Morningstar | Hawaiian Electric Reports Strong 1Q Results at the Utility and Bank. See Updated Analyst Note from 07 May 2019
We are reaffirming our $35 per share fair value estimate after Hawaiian Electric Industries reported strong 2019 first-quarter earnings and reaffirmed 2019 earnings guidance.Hawaiian Electric also reaffirmed its capital expenditures and rate base forecast, indicating a 6% average annual increase in rate base from 2019-2021. We are not as bullish on rate base increases. Our forecast assumes an average increase of 5.3% over the next five years.
Hawaiian’s utilities contributed $0.29 per share in the recently ended quarter versus $0.25 in the same period last year. The positive results were expected due to the commencement of triennial rate reviews increasing rates. Core realized ROE was 7.8% for the trailing 12 months ending March 31. This is 40 basis points higher than the first quarter in 2018. We bumped our 2019 ROE assumption by 5 basis points and this increased our utility contribution in 2019 by $0.01 per share.
American Savings Bank contributed $0.19 per share in the first quarter, $0.02 more than last year. Net interest income and lower provisions for loan losses provided favorable year-over-year variances. Holding company losses were $0.01 more than last year in the first quarter due to more debt and higher average interest rates on the debt. Our 2019 estimate assumes $0.04 per share higher ASB earnings contribution in 2019 versus 2018 and losses increasing by $0.03 per share at the holding company.
Our consolidated EPS estimates for 2020-2023 are unchanged and the $0.01 higher estimate for 2019, to $1.97 per share, did not have a material impact on our fair value estimate.
Hawaiian Electric Industries is a holding company with its subsidiaries principally engaged in electric utility, banking, and renewable/sustainable infrastructure investment businesses operating in the State of Hawaii. The company and its operating utility subsidiaries, Hawaii Electric Light Company, Inc.and Maui Electric Company, Limited are regulated electric public utilities that provide essential electric service to Hawaii's population through the operation of five separate grids that serve communities on the islands of Oahu, Hawaii, and Maui, Lanai and Molokai. The company also owns ASB Hawaii, Inc. and its subsidiary, American Savings Bank, F.S.B., a financial institution in the State of Hawaii.
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