inc.YesNo Hawaiian Electric Company, Inc.YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
Hawaiian Electric Industries, Inc.: Hawaiian Electric Company, Inc.:
Large accelerated filerSmaller reporting companyLarge accelerated filerSmaller reporting company
Accelerated filerEmerging growth companyAccelerated filerEmerging growth company
Non-accelerated filerNon-accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Hawaiian Electric Industries, Inc.Hawaiian Electric Company, Inc.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Hawaiian Electric Industries, Inc.YesNoHawaiian Electric Company, Inc.YesNo
Securities registered pursuant to 12(b) of the Act:
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
Class of Common Stock 
Outstanding July 25, 2022
Hawaiian Electric Industries, Inc. (Without Par Value) 109,469,093 Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value) 17,753,533 Shares (not publicly traded)
Hawaiian Electric Industries, Inc. (HEI) is the sole holder of Hawaiian Electric Company, Inc. (Hawaiian Electric) common stock.
This combined Form 10-Q is separately filed by HEI and Hawaiian Electric. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to the other registrant, except that information relating to Hawaiian Electric is also attributed to HEI.



Hawaiian Electric Industries, Inc. and Subsidiaries
Hawaiian Electric Company, Inc. and Subsidiaries
Form 10-Q—Quarter ended June 30, 2022
 
TABLE OF CONTENTS
 
Page No. 
  
 
  
 
three and six months ended June 30, 2022 and 2021
 
three and six months ended June 30, 2022 and 2021
 
 
three and six months ended June 30, 2022 and 2021
 
six months ended June 30, 2022 and 2021
  
 
three and six months ended June 30, 2022 and 2021
 
three and six months ended June 30, 2022 and 2021
 
 
three and six months ended June 30, 2022 and 2021
 
six months ended June 30, 2022 and 2021
 
 
 
 
  
 
 
i


Hawaiian Electric Industries, Inc. and Subsidiaries
Hawaiian Electric Company, Inc. and Subsidiaries
Form 10-Q—Quarter ended June 30, 2022
GLOSSARY OF TERMS
Terms Definitions
ACLAllowance for credit losses, which is the current credit loss standard, requires recording the allowance based on the expected loss model
AES HawaiiAES Hawaii, Inc.
AOCIAccumulated other comprehensive income/(loss)
ARAAnnual revenue adjustment
ASBAmerican Savings Bank, F.S.B., a wholly owned subsidiary of ASB Hawaii, Inc.
ASB HawaiiASB Hawaii, Inc., a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.
ASUAccounting Standards Update
CARES ActThe Coronavirus Aid, Relief, and Economic Security Act enacted March 27, 2020
CBRECommunity-based renewable energy
CompanyHawaiian Electric Industries, Inc. and its direct and indirect subsidiaries, including, without limitation, Hawaiian Electric Company, Inc. and its subsidiaries (listed under Hawaiian Electric); ASB Hawaii, Inc. and its subsidiary, American Savings Bank, F.S.B. and Pacific Current, LLC and its subsidiaries (listed under Pacific Current). The Old Oahu Tug Service, Inc. was dissolved in March 2022.
Consumer AdvocateDivision of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
CSSMCollective Shared Savings Mechanism
D&ODecision and order from the PUC
DERDistributed energy resources
DRIPHEI Dividend Reinvestment and Stock Purchase Plan
ECRCEnergy cost recovery clause
EIP2010 Equity and Incentive Plan, as amended and restated
EPAEnvironmental Protection Agency — federal
EPRMExceptional Project Recovery Mechanism
EPSEarnings per share
ESMEarnings Sharing Mechanism
EVEEconomic value of equity
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
federalU.S. Government
FHLBFederal Home Loan Bank
FHLMCFederal Home Loan Mortgage Corporation
FitchFitch Ratings, Inc.
FNMAFederal National Mortgage Association
FRBFederal Reserve Board
GAAPAccounting principles generally accepted in the United States of America
GHGGreenhouse gas
GNMAGovernment National Mortgage Association
GSPAGrid Services Purchase Agreement
Hamakua EnergyHamakua Energy, LLC, an indirect subsidiary of Pacific Current
Hawaii Electric LightHawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.
ii

GLOSSARY OF TERMS, continued
Terms Definitions
Hawaiian ElectricHawaiian Electric Company, Inc., an electric utility subsidiary of Hawaiian Electric Industries, Inc. and parent company of Hawaii Electric Light Company, Inc., Maui Electric Company, Limited and Renewable Hawaii, Inc.
HEIHawaiian Electric Industries, Inc., direct parent company of Hawaiian Electric Company, Inc., ASB Hawaii, Inc. and Pacific Current, LLC. The Old Oahu Tug Service, Inc. was dissolved in March 2022.
HEIRSPHawaiian Electric Industries Retirement Savings Plan
HELOCHome equity line of credit
HPOWERCity and County of Honolulu with respect to a power purchase agreement for a refuse-fired plant
IPPIndependent power producer
IRLCsInterest rate lock commitments
KalaeloaKalaeloa Partners, L.P.
kWhKilowatthour/s (as applicable)
LMILow-to-moderate income
LTIPLong-term incentive plan
Maui ElectricMaui Electric Company, Limited, an electric utility subsidiary of Hawaiian Electric Company, Inc.
MauoMauo, LLC, a subsidiary of Pacific Current
MPIRMajor Project Interim Recovery
MRPMulti-year rate period
MSRsMortgage servicing rights
MWMegawatt/s (as applicable)
NIINet interest income
NPBCNet periodic benefit costs
NPPCNet periodic pension costs
O&MOther operation and maintenance
OCCOffice of the Comptroller of the Currency
OPEBPostretirement benefits other than pensions
Pacific Current
Pacific Current, LLC, a wholly owned subsidiary of HEI and parent company of Hamakua Holdings, LLC, Mauo, LLC, Alenuihaha Developments, LLC, Kaʻieʻie Waho Company, LLC, Kaʻaipuaʻa, LLC, Upena, LLC and Mahipapa, LLC
PBRPerformance-based regulation
PIMsPerformance incentive mechanisms
PPAPower purchase agreement
PPACPurchased power adjustment clause
PUCPublic Utilities Commission of the State of Hawaii
PVPhotovoltaic
RAMRevenue adjustment mechanism
RBARevenue balancing account
RFPRequest for proposals
ROACEReturn on average common equity
RORBReturn on rate base
RPSRenewable portfolio standards
SBASmall Business Administration
SECSecurities and Exchange Commission
SeeMeans the referenced material is incorporated by reference
TDRTroubled debt restructuring
UtilitiesHawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited
VIEsVariable interest entities
iii


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and other presentations made by Hawaiian Electric Industries, Inc. (HEI) and Hawaiian Electric Company, Inc. (Hawaiian Electric) and their subsidiaries contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions and usually include words such as “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries (collectively, the Company), the performance of the industries in which they do business and economic, political and market factors, among other things. These forward-looking statements are not guarantees of future performance and actual results and financial condition may differ materially from those indicated in the forward-looking statements.
Risks, uncertainties and other important factors that could cause actual results to differ materially from those described in forward-looking statements and from historical results include, but are not limited to, the following:
international, national and local economic and political conditions—including the state of the Hawaii tourism, defense and construction industries; the strength or weakness of the Hawaii and continental U.S. real estate markets (including the fair value and/or the actual performance of collateral underlying loans held by ASB, which could result in higher loan loss provisions and write-offs); decisions concerning the extent of the presence of the federal government and military in Hawaii; the implications and potential impacts of future Federal government shutdowns, including the impact to our customers’ ability to pay their electric bills and/or bank loans and the impact on the state of Hawaii economy; the implications and potential impacts of U.S. and foreign capital and credit market conditions and federal, state and international responses to those conditions; the potential impacts of global and local developments (including global economic conditions and uncertainties, unrest, terrorist acts, wars (such as the Russia-Ukraine war), conflicts, political protests, deadly virus epidemic or other crisis); the effects of changes that have or may occur in U.S. policy, such as with respect to immigration and trade; and pandemics;
the extent of the impact of the COVID-19 pandemic, including the duration, spread, severity and any recurrence of the COVID-19 pandemic due to new variants or insufficient vaccinations, the duration and scope of related government orders and restrictions, the impact on our employees, customers and suppliers, and the impact of the COVID-19 pandemic on the overall demand or ability to pay for the Company’s goods and services, all of which could be affected by the pace of distribution, administration, and efficacy of COVID-19 vaccines over the short- and long-term, as well as the proportion of the population vaccinated;
ability to adequately address risks and capitalize on opportunities related to our environmental, social and governance priority areas, which currently include decarbonization, economic health and affordability, reliability and resilience, secure digitalization, diversity, equity and inclusion, employee engagement, and climate-related risks and opportunities;
citizen activism, including civil unrest, especially in times of severe economic depression and social divisiveness, which could negatively impact customers and employees, impair the ability of the Company and the Utilities to operate and maintain their facilities in an effective and safe manner, and citizen or stakeholder activism that could delay the construction, increase project costs or preclude the completion, of third-party or Utility projects that are required to meet electricity demand, resilience and reliability objectives and renewable portfolio standards (RPS) and other climate-related goals;
the effects of future actions or inaction of the U.S. government or related agencies, including those related to the U.S. debt ceiling or budget funding, monetary policy, trade policy and tariffs, energy and environmental policy, and other policy and regulatory changes advanced or proposed by President Biden and his administration;
weather, natural disasters (e.g., hurricanes, earthquakes, tsunamis, lightning strikes, lava flows and the increasing effects of climate change, such as more severe storms, flooding, droughts, heat waves, and rising sea levels) and wildfires, including their impact on the resilience and reliability and cost of the Company’s and Utilities’ operations and the economy;
the timing, speed and extent of changes in interest rates and the shape of the yield curve, which could result in lower portfolio yields and net interest margin, or higher borrowing costs;
the ability of the Company and the Utilities to access the credit and capital markets (e.g., to obtain commercial paper and other short-term and long-term debt financing, including lines of credit, and, in the case of HEI, to issue common stock) under volatile and challenging market conditions, and the potential higher cost of such financings, if available;
the risks inherent in changes in the value of the Company’s pension and other retirement plan assets and ASB’s securities available for sale, and the risks inherent in changes in the value of the Company’s pension liabilities, including changes driven by interest rates and mortality improvements;
changes in laws, regulations (including tax regulations), market conditions, interest rates and other factors that result in changes in assumptions used to calculate retirement benefits costs and funding requirements;
increasing competition in the banking industry from traditional financial institutions as well as from non-traditional providers of financial services, including financial service subsidiaries of commercial and manufacturing companies (e.g., increased price competition for loans and deposits, or an outflow of deposits to alternative investments or platforms, which may have an adverse impact on ASB’s net interest margin and portfolio growth);
iv


the potential delay by the Public Utilities Commission of the State of Hawaii (PUC) in considering (and potential disapproval of actual or proposed) renewable energy proposals and related costs; reliance by the Utilities on outside parties such as the state, independent power producers (IPPs) and developers; supply-chain challenges; and uncertainties surrounding technologies, solar power, wind power, biofuels, environmental assessments required to meet RPS and other climate-related goals; the impacts of implementation of the renewable energy proposals on future costs of electricity and potential penalties imposed by the PUC for delays in the commercial operations of renewable energy projects;
the ability of the Utilities to develop, implement and recover the costs of implementing the Utilities’ action plans included in their updated Power Supply Improvement Plans, Demand Response Portfolio Plan, Distributed Generation Interconnection Plan, Grid Modernization Plans, and business model changes, which have been and are continuing to be developed and updated in response to the orders issued by the PUC, the PUC’s April 2014 statement of its inclinations on the future of Hawaii’s electric utilities and the vision, business strategies and regulatory policy changes required to align the Utilities’ business model with customer interests and the state’s public policy goals, and subsequent orders of the PUC;
the ability of the Utilities to recover undepreciated cost of fossil fuel generating units, if they are required to be retired before the end of their expected useful life;
capacity and supply constraints or difficulties, especially if generating units (utility-owned or IPP-owned) fail or measures such as demand-side management, distributed generation, combined heat and power or other firm capacity supply-side resources fall short of achieving their forecasted benefits or are otherwise insufficient to reduce or meet peak demand;
high and/or volatile fuel prices, which increases working capital requirements and customer bills, or delivery of adequate fuel by suppliers (including as a result of the Russia-Ukraine war), which could affect the reliability of utility operations, and the continued availability to the electric utilities of their energy cost recovery clauses (ECRCs);
the continued availability to the electric utilities or modifications of other cost recovery mechanisms, including the purchased power adjustment clauses (PPACs), annual revenue adjustment (ARA) and pension and postretirement benefits other than pensions (OPEB) tracking mechanisms, and the continued decoupling of revenues from sales to mitigate the effects of declining kilowatt-hour sales;
the ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by the ARA, while providing the customer dividend required by performance-based regulation (PBR);
the ability of the Utilities to achieve performance incentive goals currently in place;
the impact from the PUC’s implementation of PBR for the Utilities pursuant to Act 005, Session Laws 2018, including the potential addition of new performance incentive mechanisms (PIMs), third-party proposals adopted by the PUC in its implementation of PBR, and the implications of not achieving performance incentive goals;
the impact of fuel price levels and volatility on customer satisfaction and political and regulatory support for the Utilities;
unfavorable changes in economic conditions, such as sustained inflation, higher interest rates or recession, may negatively impact the ability of the Company’s customers to pay their utility bills or loan payments, reduce loan production, and increase operating costs of the Utilities or Bank that cannot be passed on to, or recovered, from customers;
the risks associated with increasing reliance on renewable energy, including the availability and cost of non-fossil fuel supplies for renewable energy generation and the operational impacts of adding intermittent sources of renewable energy to the electric grid;
the growing risk that energy production from renewable generating resources may be curtailed and the interconnection of additional resources will be constrained as more generating resources are added to the Utilities’ electric systems and as customers reduce their energy usage;
the ability of IPPs to deliver the firm capacity anticipated in their power purchase agreements (PPAs);
the potential that, as IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units to ensure the availability of their units;
the ability of the Utilities to negotiate, periodically, favorable agreements for significant resources such as fuel supply contracts and collective bargaining agreements and avoid or mitigate labor disputes and work stoppages;
new technological developments that could affect the operations and prospects of the Utilities and ASB or their competitors such as the commercial development of energy storage and microgrids and banking through alternative channels, including use of digital currencies, which could include a central bank digital currency;
cybersecurity risks and the potential for cyber incidents, including potential incidents at HEI, its third-party vendors, and its subsidiaries (including at ASB branches, electric utility plants and IPP-owned facilities) and incidents at data processing centers used, to the extent not prevented by intrusion detection and prevention systems, anti-virus software, firewalls and other general IT controls;
failure to achieve remaining cost savings commitment related to the management audit committed savings of $33 million over the 2021 to 2025 multi-year rate period (MRP);
federal, state, county and international governmental and regulatory actions, such as existing, new and changes in laws, rules and regulations applicable to HEI, the Utilities and ASB (including changes in taxation and tax rates, increases in capital requirements, regulatory policy changes, environmental laws and regulations (including resulting compliance costs and risks of fines and penalties and/or liabilities), the regulation of greenhouse gas emissions, governmental fees and assessments (such as
v


Federal Deposit Insurance Corporation assessments), and potential carbon pricing or “cap and trade” legislation that may fundamentally alter costs to produce electricity and accelerate the move to renewable generation);
developments in laws, regulations and policies governing protections for historic, archaeological and cultural sites, and plant and animal species and habitats, as well as developments in the implementation and enforcement of such laws, regulations and policies;
discovery of conditions that may be attributable to historical chemical releases, including any necessary investigation and remediation, and any associated enforcement, litigation or regulatory oversight;
decisions by the PUC in rate cases and other proceedings (including the risks of delays in the timing of decisions, adverse changes in final decisions from interim decisions and the disallowance of project costs as a result of adverse regulatory audit reports or otherwise);
decisions by the PUC and by other agencies and courts on land use, environmental and other permitting issues (such as required corrective actions, restrictions and penalties that may arise, such as with respect to environmental conditions or RPS);
potential enforcement actions by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC) and/or other governmental authorities (such as consent orders, required corrective actions, restrictions and penalties that may arise, for example, with respect to compliance deficiencies under existing or new banking and consumer protection laws and regulations or with respect to capital adequacy);
the risks associated with the geographic concentration of HEI’s businesses and ASB’s loans, ASB’s concentration in a single product type (i.e., first mortgages) and ASB’s significant credit relationships (i.e., concentrations of large loans and/or credit lines with certain customers);
changes in accounting principles applicable to HEI and its subsidiaries, including the adoption of new U.S. accounting standards, the potential discontinuance of regulatory accounting related to PBR or other regulatory changes, the effects of potentially required consolidation of variable interest entities (VIEs), or required finance lease or on-balance-sheet operating lease accounting for PPAs with IPPs;
downgrades by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and their impact on results of financing efforts;
faster than expected loan prepayments that can cause a decrease in net interest income and portfolio yields, an acceleration of the amortization of premiums on loans and investments and the impairment of mortgage-servicing assets of ASB;
changes in ASB’s loan portfolio credit profile and asset quality and/or mix, which may increase or decrease the required level of provision for credit losses, allowance for credit losses (ACL) and charge-offs;
changes in ASB’s deposit cost or mix which may have an adverse impact on ASB’s cost of funds;
unanticipated changes from the expected discontinuance of LIBOR and the transition to an alternative reference rate, which may include adverse impacts to the Company’s cost of capital, loan portfolio and interest income on loans;
the final outcome of tax positions taken by HEI and its subsidiaries;
the risks of suffering losses and incurring liabilities that are uninsured (e.g., damages to the Utilities’ transmission and distribution system and losses from business interruption) or underinsured (e.g., losses not covered as a result of insurance deductibles or other exclusions or exceeding policy limits), and the risks associated with the operation of transmission and distribution assets and power generation facilities, including public and employee safety issues, and assets causing or contributing to wildfires;
the ability of the Company’s non-regulated subsidiary, Pacific Current, LLC (Pacific Current), to achieve its performance and growth objectives, which in turn could affect its ability to service its non-recourse debt;
the Company’s reliance on third parties and the risk of their non-performance, which has increased due to the impact from the COVID-19 pandemic; and
other risks or uncertainties described elsewhere in this report and in other reports (e.g., “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K) previously and subsequently filed by HEI and/or Hawaiian Electric with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, ASB, Pacific Current and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether written or oral and whether as a result of new information, future events or otherwise.
vi


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
Three months ended June 30Six months ended June 30
(in thousands, except per share amounts)2022202120222021
Revenues    
Electric utility$818,873 $601,879 $1,527,665 $1,166,743 
Bank75,324 77,260 150,439 154,391 
Other1,410 1,118 2,571 2,069 
Total revenues895,607 680,257 1,680,675 1,323,203 
Expenses    
Electric utility747,719 534,195 1,382,916 1,029,945 
Bank53,401 37,454 98,486 79,289 
Other7,819 6,752 13,329 14,082 
Total expenses808,939 578,401 1,494,731 1,123,316 
Operating income (loss)    
Electric utility71,154 67,684 144,749 136,798 
Bank21,923 39,806 51,953 75,102 
Other(6,409)(5,634)(10,758)(12,013)
Total operating income86,668 101,856 185,944 199,887 
Retirement defined benefits credit—other than service costs1,246 1,216 2,489 3,651 
Interest expense, net—other than on deposit liabilities and other bank borrowings
(24,965)(23,317)(49,314)(47,053)
Allowance for borrowed funds used during construction798 812 1,576 1,559 
Allowance for equity funds used during construction2,470 2,377 4,879 4,568 
Gain on sales of investment securities, net and equity-method investment  8,123 528 
Income before income taxes66,217 82,944 153,697 163,140 
Income taxes13,203 18,599 31,043 33,964 
Net income53,014 64,345 122,654 129,176 
Preferred stock dividends of subsidiaries473 473 946 946 
Net income for common stock$52,541 $63,872 $121,708 $128,230 
Basic earnings per common share$0.48 $0.58 $1.11 $1.17 
Diluted earnings per common share$0.48 $0.58 $1.11 $1.17 
Weighted-average number of common shares outstanding109,432 109,282 109,397 109,252 
Net effect of potentially dilutive shares230 233 317 305 
Weighted-average shares assuming dilution109,662 109,515 109,714 109,557 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

1


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
 Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Net income for common stock$52,541 $63,872 $121,708 $128,230 
Other comprehensive income (loss), net of taxes:    
Net unrealized gains (losses) on available-for-sale investment securities:    
Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of taxes of $(32,529), $6,214, $(76,608) and $(10,402), respectively
(88,857)16,976 (209,264)(28,414)
Reclassification adjustment for net realized gains included in net income, net of taxes of nil, nil, nil and $(142), respectively
   (387)
Derivatives qualifying as cash flow hedges:    
Unrealized interest rate hedging gains (losses) arising during the period, net of taxes of $273, $(243), $1,319 and $299, respectively
786 (701)3,803 861 
Reclassification adjustment for net realized losses included in net income, net of taxes of $18, nil, $37 and nil, respectively
53  108  
Retirement benefit plans:    
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of taxes of $44, $2,086, $1,606 and $4,170, respectively
122 6,008 4,623 12,018 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $19, $(2,016), $(1,481) and $(4,031), respectively
56 (5,811)(4,269)(11,622)
Other comprehensive income (loss), net of taxes(87,840)16,472 (204,999)(27,544)
Comprehensive income (loss) attributable to Hawaiian Electric Industries, Inc.$(35,299)$80,344 $(83,291)$100,686 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

2


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited) 
(dollars in thousands)June 30, 2022December 31, 2021
Assets  
Cash and cash equivalents$159,672 $305,551 
Restricted cash5,386 5,911 
Accounts receivable and unbilled revenues, net457,470 344,213 
Available-for-sale investment securities, at fair value2,444,267 2,574,618 
Held-to-maturity investment securities, at amortized cost513,767 522,270 
Stock in Federal Home Loan Bank, at cost13,200 10,000 
Loans held for investment, net5,357,539 5,139,984 
Loans held for sale, at lower of cost or fair value3,738 10,404 
Property, plant and equipment, net of accumulated depreciation of $3,122,324 and $3,028,130 at June 30, 2022 and December 31, 2021, respectively
5,429,420 5,392,068 
Operating lease right-of-use assets120,600 122,416 
Regulatory assets530,900 565,543 
Other883,594 747,469 
Goodwill82,190 82,190 
Total assets$16,001,743 $15,822,637 
Liabilities and shareholders’ equity  
Liabilities  
Accounts payable$244,239 $205,544 
Interest and dividends payable20,661 19,889 
Deposit liabilities8,253,536 8,172,212 
Short-term borrowings—other than bank124,017 53,998 
Other bank borrowings241,610 88,305 
Long-term debt, net—other than bank2,374,500 2,321,937 
Deferred income taxes302,346 384,760 
Operating lease liabilities136,445 136,760 
Regulatory liabilities1,008,075 996,768 
Defined benefit pension and other postretirement benefit plans liability341,535 348,072 
Other686,982 669,215 
Total liabilities13,733,946 13,397,460 
Preferred stock of subsidiaries - not subject to mandatory redemption34,293 34,293 
Commitments and contingencies (Notes 3 and 4)
Shareholders’ equity  
Preferred stock, no par value, authorized 10,000,000 shares; issued: none
  
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 109,466,829 shares and 109,311,785 shares at June 30, 2022 and December 31, 2021, respectively
1,688,009 1,685,496 
Retained earnings803,027 757,921 
Accumulated other comprehensive loss, net of tax benefits(257,532)(52,533)
Total shareholders’ equity2,233,504 2,390,884 
Total liabilities and shareholders’ equity$16,001,743 $15,822,637 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

3


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 
 Common stockRetainedAccumulated
other
comprehensive
 
(in thousands)SharesAmountEarningsincome (loss)Total
Balance, December 31, 2021109,312 $1,685,496 $757,921 $(52,533)$2,390,884 
Net income for common stock— — 69,167 — 69,167 
Other comprehensive loss, net of tax benefits— — — (117,159)(117,159)
Share-based expenses and other, net119 (949)— — (949)
Common stock dividends (35¢ per share)
— — (38,301)— (38,301)
Balance, March 31, 2022109,431 1,684,547 788,787 (169,692)2,303,642 
Net income for common stock— — 52,541 — 52,541 
Other comprehensive loss, net of tax benefits— — — (87,840)(87,840)
Share-based expenses and other, net36 3,462 — — 3,462 
Common stock dividends (35¢ per share)
— — (38,301)— (38,301)
Balance, June 30, 2022109,467 $1,688,009 $803,027 $(257,532)$2,233,504 
Balance, December 31, 2020109,181 $1,678,368 $660,398 $(1,264)$2,337,502 
Net income for common stock— — 64,358 — 64,358 
Other comprehensive loss, net of tax benefits— — — (44,016)(44,016)
Share-based expenses and other, net100 605 — — 605 
Common stock dividends (34¢ per share)
— — (37,156)— (37,156)
Balance, March 31, 2021109,281 1,678,973 687,600 (45,280)2,321,293 
Net income for common stock— — 63,872 — 63,872 
Other comprehensive income, net of taxes— — — 16,472 16,472 
Share-based expenses and other, net30 2,847 — — 2,847 
Common stock dividends (34¢ per share)
— — (37,155)— (37,155)
Balance, June 30, 2021109,311 $1,681,820 $714,317 $(28,808)$2,367,329 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

4


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30
(in thousands)20222021
Cash flows from operating activities  
Net income$122,654 $129,176 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment126,112 122,921 
Other amortization19,134 17,896 
Provision for credit losses(506)(20,642)
Loans originated, held for sale(108,695)(239,761)
Proceeds from sale of loans, held for sale114,299 266,497 
Gain on sales of investment securities, net and equity-method investment(8,123)(528)
Gain on sale of loans, net(1,449)(6,225)
Deferred income taxes(14,683)(7,355)
Share-based compensation expense5,593 5,454 
Allowance for equity funds used during construction(4,879)(4,568)
Other(3,858)(5,037)
Changes in assets and liabilities  
Increase in accounts receivable and unbilled revenues, net(101,641)(41,884)
Increase in fuel oil stock(119,890)(43,681)
Decrease (increase) in regulatory assets12,956 (17,731)
Increase in regulatory liabilities11,288 5,824 
Increase in accounts, interest and dividends payable62,115 2,683 
Change in prepaid and accrued income taxes, tax credits and utility revenue taxes22,173 (1,818)
Decrease in defined benefit pension and other postretirement benefit plans liability(2,698)(3,834)
Change in other assets and liabilities(55,260)(39,800)
Net cash provided by operating activities74,642 117,587 
Cash flows from investing activities  
Available-for-sale investment securities purchased(366,177)(1,101,289)
Principal repayments on available-for-sale investment securities209,094 320,597 
Proceeds from sale of available-for-sale investment securities 197,354 
Purchases of held-to-maturity investment securities (187,172)
Proceeds from repayments or maturities of held-to-maturity investment securities7,932 38,401 
Purchase of stock from Federal Home Loan Bank (18,720)(32,780)
Redemption of stock from Federal Home Loan Bank15,520 31,460 
Net decrease (increase) in loans held for investment(212,744)91,686 
Proceeds from sale of residential loans 17,398 
Capital expenditures(147,749)(148,414)
Contributions to low income housing investments (6,478)
Other15,813 7,805 
Net cash used in investing activities(497,031)(771,432)
(continued)

5


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited) (continued)
Six months ended June 30
(in thousands)20222021
Cash flows from financing activities  
Net increase in deposit liabilities81,324 486,473 
Net increase in short-term borrowings with original maturities of three months or less70,019 31,257 
Net increase in other bank borrowings with original maturities of three months or less153,305 39,995 
Repayment of short-term debt (65,000)
Proceeds from issuance of long-term debt67,312 191,487 
Repayment of long-term debt(15,030)(51,989)
Withheld shares for employee taxes on vested share-based compensation(3,079)(2,002)
Common stock dividends(76,602)(74,311)
Preferred stock dividends of subsidiaries(946)(946)
Other(318)(2,037)
Net cash provided by financing activities275,985 552,927 
Net decrease in cash, cash equivalents and restricted cash(146,404)(100,918)
Cash, cash equivalents and restricted cash, beginning of period311,462 358,979 
Cash, cash equivalents and restricted cash, end of period165,058 258,061 
Less: Restricted cash(5,386)(10,618)
Cash and cash equivalents, end of period$159,672 $247,443 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
6


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Revenues$818,873 $601,879 $1,527,665 $1,166,743 
Expenses    
Fuel oil269,655 139,136 490,941 266,563 
Purchased power218,085 162,465 381,618 304,761 
Other operation and maintenance124,892 118,142 250,149 232,712 
Depreciation58,739 57,381 117,210 114,736 
Taxes, other than income taxes76,348 57,071 142,998 111,173 
Total expenses747,719 534,195 1,382,916 1,029,945 
Operating income71,154 67,684 144,749 136,798 
Allowance for equity funds used during construction2,470 2,377 4,879 4,568 
Retirement defined benefits credit —other than service costs991 1,020 1,981 2,041 
Interest expense and other charges, net(18,800)(17,995)(37,126)(35,978)
Allowance for borrowed funds used during construction798 812 1,576 1,559 
Income before income taxes56,613 53,898 116,059 108,988 
Income taxes11,979 11,498 24,517 22,731 
Net income44,634 42,400 91,542 86,257 
Preferred stock dividends of subsidiaries229 229 458 458 
Net income attributable to Hawaiian Electric44,405 42,171 91,084 85,799 
Preferred stock dividends of Hawaiian Electric270 270 540 540 
Net income for common stock$44,135 $41,901 $90,544 $85,259 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
HEI owns all of the common stock of Hawaiian Electric. Therefore, per share data with respect to shares of common stock of Hawaiian Electric are not meaningful.

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
 Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Net income for common stock$44,135 $41,901 $90,544 $85,259 
Other comprehensive income, net of taxes:    
Retirement benefit plans:    
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of taxes of $(2), $2,028, $1,516 and $4,055, respectively
(5)5,846 4,371 11,691 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $19, $(2,016), $(1,481) and $(4,031), respectively
56 (5,811)(4,269)(11,622)
Other comprehensive income, net of taxes51 35 102 69 
Comprehensive income attributable to Hawaiian Electric Company, Inc.
$44,186 $41,936 $90,646 $85,328 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
7


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(dollars in thousands, except par value)June 30, 2022December 31, 2021
Assets  
Property, plant and equipment
Utility property, plant and equipment  
Land$52,060 $51,937 
Plant and equipment7,840,615 7,735,983 
Less accumulated depreciation(3,026,295)(2,940,517)
Construction in progress226,679 204,569 
Utility property, plant and equipment, net5,093,059 5,051,972 
Nonutility property, plant and equipment, less accumulated depreciation of $61 and $59 as of June 30, 2022 and December 31, 2021, respectively
6,947 6,949 
Total property, plant and equipment, net5,100,006 5,058,921 
Current assets  
Cash and cash equivalents15,503 52,169 
Restricted cash1,129 3,089 
Customer accounts receivable, net247,270 186,859 
Accrued unbilled revenues, net178,876 129,155 
Other accounts receivable, net10,388 7,267 
Fuel oil stock, at average cost223,787 104,078 
Materials and supplies, at average cost74,581 71,877 
Prepayments and other36,540 46,031 
Regulatory assets73,578 66,664 
Total current assets861,652 667,189 
Other long-term assets  
Operating lease right-of-use assets99,690 101,470 
Regulatory assets457,322 498,879 
Other168,326 165,166 
Total other long-term assets725,338 765,515 
Total assets$6,686,996 $6,491,625 
Capitalization and liabilities  
Capitalization  
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 17,753,533 shares at
June 30, 2022 and December 31, 2021)
$118,376 $118,376 
Premium on capital stock798,526 798,526 
Retained earnings1,375,871 1,348,277 
Accumulated other comprehensive loss, net of tax benefits-retirement benefit plans(3,178)(3,280)
Common stock equity2,289,595 2,261,899 
Cumulative preferred stock — not subject to mandatory redemption34,293 34,293 
Long-term debt, net1,684,520 1,624,427 
Total capitalization4,008,408 3,920,619 
Commitments and contingencies (Note 3)
Current liabilities  
Current portion of operating lease liabilities27,976 49,368 
Current portion of long-term debt, net51,988 51,975 
Short-term borrowings from non-affiliates54,987  
Accounts payable199,156 160,007 
Interest and preferred dividends payable17,796 17,325 
Taxes accrued, including revenue taxes211,999 208,280 
Regulatory liabilities22,633 29,760 
Other80,624 71,569 
Total current liabilities667,159 588,284 
Deferred credits and other liabilities  
Operating lease liabilities86,111 65,780 
Deferred income taxes400,110 408,634 
Regulatory liabilities985,442 967,008 
Unamortized tax credits100,112 103,945 
Defined benefit pension and other postretirement benefit plans liability315,475 321,780 
Other124,179 115,575 
Total deferred credits and other liabilities2,011,429 1,982,722 
Total capitalization and liabilities$6,686,996 $6,491,625 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
8


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited)
 
 Common stockPremium
on
capital
RetainedAccumulated
other
comprehensive
 
(in thousands)SharesAmountstockearningsincome (loss)Total
Balance, December 31, 202117,753 $118,376 $798,526 $1,348,277 $(3,280)$2,261,899 
Net income for common stock— — — 46,409 — 46,409 
Other comprehensive income, net of taxes— — — — 51 51 
Common stock dividends— — — (31,475)— (31,475)
Balance, March 31, 202217,753 118,376 798,526 1,363,211 (3,229)2,276,884 
Net income for common stock— — — 44,135 — 44,135 
Other comprehensive income, net of taxes— — — — 51 51 
Common stock dividends— — — (31,475)— (31,475)
Balance, June 30, 202217,753 $118,376 $798,526 $1,375,871 $(3,178)$2,289,595 
Balance, December 31, 202017,324 $115,515 $746,987 $1,282,335 $(2,919)$2,141,918 
Net income for common stock— — — 43,358 — 43,358 
Other comprehensive income, net of taxes— — — — 34 34 
Common stock dividends— — — (27,925)— (27,925)
Balance, March 31, 202117,324 115,515 746,987 1,297,768 (2,885)2,157,385 
Net income for common stock— — — 41,901 — 41,901 
Other comprehensive income, net of taxes— — — — 35 35 
Common stock dividends— — — (27,925)— (27,925)
Balance, June 30, 202117,324 $115,515 $746,987 $1,311,744 $(2,850)$2,171,396 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.


9


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30
(in thousands)20222021
Cash flows from operating activities  
Net income$91,542 $86,257 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment117,210 114,736 
Other amortization12,703 12,245 
Deferred income taxes(15,964)(11,871)
State refundable credit(5,517)(5,309)
Bad debt expense3,128 810 
Allowance for equity funds used during construction(4,879)(4,568)
Other(4)810 
Changes in assets and liabilities  
Increase in accounts receivable(51,927)(12,972)
Increase in accrued unbilled revenues(49,711)(31,398)
Increase in fuel oil stock(119,709)(43,828)
Increase in materials and supplies(2,704)(5,615)
Decrease (increase) in regulatory assets12,956 (17,731)
Increase in regulatory liabilities11,288 5,824 
Increase in accounts payable59,850 12,297 
Change in prepaid and accrued income taxes, tax credits and revenue taxes10,016 (9,051)
Decrease in defined benefit pension and other postretirement benefit plans liability(2,515)(2,549)
Change in other assets and liabilities(21,613)(30,634)
Net cash provided by operating activities44,150 57,453 
Cash flows from investing activities  
Capital expenditures(140,245)(138,025)
Other6,685 4,670 
Net cash used in investing activities(133,560)(133,355)
Cash flows from financing activities  
Common stock dividends(62,950)(55,850)
Preferred stock dividends of Hawaiian Electric and subsidiaries(998)(998)
Repayment of short-term debt (50,000)
Proceeds from issuance of long-term debt60,000 115,000 
Net increase in short-term borrowings from non-affiliates and affiliates with original maturities of three months or less54,987 37,999 
Other(255)(941)
Net cash provided by financing activities50,784 45,210 
Net decrease in cash, cash equivalents and restricted cash(38,626)(30,692)
Cash, cash equivalents and restricted cash, beginning of period55,258 63,326 
Cash, cash equivalents and restricted cash, end of period16,632 32,634 
Less: Restricted cash(1,129)(8,968)
Cash and cash equivalents, end of period$15,503 $23,666 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

10


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 · Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to SEC Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In preparing the unaudited condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses for the period. Actual results could differ significantly from those estimates. The accompanying unaudited condensed consolidated financial statements and the following notes should be read in conjunction with the audited consolidated financial statements and the notes thereto in HEI’s and Hawaiian Electric’s Form 10-K for the year ended December 31, 2021.
In the opinion of HEI’s and Hawaiian Electric’s management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments required by GAAP to fairly state consolidated HEI’s and Hawaiian Electric’s financial positions as of June 30, 2022 and December 31, 2021 and the results of their operations for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021. All such adjustments are of a normal recurring nature, unless otherwise disclosed below or in other referenced material. Results of operations for interim periods are not necessarily indicative of results for the full year.
Recent accounting pronouncements.
Credit Losses. In March 2022, Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which eliminates the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. The amendments in this update also require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, “Financial Instruments-Credit Losses-Measured at Amortized Cost.” Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 325-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit-quality indicator and class of financing receivable by year of origination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASB is assessing the requirements of the ASU.
11


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 2 · Segment financial information
(in thousands) Electric utilityBankOtherTotal
Three months ended June 30, 2022    
Revenues from external customers$818,873 $75,324 $1,410 $895,607 
Intersegment revenues (eliminations)    
Revenues$818,873 $75,324 $1,410 $895,607 
Income (loss) before income taxes$56,613 $22,109 $(12,505)$66,217 
Income taxes (benefit)11,979 4,643 (3,419)13,203 
Net income (loss)44,634 17,466 (9,086)53,014 
Preferred stock dividends of subsidiaries499  (26)473 
Net income (loss) for common stock$44,135 $17,466 $(9,060)$52,541 
Six months ended June 30, 2022    
Revenues from external customers$1,527,661 $150,439 $2,575 $1,680,675 
Intersegment revenues (eliminations)4  (4) 
Revenues$1,527,665 $150,439 $2,571 $1,680,675 
Income (loss) before income taxes$116,059 $52,324 $(14,686)$153,697 
Income taxes (benefit)24,517 10,988 (4,462)31,043 
Net income (loss)91,542 41,336 (10,224)122,654 
Preferred stock dividends of subsidiaries998  (52)946 
Net income (loss) for common stock$90,544 $41,336 $(10,172)$121,708 
Total assets (at June 30, 2022)
$6,686,996 $9,214,865 $99,882 $16,001,743 
Three months ended June 30, 2021    
Revenues from external customers$601,869 $77,260 $1,128 $680,257 
Intersegment revenues (eliminations)10  (10) 
Revenues$601,879 $77,260 $1,118 $680,257 
Income (loss) before income taxes$53,898 $39,992 $(10,946)$82,944 
Income taxes (benefit)11,498 9,708 (2,607)18,599 
Net income (loss)42,400 30,284 (8,339)64,345 
Preferred stock dividends of subsidiaries499  (26)473 
Net income (loss) for common stock $41,901 $30,284 $(8,313)$63,872 
Six months ended June 30, 2021    
Revenues from external customers$1,166,724 $154,391 $2,088 $1,323,203 
Intersegment revenues (eliminations)19  (19) 
Revenues$1,166,743 $154,391 $2,069 $1,323,203 
Income (loss) before income taxes$108,988 $77,094 $(22,942)$163,140 
Income taxes (benefit)22,731 17,254 (6,021)33,964 
Net income (loss)86,257 59,840 (16,921)129,176 
Preferred stock dividends of subsidiaries998  (52)946 
Net income (loss) for common stock $85,259 $59,840 $(16,869)$128,230 
Total assets (at December 31, 2021)$6,491,625 $9,181,603 $149,409 $15,822,637 
 
Intercompany electricity sales of the Utilities to ASB and “other” segments are not eliminated because those segments would need to purchase electricity from another source if it were not provided by the Utilities and the profit on such sales is nominal.
Hamakua Energy, LLC’s (Hamakua Energy’s) sales to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.
12


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 3 · Electric utility segment
Unconsolidated variable interest entities.
Power purchase agreements.  As of June 30, 2022, the Utilities had five PPAs for firm capacity (including the Puna Geothermal Venture PPA that went offline in May 2018 due to lava flow on Hawaii Island, but returned to service with firm capacity of 13.0 MW in the first quarter of 2021, ramped up to 23.9 MW in the second quarter of 2021, and further increased to 25.7 MW in June 2022) and other PPAs with independent power producers (IPPs) and Schedule Q providers (i.e., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which are currently required to be consolidated as VIEs.
Pursuant to the current accounting standards for VIEs, the Utilities are deemed to have a variable interest in Kalaeloa Partners, L.P. (Kalaeloa), AES Hawaii, Inc. (AES Hawaii) and Hamakua Energy by reason of the provisions of the PPA that the Utilities have with the three IPPs. However, management has concluded that the Utilities are not the primary beneficiary of Kalaeloa, AES Hawaii and Hamakua Energy because the Utilities do not have the power to direct the activities that most significantly impact the three IPPs’ economic performance nor the obligation to absorb their expected losses, if any, that could potentially be significant to the IPPs. Thus, the Utilities have not consolidated Kalaeloa, AES Hawaii and Hamakua Energy in its condensed consolidated financial statements. However, Hamakua Energy is an indirect subsidiary of Pacific Current and is consolidated in HEI’s condensed consolidated financial statements.
For the other PPAs with IPPs, the Utilities have concluded that the consolidation of the IPPs was not required because either the Utilities do not have variable interests in the IPPs due to the absence of an obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the IPP was considered a “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. The consolidation of any significant IPP could have a material effect on the unaudited condensed consolidated financial statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. If the Utilities determine they are required to consolidate the financial statements of such an IPP and the consolidation has a material effect, the Utilities would retrospectively apply accounting standards for VIEs to the IPP.
Commitments and contingencies.
Contingencies. The Utilities are subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, the Utilities cannot rule out the possibility that such outcomes could have a material effect on the results of operations or liquidity for a particular reporting period in the future.
Power purchase agreements.  Purchases from all IPPs were as follows:
 Three months ended June 30Six months ended June 30
(in millions)2022202120222021
Kalaeloa$83 $49 $143 $86 
AES Hawaii34 36 61 66 
HPOWER19 14 38 31 
Hamakua Energy14 12 30 23 
Puna Geothermal Venture14 7 24 11 
Wind IPPs38 28 56 57 
Solar IPPs13 16 26 28 
Other IPPs 1
3 1 4 3 
Total IPPs$218 $163 $382 $305 
1Includes hydro power and other PPAs
Kalaeloa Partners, L.P.  Under a 1988 PPA, as amended, Hawaiian Electric is committed to purchase 208 MW of firm capacity from Kalaeloa. In October 2021, Hawaiian Electric and Kalaeloa signed the Amended and Restated Power Purchase Agreement for Firm Dispatchable Capacity and Energy (Amended and Restated PPA) to extend the PPA for an additional term of 10 years. In November 2021, Hawaiian Electric submitted an application for approval of the Amended and Restated PPA to the PUC, which is pending approval before the PUC. The price of purchases from Kalaeloa in the second quarter of 2022 have increased 69% over the second quarter of 2021, primarily due to increased fuel oil cost.
13


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amended and Restated Amendment No. 4) for a period of 30 years ending September 2022, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. Hawaiian Electric does not intend to extend the term of the PPA which will expire on September 1, 2022.
Hu Honua Bioenergy, LLC (Hu Honua). In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. Under the terms of the PPA, the Hu Honua plant was scheduled to be in service in 2016. However, Hu Honua encountered construction and litigation delays, which resulted in an amended and restated PPA between Hawaii Electric Light and Hu Honua dated May 9, 2017. In July 2017, the PUC approved the amended and restated PPA, which becomes effective once the PUC’s order is final and non-appealable. In August 2017, the PUC’s approval was appealed by a third party. On May 10, 2019, the Hawaii Supreme Court issued a decision remanding the matter to the PUC for further proceedings consistent with the court’s decision, which must include express consideration of greenhouse gas (GHG) emissions that would result from approving the PPA, whether the cost of energy under the PPA is reasonable in light of the potential for GHG emissions, and whether the terms of the PPA are prudent and in the public interest, in light of its potential hidden and long-term consequences. As a result, the PUC reopened the docket for further proceedings, including re-examining all of the issues in the proceedings. On July 9, 2020, the PUC issued an order denying Hawaii Electric Light’s request to waive the amended and restated PPA from the PUC’s competitive bidding requirements and therefore, dismissed the request for approval of the amended and restated PPA without prejudice to possible participation in any future competitive bidding process. On September 9, 2020, the PUC denied Hu Honua’s motion for reconsideration of the PUC’s order. Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s order denying Hu Honua’s motion for reconsideration. On May 24, 2021, the Hawaii Supreme Court vacated the PUC’s decision and remanded the matter back to the PUC for further proceedings. On June 30, 2021, the PUC issued an order reopening the docket consistent with the Hawaii Supreme Court’s order. A contested case hearing was held in March 2022. On May 23, 2022, the PUC issued a decision and order denying the amended and restated PPA, based on, among other things, findings that: (1) the project will result in significant GHG emissions, (2) Hu Honua’s proposed carbon commitment to sequester more GHG emissions than produced by the project are speculative and unsupported, (3) the amended and restated PPA is likely to result in high costs to customers through its relatively high cost of electricity and through potential displacement of other, lower cost, renewable resources, and (4) based on the foregoing, approving the amended and restated PPA is not prudent or in the public interest. On June 2, 2022, Hawaii Electric Light and Hu Honua filed their separate motions for reconsideration. On June 24, 2022, the PUC issued an order denying Hawaii Electric Light and Hu Honua’s respective motions for reconsideration. On June 29, 2022, Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s May 23, 2022 decision and order denying the amended and restated PPA, and the PUC’s June 24, 2022 order denying Hawaii Electric Light and Hu Honua’s motions for reconsideration.
Molokai New Energy Partners (MNEP). In July 2018, the PUC approved Maui Electric’s PPA with MNEP to purchase solar energy from a photovoltaic (PV) plus battery storage project. The 4.88 MW PV and 3 MW Battery Energy Storage System project was to deliver no more than 2.64 MW at any time to the Molokai system. On March 25, 2020, MNEP filed a complaint in the United Stated District Court for the District of Hawaii against Maui Electric claiming breach of contract. On June 3, 2020, Maui Electric provided Notice of Default and Termination of the PPA to MNEP terminating the PPA with an effective date of July 10, 2020. Thereafter, MNEP filed an amended Complaint to include claims relating to the termination and Hawaiian Electric filed its Answer to the Amended Complaint on September 11, 2020, disputing the facts presented by MNEP and all claims within the original and amended complaint. Currently, the discovery phase is ongoing.
Utility projects.  Many public utility projects require PUC approval and various permits from other governmental agencies. Difficulties in obtaining, or the inability to obtain, the necessary approvals or permits or community support can result in significantly increased project costs or even cancellation of projects. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, or if PUC-imposed caps on project costs are expected to be exceeded, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.
Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) implementation project. The ERP/EAM Implementation Project went live in October 2018. Hawaii Electric Light and Hawaiian Electric began to incorporate their portion of the deferred project costs in rate base and started the amortization over a 12-year period in January 2020 and November 2020, respectively. The PUC required a minimum of $246 million ERP/EAM project-related benefit to be delivered to customers over the system’s 12-year service life.
In February 2019, the PUC approved a methodology for passing the future cost saving benefits of the new ERP/EAM system to customers developed by the Utilities in collaboration with the Consumer Advocate. The Utilities filed a benefits clarification document on June 10, 2019, reflecting $150 million in future net O&M expense reductions and cost avoidance, and
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$96 million in capital cost reductions and tax savings over the 12-year service life. To the extent the reduction in O&M expense relates to amounts reflected in electric rates, the Utilities would reduce future rates for such amounts. In October 2019, the PUC approved the Utilities and the Consumer Advocate’s Stipulated Performance Metrics and Tracking Mechanism. As of June 30, 2022, the Utilities’ regulatory liability was $9.6 million ($4.8 million for Hawaiian Electric, $1.9 million for Hawaii Electric Light and $2.9 million for Maui Electric) for the O&M expense savings that are being amortized or to be included in future rates. As part of the settlement agreement approved in the Hawaiian Electric 2020 test year rate case, the regulatory liability for Hawaiian Electric will be amortized over five years, beginning in November 2020, and the O&M benefits for Hawaiian Electric was considered flowed through to customers.
On July 7, 2021, the PUC issued an order modifying the reporting frequency of the Semi-Annual Enterprise System Benefits (SAESB) reports to an Annual Enterprise System Benefits (AESB) report on the achieved benefits savings. The most recent AESB report was filed on February 14, 2022 for the period January 1 through December 31, 2021.
West Loch PV Project. In November 2019, Hawaiian Electric placed into service a 20-MW (ac) utility-owned and operated renewable and dispatchable solar facility on property owned by the Department of the Navy. PUC orders resulted in a project cost cap of $67 million (including a cap of $4.7 million for the in-kind work performed in exchange for use of the Navy property) with capital cost recovery approved under MPIR (See “Performance-based regulation framework” section below for MPIR guidelines and cost recovery discussion.) Project costs incurred as of June 30, 2022 amounted to $60.1 million and generated $14.7 million and $14.0 million in federal and state nonrefundable tax credits, respectively. For book and regulatory purposes, the tax credits are being deferred and amortized, starting in 2020, over 25 years and 10 years for federal and state credits, respectively. In June 2022, the in-kind consideration services were completed and fully accepted by the Navy as partial consideration in lieu of rent payment. Satisfaction of the full-term rent requires on-going compliance with all terms of the lease, which, among other things, includes provision of contingent power upon written notice of the Department of the Navy. Hawaiian Electric accounted for the arrangement as a lease, recording $6.4 million as right-of-use asset with no lease liability and will amortize the right-of-use asset over the remaining term of the lease ending June 30, 2054.
Waena Switchyard/Synchronous Condenser Project. In October 2020, to support efforts to increase renewable energy generation and reduce fossil fuel consumption by deactivating current generating units, Maui Electric filed a PUC application to construct a switchyard, which includes the extension of two 69 kV transmission lines and the relocation of another 69 kV transmission line; and the conversion of two generating units to synchronous condensers at Kahului Power Plant in central Maui. In November 2021, the PUC approved Maui Electric’s request to commit funds estimated at $38.8 million for the project, and to recover capital expenditures for the project under Exceptional Project Recovery Mechanism (EPRM) not to exceed $38.8 million, which shall be further reduced to reflect the total project cost exclusive of overhead costs not directly attributable to the project.
In approving the project, the PUC recognized that the project will facilitate the ability to accommodate increased renewable energy, as contemplated under the EPRM guidelines. As of June 30, 2022, $10.2 million has been incurred for the project.
Environmental regulation.  The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances.
Hawaiian Electric, Hawaii Electric Light and Maui Electric, like other utilities, periodically encounter petroleum or other chemical releases associated with current or previous operations. The Utilities report and take action on these releases when and as required by applicable law and regulations. The Utilities believe the costs of responding to such releases identified to date will not have a material effect, individually or in the aggregate, on Hawaiian Electric’s consolidated results of operations, financial condition or liquidity.
Former Molokai Electric Company generation site.  In 1989, Maui Electric acquired Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983, but continued to operate at the Site under a lease until 1985 and left the property in 1987. The federal Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. In cooperation with the Department of Health of State of Hawaii and EPA, Maui Electric further investigated the Site and the adjacent parcel to determine the extent of impacts of polychlorinated biphenyls (PCBs), residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $2.7 million as of June 30, 2022, representing the probable and reasonably estimable undiscounted cost for remediation of the Site and the adjacent parcel based on presently available information; however, final costs of remediation will depend on the cleanup approach implemented.
Additionally, on November 24, 2021, the current landowners of the Site, Misaki’s, Inc., filed a lawsuit against Hawaiian Electric (as alleged successor in interest to Molokai Electric, the prior owner of the Site) in the Circuit Court of the Second Circuit of the State of Hawaii (removed to the U.S. District Court for the District of Hawaii). The complaint which was
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subsequently amended to include Maui Electric, alleges that Hawaiian Electric is responsible for remediation of the Site based on the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and the Hawaii Environmental Response Law under Hawaii Revised Statutes Chapter 128D, as well as being liable on contractual claims related to a short leaseback period during the transition of ownership from Molokai Electric. The amended complaint was dismissed and a new complaint is pending subject to the parties attempt to enter into settlement negotiations, but the Utilities intend to vigorously defend the action if necessary. At this time, the Utilities are unable to determine the ultimate outcome of the lawsuit or the amount of any possible loss. As of June 30, 2022, the reserve balance recorded by the Utilities to address the lawsuit was not material.
Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party under CERCLA responsible for the costs of investigation and cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. Hawaiian Electric was also required by the EPA to assess potential sources and extent of PCB contamination onshore at Waiau Power Plant.
As of June 30, 2022, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $10.1 million. The reserve balance represents the probable and reasonably estimable undiscounted cost for the onshore and offshore investigation and remediation. The final remediation costs will depend on the actual onshore and offshore cleanup costs.
Regulatory proceedings
Decoupling. Decoupling is a regulatory model that is intended to provide the Utilities with financial stability and facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. Decoupling delinks the utility’s revenues from the utility’s sales, removing the disincentive to promote energy efficiency and accept more renewable energy. Decoupling continues under the PBR Framework.
Performance-based regulation framework. On December 23, 2020, the PUC issued a decision and order (PBR D&O) establishing a new PBR Framework to govern the Utilities. The PBR Framework incorporates an annual revenue adjustment (ARA) and a suite of new regulatory mechanisms in addition to previously established regulatory mechanisms. Under the PBR Framework, the decoupling mechanism (i.e., the Revenue Balancing Account (RBA)) established by the previous regulatory framework will continue. The existing cost recovery mechanisms will continue as currently implemented (i.e., the Energy Cost Recovery Clause (ECRC), Purchased Power Adjustment Clause (PPAC), Demand Side Management surcharge, Renewable Energy Infrastructure Program, Demand Response Adjustment Clause (DRAC), Pension and Other Post-Employment Benefits (OPEB) tracking mechanisms). In addition to annual revenues provided by the ARA, the Utilities may seek relief for extraordinary projects or programs through the Exceptional Project Recovery Mechanism (EPRM) (formerly known as the Major Project Interim Recovery adjustment mechanism) and earn financial rewards for exemplary performance as provided through a portfolio of Performance Incentive Mechanisms (PIMs) and Shared Savings Mechanisms (SSMs). The PBR Framework incorporates a variety of additional performance mechanisms, including Scorecards, Reported Metrics, and an expedited Pilot Process. The PBR Framework also contains a number of safeguards, including a symmetric Earnings Sharing Mechanism (ESM) which protects the Utilities and customers from excessive earnings or losses, as measured by the Utilities’ achieved rate-making ROACE and a Re-Opener mechanism, under which the PUC will open an examination, at its discretion, to determine if adjustments or modifications to specific PBR mechanisms are appropriate. The new PBR Framework became fully effective on June 1, 2021.
On June 17, 2022, the PUC issued a decision and order (June 2022 D&O) establishing additional PIMs under the PBR Framework for the Utilities. In 2021, the PUC Staff originally proposed consideration of 11 PIMs and other mechanisms to address identified areas of concern. Seven of the staff proposed PIMs were designed as penalty-only. The June 2022 D&O approved two new PIMs, a new SSM, and extended the timeframe for an existing PIM. Of the new PIMs, only one is penalty-only. Specifically, the PUC approved (1) a new (penalty-only) generation-caused interruption reliability PIM, (2) a new (penalty/reward) interconnection requirements study (IRS) PIM, (3) a new (reward-only) Collective Shared Savings Mechanism (CSSM), and (4) a modification and extension of the existing interim (reward-only) Grid Services PIM. The effective date for the changes has not yet been established. On July 15, 2022, the Utilities submitted for the PUC’s review and approval, proposed tariffs to implement the aforementioned PIMs with an evaluation period proposed for the generation-caused interruption reliability PIMs, IRS PIM, and CSSM to start on January 1, 2023. The evaluation period is the calendar year period over which performance is compared to performance targets of the PIM to determine the amount of reward or penalty.
In addition, the June 2022 D&O instructed the Utilities to prepare and submit: a detailed fossil fuel retirement report outlining necessary steps to safely and reliably retire certain existing fossil fuel power plants during the first multi-year rate period (MRP); and a functional integration plan for DER to increase transparency into the Utilities’ plans and progress for
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utilizing cost-effective grid services from DERs and ensure that the necessary functionalities and requisite technologies are in place to do so. The PUC also instructed the PBR Working Group to continue its ongoing collaborative efforts to consider other potential new incentive mechanisms and to address other issues raised during the proceeding. Following the PUC’s review of the Utilities’ tariffs to implement the approved PIMs, an order will be issued providing details on next steps for the proceeding.
Revenue adjustment mechanism. Prior to the implementation of the PBR Framework, the revenue adjustment mechanism (RAM) was a major component of the previously established regulatory framework. The RAM was based on the lesser of: a) an inflationary adjustment for certain O&M expenses and return on investment for certain rate base changes, or b) cumulative annual compounded increase in Gross Domestic Product Price Index applied to annualized target revenues (the RAM Cap). Under the PBR Framework, the ARA mechanism replaced the RAM, and became effective on June 1, 2021. RAM revenue adjustments approved by the PUC in 2020 will continue to be included in the RBA provision’s target revenue and RBA rate adjustment unless modified with PUC approval.
Annual revenue adjustment mechanism. The PBR Framework established a five-year MRP during which there will be no general rate cases. Target revenues will be adjusted according to an index-driven ARA based on (i) an inflation factor, (ii) a predetermined X-factor to encompass productivity, which is set at zero, (iii) a Z-factor to account for exceptional circumstances not in the Utilities’ control and (iv) a customer dividend consisting of a negative adjustment of 0.22% of adjusted revenue requirements compounded annually and a flow through of the “pre-PBR” savings commitment from the management audit recommendations developed in a prior docket at a rate of $6.6 million per year from 2021 to 2025. The implementation of the ARA occurred on June 1, 2021.
Earnings sharing mechanism. The PBR Framework established a symmetrical ESM for achieved rate-making ROACE outside of a 300 basis points dead band above or below the current authorized ROACE of 9.5% for each of the Utilities. There is a 50/50 sharing between customers and Utilities for the achieved rate-making ROACE falling within 150 basis points outside of the dead band in either direction, and a 90/10 sharing for any further difference. A reopening or review of the PBR terms will be triggered if the Utilities credit rating outlook indicates a potential credit downgrade below investment grade status, or if its achieved rate-making ROACE enters the outer most tier of the ESM.
Exceptional project recovery mechanism. Prior to the implementation of the PBR Framework, the PUC established the Major Project Interim Recovery (MPIR) adjustment mechanism and MPIR Guidelines. The MPIR mechanism provides the opportunity to recover revenues for net costs of approved eligible projects placed in service between general rate cases. In establishing the PBR Framework, the MPIR Guidelines were terminated and replaced with the EPRM Guidelines. Although the MPIR Guidelines were terminated and replaced by the EPRM Guidelines, the MPIR mechanism will continue within the PBR Framework to provide recovery of project costs previously approved for recovery under the MPIR. The newly established EPRM Guidelines permit the Utilities to include the full amount of approved costs in the EPRM for recovery in the first year the project goes into service, pro-rated for the portion of the year the project is in service. Deferred and O&M expense projects are also eligible for EPRM recovery under the EPRM Guidelines. EPRM recoverable costs will be limited to the lesser of actual incurred project costs or PUC‑approved amounts, net of savings.
As of June 30, 2022, the Utilities submitted 2022 MPIR amounts totaling $25.9 million, including revenue taxes, for the Schofield Generating Station ($16.5 million), West Loch PV Project ($3.3 million), and Grid Modernization Strategy (GMS) Phase 1 project ($6.1 million for all three utilities) for the accrual of revenues effective January 1, 2022, that included the 2022 return on project amount (based on approved amounts) in rate base, depreciation and incremental O&M expenses. The PUC approved the Utilities’ recovery of the annualized 2022 MPIR amounts effective June 1, 2022 through the RBA rate adjustment.
As of June 30, 2022, the PUC approved two EPRM applications for projects totaling $41 million to the extent that the project costs are not included in rates. Currently, the Utilities have outstanding applications seeking EPRM recovery for five projects with total project costs of $450 million, subject to PUC approval.
Pilot process. The PBR D&O approved a Pilot Process to foster innovation by establishing an expedited implementation process for pilots that test new technologies, programs, business models, and other arrangements. This is intended to support initiatives by the Utilities to test new programs and ideas quickly and elevate any successful pilots for consideration of full-scale implementation. The proposed pilots are subject to PUC approval with a total annual cap of $10 million. The Pilot Process includes an initial workplan development phase, during which the Utilities identify and scope areas of interests, so as to inform the subsequent implementation phase, during which the Utilities submit specific pilot proposals for expedited review by the PUC and implement the pilots upon approval. The PUC will issue an order, approving, denying, or modifying a proposed Pilot within 45 days of receiving notice of a specific pilot project.
On July 9, 2021, the PUC issued an order approving the Utilities’ proposed Pilot Process submitted in April 2021 with modifications, including a cost recovery process that generally allows the Utilities to defer and recover total annual
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expenditures of approved pilot projects in full over twelve months beginning June 1 of the year following implementation through the RBA rate adjustment, although the Utilities may determine on a case-by-case basis that a particular project’s deferred costs should be amortized over a period greater than twelve months. On July 28, 2021, the Utilities submitted the finalized Pilot Process to govern the review of the pilot project proposals in accordance with the July 9, 2021 order.
On November 12, 2021, the Utilities requested PUC approval of their proposed Pilot Process Workplan to guide the development of pilot projects over the next three years. A PUC order on the Workplan is pending.
On February 28, 2022, the Utilities filed their first annual Pilot Update report covering pilot projects approved through the Pilot Process framework. The Pilot Update reported on approximately $0.1 million of 2021 deferred costs which was incorporated in the Utilities’ adjustments to target revenue in the 2022 spring revenue report. The PUC approved the Utilities’ recovery of the 2021 Pilot amounts effective June 1, 2022 through the RBA rate adjustment.
Performance incentive mechanisms. The PUC has established the following PIMs and SSMs: (1) Service Quality performance incentives, (2) Phase 1 Request for proposal (RFP) PIM for procurement of low-cost renewable energy, (3) Phase 2 RFP PIMs for generation and generation plus storage project, and Grid Services and standalone storage, (4) new PIMs established in the PBR D&O and (5) new PIMs and a SSM established in the June 2022 D&O.
Service Quality performance incentives (ongoing). Service Quality performance incentives are measured on a calendar-year basis. The PIM tariff requires the performance targets, deadbands and the amount of maximum financial incentives used to determine the PIM financial incentive levels for each of the PIMs to remain constant in interim periods, unless otherwise amended by order of the PUC.
Service Reliability Performance measured by Transmission and Distribution-caused System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one standard deviation. The maximum penalty for each performance index is 20 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $6.8 million - for both indices in total for the three utilities). For the 2021 evaluation period, the Utilities earned $0.2 million in penalties.
Call Center Performance measured by the percentage of calls answered within 30 seconds. Target performance is based on the annual average performance for each utility for the most recent 8 quarters with a deadband of 3% above and below the target. The maximum penalty or reward is 8 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties or rewards of approximately $1.4 million - in total for the three utilities).
Phase 1 RFP PIM. Procurement of low-cost variable renewable resources through the RFP process in 2018 is measured by comparison of the procurement price to target prices. Half of the incentive was earned upon PUC approval of the PPAs. Based on the seven PPAs approved in 2019, the Utilities recognized $1.7 million in 2019 with the remaining award to be recognized in the year following the in-service date of the projects, which is estimated to occur from 2023 to 2024.
Phase 2 RFP PIMs. The PUC order issued on October 9, 2019 establishes pricing thresholds, timelines to complete contracting, and other performance criteria for the performance incentive eligibility. The PIMs provide incentives only without penalties. On July 9, 2020, the Utilities filed two Grid Services Purchase Agreements (GSPA) for the Grid Service RFP that potentially qualify for a demand response PIM; however, details of the incentive metrics will be determined by the PUC. On September 15, 2020, the Utilities filed a PPA that qualified for a PIM incentive and on February 16, 2021, the Utilities filed one additional PPA that qualified for a declining PIM incentive. The PUC approved two PPAs in September 2021 and November 2021 and two GSPAs on December 31, 2020. For the 2021 evaluation period, the Utilities earned $0.1 million in rewards related to the two PPAs.
The PUC previously established the following two PIMs in its PBR D&O, which were approved in an order issued on March 23, 2021 and became effective on June 1, 2021. In its June 2022 D&O, the PUC modified and extended the Grid Services PIM.
Renewable portfolio standard (RPS)-A PIM that provides a financial reward for accelerating the achievement of RPS goals. The Utilities may earn a reward for the amount of system generation above the interpolated statutory RPS goal at $20/MWh in 2021 and 2022, $15/MWh in 2023, and $10/MWh for the remainder of the MRP. Penalties are already prescribed in the RPS as $20/MWh for failing to meet RPS targets in 2030, 2040 and 2045. The evaluation period commenced on January 1, 2021. For the 2021 evaluation period, the Utilities earned $1.0 million in rewards.
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Grid Services PIM that provides financial rewards on a $/kW basis for the acquisition of eligible grid services. The eligibility period for this PIM initially commenced on January 1, 2021 and was scheduled to end on December 31, 2022. However, the June 2022 D&O extended the eligibility period for this PIM through December 31, 2023. The June 2022 D&O also increased the incentive rate for the acquisition of load reduction grid services. During the PIM performance period, newly acquired committed capacity in the Oahu Scheduled Dispatch Program (SDP), the Oahu Fast DR program (up to the 7 MW cap), and the Maui SDP program shall qualify for the incentive. The Utilities can earn a maximum reward of $1.5 million from 2021 through 2023. The effective date of the revised Grid Services PIM tariff is pending.
The PUC also previously established the following three PIMs in its PBR D&O, which were approved by the PUC on May 17, 2021 and became effective on June 1, 2021.
Interconnection Approval PIM that provides financial rewards and penalties for interconnection times for DER systems <100 kW in size. The Utilities can earn a total annual maximum reward of $3.0 million or a total annual maximum penalty of $0.9 million. For the 2021 evaluation period, the Utilities earned $2.8 million in rewards.
Low-to-Moderate Income (LMI) Energy Efficiency PIM that provides financial rewards for collaboration between the Utilities and the third-party Public Benefits Fee Administrator to deliver energy savings for low- and moderate-income customers. The Utilities can earn a total annual maximum reward of $2.0 million. The PIM will initially have a duration of three years and be subject to an annual review. The evaluation period is based on Hawaii Energy’s program year with the initial evaluation year being the period of July 1, 2021 through June 30, 2022.
Advanced Metering Infrastructure Utilization PIM that provides financial rewards for leveraging grid modernization investments and engaging customers beyond what is already planned in the Phase 1 Grid Modernization program. The Utilities can earn a total annual maximum reward of $2.0 million. The PIM will initially have a duration of three years after which it will be re-evaluated. The evaluation period commenced on January 1, 2021.
The PUC established the following new PIMs and SSM in its June 2022 D&O. The proposed tariffs and the effective date for these PIMs and SSM are pending the PUC’s review and approval.
Generation-caused System Average Interruption Duration and Frequency Indexes PIMs to incentivize achievement of generation-based reliability targets, measured by Generation System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one standard deviation. The maximum penalty for each performance index is 3 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $1 million - for both indices in total for the three utilities).
An IRS PIM to incentivize the timely completion of the IRS process for large-scale renewable energy projects (rewards and penalties) measured by the number of months between final model checkout and delivery of IRS results to the developer. Target performance is ten months with an asymmetrical deadband of two-months for penalties and no deadband for rewards. The maximum penalty and reward will depend on the specifics of the upcoming procurement.
A CSSM to incentivize cost control over the Utilities’ fuel, purchased power, and EPRM/MPIR costs (collectively, non-ARA costs). This is a reward only incentive where the Utilities retain a portion of savings when non-ARA costs in a performance year are lower than target year non-ARA costs, which are adjusted for changes in fuel prices, inflation, and system generation from a base year (calendar year 2021). The CSSM does not have a maximum reward, however, rewards are tiered, with the Utilities retaining a 20% share of the first $5 million in savings at Hawaiian Electric and of the first $1 million in savings at both Hawaii Electric Light and Maui Electric, with the Utilities’ share at 5% of any savings beyond the initial amounts of CSSM savings for each utility.
For the 2021 evaluation period, the Utilities accrued $3.7 million ($2.8 million for Hawaiian Electric, $0.4 million for Hawaii Electric Light and $0.5 million for Maui Electric) in rewards net of penalties. The net rewards related to 2021 were reflected in the 2021 fall revenue report and 2022 spring revenue report filings.
Annual review cycle. PBR D&O established an annual review cycle for revenue adjustments under the PBR Framework, including the biannual submission of the revenue reports. The Utilities spring revenue report filed on March 31, 2022, was approved by the PUC on May 25, 2022.

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The net incremental amounts between the 2021 fall and 2022 spring revenue reports are to be collected (refunded) from June 1, 2022 through May 31, 2023 as follows:
(in millions)Hawaiian ElectricHawaii Electric LightMaui ElectricTotal
Incremental accrued RBA balance through September 30, 2021 (and associated revenue taxes)$(5.7)$2.1 $(4.7)$(8.3)
Incremental Performance Incentive Mechanisms (net)
1.9 0.4 0.4 2.7 
Incremental MPIR/EPRM Revenue Adjustment1.3 0.8 0.7 2.8
Other(0.1)  $(0.1)
Net incremental amount to be collected under the RBA rate tariffs$(2.6)$3.3 $(3.6)$(2.9)

Regulatory assets for COVID-19 related costs. On May 4, 2020, the PUC issued an order, authorizing all utilities, including the Utilities, to establish regulatory assets to record costs resulting from the suspension of disconnections of service during the pendency of the Governor’s Emergency Proclamation and until otherwise ordered by the PUC. In future proceedings, the PUC will consider the reasonableness of the costs, the appropriate period of recovery, any amount of carrying costs thereon, and any savings directly attributable to suspension of disconnects, and other related matters. As part of the order, the PUC prohibits the Utilities from charging late payment fees on past due payments. As the moratorium on customer disconnections ended on May 31, 2021, the Utilities have resumed charging late payment fees in July 2021. Pursuant to PUC orders, the deferral of COVID-19 related costs by the Utilities ended on December 31, 2020. On October 1, 2021, the PUC approved the Utilities’ request to extend the deferral period to December 31, 2021. In December 2021, to keep customers connected and provide some relief to customers experiencing financial difficulty during the pandemic, the Utilities committed to issuing $2 million in bill credits to qualified customers. The Utilities will not seek recovery for the issued bill credits, resulting in a reduction to the cumulative deferred costs. On June 9, 2022, the Utilities filed an application with the PUC, requesting recovery of a portion of the COVID-19 related deferral costs, net of cost savings realized, not to exceed the amount of $27.8 million over three years, from June 2023 through May 2026. Annual requests will be limited to actual costs incurred.
Army privatization. On October 30, 2020, the PUC approved Hawaiian Electric’s 50-year contract with the U.S. Army to own, operate and maintain the electric distribution system serving the U.S. Army’s 12 installations on Oahu, including Schofield Barracks, Wheeler Army Airfield, Tripler Army Medical Center, Fort Shafter, and Army housing areas. On March 1, 2022, Hawaiian Electric acquired the Army’s existing distribution system for a purchase price of $14.5 million, and will pay the Army in the form of a monthly credit against the monthly utility services charge over the 50-year term of the contract. The acquisition of additional assets contemplated in the contract, with an estimated value of $4 million, is planned for 2023.
Hawaiian Electric took ownership and all responsibilities for operation and maintenance of the system on March 1, 2022 for a 50-year term after a one-year transition period. Under the contract, Hawaiian Electric will make initial capital upgrades over the first six years of the contract and replace aging infrastructure over the 50-year term. In addition to its regular monthly electricity bill, the Army will pay Hawaiian Electric a monthly utility services charge to cover operations and maintenance expenses and provide recovery for capital upgrades, capital replacements, and the existing distribution system based on a rate of return determined by the PUC for regulated utility investments, as well as depreciation expense. The PUC requires Hawaiian Electric to file regular periodic reports on the activities and investments in fulfillment of the contract and will review the major projects planned on behalf of the Army. The annual impact on Hawaiian Electric’s earnings is not expected to be material and will depend on a number of factors, including the amount and timing of capital upgrades and capital replacement.
Condensed consolidating financial information. Condensed consolidating financial information for Hawaiian Electric and its subsidiaries are presented for the three and six month periods ended June 30, 2022 and 2021, and as of June 30, 2022 and December 31, 2021.
Hawaiian Electric unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric, and (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder. Hawaiian Electric is also obligated, after the satisfaction of its obligations on its own preferred stock, to make dividend, redemption and liquidation payments on Hawaii Electric Light’s and Maui Electric’s preferred stock if the respective subsidiary is unable to make such payments.

20


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Three months ended June 30, 2022

(in thousands)Hawaiian ElectricHawaii Electric LightMaui Electric
Other subsidiaries
Consolidating adjustments
Hawaiian Electric
Consolidated
Revenues$576,472 124,502 117,928  (29)$818,873 
Expenses
Fuel oil184,297 33,065 52,293   269,655 
Purchased power165,202 38,735 14,148   218,085 
Other operation and maintenance82,707 21,331 20,854   124,892 
Depreciation39,501 10,352 8,886   58,739 
Taxes, other than income taxes54,025 11,378 10,945   76,348 
   Total expenses525,732 114,861 107,126   747,719 
Operating income50,740 9,641 10,802  (29)71,154 
Allowance for equity funds used during construction1,946 217 307   2,470 
Equity in earnings of subsidiaries12,237    (12,237) 
Retirement defined benefits credit (expense)—other than service costs856 167 (32)  991 
Interest expense and other charges, net(13,519)(2,642)(2,668) 29 (18,800)
Allowance for borrowed funds used during construction637 67 94   798 
Income before income taxes52,897 7,450 8,503  (12,237)56,613 
Income taxes8,492 1,659 1,828   11,979 
Net income44,405 5,791 6,675  (12,237)44,634 
Preferred stock dividends of subsidiaries 133 96   229 
Net income attributable to Hawaiian Electric
44,405 5,658 6,579  (12,237)44,405 
Preferred stock dividends of Hawaiian Electric270     270 
Net income for common stock$44,135 5,658 6,579  (12,237)$44,135 

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock$44,135 5,658 6,579  (12,237)$44,135 
Other comprehensive income, net of taxes:      
Retirement benefit plans:      
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of taxes (5)(72)603  (531)(5)
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes56 74 (602) 528 56 
Other comprehensive income, net of taxes51 2 1  (3)51 
Comprehensive income attributable to common shareholder
$44,186 5,660 6,580  (12,240)$44,186 

21


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Three months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui Electric
Other subsidiaries
Consolidating adjustments
Hawaiian Electric
Consolidated
Revenues$422,697 91,512 87,670   $601,879 
Expenses
Fuel oil91,345 19,586 28,205   139,136 
Purchased power124,948 24,236 13,281   162,465 
Other operation and maintenance77,903 19,474 20,765   118,142 
Depreciation38,907 10,053 8,421   57,381 
Taxes, other than income taxes40,301 8,539 8,231   57,071 
   Total expenses373,404 81,888 78,903   534,195 
Operating income49,293 9,624 8,767   67,684 
Allowance for equity funds used during construction1,930 140 307   2,377 
Equity in earnings of subsidiaries10,744    (10,744) 
Retirement defined benefits credit (expense)—other than service costs884 169 (33)  1,020 
Interest expense and other charges, net(12,829)(2,573)(2,593)  (17,995)
Allowance for borrowed funds used during construction654 48 110   812 
Income before income taxes50,676 7,408 6,558  (10,744)53,898 
Income taxes8,505 1,668 1,325   11,498 
Net income42,171 5,740 5,233  (10,744)42,400 
Preferred stock dividends of subsidiaries 133 96   229 
Net income attributable to Hawaiian Electric
42,171 5,607 5,137  (10,744)42,171 
Preferred stock dividends of Hawaiian Electric270     270 
Net income for common stock$41,901 5,607 5,137  (10,744)$41,901 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock$41,901 5,607 5,137  (10,744)$41,901 
Other comprehensive income, net of taxes:      
Retirement benefit plans:      
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of taxes5,846 834 761  (1,595)5,846 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(5,811)(834)(761) 1,595 (5,811)
Other comprehensive income, net of taxes35     35 
Comprehensive income attributable to common shareholder
$41,936 5,607 5,137  (10,744)$41,936 

22


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Six months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated
Revenues$1,076,714 233,030 217,956  (35)$1,527,665 
Expenses
Fuel oil338,722 58,316 93,903   490,941 
Purchased power289,385 69,447 22,786   381,618 
Other operation and maintenance166,363 41,545 42,241   250,149 
Depreciation78,985 20,703 17,522   117,210 
Taxes, other than income taxes101,299 21,410 20,289   142,998 
   Total expenses974,754 211,421 196,741   1,382,916 
Operating income101,960 21,609 21,215  (35)144,749 
Allowance for equity funds used during construction3,936 410 533   4,879 
Equity in earnings of subsidiaries25,898    (25,898) 
Retirement defined benefits credit (expense)—other than service costs1,711 334 (64)  1,981 
Interest expense and other charges, net(26,612)(5,251)(5,298) 35 (37,126)
Allowance for borrowed funds used during construction1,288 127 161   1,576 
Income before income taxes108,181 17,229 16,547  (25,898)116,059 
Income taxes17,097 3,927 3,493   24,517 
Net income91,084 13,302 13,054  (25,898)91,542 
Preferred stock dividends of subsidiaries 267 191   458 
Net income attributable to Hawaiian Electric91,084 13,035 12,863  (25,898)91,084 
Preferred stock dividends of Hawaiian Electric540     540 
Net income for common stock$90,544 13,035 12,863  (25,898)$90,544 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Six months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$90,544 13,035 12,863  (25,898)$90,544 
Other comprehensive income, net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of taxes4,371 598 1,206  (1,804)4,371 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(4,269)(596)(1,205) 1,801 (4,269)
Other comprehensive income, net of taxes102 2 1  (3)102 
Comprehensive income attributable to common shareholder$90,646 13,037 12,864  (25,901)$90,646 
23


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Six months ended June 30, 2021

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated
Revenues$823,251 176,661 166,851  (20)$1,166,743 
Expenses
Fuel oil180,073 36,071 50,419   266,563 
Purchased power233,552 45,833 25,376   304,761 
Other operation and maintenance155,238 37,386 40,088   232,712 
Depreciation77,821 20,101 16,814   114,736 
Taxes, other than income taxes78,928 16,532 15,713   111,173 
   Total expenses725,612 155,923 148,410   1,029,945 
Operating income97,639 20,738 18,441  (20)136,798 
Allowance for equity funds used during construction3,678 272 618   4,568 
Equity in earnings of subsidiaries23,254    (23,254) 
Retirement defined benefits credit (expense)—other than service costs1,770 337 (66)  2,041 
Interest expense and other charges, net(25,661)(5,154)(5,183) 20 (35,978)
Allowance for borrowed funds used during construction1,245 92 222   1,559 
Income before income taxes101,925 16,285 14,032  (23,254)108,988 
Income taxes16,126 3,719 2,886   22,731 
Net income85,799 12,566 11,146  (23,254)86,257 
Preferred stock dividends of subsidiaries 267 191   458 
Net income attributable to Hawaiian Electric85,799 12,299 10,955  (23,254)85,799 
Preferred stock dividends of Hawaiian Electric540     540 
Net income for common stock$85,259 12,299 10,955  (23,254)$85,259 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Six months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$85,259 12,299 10,955  (23,254)$85,259 
Other comprehensive income, net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of taxes11,691 1,669 1,522  (3,191)11,691 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(11,622)(1,668)(1,522) 3,190 (11,622)
Other comprehensive income, net of taxes69 1   (1)69 
Comprehensive income attributable to common shareholder$85,328 12,300 10,955  (23,255)$85,328 

24


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsi-
diaries
Consoli-
dating
adjustments
Hawaiian Electric
Consolidated
Assets      
Property, plant and equipment
Utility property, plant and equipment      
Land$42,860 5,606 3,594   $52,060 
Plant and equipment5,178,903 1,399,002 1,262,710   7,840,615 
Less accumulated depreciation(1,816,724)(633,559)(576,012)  (3,026,295)
Construction in progress173,970 20,725 31,984   226,679 
Utility property, plant and equipment, net3,579,009 791,774 722,276   5,093,059 
Nonutility property, plant and equipment, less accumulated depreciation
5,300 115 1,532   6,947 
Total property, plant and equipment, net3,584,309 791,889 723,808   5,100,006 
Investment in wholly owned subsidiaries, at equity686,338    (686,338) 
Current assets      
Cash and cash equivalents6,578 5,754 3,094 77  15,503 
Restricted cash1,129     1,129 
Advances to affiliates3,000  10,000  (13,000) 
Customer accounts receivable, net176,838 37,631 32,801   247,270 
Accrued unbilled revenues, net128,083 26,245 24,548   178,876 
Other accounts receivable, net20,525 3,063 3,320  (16,520)10,388 
Fuel oil stock, at average cost178,911 17,254 27,622   223,787 
Materials and supplies, at average cost43,836 10,001 20,744   74,581 
Prepayments and other27,424 4,911 3,593  612 36,540 
Regulatory assets64,999 4,452 4,127   73,578 
Total current assets651,323 109,311 129,849 77 (28,908)861,652 
Other long-term assets      
Operating lease right-of-use assets49,326 36,743 13,621   99,690 
Regulatory assets309,077 76,660 71,585   457,322 
Other129,402 19,163 20,280  (519)168,326 
Total other long-term assets487,805 132,566 105,486  (519)725,338 
Total assets$5,409,775 1,033,766 959,143 77 (715,765)$6,686,996 
Capitalization and liabilities      
Capitalization      
Common stock equity$2,289,595 337,737 348,524 77 (686,338)$2,289,595 
Cumulative preferred stock—not subject to mandatory redemption
22,293 7,000 5,000   34,293 
Long-term debt, net1,176,691 244,393 263,436   1,684,520 
Total capitalization3,488,579 589,130 616,960 77 (686,338)4,008,408 
Current liabilities      
Current portion of operating lease liabilities18,985 6,441 2,550   27,976 
Current portion of long-term debt39,991 11,997    51,988 
Short-term borrowings from non-affiliates54,987     54,987 
Short-term borrowings from affiliate10,000 3,000   (13,000) 
Accounts payable156,222 22,524 20,410   199,156 
Interest and preferred dividends payable12,779 2,677 2,350  (10)17,796 
Taxes accrued, including revenue taxes145,594 34,157 31,636  612 211,999 
Regulatory liabilities14,614 3,532 4,487   22,633 
Other61,438 17,749 18,105  (16,668)80,624 
Total current liabilities514,610 102,077 79,538  (29,066)667,159 
Deferred credits and other liabilities      
Operating lease liabilities44,498 30,428 11,185   86,111 
Deferred income taxes285,438 51,403 63,269   400,110 
Regulatory liabilities709,954 182,303 93,185   985,442 
Unamortized tax credits73,441 13,643 13,028   100,112 
Defined benefit pension and other postretirement benefit plans liability
216,789 47,783 51,264  (361)315,475 
Other76,466 16,999 30,714   124,179 
Total deferred credits and other liabilities1,406,586 342,559 262,645  (361)2,011,429 
Total capitalization and liabilities$5,409,775 1,033,766 959,143 77 (715,765)$6,686,996 

25


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
December 31, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsi-diaries
Consoli-
dating
adjustments
Hawaiian Electric
Consolidated
Assets      
Property, plant and equipment
Utility property, plant and equipment      
Land$42,737 5,606 3,594   $51,937 
Plant and equipment5,097,033 1,390,361 1,248,589   7,735,983 
Less accumulated depreciation(1,757,096)(619,991)(563,430)  (2,940,517)
Construction in progress159,854 17,129 27,586   204,569 
Utility property, plant and equipment, net3,542,528 793,105 716,339   5,051,972 
Nonutility property, plant and equipment, less accumulated depreciation
5,302 115 1,532   6,949 
Total property, plant and equipment, net3,547,830 793,220 717,871   5,058,921 
Investment in wholly owned subsidiaries, at equity
676,237    (676,237) 
Current assets      
Cash and cash equivalents23,344 5,326 23,422 77  52,169 
Restricted cash3,089     3,089 
Advances to affiliates1,000    (1,000) 
Customer accounts receivable, net135,949 28,469 22,441   186,859 
Accrued unbilled revenues, net92,469 19,529 17,157   129,155 
Other accounts receivable, net18,624 3,347 3,031  (17,735)7,267 
Fuel oil stock, at average cost71,184 12,814 20,080   104,078 
Materials and supplies, at average cost42,006 9,727 20,144   71,877 
Prepayments and other32,140 6,052 7,114  725 46,031 
Regulatory assets58,695 3,051 4,918   66,664 
Total current assets478,500 88,315 118,307 77 (18,010)667,189 
Other long-term assets      
Operating lease right-of-use assets78,710 22,442 318   101,470 
Regulatory assets337,903 81,645 79,331   498,879 
Other130,546 17,124 18,510  (1,014)165,166 
Total other long-term assets547,159 121,211 98,159  (1,014)765,515 
Total assets$5,249,726 1,002,746 934,337 77 (695,261)$6,491,625 
Capitalization and liabilities      
Capitalization
Common stock equity$2,261,899 332,900 343,260 77 (676,237)$2,261,899 
Cumulative preferred stock—not subject to mandatory redemption
22,293 7,000 5,000   34,293 
Long-term debt, net1,136,620 234,390 253,417   1,624,427 
Total capitalization3,420,812 574,290 601,677 77 (676,237)3,920,619 
Current liabilities     
Current portion of operating lease liabilities45,955 3,378 35   49,368 
Current portion of long-term debt39,981 11,994    51,975 
Short-term borrowings-affiliate 1,000   (1,000) 
Accounts payable111,024 26,139 22,844   160,007 
Interest and preferred dividends payable12,442 2,617 2,269  (3)17,325 
Taxes accrued, including revenue taxes143,723 33,153 30,679  725 208,280 
Regulatory liabilities22,240 3,247 4,273   29,760 
Other56,752 14,158 18,540  (17,881)71,569 
Total current liabilities432,117 95,686 78,640  (18,159)588,284 
Deferred credits and other liabilities     
Operating lease liabilities46,426 19,063 291   65,780 
Deferred income taxes291,027 53,298 64,309   408,634 
Regulatory liabilities695,152 179,267 92,589   967,008 
Unamortized tax credits76,201 14,212 13,532   103,945 
Defined benefit pension and other postretirement benefit plans liability
220,480 48,900 53,257  (857)321,780 
Other67,511 18,030 30,042  (8)115,575 
Total deferred credits and other liabilities1,396,797 332,770 254,020  (865)1,982,722 
Total capitalization and liabilities$5,249,726 1,002,746 934,337 77 (695,261)$6,491,625 

26


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Changes in Common Stock Equity
Six months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2021$2,261,899 332,900 343,260 77 (676,237)$2,261,899 
Net income for common stock90,544 13,035 12,863 — (25,898)90,544 
Other comprehensive income, net of taxes102 2 1 — (3)102 
Common stock dividends(62,950)(8,200)(7,600)— 15,800 (62,950)
Balance, June 30, 2022$2,289,595 337,737 348,524 77 (686,338)$2,289,595 
 
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Changes in Common Stock Equity
Six months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2020$2,141,918 317,451 309,363 77 (626,891)$2,141,918 
Net income for common stock85,259 12,299 10,955 — (23,254)85,259 
Other comprehensive income, net of taxes69 1 — — (1)69 
Common stock dividends(55,850)(7,300)(7,550)— 14,850 (55,850)
Balance, June 30, 2021$2,171,396 322,451 312,768 77 (635,296)$2,171,396 

27


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Six months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net cash provided by operating activities$25,367 19,742 14,841  (15,800)$44,150 
Cash flows from investing activities      
Capital expenditures(87,892)(23,638)(28,715)  (140,245)
Advances to affiliates(2,000) (10,000) 12,000  
Other4,471 834 1,380   6,685 
Net cash used in investing activities(85,421)(22,804)(37,335) 12,000 (133,560)
Cash flows from financing activities      
Common stock dividends(62,950)(8,200)(7,600) 15,800 (62,950)
Preferred stock dividends of Hawaiian Electric and subsidiaries(540)(267)(191)  (998)
Proceeds from issuance of long-term debt40,000 10,000 10,000   60,000 
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less64,987 2,000   (12,000)54,987 
Other(169)(43)(43)  (255)
Net cash provided by financing activities41,328 3,490 2,166  3,800 50,784 
Net increase (decrease) in cash, cash equivalents and restricted cash(18,726)428 (20,328)  (38,626)
Cash, cash equivalents and restricted cash, beginning of period26,433 5,326 23,422 77  55,258 
Cash, cash equivalents and restricted cash, end of period7,707 5,754 3,094 77  16,632 
Less: Restricted cash(1,129)    (1,129)
Cash and cash equivalents, end of period$6,578 5,754 3,094 77  $15,503 

28


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Six months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net cash provided by operating activities$43,623 15,315 13,365  (14,850)$57,453 
Cash flows from investing activities     
Capital expenditures (92,352)(22,135)(23,538)  (138,025)
Advances from affiliates22,900    (22,900) 
Other3,087 911 672   4,670 
Net cash used in investing activities(66,365)(21,224)(22,866) (22,900)(133,355)
Cash flows from financing activities     
Common stock dividends(55,850)(7,300)(7,550) 14,850 (55,850)
Preferred stock dividends of Hawaiian Electric and subsidiaries(540)(267)(191)  (998)
Repayment of short-term debt(50,000)    (50,000)
Proceeds from issuance of long-term debt60,000 30,000 25,000   115,000 
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less37,999 (15,700)(7,200) 22,900 37,999 
Other(703)(116)(122)  (941)
Net cash provided by (used in) financing activities(9,094)6,617 9,937  37,750 45,210 
Net increase (decrease) in cash, cash equivalents and restricted cash(31,836)708 436   (30,692)
Cash, cash equivalents and restricted cash, beginning of period58,171 3,046 2,032 77  63,326 
Cash, cash equivalents and restricted cash, end of period26,335 3,754 2,468 77  32,634 
Less: Restricted cash(8,968)    (8,968)
Cash and cash equivalents, end of period$17,367 3,754 2,468 77  $23,666 

29


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 4 ·Bank segment
Selected financial information
American Savings Bank, F.S.B.
Statements of Income and Comprehensive Income Data
 Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Interest and dividend income    
Interest and fees on loans$48,129 $51,026 $94,134 $100,973 
Interest and dividends on investment securities14,693 11,040 28,677 19,713 
Total interest and dividend income62,822 62,066 122,811 120,686 
Interest expense    
Interest on deposit liabilities921 1,281 1,868 2,743 
Interest on other borrowings139 23 144 50 
Total interest expense1,060 1,304 2,012 2,793 
Net interest income61,762 60,762 120,799 117,893 
Provision for credit losses2,757 (12,207)(506)(20,642)
Net interest income after provision for credit losses59,005 72,969 121,305 138,535 
Noninterest income    
Fees from other financial services4,716 5,464 10,303 10,537 
Fee income on deposit liabilities4,552 3,904 9,243 7,767 
Fee income on other financial products2,529 2,201 5,247 4,643 
Bank-owned life insurance(142)1,624 539 4,185 
Mortgage banking income372 1,925 1,449 6,225 
Gain on sale of real estate  1,002  
Gain on sale of investment securities, net   528 
Other income, net475 76 847 348 
Total noninterest income12,502 15,194 28,630 34,233 
Noninterest expense    
Compensation and employee benefits27,666 27,670 54,881 55,707 
Occupancy5,467 5,100 11,419 10,069 
Data processing4,484 4,533 8,635 8,884 
Services2,522 2,475 4,961 5,337 
Equipment2,402 2,394 4,731 4,616 
Office supplies, printing and postage1,073 978 2,133 2,022 
Marketing934 665 1,952 1,313 
FDIC insurance891 788 1,699 1,604 
Other expense3,959 3,568 7,200 6,122 
Total noninterest expense49,398 48,171 97,611 95,674 
Income before income taxes22,109 39,992 52,324 77,094 
Income taxes4,643 9,708 10,988 17,254 
Net income17,466 30,284 41,336 59,840 
Other comprehensive income (loss), net of taxes(88,835)16,999 (211,276)(28,755)
Comprehensive income (loss)$(71,369)$47,283 $(169,940)$31,085 

30


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:
 Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Interest and dividend income$62,822 $62,066 $122,811 $120,686 
Noninterest income12,502 15,194 28,630 34,233 
Less: Gain on sale of real estate  1,002  
Less: Gain on sale of investment securities, net   528 
*Revenues-Bank75,324 77,260 150,439 154,391 
Total interest expense1,060 1,304 2,012 2,793 
Provision for credit losses2,757 (12,207)(506)(20,642)
Noninterest expense49,398 48,171 97,611 95,674 
Less: Gain on sale of real estate  1,002  
Less: Retirement defined benefits credit—other than service costs(186)(186)(371)(1,464)
*Expenses-Bank53,401 37,454 98,486 79,289 
*Operating income-Bank21,923 39,806 51,953 75,102 
Add back: Retirement defined benefits credit—other than service costs(186)(186)(371)(1,464)
Add back: Gain on sale of investment securities, net   528 
Income before income taxes$22,109 $39,992 $52,324 $77,094 


31


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
American Savings Bank, F.S.B.
Balance Sheets Data
(in thousands)June 30, 2022December 31, 2021
Assets    
Cash and due from banks $128,971  $100,051 
Interest-bearing deposits12,054 151,189 
Cash and cash equivalents141,025 251,240 
Investment securities
Available-for-sale, at fair value 2,444,267  2,574,618 
Held-to-maturity, at amortized cost (fair value of $440,023 and $510,474, respectively)
513,767 522,270 
Stock in Federal Home Loan Bank, at cost 13,200  10,000 
Loans held for investment 5,426,995  5,211,114 
Allowance for credit losses (69,456) (71,130)
Net loans 5,357,539  5,139,984 
Loans held for sale, at lower of cost or fair value 3,738  10,404 
Other 659,139  590,897 
Goodwill 82,190  82,190 
Total assets $9,214,865  $9,181,603 
Liabilities and shareholder’s equity    
Deposit liabilities—noninterest-bearing $2,993,900  $2,976,632 
Deposit liabilities—interest-bearing 5,259,636  5,195,580 
Other borrowings 241,610  88,305 
Other 187,770  193,268 
Total liabilities 8,682,916  8,453,785 
  
Common stock 1  1 
Additional paid-in capital354,966 353,895 
Retained earnings 426,040  411,704 
Accumulated other comprehensive loss, net of tax benefits    
Net unrealized losses on securities$(241,301) $(32,037)
Retirement benefit plans(7,757)(249,058)(5,745)(37,782)
Total shareholder’s equity531,949  727,818 
Total liabilities and shareholder’s equity $9,214,865  $9,181,603 
Other assets    
Bank-owned life insurance $181,166  $177,566 
Premises and equipment, net 199,429  202,299 
Accrued interest receivable 21,335  20,854 
Mortgage-servicing rights 9,696  9,950 
Low-income housing investments104,592 110,989 
Real estate acquired in settlement of loans, net 271   
Real estate held for sale3,030  
Deferred tax asset84,814 7,699 
Other 54,806  61,540 
  $659,139  $590,897 
Other liabilities    
Accrued expenses $83,915  $87,905 
Federal and state income taxes payable    
Cashier’s checks 33,747  33,675 
Advance payments by borrowers 9,980  9,994 
Other 60,128  61,694 
  $187,770  $193,268 
32


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
    
Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death.
Other borrowings consisted of FHLB advances of $80.0 million and nil at June 30, 2022 and December 31, 2021, respectively, and securities sold under agreements to repurchase of $161.6 million and $88.3 million at June 30, 2022 and December 31, 2021, respectively.
Investment securities.  The major components of investment securities were as follows:
 Amortized costGross unrealized gainsGross unrealized lossesEstimated fair
value
Gross unrealized losses
 Less than 12 months12 months or longer
(dollars in thousands)Number of issuesFair 
value
AmountNumber of issuesFair 
value
Amount
June 30, 2022        
Available-for-sale
U.S. Treasury and federal agency obligations$107,389 $ $(4,902)$102,487 17 $102,487 $(4,902) $ $ 
Mortgage-backed securities*2,606,904 467 (322,185)2,285,186 180 1,409,947 (158,235)66 845,879 (163,950)
Corporate bonds44,447  (3,018)41,429 5 41,429 (3,018)   
Mortgage revenue bonds15,165   15,165       
 $2,773,905 $467 $(330,105)$2,444,267 202 $1,553,863 $(166,155)66 $845,879 $(163,950)
Held-to-maturity
U.S. Treasury and Federal agency obligations$59,882 $ $(5,997)$53,885 3 $53,885 $(5,997) $ $ 
Mortgage-backed securities*453,885  (67,747)386,138 24 236,918 (35,867)13 149,220 (31,880)
 $513,767 $ $(73,744)$440,023 27 $290,803 $(41,864)13 $149,220 $(31,880)
December 31, 2021
Available-for-sale
U.S. Treasury and federal agency obligations$89,714 $803 $(427)$90,090 4 $44,827 $(427) $ $ 
Mortgage-backed securities*2,482,618 6,511 (51,206)2,437,923 120 1,845,243 (38,321)18 271,012 (12,885)
Corporate bonds30,625 655 (102)31,178 1 12,780 (102)   
Mortgage revenue bonds15,427   15,427       
 $2,618,384 $7,969 $(51,735)$2,574,618 125 $1,902,850 $(38,850)18 $271,012 $(12,885)
Held-to-maturity
U.S. Treasury and Federal agency obligations$59,871 $168 $(170)$59,869 2 $39,594 $(170) $ $ 
Mortgage-backed securities* 462,399 1,480 (13,274)450,605 22 290,883 (7,665)7 106,483 (5,609)
 $522,270 $1,648 $(13,444)$510,474 24 $330,477 $(7,835)7 $106,483 $(5,609)
* Issued or guaranteed by U.S. Government agencies or sponsored agencies
ASB does not believe that the investment securities that were in an unrealized loss position at June 30, 2022 and December 31, 2021, represent a credit loss. Total gross unrealized losses were primarily attributable to change in market conditions. On a quarterly basis the investment securities are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment portfolio continue to be investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and agency mortgage-backed securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB’s investment securities portfolio did not require an allowance for credit losses at June 30, 2022 and December 31, 2021.
33


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
U.S. Treasury, federal agency obligations, corporate bonds, and mortgage revenue bonds have contractual terms to maturity. Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.
The contractual maturities of investment securities were as follows:
June 30, 2022Amortized costFair value
(in thousands)  
Available-for-sale
Due in one year or less$15,807 $15,781 
Due after one year through five years84,406 81,286 
Due after five years through ten years66,788 62,014 
Due after ten years  
 167,001 159,081 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies2,606,904 2,285,186 
Total available-for-sale securities$2,773,905 $2,444,267 
Held-to-maturity
Due in one year or less$ $ 
Due after one year through five years  
Due after five years through ten years59,882 53,885 
Due after ten years  
59,882 53,885 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies453,885 386,138 
Total held-to-maturity securities$513,767 $440,023 
The proceeds, gross gains and losses from sales of available-for-sale securities were as follows:
Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Proceeds $ $ $ $197,354 
Gross gains    975 
Gross losses   447 
Tax expense on realized gains   142 
34


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The components of loans were summarized as follows:
June 30, 2022December 31, 2021
(in thousands)  
Real estate:  
Residential 1-4 family$2,310,041 $2,299,212 
Commercial real estate1,261,389 1,056,982 
Home equity line of credit923,976 835,663 
Residential land21,535 19,859 
Commercial construction94,060 91,080 
Residential construction19,230 11,138 
Total real estate4,630,231 4,313,934 
Commercial660,478 793,304 
Consumer148,637 113,966 
Total loans5,439,346 5,221,204 
Less: Deferred fees and discounts(12,351)(10,090)
Allowance for credit losses (69,456)(71,130)
Total loans, net$5,357,539 $5,139,984 
ASB's policy is to require private mortgage insurance on all real estate loans when the loan-to-value ratio of the property exceeds 80% of the lower of the appraised value or purchase price at origination. For non-owner occupied residential property purchases, the loan-to-value ratio may not exceed 75% of the lower of the appraised value or purchase price at origination.
35


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Allowance for credit losses.  The allowance for credit losses (balances and changes) by portfolio segment were as follows:
(in thousands)Residential
1-4 family
Commercial real
estate
Home
equity line of credit
Residential landCommercial constructionResidential constructionCommercial loansConsumer loansTotal
Three months ended June 30, 2022        
Allowance for credit losses:         
Beginning balance$7,874 $20,176 $5,650 $697 $2,340 $31 $14,314 $16,129 $67,211 
Charge-offs      (148)(1,369)(1,517)
Recoveries3  31 96   399 976 1,505 
Provision643 724 415 (116)294 15 (2,152)2,434 2,257 
Ending balance$8,520 $20,900 $6,096 $677 $2,634 $46 $12,413 $18,170 $69,456 
Three months ended June 30, 2021        
Allowance for credit losses:         
Beginning balance$5,261 $34,345 $5,901 $573 $1,453 $16 $24,504 $19,740 $91,793 
Charge-offs(20) 10    (319)(1,931)(2,260)
Recoveries51  61 11   366 1,187 1,676 
Provision226 (5,637)(637)34 176  (4,493)(2,626)(12,957)
Ending balance$5,518 $28,708 $5,335 $618 $1,629 $16 $20,058 $16,370 $78,252 
Six months ended June 30, 2022        
Allowance for credit losses:         
Beginning balance$6,545 $24,696 $5,657 $646 $2,186 $18 $15,798 $15,584 $71,130 
Charge-offs      (224)(2,851)(3,075)
Recoveries11  42 101   752 2,001 2,907 
Provision1,964 (3,796)397 (70)448 28 (3,913)3,436 (1,506)
Ending balance$8,520 $20,900 $6,096 $677 $2,634 $46 $12,413 $18,170 $69,456 
Six months ended June 30, 2021        
Allowance for credit losses:         
Beginning balance$4,600 $35,607 $6,813 $609 $4,149 $11 $25,462 $23,950 $101,201 
Charge-offs(20) (40)   (1,090)(4,791)(5,941)
Recoveries54  76 21   639 2,194 2,984 
Provision884 (6,899)(1,514)(12)(2,520)5 (4,953)(4,983)(19,992)
Ending balance$5,518 $28,708 $5,335 $618 $1,629 $16 $20,058 $16,370 $78,252 

36


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Allowance for loan commitments.  The allowance for loan commitments by portfolio segment were as follows:
(in thousands)Home equity
 line of credit
Commercial constructionCommercial loansTotal
Three months ended June 30, 2022
Allowance for loan commitments:
Beginning balance$400 $3,600 $1,400 $5,400 
Provision 500  500 
Ending balance$400 $4,100 $1,400 $5,900 
Three months ended June 30, 2021
Allowance for loan commitments:
Beginning balance$400 $1,300 $1,200 $2,900 
Provision 1,100 (350)750 
Ending balance$400 $2,400 $850 $3,650 
Six months ended June 30, 2022
Allowance for loan commitments:
Beginning balance$400 $3,700 $800 $4,900 
Provision 400 600 1,000 
Ending balance$400 $4,100 $1,400 $5,900 
Six months ended June 30, 2021
Allowance for loan commitments:
Beginning balance$300 $3,000 $1,000 $4,300 
Provision100 (600)(150)(650)
Ending balance$400 $2,400 $850 $3,650 
Credit quality.  ASB performs an internal loan review and grading on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of its lending policies and procedures. The objectives of the loan review and grading procedures are to identify, in a timely manner, existing or emerging credit trends so that appropriate steps can be initiated to manage risk and avoid or minimize future losses. Loans subject to grading include commercial, commercial real estate and commercial construction loans.
Each commercial and commercial real estate loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications:  Pass, Special Mention, Substandard, Doubtful, and Loss. The AQR is a function of the probability of default model rating, the loss given default, and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. Pass exposures generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that ASB may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and has such little value that its continuance as a bankable asset is not warranted.
37


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The credit risk profile by vintage date based on payment activity or internally assigned grade for loans was as follows:
Term Loans by Origination YearRevolving Loans
(in thousands)20222021202020192018PriorRevolvingConverted to term loansTotal
June 30, 2022
Residential 1-4 family
Current$176,333 $768,123 $437,911 $119,503 $56,469 $742,653 $ $ $2,300,992 
30-59 days past due  572 217 453 3,288   4,530 
60-89 days past due     637   637 
Greater than 89 days past due    809 3,073   3,882 
176,333 768,123 438,483 119,720 57,731 749,651   2,310,041 
Home equity line of credit
Current      881,505 41,295 922,800 
30-59 days past due      110 101 211 
60-89 days past due      106 83 189 
Greater than 89 days past due      423 353 776 
      882,144 41,832 923,976 
Residential land
Current4,290 9,861 5,410 753 527 283   21,124 
30-59 days past due         
60-89 days past due     109   109 
Greater than 89 days past due   205  97   302 
4,290 9,861 5,410 958 527 489   21,535 
Residential construction
Current5,614 11,071 2,297   248   19,230 
30-59 days past due         
60-89 days past due         
Greater than 89 days past due         
5,614 11,071 2,297   248   19,230 
Consumer
Current71,436 28,455 10,209 16,525 3,385 198 11,509 4,235 145,952 
30-59 days past due268 224 68 330 82 2 107 110 1,191 
60-89 days past due74 109 78 161 91  45 57 615 
Greater than 89 days past due80 159 67 255 107  91 120 879 
71,858 28,947 10,422 17,271 3,665 200 11,752 4,522 148,637 
Commercial real estate
Pass229,603 171,805 301,360 52,361 61,179 289,835 4,235  1,110,378 
Special Mention 19,600 3,488 41,235 14,174 36,958   115,455 
Substandard  675 11,444 1,835 21,602   35,556 
Doubtful         
229,603 191,405 305,523 105,040 77,188 348,395 4,235  1,261,389 
Commercial construction
Pass 35,982 25,123  11,341  21,614  94,060 
Special Mention         
Substandard         
Doubtful         
 35,982 25,123  11,341  21,614  94,060 
Commercial
Pass41,268 181,637 87,936 74,326 45,637 87,962 78,344 14,590 611,700 
Special Mention 23 9,702 6,533 101 1,011 15,414 14 32,798 
Substandard315 409 156 2,122 1,548 5,975 4,308 1,147 15,980 
Doubtful         
41,583 182,069 97,794 82,981 47,286 94,948 98,066 15,751 660,478 
Total loans$529,281 $1,227,458 $885,052 $325,970 $197,738 $1,193,931 $1,017,811 $62,105 $5,439,346 
38


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Term Loans by Origination YearRevolving Loans
(in thousands)20212020201920182017PriorRevolvingConverted to term loansTotal
December 31, 2021
Residential 1-4 family
Current$791,758 $461,683 $133,345 $64,421 $124,994 $712,452 $ $ $2,288,653 
30-59 days past due   809  2,210   3,019 
60-89 days past due     1,468   1,468 
Greater than 89 days past due  2,987   3,085   6,072 
791,758 461,683 136,332 65,230 124,994 719,215   2,299,212 
Home equity line of credit
Current      794,518 39,116 833,634 
30-59 days past due      296 313 609 
60-89 days past due      16 70 86 
Greater than 89 days past due      838 496 1,334 
      795,668 39,995 835,663 
Residential land
Current10,572 6,794 1,116 532 267 181   19,462 
30-59 days past due         
60-89 days past due         
Greater than 89 days past due     397   397 
10,572 6,794 1,116 532 267 578   19,859 
Residential construction
Current7,856 3,019   263    11,138 
30-59 days past due         
60-89 days past due         
Greater than 89 days past due         
7,856 3,019   263    11,138 
Consumer
Current37,563 15,488 29,383 10,897 302 238 12,740 4,157 110,768 
30-59 days past due202 181 517 234 15  156 70 1,375 
60-89 days past due59 127 392 183 8  7 106 882 
Greater than 89 days past due14 93 387 192 27  141 87 941 
37,838 15,889 30,679 11,506 352 238 13,044 4,420 113,966 
Commercial real estate
Pass173,794 275,242 49,317 56,490 33,581 259,583 11,602  859,609 
Special Mention19,600 3,529 42,935 30,870 20,788 32,824   150,546 
Substandard 684 13,936 1,859 1,805 28,543   46,827 
Doubtful         
193,394 279,455 106,188 89,219 56,174 320,950 11,602  1,056,982 
Commercial construction
Pass17,140 43,261  11,342   19,337  91,080 
Special Mention         
Substandard         
Doubtful         
17,140 43,261  11,342   19,337  91,080 
Commercial
Pass266,087 96,963 79,329 56,497 31,019 66,570 96,673 15,510 708,648 
Special Mention40 27,336 10,071 202 439 8,966 15,303 18 62,375 
Substandard427 184 3,737 1,777 4,457 2,961 7,083 1,655 22,281 
Doubtful         
266,554 124,483 93,137 58,476 35,915 78,497 119,059 17,183 793,304 
Total loans$1,325,112 $934,584 $367,452 $236,305 $217,965 $1,119,478 $958,710 $61,598 $5,221,204 
39


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Revolving loans converted to term loans during the six months ended June 30, 2022 in the commercial, home equity line of credit and consumer portfolios were $1.0 million, $10.0 million and $1.7 million, respectively. Revolving loans converted to term loans during the six months ended June 30, 2021 in the commercial, home equity line of credit and consumer portfolios were $0.6 million, $9.8 million and $1.5 million, respectively.
The credit risk profile based on payment activity for loans was as follows:
(in thousands)30-59
days
past due
60-89
days
past due
 
Greater than
90 days
Total
past due
CurrentTotal
financing
receivables
Amortized cost>
90 days and
accruing
June 30, 2022       
Real estate:       
Residential 1-4 family$4,530 $637 $3,882 $9,049 $2,300,992 $2,310,041 $ 
Commercial real estate472   472 1,260,917 1,261,389  
Home equity line of credit211 189 776 1,176 922,800 923,976  
Residential land 109 302 411 21,124 21,535  
Commercial construction    94,060 94,060  
Residential construction    19,230 19,230  
Commercial87 763 9 859 659,619 660,478  
Consumer1,191 615 879 2,685 145,952 148,637  
Total loans$6,491 $2,313 $5,848 $14,652 $5,424,694 $5,439,346 $ 
December 31, 2021       
Real estate:       
Residential 1-4 family$3,019 $1,468 $6,072 $10,559 $2,288,653 $2,299,212 $ 
Commercial real estate    1,056,982 1,056,982  
Home equity line of credit609 86 1,334 2,029 833,634 835,663  
Residential land  397 397 19,462 19,859  
Commercial construction    91,080 91,080  
Residential construction    11,138 11,138  
Commercial700 313 48 1,061 792,243 793,304  
Consumer1,375 882 941 3,198 110,768 113,966  
Total loans$5,703 $2,749 $8,792 $17,244 $5,203,960 $5,221,204 $ 
The credit risk profile based on nonaccrual loans were as follows:
(in thousands)June 30, 2022December 31, 2021
With a Related ACLWithout a Related ACLTotalWith a Related ACLWithout a Related ACLTotal
Real estate:
Residential 1-4 family$11,487 $3,571 $15,058 $16,045 $3,703 $19,748 
Commercial real estate   14,104 1,221 15,325 
Home equity line of credit3,225 725 3,950 4,227 1,294 5,521 
Residential land205 97 302 97 300 397 
Commercial construction      
Residential construction      
Commercial 240 899 1,139 1,446 692 2,138 
Consumer 1,430  1,430 1,845  1,845 
  Total $16,587 $5,292 $21,879 $37,764 $7,210 $44,974 

40


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The credit risk profile based on loans whose terms have been modified and accruing interest were as follows:
(in thousands)June 30, 2022December 31, 2021
Real estate:
Residential 1-4 family$7,690 $6,949 
Commercial real estate10,031 3,055 
Home equity line of credit5,037 6,021 
Residential land920 980 
Commercial construction  
Residential construction  
Commercial6,844 7,860 
Consumer51 52 
Total troubled debt restructured loans accruing interest$30,573 $24,917 
ASB did not recognize interest on nonaccrual loans for the six months ended June 30, 2022 and 2021.
Troubled debt restructurings.  A loan modification is deemed to be a TDR when the borrower is determined to be experiencing financial difficulties and ASB grants a concession it would not otherwise consider.
The allowance for credit losses on TDR loans that do not share risk characteristics are individually evaluated based on the present value of expected future cash flows discounted at the loan’s effective original contractual rate or based on the fair value of collateral less cost to sell. The financial impact of the estimated loss is an increase to the allowance associated with the modified loan. When available information confirms that specific loans or portions thereof are uncollectible (confirmed losses), these amounts are charged off against the allowance for credit losses.
Loans modified as a TDR.  Loan modifications that occurred during the three and six months ended June 30, 2022 and 2021 were as follows:
Three months ended June 30, 2022Six months ended June 30, 2022
(dollars in thousands)Number 
of contracts
Outstanding 
recorded 
investment
 (as of period end)1
Related allowance
(as of period end)
Number 
of contracts
Outstanding recorded 
investment
 (as of period end)1
Related allowance
(as of period end)
Troubled debt restructurings    
Real estate:    
Residential 1-4 family1 381 135 1 381 135 
Commercial real estate      
Home equity line of credit      
Residential land      
Commercial construction      
Residential construction      
Commercial      
Consumer       
 1 $381 $135 1 $381 $135 
41


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Three months ended June 30, 2021Six months ended June 30, 2021
(dollars in thousands)Number 
of contracts
Outstanding 
recorded 
investment
 (as of period end)1
Related allowance
(as of period end)
Number 
of contracts
Outstanding recorded 
investment
 (as of period end)1
Related allowance
(as of period end)
Troubled debt restructurings    
Real estate:    
Residential 1-4 family3 $1,835 $77 15 $10,024 $271 
Commercial real estate      
Home equity line of credit   1 163 18 
Residential land1 288 12 2 558 23 
Commercial construction      
Residential construction      
Commercial4 237 11 6 296 26 
Consumer       
 8 $2,360 $100 24 $11,041 $338 
1 The period end balances reflect all paydowns and charge-offs since the modification period. TDRs fully paid off, charged-off, or foreclosed upon by period end are not included.

There were no loans modified in TDRs that experienced a payment default of 90 days or more during the second quarter and first six months of 2022 and 2021.
If a loan modified in a TDR subsequently defaults, ASB evaluates the loan for further impairment. Based on its evaluation, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. Commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR totaled nil at June 30, 2022 and December 31, 2021.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes.
In response to the COVID-19 pandemic, the Board of Governors of the FRB, the FDIC, the National Credit Union Administration, the OCC, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the agencies) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to accounting for loan modifications, past due reporting and nonaccrual status and charge-offs.
Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with the FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment. Financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral. Lastly, during short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or as classified.
Collateral-dependent loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral.
42


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Loans considered collateral-dependent were as follows:
Amortized cost
(in thousands)June 30, 2022December 31, 2021Collateral type
Real estate:
   Residential 1-4 family$4,070 $3,493  Residential real estate property
Commercial real estate 1,221  Commercial real estate property
   Home equity line of credit706 1,294  Residential real estate property
Residential land97 300  Residential real estate property
     Total real estate4,873 6,308 
Commercial205 692  Business assets
     Total $5,078 $7,000 
ASB had $3.2 million and $3.4 million of mortgage loans collateralized by residential real estate property that were in the process of foreclosure at June 30, 2022 and December 31, 2021, respectively.
Mortgage servicing rights (MSRs). In its mortgage banking business, ASB sells residential mortgage loans to government-sponsored entities and other parties, who may issue securities backed by pools of such loans. ASB retains no beneficial interests in these loans other than the servicing rights of certain loans sold.
ASB received proceeds from the sale of residential mortgages of $38.7 million and $95.6 million for the three months ended June 30, 2022 and 2021, respectively, and recognized gains on such sales of $0.3 million and $1.9 million for the three months ended June 30, 2022 and 2021, respectively. ASB received proceeds from the sale of residential mortgages of $114.3 million and $266.5 million for the six months ended June 30, 2022 and 2021, respectively, and recognized gains on such sales of $1.4 million and $6.2 million for the six months ended June 30, 2022 and 2021, respectively.
There were no repurchased mortgage loans for the six months ended June 30, 2022 and 2021.
Mortgage servicing fees, a component of other income, net, were $0.9 million and $1.0 million for the three months ended June 30, 2022 and 2021, respectively, and $1.8 million and $1.9 million for the six months ended June 30, 2022 and 2021, respectively.
Changes in the carrying value of MSRs were as follows:
(in thousands)Gross
carrying amount
Accumulated amortizationValuation allowanceNet
carrying amount
June 30, 2022$19,341 $(9,645)$ $9,696 
December 31, 202118,674 (8,724) 9,950 

Changes related to MSRs were as follows:
Three months ended June 30,Six months ended June 30
(in thousands)2022202120222021
Mortgage servicing rights
Beginning balance$10,024 $10,689 $9,950 $10,280 
Amount capitalized204 1,023 923 2,570 
Amortization(532)(958)(1,177)(2,096)
Other-than-temporary impairment    
Carrying amount before valuation allowance9,696 10,754 9,696 10,754 
Valuation allowance for mortgage servicing rights
Beginning balance 4  260 
Provision (4) (260)
Other-than-temporary impairment    
Ending balance    
Net carrying value of mortgage servicing rights$9,696 $10,754 $9,696 $10,754 
43


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
ASB capitalizes MSRs acquired upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the MSRs to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the MSRs.
ASB uses a present value cash flow model to estimate the fair value of MSRs. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in “Revenues - bank” in the condensed consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable.
Key assumptions used in estimating the fair value of ASB’s MSRs used in the impairment analysis were as follows:
(dollars in thousands)June 30, 2022December 31, 2021
Unpaid principal balance$1,483,877 $1,481,899 
Weighted average note rate3.34 %3.38 %
Weighted average discount rate9.25 %9.25 %
Weighted average prepayment speed6.55 %9.77 %

The sensitivity analysis of fair value of MSRs to hypothetical adverse changes of 25 and 50 basis points in certain key assumptions was as follows:
(dollars in thousands)June 30, 2022December 31, 2021
Prepayment rate:
  25 basis points adverse rate change$(111)$(714)
  50 basis points adverse rate change(244)(1,608)
Discount rate:
  25 basis points adverse rate change(176)(129)
  50 basis points adverse rate change(350)(256)
The effect of a variation in certain assumptions on fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the changes in the fair value of MSRs typically is not linear.
Other borrowings.  As of June 30, 2022 and December 31, 2021, ASB had $80 million and nil of FHLB advances outstanding, respectively, and no federal funds purchased with the Federal Reserve Bank. ASB was in compliance with all Advances, Pledge and Security Agreement requirements as of June 30, 2022.
Securities sold under agreements to repurchase are accounted for as financing transactions and the obligations to repurchase these securities are recorded as liabilities in the condensed consolidated balance sheets. ASB pledges investment securities as collateral for securities sold under agreements to repurchase. All such agreements are subject to master netting arrangements, which provide for a conditional right of set-off in case of default by either party; however, ASB presents securities sold under agreements to repurchase on a gross basis in the balance sheet. The following tables present information about the securities sold under agreements to repurchase, including the related collateral received from or pledged to counterparties:
(in millions)Gross amount
 of recognized
 liabilities
Gross amount
 offset in the 
Balance Sheets
Net amount of
liabilities presented
in the Balance Sheets
Repurchase agreements   
June 30, 2022$162 $ $162 
December 31, 202188  88 
 Gross amount not offset in the Balance Sheets
(in millions) Net amount of liabilities presented
in the Balance Sheets
Financial
instruments
Cash
collateral
pledged
Commercial account holders
June 30, 2022$162 $181 $ 
December 31, 202188 161  
44


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The securities underlying the agreements to repurchase are book-entry securities and were delivered by appropriate entry into the counterparties’ accounts or into segregated tri-party custodial accounts at the FHLB. The securities underlying the agreements to repurchase continue to be reflected in ASB’s asset accounts.
Derivative financial instruments. ASB enters into interest rate lock commitments (IRLCs) with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed securities to investors to hedge against the inherent interest rate and pricing risks associated with selling loans.
ASB enters into IRLCs for residential mortgage loans, which commit ASB to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose ASB to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.
ASB enters into forward commitments to hedge the interest rate risk for rate locked mortgage applications in process and closed mortgage loans held for sale. These commitments are primarily forward sales of to-be-announced mortgage backed securities. Generally, when mortgage loans are closed, the forward commitment is liquidated and replaced with a mandatory delivery forward sale of the mortgage to a secondary market investor. In some cases, a best-efforts forward sale agreement is utilized as the forward commitment. These commitments are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.
Changes in the fair value of IRLCs and forward commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.
The notional amount and fair value of ASB’s derivative financial instruments were as follows:
 June 30, 2022December 31, 2021
(in thousands)Notional amountFair valueNotional amountFair value
Interest rate lock commitments$4,939 $44 $39,377 $638 
Forward commitments4,750 27 38,000 (11)
ASB’s derivative financial instruments, their fair values and balance sheet location were as follows:
Derivative Financial Instruments Not Designated as Hedging Instruments 1
June 30, 2022December 31, 2021
(in thousands) Asset derivatives Liability
derivatives
 Asset derivatives Liability
derivatives
Interest rate lock commitments$44 $ $638 $ 
Forward commitments27   11 
 $71 $ $638 $11 
1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.
The following table presents ASB’s derivative financial instruments and the amount and location of the net gains or losses recognized in ASB’s statements of income:
Derivative Financial Instruments Not Designated as Hedging Instruments Location of net gains (losses) recognized in the Statements of IncomeThree months ended June 30,Six months ended June 30
(in thousands)2022202120222021
Interest rate lock commitmentsMortgage banking income$62 $(67)$(593)$(4,165)
Forward commitmentsMortgage banking income(141)(381)37 459 
 $(79)$(448)$(556)$(3,706)
Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were $62.8 million at June 30, 2022 and December 31, 2021. These unfunded commitments were unconditional and legally binding and are recorded in other liabilities with a corresponding increase in other assets. As of June 30, 2022, ASB did not
45


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.
Note 5 · Credit agreement and changes in debt
On May 14, 2021, HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of nine financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Credit Facilities) to amend and restate their respective previously existing revolving unsecured credit agreements. The $175 million HEI Facility and $200 million Hawaiian Electric Facility both terminate on May 14, 2026. On February 18, 2022, the PUC approved Hawaiian Electric’s request to extend the term of the $200 million Hawaiian Electric Facility to May 14, 2026. In addition to extending the term, Hawaiian Electric also received PUC approval to exercise its options of two one-year extensions of the commitment termination date and to increase its aggregate revolving commitment amount from $200 million to $275 million, should there be a need.
None of the facilities are collateralized. As of June 30, 2022 and December 31, 2021, no amounts were outstanding under the Credit Facilities.
The Credit Facilities will be maintained to support each company’s respective short-term commercial paper program, but may be drawn on to meet each company’s respective working capital needs and general corporate purposes.
Changes in debt. On May 11, 2022, the Utilities executed, through a private placement pursuant to separate Note Purchase Agreements (the Note Purchase Agreements), the following unsecured senior notes bearing taxable interest (the Notes). The Notes had a delayed draw feature and the Utilities drew down all the proceeds on June 15, 2022.
Series 2022A
Aggregate principal amount$60 million
Fixed coupon interest rate3.7%
Maturity date6/15/2032
Principal amount by company:
Hawaiian Electric$40 million
Hawaii Electric Light$10 million
Maui Electric$10 million
The Notes include substantially the same financial covenants and customary conditions as Hawaiian Electric’s credit agreement. Hawaiian Electric is also a party as guarantor under the Note Purchase Agreements entered into by Hawaii Electric Light and Maui Electric. The Utilities did not obtain any of the proceeds at execution and instead drew down all the proceeds on June 15, 2022. The proceeds were used to finance their respective capital expenditures, repay short-term debt used to finance or refinance capital expenditures and/or reimburse funds used for the payment of capital expenditures. The Notes may be prepaid in whole or in part at any time at the prepayment price of the principal amount plus a “Make-Whole Amount.”
46


Note 6 · Shareholders' equity
Accumulated other comprehensive income/(loss).  Changes in the balances of each component of accumulated other comprehensive income/(loss) (AOCI) were as follows:
HEI ConsolidatedHawaiian Electric Consolidated
 (in thousands) Net unrealized gains (losses) on securities Unrealized gains (losses) on derivativesRetirement benefit plansAOCIAOCI-Retirement benefit plans
Balance, December 31, 2021$(32,037)$(3,638)$(16,858)$(52,533)$(3,280)
Current period other comprehensive income (loss)(209,264)3,911 354 (204,999)102 
Balance, June 30, 2022$(241,301)$273 $(16,504)$(257,532)$(3,178)
Balance, December 31, 2020$19,986 $(3,363)$(17,887)$(1,264)$(2,919)
Current period other comprehensive income (loss)(28,801)861 396 (27,544)69 
Balance, June 30, 2021$(8,815)$(2,502)$(17,491)$(28,808)$(2,850)

Reclassifications out of AOCI were as follows:
 Amount reclassified from AOCIAffected line item in the
 Statements of Income / Balance Sheets
Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
HEI consolidated
Net realized gains on securities included in net income$ $ $ $(387)Gain on sale of investment securities, net
Net realized losses on derivatives qualifying as cash flow hedges53  108  Interest expense
Retirement benefit plans:     
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost122 6,008 4,623 12,018 
See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets56 (5,811)(4,269)(11,622)
See Note 9 for additional details
Total reclassifications$231 $197 $462 $9  
Hawaiian Electric consolidated
Retirement benefit plans:   
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost$(5)$5,846 $4,371 $11,691 
See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets56 (5,811)(4,269)(11,622)
See Note 9 for additional details
Total reclassifications$51 $35 $102 $69  

47


Note 7 · Interest rate swaps
The Company uses interest rate swap agreements to fix the variable interest rates on portions of its debt. The purpose of using these derivatives is to reduce the Company’s exposure to the interest rate risk associated with variable-rate borrowings. Under these agreements, the Company pays a fixed interest rate in exchange for a LIBOR- or SOFR-based variable interest rate on a given notional amount. All of the Company’s interest rate swaps are designated and accounted for as cash flow hedges. Changes in the fair value of these derivatives are reported as a component of other comprehensive income and are reclassified into earnings in the period or periods in which the hedged transaction affects earnings. For information regarding the valuation of our interest rate swaps, see Note 13, “Fair value measurements.”
Notional amount
(in millions)
Fixed interest rateAsset (liability) (in millions) at
Effective dateMaturity dateJune 30, 2022December 31, 2021
$50.02.75%11/21/202211/21/2027$(0.1) $  
$50.02.78%11/21/202211/21/2029(0.1)   
$24.0
4.88% - 5.05%
9/1/2021 - 9/1/2022
9/1/2034 - 9/1/2035
(0.6) (5.3) 
$13.02.79%11/1/202010/1/20311.0  0.3  

The asset related to the interest rate swaps as of June 30, 2022, is presented within other assets in the condensed consolidated balance sheet. The liability related to the interest rate swaps as of December 31, 2021, is presented within other liabilities. The changes in fair value of the cash flow hedges are recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense as interest is incurred on the related variable-rate debt.
The following table provides the pre-tax gain (loss) of the derivative instruments in the Company's condensed consolidated statement of comprehensive income (loss) during the three and six months ended June 30, 2022 and 2021:
Three months ended June 30Six months ended June 30
(in millions)2022202120222021
Gain (loss) on interest rate swaps designated as cash flow hedges recognized in other comprehensive income$1.1 $(0.9)$5.1 $1.2 

As of June 30, 2022, the amount the Company expects to reclassify out of net gains (losses) on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months is not expected to be material.
48


Note 8 · Revenues
Revenue from contracts with customers. The following tables disaggregate revenues by major source, timing of revenue recognition, and segment:
Three months ended June 30, 2022Six months ended June 30, 2022
(in thousands) Electric  utilityBankOtherTotalElectric  utilityBankOtherTotal
Revenues from contracts with customers
Electric energy sales - residential
$259,433 $ $ $259,433 $484,007 $ $ $484,007 
Electric energy sales - commercial
264,701   264,701 484,298   484,298 
Electric energy sales - large light and power
293,847   293,847 534,970   534,970 
Electric energy sales - other 4,873   4,873 6,299   6,299 
Bank fees 11,797  11,797  24,793  24,793 
Other sales  1,333 1,333   2,448 2,448 
Total revenues from contracts with customers822,854 11,797 1,333 835,984 1,509,574 24,793 2,448 1,536,815 
Revenues from other sources
Regulatory revenue$(11,428)$ $ $(11,428)$1,458 $ $ $1,458 
Bank interest and dividend income
 62,822  62,822  122,811  122,811 
Other bank noninterest income 705  705  2,835  2,835 
Other7,447  77 7,524 16,633  123 16,756 
Total revenues from other sources(3,981)63,527 77 59,623 18,091 125,646 123 143,860 
Total revenues$818,873 $75,324 $1,410 $895,607 $1,527,665 $150,439 $2,571 $1,680,675 
Timing of revenue recognition
Services/goods transferred at a point in time
$ $11,797 $ $11,797 $ $24,793 $ $24,793 
Services/goods transferred over time
822,854  1,333 824,187 1,509,574  2,448 1,512,022 
Total revenues from contracts with customers$822,854 $11,797 $1,333 $835,984 $1,509,574 $24,793 $2,448 $1,536,815 
49


Three months ended June 30, 2021Six months ended June 30, 2021
(in thousands) Electric  utilityBankOtherTotalElectric  utilityBankOtherTotal
Revenues from contracts with customers
Electric energy sales - residential
$196,318 $ $ $196,318 $377,557 $ $ $377,557 
Electric energy sales - commercial
192,103   192,103 360,568   360,568 
Electric energy sales - large light and power
201,536   201,536 378,351   378,351 
Electric energy sales - other2,212   2,212 4,691   4,691 
Bank fees 11,569  11,569  22,947  22,947 
Other sales  1,089 1,089   2,013 2,013 
Total revenues from contracts with customers592,169 11,569 1,089 604,827 1,121,167 22,947 2,013 1,146,127 
Revenues from other sources
Regulatory revenue2,854   2,854 31,283   31,283 
Bank interest and dividend income
 62,066  62,066  120,686  120,686 
Other bank noninterest income 3,625  3,625  10,758  10,758 
Other6,856  29 6,885 14,293  56 14,349 
Total revenues from other sources9,710 65,691 29 75,430 45,576 131,444 56 177,076 
Total revenues$601,879 $77,260 $1,118 $680,257 $1,166,743 $154,391 $2,069 $1,323,203 
Timing of revenue recognition
Services/goods transferred at a point in time
$ $11,569 $ $11,569 $ $22,947 $ $22,947 
Services/goods transferred over time
592,169  1,089 593,258 1,121,167  2,013 1,123,180 
Total revenues from contracts with customers$592,169 $11,569 $1,089 $604,827 $1,121,167 $22,947 $2,013 $1,146,127 
There are no material contract assets or liabilities associated with revenues from contracts with customers existing at December 31, 2021 or as of June 30, 2022. Accounts receivable and unbilled revenues related to contracts with customers represent an unconditional right to consideration since all performance obligations have been satisfied. These amounts are disclosed as accounts receivable and unbilled revenues, net on HEI’s condensed consolidated balance sheets and customer accounts receivable, net and accrued unbilled revenues, net on Hawaiian Electric’s condensed consolidated balance sheets.
As of June 30, 2022, the Company had no material remaining performance obligations due to the nature of the Company’s contracts with its customers. For the Utilities, performance obligations are fulfilled as electricity is delivered to customers. For ASB, fees are recognized when a transaction is completed.
Note 9 · Retirement benefits
Defined benefit pension and other postretirement benefit plans information.  For the first six months of 2022, the Company contributed $21 million ($20 million by the Utilities) to its pension and other postretirement benefit plans, compared to $23 million ($23 million by the Utilities) in the first six months of 2021. The Company’s current estimate of total contributions to its pension and other postretirement benefit plans in 2022 is $41 million ($41 million by the Utilities), compared to $52 million ($51 million by the Utilities) in 2021. In addition, the Company expects to pay directly $3 million ($1 million by the Utilities) of benefits in 2022, compared to $1 million ($1 million by the Utilities) paid in 2021.
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The components of net periodic pension costs (NPPC) and net periodic benefit costs (NPBC) for HEI consolidated and Hawaiian Electric consolidated were as follows:
Three months ended June 30Six months ended June 30
 Pension benefitsOther benefitsPension benefitsOther benefits
(in thousands)20222021202220212022202120222021
HEI consolidated
Service cost$19,823 $20,465 $657 $705 $39,647 $40,929 $1,313 $1,410 
Interest cost19,810 18,800 1,638 1,569 39,621 37,601 3,275 3,138 
Expected return on plan assets(35,331)(33,068)(3,398)(3,232)(70,664)(66,135)(6,795)(6,465)
Amortization of net prior period gain  (232)(384)  (464)(767)
Amortization of net actuarial (gain)/losses1
6,297 8,431 (3)44 12,594 9,987 (6)298 
Net periodic pension/benefit cost (return)
10,599 14,628 (1,338)(1,298)21,198 22,382 (2,677)(2,386)
Impact of PUC D&Os9,552 5,513 1,217 1,176 19,103 16,680 2,436 2,146 
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)
$20,151 $20,141 $(121)$(122)$40,301 $39,062 $(241)$(240)
Hawaiian Electric consolidated
Service cost$19,317 $19,993 $649 $698 $38,635 $39,987 $1,298 $1,397 
Interest cost18,461 17,531 1,572 1,504 36,923 35,062 3,145 3,008 
Expected return on plan assets(33,545)(31,367)(3,345)(3,182)(67,091)(62,735)(6,692)(6,364)
Amortization of net prior period gain  (231)(382)  (462)(765)
Amortization of net actuarial losses1
6,125 8,212  43 12,250 10,771  293 
Net periodic pension/benefit cost (return)
10,358 14,369 (1,355)(1,319)20,717 23,085 (2,711)(2,431)
Impact of PUC D&Os9,552 5,513 1,217 1,176 19,103 16,680 2,436 2,146 
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)
$19,910 $19,882 $(138)$(143)$39,820 $39,765 $(275)$(285)
1 Six months ended June 30, 2021 amounts include the one-time cumulative impact of the change in accounting principle for the plans’ fixed income securities from the calculated market-related value method to the fair value method, which was recorded in the first quarter of 2021.
HEI consolidated recorded retirement benefits expense of $24 million ($23 million by the Utilities) in the first six months of 2022 and $23 million ($23 million by the Utilities) in the first six months of 2021 and charged the remaining net periodic benefit cost primarily to electric utility plant.
The Utilities have implemented pension and OPEB tracking mechanisms under which all of their retirement benefit expenses (except for executive life and nonqualified pension plan expenses) determined in accordance with GAAP are recovered over time. Under the tracking mechanisms, any actual costs determined in accordance with GAAP that are over/under amounts allowed in rates are charged/credited to a regulatory asset/liability. The regulatory asset/liability for each utility will then be amortized over 5 years beginning with the respective utility’s next rate case.
Defined contribution plans information.  For the first six months of 2022 and 2021, the Company’s expenses for its defined contribution plans under the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP) and the ASB 401(k) Plan were $4.1 million and $3.2 million, respectively, and cash contributions were $3.5 million and $3.2 million, respectively. For the first six months of 2022 and 2021, the Utilities’ expenses and cash contributions for its defined contribution plan under the HEIRSP were $1.8 million and $1.5 million, respectively.
Retirement benefit plan changes. On December 3, 2021, the Utilities’ union members ratified a new collective bargaining
agreement, which included changes to retirement benefits for all new employees commencing employment on or
after January 1, 2022. The changes ratified in the collective bargaining agreement apply to all employees of HEI and the
Utilities first hired on or after January 1, 2022 (New Employees). New Employees are not eligible to participate in the HEI
Pension Plan. Instead, New Employees will receive a non-elective employer contribution, equal to 10% of their annual
compensation, subject to a vesting schedule, to their account under the HEIRSP, the defined contribution plan for HEI and the
Utilities. Only New Employees are impacted by the retirement benefit plan changes. There are no retirement benefit plan
changes for employees hired on or before December 31, 2021.
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Note 10 · Share-based compensation
Under the 2010 Equity and Incentive Plan, as amended, HEI can issue shares of common stock as incentive compensation to selected employees in the form of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares and other share-based and cash-based awards. The 2010 Equity and Incentive Plan (original EIP) was amended and restated effective March 1, 2014 (EIP) and an additional 1.5 million shares were added to the shares available for issuance under these programs.
As of June 30, 2022, approximately 2.8 million shares remained available for future issuance under the terms of the EIP, assuming recycling of shares withheld to satisfy statutory tax liabilities relating to EIP awards, including an estimated 0.6 million shares that could be issued upon the vesting of outstanding restricted stock units and the achievement of performance goals for awards outstanding under long-term incentive plans (assuming that such performance goals are achieved at maximum levels).
Under the 2011 Nonemployee Director Stock Plan (2011 Director Plan), HEI can issue shares of common stock as compensation to nonemployee directors of HEI, Hawaiian Electric and ASB. As of June 30, 2022, there were 209,592 shares remaining available for future issuance under the 2011 Director Plan.
Share-based compensation expense and the related income tax benefit were as follows:
 Three months ended June 30Six months ended June 30
(in millions)2022202120222021
HEI consolidated
Share-based compensation expense 1
$3.5 $2.9 $5.6 $5.5 
Income tax benefit0.8 0.5 1.1 1.0 
Hawaiian Electric consolidated
Share-based compensation expense 1
1.0 0.9 1.6 2.0 
Income tax benefit0.3 0.2 0.4 0.4 
1    For the three and six months ended June 30, 2022 and 2021, the Company has not capitalized any share-based compensation.
Stock awards. HEI granted HEI common stock to nonemployee directors under the 2011 Director Plan as follows:
Three months ended June 30Six months ended June 30
(dollars in millions)2022202120222021
Shares granted34,755 29,320 34,755 29,320 
Fair value$1.4 $1.2 $1.4 $1.2 
Income tax benefit0.4 0.3 0.4 0.3 
The number of shares issued to each nonemployee director of HEI, Hawaiian Electric and ASB is determined based on the closing price of HEI common stock on the grant date.
Restricted stock units.  Information about HEI’s grants of restricted stock units was as follows:
Three months ended June 30Six months ended June 30
 2022202120222021
Shares(1)Shares(1)Shares(1)Shares(1)
Outstanding, beginning of period208,345 $39.71 236,191 $37.91 233,448 $38.10 193,939 $40.89 
Granted2,008 42.15 4,894 44.61 98,463 41.31 132,492 34.37 
Vested(1,034)44.31 (292)38.77 (91,414)37.65 (79,280)38.51 
Forfeited(366)38.07 (11,018)38.74 (31,544)38.77 (17,376)40.01 
Outstanding, end of period208,953 $39.71 229,775 $38.02 208,953 $39.71 229,775 $38.02 
Total weighted-average grant-date fair value of shares granted (in millions)$0.1 $0.2 $4.1 $4.6 
(1)    Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant.
For the six months ended June 30, 2022 and 2021, total restricted stock units and related dividends that vested had a fair value of $4.0 million and $3.0 million, respectively, and the related tax benefits were $0.6 million and $0.6 million, respectively.
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As of June 30, 2022, there was $6.2 million of total unrecognized compensation cost related to the nonvested restricted stock units. The cost is expected to be recognized over a weighted-average period of 2.1 years.
Long-term incentive plan payable in stock.  The 2020-22, 2021-23 and 2022-24 long-term incentive plans (LTIP) provide for performance awards under the EIP of shares of HEI common stock based on the satisfaction of performance goals, including a market condition goal. The number of shares of HEI common stock that may be awarded is fixed on the date the grants are made, subject to the achievement of specified performance levels and calculated dividend equivalents. The potential payout varies from 0% to 200% of the number of target shares, depending on the achievement of the goals. The market condition goal is based on HEI’s total shareholder return (TSR) compared to the Edison Electric Institute Index over the relevant three-year period. The other performance condition goals relate to EPS growth, return on average common equity (ROACE), renewable portfolio standards, carbon emissions reduction, Hawaiian Electric’s net income growth, ASB’s efficiency ratio and strategic initiatives and Pacific Current’s EBITDA growth and return on average invested capital.
LTIP linked to TSRInformation about HEI’s LTIP grants linked to TSR was as follows:
Three months ended June 30Six months ended June 30
 2022202120222021
Shares(1)Shares(1)Shares(1)Shares(1)
Outstanding, beginning of period76,340 $47.70 100,053 $42.89 90,974 $42.86 89,222 $42.10 
Granted 390 54.92 1,533 41.12 26,469 54.92 45,743 41.12 
Vested (issued or unissued and cancelled)    (29,042)41.07 (32,355)38.20 
Forfeited  (10,427)42.82 (11,671)42.60 (11,451)43.10 
Outstanding, end of period76,730 $47.74 91,159 $42.87 76,730 $47.74 91,159 $42.87 
Total weighted-average grant-date fair value of shares granted (in millions)$ $0.1 $1.5 $1.9 
(1)    Weighted-average grant-date fair value per share determined using a Monte Carlo simulation model.
The grant date fair values of the shares were determined using a Monte Carlo simulation model utilizing actual information for the common shares of HEI and its peers for the period from the beginning of the performance period to the grant date and estimated future stock volatility of HEI and its peers over the remaining three-year performance period. The expected stock volatility assumptions for HEI and its peer group were based on the three-year historic stock volatility. A dividend assumption is not required for the Monte Carlo simulation because the grant payout includes dividend equivalents and projected returns include the value of reinvested dividends.
The following table summarizes the assumptions used to determine the fair value of the LTIP awards linked to TSR and the resulting fair value of LTIP awards granted:
20222021
Risk-free interest rate1.71 %0.19 %
Expected life in years33
Expected volatility31.0 %29.9 %
Range of expected volatility for Peer Group
25.4% to 76.7%
25.6% to 102.9%
Grant date fair value (per share)$54.92$41.12
For the six months ended June 30, 2022 and 2021, total vested LTIP awards linked to TSR and related dividends had a fair value of $0.8 million and $0.8 million, respectively, and the related tax benefits were $0.1 million and $0.2 million, respectively.
As of June 30, 2022, there was $1.7 million of total unrecognized compensation cost related to the nonvested performance awards payable in shares linked to TSR. The cost is expected to be recognized over a weighted-average period of 1.6 years.
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LTIP awards linked to other performance conditions.  Information about HEI’s LTIP awards payable in shares linked to other performance conditions was as follows:
Three months ended June 30Six months ended June 30
2022202120222021
 Shares(1)Shares (1)Shares(1)Shares(1)
Outstanding, beginning of period292,151 $39.89 335,702 $38.04 306,342 $38.42 220,715 $41.03 
Granted 1,560 42.37 6,133 44.49 105,860 41.31 182,977 34.33 
Vested     (71,807)37.68 (43,155)34.12 
Increase above target (cancelled)  15,881 42.92   1,277 31.71 
Forfeited  (41,711)38.27 (46,684)36.77 (45,809)38.82 
Outstanding, end of period293,711 $39.91 316,005 $38.38 293,711 $39.91 316,005 $38.38 
Total weighted-average grant-date fair value of shares granted (at target performance levels) (in millions)
$0.1 $0.3 $4.4 $6.3 
(1)    Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant.
For the six months ended June 30, 2022 and 2021, total vested LTIP awards linked to other performance conditions and related dividends had a fair value of $3.2 million and $1.7 million, respectively, and the related tax benefits were $0.4 million and $0.4 million, respectively.
As of June 30, 2022, there was $5.2 million of total unrecognized compensation cost related to the nonvested shares linked to performance conditions other than TSR. The cost is expected to be recognized over a weighted-average period of 1.6 years.

Note 11 · Income tax
The Company’s and the Utilities’ effective tax rates (combined federal and state income tax rates) were 20% and 21%, respectively, for the six months ended June 30, 2022. These rates differed from the combined statutory rates, due primarily to the Utilities’ amortization of excess deferred income taxes related to the provision in the 2017 Tax Cuts and Jobs Act that lowered the federal income tax rate from 35% to 21%, the tax benefits derived from the low income housing tax credit investments and the non-taxability of the bank-owned life insurance income. The Company’s and the Utilities’ effective tax rates were each 21% for the six months ended June 30, 2021.
In August 2020, the Internal Revenue Service notified the Company that its 2017 and 2018 income tax returns would be examined. The Company was previously audited every year through 2011, at which time the IRS changed their internal policies regarding audit frequency. The audit is still in progress and the Company has responded to all information requests received. The Company has not been notified of any material audit adjustments to date.

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Note 12 · Cash flows
Six months ended June 3020222021
(in millions)  
Supplemental disclosures of cash flow information  
HEI consolidated
Interest paid to non-affiliates, net of amounts capitalized$47 $51 
Income taxes paid (including refundable credits)14 14 
Income taxes refunded (including refundable credits)2  
Hawaiian Electric consolidated
Interest paid to non-affiliates34 37 
Income taxes paid (including refundable credits)27 20 
Supplemental disclosures of noncash activities  
HEI consolidated
Property, plant and equipment
   Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)25 31 
   Increase related to an acquisition (investing)15  
Right-of-use assets obtained in exchange for operating lease obligations (investing)40 38 
Common stock issued (gross) for director and executive/management compensation (financing)1
9 7 
Obligations to fund low income housing investments (investing) 9 
Loans transferred from held for investment to held for sale (investing) 62 
Hawaiian Electric consolidated
Electric utility property, plant and equipment
   Unpaid invoices and accruals for capital expenditures, balance, end of period (investing)22 27 
   Increase related to an acquisition (investing)15  
Right-of-use assets obtained in exchange for operating lease obligations (investing)37 38 
1 The amounts shown represent the market value of common stock issued for director and executive/management compensation and withheld to satisfy statutory tax liabilities.
55


Note 13 · Fair value measurements
Fair value measurement and disclosure valuation methodology. The following are descriptions of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not carried at fair value:
Short-term borrowings—other than bank.  The carrying amount of short-term borrowings approximated fair value because of the short maturity of these instruments.
Investment securities. The fair value of ASB’s investment securities is determined quarterly through pricing obtained from independent third-party pricing services or from brokers not affiliated with the trade. Non-binding broker quotes are infrequent and generally occur for new securities that are settled close to the month-end pricing date. The third-party pricing vendors ASB uses for pricing its securities are reputable firms that provide pricing services on a global basis and have processes in place to ensure quality and control. The third-party pricing services use a variety of methods to determine the fair value of securities that fall under Level 2 of ASB’s fair value measurement hierarchy. Among the considerations are quoted prices for similar securities in an active market, yield spreads for similar trades, adjustments for liquidity, size, collateral characteristics, historic and generic prepayment speeds, and other observable market factors.
To enhance the robustness of the pricing process, ASB will on a quarterly basis compare its standard third-party vendor’s price with that of another third-party vendor. If the prices are within an acceptable tolerance range, the price of the standard vendor will be accepted. If the variance is beyond the tolerance range, an evaluation will be conducted by ASB and a challenge to the price may be made. Fair value in such cases will be based on the value that best reflects the data and observable characteristics of the security. In all cases, the fair value used will have been independently determined by a third-party pricing vendor or non-affiliated broker.
The fair value of the mortgage revenue bonds is estimated using a discounted cash flow model to calculate the present value of future principal and interest payments and, therefore is classified within Level 3 of the valuation hierarchy.
Loans held for sale. Residential and commercial loans are carried at the lower of cost or market and are valued using market observable pricing inputs, which are derived from third party loan sales and, therefore, are classified within Level 2 of the valuation hierarchy.
Loans held for investment. Fair value of loans held for investment is derived using a discounted cash flow approach which includes an evaluation of the underlying loan characteristics. The valuation model uses loan characteristics which includes product type, maturity dates and the underlying interest rate of the portfolio. This information is input into the valuation models along with various forecast valuation assumptions including prepayment forecasts, to determine the discount rate. These assumptions are derived from internal and third party sources. Since the valuation is derived from model-based techniques, ASB includes loans held for investment within Level 3 of the valuation hierarchy.
Collateral dependent loans. Collateral dependent loans have been adjusted to fair value. When a loan is identified as collateral dependent, the Company measures the impairment using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is generally estimated by obtaining external appraisals, but in some cases, the value of the collateral may be estimated as having little or no value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. If it is determined that the value of the collateral dependent loan is less than its recorded investment, the Company recognizes this impairment and adjusts the carrying value of the loan to fair value through the allowance for credit losses.
Real estate acquired in settlement of loans. Foreclosed assets are carried at fair value (less estimated costs to sell) and are generally based upon appraisals or independent market prices that are periodically updated subsequent to classification as real estate owned. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. ASB estimates the fair value of collateral-dependent loans and real estate owned using the sales comparison approach.
Mortgage servicing rights. MSRs are capitalized at fair value based on market data at the time of sale and accounted for in subsequent periods at the lower of amortized cost or fair value. MSRs are evaluated for impairment at each reporting date. ASB's MSRs are stratified based on predominant risk characteristics of the underlying loans including loan type and note rate. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Expected net income streams are estimated based on industry assumptions regarding prepayment expectations and income and expenses associated with servicing residential mortgage loans for others. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in "Revenues - bank" in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable.
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ASB compares the fair value of MSRs to an estimated value calculated by an independent third-party. The third-party relies on both published and unpublished sources of market related assumptions and its own experience and expertise to arrive at a value. ASB uses the third-party value only to assess the reasonableness of its own estimate. ASB includes MSRs within Level 3 of the valuation hierarchy.
Time deposits. The fair value of fixed-maturity certificates of deposit was estimated by discounting the future cash flows using the rates currently offered for FHLB advances of similar remaining maturities. Deposit liabilities are classified in Level 2 of the valuation hierarchy.
Other borrowings. For advances and repurchase agreements, fair value is estimated using quantitative discounted cash flow models that require the use of interest rate inputs that are currently offered for advances and repurchase agreements of similar remaining maturities. The majority of market inputs are actively quoted and can be validated through external sources, including broker market transactions and third party pricing services.
Long-term debt—other than bank.  Fair value of fixed-rate long-term debt—other than bank was obtained from third-party financial services providers based on the current rates offered for debt of the same or similar remaining maturities and from discounting the future cash flows using the current rates offered for debt of the same or similar risks, terms, and remaining maturities. The carrying amount of floating rate long-term debt—other than bank approximated fair value because of the short-term interest reset periods. Long-term debt—other than bank is classified in Level 2 of the valuation hierarchy.
Interest rate lock commitments (IRLCs). The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. IRLCs are classified as Level 2 measurements.
Forward sales commitments. To be announced (TBA) mortgage-backed securities forward commitments are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of ASB’s best efforts and mandatory delivery loan sale commitments are determined using quoted prices in the market place that are observable and are classified as Level 2 measurements.
Interest rate swaps. The Company measures its interest rate swaps at fair value. The fair values of the Company's interest rate swaps are based on the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs. The fair values of the Company's interest rate swaps are classified as a Level 2 measurements.
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The following table presents the carrying or notional amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments.
Estimated fair value
(in thousands)Carrying or notional amountQuoted prices in
active markets
for identical assets
 (Level 1)
Significant
 other observable
 inputs
 (Level 2)
Significant
unobservable
inputs
 (Level 3)
Total
June 30, 2022     
Financial assets     
HEI consolidated
Available-for-sale investment securities
$2,444,267 $ $2,429,102 $15,165 $2,444,267 
Held-to-maturity investment securities
513,767  440,023  440,023 
Loans, net5,361,277  3,737 5,096,243 5,099,980 
Mortgage servicing rights9,696   17,201 17,201 
Derivative assets22,689 27 1,074  1,101 
Financial liabilities    
HEI consolidated
Deposit liabilities407,972  397,909  397,909 
Short-term borrowings—other than bank124,017  124,017  124,017 
Other bank borrowings241,610  241,606  241,606 
Long-term debt, net—other than bank2,374,500  2,222,491  2,222,491 
  Derivative liabilities124,000  810  810 
Hawaiian Electric consolidated
Short-term borrowings54,987  54,987  54,987 
Long-term debt, net 1,736,508  1,622,996  1,622,996 
December 31, 2021     
Financial assets     
HEI consolidated
Available-for-sale investment securities
$2,574,618 $ $2,559,191 $15,427 $2,574,618 
Held-to-maturity investment securities
522,270  510,474  510,474 
Loans, net5,150,388  10,403 5,218,121 5,228,524 
Mortgage servicing rights9,950   14,480 14,480 
Derivative assets57,377  909  909 
Financial liabilities    
HEI consolidated
Deposit liabilities423,976  442,361  442,361 
Short-term borrowings—other than bank53,998  53,998  53,998 
Other bank borrowings88,305  88,304  88,304 
Long-term debt, net—other than bank2,321,937  2,624,130  2,624,130 
Derivative liabilities57,000 11 5,271  5,282 
Hawaiian Electric consolidated
Long-term debt, net 1,676,402  1,955,710  1,955,710 
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Fair value measurements on a recurring basis.  Assets and liabilities measured at fair value on a recurring basis were as follows:
June 30, 2022December 31, 2021
 Fair value measurements usingFair value measurements using
(in thousands)Level 1Level 2Level 3Level 1Level 2Level 3
Available-for-sale investment securities (bank segment)      
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies
$ $2,285,186 $ $ $2,437,923 $ 
U.S. Treasury and federal agency obligations 102,487   90,090  
Corporate bonds 41,429   31,178  
Mortgage revenue bonds  15,165   15,427 
 $ $2,429,102 $15,165 $ $2,559,191 $15,427 
Derivative assets     
Interest rate lock commitments (bank segment)1
$ $44 $ $ $638 $ 
Forward commitments (bank segment)1
27      
Interest rate swap (Other segment)2
 1,030   271  
 $27 $1,074 $ $ $909 $ 
Derivative liabilities
Interest rate lock commitments (bank segment)1
$ $ $ $ $ $ 
Forward commitments (bank segment)1
   11   
Interest rate swap (Other segment)2
 810   5,271  
$ $810 $ $11 $5,271 $ 
1     Derivatives are carried at fair value in other assets or other liabilities in the balance sheets with changes in value included in mortgage banking income.
2     Derivatives are included in other assets and other liabilities in the balance sheets.
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
Three months ended June 30Six months ended June 30
Mortgage revenue bonds2022202120222021
(in thousands)
Beginning balance$15,296 $15,427 $15,427 $27,185 
Principal payments received(131) (262)(11,758)
Purchases    
Unrealized gain (loss) included in other comprehensive income    
Ending balance$15,165 $15,427 $15,165 $15,427 
Mortgage revenue bonds are issued by the Department of Budget and Finance of the State of Hawaii. The Company estimates the fair value by using a discounted cash flow model to calculate the present value of estimated future principal and interest payments. The unobservable input used in the fair value measurement is the weighted average discount rate. As of June 30, 2022, the weighted average discount rate was 2.89%, which was derived by incorporating a credit spread over the one month LIBOR rate. Significant increases (decreases) in the weighted average discount rate could result in a significantly lower (higher) fair value measurement.
Fair value measurements on a nonrecurring basis.  Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above. These measurements primarily result from assets carried at the lower of cost or fair value or from impairment of individual assets. As of June 30, 2022 and December 31, 2021, there were no financial instruments measured at fair value on a nonrecurring basis. For the six months ended June 30, 2022 and 2021, there were no adjustments to fair value for ASB’s loans held for sale.
Significant increases (decreases) in any of those inputs in isolation would result in significantly higher (lower) fair value measurements.
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Note 14 · Subsequent event
On July 1, 2022, Mahipapa, LLC (Mahipapa), a wholly owned subsidiary of Pacific Current, acquired Green Energy Team, LLC’s 7.5 MW renewable, firm dispatchable closed-loop biomass-to-energy facility on Kauai. In addition to the biomass facility situated on 65 acres of fee simple land, the acquisition also included machinery and equipment and the assumption of land leases totaling approximately 3,500 acres, upon which the eucalyptus feedstock is grown. The plant sells all of the power it produces to Kauai Island Utility Cooperative under an existing power purchase agreement that expires in 2036. In connection with the acquisition, Mahipapa assumed approximately $61 million of long-term debt in various tranches, which have a final maturity in 2036 for the last tranche. Principal and interest total approximately $1.2 million per quarter. The loan is secured by all of assets of Mahipapa and all equity ownership interests in Mahipapa, excluding certain mobile equipment. Covenants include a debt service coverage ratio and a times interest earned ratio, which must be above 1.0 and 1.05, respectively, in two of the best calendar years out of the three most recent calendar years.
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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion updates “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in HEI’s and Hawaiian Electric’s 2021 Form 10-K and should be read in conjunction with such discussion and the 2021 annual consolidated financial statements of HEI and Hawaiian Electric and notes thereto included in HEI’s and Hawaiian Electric’s 2021 Form 10-K, as well as the quarterly (as of and for the six months ended June 30, 2022) condensed consolidated financial statements and notes thereto included in this Form 10-Q.
HEI consolidated
Recent developments. In the second quarter of 2022, Hawaii’s 7-day average daily COVID-19 case counts peaked at 1,258 cases and case counts have since receded, recently averaging below 600 cases per day (7-day daily average). Hospitalizations have remained at low levels with approximately 77% of the state’s population fully vaccinated, and approximately 44% of those fully vaccinated received the first booster shot as of July 26, 2022. On March 25, 2022, Hawaii ended its Safe Travels program for domestic U.S. travelers and its indoor mask mandate. On June 12, 2022, the U.S. Centers for Disease Control and Prevention ended the requirement that required air passengers traveling from a foreign country to the United States to show a negative COVID-19 test before boarding their flight.
As a result of the removal of COVID restrictions, domestic tourism has recovered to pre-pandemic levels with June 2022 domestic passenger counts up more than 5% of the domestic passenger counts in June 2019. However, the number of international travelers remains below pre-pandemic levels with June 2022 passenger counts down approximately 72% from the total number of international travelers in June 2019.
While economic conditions have improved significantly over the past year as the Hawaii economy fully reopened, new variants, such as BA.5, present potential risks to the ongoing economic recovery. At this time, the Company does not expect that COVID restrictions will be reinstated, but will continue to monitor the situation and remains focused on the continued safety and well-being of customers, employees, their families and the community. The Company has maintained its safety protocols and policies to keep employees safe, while at the same time ensuring the reliability and resilience of its operations.
In the second quarter of 2022, driven by increased economic activity as the tourism industry continues its recovery, the Utility’s kWh sales improved modestly increasing 0.3% compared to the second quarter of 2021. While the level of kWh sales does not affect Utility revenues due to decoupling, it may increase or decrease the price per kWh paid by customers. See “Decoupling” in Note 3 of the Condensed Consolidated Financial Statements for a discussion of the decoupling mechanism.
At the Bank, an improving Hawaii economy helped fuel loan growth, which required additional provision for credit losses. ASB recorded a $2.8 million provision for credit losses in the second quarter of 2022 due primarily to growth in the commercial real estate loan portfolio and consumer loan purchases. In the second quarter of 2021, ASB recorded a negative provision for credit losses of $12.2 million due primarily to credit upgrades in the commercial real estate and commercial loan portfolios and lower net charge-offs. Net interest income increased $1.0 million to $61.8 million in the second quarter of 2022 compared to net interest income in the second quarter of 2021 due primarily to higher investment portfolio balances and yields, partially offset by lower PPP fees.
Over the past few months, inflation has rapidly increased as reflected in the U.S. Consumer Price Index, which hit a 41-year high of 9.1% in June 2022. In addition, fuel costs have risen rapidly, increasing 90% over the prior year’s quarter. These inflationary pressures are expected to continue over the near- to medium-term and have led to higher costs for O&M and capital projects at the Utility, as well as higher compensation and benefits cost at the bank.
For further discussion of the impacts of the COVID-19 pandemic, fuel prices and other macro-economic factors impacting the Utilities and the Bank, see “Recent Developments” in the Electric Utility and Bank sections below.

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RESULTS OF OPERATIONS

Three months ended June 30%
(in thousands)20222021changePrimary reason(s)*
Revenues$895,607 $680,257 32 Primarily increase for the electric utility segment
Operating income86,668 101,856 (15)Decrease for bank segment and higher losses for the “other” segment, partly offset by increase for the electric utility segment
Net income for common stock52,541 63,872 (18)Lower net income at the bank segment and higher net loss for the “other” segment, partly offset by higher net income at the electric utility segment. See below for effective tax rate explanation.
Six months ended June 30%
(in thousands)20222021changePrimary reason(s)*
Revenues$1,680,675 $1,323,203 27 Primarily increase for the electric utility segment
Operating income185,944 199,887 (7)Decrease for bank segment, partially offset by increase for the electric utility segment and lower losses for the “other” segment
Net income for common stock121,708 128,230 (5)Lower net income at the bank segment, partly offset by lower net loss for the “other” segment and higher net income at the electric utility segment. See below for effective tax rate explanation.
*     Also, see segment discussions which follow.
The Company’s effective tax rates for the second quarters of 2022 and 2021 were 20% and 22%, respectively. The Company’s effective tax rates for the first six months of 2022 and 2021 were comparable at 20% and 21%, respectively. The lower effective tax rate for the second quarter and first six months of 2022 was primarily due to a decrease in income before taxes at ASB over the prior periods, which increased the rate impact of certain tax items.
Economic conditions.
Note: The statistical data in this section is from public third-party sources that management believes to be reliable (e.g., Department of Business, Economic Development and Tourism (DBEDT), University of Hawaii Economic Research Organization (UHERO), U.S. Bureau of Labor Statistics, Department of Labor and Industrial Relations (DLIR), Hawaii Tourism Authority (HTA), Honolulu Board of REALTORS® and national and local news media).
At the end of March 2022, the Safe Travels Program, which required proof of vaccination or a negative COVID test for travel to Hawaii, ended following a significant reduction in case counts in recent months. In addition, lower case counts across most states also led to stronger demand for travel to Hawaii in the second quarter of 2022, resulting in the average daily passenger count 29.1% higher than the comparable period in the prior year, but remained 5.7% below 2019. The recovery in total passenger counts from the low levels in 2020 thus far has been driven by domestic travelers, with international travelers remaining at low levels due to higher restrictions for international travelers, depending on country of origin. In June 2022, domestic passenger counts were up 7.6% compared to 2019 pre-COVID-19 levels, while international passenger counts were down 72% compared to 2019 pre-COVID-19 levels.
Hawaii’s seasonally adjusted unemployment rate in June 2022 was 4.3%, which was lower compared to the June 2021 rate of 5.9%. The national unemployment rate in June 2022 was 3.6% compared to 5.9% in June 2021. Hawaii’s unemployment rate is expected to continue to improve now that restrictions have been lifted and non-farm jobs are expected to increase this year.
Hawaii real estate activity through June 2022, as indicated by Oahu’s home resale market, drove an increase in the median sales price of 13.2% for condominiums and 17% for single-family homes compared to the same period in 2021, with the June median single-family home price of $1,100,000, below the record $1,150,000 set in March. The number of closed sales was up 7.5% for condominiums and down 8.8% for single-family residential homes for the second quarter of 2022 compared to 2021.
Hawaii’s petroleum product prices reflect supply and demand in the Asia-Pacific region and the price of crude oil in international markets. The price of crude oil gradually increased throughout 2021 but decreased in January 2022 and increased significantly through May 2022.
At its July 27, 2022 meeting, the Federal Open Market Committee (FOMC) decided to raise the federal funds rate target range of 2.25%-2.5% and anticipates ongoing increases as appropriate. The FOMC plans to continue to maintain an
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accommodative stance of monetary policy to achieve maximum employment and inflation at the rate of 2 percent over the long run. The Federal Reserve stated that it will continue to reduce its holdings of Treasury securities and agency mortgage-backed securities.
The most recent forecast by UHERO, which was issued on May 12, 2022, forecasts full year 2022 real GDP growth of 3.5%, an increase in total visitor arrivals of 31.8%, a decrease in real personal income of 5.1%, and an unemployment rate of 3.6%. This forecast reflects growth of Hawaii’s economy after experiencing a downturn due to omicron variants of COVID-19 in early 2022. The international market is anticipated to return as the omicron wave in Asia recedes. However, a full economic recovery is still forecasted to be several years out and dependent on adapting to new COVID-19 threats, ongoing global economic fallout from Russia’s invasion of Ukraine, increasing federal interest rates to combat rising inflation, risks of recession, and returning international visitors.
The Company expects economic conditions to improve going forward; however, it is difficult to predict the future path of the pandemic. If economic conditions worsen from current levels or remain depressed for an extended period of time, it could have a material unfavorable impact on the Company’s financial position or results of operations in 2022.
See also “Recent Developments” in the “Electric utility” and “Bank” sections below for further discussion of the economic impact caused by the pandemic.
“Other” segment.
 Three months ended June 30Six months ended June 30
(in thousands)2022202120222021Primary reason(s)
Revenues$1,410 $1,118 $2,571 $2,069 Increase in other sales at Pacific Current subsidiaries.
Operating loss(6,409)(5,634)(10,758)(12,013)
The second quarters of 2022 and 2021 include $0.7 million and $0.6 million, respectively, of operating income from Pacific Current1. Corporate expenses for the second quarter 2022 were $0.8 million higher than the same period in 2021, primarily due to higher charitable donations in the second quarter of 2022 (due to timing of contributions) and higher board and consulting expenses, partly offset by a settlement agreement with the former President and Chief Executive Officer of the Bank in 2021. The first six months of 2022 and 2021 include $1.5 million and $1.3 million, respectively, of operating income from Pacific Current1. Corporate expenses for the first six months of 2022 were $1.1 million lower than the same period in 2021, primarily due to a settlement agreement with the former President and Chief Executive Officer of the Bank in 2021 and higher charitable donations in 2021, due to timing of contributions, partly offset by higher board and consulting expenses.
Gain on sale of equity-method investment— — 8,123 — Gain on sale of an equity-method investment at Pacific Current.
Net loss (9,060)(8,313)(10,172)(16,869)
The net loss for the second quarter of 2022 was slightly higher than the net loss for the second quarter of 2021 due to the same factors cited for the change in operating loss and higher interest expense due to higher average borrowings. The net loss for the first six months of 2022 was lower than the net loss for the first six months of 2021 due to the gain on sale of an equity-method investment by Pacific Current and the same factors cited for the change in operating loss, partly offset by higher interest expense due to higher average borrowings.
1     Hamakua Energy’s sales to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.

The “other” business segment loss includes results of the stand-alone corporate operations of HEI (including eliminations of intercompany transactions) and ASB Hawaii, Inc. (ASB Hawaii), as well as the results of Pacific Current, a direct subsidiary of HEI focused on investing in clean energy and sustainable infrastructure projects; Pacific Current’s indirect subsidiary, Hamakua Energy, which owns a 60-MW combined cycle power plant that provides electricity to Hawaii Electric Light; Pacific Current’s subsidiaries, Mauo, LLC (Mauo), which owns solar-plus-storage projects totaling 8.6 MW on five University of Hawaii campuses, Alenuihaha Developments, LLC, which owns a collection of renewable energy assets, Ka‘ie‘ie Waho Company, LLC, which owns a 6 MW solar photovoltaic system that provides renewable energy to Kauai Island Utility
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Cooperative, and Ka‘aipua‘a, LLC, which is constructing a wastewater treatment and energy recovery facility on Hawaii island; as well as eliminations of intercompany transactions.

FINANCIAL CONDITION
Liquidity and capital resources.  As of June 30, 2022, there was no balance on HEI’s revolving credit facility or Hawaiian Electric’s revolving credit facility and the available committed capacities under the facilities were $175 million and $200 million, respectively. At the end of the quarter, HEI and Hawaiian Electric had approximately $69 million and $55 million of commercial paper outstanding, respectively. As of June 30, 2022, ASB’s unused FHLB borrowing capacity was approximately $2.0 billion and ASB had unpledged investment securities of $2.3 billion that were available to be used as collateral for additional borrowing capacity.
As of June 30, 2022 and December 31, 2021, the total amount of available borrowing capacity (net of commercial paper outstanding) under the Company’s committed lines of credit was approximately $251 million and $321 million, respectively.
The Company believes that its cash and cash equivalents, expected operating cash flow from subsidiaries, existing credit facilities, and access to the capital markets will be sufficient to meet the Company’s cash requirements over the next twelve months and beyond based on its current business plans. However, the Company expects that its liquidity will continue to be moderately impacted at the Utilities due to higher working capital requirements due to lingering COVID-19 impacts to the local economy and elevated fuel prices. For the Utilities, the elevated fuel prices billed to customers have resulted in higher accounts receivable balances and bad debt expense and may result in higher write-offs in the future. As of June 30, 2022, approximately $42 million of the Utilities’ accounts receivables were 30 days past due. Of the over 30 days past due amounts, approximately 22% were on payment plans. The Company commenced its disconnection process on a tiered basis, starting in the third quarter of 2021, targeting the oldest and largest balances first, which has reduced the older balances in arrears over time as payments were made, as well as decreasing the number of customers in arrears. In addition to the cash flow impact from delayed collection of accounts receivable, lower kWh sales relative to the level of kWh sales approved in the last rate case generally result in delayed timing of cash flows, resulting in higher working capital requirements. At this time, the delay in customer cash collections has not significantly affected the Company’s liquidity. The Company is prepared to address, if needed, the potential financing requirement related to the delayed timing of customer collections.
At ASB, liquidity remains at satisfactory levels largely due to U.S. economic stimulus programs implemented as a result of COVID-19 that led to a substantial increase in customer deposits. ASB’s cash and cash equivalents was $141 million as of June 30, 2022, compared to $251 million as of December 31, 2021. ASB remains well above the “well capitalized” level under the FDIC Improvement Act prompt correction action capital category, and while the economic outlook has improved and is expected to continue to improve, there are emerging risks from inflation and the tightening of monetary policy that increases the risk of a recession, as well as ongoing COVID-19 risks, such as new variants, all of which could create increased uncertainty regarding the impact on loan performance and the allowance for credit losses.
HEI material cash requirements. HEI’s material cash requirements include: capital expenditures, labor and benefit costs, O&M expenses, fuel and purchase power costs, and debt and interest payments at the Utilities; investments in loans and investment securities at the Bank; labor and benefits costs, shareholder dividends and debt and interest payments at HEI; and HEI equity contributions to support Pacific Current’s sustainable infrastructure investments.
The Company believes that its ability to generate cash, both internally from electric utility and banking operations and externally from issuances of equity and debt securities, as well as bank borrowings, is adequate to maintain sufficient liquidity to fund its contractual obligations and commercial commitments, its forecasted capital expenditures and investments, its expected retirement benefit plan contributions and other short-term and long-term material cash requirements. However, the economic impact of higher fuel prices, inflation, higher interest rates, tightening of monetary policy and the ongoing COVID-19 pandemic, create significant uncertainty, and the Company cannot predict the future effects that these factors will have on the global, national or local economy, including the impact on the Company’s cost of capital and its ability to access additional capital, or the future impacts on the Company’s financial position, results of operations, and cash flows.
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The consolidated capital structure of HEI (excluding deposit liabilities and other bank borrowings) was as follows:
(dollars in millions)June 30, 2022December 31, 2021
Short-term borrowings—other than bank$124 %$54 %
Long-term debt, net—other than bank2,375 50 2,322 48 
Preferred stock of subsidiaries34 34 
Common stock equity2,234 47 2,391 50 
 $4,767 100 %$4,801 100 %
HEI’s commercial paper borrowings and line of credit facility were as follows:
 Average balanceBalance
(in millions) Six months ended June 30, 2022June 30, 2022December 31, 2021
Commercial paper$45 $69 $54 
Line of credit draws on revolving credit facility— — — 
Note: This table does not include Hawaiian Electric’s separate commercial paper issuances and line of credit facilities and draws, which are disclosed below under “Electric utility—Financial Condition—Liquidity and capital resources.” The maximum amount of HEI’s short-term commercial paper borrowings during the first six months of 2022 was $69 million. As of June 30, 2022, available committed capacity under HEI’s line of credit facility was $175 million.
On June 27, 2022, Fitch revised HEI’s outlook to “Positive” from “Stable” and affirmed the “BBB” long-term issuer default rating and “F3” short-term issuer default rating.
There were no new issuances of common stock through the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP), HEIRSP or the ASB 401(k) Plan in the six months ended June 30, 2022 and 2021 and HEI satisfied the share purchase requirements of the DRIP, HEIRSP and ASB 401(k) Plan through open market purchases of its common stock.
For the first six months of 2022, net cash provided by operating activities of HEI consolidated was $75 million. Net cash used by investing activities for the same period was $497 million, primarily due to capital expenditures, ASB’s purchases of available-for-sale investment securities, net increase in loans held for investment, partly offset by ASB’s receipt of investment security repayments and maturities. Net cash provided by financing activities during this period was $276 million as a result of several factors, including net increases in ASB’s other bank borrowings and deposit liabilities, net increases in short-term borrowings and issuances of long-term debt, partly offset by repayment of long-term debt and payment of common stock dividends. During the first six months of 2022, Hawaiian Electric and ASB (through ASB Hawaii) paid cash dividends to HEI of $63 million and $27 million, respectively.
Dividends.  The payout ratios for the first six months of 2022 and full year 2021 were 63% and 60%, respectively. On February 11, 2022, the HEI Board of Directors approved a 1 cent increase in the quarterly dividend from $0.34 per share to $0.35 per share, starting with the dividend in the first quarter of 2022. HEI currently expects to maintain its dividend at its present level; however, the HEI Board of Directors evaluates the dividend quarterly and considers many factors in the evaluation including, but not limited to, the Company’s results of operations, the long-term prospects for the Company, current and expected future economic conditions, including impacts from the COVID-19 pandemic, and capital investment alternatives.
MATERIAL ESTIMATES AND CRITICAL ACCOUNTING POLICIES
In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ significantly from those estimates.
In accordance with SEC Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” management has identified the accounting policies it believes to be the most critical to the Company’s financial statements—that is, management believes that these policies are both the most important to the portrayal of the Company’s results of operations and financial condition, and currently require management’s most difficult, subjective or complex judgments.
For information about these material estimates and critical accounting policies, in addition to the critical policy discussed below, see pages 45 to 46, 62 to 63, and 76 to 77 of HEI’s MD&A included in Part II, Item 7 of HEI’s 2021 Form 10-K.
Following are discussions of the results of operations, liquidity and capital resources of the electric utility and bank segments.
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Electric utility
Recent developments
See also Recent developments in HEI’s MD&A.
In the second quarter and first six months of 2022, kWh sales volume increased 0.3% and 1.4% compared to the same periods in 2021, respectively. The increase in kWh sales is primarily due to continued recovery of the economy and tourism activity.
Accounts receivable increased in the second quarter with past due accounts receivable balances increasing by $11.9 million, or 17%, while the number of accounts past due decreased by approximately 9% since December 31, 2021. The increase in accounts receivables was primarily driven by higher customer bills impacted by the increase in fuel prices, delays in a large government account payments, offset by payments on installment plans, higher cash receipts associated with increased disconnection efforts and application of the $2 million Kokua bill credit, all of which contributed to the decrease in the number of customers in arrears. At this time, the delay in customer cash collections has not significantly affected the Utilities’ liquidity. The Utilities are prepared to address, if needed, the financing requirement related to the delayed timing of cash flows collected under the decoupling mechanism through the Revenue Balancing Account and the modest slowing or reduction in accounts receivable collections from customers. See “Financial Condition—Liquidity and capital resources” for additional information.
In the second quarter of 2020, the PUC approved the deferral of certain COVID-19 related costs, such as higher bad debt expense, higher financing costs, non-collection of late payment fees, increased personal protective equipment costs, and sequestration costs for mission-critical employees. The Utilities deferred COVID-19 related costs through a PUC approved period that ended on December 31, 2021. In the second quarter of 2022, the Utilities filed an application, which is currently pending, to seek recovery of the COVID-19 deferred costs, not to exceed the amount of $27.8 million. (See discussion under “Regulatory assets for COVID-19 related costs” in Note 3 of the Condensed Consolidated Financial Statements).
Looking forward, while case counts and hospitalizations have declined, a worsening of COVID-19 case counts with new variants or a reinstatement of COVID-19 restrictions could adversely affect the ability of the Utilities’ contractors, suppliers, IPPs, and other business partners to perform or fulfill their obligations timely, or at all, or require modifications to existing contracts, which could adversely affect the Utilities’ business, increase expenses, and impact the Utilities’ ability to achieve their RPS and other climate related goals.
In June 2022, the consumer price index reached a 40-year high of 9.1% as gas prices and rents spiked. In Hawaii, the May 2022 Urban Hawaii (Honolulu) Consumer Price Index (CPI) was 7.0% higher than it was one year ago. In addition, fuel costs have risen rapidly and have increased 90% over prior year’s quarter. Although the Utilities are able to pass through fuel costs to customers and have limited fuel cost exposure through a 2% fuel-cost sharing mechanism (approximately $3.7 million exposure annually), higher customer bills could reduce customers’ ability to pay timely or increase the risk of non-payment. In addition, the higher customer bills may lead the PUC to consider other actions to limit or delay any proposed increase in rates in order to mitigate the overall bill impact of rising fuel prices.
Under the PBR framework, inflation risk for the Utilities is mitigated by an Annual Rate Adjustment (ARA), which is based on a formula that includes a compounded and non-compounded portion.
The compounded portion of the ARA adjustment includes an adjustment for inflation based on the estimated change in Gross Domestic Product Price Index (GDPPI) for the upcoming year, less a predetermined annual productivity factor (currently set at zero), less a 0.22% customer dividend, applied to a basis equal to test year target revenues plus the RAM Revenue adjustments in effect prior to the implementation of PBR, plus the prior adjustment year’s compounded portion of the ARA adjustment. The GDPPI adjustment is determined using the forecasted GDPPI in October, which is effective for the following calendar year. For the 2022 calendar year, GDPPI was measured at 3% in October 2021 and was effective in rates on January 1, 2022. For the 2023 calendar year, the estimated change in GDPPI will be effective in rates on January 1, 2023.
The non-compounded portion of the ARA adjustment includes a subtractive component, representing the management audit savings commitment, or refund to customers, which was approved by the PUC for the years 2021 through 2025.
Regulatory Developments. On June 17, 2022, the PUC issued a D&O approving (1) a new (penalty-only) Performance Incentive Mechanism (PIM) to incentivize achievement of generation-based reliability targets, with an annual maximum penalty of $1 million, (2) a new (penalty/reward) PIM to incentivize the timely completion of the interconnection requirements study process for large-scale renewable energy projects, the penalty/reward will depend on the specifics of the upcoming procurement, (3) a new (reward-only) Collective Shared Savings Mechanism to incentivize cost control over the Utilities’ fuel, purchased power, and Exceptional Project Recovery Mechanism costs (collectively, non-Annual Revenue Adjustment-related costs), and (4) a modification and extension of the existing interim (reward-only) Grid Services PIM with a maximum reward of
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$1.5 million through December 31, 2023. The effective date for the changes has not yet been established. See “Regulatory proceedings” in Note 3 of the Condensed Consolidated Financial Statements for additional discussions.
For a discussion regarding the impact of the economic conditions caused by the COVID-19 pandemic on the Utilities’ liquidity and capital resources, see discussion under “Financial Condition–Liquidity and capital resources.”
RESULTS OF OPERATIONS
Three months ended June 30Increase 
20222021(decrease)(dollars in millions, except per barrel amounts)
$819 $602 $217 
Revenues. Net increase largely due to:
$143 
higher fuel oil prices and higher kWh generated1
62 
higher purchased power energy prices, partially offset by lower kWh purchased2
10 higher revenue from ARA adjustments, which included an offset of management audit savings delivered to customers
revenue in 2022 related to ownership of and responsibility for the U.S. Army’s electrical distribution system on Oahu starting March 1, 2022
higher MPIR revenue
higher revenue related solely to a change in the timing for revenue recognition within the year, which eliminates seasonality in recognizing target revenues and results in recognizing revenues evenly throughout the year with target revenues recognized on an annual basis remaining unchanged
270 139 131 
Fuel oil expense1. Net increase largely due to higher fuel oil prices and higher kWh generated
218 162 56 
Purchased power expense1, 2. Net increase largely due to higher purchased power energy prices partially offset by lower kWh purchased
125 118 
Operation and maintenance expenses. Net increase largely due to:
more generating facility maintenance work performed
more generating facility overhauls performed
higher bad debt expense
(1)expense due to decommissioning of combined heat and power unit on Lanai in 2021
(1)higher Pearl Harbor environmental reserves in 2021
135 114 21 
Other expenses. Increase due to higher revenue taxes, coupled with higher depreciation expense in 2022 for plant investment in 2021
71 68 
Operating income. Increase largely due to higher ARA and MPIR revenue, offset in part by higher operation and maintenance expenses and higher depreciation expense
57 54 
Income before income taxes. Increase largely due to higher operating income, partially offset by higher interest expense
44 42 
Net income for common stock. Increase largely due to higher income before income taxes. See below for effective tax rate explanation.
2,031 2,026 
Kilowatthour sales (millions)3
$139.51 $73.58 $65.93 Average fuel oil cost per barrel
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Six months ended June 30Increase 
20222021(decrease)(dollars in millions, except per barrel amounts)
$1,528 $1,167 $361 
Revenues. Net increase largely due to:
$247 
higher fuel oil prices and higher kWh generated1
86 
higher purchased power energy prices, partially offset by lower kWh purchased2
20 higher revenue from ARA adjustments, which included an offset of management audit savings delivered to customers
revenue in 2022 related to ownership of and responsibility for the U.S. Army’s electrical distribution system on Oahu starting March 1, 2022
higher MPIR revenue
higher revenue related solely to a change in the timing for revenue recognition within the year, which eliminates seasonality in recognizing target revenues and results in recognizing revenues evenly throughout the year with target revenues recognized on an annual basis remaining unchanged
491 267 224 
Fuel oil expense1. Net increase largely due to higher fuel oil prices and higher kWh generated partially offset by lower penalties for better fuel efficiency due to reset of heat rate
382 305 77 
Purchased power expense1, 2. Net increase largely due to higher purchased power energy prices partially offset by lower kWh purchased
250 233 17 
Operation and maintenance expenses. Net increase largely due to:
more generating facility maintenance work performed
more generating facility overhauls performed
higher transmission and distribution preventive and corrective maintenance expense
higher outside services for Information Technology and Services support, Customer Interconnection/Installation, Demand Response Management System, and Battery Bonus program
higher bad debt expense
expense in 2022 related to ownership of and responsibility for the U.S. Army’s electrical distribution system on Oahu starting March, 1, 2022
higher property damage and legal reserve for pending claims
(1)expense due to decommissioning of combined heat and power unit on Lanai in 2021
(1)higher Pearl Harbor environmental reserves in 2021
260 226 34 
Other expenses. Increase due to higher revenue taxes, coupled with higher depreciation expense in 2022 for plant investment in 2021
145 137 
Operating income. Increase largely due to higher ARA and MPIR revenue, offset by higher operation and maintenance expense and higher depreciation expense
116 109 
Income before income taxes. Increase largely due to higher operating income, partially offset by higher interest expense
91 85 
Net income for common stock. Increase largely due to higher income before income taxes. See below for effective tax rate explanation.
3,988 3,935 53 
Kilowatthour sales (millions)3
$120.54 $68.59 $51.95 Average fuel oil cost per barrel
470,812 468,745 2,067 Customer accounts (end of period)
1The rate schedules of the electric utilities currently contain ECRCs through which changes in fuel oil prices and certain components of purchased energy costs are passed on to customers.
2The rate schedules of the electric utilities currently contain PPACs through which changes in purchased power expenses (except purchased energy costs) are passed on to customers.
3 In the second quarter of 2022, kWh sales were higher when compared to the same periods last year largely due to continued recovery from the impacts of the COVID-19 pandemic. COVID-19 cases have decreased in the second quarter of 2022, but not to pre-Omicron levels. U.S. visitor arrivals continued to increase above the second quarter of 2021 levels and approach pre-pandemic levels, but international
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arrivals remain low. The economic recovery is expected to strengthen this year as international visitors return and sales rebound, although the improvement is expected to remain below pre-pandemic levels due to global economic factors such as the continued effects of the invasion of Ukraine, increasing inflation, supply chain issues, and lingering impacts from the pandemic.

The Utilities’ effective tax rate for the second quarters of 2022 and 2021 were comparable at 21%. The Utilities’ effective tax rate for the first six months of 2022 and 2021 were comparable at 21%.
Hawaiian Electric’s consolidated ROACE was 8.2% and 8.9% for the twelve months ended June 30, 2022 and June 30, 2021, respectively.
The net book value (cost less accumulated depreciation) of utility property, plant and equipment (PPE) as of June 30, 2022 amounted to $4.9 billion, of which approximately 25% related to generation PPE, 66% related to transmission and distribution PPE, and 9% related to other PPE. Approximately 8% of the total net book value relates to generation PPE that has been deactivated or that the Utilities plan to deactivate or decommission.
See “Economic conditions” in the “HEI Consolidated” section above.
Executive overview and strategy.  The Utilities provide electricity on all the principal islands in the state, other than Kauai, to approximately 95% of the state’s population and operate five separate grids. The Utilities’ mission is to provide innovative energy leadership for Hawaii, to meet the needs and expectations of customers and communities, and to empower them with affordable, reliable and clean energy. The goal is to create a modern, resilient, flexible and dynamic electric grid that enables an optimal mix of distributed energy resources (DER), such as private rooftop solar, demand response and grid-scale resources to enable the creation of smart, sustainable, resilient communities and achieve the statutory goal of 100% renewable energy by 2045.
Performance-based regulations. On December 23, 2020, the PUC issued a D&O (PBR D&O) approving a new performance-based regulation framework (PBR Framework). See “Regulatory proceedings” under “Commitments and contingencies” in Note 3 of the Condensed Consolidated Financial Statements.
Transition to a decarbonized and sustainable energy future.  The Utilities are fully committed to leading and enabling pathways to a decarbonized and sustainable energy future for Hawaii. The Utilities believe that a holistic approach to decarbonization is needed, and that such a strategy requires achieving the Utilities’ decarbonization and renewable energy commitments, facilitating and promoting beneficial electrification, and deploying carbon removal and offsets among other levers to reduce statewide emissions.
In the fourth quarter of 2021, the Utilities outlined its Climate Action Plan to cut carbon emissions from power generation 70% by 2030, compared to a 2005 baseline. The emissions covered by this goal include stack emissions from generation owned by Hawaiian Electric and IPPs who sell electricity to the Utilities. The 2030 commitment would provide a significant portion of the reduction the entire Hawaii economy needs to meet the U.S. target of cutting carbon emissions by at least 50% economy-wide by 2030. Hawaiian Electric has also committed to achieving net zero carbon emissions from power generation by 2045 or sooner. Key elements of the 2030 plan include the closure of the state’s last coal-fired IPP plant in 2022 upon expiry of the PPA, increasing rooftop solar by more than 50% over 2021 levels, retiring six fossil fuel generating units, adding at least 1 GW of renewable generation to what was already in place in 2021, increasing grid-scale and customer-owned storage, expanding geothermal resources, and creating customer incentives for using clean, lower-cost energy at certain times of the day and using less fossil-fueled energy at night. The retirement of fossil-fueled generating units to achieve the Utilities’ 70% decarbonization goal is consistent with state policy and supported by Hawaii State law. See “Forecast of capital expenditures—Liquidity and capital resources” for a discussion of potential capital expenditures related to decarbonization efforts.
On September 1, 2022, the last coal-fired IPP plant in the state, providing approximately 10% of Oahu’s generation, will cease operations, removing a significant amount of GHG emissions from the Utilities’ generation mix. The plant’s aging infrastructure could lead to more unscheduled outages compared to historic performance, which may impact system reliability.
In anticipation of the retirement of the coal-fired IPP plant, the Utilities have developed plans, including contingency plans, to ensure reliable service through the transition period. These plans include the anticipated addition of renewable energy/storage projects, reserve capacity from existing generation sources, the acceleration of maintenance work during periods with anticipated higher reserve levels, and multiple demand response/DER programs. For example, the state’s largest solar plus battery storage project to date, totaling 39 MW, reached commercial operations on July 31, 2022. However, future events, including unexpected issues with existing generation, or supply chain issues and inflationary pressures, as well as federal policies related to solar panel imports, among other factors, delay in the commercial operation of new generation resources, could disrupt the ability of the Utilities to deliver reliable service. Also, see the “Developments in renewable energy efforts—New renewable PPAs” section below.
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Hawaii’s renewable portfolio standard law requires electric utilities to meet an RPS of 40%, 70% and 100% by December 31, 2030, 2040 and 2045, respectively. Hawaii law has also established a target of sequestering more atmospheric carbon and greenhouse gases than emitted within the state by 2045. The Utilities’ strategies and plans are fully aligned in meeting these targets.
The Utilities have made significant progress on the path to clean energy and have been successful in achieving RPS goals. To date the Utilities have met all of the statutory RPS goals, including exceeding the last milestone RPS target of 30% for 2020, where it achieved an RPS of 34.5%. In 2021, the Utilities achieved an RPS of 38.4%. The Utilities will continue to actively procure additional renewable energy post-2021 and expect to meet or exceed the next statutory RPS goal of 40% in advance of the 2030 compliance year. In July 2022, Governor Ige signed Act 240 (H.B.2089), that amended the RPS calculation from renewable energy as a percentage of sales to renewable energy as a percentage of total generation. The amended RPS calculation results in a lower calculated percentage than the amount calculated under the previous methodology. The change in the definition is to be applied prospectively to future milestone measurements and will require that the Utilities acquire more renewable energy than under the previous RPS calculation to comply with the RPS milestones; however, the Utilities expect to continue to meet the RPS milestones under the amended RPS law. (See “Developments in renewable energy efforts” below).
If the Utilities are not successful in meeting the RPS targets as mandated by law, the PUC could assess a penalty of $20 for every MWh that an electric utility is deficient. Based on the level of total generation in 2021, a 1% shortfall in meeting the 2030 RPS requirement of 40% would translate into a penalty of approximately $2 million. The PUC has the discretion to reduce the penalty due to events or circumstances that are outside an electric utility’s reasonable control, to the extent the event or circumstance could not be reasonably foreseen and ameliorated. In addition to penalties under the RPS law, failure to meet the mandated RPS targets would be expected to result in a higher proportion of fossil fuel-based generation than if the RPS target had been achieved, which in turn would be expected to subject the Utilities to limited commodity fossil fuel price exposure under a fuel cost risk-sharing mechanism. The fuel cost risk-sharing mechanism apportions 2% of the fuel cost risk to the utilities (and 98% to ratepayers) and has a maximum exposure (or benefit) of $3.7 million. Conversely, the Utilities have incentives under PIMs that provide a financial reward for accelerating the achievement of renewable generation as a percentage of total generation, including customer supplied generation. The Utilities may earn a reward for the amount of system generation above the interpolated statutory RPS goal at $20/MWh in 2022, $15/MWh in 2023, and $10/MWh for the remainder of the multi-year rate period.
The Utilities are fully aligned with, and supportive of, state policy to achieve a decarbonized future and have made significant progress in reducing emissions through renewable energy and electrification. This alignment with state policy is reflected in management compensation programs and the Utilities’ long-range plans, which include aspirational targets in order to catalyze action and accelerate the transition away from fossil fuels throughout its operations at a pace more rapid than dictated by current law. The long-range plans, including aspirational targets, serve as guiding principles in the Utilities’ continued transformation, and are updated regularly to adapt to changing technology, costs, and other factors. While there is no financial penalty for failure to achieve the Utilities’ long-range aspirational objectives, the Utilities recognize that there are environmental and social costs from the continued use of fossil fuels.
The State of Hawaii’s policy is supported by the regulatory framework and includes a number of mechanisms designed to maintain the Utilities’ financial stability during the transition toward the State’s decarbonized future. Under the sales decoupling mechanism, the Utilities are allowed to recover from customers, target test year revenues, independent of the level of kWh sales, which have generally trended lower over time as privately-owned DER have been added to the grid and energy efficiency measures have been put into place. Other regulatory mechanisms under the new PBR framework reduce some of the regulatory lag during the multi-year rate plan (MRP), such as the annual revenue adjustment to provide annual changes in utility revenues, including inflationary adjustments, and the exceptional project recovery mechanism, which allows the Utilities to recover and earn on certain approved eligible projects placed into service. See “Regulatory proceedings” under “Commitments and contingencies” and “Decoupling” in Note 3 of the Condensed Consolidated Financial Statements.
Integrated Grid Planning. Achieving high levels of renewable energy and a carbon free electric system will require modernizing the grid through coordinated energy system planning in partnership with local communities and stakeholders. To accomplish this, the Utilities are implementing an innovative systems approach to energy planning intended to yield the most cost-effective renewable energy and decarbonization pathways that incorporates customer and stakeholder input.
The Integrated Grid Planning (IGP) utilizes an inclusive and transparent Stakeholder Engagement model to provide an avenue for interested parties to engage with the Utilities and contribute meaningful input throughout the IGP process. The IGP Stakeholder Council, Technical Advisory Panel and Working groups have been established and meet regularly to provide feedback and input on specific issues and process steps in the IGP. The Utilities submitted an updated IGP work plan to the PUC in January 2021. In August 2021, the Utilities submitted their Revised Inputs and Assumptions to the PUC for review and approval, marking the significant progress made through the stakeholder engagement phase of the IGP process. On March 31, 2022, the Utilities submitted the final Inputs and Assumptions approved by the PUC. On June 30, 2022, the PUC approved the
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Utilities’ planning methodologies and criteria with modifications. Once the revised planning methodologies and criteria are approved, the next step in the IGP process to complete a Grid Needs Assessment will begin.
Demand response programs. Pursuant to PUC orders, the Utilities are developing an integrated Demand Response (DR) Portfolio Plan that will enhance system operations and reduce costs to customers. The reduction in cost for the customer will take the form of either rates or incentive-based programs that will compensate customers for their participation individually, or by way of engagements with turnkey service providers that contract with the Utilities to aggregate and deliver various grid services on behalf of participating customers and their distributed assets.
On June 9, 2021, the PUC issued an order providing guidance to the third Grid Service RFP filed on February 23, 2021. The proposed Grid Service RFP focused only on Oahu and is seeking 132 MW of grid services with focus on capacity reduction (60 MW) similarly in response to the potential reserve shortfall from the AES coal plant retirement scheduled on September 1, 2022. The Utilities executed a GSPA for a total grid services amount of 97.4 MW and filed with the PUC to request approval on March 16, 2022. The Utilities are currently going through the procedural schedule where they answered a set of information requests. On July 26, 2022, the Consumer Advocate filed its Statement of Position not objecting to the PUC approving the GSPA if certain conditions are adopted. The Utilities will respond to the Statement of Position in August 2022 to comment to the various conditions proposed by the Consumer Advocate, at which point the procedural schedule steps are completed and the GSPA is ready for the PUC’s decision.
On June 8, 2021, the PUC approved the new program, Emergency Demand Response Program (EDRP), a battery storage incentive program to dispatch electricity between 6 p.m. to 8 p.m. daily from participating residential and commercial customers, to address the potential reserve shortfalls following the AES coal plant retirement. The PUC approved EDRP for 50MW on Oahu with an incentive budget not to exceed $34 million, which will be recovered via a surcharge cost recovery mechanism over a 10-year amortization. The Utilities’ implementation plan was approved by the PUC on June 30, 2021, and the Utilities subsequently filed the updated EDRP tariffs on July 1, 2021. On February 25, 2022, the PUC approved an amendment to the Battery Bonus program that provides additional incentives to participating customers. This new amendment became effective on March 1, 2022. As of June 30, 2022, the Utilities have received and approved the applications totaling approximately 7.5 MW on Oahu.
On March 30, 2022, the Utilities filed with the PUC to request expanding the EDRP for up to 15 MW on the island of Maui and received PUC approval on May 20, 2022. The EDRP on Maui became effective as of June 1, 2022. Subsequently on June 23, 2022, the PUC approved the cost recovery of the additional incentives for both Oahu and Maui through the DSM Surcharge. As of June 30, 2022, the Utilities have received less than 10 applications for Maui that are currently being reviewed.
Grid modernization. The overall goal of the Grid Modernization Strategy is to deploy modern grid investments at an appropriate priority, sequence and pace to cost-effectively maximize flexibility, minimize the risk of redundancy and obsolescence, deliver customer benefits and enable greater DER and renewable energy integration. Under the Grid Modernization Strategy, the Utilities expect that new technology will help increase adoption of private rooftop solar and make use of rapidly evolving products, including storage and advanced inverters. On March 25, 2019, the PUC approved a plan for the Utilities to implement Phase 1 of their Grid Modernization Strategy, which is the proportional deployment of advanced metering infrastructure (AMI). On February 28, 2022, the PUC expanded the scope of Phase 1 to the full service territory with a completion date set for the third quarter of 2024. The estimated cost of full deployment (including proportional deployment) is approximately $143 million in capital and deferred software cost and is expected to be incurred over five years. As of June 30, 2022, approximately $46 million of capital and deferred software cost has been incurred to date under Phase 1 and is currently being recovered under the MPIR mechanism until such costs are included in base rates. On June 24, 2022, the PUC approved with certain conditions the Utilities’ request to aggregate the per-meter and network cost caps and to recover O&M costs associated with full-service territory AMI deployment under the MPIR mechanism. To date, the Utilities have deployed over 100,000 advanced meters, servicing approximately 21% of total customers.
The Utilities filed an application with the PUC on September 30, 2019 for an Advanced Distribution Management System (ADMS) as part of Phase 2 of their Grid Modernization Strategy implementation. However, on December 30, 2019, the PUC suspended the Utilities’ application for the ADMS pending the Utilities’ filing of a supplemental application for the broad deployment of field devices. This supplement and update to the Grid Modernization Strategy Phase 2 field devices application was filed on March 31, 2021. The estimated cost for the implementation over five years of the ADMS and field devices, which includes capital, deferred software costs and O&M costs, is $105 million. A PUC order was issued on April 27, 2021, unsuspending and resuming consideration of the Phase 2 Application. The Utilities filed the reply statement of position on October 15, 2021, completing the discovery phase of the docket. On November 16, 2021, the PUC suspended the Utilities’ ADMS and Phase 2 field device application to focus the Utilities’ attention on completing Phase 1. The Utilities filed a Motion for Reconsideration with the PUC in response to the suspension, but the motion was denied. The PUC subsequently clarified that the Utilities may resume the Phase 2 docket no earlier than six months before Phase 1 is scheduled to be completed in the
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third quarter of 2024. Resumption of the Phase 2 proceeding would likely commence six months prior to the scheduled completion date selected by the PUC.
Community-based renewable energy. In December 2017, the PUC adopted a community-based renewable energy (CBRE) program framework which allows customers who cannot, or chose not to, take advantage of private rooftop solar to receive the benefits of renewable energy to help offset their monthly electric bills and support clean energy for Hawaii. The program has two phases.
The first phase, which commenced in July 2018, totals 8 MW of solar photovoltaic (PV) only with one credit rate for each island, closed on April 9, 2020. Two phase 1 projects (28.32 kW on Maui and 270 kW on Oahu) have been operational for over a year, with four additional phase 1 projects expected to become operational in 2023.
The second phase, which commenced on April 9, 2020 and subsequently expanded on July 27, 2021, allows over 250 MW across all Hawaiian Electric service territories in two tranches for small (under 250 kW), mid-tier and large system sizes to encourage a variety of system sizes. To provide opportunities for Low-to-Moderate Income (LMI) customers to participate in the program, separate project proposals may be submitted specifically targeting LMI customers.
Eight RFPs were required by order: one each for Oahu, Maui, Hawaii Island, Molokai, and Lanai, and LMI-specific RFPs for Oahu, Maui, and Hawaii Island. LMI projects do not have a size cap nor do they decrease the 250 MW capacity available to other projects.
For Lanai, the Utilities proposed to combine the previously issued Variable Renewable Dispatchable Generation Paired with Energy Storage RFP and the CBRE RFP to optimize the benefits of procuring renewable energy, spurring development and increasing the likelihood of success of the CBRE Program on Lanai. See “Developments in renewable energy efforts–Requests for renewable proposals, expressions of interest, and information” for additional information.
One CBRE proposal for Lanai was selected but negotiations were terminated on June 15, 2022. With the concurrence of the Independent Observer, a replacement proposal was selected on July 1, 2022. On July 25, 2022, the Utilities announced the selection of a new developer for the Lanai CBRE RFP. CBRE proposals due date for Molokai was extended until March 1, 2022 and are currently being evaluated. CBRE LMI proposals for Oahu, Maui and Hawaii were issued and are currently being evaluated. The Utilities issued the CBRE Tranche 1 RFPs for Oahu, Maui and Hawaii on April 14, 2022 and will accept proposals for these RFPs through August 17, 2022.
The Utilities CBRE Phase 2 Rule 29 became effective on March 10, 2022. The Utilities are currently accepting project applications for small CBRE projects less than 250 kW in size. The PUC reserved 45 MW as well as a small amount of unallocated capacity from Phase 1 for small projects in Phase 2 on Oahu, Maui and Hawaii Island. The Utilities have developed a CBRE Portal where Subscriber Organizations can apply for small project capacity and manage subscribers for all CBRE projects in the program. Customers can also use the portal to subscribe to a project once the Subscriber Organization has added their project to the portal.
Microgrid services tariff proceeding. In enacting Act 200 of 2018, the Hawaii legislature found that Hawaii’s residents and businesses were vulnerable to disruptions in the islands’ energy systems caused by extreme weather events or other disasters, and stated its belief that the use of microgrids would build energy resiliency into Hawaii’s communities, thereby increasing public safety and security. The purpose of Act 200 was therefore to encourage and facilitate the development and use of microgrids through the establishment of a standard microgrid services tariff. In July 2018, pursuant to Act 200, the PUC opened a proceeding to investigate the establishment of a microgrid services tariff. In August 2019, the PUC issued an order prioritizing items for resolution in the docket and directed the Parties to establish working groups (the Working Group) to address issues identified by the PUC.
On May 27, 2021, the Utilities filed the Microgrid Service Tariff. On September 21, 2021, the PUC provided guidance for Phase 2 of the Microgrid Tariff proceeding, specifically identifying the objective for Phase 2 to promote self-sufficiency and resilience among microgrid project operators, as well as to further streamline the Microgrid Services Tariff where applicable. Furthermore, the PUC instructed Parties to recommend priority topics, along with supporting rationale to better inform the topics that will be discussed during this phase of the proceeding, which the parties submitted by October 21, 2021.
On April 1, 2022, the PUC established its Prioritized Issues for Resolution for Phase 2 of the Microgrid proceeding, which includes the following: 1) Microgrid Compensation and Grid Services; 2) Utility Compensation; 3) Customer Protection and Related Considerations; 4) Interconnection; and 5) Working group coordination with related microgrid and resilience Initiatives at Hawaiian Electric and government agencies. Furthermore, the PUC established a procedural schedule to consist of quarterly status conference meetings with the PUC, a Phase 2 Working Group Report, draft of a revised Microgrid Service Tariff, Party comments to the proposed Microgrid Service Tariff, followed by a PUC D&O.
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On June 30, 2022, the PUC provided further guidance to the Working Group and instructed the Working Group to prioritize discussion of the microgrid types in the following order: 1) Hybrid Microgrid - Third Party Developer using Utility lines/infrastructure; 2) Hybrid Microgrid - Utility Project with Partners; and 3) Customer Microgrid. Additionally, the PUC instructed the Working Group to discuss microgrid compensation and continue the involvement of microgrid developers in working group meetings.
Decoupling. See “Decoupling” in Note 3 of the Condensed Consolidated Financial Statements for a discussion of decoupling.
Regulated returns. As part of the PBR Framework’s annual review cycle, the Utilities track their rate-making ROACEs as calculated under the earnings sharing mechanism, which includes only items considered in establishing rates. At year-end, each utility’s rate-making ROACE is compared against its ROACE allowed by the PUC to determine whether earnings sharing has been triggered. The D&O in the PBR proceeding modified the earnings sharing mechanism to a symmetric arrangement. Effective with annual earnings for 2021, the earnings sharing will be triggered for achieved rate-making ROACE outside of a 300 basis points dead band above and below the current authorized rate-making ROACE of 9.5% for each of the Utilities. Earnings sharing credits or recoveries will be included in the biannual report (formally known as annual decoupling filing) to be filed with the PUC in the spring of the following year. Results for 2021, 2020 and 2019 did not trigger the earnings sharing mechanism for the Utilities.
Actual and PUC-allowed returns, as of June 30, 2022, were as follows:
%Rate-making Return on rate base (RORB)*ROACE**Rate-making ROACE***
Twelve months ended 
June 30, 2022
Hawaiian ElectricHawaii Electric LightMaui ElectricHawaiian ElectricHawaii Electric LightMaui ElectricHawaiian ElectricHawaii Electric LightMaui Electric
Utility returns7.20 5.99 6.87 8.60 6.64 7.89 9.53 7.47 8.99 
PUC-allowed returns7.37 7.52 7.43 9.50 9.50 9.50 9.50 9.50 9.50 
Difference(0.17)(1.53)(0.56)(0.90)(2.86)(1.61)0.03 (2.03)(0.51)
*      Based on recorded operating income and average rate base, both adjusted for items not included in determining electric rates.
**    Recorded net income divided by average common equity.
***  ROACE adjusted to remove items not included by the PUC in establishing rates, such as incentive compensation.
The gap between PUC-allowed ROACEs and the ROACEs achieved is primarily due to the exclusion of certain expenses from rates (for example, incentive compensation and charitable contributions), and depreciation, O&M expense and return on rate base that are in excess of what is currently being recovered through rates (the last rate case plus authorized RAM adjustments and ARA revenues).
Regulatory proceedings.  On December 23, 2020, the PBR D&O was issued, establishing a new PBR Framework. The PBR Framework implemented a five-year MRP, during which there will be no general rate case applications. In the fourth year of the MRP, the PUC will comprehensively review the PBR Framework to determine if any modifications or revisions are appropriate. See also “Regulatory proceedings” in Note 3 of the Condensed Consolidated Financial Statements.
Developments in renewable energy effortsDevelopments in the Utilities’ efforts to further their renewable energy strategy include renewable energy projects discussed in Note 3 of the Condensed Consolidated Financial Statements and the following:
New renewable PPAs.
On December 31, 2019, Hawaii Electric Light and Puna Geothermal Ventures entered into an Amended and Restated Power Purchase Agreement (ARPPA). The ARPPA extends the term of the existing PPA by 25 years to 2052, expands the firm capacity of the facility to 46 MW and delinks the pricing for energy delivered from the facility from fossil fuel prices to reduce cost to customers. On March 31, 2021, the PUC suspended the docket pending the completion of a supplemental environmental review under the Hawaii Environmental Policy Act (HEPA). After the Office of Planning and Sustainable Development identified the Planning Department for the County of Hawaii to be the accepting agency and approving authority for any required HEPA review, the PUC lifted the suspension of the docket stating that the docket was ready for decision-making. On March 16, 2022, the PUC issued a D&O, approving the ARPPA, subject to conditions, that include requiring completion of the final environmental review prior to construction. On March 28, 2022, Puna Pono Alliance filed a Motion for Reconsideration seeking reconsideration, modification and/or vacation of the D&O. On June 6, the PUC denied Puna Pono’s Motion for Reconsideration. PGV has notified the Utilities that changes in market conditions have transpired since the terms of the ARPPA were negotiated and has indicated its desire to negotiate an amendment to the ARPPA to mitigate the impacts. The Utilities are reviewing PGV’s request.
Under a request for proposal process governed by the PUC and monitored by independent observers, in February 2018, the Utilities issued Stage 1 Renewable RFPs for 220 MW of renewable generation on Oahu, 50 MW of
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renewable generation on Hawaii Island, and 60 MW of renewable generation on Maui. To date, summarized information for a total of eight PPAs is as follows:
UtilitiesNumber of contractsTotal photovoltaic size (MW)BESS Size (MW/MWh)Guaranteed commercial operation datesContract term (years)Total projected annual payment (in millions)
Hawaiian Electric4139.5139.5/5587/31/22, 9/30/22, 1/20/23 &8/31/2320 & 25$32.2 
Hawaii Electric Light26060/24012/2/22 & 4/21/232514.9 
Maui Electric27575/3004/28/23 & 10/27/232517.6 
Total8274.5274.5/1,098$64.7 
The Utilities have received PUC approvals to recover the total projected annual payment of $64.7 million for the eight PPAs through the PPAC to the extent such costs are not included in base rates. On March 29, 2022, the Utilities filed a letter with the PUC requesting approval of an amendment requesting a price and guaranteed commercial operation date change to a previously-approved PPA for Stage 1 on Oahu to resolve a force majeure condition. On May 6, 2022, the PUC conditionally approved this PPA amendment. On May 26, 2022, the Utilities filed a letter with the PUC requesting approval of an amendment requesting a price increase, a guaranteed commercial operation date change, and provisions to allow partial commissioning to a previously-approved PPA for Stage 1 on Hawaii Island to resolve a force majeure condition. On June 29, 2022, the PUC approved this PPA amendment.
In continuation of their February 2018 request for proposal process, the Utilities issued their Stage 2 Renewable RFPs for Oahu, Maui and Hawaii Island and Grid Services RFP on August 22, 2019. Final awards for the renewable projects were made on May 8, 2020. Final awards for the grid services projects were made starting in January 2020. To date, the Utilities had filed 11 PPAs, including 4 PPAs declared null and void by the independent power producers, 2 GSPAs and 2 applications for commitments of funds for capital expenditures for approval of the utility self-build projects with the PUC. On March 23, 2022, the PUC approved one solar-plus-storage project on Oahu for 15 MW of generation and 60 MWh of storage. On May 25, 2022, the PUC denied the one Utility Self-Build project on Hawaii Island. In response, the Utilities filed a motion for reconsideration with the PUC. On June 24, 2022 the Utilities filed Supplemental Request informing the PUC that the project might be eligible to receive funds under the federal Infrastructure Investment and Jobs Act (IIJA). On July 27, 2022 the PUC suspended the docket until after such time that the Utilities have received final disposition of its application for funding under the IIJA. The Utilities shall then properly request the PUC to lift the suspension and either issue a decision on the pending Motion, or take further action as appropriate. On July 25, 2022, the PUC approved the final solar-plus-storage project on Oahu for 42 MW of generation and 168 MWh of storage.
A summary of the seven PPAs that are approved and still under active development, is as follows:
UtilitiesNumber of contractsTotal photovoltaic size (MW)BESS Size (MW/MWh)Guaranteed commercial operation datesContract term (years)Total projected annual payment (in millions)
Hawaiian Electric49494/5035/17/23, 10/30/23, 12/29/23 & 4/9/202420 & 25$32.9 
Hawaiian Electric1*N/A185/56512/30/222024.0 
Maui Electric26060/2407/25/23 & 12/29/232518.2 
Total7154339/1,308$75.1 
* See further discussion under “Review of Interconnection Process and Kapolei Energy Storage Power Purchase Agreement” below.
The total projected annual payment of $75.1 million for these PPAs will be recovered through the PPAC to the extent such costs are not included in base rates. On February 15, 2022, the Utilities filed letters with the PUC requesting approval of amendments to two of the previously-approved PPAs for Stage 2, one on Oahu and one on Maui, that address delays and price increase due to the COVID-19 pandemic and the global supply-chain crisis, as well as other market conditions that have arisen during the development of these projects. On March 2, 2022, the PUC declined to approve both amendments. On March 14, 2022, both the developer of the project and the Utilities filed a motion for reconsideration for one project, and the developer also filed a motion for reconsideration for the second project. On May 5, 2022, the developer withdrew its motions for reconsideration for both projects and on May 6, 2022, the Utilities withdrew their motion for reconsideration and filed the developer’s notices declaring PPAs for the projects null and void. On May 6, 2022, after the developer declared the PPAs null and void, the PUC granted the Utilities’
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motion for reconsideration, approving the amendment to the Maui based project. However, the PUC’s order did not change the developer’s null and void declaration of the PPA for the Maui based project.
A summary of the GSPAs that were approved by PUC in December 2020 is as follows:
UtilitiesFast Frequency Response - 1
(MW)
Fast Frequency Response - 2
(MW)
Capacity -
Load Build
(MW)
Capacity -
Load Reduction
(MW)
Hawaiian Electric26.714.519.4
Hawaii Electric Light6.03.24.0
Maui Electric6.11.94.7
Total12.126.719.628.1
A summary of the utility self-build projects that are pending PUC approval is as follows:
UtilitiesNumber of contractsBESS Size (MW/MWh)Guaranteed commercial operation dates
Hawaii Electric Light1*12/1212/30/22
Maui Electric140/1604/28/23
Total252/172
* The Utility Self-Build project was denied by the PUC on May 25, 2022 and the Utilities have filed a motion for reconsideration with the PUC.
The Utilities’ renewable energy goals depend, in large part, on the success of renewable projects developed and operated by independent power producers. Beginning in 2017, the Utilities embarked on an ambitious procurement effort, selecting multiple solar plus storage efforts to help reach the Utilities renewable portfolio standards goals as well as to assist the Utilities in retiring fossil fuel generation. Several of the recently procured projects have experienced delays and four Stage 2 projects have been declared null and void by the independent power producers due to a number of issues, including supply chain disruptions caused by impacts from the COVID-19 pandemic, solar product detentions at U.S. ports of entry ordered by the U.S. Customers and Border Protection agency, and unforeseen site conditions which resulted in unanticipated project costs or in some cases the inability to effectively use previously identified project sites. Projects have also indicated potential impacts from the investigation launched by the US Department of Commerce on March 28, 2022, in response to a request by Auxin Solar Inc. in regards to solar panel imports. On June 6, 2022, President Biden created a bridge to temporarily facilitate U.S. solar deployers’ ability to source certain imported solar modules and cells free of certain duties for 24 months in order to ensure the U.S. has access to a sufficient supply of solar modules to meet electricity generation needs. Significant project delays or failures of these projects increase the risk of the Utilities not meeting the renewable portfolio standards or other climate related goals, eligibility for performance incentive mechanisms associated with the speed of increasing renewable generation, and the ability to retire fossil fuel units.
Tariffed renewable resources.
As of June 30, 2022, there were approximately 560 MW, 121 MW and 134 MW of installed distributed renewable energy technologies (mainly PV) at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively, for tariff-based private customer generation programs, namely Standard Interconnection Agreement, Net Energy Metering, Net Energy Metering Plus, Customer Grid Supply, Customer Self Supply, Customer Grid Supply Plus and Interim Smart Export. As of June 30, 2022, an estimated 33% of single family homes on the islands of Oahu, Hawaii and Maui have installed private rooftop solar systems, and approximately 20% of the Utilities’ total customers have solar systems.   
The Utilities began accepting energy from feed-in tariff projects in 2011. As of June 30, 2022, there were 43 MW, 2 MW and 6 MW of installed feed-in tariff capacity from renewable energy technologies at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.
Biofuel sources.
In July 2018, the PUC approved Hawaiian Electric’s three-year biodiesel supply contract with Pacific Biodiesel Technologies, LLC (PBT) to supply 2 million to 4 million gallons of biodiesel at Hawaiian Electric’s Schofield Generating Station and the Honolulu International Airport Emergency Power Facility and any other generating unit on Oahu, as necessary. The PBT contract became effective on November 1, 2018 and has been extended for one year through December 2022. Hawaiian Electric also has a spot buy contract with PBT to purchase additional quantities of biodiesel at or below the price of diesel. Some purchases of “at parity” biodiesel have been made under the spot purchase contract, which was extended through June 2023. On June 30, 2021, the Utilities issued an RFP for all fuels,
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including biodiesel, for supply commencing January 1, 2023. The Utilities and PBT signed an agreement on December 13, 2021 for supply of biodiesel on all islands commencing January 1, 2023, subject to PUC approval.
Hawaiian Electric has a contingency supply contract with REG Marketing & Logistics Group, LLC to also supply biodiesel to any generating unit on Oahu in the event PBT is not able to supply necessary quantities. This contingency contract has been extended to November 2023, and will continue with no volume purchase requirements.
Requests for renewable proposals, expressions of interest, and information.
On November 27, 2019, the Utilities issued RFPs for renewable generation paired with energy storage on the islands of Lanai and Molokai. The Utilities were seeking PV paired with storage or small wind (specified as 100 kW turbines or smaller) on Molokai and PV paired with storage on Lanai. The RFP on Lanai was postponed on January 14, 2020 to allow the Utility to re-evaluate the scope of the RFP in response to announced plans to remove two large resorts from the grid. Proposals for the Molokai RFP were received on February 14, 2020. In light of a PUC order issued on April 9, 2020 in the CBRE docket, the Utilities proposed in their July 9, 2020 filing to combine the previously issued and subsequently postponed Lanai RFP with the CBRE RFP described in the order to optimize the benefits of procuring renewable energy, spurring development and increasing the likelihood of success of the CBRE program on Lanai. On May 21, 2021, the PUC approved the proposed combined Lanai RFP. On October 15, 2020, the Utilities selected one project from the Molokai RFP for a total of 4.5 MW of solar and 24 MWh of storage. The developer, however, declined to accept the award. On August 25 and 31, 2021, the Utilities filed proposed final drafts of the CBRE RFPs, which included three dedicated Low-to-Moderate-Income RFPs on Oahu, Maui and Hawaii, three Tranche 1 RFPs on Oahu, Maui and Hawaii, a Molokai CBRE RFP, and a combined Lanai Variable and CBRE RFP. On November 22, 2021, CBRE RFPs for Molokai and Lanai were opened. The Lanai RFP closed on February 14, 2022 and the Molokai RFP closed on March 1, 2022. A project was selected in the Lanai RFP but negotiations were terminated. On July 1, 2022, a replacement project was selected. Proposals are currently being evaluated in the Molokai RFP. On February 8, 2022, the PUC approved, subject to modifications, the CBRE and LMI CBRE RFPs for Oahu, Maui, and Hawaii Island. The Utilities filed the final RFPs with the PUC on February 23, 2022. On March 17, 2022, the CBRE LMI RFPs for Oahu, Maui and Hawaii were opened and proposals are currently being evaluated. The Utilities opened the CBRE Tranche 1 RFPs for Oahu, Maui and Hawaii on April 14, 2022. See “Transition to a decarbonized and sustainable energy future—Community-based renewable energy” for additional information.
The PUC issued a letter to the Utilities requesting development with a Stage 3 RFP on Hawaii Island on January 21, 2021. In accordance with guidance provided by the PUC in a subsequent letter on April 20, 2021, the Utilities filed the Hawaii Island Grid Needs Assessment on July 15, 2021 and the draft RFP, including model contracts for PV+BESS, wind+BESS, standalone storage, firm renewable generation, and DER aggregators on October 15, 2021. The requirements in the Stage 3 RFP are guided by the results of the Grid Needs Assessment. On March 18, 2022, the Utilities filed a second draft of the Stage 3 RFP for Hawaii Island, incorporating stakeholder and PUC feedback. On May 31, 2022, the Utilities filed its proposed final draft Stage 3 RFP for Hawaii Island. On June 30, 2022, the PUC issued an order approving with modifications the Stage 3 RFP for Hawaii Island and providing guidance on the Oahu and Maui Stage 3 RFPs. On July 11, 2022, the Utilities filed a motion for partial reconsideration and/or clarification of the PUC’s order. On July 20, 2022, the Utilities filed a Request for Extension to file the final Stage 3 RFP for Hawaii Island. On July 29, 2022, the PUC issued an order granting the Utilities’ motion for an enlargement of time to file the final Stage 3 RFP for Hawaii Island. The Utilities’ deadline to file the final Stage 3 RFP for Hawaii Island is 15 days from the filing date of the PUC’s decision on the Utilities’ Motion for Reconsideration.
On February 18, 2022, the PUC sent a letter to the Utilities directing them to develop Stage 3 RFPs for Oahu and Maui. On March 10, 2022, the Utilities submitted its recommendations on plans to develop Stage 3 RFPs for Oahu and Maui, and on May 2, 2022, the Utilities filed draft RFPs for Oahu and Maui. For Oahu, the Utilities are seeking 500 to 700 MW of renewable firm capacity, and at least 475 GWh of renewable dispatchable energy annually. For Maui, the Utilities are procuring at least 40 MW of renewable firm capacity, and at least 180 GWh of renewable dispatchable energy annually. Updated grid needs assessments for Oahu and Maui were filed on July 29, 2022.
On November 17, 2021, the Utilities filed a request with the PUC to develop an RFP for firm renewable generation for Oahu. On December 22, 2021, the PUC issued guidance to the Utilities on proceeding with such RFP. The Utilities filed a draft RFP on February 28, 2022. Per the PUC’s March 23, 2022 letter, the Utilities will pursue firm renewable generation as a part of the Stage 3 Oahu RFP.
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Review of Interconnection Process and Kapolei Energy Storage Power Purchase Agreement.
In February 2021, the PUC initiated a docket for the purposes of reviewing the status and interconnection progress of various utility-related renewable projects (i.e., Stage 1 and Stage 2 RFP PPAs and CBRE) and the Utilities’ transition plans for the expiration of the AES power purchase agreement, the retirement of the Kahului Power Plant, and other fossil fuel power plant transition plans, as needed. The Utilities filed initial status updates on the project timelines, steps needed for each of the renewable projects to achieve commercial operation and steps the Utilities are taking to address projected extensions of guaranteed commercial operation dates (GCOD) for renewable projects under development, which are due to a variety of factors, including those outside of the control of the Utilities. The PUC subsequently held status conferences on the Utilities’ updates. In April 2021, the PUC issued an Order directing the Utilities to establish regulatory liabilities for the difference between the on-peak avoided cost and the unit price included in the applications for approval of the renewable project PPAs, effective with the GCOD included in the applications (the earliest GCOD included in the applications is July 2021) or from the date of the Order for CBRE Phase 1 projects. The amount of regulatory liabilities to be recorded in future periods are not determinable at this time and would be affected by a number of factors, including the length of the GCOD extension period, the monthly on-peak avoided cost, as well as the factors described above. The Utilities filed a Motion for Reconsideration of the entire Order, or in the alternative to clarify that at most the PUC is directing the Utilities to track the information and not record the information at this time. The Utilities further requested a Stay of the Order pending resolution of the Motion. The Utilities maintain that extensions of GCODs are allowed under the PUC-approved contracts and that the Order has the unintended consequence of imposing penalties against the Utilities without due process. In May 2021, the PUC issued an order clarifying its Order and directed the Utilities to track costs to consumers caused by the perceived delay of renewable projects, and that the PUC does not intend to, at this time, impose any penalties on the Utilities. The Utilities report the tracked cost on a monthly basis. The full text of the Order, Motion for Reconsideration and request for a Stay of the Order, and clarification Order as well as the tracked costs can be found on the PUC website at dms.puc.hawaii.gov/dms (Docket No. 2021-0024).
Also in April 2021, the PUC approved the Kapolei Energy Storage (KES) PPA (one of the PPAs as a result of the Stage 2 Renewable RFP process) (KES Decision and Order), subject to nine conditions, including the Utilities forgoing the second portion of the PIM rewards amounting up to $1.7 million for the Stage 1 RFP PPAs, removing grid constraints for the Utilities’ CBRE Phase 2 projects and for existing and new distributed energy programs, financial retirement of Hawaiian Electric generating units by specified dates and adjusting target revenues at the retirement dates for such retirements, and a requirement to charge the batteries in the project using significant levels of renewable energy generation. The financial retirement of the generating units described in the KES Decision and Order is contrary to the intent of Hawaii Revised Statutes §269-6(d), which encourages the recovery of stranded costs for the retirement of fossil fuel generation, and contrary to the regulatory compact under which in return for agreeing to commit capital necessary to allow utilities to meet their obligation to serve, utilities are assured recovery of their investment and a fair opportunity to earn a reasonable return on the capital prudently committed to the business. Hawaiian Electric filed a Motion for Reconsideration and Stay of the Decision and Order due to potentially significant financial and operational impacts. In May 2021, the PUC granted, in part, Hawaiian Electric’s Motion for Reconsideration and Stay. In this Order, the PUC addressed a number of Hawaiian Electric’s concerns, including removing the condition of the Utilities foregoing the PIM award from Stage 1 RFP projects, agreeing to address grid constraint concerns in respective DER and CBRE dockets and not in the KES docket, removing the minimum thresholds of charging energy coming from renewable energy generation and corresponding deadlines associated with these thresholds and modifying the condition on financial retirement of generating units. The PUC indicated the net book value of generating assets would be addressed at the time of retirement. The full text of the KES Decision and Order and the Motion for Reconsideration and Stay with respect thereto, and the Order granting, in part, Hawaiian Electric’s Motion for Reconsideration can be found on the PUC website at dms.puc.hawaii.gov/dms (Docket No. 2020-0136).
Legislation and regulation. Congress and the Hawaii legislature periodically consider legislation that could have positive or negative effects on the Utilities and their customers. Also see “Environmental regulation” in Note 3 of the Condensed Consolidated Financial Statements.
Fuel contracts. The fuel contract entered into in January 2019, by the Utilities and PAR Hawaii Refining, LLC (PAR Hawaii), for the Utilities’ low sulfur fuel oil (LSFO), high sulfur fuel oil (HSFO), No. 2 diesel, and ultra-low sulfur diesel (ULSD) requirements was approved by the PUC, and became effective on April 28, 2019 and terminates on December 31, 2022. This contract is a requirement contract with no minimum purchases. If PAR Hawaii is unable to provide LSFO, HSFO, diesel and/or ULSD the contract allows the Utilities to purchase LSFO, HSFO, diesel and/or ULSD from another supplier.
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On June 9, 2020, the Utilities and PAR Hawaii entered into a First Amendment to the fuel contract. The First Amendment amends only the LSFO pricing to create a two-tiered structure based on volume, with all tier-1 LSFO up to the tier-1 maximum to be purchased exclusively from PAR Hawaii at the established pricing, and purchases in excess of that volume (tier-2) either from PAR Hawaii at the established pricing, or from an alternative supplier. On August 4, 2020, the PUC approved the First Amendment, which has an effective date of July 15, 2020, on an interim basis. The PUC’s approval order allows the recovery of such costs associated with the First Amendment through the ECRC to the extent that the costs are not recovered in base rates. The PUC intends to review whether the First Amendment is reasonable and in the public interest in the final decision, but it will not subject the recovery of the costs between the interim decision and the final decision to retroactive disallowances. On July 6, 2021, the PUC issued a D&O, approving the First Amendment and requiring the Utilities to meet certain conditions of approval (COA). The Utilities are currently addressing the COAs as required in the D&O.
On June 30, 2021, the Utilities issued two RFPs for all fuels for supply commencing January 1, 2023. On February 1, 2022, the Utilities and PAR Hawaii entered into a fuel supply contract commencing January 1, 2023 and Second Amendment to the existing fuel contract to amend tier-1 volumes. The Second Amendment will take effect contingent upon PUC’s approval. The costs incurred under the contract with PAR Hawaii are recovered in the Utilities’ respective ECRCs.
On March 3, 2022, as part of economic sanctions amid the Russia-Ukraine war, Par Hawaii announced that it is suspending all purchases of Russian crude oil, which accounts for at least 25% of Hawaii’s supply. The average fuel oil cost per barrel has increased 90% over prior year’s quarter. The Utilities are expecting bills to fluctuate until global oil market stabilizes.
Proposed modification to the pension tracking mechanisms. On June 9, 2022, the Utilities filed an application with the PUC for approval to modify the pension tracking mechanisms. The existing pension tracking mechanisms allow the Utilities to record the difference between actual NPPC and NPPC in rates to regulatory asset or liability. The proposed modification would allow the Utilities to also record to regulatory asset or liability the difference between the actual cash contributions made to the defined contribution plans and the contribution amounts included in rates. The Utilities also proposed in the application the accelerated return of pension tracking regulatory liability to the ratepayers during the current MRP.
FINANCIAL CONDITION
Liquidity and capital resources. As of June 30, 2022, there were no amounts outstanding on Hawaiian Electric’s revolving credit facility and $55 million of commercial paper borrowings outstanding by the Utilities. The total amount of available borrowing capacity under the Utilities’ committed line of credit was $200 million.
Hawaiian Electric expects that its liquidity will continue to be moderately impacted at the Utilities due to higher fuel prices and lingering COVID-19 impacts to the local economy. As of June 30, 2022, fuel inventories have increased by $120 million compared to December 31, 2021. Elevated fuel prices billed to customers have also resulted in higher accounts receivable balances, which increased by $60 million, compared to the accounts receivable balances as of December 31, 2021. Higher accounts receivable balances and bad debt expense may result in higher write-offs in the future. In addition to the cash flow impact from delayed collection of accounts receivable, lower kWh sales relative to the level of kWh sales approved in the last rate case generally result in delayed timing of cash flows, resulting in higher working capital requirements. However, the Utilities’ liquidity and access to capital remains adequate and is expected to remain adequate. As of June 30, 2022, the total amount of available borrowing capacity (net of commercial paper outstanding) under the Utilities’ committed lines of credit and cash and cash equivalents was approximately $160 million.
The Utilities are continuing the disconnection process on a tiered basis, expanding the targeted balances, which is expected to reduce delinquent accounts receivable balances and accelerate cash collections.
Hawaiian Electric’s consolidated capital structure was as follows:
(dollars in millions)June 30, 2022December 31, 2021
Short-term borrowings$55 %$— — %
Long-term debt, net1,737 42 1,676 42 
Preferred stock34 34 
Common stock equity2,290 56 2,262 57 
$4,116 100 %$3,972 100 %

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Information about Hawaiian Electric’s commercial paper borrowings, borrowings from HEI and line of credit facility were as follows:
 Average balanceBalance
(in millions)Six months ended June 30, 2022June 30, 2022December 31, 2021
Short-term borrowings1
   
Commercial paper$31 $55 $— 
Borrowings from HEI— — — 
Line of credit draws on revolving credit facility— — — 
 
1   The maximum amount of external short-term borrowings by Hawaiian Electric during the first six months of 2022 was approximately $92 million. As of June 30, 2022, Hawaii Electric Light had short-term borrowings from Hawaiian Electric of $3 million and Hawaiian Electric had short-term borrowings from Maui Electric of $10 million, which intercompany borrowings are eliminated in consolidation.
Credit agreement. On February 18, 2022, the PUC approved Hawaiian Electric’s request to extend the term of the $200 million Hawaiian Electric revolving credit facility to May 14, 2026. In addition to extending the term, Hawaiian Electric also received PUC approval to exercise its options of two one-year extensions of the commitment termination date and to increase its aggregate revolving commitment amount from $200 million to $275 million, should there be a need. Hawaiian Electric has a $200 million line of credit facility with no amount outstanding at June 30, 2022.
Credit ratings. On June 27, 2022, Fitch revised Hawaiian Electric’s outlook to “Positive” from “Stable” and affirmed the “BBB+” long-term issuer default rating and “F-2” short-term issuer default rating.
SPRBs. Special purpose revenue bonds (SPRBs) have been issued by the Department of Budget and Finance of the State of Hawaii (DBF) to finance (and refinance) capital improvement projects of Hawaiian Electric and its subsidiaries, but the sources of their repayment are the non-collateralized obligations of Hawaiian Electric and its subsidiaries under loan agreements and notes issued to the DBF, including Hawaiian Electric’s guarantees of its subsidiaries’ obligations.
On May 24, 2019, the PUC approved the Utilities’ request to issue SPRBs in the amounts of up to $70 million, $2.5 million and $7.5 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively, prior to June 30, 2020, to finance the Utilities’ capital improvement programs. Pursuant to this approval, on October 10, 2019, the DBF issued, at par, Series 2019 SPRBs in the aggregate principal amount of $80 million with a maturity of October 1, 2049. As of June 30, 2022, Hawaiian Electric had $1.1 million of undrawn funds remaining with the trustee. Hawaii Electric Light and Maui Electric have no undrawn funds.
On June 10, 2019, the Hawaii legislature authorized the issuance of up to $700 million of SPRBs ($400 million for Hawaiian Electric, $150 million for Hawaii Electric Light and $150 million for Maui Electric), with PUC approval, prior to June 30, 2024, to finance the Utilities’ multi-project capital improvement programs (2019 Legislative Authorization).
On February 9, 2021, the PUC approved the Utilities’ request to issue SPRBs (up to $100 million, $35 million and $45 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively) through 2022, with the proceeds to be used to finance the Utilities’ multi-project capital improvement programs. The PUC also approved the use of the expedited approval procedure to request the issuance and sale of the remaining/unused amount of SPRBs authorized by the 2019 Legislative Authorization (i.e., total not to exceed up to $400 million for Hawaiian Electric, up to $150 million for Hawaii Electric Light, and up to $150 million for Maui Electric) during the period January 1, 2023 through June 30, 2024. The Utilities filed their expedited letter request on July 29, 2022.
Taxable debt. On January 31, 2019, the Utilities received PUC approval (January 2019 Approval) to issue the remaining authorized amounts under the PUC approval received in April 2018 (April 2018 Approval) in 2019 through 2020 (Hawaiian Electric up to $205 million and Hawaii Electric Light up to $15 million of taxable debt), as well as a supplemental increase to authorize the issuance of additional taxable debt to finance capital expenditures, repay long-term and/or short term debt used to finance or refinance capital expenditures, and/or to reimburse funds used for payment of capital expenditures, and to refinance the Utilities’ 2004 junior subordinated deferrable interest debentures (QUIDS) prior to maturity. In addition, the January 2019 Approval authorized the Utilities to extend the period to issue additional taxable debt from December 31, 2021 to December 31, 2022. The new total “up to” amounts of taxable debt requested to be issued through December 31, 2022 are $410 million, $150 million and $130 million for Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.
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As of June 30, 2022, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $95 million, $75 million, and $35 million, respectively, of remaining taxable debt to issue prior to December 31, 2022. See summary table below.
(in millions)Hawaiian ElectricHawaii Electric LightMaui Electric
Total “up to” amounts of taxable debt authorized through 2022$410 $150 $130 
Less:
Taxable debt authorized and issued in 2018 under April 2018 Approval75 15 10 
Taxable debt issuance to refinance the 2004 QUIDS in 201930 10 10 
Taxable debt issuance in May 2020110 10 40 
Taxable debt executed in October 2020, but issued on January 14, 202160 30 25 
Taxable debt executed in May 2022, but issued on June 15, 202240 10 10 
Remaining authorized amounts $95 $75 $35 
On April 29, 2022, the Utilities requested PUC approval to issue, over a four-year period from January 1, 2023 to December 31, 2026, unsecured obligations bearing taxable interest (Hawaiian Electric up to $230 million, Hawaii Electric Light up to $65 million and Maui Electric up to $105 million), to finance capital expenditures, repay long-term and/or short-term debt used to finance or refinance capital expenditures, and/or to reimburse funds used for payment of capital expenditures.
On May 3, 2022, the Utilities received PUC approval through the expedited approval process to issue taxable debt (Hawaiian Electric up to $50 million, Hawaii Electric Light up to $30 million and Maui Electric up to $35 million) prior to December 31, 2022. Pursuant to the approval, on June 15, 2022, the Utilities drew $60 million of proceeds using a delayed draw feature under a private placement executed on May 11, 2022. The proceeds of the notes were used by the Utilities to finance their respective capital expenditures, repay short-term debt used to finance or refinance capital expenditures and/or reimburse funds used for the payment of capital expenditures. See Note 5 of the Condensed Consolidated Financial Statements.
Equity. In October 2018, the Utilities received PUC approval for the supplemental increase to issue and sell additional common stock in the amounts of up to $280 million for Hawaiian Electric and up to $100 million each for Hawaii Electric Light and Maui Electric, with the new total “up to” amounts of $430 million for Hawaiian Electric and $110 million each for Hawaii Electric Light and Maui Electric, and to extend the period authorized by the PUC to issue and sell common stock from December 31, 2021 to December 31, 2022. As of June 30, 2022, Hawaiian Electric, Hawaii Electric Light, and Maui Electric have $221.4 million, $93.7 million, and $63.2 million, respectively, of remaining common stock to issue prior to December 31, 2022. See summary table below.
(in millions)Hawaiian ElectricHawaii Electric LightMaui Electric
Total “up to” amounts of common stock authorized to issue and sell through 2021$150.0 $10.0 $10.0 
Supplemental increase authorized280.0 100.0 100.0 
Total “up to” amounts of common stock authorized to issue and sell through 2022430.0 110.0 110.0 
Less: Common stock authorized and issued in 2017, 2018, 2019, 2020 and 2021208.6 16.3 46.8 
Remaining authorized amounts $221.4 $93.7 $63.2 
On April 29, 2022, the Utilities requested PUC approval to issue and sell each utility’s common stock over a four-year period from January 1, 2023 through December 31, 2026 (Hawaiian Electric’s sale/s to HEI of up to $75 million, Hawaii Electric Light sale/s to Hawaiian Electric of up to $25 million, and Maui Electric sale/s to Hawaiian Electric of up to $55 million) and the purchase of Hawaii Electric Light and Maui Electric common stock by Hawaiian Electric from 2023 through December 31, 2026.
Cash flows. The following table reflects the changes in cash flows for the six months ended June 30, 2022 compared to the six months ended June 30, 2021:
Six months ended June 30
(in thousands)20222021Change
Net cash provided by operating activities$44,150 $57,453 $(13,303)
Net cash used in investing activities(133,560)(133,355)(205)
Net cash provided by financing activities50,784 45,210 5,574 

Net cash provided by operating activities. The decrease in net cash provided by operating activities was driven by higher cash paid for fuel oil stock due to higher fuel oil prices and volume purchased, as well as increase in customer accounts receivable resulting from increase in fuel prices and delays in a large government account payments, partially offset by
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payments on installment plans, higher cash receipts associated with increased disconnection efforts, and lower cash paid for accounts payable due to timing.
Net cash used in investing activities. The increase in net cash used in investing activities was primarily driven by an increase in capital expenditures related to construction activities.
Net cash provided by financing activities. The increase in net cash provided by financing activities was primarily driven by net increase in short-term borrowing and repayment of short-term debt in 2021, partially offset by lower net cash from long-term debts.
Material cash requirements. Material cash requirements of the Utilities include O&M expenses, including labor and benefit costs, fuel and purchase power costs, repayment of debt and interest payments, operating lease obligations, its forecasted capital expenditures and investments, its expected retirement benefit plan contributions and other short-term and long-term material cash requirements. The cash requirements for O&M, fuel and purchase power costs, debt and interest payments, and operating lease obligations are generally funded through the collection of the Utilities’ revenue requirement established in the last rate case and other mechanisms established under the regulatory framework. The cash requirements for capital expenditures are generally funded through retained earnings, the issuance of debt, and contributions of equity from HEI and generally recovered through the Utilities’ revenue requirement or other capital recovery mechanisms over time. The Utilities believe that their ability to generate cash is adequate to maintain sufficient liquidity to fund their material cash requirements. However, the economic impact of higher fuel prices, inflation, higher interest rates, tightening of monetary policy, and the ongoing COVID-19 pandemic, create significant uncertainty, and the Utilities cannot predict the extent or duration of the outbreak, the future effects that it will have on the global, national or local economy, including the impacts on the Utilities’ ability, as well as the cost, to access additional capital, or the future impacts on the Utilities’ financial position, results of operations, and cash flows.
Forecast capital expenditures. For the five-year period 2022 through 2026, the Utilities forecast up to $2.1 billion of net capital expenditures, which could change over time based upon external factors such as the timing and scope of environmental regulations and/or unforeseen delays in permitting and timing of PUC decisions. Approximately $1.3 billion is related to replacement and modernization of generation, transmission and distribution assets; approximately $0.5 billion is related to climate-related projects to transition to renewable energy or mitigate climate impacts by increasing the resilience of the system, and approximately $0.3 billion for targeted efforts to improve reliability. Proceeds from the issuance of equity and long-term debt, cash flows from operating activities, temporary increases in short-term borrowings and existing cash and cash equivalents are expected to provide the funds needed for the net capital expenditures, to pay down commercial paper or other short-term borrowings, as well as to fund any unanticipated expenditures not included in the 2022 to 2026 forecast (such as increases in the costs or acceleration of capital projects, or unanticipated capital expenditures that may be required by new environmental laws and regulations).
Management periodically reviews capital expenditure estimates and the timing of construction projects. These estimates may change significantly as a result of many considerations, including changes in economic conditions, changes in forecasts of kWh sales and peak load, the availability of purchased power and changes in expectations concerning the construction and ownership of future generation units, the availability of generating sites and transmission and distribution corridors, the need for fuel infrastructure investments, the ability to obtain adequate and timely rate increases, escalation in construction costs, the effects of opposition to proposed construction projects and requirements of environmental and other regulatory and permitting authorities.
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Bank
Recent Developments. See also Recent developments in HEI’s MD&A.
The Hawaii economy continued to improve in the second quarter of 2022 as an increase in visitor arrivals have helped drive a growing labor market and tax collections. Domestic visitor arrivals exceeded pre-pandemic levels in June 2022 due to pent up demand from leisure travelers. The state and county governments have also lifted all COVID-related travel restrictions for arriving domestic passengers. International visitor arrivals continued to lag significantly behind pre-pandemic levels but it is expected to increase as Asian countries begin to loosen travel restrictions. Other COVID-related mandates have also been lifted such as the indoor mask mandate and capacity limits for indoor and outdoor events. Although cases caused by the new variants have increased, hospitalization rates have not been significantly impacted.
In the first six months in 2022, the Federal Reserve raised its federal funds rate to a target range of 1.5%-1.75% in response to surging inflationary pressures in the economy. The increase in interest rates have increased ASB’s net interest margin; however, the higher interest rates have also reduced mortgage refinance and purchase activity, negatively impacting mortgage banking income. Additionally, the tight labor market and inflationary pressures have increased compensation and benefit expenses, which have partially offset the benefit of a higher interest rate environment. ASB’s net interest margin for the quarter ended June 30, 2022 of 2.85% was slightly higher than the linked quarter ended March 31, 2022 and lower than the net interest margin for the quarter ended June 30, 2021 of 2.98%.
ASB continued to experience deposit growth, which was used to fund loan growth and purchase investment securities. The Bank’s ASB CARES loan program continued to paydown and fees from the program along with the growth in investment securities portfolio contributed to higher interest income in 2022, offsetting the effect of lower loan portfolio balances and earning asset yields when compared to the prior year. Net interest income was $61.8 million for the quarter ended June 30, 2022 compared to $60.8 million for the quarter ended June 30, 2021.
For the quarter ended June 30, 2022, ASB recorded a $2.8 million provision for credit losses, primarily driven by loan growth in the commercial real estate loan portfolio and reserves established for consumer loans purchased. Credit upgrades in the commercial real estate and commercial loan portfolios released reserves to partially offset the additional reserves for loan portfolio growth and purchased loans. The provision for credit losses in future quarters will be dependent on future economic conditions and changes to borrower credit quality at that time.
In response to COVID-19, ASB made short-term loan modifications to borrowers who were generally payment current at the time of relief. As of June 30, 2022, no loans remained in their active deferral period. Approximately $4.4 million of loans were not able to resume their contractual payments and were considered delinquent as of June 30, 2022.
In 2020, ASB temporarily closed 15 of its 49 branches and reduced banking hours at the branches that remained open in an effort to reduce social gathering and protect employees and customers. The bank has since reopened seven of the branches that were temporarily closed and permanently closed eight branches. Three of the reopened branches are now digital branches, which provides digital solutions such as full-service ATMs and access to expert bankers through videoconferencing tools while allowing ASB to have a more efficient physical footprint. The reduction in ASB’s branch network should not have a significant impact to the bank’s customers as there are other branches nearby and other channels such as online and mobile banking. ASB continues to evaluate its branch network to determine whether further changes may be appropriate given its customers’ use of other banking channels.
ASB’s senior management team continually addresses the impacts to the operations and business of the bank as a result of the pandemic and meets regularly with ASB’s board of directors to keep them apprised of the impacts of the COVID-19 pandemic.
The CARES Act was signed into law on March 27, 2020. The CARES Act provided over $2 trillion in economic assistance for American workers, families, and small businesses, and job preservation for American industries. The PPP was established under the CARES Act and implemented by the United States Small Business Administration (SBA) to provide a direct incentive for small businesses to keep their workers on the payroll as a result of the COVID-19 crisis. ASB worked with a number of small businesses, both customers and non-customers, to complete the loan application forms so that these businesses could participate in the program. During the first round of PPP, the Bank secured more than $370 million in PPP loans for approximately 4,100 small businesses that supported over 40,000 jobs; ASB received processing fees totaling approximately $13 million and started recognizing these fees over the life of the loans. During the second round of PPP, ASB secured more than $175 million for approximately 2,200 small businesses that supported more than 20,000 jobs; ASB received processing fees of approximately $9 million. The remaining PPP loans outstanding as of June 30, 2022 was approximately $9 million and the remaining fees to be recognized over the life of the loans was approximately $0.3 million.
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Other provisions of the CARES Act provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes. See Note 4 of the Condensed Consolidated Financial Statements and “Economic conditions” in the “HEI Consolidated” section above.
ASB continues to maintain its low-risk profile, strong balance sheet and straightforward community banking business model.
 Three months ended June 30Increase 
(in millions)20222021(decrease)Primary reason(s)
Interest and dividend income$63 $62 $
Average loan portfolio yields were 21 basis points lower—impacted by low interest rate environment in the prior year, which has only started to rise in the current quarter. New loan production had been below the portfolio yields.
Average loan portfolio balances decreased $11 million - residential and commercial real estate loan portfolio average balances increased $163 million and $105 million, respectively. The increase in the commercial real estate loan portfolio was due to increased demand for this loan product. The increase in the residential loan portfolio was due to the Bank’s decision to portfolio a larger portion of the residential loan production. The commercial and consumer loan average balances decreased $267 million and $15 million, respectively, due to repayments in the portfolios.
Average investment securities portfolio balance increased $547 million—excess liquidity from deposit growth invested in agency securities. Average investment securities portfolio yield was 18 basis point higher due to lower premium amortizations.
Average other investments decreased $11 million - decrease in interest earning deposits due to excess liquidity being used to purchase investment securities.
Noninterest income13 15 (2)
Lower mortgage banking income - lower residential loan sale volume due to lower production volume and ASB’s decision to portfolio a larger portion of the residential loan production. In addition, the residential loan sale profit margin was lower in 2022 compared to 2021.
Lower bank owned life insurance income - lower returns from insurance policies.
Revenues76 77 (1)
The decrease in revenues for the three months ended June 30, 2022 compared to the same period in 2021 was primarily due to lower noninterest income partly offset by higher interest and dividend income.
Interest expense— 
Interest expense on deposits and other borrowings were flat.
Average core deposit balances increased $607 million; average term certificate balances decreased $108 million.
Average deposit yields decreased from 7 basis points to 4 basis points.
Average other borrowings increased $17 million and average yields increased 33 basis points.
Provision for credit losses(12)15 
2022 provision for credit losses was primarily due to additional reserves for growth in the commercial real estate and consumer loan portfolios, and higher loss rates for the residential and consumer loan portfolios. In addition, loan loss reserves were established for the solar and sustainable home improvement loans purchased during the quarter.
2022 provision for credit losses also included the release of loss reserves for a commercial and commercial real estate loan portfolios due to improved credit trends in those loan portfolios and reduction in the commercial loan portfolio.
2021 negative provision for credit losses reflected improvement in economic outlook, strong credit results including lower net charge-offs and credit upgrades in the commercial real estate and commercial loan portfolios.
2021 negative provision for credit losses was also due to a shift in asset mix - lower personal unsecured loan portfolio balances which had higher credit loss rates partly offset by higher commercial real estate loan portfolio balances.
Delinquency rates have decreased—from 0.43% at June 30, 2021 to 0.27% at June 30, 2022 due to lower residential 1-4 family, consumer and home equity line of credit loan delinquencies.
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 Three months ended June 30Increase 
(in millions)20222021(decrease)Primary reason(s)
Net charge-off to average loans have decreased—from 0.04% at June 30, 2021 to nil at June 30, 2022 primarily due to lower personal unsecured loan portfolio net charge-offs.
Noninterest expense49 48 Higher occupancy, marketing and employee expenses.
Included in compensation and benefits were higher base compensation, incentive compensation and employee benefit costs for the three months ended June 30, 2022 compared to the same period in 2021, offset by the fair value adjustment related to the deferred compensation plan and the separation agreement for an executive officer that was paid in the second quarter of 2021 with no similar payment in 2022.
Expenses53 37 16 
The increase in expenses for the three months ended June 30, 2022 compared to the same period in 2021 was due to higher provision for credit losses in 2022 and higher noninterest expenses.
Operating income23 40 (17)
The decrease in operating income for the three months ended June 30, 2022 compared to the same period in 2021 was primarily due to higher provision for credit losses in 2022, higher noninterest expenses and lower noninterest income, partly offset by higher interest income.
Net income17 30 (13)
Net income for the three months ended June 30, 2022 was lower than the same period in 2021 due to lower operating income partly offset by lower income tax expense.
 Six months ended June 30Increase 
(in millions)20222021(decrease)Primary reason(s)
Interest and dividend income$123 $121 $
Average loan portfolio yields were 20 basis points lower—impacted by the continued low interest rate environment in 2021 and the beginning of 2022 as adjustable rate loans had repriced lower during the past year and new loan production yields continued to originate below their portfolio yields. Lower loan yields were also due to lower PPP loan fees recognized in 2022 compared to 2021 as the PPP loan portfolio has paid down significantly over the past year.
Average loan portfolio balances decreased $83 million - home equity lines of credit average balance decreased $49 million due to increased paydowns in the portfolio; consumer loan average balance decreased $30 million due to ASB’s strategic decision to reduce production of this loan type during the period of weakened economic activity caused by the COVID-19 pandemic. Commercial loan average balance decreased $234 million due to repayments in the PPP loan portfolio. Residential average balance increased $158 million due to the Bank’s decision to portfolio a larger portion of the residential loan production. Commercial real estate average balance increased $67 million due to demand for this loan type.
Average investment securities portfolio balance increased $673 million—excess liquidity from strong deposit growth invested in agency securities.
Average investment securities yields 24 basis points higher—benefited from lower amortization of premiums in the investment portfolio.
Noninterest income29 34 (5)
Lower mortgage banking income - lower residential loan sale volume due to lower production volume and ASB’s decision to portfolio a larger portion of the residential loan production. In addition, the residential loan sale profit margin was lower in 2022 compared to 2021.
Lower bank owned life insurance income - lower return from insurance policies and lower insurance policy claim proceeds in 2022 compared to 2021.
Gain on sale of real estate - due to the sale of a branch property owned by ASB. The branch was closed in January 2022. No similar sale in 2021.
Less: gain on sale of real estate(1)— (1)Gain on sale of real estate, which is included in Noninterest income above and in the Bank’s statements of income and comprehensive income in Note 4, is classified as gain on sale of real estate in the condensed consolidated statements of income, and accordingly, is reflected in operating expenses below as a separate line item and excluded from Revenues.
Less: gain on sale of investment securities, net— (1)Gain on sale of investment securities, net, which is included in Noninterest income above and in the Bank’s statements of income and comprehensive income in Note 4, is classified as gain on sale of investment securities, net in the condensed consolidated statements of income, and accordingly, is reflected below following operating income as a separate line item and excluded from Revenues.
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 Six months ended June 30Increase 
(in millions)20222021(decrease)Primary reason(s)
Revenues151 154 (3)
The decrease in revenues for the six months ended June 30, 2022 compared to the same period in 2021 was primarily due to lower noninterest income partly offset by higher interest and dividend income.
Interest expense(1)
Interest expense on deposits and other borrowings decreased in 2022 compared to 2021 due to a decrease in term certificate balances and yields.
Average core deposit balances increased $734 million; average term certificate balances decreased $118 million.
Average deposit yields decreased from 7 basis points to 5 basis points.
Average other borrowings increased $1 million and average yields increased 17 basis points.
Provision for credit losses(1)(21)20 
2022 negative provision for credit losses reflects good credit trends including lower net charge-offs and improved credit loss rates which included credit upgrades in the commercial real estate and commercial loan portfolios.
2022 negative provision for credit losses also included additional reserves for growth in the commercial real estate loan portfolio and loss reserves established for the solar and sustainable home improvement loans purchased during the year.
2021 negative provision for credit losses reflected improvement in economic outlook, strong credit results including lower net charge-offs and credit upgrades in the commercial real estate and commercial loan portfolios.
2021 negative provision for credit losses was also due to lower personal unsecured loan portfolio balances which had higher credit loss rates.
Delinquency rates have decreased—from 0.43% at June 30, 2021 to 0.27% at June 30, 2022 due to lower residential 1-4 family, consumer and home equity line of credit loan delinquencies.
Net charge-off to average loans have decreased—from 0.11% at June 30, 2021 to 0.01% at June 30, 2022 primarily due to lower personal unsecured loan portfolio net charge-offs.
Noninterest expense98 96 
Lower compensation and benefits expenses offset by higher occupancy expenses.
Higher base compensation, incentive compensation and employee benefit costs were more than offset by the fair value adjustment related to the deferred compensation plan and the separation agreement for an executive officer that was paid in 2021 with no similar payment in 2022.
2021 noninterest expense benefited from a one-time credit adjustment for a change in accounting for the ASB retirement plan.
Gain on sale of real estate(1)— (1)
Expenses98 78 20 
The increase in expenses for the six months ended June 30, 2022 compared to the same period in 2021 was due to lower negative provision for credit losses in 2022 and higher noninterest expenses, partly offset by lower interest expenses and higher gain on sale of real estate.
Operating income53 76 (23)
The decrease in operating income for the six months ended June 30, 2022 compared to the same period in 2021 was primarily due to higher negative provision for credit losses in 2021 and lower noninterest income, partly offset by higher interest income.
Gain on sale of investment securities, net— (1)The decrease in gain on sale of investment securities - primarily due to the sale of investment securities in 2021 with no similar sales in 2022.
Net income41 60 (19)
Net income for the six months ended June 30, 2022 was lower than the same period in 2021 due to lower operating income and lower gain on sale of investment securities, partly offset by lower income tax expense.

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ASB’s return on average assets, return on average equity and net interest margin were as follows:
Three months ended June 30Six months ended June 30
(%)2022202120222021
Return on average assets0.76 1.38 0.90 1.39 
Return on average equity12.17 16.76 13.01 16.40 
Net interest margin2.85 2.98 2.82 2.97 
Three months ended June 30
20222021
(dollars in thousands)Average
balance
Interest
income/
expense
Yield/
rate (%)
Average
balance
Interest
 income/
expense
Yield/
rate (%)
Assets:
Interest-earning deposits$59,306 $81 0.54 $69,987 $19 0.11 
FHLB stock11,265 94 3.34 11,263 94 3.38 
Investment securities
Taxable3,262,914 14,213 1.74 2,748,382 10,770 1.57 
Non-taxable69,264 386 2.22 36,960 198 2.13 
Total investment securities3,332,178 14,599 1.75 2,785,342 10,968 1.57 
Loans
Residential 1-4 family2,309,091 20,070 3.48 2,146,078 19,473 3.63 
Commercial real estate1,258,349 10,739 3.39 1,153,578 9,541 3.29 
Home equity line of credit889,560 6,481 2.92 890,998 7,062 3.18 
Residential land22,507 531 9.43 17,840 204 4.57 
Commercial675,760 6,593 3.90 942,871 10,279 4.36 
Consumer125,120 3,798 12.18 140,001 4,504 12.91 
Total loans 1,2
5,280,387 48,212 3.65 5,291,366 51,063 3.86 
Total interest-earning assets 3
8,683,136 62,986 2.90 8,157,958 62,144 3.05 
Allowance for credit losses(67,620)(91,329)
Noninterest-earning assets572,869 724,767 
Total assets$9,188,385 $8,791,396 
Liabilities and shareholder’s equity:
Savings$3,297,511 $212 0.03 $3,054,677 $199 0.03 
Interest-bearing checking1,372,035 81 0.02 1,221,540 60 0.02 
Money market212,527 36 0.07 192,667 31 0.06 
Time certificates386,869 592 0.61 494,844 991 0.80 
Total interest-bearing deposits5,268,942 921 0.07 4,963,728 1,281 0.10 
Advances from Federal Home Loan Bank31,638 134 1.68 31,573 19 0.24 
Securities sold under agreements to repurchase and federal funds purchased101,861 0.02 85,330 0.02 
Total interest-bearing liabilities5,402,441 1,060 0.08 5,080,631 1,304 0.10 
Noninterest bearing liabilities:
Deposits3,024,910 2,831,273 
Other186,749 156,883 
Shareholder’s equity574,285 722,609 
Total liabilities and shareholder’s equity$9,188,385 $8,791,396 
Net interest income$61,926 $60,840 
Net interest margin (%) 4
2.85 2.98 
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Six months ended June 30
20222021
(dollars in thousands)Average
balance
Interest
income/
expense
Yield/
rate (%)
Average
balance
Interest
 income/
expense
Yield/
rate (%)
Assets:      
Interest-earning deposits$96,862 $147 0.30 $58,597 $31 0.11 
FHLB stock10,636 168 3.18 10,600 175 3.34 
Investment securities
Taxable3,197,561 27,767 1.74 2,551,569 19,136 1.50 
Non-taxable69,431 753 2.17 42,250 469 2.21 
Total investment securities3,266,992 28,520 1.75 2,593,819 19,605 1.51 
Loans   
Residential 1-4 family2,306,284 40,183 3.48 2,147,923 39,061 3.64 
Commercial real estate1,198,157 19,950 3.32 1,131,338 18,546 3.27 
Home equity line of credit865,401 12,704 2.96 914,340 14,327 3.16 
Residential land21,669 788 7.27 17,152 414 4.83 
Commercial718,406 13,405 3.74 952,481 19,191 4.04 
Consumer119,504 7,257 12.25 149,413 9,491 12.81 
Total loans 1,2
5,229,421 94,287 3.61 5,312,647 101,030 3.81 
Total interest-earning assets 3
8,603,911 123,122 2.87 7,975,663 120,841 3.04 
Allowance for credit losses(69,368)  (96,492)  
Noninterest-earning assets640,563   745,690   
Total assets$9,175,106   $8,624,861   
Liabilities and shareholder’s equity:      
Savings$3,278,139 $419 0.03 $2,978,592 $390 0.03 
Interest-bearing checking1,351,635 145 0.02 1,200,909 117 0.02 
Money market208,965 69 0.07 185,511 68 0.07 
Time certificates399,053 1,235 0.62 517,527 2,168 0.84 
Total interest-bearing deposits5,237,792 1,868 0.07 4,882,539 2,743 0.11 
Advances from Federal Home Loan Bank15,906 134 1.68 30,853 42 0.27 
Securities sold under agreements to repurchase and federal funds purchased96,102 10 0.02 80,358 0.02 
Total interest-bearing liabilities5,349,800 2,012 0.08 4,993,750 2,793 0.11 
Noninterest bearing liabilities:      
Deposits2,999,395   2,738,967   
Other190,577   162,444   
Shareholder’s equity635,334   729,700   
Total liabilities and shareholder’s equity$9,175,106   $8,624,861   
Net interest income $121,110   $118,048  
Net interest margin (%) 4
  2.82   2.97 
1   Includes loans held for sale, at lower of cost or fair value.
2   Includes recognition of net deferred loan fees of $1.7 million and $4.6 million for the three months ended June 30, 2022 and 2021, respectively, and $3.6 million and $7.4 million for the six months ended June 30, 2022 and 2021, respectively, together with interest accrued prior to suspension of interest accrual on nonaccrual loans. Includes nonaccrual loans.
3   For the three and six months ended June 30, 2022 and 2021, the taxable-equivalent basis adjustments made to the table above were not material.
4   Defined as net interest income, on a fully taxable equivalent basis, as a percentage of average total interest-earning assets.
Earning assets, costing liabilities, contingencies and other factors.  Earnings of ASB depend primarily on net interest income, which is the difference between interest earned on earning assets and interest paid on costing liabilities. The interest rate environment has been impacted by disruptions in the financial markets over a period of several years. The Federal Open
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Market Committee increased its federal funds rate target range to 2.25% - 2.5% in 2022 due to signs of inflation and ASB’s net interest income and net interest margin has started to increase but still remains at lower levels. A return of the recent low interest rate environment may negatively impact ASB’s net interest income and net interest margin.
Loans and mortgage-backed securities are ASB’s primary earning assets.
Loan portfolio.  ASB’s loan volumes and yields are affected by market interest rates, competition, demand for financing, availability of funds and management’s responses to these factors. See Note 4 of the Condensed Consolidated Financial Statements for a composition of ASB’s loan portfolio.
Home equity — key credit statistics. The HELOC portfolio makes up 17% of the total loan portfolio and is generally an interest-only revolving loan for a 10-year period, after which time the HELOC outstanding balance converts to a fully amortizing variable-rate term loan with a 20-year amortization period. Borrowers also have a “Fixed Rate Loan Option” to convert a part of their available line of credit into a 5, 7 or 10-year fully amortizing fixed-rate loan with level principal and interest payments. As of June 30, 2022, approximately 41% of the portfolio balances were amortizing loans under the Fixed Rate Loan Option. A HELOC loan is typically in a subordinate lien position to a borrower’s first mortgage loan, however, approximately 57% of ASB’s HELOC loan portfolio is in a first lien position.
Loan portfolio risk elements.  See Note 4 of the Condensed Consolidated Financial Statements.
Investment securities.  ASB’s investment portfolio was comprised as follows:
 June 30, 2022December 31, 2021
(dollars in thousands)Balance% of totalBalance% of total
U.S. Treasury and federal agency obligations$162,369 %$149,961 %
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies2,739,071 93 2,900,322 94 
Corporate bonds41,429 31,178 
Mortgage revenue bonds15,165 15,427 — 
Total investment securities$2,958,034 100 %$3,096,888 100 %
Currently, ASB’s investment portfolio consists of U.S. Treasury and federal agency obligations, mortgage-backed securities, corporate bonds and mortgage revenue bonds. ASB owns mortgage-backed securities issued or guaranteed by the U.S. government agencies or sponsored agencies, including the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA) and Small Business Administration (SBA). Principal and interest on mortgage-backed securities issued by FNMA, FHLMC, GNMA and SBA are guaranteed by the issuer and, in the case of GNMA and SBA, backed by the full faith and credit of the U.S. government. U.S. Treasury securities are also backed by the full faith of the U.S. government. The increase in the investment securities portfolio was primarily due to the purchase of treasury and agency mortgage-backed securities with excess liquidity.
Deposits and other borrowings.  Deposits continue to be the largest source of funds for ASB and are affected by market interest rates, competition and management’s responses to these factors. While deposits have increased by $81 million year-to-date, deposit retention and sustained growth will remain challenging in the current environment due to the low level of short-term interest rates. Advances from the FHLB of Des Moines, securities sold under agreements to repurchase and federal funds purchased continue to be additional sources of funds. As of June 30, 2022 ASB’s costing liabilities consisted of 97% deposits and 3% other borrowings compared to 99% deposits and 1% other borrowings as of December 31, 2021. The weighted average cost of deposits for the first six months of 2022 and 2021 was 0.05% and 0.07%, respectively.
Federal Home Loan Bank of Des Moines. As of June 30, 2022 ASB had $80 million of advances outstanding at the FHLB of Des Moines compared to no advances outstanding as of December 31, 2021. As of June 30, 2022, the unused borrowing capacity with the FHLB of Des Moines was $2.0 billion. The FHLB of Des Moines continues to be an important source of liquidity for ASB.
Contingencies.  ASB is subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, ASB cannot rule out the possibility that such outcomes could have a material adverse effect on the results of operations or liquidity for a particular reporting period in the future.
Other factors.  Interest rate risk is a significant risk of ASB’s operations and also represents a market risk factor affecting the fair value of ASB’s investment securities. Increases and decreases in prevailing interest rates generally translate into
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decreases and increases in the fair value of the investment securities, respectively. In addition, changes in credit spreads also impact the fair values of the investment securities.
As of June 30, 2022, ASB had an unrealized loss, net of taxes, on available-for-sale investment securities (including securities pledged for repurchase agreements) in AOCI of $241.3 million compared to an unrealized loss, net of taxes, of $32.0 million as of December 31, 2021. See “Item 3. Quantitative and qualitative disclosures about market risk” for a discussion of ASB’s interest rate risk sensitivity.
During the first six months of 2022, ASB recorded a negative provision for credit losses of $1.5 million in the allowance for credit losses reflecting good credit trends including lower net charge-offs and credit upgrades in the commercial real estate and commercial loan portfolios, partly offset by loan reserves for growth in the commercial real estate loan portfolio and solar and sustainable home improvement loans purchased during the year. During the first six months of 2021, ASB recorded a negative provision for credit losses of $20.0 million in the allowance for credit losses primarily due to improvement in the economic outlook, strong credit results including lower net charge-offs and credit upgrades in the commercial real estate and commercial loan portfolios and due to lower personal unsecured loan portfolio balances which had higher credit loss rates.
 Six months ended June 30
Year ended
December 31, 2021
(in thousands)20222021
Allowance for credit losses, beginning of period$71,130 $101,201 $101,201 
Provision for credit losses(1,506)(19,992)(26,425)
Less: net charge-offs168 2,957 3,646 
Allowance for credit losses, end of period$69,456 $78,252 $71,130 
Ratio of net charge-offs during the period to average loans outstanding (annualized)0.01 %0.11 %0.07 %
ASB maintains a reserve for credit losses that consists of two components, the allowance for credit losses and an allowance for loan commitments (unfunded reserve). The level of the reserve for unfunded loan commitments is adjusted by recording an expense or recovery in provision for credit losses. For the six months ended June 30, 2022 and 2021, ASB recorded a provision for credit losses for unfunded commitments of $1.0 million and a recovery in the provision for credit losses for unfunded commitments of $0.7 million, respectively. As of June 30, 2022 and December 31, 2021, the reserve for unfunded loan commitments was $5.9 million and $4.9 million, respectively.
Legislation and regulation.  ASB is subject to extensive regulation, principally by the OCC and the FDIC. Depending on ASB’s level of regulatory capital and other considerations, these regulations could restrict the ability of ASB to compete with other institutions and to pay dividends to its shareholder. See the discussion below under “Liquidity and capital resources.”
Changes to Community Bank Leverage Ratio. In April 2020, the federal bank regulatory agencies issued two interim final rules to implement Section 4012 of the CARES Act, which requires the agencies to temporarily lower the community bank leverage ratio to 8 percent. The two rules modify the community bank leverage ratio framework so that:
Beginning in the second quarter of 2020 and until the end of the year, a banking organization that has a leverage ratio of 8 percent or greater and meets certain other criteria may elect to use the community bank leverage ratio framework; and
Community banking organizations had until January 1, 2022 before the community bank leverage ratio requirement is re-established at greater than 9 percent.
Under the interim final rules, the community bank leverage ratio was 8 percent beginning in the second quarter of 2020 and for the remainder of calendar year 2020, 8.5 percent for calendar year 2021, and 9 percent thereafter. The interim final rules also maintain a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 1 percent below the applicable community bank leverage ratio.
Beginning in the second quarter of 2020, ASB adopted the community bank leverage ratio framework, which allowed it to report only on the community bank leverage ratio, but does not change minimum capital requirements under OCC regulations. At March 31, 2021, ASB’s leverage ratio was below the 8.5 percent requirement to qualify for abbreviated reporting under the community bank leverage framework for 2021 and started reporting its risk-based capital ratios in the third quarter of 2021. As of June 30, 2022, the bank was in compliance with all of the minimum capital requirements under OCC regulations, and was categorized as “well capitalized” under the regulatory framework for prompt corrective action.
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FINANCIAL CONDITION
Liquidity and capital resources.
(dollars in millions)June 30, 2022December 31, 2021% change
Total assets$9,215 $9,182 — 
Investment securities2,958 3,097 (4)
Loans held for investment, net5,358 5,140 
Deposit liabilities8,254 8,172 
Other bank borrowings242 88 174 
As of June 30, 2022, ASB was one of Hawaii’s largest financial institutions based on assets of $9.2 billion and deposits of $8.3 billion.
As of June 30, 2022, ASB’s unused FHLB borrowing capacity was approximately $2.0 billion. As of June 30, 2022, ASB had commitments to borrowers for loans and unused lines and letters of credit of $2.0 billion, of which, commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings were nil. Management believes ASB’s current sources of funds will enable it to meet these obligations while maintaining liquidity at satisfactory levels.
For the six months ended June 30, 2022, net cash provided by ASB’s operating activities was $53 million. Net cash used during the same period by ASB’s investing activities was $371 million, primarily due to purchases of available-for-sale securities of $366 million, net increase in loans receivables of $188 million, purchases of loans held for investment of $25 million, bank owned life insurance purchases of $5 million, additions to premises and equipment of $4 million and a net increase in FHLB stock of $3 million, partly offset by the receipt of investment security repayments and maturities of $217 million, proceeds from redemption of bank owned life insurance of $2 million and proceeds from the sale of real estate of $1 million. Net cash provided by financing activities during this period was $208 million, primarily due to increases in deposit liabilities of $81 million, a net increase in short-term borrowings of $80 million and a net increase in repurchase agreements of $73 million, partly offset by $27 million in common stock dividends to HEI (through ASB Hawaii).
For the six months ended June 30, 2021, net cash provided by ASB’s operating activities was $63 million. Net cash used during the same period by ASB’s investing activities was $633 million, primarily due to purchases of available-for-sale securities of $1.1 billion, purchases of held-to-maturity securities of $187 million, additions to premises and equipment of $6 million, contributions to low income housing investments of $6 million and a net increase in stock from the Federal Home Loan Bank, partly offset by the receipt of investment security repayments and maturities of $359 million, proceeds from the sale of investment securities of $197 million, a net decrease in loans of $92 million, proceeds from the sale of residential loans of $17 million and proceeds from redemption of bank owned life insurance of $3 million. Net cash provided by financing activities during this period was $499 million, primarily due to increases in deposit liabilities of $486 million and a net increase in repurchase agreements of $40 million, partly offset by $28 million in common stock dividends to HEI (through ASB Hawaii).
ASB believes that maintaining a satisfactory regulatory capital position provides a basis for public confidence, affords protection to depositors, helps to ensure continued access to capital markets on favorable terms and provides a foundation for growth. FDIC regulations restrict the ability of financial institutions that are not well-capitalized to compete on the same terms as well-capitalized institutions, such as by offering interest rates on deposits that are significantly higher than the rates offered by competing institutions. As of June 30, 2022, ASB was well-capitalized (well-capitalized ratio requirements noted in parentheses) with a Tier-1 leverage ratio of 7.7% (5.0%), common equity Tier-1 ratio of 12.8% (6.5%), Tier-1 capital ratio of 12.8% (8.0%) and total capital ratio of 13.8% (10.0%). As of December 31, 2021, ASB was well-capitalized (well-capitalized ratio requirements noted in parentheses) with a Tier-1 leverage ratio of 7.9% (5.0%), common equity Tier-1 ratio of 13.3% (6.5%), Tier-1 capital ratio of 13.3% (8.0%) and total capital ratio of 14.3% (10.0%). All dividends are subject to review by the OCC and FRB and receipt of a letter from the FRB communicating the agencies’ non-objection to the payment of any dividend ASB proposes to declare and pay to HEI (through ASB Hawaii).
90


Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company considers interest-rate risk (a non-trading market risk) to be a significant market risk for ASB as it could potentially have material impacts on the Company’s results of operations, financial condition and liquidity. For additional quantitative and qualitative information about the Company’s market risks, see HEI’s and Hawaiian Electric’s Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A of HEI’s 2021 Form 10-K (pages 77 to 79).
ASB’s interest-rate risk sensitivity measures as of June 30, 2022 and December 31, 2021 constitute “forward-looking statements” and were as follows:
Change in interest ratesChange in NII
(gradual change in interest rates)
Change in EVE
(instantaneous change in interest rates)
(basis points)June 30, 2022December 31, 2021June 30, 2022December 31, 2021
+3001.9 %5.6 %6.8 %15.5 %
+2001.3 4.0 4.8 11.7 
+1000.7 2.3 2.6 7.0 
-100(1.5)(2.5)(3.2)(12.6)
ASB’s net interest income (NII) sensitivity profile was less asset sensitive as of June 30, 2022 compared to December 31, 2021, primarily driven by the increase in market rates and the shift in liability mix. The increase in market rates decreased prepayment expectations in the bank’s fixed-rate mortgage and mortgage-backed investment portfolios, driving decreased asset sensitivity. In addition, the bank’s liability mix shifted slightly with increased short-term borrowings due to temporary funding needs, further contributing to decreased NII sensitivity.
Economic value of equity (EVE) sensitivity decreased as of June 30, 2022 compared to December 31, 2021 as the duration of assets lengthened while the duration of core deposits shortened. The increase in market rates led to slower prepayment expectations and lengthened the duration of the fixed-rate mortgage and mortgage-backed investment portfolios. The upward shift in shorter term interest rates lowered the duration of core deposits, further contributing to decreased EVE sensitivity.
The computation of the prospective effects of hypothetical interest rate changes on the NII sensitivity and the percentage change in EVE is based on numerous assumptions, including relative levels of market interest rates, loan prepayments, balance changes and pricing strategies, and should not be relied upon as indications of actual results. To the extent market conditions and other factors vary from the assumptions used in the simulation analysis, actual results may differ materially from the simulation results. NII sensitivity analysis measures the change in ASB’s twelve-month, pretax NII in alternate interest rate scenarios, and is intended to help management identify potential exposures in ASB’s current balance sheet and formulate appropriate strategies for managing interest rate risk. The simulation does not contemplate any actions that ASB management might undertake in response to changes in interest rates. Further, the changes in NII vary in the twelve-month simulation period and are not necessarily evenly distributed over the period. These analyses are for analytical purposes only and do not represent management’s views of future market movements, the level of future earnings or the timing of any changes in earnings within the twelve month analysis horizon. The actual impact of changes in interest rates on NII will depend on the magnitude and speed with which rates change, actual changes in ASB’s balance sheet and management’s responses to the changes in interest rates.
91


Item 4. Controls and Procedures
HEI:
Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Management, including the Company’s Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report, at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the second quarter of 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Hawaiian Electric:
Disclosure Controls and Procedures
Hawaiian Electric maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by Hawaiian Electric in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to Hawaiian Electric’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was performed under the supervision and with the participation of Hawaiian Electric’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Hawaiian Electric’s disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Management, including Hawaiian Electric’s Chief Executive Officer and Chief Financial Officer, concluded that Hawaiian Electric’s disclosure controls and procedures were effective, as of the end of the period covered by this report, at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the second quarter of 2022 that have materially affected, or are reasonably likely to materially affect, Hawaiian Electric’s internal control over financial reporting.
92



PART II - OTHER INFORMATION

Item 1. Legal Proceedings
The descriptions of legal proceedings (including judicial proceedings and proceedings before the PUC and environmental and other administrative agencies) in HEI’s and Hawaiian Electric’s 2021 Form 10-K (see “Part I. Item 3. Legal Proceedings” and proceedings referred to therein) and this Form 10-Q (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 3 and 4 of the Condensed Consolidated Financial Statements) are incorporated by reference in this Item 1. With regard to any pending legal proceeding, alternative dispute resolution, such as mediation or settlement, may be pursued where appropriate, with such efforts typically maintained in confidence unless and until a resolution is achieved. Certain HEI subsidiaries (including Hawaiian Electric and its subsidiaries, ASB and Pacific Current and its subsidiaries) may also be involved in ordinary routine PUC proceedings, environmental proceedings and litigation incidental to their respective businesses.
Item 1A. Risk Factors
For information about Risk Factors, see pages 20 to 34 of HEI’s and Hawaiian Electric’s 2021 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk” and the Condensed Consolidated Financial Statements herein. Also, see “Cautionary Note Regarding Forward-Looking Statements” on pages iv through vi herein.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Purchases of HEI common shares were made on the open market during the second quarter of 2022 to satisfy the requirements of certain plans as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
Period*
Total Number of Shares Purchased **
 
Average
Price Paid
per Share **
 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 to 30, 202220,141$42.97NA
May 1 to 31, 202212,965$41.58NA
June 1 to 30, 2022165,586$42.91NA
NA - Not applicable.
* Trades (total number of shares purchased) are reflected in the month in which the order is placed.
**The purchases were made to satisfy the requirements of the DRIP, the HEIRSP and the ASB 401(k) Plan for shares purchased for cash or by the reinvestment of dividends by participants under those plans and none of the purchases were made under publicly announced repurchase plans or programs. Average prices per share are calculated exclusive of any commissions payable to the brokers making the purchases for the DRIP, the HEIRSP and the ASB 401(k) Plan. Of the “Total number of shares purchased,” 10,287 of the 20,141 shares, 7,316 of the 12,965 shares and 135,724 of the 165,586 shares were purchased for the DRIP; 8,909 of the 20,141 shares, 4,675 of the 12,965 shares and 25,680 of the 165,586 shares were purchased for the HEIRSP; and the remainder was purchased for the ASB 401(k) Plan. The repurchased shares were issued for the accounts of the participants under registration statements registering the shares issued under these plans.

93


Item 6. Exhibits
 
Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Scott W. H. Seu (HEI Chief Executive Officer)
Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Paul K. Ito (HEI Chief Financial Officer)
HEI Certification Pursuant to 18 U.S.C. Section 1350
HEI Exhibit 101.INSXBRL Instance Document - the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
HEI Exhibit 101.SCHInline XBRL Taxonomy Extension Schema Document
HEI Exhibit 101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
HEI Exhibit 101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
HEI Exhibit 101.LABInline XBRL Taxonomy Extension Label Linkbase Document
HEI Exhibit 101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
HEI Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Shelee M. T. Kimura (Hawaiian Electric Chief Executive Officer)
Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Tayne S. Y. Sekimura (Hawaiian Electric Chief Financial Officer)
Hawaiian Electric Certification Pursuant to 18 U.S.C. Section 1350


94


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. The signature of the undersigned companies shall be deemed to relate only to matters having reference to such companies and any subsidiaries thereof.
 
HAWAIIAN ELECTRIC INDUSTRIES, INC. HAWAIIAN ELECTRIC COMPANY, INC.
(Registrant) (Registrant)
   
   
By/s/ Scott W. H. Seu By/s/ Shelee M. T. Kimura
 Scott W. H. Seu  Shelee M. T. Kimura
 President and Chief Executive Officer  President and Chief Executive Officer
 (Principal Executive Officer of HEI)  (Principal Executive Officer of Hawaiian Electric)
   
   
By/s/ Paul K. Ito By/s/ Tayne S. Y. Sekimura
 Paul K. Ito  Tayne S. Y. Sekimura
 Vice President - Tax, Controller and Treasurer and  Senior Vice President,
  Interim Chief Financial Officer  Chief Financial Officer and Treasurer
 (Principal Financial Officer of HEI)  (Principal Financial Officer of Hawaiian Electric)
   
   
Date: August 8, 2022 Date: August 8, 2022

95

Document

HEI Exhibit 31.1
 
CERTIFICATION
 
I, Scott W. H. Seu, certify that:
 
1. I have reviewed this report on Form 10-Q for the quarter ended June 30, 2022 of Hawaiian Electric Industries, Inc. (“registrant”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: August 8, 2022
 
 /s/ Scott W. H. Seu
 Scott W. H. Seu
 President and Chief Executive Officer
 



Document

HEI Exhibit 31.2
 
 
CERTIFICATION
 
I, Paul K. Ito, certify that:
 
1. I have reviewed this report on Form 10-Q for the quarter ended June 30, 2022 of Hawaiian Electric Industries, Inc. (“registrant”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: August 8, 2022 
 /s/ Paul K. Ito
Paul K. Ito
 Vice President - Tax, Controller and Treasurer and
 and Interim Chief Financial Officer
 


Document

Hawaiian Electric Exhibit 31.3
 
CERTIFICATION
 
I, Shelee M. T. Kimura, certify that:
 
1. I have reviewed this report on Form 10-Q for the quarter ended June 30, 2022 of Hawaiian Electric Company, Inc. (“registrant”);
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: August 8, 2022 
 /s/ Shelee M. T. Kimura
 Shelee M. T. Kimura
 President and Chief Executive Officer



Document

Hawaiian Electric Exhibit 31.4
 
CERTIFICATION
I, Tayne S. Y. Sekimura, certify that:
1.I have reviewed this report on Form 10-Q for the quarter ended June 30, 2022 of Hawaiian Electric Company, Inc. (“registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2022 
 /s/ Tayne S. Y. Sekimura
 Tayne S. Y. Sekimura
 Senior Vice President, Chief Financial Officer and Treasurer



Document

HEI Exhibit 32.1
 
Hawaiian Electric Industries, Inc.
 
Certification Pursuant to
18 U.S.C. Section 1350
 
In connection with the Quarterly Report of Hawaiian Electric Industries, Inc. (HEI) on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission (the Report), each of Scott W. H. Seu and Paul K. Ito, Chief Executive Officer and Chief Financial Officer, respectively, of HEI, certify, pursuant to 18 U.S.C. Section 1350, that to the best of his knowledge:
 
(1)   The Report complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and
 
(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HEI and its subsidiaries as of, and for, the periods presented in this report.

 
Date: August 8, 2022
 
/s/ Scott W. H. Seu
Scott W. H. Seu
President and Chief Executive Officer
 
/s/ Paul K. Ito
Paul K. Ito
Vice President - Tax, Controller and Treasurer and
and Interim Chief Financial Officer
 
A signed original of this written statement has been provided to HEI and will be retained by HEI and furnished to the Securities and Exchange Commission or its staff upon request.
 



Document

Hawaiian Electric Exhibit 32.2
 
Hawaiian Electric Company, Inc.
 
Certification Pursuant to
18 U.S.C. Section 1350
 
In connection with the Quarterly Report of Hawaiian Electric Company, Inc. (Hawaiian Electric) on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission (the Hawaiian Electric Report), each of Shelee M. T. Kimura and Tayne S. Y. Sekimura, Chief Executive Officer and Chief Financial Officer, respectively, of Hawaiian Electric, certify, pursuant to 18 U.S.C. Section 1350, that to the best of her knowledge:
 
(1)   The Hawaiian Electric Report complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and
 
(2)   The Hawaiian Electric information contained in the Hawaiian Electric Report fairly presents, in all material respects, the financial condition and results of operations of Hawaiian Electric and its subsidiaries as of, and for, the periods presented in this report. 


 
Date: August 8, 2022
/s/ Shelee M. T. Kimura
Shelee M. T. Kimura
President and Chief Executive Officer
 
/s/ Tayne S. Y. Sekimura
Tayne S. Y. Sekimura
Senior Vice President, Chief Financial Officer and Treasurer
 
A signed original of this written statement has been provided to Hawaiian Electric and will be retained by Hawaiian Electric and furnished to the Securities and Exchange Commission or its staff upon request.
 



he-20220630.xsd
Attachment: XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT


he-20220630_cal.xml
Attachment: XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT


he-20220630_def.xml
Attachment: XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT


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Attachment: XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT


he-20220630_pre.xml
Attachment: XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT