Utility Results:
Electric utility net income for the first quarter of 2009 was $14.1 million compared to $24.6 million in 2008. Lower net income was mainly due to lower electric sales and higher operations and maintenance (O&M) expenses.
Kilowatthour sales were down 7.4% compared with the same quarter of 2008, impacting utility net income by an expected $9 million.
O&M expenses were up $9.4 million or 11.8% quarter-over-quarter, below the 13% increase still expected for the full year. The forecast increase for the year is based mainly on planned higher production, transmission and distribution costs to maintain system reliability; additional expenses expected to be incurred for the Campbell Industrial Park CT-1 generating unit after it starts commercial operations this summer; and higher costs to pursue renewable initiatives.
The increase in O&M expenses for the quarter is due mainly to:
$2.6 million higher maintenance expense due mainly to the intended scope of generating unit overhauls, and more overhead line maintenance and vegetation management;
$2.5 million higher demand-side management costs that are generally passed on to customers as a surcharge; and
$1.8 million higher planned production, transmission and distribution operations expenses and costs for renewable initiatives to support the Hawaii Clean Energy Initiative.
Quarter-over-quarter depreciation expenses were higher by $1 million due to 2008 plant additions.
“As expected, first quarter earnings were lower reflecting the impact of the global financial and economic crisis on Hawaii which lowered electric sales and resulted in a higher provision for loan losses at the bank. In addition, cooler, less humid weather, together with higher expected utility operating and maintenance costs, reduced earnings quarter-over-quarter,” said Constance H. Lau, Hawaiian Electric president and chief executive officer.
“About two-thirds of the decline in sales is attributable to cooler, less humid weather and one less day of sales due to the leap year day in 2008,” said Lau. “The soft economy and overall ongoing customer conservation account for the remainder of the first quarter sales decline.”
“To help offset these negative impacts, both our utility and bank are continuing to aggressively pursue initiatives which have improved operating and financial performance over the last year and positioned us to weather this downturn and to grow as economic conditions improve,” added Lau.
“The core bank business is performing well,” said Lau. “Thanks to the bank’s balance sheet restructuring that was executed in June of 2008, the bank is earning the same net interest income on approximately $1.7 billion less assets than in the first quarter of last year,” added Lau. “Profitability has improved significantly as evidenced by the nearly 100 basis points increase in net interest margin.”
“We’re pleased with the progress the bank is making on its performance improvement initiatives. While management expects credit costs to remain elevated in the near-term, our bank continues to focus on efficiency improvements that should help offset the higher levels of loan loss provisions we expect through this economic downturn.”
