HEI Earns $20 Million in First Quarter; Utility and Bank Pursue Initiatives to Offset Lower Sales and Higher Costs

Hawaiian Electric Industries, Inc. (NYSE:HE) today reported consolidated net income for the first quarter of 2009 of $20.4 million or 23 cents per share, compared with $34.0 million or 41 cents per share for the first quarter of 2008.

"As expected, first quarter earnings were lower reflecting the impact of the global financial and economic crisis on Hawaii which lowered electric sales and resulted in a higher provision for loan losses at the bank. In addition, cooler, less humid weather, together with higher expected utility operating and maintenance costs, reduced earnings quarter-over-quarter,” said Constance H. Lau, HEI president and chief executive officer. "To help offset these negative impacts, both our utility and bank are continuing to aggressively pursue initiatives which have improved operating and financial performance over the last year and positioned us to weather this downturn and to grow as economic conditions improve,” added Lau.

UTILITY RESULTS

Electric utility net income for the first quarter of 2009 was $14.1 million compared with $24.6 million in 2008. Lower net income was primarily due to lower electric sales and higher operations and maintenance (O&M) expenses.

Kilowatthour sales were down 7.4% compared with the same quarter of 2008, impacting utility net income by an estimated $9 million. "About two-thirds of the decline in sales is attributable to cooler, less humid weather and one less day of sales due to the leap year day in 2008,” said Lau. "The soft economy and overall ongoing customer conservation account for the remainder of the first quarter sales decline.”

O&M expenses were up $9.4 million or 11.8% quarter-over-quarter, slightly below the 13% increase still expected for the full year. The forecast increase for the year is based primarily on planned higher production, transmission and distribution costs to maintain system reliability; additional expenses expected to be incurred for the Campbell Industrial Park CT-1 generating unit after it commences commercial operations this summer; and higher costs to pursue renewable initiatives. The increase in O&M expenses for the quarter is due primarily to: 1) $2.6 million higher maintenance expense due primarily to the planned greater scope of generating unit overhauls, and more overhead line maintenance and vegetation management; 2) $2.5 million higher demand-side management costs that are generally passed on to customers as a surcharge; and 3) $1.8 million higher planned production, transmission and distribution operations expenses and costs for renewable initiatives to support the Hawaii Clean Energy Initiative.

Quarter-over-quarter depreciation expenses were higher by $1 million due to 2008 plant additions.

BANK RESULTS

Bank net income was $10.9 million in the first quarter of 2009 compared to $14.6 million for the same quarter last year.

Net interest income in the first quarter of 2009 was $50.9 million compared to $50.5 million in the first quarter of 2008. Lower interest expense, primarily due to lower borrowings and lower rates on deposits and borrowings, more than offset lower balances of mortgage-related securities and lower interest income on loans. Net interest margin was 4.11% in the first quarter of 2009, compared with 3.13% in the first quarter of 2008.

"The core bank business is performing well,” said Lau. "Thanks to the bank’s balance sheet restructuring that was executed in June of 2008, the bank is earning the same net interest income on approximately $1.7 billion less assets than in the first quarter of last year,” added Lau. "Profitability has improved significantly as evidenced by the nearly 100 basis points increase in net interest margin.”

The bank recorded an $8.3 million provision for loan losses for the first quarter of 2009 compared with a $6.3 million provision for the fourth quarter of 2008 and less than a million dollars in the quarter a year ago. This quarter’s provision reflected the reclassification of a single commercial credit, which accounted for about 40% of the provision and higher delinquencies in residential lot loans, which accounted for 20% of the provision. In total, nonperforming assets ratio increased from 0.48% at December 31, 2008 to 1.37% at March 31, 2009. Excluding the single commercial credit and residential lot loans, nonperforming assets ratio at March 31, 2009, was 0.57%.

Noninterest income for the first quarter of 2009 was $16.3 million, $1.7 million lower than the same quarter of 2008, primarily due to a gain on sale of stock in a credit card organization in 2008.

Noninterest expense for the first quarter 2009 was $2.4 million lower than the same period in 2008, primarily due to lower legal and consulting expenses, partially offset by increased compensation and employee benefits expenses.

"We’re pleased with the progress the bank is making on its performance improvement initiatives. While management expects credit costs to remain elevated in the near-term, our bank continues to focus on efficiency improvements that should help offset the higher levels of loan loss provisions we expect through this economic downturn.”

HOLDING AND OTHER COMPANIES’ RESULTS

The holding and other companies’ net losses were $4.6 million in the first quarter of 2009 versus net losses of $5.2 million for the first quarter of 2008, primarily from lower interest expenses.

WEBCAST AND TELECONFERENCE

Hawaiian Electric Industries, Inc. will conduct a webcast and teleconference call to review its first quarter 2009 earnings on Wednesday, May 6, 2009, at 8:00 a.m. Hawaii Time (2:00 p.m. Eastern Time). The event can be accessed through HEI’s website at http://www.hei.com or by dialing (866) 700-7477, passcode: 20133959 for the teleconference call.

An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the teleconference call will also be available approximately two hours after the event through May 20, 2009, by dialing (888) 286-8010, passcode: 82965049.

HEI supplies power to over 400,000 customers or 95% of Hawaii’s population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Ltd. and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, F.S.B., one of Hawaii’s largest financial institutions.

FORWARD-LOOKING STATEMENTS

This release may 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 expects, anticipates, intends, plans, believes, predicts, estimates or similar expressions. In addition, any statements concerning future financial performance (including future revenues, expenses, earnings or losses or growth rates), ongoing business strategies or prospects and possible future actions, which may be provided by management, 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 assumptions about HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the "Forward-Looking Statements” discussion (which is incorporated by reference herein) set forth on pages v and vi of HEI’s Annual Report on Form 10-K for the year ended December 31, 2008, and in HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. Forward-looking statements speak only as of the date of this release.