Hawaiian Electric Industries, Inc. (HE): SWOT Analysis [Nov-2025 Updated]

You're looking at Hawaiian Electric Industries, Inc. (HE), and the story isn't just about electricity anymore; it's about risk management. The company posted a solid Q3 2025 core net income of $32.8 million, showing the strength of its regulated monopoly, but that stability is defintely overshadowed by the $479 million set aside for the initial Maui wildfire tort settlement payment expected in early 2026. This is the tightrope walk: a utility making great strides in renewable energy-hitting a 36% consolidated Renewable Portfolio Standard (RPS) as of September 2025-while simultaneously facing an existential threat from the 2023 disaster. We need to look past the core earnings to the underlying liability, so let's break down the true Strengths, Weaknesses, Opportunities, and Threats (SWOT) of Hawaiian Electric's business right now.

Hawaiian Electric Industries, Inc. (HE) - SWOT Analysis: Strengths

You're looking for the bedrock of Hawaiian Electric Industries, Inc.'s (HE) value, especially after a challenging period, and honestly, it still boils down to the fundamentals of a regulated utility. The company's core strengths are not flashy, but they are defintely durable, providing the financial and operational stability that underpins any long-term recovery and growth strategy.

Regulated monopoly status provides stable cash flow from five Hawaiian islands.

The most significant strength is the company's status as a regulated utility monopoly for electricity transmission and distribution across five islands: Oahu, Maui, Molokai, Lanai, and Hawaii Island. This structure means no real competitor for its core business, ensuring a captive customer base and a predictable revenue stream. Here's the quick math on recent performance: for the third quarter of 2025, the utility core net income was a solid $39.6 million, with total revenue hitting $790.61 million. This type of consistent core income, even amid high legal and consulting costs, is what attracts long-term utility investors.

The regulatory framework, while sometimes cumbersome, allows for the recovery of prudent capital investments through rate base adjustments, which translates directly into future earnings stability. It's a low-growth, high-certainty model.

High penetration of renewable energy capacity, nearing the state's ambitious 2045 goal.

Hawaiian Electric is a national leader in integrating clean energy, which is a massive competitive advantage as the US energy transition accelerates. The company reached a 36% consolidated Renewable Portfolio Standard (RPS) in 2024, putting it on a strong pace to surpass the 2030 target of 40% well ahead of schedule. The state's mandate for 100% clean energy by 2045 is a clear, long-term roadmap that guides the company's capital spending and growth.

This high penetration is driven by both utility-scale and customer-sited resources. The total installed capacity of rooftop solar and battery storage across the five islands recently surpassed 1 gigawatt (GW). About 43% of single-family homes served by Hawaiian Electric have rooftop solar, a figure most mainland utilities can only dream of.

Essential service provider with a captive customer base; no real competitor for transmission and distribution.

As the primary electricity provider, Hawaiian Electric serves approximately 95% of Hawaii's population. This essential service role translates into a highly stable customer base that totaled 472,536 as of December 31, 2024. The geographic isolation of the islands makes the construction of competing transmission and distribution infrastructure prohibitively expensive and practically impossible.

This essential nature, plus the lack of alternatives, provides a strong foundation for financial resilience, even when facing significant external pressures. The company's service territory is:

• Oahu (largest customer base: 310,336 customers)
• Maui
• Hawaii Island
• Molokai
• Lanai

Strong commitment to grid modernization and hardening, a long-term investment.

Despite the financial challenges, the commitment to long-term infrastructure investment remains robust, which is crucial for future rate base growth and risk mitigation. The company's 2025 Capital Expenditures (CapEx) are expected to be approximately $400 million, with a significant portion dedicated to wildfire risk reduction and grid resilience.

The forward-looking CapEx plan shows this is a multi-year strategy, not just a one-off spend. The total planned CapEx for the three-year period from 2026 to 2028 is projected to be between $1.8 billion and $2.4 billion. This massive investment is directly tied to regulatory-approved programs like the Annual Revenue Adjustment (ARA) mechanism, which helps ensure cost recovery.

Here's a look at the near-term CapEx focus:

This level of planned investment confirms the utility's long-term operational focus and its ability to secure financing for essential infrastructure upgrades, which ultimately increases the value of its rate base.

Hawaiian Electric Industries, Inc. (HE) - SWOT Analysis: Weaknesses

Massive, unquantified financial liability and litigation risk from the 2023 Maui wildfires.

You are facing a massive, though now largely quantified, financial burden from the 2023 Maui wildfires that severely limits your financial flexibility. Hawaiian Electric Industries and Hawaiian Electric reached an agreement in principle to settle all tort claims for a total contribution of $1.99 billion (pre-tax), which includes the $75 million already contributed to the One 'Ohana Initiative.

Here's the quick math: that $1.99 billion is a huge capital outlay that requires a complex financing plan involving a mix of debt, common equity, and equity-linked securities. The payments are expected to start no earlier than mid-2025, but the full resolution is not yet done. The court is scheduled to consider final approval of the class settlement agreement on January 8, 2026. Plus, the settlement is conditional on resolving the separate subrogation insurer claims-that unresolved litigation risk is the real kicker here.

• Settlement contribution: $1.99 billion (pre-tax).
• First payments begin: No earlier than mid-2025.
• Final court approval hearing: Scheduled for January 8, 2026.

Aging transmission and distribution infrastructure requires billions in capital expenditure.

Your grid infrastructure is aging, and the Maui disaster highlighted the critical need for immediate, massive investment in hardening the system against climate risks. The company projects significant capital expenditures (CapEx) over the next few years to address this. The CapEx for fiscal year 2025 is expected to be approximately $400 million.

The real challenge is the long-term cost. Total CapEx for the three-year period from 2026 through 2028 is projected to be between $1.8 billion and $2.4 billion. This includes a substantial portion dedicated to wildfire risk reduction and grid resilience. For instance, the expanded 3-year Wildfire Safety Strategy blueprint filed with the Public Utilities Commission (PUC) is projected to cost $350 million, with $137 million budgeted for work in 2025 alone. That's a massive amount of capital to deploy while simultaneously managing the wildfire settlement financing.

High operating costs due to reliance on imported fuel for non-renewable generation.

The reliance on imported fossil fuels for non-renewable generation keeps your operating costs-and customer bills-significantly elevated compared to the mainland U.S. This is a structural weakness. For a residential customer consuming 500 kWh of electricity, the bill in July 2025 was $191.46. This is reportedly three times the national average.

The Energy Cost Recovery Factor (ECRF) for Hawaiian Electric in July 2025 was 17.440 cents per kilowatt-hour (kWh). The composite cost of major energy (fossil fuel) was 1,482.13 cents per million BTU in the same month. To be fair, the PUC's automatic fuel cost surcharge mechanism means that fluctuations in fuel costs are shared 98% by customers and only 2% by the utility, which caps the utility's financial risk but removes a major incentive to aggressively reduce fuel reliance.

Increased scrutiny from the Public Utilities Commission (PUC) and rating agencies, limiting financial flexibility.

The post-wildfire environment has led to intense scrutiny from regulators and a major downgrade from credit rating agencies, which directly limits your access to capital. Following the Maui wildfires, your credit ratings were downgraded to sub-investment grade (or junk status). This means financing is much more expensive.

For example, in September 2025, Hawaiian Electric had to raise debt through a 'high yield' (higher interest rate) bond sale to secure funds for CapEx and debt refinancing. The PUC is also highly engaged, having opened a formal docketed proceeding in January 2025 (Docket No. 2025-0156) to review the Wildfire Mitigation Plan. This regulatory oversight, while necessary, slows down the approval and cost recovery process for critical investments. You're defintely operating under a microscope now, and that slows down every major strategic move.

• Credit Rating Status: Downgraded to sub-investment grade.
• Financing Impact: Forced to issue 'high yield' (higher interest rate) bonds.
• PUC Oversight: Formal docket opened in 2025 to review the Wildfire Mitigation Plan.

Hawaiian Electric Industries, Inc. (HE) - SWOT Analysis: Opportunities

Access federal funding through the Infrastructure Investment and Jobs Act for grid hardening and climate resilience.

You have a significant opportunity to de-risk your capital expenditure (CapEx) program by tapping into federal funds, which directly lowers the cost burden on your customers. Hawaiian Electric's Climate Adaptation Transmission and Distribution Resilience Program has already secured a crucial federal grant of $95 million under the Infrastructure Investment and Jobs Act (IIJA).

This federal money matches the $95 million in customer funding for a total $190 million program approved by the Public Utilities Commission (PUC) in early 2024. That's a 50% cost reduction for ratepayers on this critical work. The five-year plan focuses on hardening the grid, which includes replacing and strengthening 2,100 poles on critical circuits.

Here's the quick math on the near-term CapEx: The company's total projected CapEx for 2025 is approximately $400 million. The wildfire safety strategy alone is budgeted at $137 million for 2025. The company is also proactively seeking more funds, having applied for a second-round IIJA grant for its Grid Modernization Strategy, seeking the maximum award size of $100.0 million. This is smart; you should always use OPM (Other People's Money) for system upgrades.

Accelerate the shift to 100% renewable energy, reducing fuel cost volatility and meeting state mandates.

The state mandate to reach 100% renewable energy by 2045 is a massive capital investment driver, but it's also a clear roadmap to reduced fuel cost exposure. Hawaiian Electric is ahead of schedule, having achieved a consolidated Renewable Portfolio Standard (RPS) of 36% in 2024, already surpassing the mandated 30% goal for 2020 and accelerating toward the 40% milestone for 2030.

This progress is driven by a strong pipeline of new projects. The company has 16 new renewable energy projects underway, which collectively will add 460 megawatts (MW) of solar energy and nearly three gigawatt-hours (GWh) of energy storage. These projects are crucial because they stabilize rates and reduce reliance on imported fossil fuels, which are highly volatile in the island economy.

2024 RPS Progress by Island:

• Hawaii Island: 58.7%
• Maui County: 41.1%
• O'ahu: 30.8%

Develop advanced microgrids and distributed energy resources to improve system resilience.

Shifting to a more decentralized grid architecture-using microgrids and Distributed Energy Resources (DER)-is the best defense against severe weather and climate risks. Hawaiian Electric is actively working to integrate these resources, which include customer-sited solar and battery systems.

The company is on a strong trajectory to exceed its distributed solar goals. New private rooftop solar installations totaled 61 MW in 2024 alone. About 43% of single-family homes served by Hawaiian Electric now have rooftop solar, which is a huge base to build upon. The goal is to have 125,000 private rooftop solar and energy storage systems (totaling 1,186 MW) by 2030, a target they are on track to exceed.

This is a win-win: customers get better resilience and lower bills, and the utility gains a more flexible, less centralized grid. The partnership with the U.S. Department of Energy on the Energy Transitions Initiative Partnership Project (ETIPP) is specifically helping to map optimal microgrid locations on O'ahu, directly translating resilience planning into actionable infrastructure development.

Potential for a favorable legislative or regulatory solution to cap wildfire-related liabilities.

The most significant opportunity for financial stabilization is the legislative and regulatory movement to limit future wildfire liability. The Hawaii State legislature passed Senate Bill 897 (SB 897) in May 2025.

This bill is a game-changer because it allows for two things: an aggregate liability cap on economic damages from future catastrophic wildfires, and a mechanism for securitization to finance wildfire safety improvements. The securitization process, if approved by the PUC, would allow the utility to issue long-term bonds-a cheaper way to borrow-to fund the expanded Wildfire Safety Strategy.

The three-year Wildfire Safety Strategy is projected to cost $350 million in total, with $137 million budgeted for 2025 work. Using securitization for this CapEx would significantly reduce the cost of borrowing compared to traditional utility financing, which is defintely a credit positive.

What this estimate hides is that the securitization mechanism from SB 897 is designed to lower these customer costs even further.

Hawaiian Electric Industries, Inc. (HE) - SWOT Analysis: Threats

Catastrophic Legal Settlements or Judgments

You are looking at a utility that, until recently, faced an existential threat of bankruptcy, reminiscent of Pacific Gas & Electric Company's 2019 filing. The primary threat remains the legal fallout from the 2023 Maui wildfires, which has forced a massive financial restructuring.

The good news is that Hawaiian Electric Industries, Inc. (HEI) has largely mitigated the immediate bankruptcy risk by securing a global settlement. The total liability exposure for HEI and its subsidiaries is capped at approximately $1.99 billion, which is a massive number but manageable over time. To be fair, this is a significant step back from the initial fear of uncapped liability.

The settlement is structured with four equal annual installments of roughly $479 million each. The first payment is expected in early 2026. Here's the quick math: HEI secured net proceeds of approximately $557.7 million from a September 2024 common stock offering, plus they held $479 million in restricted cash by Q1 2025, specifically earmarked for this first installment. The real threat now shifts to funding the subsequent three installments without causing a liquidity crisis or excessive shareholder dilution.

Regulatory Action: PUC Scrutiny and Potential Utility Breakup

The regulatory environment in Hawaii is defintely a double-edged sword right now. While the Public Utilities Commission (PUC) has not moved to break up the utility, its power to impose stricter performance standards and control cost recovery is a major threat to profitability. The PUC must approve the recovery of all wildfire mitigation costs, and any denial would directly hit the bottom line.

The Hawaii State Legislature passed critical bills in 2025 that both help and hurt. Senate Bill (SB) 897 is a positive, as it directs the PUC to establish an aggregate liability cap for economic damages from future wildfires. But the PUC still holds the keys to the company's financial health by controlling the rate-setting process.

Hawaiian Electric is currently navigating a critical alternative rate rebasing process under Performance-Based Ratemaking (PBR). They are trying to reset target revenues to recover elevated costs before the next multiyear rate period starts in 2027. If the PUC rejects this proposal, the utility will struggle to earn its authorized Return on Equity (ROE) of 9.5%, which was already only 7.2% in Q2 2025, according to core ROE figures. That's a huge gap to close.

Increasing Frequency and Severity of Climate Change-Driven Events

The physical threat from climate change is now a core financial risk. Hawaii's increasing exposure to severe weather, like hurricanes and wildfires, requires monumental capital investment simply to maintain service and avoid future catastrophic liabilities.

Hawaiian Electric's response is a massive increase in capital expenditures (CapEx). The company expects to spend approximately $400 million on CapEx in the 2025 fiscal year. This is just the start. Total CapEx for the three-year period from 2026 to 2028 is projected to be between $1.8 billion and $2.4 billion. That scale of spending-a potential 75% increase in CapEx from 2025 to 2026 alone-is staggering for a utility of this size.

The 2025-2027 Wildfire Safety Strategy alone is estimated to cost up to $450 million, with approximately $137 million budgeted for work in 2025. More than half of this 3-year plan, about $180 million, is targeted for Maui County, the highest-risk area. If this infrastructure spending is not fully approved for recovery by the PUC, the utility will be absorbing billions in costs that should be borne by the rate base, which would be a severe financial blow.

Downgrades by Credit Rating Agencies

The utility's credit rating is the direct link between its past liabilities and its future cost of capital. Following the Maui wildfires, HEI's credit ratings were downgraded to sub-investment grade, or 'junk' status. While rating agencies have shown some optimism in 2025, the company is still paying a premium to borrow money.

In June 2025, S&P Global Ratings upgraded HEI's long-term issuer credit rating to 'B+' from 'B-', and Fitch Ratings upgraded it to 'BB-' from 'B'. This is an improvement, but it is still deep in speculative territory. The lower rating means the company's debt is considered higher risk, which translates directly into higher interest rates on new debt.

This is a real-world financial constraint. For example, in September 2025, Hawaiian Electric Company aimed to raise $500 million through a sale of senior notes, explicitly classified as a 'high yield' (junk-bond) issuance. This higher cost of borrowing makes the already massive CapEx plan of $1.8 billion to $2.4 billion for grid hardening significantly more expensive to finance, which ultimately strains customer rates and shareholder returns.