Hawaiian Electric Halts Dividend, Draws Credit Concerns
Hawaiian Electric Industries Inc. (HEI) saw its stock price drop after the company announced it was suspending its dividend and drawing credit concerns. The Honolulu-based company, which is the largest provider of electricity in the state of Hawaii, said it was suspending its dividend in order to preserve cash and maintain financial flexibility.
Background of Hawaiian Electric
Hawaiian Electric Industries Inc. is a holding company that provides electric utility services in the state of Hawaii through its subsidiaries, Hawaiian Electric Company, Inc. (HECO) and Maui Electric Company, Ltd. (MECO). HECO is the largest electric utility in the state, serving 95% of the population, while MECO serves the remaining 5%. HEI also owns American Savings Bank, the third-largest financial institution in Hawaii.
Hawaiian Electric’s Financial Performance
HEI has been struggling financially in recent years. In 2019, the company reported a net loss of $118 million, compared to a net income of $87 million in 2018. This was due to higher operating expenses, lower sales, and higher interest expenses. The company’s total debt also increased from $2.2 billion in 2018 to $2.5 billion in 2019.
Impact of the Pandemic on Hawaiian Electric
The COVID-19 pandemic has had a significant impact on HEI’s financial performance. The company reported a net loss of $118 million in the first quarter of 2020, compared to a net income of $87 million in the same period in 2019. This was due to lower sales, higher operating expenses, and higher interest expenses.
Hawaiian Electric’s Response to the Pandemic
In response to the pandemic, HEI has taken several steps to reduce costs and preserve cash. The company has implemented a hiring freeze, reduced capital expenditures, and suspended its dividend. The company also announced that it was in talks with its lenders to restructure its debt.
Credit Concerns
The suspension of the dividend and the restructuring of its debt have raised concerns about HEI’s creditworthiness. Moody’s Investors Service downgraded the company’s credit rating from Baa2 to Baa3, citing the company’s weakened financial position and increased leverage.
Outlook for Hawaiian Electric
The outlook for HEI is uncertain. The company is facing significant financial challenges due to the pandemic, and its credit rating has been downgraded. The company is taking steps to reduce costs and preserve cash, but it remains to be seen if these measures will be enough to improve its financial position.