Hawaiian Electric flags Hurricane Lala costs as rebasing and credit recovery progress

The market already knew the near-term earnings picture was weak. Second-quarter core EPS was $0.13 versus a published consensus near $0.21, while management had already warned that 2026 adjusted O&M would significantly outpace inflation ahead of the 2027 rebasing. The investor presentation does not reverse that message: core EPS fell from $0.20 to $0.13, and adjusted O&M increased from $136.0 million to $143.5 million (2Q 2026 Financial Performance; QTD Adjusted O&M).

The genuinely new information is Hurricane Lala’s financial exposure, not the broad recovery story. More than 40% of customer accounts were affected at the outage peak, and management estimates $25 million to $30 million of combined Lala and Kona Low storm O&M, with roughly 20% to 25% potentially ineligible for recovery. Storm capex is estimated at another $30 million to $40 million. (Hurricane Lala response) The filing also makes clear that recovery is not assured, so the storm is a new execution and cash-flow risk rather than a booked loss.

The rate case is advancing, but the filing adds a request—not an approved earnings uplift. HEI has re-submitted its alternative rebasing application and is seeking a phased $169.8 million increase in 2027 and $44.8 million in 2028, with a company-proposed interim decision on December 18, 2026. (Alternative Rate Rebasing) 〔0〕 That is strategically important because current returns remain below the allowed level: utility LTM core ROE was 5.7% versus a 9.0% allowed ROE less structural items. (Utility LTM ROE) But the PUC has not accepted the requested amounts, so the presentation strengthens the timing framework more than it changes the earnings outlook today.

Balance-sheet and regulatory progress partly offsets the operating pressure. The filing highlights a July S&P upgrade to BB- from B+, continued liquidity, approval of up to $350 million of wildfire mitigation spending, and planned securitization to reduce customer-bill impact. (Credit ratings; Wildfire Mitigation Plan) 〔1〕 Those developments were largely known before this presentation, making them confirmation rather than a major surprise. The remaining issue is financing: HEI still expects to fund $1.99 billion of settlement obligations through a mix of insurance, prior equity, debt or convertible debt, and future capital.

Net read: a mixed update, with the long-term regulatory path intact but no near-term earnings relief. The presentation reinforces the recovery thesis through rebasing, wildfire-cost mechanisms and credit improvement, but the new storm expense estimates and already-below-consensus core earnings keep the current picture pressured. The next decisive information point is whether the PUC grants an interim rate increase by December 18, 2026 and on what terms.