HAWAIIAN ELECTRIC INDUSTRIES INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

August 08, 2022 at 04:23 pm EDT

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)                            2022                  2021              change                       Primary reason(s)*
Revenues                            $      895,607          $ 680,257                 32          Primarily increase for the electric utility
                                                                                                  segment
Operating income                            86,668            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 stock                 52,541             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)                            2022                  2021               change                       Primary reason(s)*
Revenues                            $   1,680,675          $ 1,323,203                 27          Primarily increase for the electric utility
                                                                                                   segment
Operating income                          185,944              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 stock               121,708              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 30             Six months ended June 30
(in thousands)                       2022              2021                2022                2021                         Primary 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                          -                -                  8,123                 -          Gain on sale of an equity-method investment
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, 2022                December 31, 2021
Short-term borrowings-other than bank        $        124         2  %    $             54         1  %
Long-term debt, net-other than bank                 2,375        50                  2,322        48
Preferred stock of subsidiaries                        34         1                     34         1
Common stock equity                                 2,234        47                  2,391        50
                                             $      4,767       100  %    $          4,801       100  %


HEI's commercial paper borrowings and line of credit facility were as follows:
                                                             Average balance                           Balance
                                                             Six months ended
(in millions)                                                 June 30, 2022           June 30, 2022           December 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 30                 Increase
    2022              2021                 (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


                                                         1          revenue

in 2022 related to ownership of and responsibility


                                                                    for the

U.S. Army's electrical distribution system on Oahu


                                                                    starting March 1, 2022
                                                         1          higher MPIR revenue
                                                         1          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                7

Operation and maintenance expenses. Net increase largely due


                                                                    to:
                                                         5          more

generating facility maintenance work performed


                                                         3          more

generating facility overhauls performed


                                                         1          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                3

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                3                         Income

before income taxes. Increase largely due to higher

operating income, partially offset by higher interest


                                                                    expense
       44               42                2                         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                5                         Kilowatthour sales (millions)3
$  139.51          $ 73.58          $ 65.93                         Average fuel oil cost per barrel


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     Six months ended June 30                     Increase
      2022                 2021                  (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

higher purchased power energy prices, partially offset by lower kWh

purchased2

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
                                                               2          higher bad debt expense
                                                               2

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                8

Operating income. Increase largely due to higher ARA and MPIR revenue,

offset by higher operation and maintenance expense and higher depreciation

expense


           116               109                7

Income before income taxes. Increase largely due to higher operating

income, partially offset by higher interest expense


            91                85                6

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                                                                                                                                                        Hawaii Electric
June 30, 2022                                         Hawaiian Electric                Hawaii Electric Light              Maui Electric         Hawaiian Electric               Light               Maui Electric            Hawaiian Electric             Hawaii Electric Light           Maui Electric
Utility returns                                              7.20                               5.99                            6.87                   8.60                         6.64                 7.89                       9.53                            7.47                        8.99
PUC-allowed returns                                          7.37                               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 efforts. Developments 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:
                                                                                                                                                                                       Total
                                                                                                                                                                                     projected
                                                                                                                                                                                      annual
                                                                 Total photovoltaic                                     Guaranteed commercial                                       payment (in
         Utilities                  Number of contracts              size (MW)              BESS Size (MW/MWh)             operation dates            Contract term (years)          millions)
                                                                                                                             7/31/22, 9/30/22,
Hawaiian Electric                                       4                      139.5                   139.5/558              1/20/23 &8/31/23                       20 & 25       $     32.2
Hawaii Electric Light                                   2                         60                      60/240             12/2/22 & 4/21/23                            25             14.9
Maui Electric                                           2                         75                      75/300            4/28/23 & 10/27/23                            25             17.6
Total                                                   8                      274.5                 274.5/1,098                                                                   $     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:
                                                                                                                                                                                          Total
                                                                                                                                                                                        projected
                                                                                                                                                                                         annual
                                                             Total photovoltaic                                            Guaranteed commercial                                       payment (in
       Utilities                Number of contracts              size (MW)                  BESS Size (MW/MWh)                operation dates

Contract term (years) millions)


                                                                                                                            5/17/23, 10/30/23,
Hawaiian Electric                                   4                         94             94        / 503                12/29/23 & 4/9/2024                         20 & 25       $     32.9
Hawaiian Electric                                   1 *                      N/A            185        / 565                     12/30/22                                    20             24.0
Maui Electric                                       2                         60             60        / 240                7/25/23 & 12/29/23                               25             18.2
Total                                               7                        154            339        / 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:

                                               Fast Frequency             Fast Frequency               Capacity -                   Capacity -
                                                Response - 1               Response - 2                Load Build                 Load Reduction
           Utilities                                (MW)                       (MW)                       (MW)                         (MW)
Hawaiian Electric                                              -                       26.7                        14.5                          19.4
Hawaii Electric Light                                        6.0                          -                         3.2                           4.0
Maui Electric                                                6.1                          -                         1.9                           4.7
Total                                                       12.1                       26.7                        19.6                          28.1


A summary of the utility self-build projects that are pending PUC approval is as
follows:

                                                                                                                   Guaranteed commercial
               Utilities                          Number of contracts             BESS Size (MW/MWh)                  operation dates
Hawaii Electric Light                                                  1   *                       12/12                             12/30/22
Maui Electric                                                          1                          40/160                              4/28/23
Total                                                                  2                          52/172

* 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, 2022                December 31, 2021
Short-term borrowings      $         55         1  %    $              -         -  %
Long-term debt, net               1,737        42                  1,676        42
Preferred stock                      34         1                     34         1
Common stock equity               2,290        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 balance                              Balance
                                                             Six months ended June
(in millions)                                                      30, 2022                 June 30, 2022           December 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.


                                                                  Hawaiian    Hawaii Electric
(in millions)                                                     Electric         Light         Maui 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
Approval                                                                75               15                10
Taxable debt issuance to refinance the 2004 QUIDS in 2019               30               10                10
Taxable debt issuance in May 2020                                      110               10                40

Taxable debt executed in October 2020, but issued on January 14, 2021

                                                                60               30                25

Taxable debt executed in May 2022, but issued on June 15, 2022 40


             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.

                                                                  Hawaiian   Hawaii Electric
(in millions)                                                     Electric

Light Maui Electric Total "up to" amounts of common stock authorized to issue and sell through 2021

$   150.0    $       10.0    $         10.0
Supplemental increase authorized                                    280.0           100.0             100.0

Total "up to" amounts of common stock authorized to issue and sell through 2022

                                                   430.0           110.0             110.0

Less: Common stock authorized and issued in 2017, 2018, 2019, 2020 and 2021

                                                       208.6            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)                                                  2022                 2021              Change
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 activities                        50,784             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.

                                       81
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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
                                           30                    Increase
(in millions)                      2022           2021          (decrease)                                Primary reason(s)
Interest and dividend           $    63          $ 62          $        1
income
                                                                                   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 income                   13            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.

Revenues                             76            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                      1             1                   -
                                                                                   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                  3           (12)                 15

losses


                                                                                   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 30              Increase
(in millions)                      2022                    2021            (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 expense                 49                      48                   1            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.

Expenses                            53                      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 income                    23                      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 income                          17                      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 30          Increase
(in millions)                      2022            2021          (decrease)                                Primary reason(s)
Interest and dividend           $   123          $ 121          $        2
income
                                                                                    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 income                   29             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                (1)             -                  (1)

Gain on sale of real estate, which is included in Noninterest real estate


        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

                 -             (1)                  1

Gain on sale of investment securities, net, which is included investment securities,


        in Noninterest income above and in the Bank's statements of
net                                                                                 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.


                                       84


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                                    Six months ended June 30              Increase
(in millions)                      2022                   2021           (decrease)                                Primary reason(s)
Revenues                           151                     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                     2                       3                (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                (1)                    (21)               20
losses
                                                                                            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 expense                 98                      96                 2
                                                                                            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                (1)                      -                (1)
estate
Expenses                            98                      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 income                    53                      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                      -                       1                (1)           The decrease in gain on sale of investment securities -
investment securities,                                                                      primarily due to the sale of investment securities in 2021 with
net                                                                                         no similar sales in 2022.
Net income                          41                      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 30                             Six months ended June 30
(%)                                                    2022                          2021                     2022                         2021
Return on average assets                                 0.76                          1.38                     0.90                          1.39
Return on average equity                                12.17                         16.76                    13.01                         16.40
Net interest margin                                      2.85                          2.98                     2.82                          2.97


                                                                                              Three months ended June 30
                                                                            2022                                                      2021
                                                                           Interest                                                  Interest
                                                        Average             income/            Yield/             Average             income/            Yield/
(dollars in thousands)                                  balance             expense           rate (%)            balance             expense           rate (%)
Assets:
Interest-earning deposits                            $    59,306          $     81             0.54            $    69,987          $     19             0.11
FHLB stock                                                11,265                94             3.34                 11,263                94             3.38
Investment securities
Taxable                                                3,262,914            14,213             1.74              2,748,382            10,770             1.57
Non-taxable                                               69,264               386             2.22                 36,960               198             2.13
Total investment securities                            3,332,178            14,599             1.75              2,785,342            10,968             1.57
Loans
Residential 1-4 family                                 2,309,091            20,070             3.48              2,146,078            19,473             3.63
Commercial real estate                                 1,258,349            10,739             3.39              1,153,578             9,541             3.29
Home equity line of credit                               889,560             6,481             2.92                890,998             7,062             3.18
Residential land                                          22,507               531             9.43                 17,840               204             4.57
Commercial                                               675,760             6,593             3.90                942,871            10,279             4.36
Consumer                                                 125,120             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 assets                               572,869                                                   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 checking                              1,372,035                81             0.02              1,221,540                60             0.02
Money market                                             212,527                36             0.07                192,667                31             0.06
Time certificates                                        386,869               592             0.61                494,844               991             0.80
Total interest-bearing deposits                        5,268,942               921             0.07              4,963,728             1,281

0.10


Advances from Federal Home Loan Bank                      31,638               134             1.68                 31,573                19

0.24


Securities sold under agreements to repurchase
and federal funds purchased                              101,861                 5             0.02                 85,330                 4

0.02


Total interest-bearing liabilities                     5,402,441             1,060             0.08              5,080,631             1,304

0.10


Noninterest bearing liabilities:
Deposits                                               3,024,910                                                 2,831,273
Other                                                    186,749                                                   156,883
Shareholder's equity                                     574,285                                                   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
                                                                             2022                                                       2021
                                                                            Interest                                                   Interest
                                                        Average             income/             Yield/             Average              income/            Yield/
(dollars in thousands)                                  balance             expense            rate (%)            balance             expense            rate (%)
Assets:
Interest-earning deposits                            $    96,862          $     147             0.30            $    58,597          $      31             0.11
FHLB stock                                                10,636                168             3.18                 10,600                175             3.34
Investment securities
Taxable                                                3,197,561             27,767             1.74              2,551,569             19,136             1.50
Non-taxable                                               69,431                753             2.17                 42,250                469             2.21
Total investment securities                            3,266,992             28,520             1.75              2,593,819             19,605             1.51
Loans
Residential 1-4 family                                 2,306,284             40,183             3.48              2,147,923             39,061             3.64
Commercial real estate                                 1,198,157             19,950             3.32              1,131,338             18,546             3.27
Home equity line of credit                               865,401             12,704             2.96                914,340             14,327             3.16
Residential land                                          21,669                788             7.27                 17,152                414             4.83
Commercial                                               718,406             13,405             3.74                952,481             19,191             4.04
Consumer                                                 119,504              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 assets                               640,563                                                    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 checking                              1,351,635                145             0.02              1,200,909                117             0.02
Money market                                             208,965                 69             0.07                185,511                 68             0.07
Time certificates                                        399,053              1,235             0.62                517,527              2,168             0.84
Total interest-bearing deposits                        5,237,792              1,868             0.07              4,882,539              2,743

0.11


Advances from Federal Home Loan Bank                      15,906                134             1.68                 30,853                 42

0.27


Securities sold under agreements to repurchase
and federal funds purchased                               96,102                 10             0.02                 80,358                  8

0.02


Total interest-bearing liabilities                     5,349,800              2,012             0.08              4,993,750              2,793

0.11


Noninterest bearing liabilities:
Deposits                                               2,999,395                                                  2,738,967
Other                                                    190,577                                                    162,444
Shareholder's equity                                     635,334                                                    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, 2022                                 December 31, 2021
(dollars in thousands)                                                    Balance              % of total                 Balance                 % of total
U.S. Treasury and federal agency obligations                          $    162,369                       5  %       $         149,961

5 % Mortgage-backed securities - issued or guaranteed by U.S. Government agencies or sponsored agencies


2,739,071                      93                  2,900,322                      94
Corporate bonds                                                             41,429                       1                     31,178                       1
Mortgage revenue bonds                                                      15,165                       1                     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
(in thousands)                                                         2022                     2021            December 31, 2021
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-offs                                                     168                   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, 2022       December 31, 2021       % change
Total assets                        $        9,215      $            9,182           -
Investment securities                        2,958                   3,097          (4)
Loans held for investment, net               5,358                   5,140           4
Deposit liabilities                          8,254                   8,172           1
Other bank borrowings                          242                      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).

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Apr. 15	Hawaiian Electric urges Hawaii Island customers to conserve power	RE
Mar. 25	Hawaiian Electric asks customers to conserve power in April as supply tightens	RE

Hawaiian Electric urges Hawaii Island customers to conserve power	Apr. 15	RE
Hawaiian Electric asks customers to conserve power in April as supply tightens	Mar. 25	RE
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Sector Update: Energy	Mar. 22	MT
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Hawaiian Electric initiates outages on Hawaii Island due to loss of generators	Feb. 14	RE
Hawaiian Electric Industries Q4 Earnings, Revenue Decline	Feb. 13	MT
Transcript : Hawaiian Electric Industries, Inc., Q4 2023 Earnings Call, Feb 13, 2024	Feb. 13
Earnings Flash (HE) HAWAIIAN ELECTRIC INDUSTRIES Reports Q4 Revenue $961.4M	Feb. 13	MT
Earnings Flash (HE) HAWAIIAN ELECTRIC INDUSTRIES Posts Q4 EPS $0.48, vs. Street Est of $0.49	Feb. 13	MT
Hawaiian Electric Industries, Inc. Reports Earnings Results for the Fourth Quarter Ended December 31, 2023	Feb. 13	CI
Hawaiian Electric Industries, Inc. Reports Earnings Results for the Full Year Ended December 31, 2023	Feb. 13	CI
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Hawaiian Electric Starts Rolling Outages on Hawaii Island Due to Generator Issues	Jan. 30	MT
Sector Update: Energy Stocks Rise Late Afternoon	Nov. 10	MT
Hawaiian Electric Industries Falls After Wells Fargo Downgrade, Q3 Results	Nov. 10	MT
Sector Update: Energy	Nov. 10	MT
Wells Fargo Downgrades Hawaiian Electric Industries to Underweight From Equalweight, Adjusts Price Target to $8.50 From $8	Nov. 10	MT
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Hawaiian Electric delays quarterly filing due to fund for Maui fire victims	Nov. 09	RE
Hawaiian Electric Industries' Q3 Earnings, Revenue Fall	Nov. 09	MT
Transcript : Hawaiian Electric Industries, Inc., Q3 2023 Earnings Call, Nov 09, 2023	Nov. 09

	1st Jan change	Capi.
HAWAIIAN ELECTRIC INDUSTRIES, INC.	-28.05%	1.08B
NEXTERA ENERGY	+5.38%	131B
SOUTHERN COMPANY	+0.64%	76.34B
IBERDROLA, S.A.	-4.84%	75.04B
DUKE ENERGY CORPORATION	-1.14%	72.9B
ENEL S.P.A.	-12.75%	62.52B
CONSTELLATION ENERGY CORPORATION	+57.29%	58.42B
AMERICAN ELECTRIC POWER COMPANY, INC.	+1.65%	42.78B
DOMINION ENERGY, INC.	+3.34%	40.47B
GE VERNOVA INC.	0.00%	36.66B

Hawaiian Electric Industries, Inc.

Equities

HE

US4198701009

Electric Utilities

HAWAIIAN ELECTRIC INDUSTRIES INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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