Edgar Filing: HAWAIIAN ELECTRIC INDUSTRIES INC

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Exact Name of Registrant as	Commission	I.R.S. Employer
Specified in Its Charter	File Number	Identification No.
HAWAIIAN ELECTRIC INDUSTRIES, INC.	1-8503	99-0208097
and Principal Subsidiary
HAWAIIAN ELECTRIC COMPANY, INC.	1-4955	99-0040500

State of Hawaii

(State or other jurisdiction of incorporation or organization)

Hawaiian Electric Industries, Inc. – 1001 Bishop Street, Suite 2900, Honolulu, Hawaii 96813

Hawaiian Electric Company, Inc. – 900 Richards Street, Honolulu, Hawaii 96813

(Address of principal executive offices and zip code)

Hawaiian Electric Industries, Inc. – (808) 543-5662

Hawaiian Electric Company, Inc. – (808) 543-7771

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Hawaiian Electric Industries, Inc. Yes x No o		Hawaiian Electric Company, Inc. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Hawaiian Electric Industries, Inc. Yes x No o		Hawaiian Electric Company, Inc. Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Hawaiian Electric Industries, Inc. Yes o No x		Hawaiian Electric Company, Inc. Yes o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Hawaiian Electric Industries, Inc.	Large accelerated filer x	Hawaiian Electric Company, Inc.	Large accelerated filer o
	Accelerated filer o		Accelerated filer o
	Non-accelerated filer o		Non-accelerated filer x
	(Do not check if a smaller reporting company)		(Do not check if a smaller reporting company)
	Smaller reporting company o		Smaller reporting company o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.



Class of Common Stock		Outstanding October 31, 2015
Hawaiian Electric Industries, Inc. (Without Par Value)		107,458,641 Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value)		15,805,327 Shares (not publicly traded)

Hawaiian Electric Industries, Inc. (HEI) is the sole holder of Hawaiian Electric Company, Inc. (Hawaiian Electric) common stock.

This combined Form 10-Q is separately filed by HEI and Hawaiian Electric. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to the other registrant, except that information relating to Hawaiian Electric is also attributed to HEI.

Hawaiian Electric Industries, Inc. and Subsidiaries

Hawaiian Electric Company, Inc. and Subsidiaries

Form 10-Q—Quarter ended September 30, 2015

TABLE OF CONTENTS



Page No.
ii	Glossary of Terms
iv	Forward-Looking Statements

	PART I. FINANCIAL INFORMATION
1	Item 1.	Financial Statements

		Hawaiian Electric Industries, Inc. and Subsidiaries
1		Consolidated Statements of Income - three and nine months ended September 30, 2015 and 2014
2		Consolidated Statements of Comprehensive Income - three and nine months ended September 30, 2015 and 2014
3		Consolidated Balance Sheets - September 30, 2015 and December 31, 2014
4		Consolidated Statements of Changes in Shareholders’ Equity - nine months ended September 30, 2015 and 2014
5		Consolidated Statements of Cash Flows - nine months ended September 30, 2015 and 2014
		Hawaiian Electric Company, Inc. and Subsidiaries
6		Consolidated Statements of Income - three and nine months ended September 30, 2015 and 2014
6		Consolidated Statements of Comprehensive Income - three and nine months ended September 30, 2015 and 2014
7		Consolidated Balance Sheets - September 30, 2015 and December 31, 2014
8		Consolidated Statements of Changes in Common Stock Equity - nine months ended September 30, 2015 and 2014
9		Consolidated Statements of Cash Flows - nine months ended September 30, 2015 and 2014
10		Notes to Consolidated Financial Statements
64	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
64		HEI consolidated
69		Electric Utilities
79		Bank
87	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
88	Item 4.	Controls and Procedures

	PART II.	OTHER INFORMATION
89	Item 1.	Legal Proceedings
89	Item 1A.	Risk Factors
90	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds
90	Item 5.	Other Information
91	Item 6.	Exhibits
92	Signatures

Hawaiian Electric Industries, Inc. and Subsidiaries

Hawaiian Electric Company, Inc. and Subsidiaries

Form 10-Q—Quarter ended September 30, 2015

GLOSSARY OF TERMS



Terms		Definitions
AES Hawaii		AES Hawaii, Inc.
AFUDC		Allowance for funds used during construction
AOCI		Accumulated other comprehensive income/(loss)
ARO		Asset retirement obligation
ASB		American Savings Bank, F.S.B., a wholly-owned subsidiary of ASB Hawaii, Inc.
ASB Hawaii		ASB Hawaii, Inc. (formerly American Savings Holdings, Inc.), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
CIP CT-1		Campbell Industrial Park 110 MW combustion turbine No. 1
CIS		Customer Information System
Company		Hawaiian Electric Industries, Inc. and its direct and indirect subsidiaries, including, without limitation, Hawaiian Electric Company, Inc. and its subsidiaries (listed under Hawaiian Electric); ASB Hawaii, Inc. and its subsidiary, American Savings Bank, F.S.B.; HEI Properties, Inc.; Hawaiian Electric Industries Capital Trust II and Hawaiian Electric Industries Capital Trust III (inactive financing entities); and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.).
Consumer Advocate		Division of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
DER		Distributed Energy Resources
D&O		Decision and order
DG		Distributed generation
Dodd-Frank Act		Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DOH		Department of Health of the State of Hawaii
DRIP		HEI Dividend Reinvestment and Stock Purchase Plan
DSM		Demand-side management
ECAC		Energy cost adjustment clause
EGU		Electrical generating unit
EIP		2010 Equity and Incentive Plan, as amended and restated
EPA		Environmental Protection Agency — federal
EPS		Earnings per share
ERISA		Employee Retirement Income Security Act of 1974, as amended
EVE		Economic value of equity
Exchange Act		Securities Exchange Act of 1934
FASB		Financial Accounting Standards Board
FDIC		Federal Deposit Insurance Corporation
federal		U.S. Government
FERC		Federal Energy Regulatory Commission
FHLB		Federal Home Loan Bank
FHLMC		Federal Home Loan Mortgage Corporation
FNMA		Federal National Mortgage Association
FRB		Federal Reserve Board
GAAP		Accounting principles generally accepted in the United States of America
GHG		Greenhouse gas

GLOSSARY OF TERMS, continued



Terms		Definitions
GNMA		Government National Mortgage Association
Hawaii Electric Light		Hawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.
Hawaiian Electric		Hawaiian Electric Company, Inc., an electric utility subsidiary of Hawaiian Electric Industries, Inc. and parent company of Hawaii Electric Light Company, Inc., Maui Electric Company, Limited, HECO Capital Trust III (unconsolidated financing subsidiary), Renewable Hawaii, Inc. and Uluwehiokama Biofuels Corp.
HIE		Hawaii Independent Energy, LLC
HEI		Hawaiian Electric Industries, Inc., direct parent company of Hawaiian Electric Company, Inc., ASB Hawaii, Inc., HEI Properties, Inc., Hawaiian Electric Industries Capital Trust II, Hawaiian Electric Industries Capital Trust III and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.)
HEIRSP		Hawaiian Electric Industries Retirement Savings Plan
HELOC		Home equity line of credit
Hpower		City and County of Honolulu with respect to a power purchase agreement for a refuse-fired plant
IPP		Independent power producer
Kalaeloa		Kalaeloa Partners, L.P.
KWH		Kilowatthour/s (as applicable)
LNG		Liquefied natural gas
LTIP		Long-term incentive plan
MATS		Mercury and Air Toxics Standards
Maui Electric		Maui Electric Company, Limited, an electric utility subsidiary of Hawaiian Electric Company, Inc.
Merger		As provided in the Merger Agreement, merger of Merger Sub I with and into HEI, with HEI surviving, and then merger of HEI with and into Merger Sub II, with Merger Sub II surviving as a wholly owned subsidiary of NEE
Merger Agreement		Agreement and Plan of Merger by and among HEI, NEE, Merger Sub II and Merger Sub I, dated December 3, 2014
Merger Sub I		NEE Acquisition Sub II, Inc., a Delaware corporation and a wholly owned subsidiary of NEE
Merger Sub II		NEE Acquisition Sub I, LLC, a Delaware limited liability company and a wholly owned subsidiary of NEE
MW		Megawatt/s (as applicable)
NEE		NextEra Energy, Inc.
NEM		Net energy metering
NII		Net interest income
O&M		Other operation and maintenance
OCC		Office of the Comptroller of the Currency
OPEB		Postretirement benefits other than pensions
PPA		Power purchase agreement
PPAC		Purchased power adjustment clause
PSIPs		Power Supply Improvement Plans
PUC		Public Utilities Commission of the State of Hawaii
PV		Photovaltaic
RAM		Rate adjustment mechanism
RBA		Revenue balancing account
RFP		Request for proposals
ROACE		Return on average common equity
RORB		Return on rate base
RPS		Renewable portfolio standards
SAR		Stock appreciation right
SEC		Securities and Exchange Commission
See		Means the referenced material is incorporated by reference
Spin-Off		The distribution to HEI shareholders of all of the common stock of ASB Hawaii immediately prior to the Merger
TDR		Troubled debt restructuring
Trust III		HECO Capital Trust III
Utilities		Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited
VIE		Variable interest entity

iii

FORWARD-LOOKING STATEMENTS

This report and other presentations made by Hawaiian Electric Industries, Inc. (HEI) and Hawaiian Electric Company, Inc. (Hawaiian Electric) and their subsidiaries contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries (collectively, the Company), the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Risks, uncertainties and other important factors that could cause actual results to differ materially from those described in forward-looking statements and from historical results include, but are not limited to, the following:

•

the successful and timely completion of the proposed Merger with NextEra Energy, Inc. (NEE), which could be materially and adversely affected by, among other things, resolving the litigation brought in connection with the proposed Merger, obtaining (and the timing and terms and conditions of) required governmental and regulatory approvals, and ability to maintain relationships with employees, customers or suppliers, as well as the ability to integrate the businesses;


•	the ability of ASB to operate successfully after the Spin-Off of its parent ASB Hawaii;

•

international, national and local economic conditions, including the state of the Hawaii tourism, defense and construction industries, the strength or weakness of the Hawaii and continental U.S. real estate markets (including the fair value and/or the actual performance of collateral underlying loans held by American Savings Bank, F.S.B. (ASB), which could result in higher loan loss provisions and write-offs), decisions concerning the extent of the presence of the federal government and military in Hawaii, the implications and potential impacts of U.S. and foreign capital and credit market conditions and federal, state and international responses to those conditions, and the potential impacts of global developments (including global economic conditions and uncertainties, unrest, ongoing conflicts in North Africa and the Middle East, terrorist acts, potential conflict or crisis with North Korea or Iran, developments in the Ukraine and potential pandemics);


•	the effects of future actions or inaction of the U.S. government or related agencies, including those related to the U.S. debt ceiling and monetary policy;


•	weather and natural disasters (e.g., hurricanes, earthquakes, tsunamis, lightning strikes, lava flows and the potential effects of climate change, such as more severe storms and rising sea levels), including their impact on the Company's and Utilities' operations and the economy;


•	the timing and extent of changes in interest rates and the shape of the yield curve;


•	the ability of the Company and the Utilities to access the credit and capital markets (e.g., to obtain commercial paper and other short-term and long-term debt financing, including lines of credit, and, in the case of HEI, to issue common stock) under volatile and challenging market conditions, and the cost of such financings, if available;


•	the risks inherent in changes in the value of the Company’s pension and other retirement plan assets and ASB’s securities available for sale;


•	changes in laws, regulations, market conditions and other factors that result in changes in assumptions used to calculate retirement benefits costs and funding requirements;


•	the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and of the rules and regulations that the Dodd-Frank Act requires to be promulgated;


•	increasing competition in the banking industry (e.g., increased price competition for deposits, or an outflow of deposits to alternative investments, which may have an adverse impact on ASB’s cost of funds);

•

the potential delay by the Public Utilities Commission of the State of Hawaii (PUC) in considering (and potential disapproval of actual or proposed) renewable energy proposals and related costs; reliance by the Utilities on outside parties such as the state, independent power producers (IPPs) and developers; and uncertainties surrounding technologies, solar power, wind power, proposed undersea cables, biofuels, environmental assessments required to meet RPS goals and the impacts of implementation of the renewable energy proposals on future costs of electricity;

•

the ability of the Utilities to develop, implement and recover the costs of implementing the Utilities’ action plans and business model changes proposed and being developed in response to the four orders that the PUC issued in April 2014, in which the PUC: directed the Utilities to develop, among other things, Power Supply Improvement Plans, a Demand Response Portfolio Plan and a Distributed Generation Interconnection Plan; described the PUC’s inclinations on the future of Hawaii’s electric utilities and the vision, business strategies and regulatory policy changes required to align the Utilities’ business model with customer interests and the state’s public policy goals; and emphasized the need to “leap ahead” of other states in creating a 21st century generation system and modern transmission and distribution grids;


•	capacity and supply constraints or difficulties, especially if generating units (utility-owned or IPP-owned) fail or measures such as demand-side management (DSM), distributed generation (DG), combined heat and power or other firm capacity supply-side resources fall short of achieving their forecasted benefits or are otherwise insufficient to reduce or meet peak demand;


•	fuel oil price changes, delivery of adequate fuel by suppliers and the continued availability to the electric utilities of their energy cost adjustment clauses (ECACs);


•	the continued availability to the electric utilities or modifications of other cost recovery mechanisms, including the purchased power adjustment clauses (PPACs), rate adjustment mechanisms (RAMs) and pension and postretirement benefits other than pensions (OPEB) tracking mechanisms, and the continued decoupling of revenues from sales to mitigate the effects of declining kilowatthour sales;


•	the impact of fuel price volatility on customer satisfaction and political and regulatory support for the Utilities;


•	the risks associated with increasing reliance on renewable energy, including the availability and cost of non-fossil fuel supplies for renewable energy generation and the operational impacts of adding intermittent sources of renewable energy to the electric grid;


•	the growing risk that energy production from renewable generating resources may be curtailed and the interconnection of additional resources will be constrained as more generating resources are added to the Utilities' electric systems and as customers reduce their energy usage;


•	the ability of IPPs to deliver the firm capacity anticipated in their power purchase agreements (PPAs);


•	the potential that, as IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units to ensure the availability of their units;


•	the ability of the Utilities to negotiate, periodically, favorable agreements for significant resources such as fuel supply contracts and collective bargaining agreements;


•	new technological developments that could affect the operations and prospects of the Utilities and ASB or their competitors;


•	new technological developments, such as the commercial development of energy storage and microgrids, that could affect the operations of the Utilities;


•	cyber security risks and the potential for cyber incidents, including potential incidents at HEI, ASB and the Utilities (including at ASB branches and electric utility plants) and incidents at data processing centers they use, to the extent not prevented by intrusion detection and prevention systems, anti-virus software, firewalls and other general information technology controls;

•

federal, state, county and international governmental and regulatory actions, such as existing, new and changes in laws, rules and regulations applicable to HEI, the Utilities and ASB (including changes in taxation, increases in capital requirements, regulatory policy changes, environmental laws and regulations (including resulting compliance costs and risks of fines and penalties and/or liabilities), the regulation of greenhouse gas (GHG) emissions, governmental fees and assessments (such as Federal Deposit Insurance Corporation assessments), and potential carbon “cap and trade” legislation that may fundamentally alter costs to produce electricity and accelerate the move to renewable generation);


•	developments in laws, regulations, and policies governing protections for historic, archaeological, and cultural sites, and plant and animal species and habitats, as well as developments in the implementation and enforcement of such laws, regulations, and policies;


•	discovery of conditions that may be attributable to historical chemical releases, including any necessary investigation and remediation, and any associated enforcement, litigation, or regulatory oversight;


•	decisions by the PUC in rate cases and other proceedings (including the risks of delays in the timing of decisions, adverse changes in final decisions from interim decisions and the disallowance of project costs as a result of adverse regulatory audit reports or otherwise);


•	decisions by the PUC and by other agencies and courts on land use, environmental and other permitting issues (such as required corrective actions, restrictions and penalties that may arise, such as with respect to environmental conditions or renewable portfolio standards (RPS));

•

potential enforcement actions by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC) and/or other governmental authorities (such as consent orders, required corrective actions, restrictions and penalties that may arise, for example, with respect to compliance deficiencies under existing or new banking and consumer protection laws and regulations or with respect to capital adequacy);


•	the ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by RAMs;


•	the risks associated with the geographic concentration of HEI’s businesses and ASB’s loans, ASB’s concentration in a single product type (i.e., first mortgages) and ASB’s significant credit relationships (i.e., concentrations of large loans and/or credit lines with certain customers);


•	changes in accounting principles applicable to HEI, the Utilities and ASB, including the adoption of new U.S. accounting standards, the potential discontinuance of regulatory accounting and the effects of potentially required consolidation of variable interest entities (VIEs) or required capital lease accounting for PPAs with IPPs;


•	changes by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and the results of financing efforts;


•	faster than expected loan prepayments that can cause an acceleration of the amortization of premiums on loans and investments and the impairment of mortgage-servicing assets of ASB;


•	changes in ASB’s loan portfolio credit profile and asset quality which may increase or decrease the required level of provision for loan losses, allowance for loan losses and charge-offs;


•	changes in ASB’s deposit cost or mix which may have an adverse impact on ASB’s cost of funds;


•	the final outcome of tax positions taken by HEI, the Utilities and ASB;


•	the risks of suffering losses and incurring liabilities that are uninsured (e.g., damages to the Utilities’ transmission and distribution system and losses from business interruption) or underinsured (e.g., losses not covered as a result of insurance deductibles or other exclusions or exceeding policy limits); and


•	other risks or uncertainties described elsewhere in this report and in other reports (e.g., “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K) previously and subsequently filed by HEI and/or Hawaiian Electric with the Securities and Exchange Commission (SEC).

Forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, ASB and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Statements of Income (unaudited)



	Three months ended September 30						Nine months ended September 30
(in thousands, except per share amounts)	2015			2014			2015			2014
Revenues
Electric utility	$	648,127		$	803,565		$	1,779,732		$	2,262,056
Bank	69,091			63,536			199,222			187,771
Other	(42		)	(5		)	(4		)	(325		)
Total revenues	717,176			867,096			1,978,950			2,449,502
Expenses
Electric utility	565,470			727,409			1,573,278			2,045,166
Bank	48,289			43,030			138,063			126,778
Other	6,322			4,621			28,278			13,125
Total expenses	620,081			775,060			1,739,619			2,185,069
Operating income (loss)
Electric utility	82,657			76,156			206,454			216,890
Bank	20,802			20,506			61,159			60,993
Other	(6,364		)	(4,626		)	(28,282		)	(13,450		)
Total operating income	97,095			92,036			239,331			264,433
Interest expense, net—other than on deposit liabilities and other bank borrowings	(19,229		)	(19,170		)	(57,235		)	(58,648		)
Allowance for borrowed funds used during construction	737			740			1,918			1,877
Allowance for equity funds used during construction	2,057			1,937			5,366			4,933
Income before income taxes	80,660			75,543			189,380			212,595
Income taxes	29,516			27,264			70,406			76,302
Net income	51,144			48,279			118,974			136,293
Preferred stock dividends of subsidiaries	471			471			1,417			1,417
Net income for common stock	$	50,673		$	47,808		$	117,557		$	134,876
Basic earnings per common share	$	0.47		$	0.47		$	1.11		$	1.33
Diluted earnings per common share	$	0.47		$	0.46		$	1.11		$	1.32
Dividends per common share	$	0.31		$	0.31		$	0.93		$	0.93
Weighted-average number of common shares outstanding	107,457			102,416			106,067			101,768
Net effect of potentially dilutive shares	281			610			280			710
Adjusted weighted-average shares	107,738			103,026			106,347			102,478

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)



	Three months ended September 30						Nine months ended September 30
(in thousands)	2015			2014			2015			2014
Net income for common stock	$	50,673		$	47,808		$	117,557		$	134,876
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of (taxes) benefits of ($2,543), $1,094, ($2,382) and ($2,249) for the respective periods	3,851			(1,657		)	3,608			3,406
Less: reclassification adjustment for net realized gains included in net income, net of taxes of nil, nil, nil and $1,132 for the respective periods	—			—			—			(1,715		)
Derivatives qualified as cash flow hedges:
Less: reclassification adjustment to net income, net of tax benefits of $37, $37, $112 and $112 for the respective periods	59			59			177			177
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $3,583, $1,900, $10,760, and $5,438 for the respective periods	5,611			2,829			16,850			8,515
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $3,243, $1,619, $9,729 and $4,858 for the respective periods	(5,091		)	(2,542		)	(15,274		)	(7,627		)
Other comprehensive income (loss), net of taxes	4,430			(1,311		)	5,361			2,756
Comprehensive income attributable to Hawaiian Electric Industries, Inc.	$	55,103		$	46,497		$	122,918		$	137,632

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Balance Sheets (unaudited)



(dollars in thousands)	September 30, 2015			December 31, 2014
Assets
Cash and cash equivalents	$	228,417		$	175,542
Accounts receivable and unbilled revenues, net	305,448			313,696
Available-for-sale investment securities, at fair value	785,837			550,394
Stock in Federal Home Loan Bank, at cost	10,678			69,302
Loans receivable held for investment, net	4,487,130			4,389,033
Loans held for sale, at lower of cost or fair value	5,598			8,424
Property, plant and equipment, net of accumulated depreciation of $2,318,227 and $2,250,950 at the respective dates	4,317,121			4,148,774
Regulatory assets	897,948			905,264
Other	453,099			542,523
Goodwill	82,190			82,190
Total assets	$	11,573,466		$	11,185,142
Liabilities and shareholders’ equity
Liabilities
Accounts payable	$	152,896		$	186,425
Interest and dividends payable	25,914			25,336
Deposit liabilities	4,825,954			4,623,415
Short-term borrowings—other than bank	171,992			118,972
Other bank borrowings	368,593			290,656
Long-term debt, net—other than bank	1,506,546			1,506,546
Deferred income taxes	643,951			633,570
Regulatory liabilities	362,251			344,849
Contributions in aid of construction	495,667			466,432
Defined benefit pension and other postretirement benefit plans liability	607,682			632,845
Other	456,726			531,230
Total liabilities	9,618,172			9,360,276
Preferred stock of subsidiaries - not subject to mandatory redemption	34,293			34,293
Commitments and contingencies (Notes 4 and 5)
Shareholders’ equity
Preferred stock, no par value, authorized 10,000,000 shares; issued: none	—			—
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 107,458,641 shares and 102,565,266 shares at the respective dates	1,627,259			1,521,297
Retained earnings	315,759			296,654
Accumulated other comprehensive loss, net of tax benefits	(22,017		)	(27,378		)
Total shareholders’ equity	1,921,001			1,790,573
Total liabilities and shareholders’ equity	$	11,573,466		$	11,185,142

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (unaudited)



	Common stock			Retained			Accumulated other comprehensive
(in thousands, except per share amounts)	Shares	Amount		Earnings			income (loss)			Total
Balance, December 31, 2014	102,565	$	1,521,297	$	296,654		$	(27,378	)	$	1,790,573
Net income for common stock	—	—		117,557			—			117,557
Other comprehensive income, net of taxes	—	—		—			5,361			5,361
Issuance of common stock, net	4,894	105,962		—			—			105,962
Common stock dividends ($0.93 per share)	—	—		(98,452		)	—			(98,452		)
Balance, September 30, 2015	107,459	$	1,627,259	$	315,759		$	(22,017	)	$	1,921,001
Balance, December 31, 2013	101,260	$	1,488,126	$	255,030		$	(16,750	)	$	1,726,406
Net income for common stock	—	—		134,876			—			134,876
Other comprehensive income, net of taxes	—	—		—			2,756			2,756
Issuance of common stock, net	1,302	31,130		—			—			31,130
Common stock dividends ($0.93 per share)	—	—		(94,711		)	—			(94,711		)
Balance, September 30, 2014	102,562	$	1,519,256	$	295,195		$	(13,994	)	$	1,800,457

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)



Nine months ended September 30	2015			2014
(in thousands)
Cash flows from operating activities
Net income	$	118,974		$	136,293
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	137,721			129,574
Other amortization	12,080			5,081
Provision for loan losses	5,436			3,566
Loans receivable originated and purchased, held for sale	(226,081		)	(102,523		)
Proceeds from sale of loans receivable, held for sale	231,509			106,918
Increase in deferred income taxes	2,723			50,296
Share-based compensation expense	4,780			7,200
Excess tax benefits from share-based payment arrangements	(1,012		)	(271		)
Allowance for equity funds used during construction	(5,366		)	(4,933		)
Change in cash overdraft	—			(1,038		)
Changes in assets and liabilities
Decrease (increase) in accounts receivable and unbilled revenues, net	8,248			(18,943		)
Decrease in fuel oil stock	35,942			15,784
Increase in regulatory assets	(23,458		)	(17,531		)
Decrease in accounts, interest and dividends payable	(34,171		)	(51,199		)
Change in prepaid and accrued income taxes and utility revenue taxes	(8,458		)	(2,044		)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	418			(2,594		)
Change in other assets and liabilities	(38,033		)	(56,326		)
Net cash provided by operating activities	221,252			197,310
Cash flows from investing activities
Available-for-sale investment securities purchased	(326,965		)	(130,578		)
Principal repayments on available-for-sale investment securities	96,053			52,678
Proceeds from sale of available-for-sale investment securities	—			79,564
Purchase of stock from Federal Home Loan Bank	(1,600		)	—
Redemption of stock from Federal Home Loan Bank	60,223			17,482
Net increase in loans held for investment	(101,771		)	(184,766		)
Proceeds from sale of real estate acquired in settlement of loans	1,258			2,930
Proceeds from sale of real estate held-for-sale	7,280			—
Capital expenditures	(276,186		)	(260,616		)
Contributions in aid of construction	34,627			21,740
Other	4,084			674
Net cash used in investing activities	(502,997		)	(400,892		)
Cash flows from financing activities
Net increase in deposit liabilities	202,539			161,320
Net increase in short-term borrowings with original maturities of three months or less	53,020			45,094
Net increase (decrease) in retail repurchase agreements	67,934			(6,306		)
Proceeds from other bank borrowings	50,000			90,000
Repayments of other bank borrowings	(40,000		)	(65,000		)
Proceeds from issuance of long-term debt	—			125,000
Repayment of long-term debt	—			(100,000		)
Excess tax benefits from share-based payment arrangements	1,012			271
Net proceeds from issuance of common stock	104,437			26,910
Common stock dividends	(98,452		)	(94,674		)
Preferred stock dividends of subsidiaries	(1,417		)	(1,417		)
Other	(4,453		)	(5,097		)
Net cash provided by financing activities	334,620			176,101
Net increase (decrease) in cash and cash equivalents	52,875			(27,481		)
Cash and cash equivalents, beginning of period	175,542			220,036
Cash and cash equivalents, end of period	$	228,417		$	192,555

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Statements of Income (unaudited)



	Three months ended September 30						Nine months ended September 30
(in thousands)	2015			2014			2015			2014
Revenues	$	648,127		$	803,565		$	1,779,732		$	2,262,056
Expenses
Fuel oil	195,633			309,432			518,670			865,989
Purchased power	160,518			192,882			445,809			546,121
Other operation and maintenance	103,653			108,313			306,519			295,483
Depreciation	44,356			41,594			132,840			124,790
Taxes, other than income taxes	61,310			75,188			169,440			212,783
Total expenses	565,470			727,409			1,573,278			2,045,166
Operating income	82,657			76,156			206,454			216,890
Allowance for equity funds used during construction	2,057			1,937			5,366			4,933
Interest expense and other charges, net	(16,557		)	(16,414		)	(49,170		)	(48,989		)
Allowance for borrowed funds used during construction	737			740			1,918			1,877
Income before income taxes	68,894			62,419			164,568			174,711
Income taxes	25,390			23,042			60,351			64,686
Net income	43,504			39,377			104,217			110,025
Preferred stock dividends of subsidiaries	228			228			686			686
Net income attributable to Hawaiian Electric	43,276			39,149			103,531			109,339
Preferred stock dividends of Hawaiian Electric	270			270			810			810
Net income for common stock	$	43,006		$	38,879		$	102,721		$	108,529

HEI owns all of the common stock of Hawaiian Electric. Therefore, per share data with respect to shares of common stock of Hawaiian Electric are not meaningful.

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)



	Three months ended September 30						Nine months ended September 30
(in thousands)	2015			2014			2015			2014
Net income for common stock	$	43,006		$	38,879		$	102,721		$	108,529
Other comprehensive income, net of taxes:
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $3,245, $1,626, $9,735 and $4,878 for the respective periods	5,095			2,552			15,285			7,659
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $3,243, $1,619, $9,729 and $4,858 for the respective periods	(5,091		)	(2,542		)	(15,274		)	(7,627		)
Other comprehensive income, net of taxes	4			10			11			32
Comprehensive income attributable to Hawaiian Electric Company, Inc.	$	43,010		$	38,889		$	102,732		$	108,561

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Balance Sheets (unaudited)



(dollars in thousands, except par value)	September 30, 2015			December 31, 2014
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	52,283		$	52,299
Plant and equipment	6,216,114			6,009,482
Less accumulated depreciation	(2,246,614		)	(2,175,510		)
Construction in progress	196,681			158,616
Utility property, plant and equipment, net	4,218,464			4,044,887
Nonutility property, plant and equipment, less accumulated depreciation of $1,228 and $1,227 at respective dates	6,562			6,563
Total property, plant and equipment, net	4,225,026			4,051,450
Current assets
Cash and cash equivalents	10,704			13,762
Customer accounts receivable, net	162,468			158,484
Accrued unbilled revenues, net	123,578			137,374
Other accounts receivable, net	4,763			4,283
Fuel oil stock, at average cost	70,104			106,046
Materials and supplies, at average cost	58,973			57,250
Prepayments and other	46,891			66,383
Regulatory assets	79,950			71,421
Total current assets	557,431			615,003
Other long-term assets
Regulatory assets	817,998			833,843
Unamortized debt expense	7,586			8,323
Other	75,951			81,838
Total other long-term assets	901,535			924,004
Total assets	$	5,683,992		$	5,590,457
Capitalization and liabilities
Capitalization
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,805,327 shares)	$	105,388		$	105,388
Premium on capital stock	578,930			578,938
Retained earnings	1,032,690			997,773
Accumulated other comprehensive income, net of income taxes-retirement benefit plans	56			45
Common stock equity	1,717,064			1,682,144
Cumulative preferred stock — not subject to mandatory redemption	34,293			34,293
Long-term debt, net	1,206,546			1,206,546
Total capitalization	2,957,903			2,922,983
Commitments and contingencies (Note 4)
Current liabilities
Short-term borrowings from non-affiliates	94,995			—
Accounts payable	124,779			163,934
Interest and preferred dividends payable	25,078			22,316
Taxes accrued	193,575			250,402
Regulatory liabilities	347			632
Other	75,450			65,146
Total current liabilities	514,224			502,430
Deferred credits and other liabilities
Deferred income taxes	625,422			602,872
Regulatory liabilities	361,904			344,217
Unamortized tax credits	83,648			79,492
Defined benefit pension and other postretirement benefit plans liability	570,028			595,395
Other	75,196			76,636
Total deferred credits and other liabilities	1,716,198			1,698,612
Contributions in aid of construction	495,667			466,432
Total capitalization and liabilities	$	5,683,992		$	5,590,457

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Statements of Changes in Common Stock Equity (unaudited)



	Common stock			Premium on capital			Retained			Accumulated other comprehensive
(in thousands)	Shares	Amount		stock			earnings			income (loss)		Total
Balance, December 31, 2014	15,805	$	105,388	$	578,938		$	997,773		$	45	$	1,682,144
Net income for common stock	—	—		—			102,721			—		102,721
Other comprehensive income, net of taxes	—	—		—			—			11		11
Common stock dividends	—	—		—			(67,804		)	—		(67,804		)
Common stock issuance expenses	—	—		(8		)	—			—		(8		)
Balance, September 30, 2015	15,805	$	105,388	$	578,930		$	1,032,690		$	56	$	1,717,064
Balance, December 31, 2013	15,429	$	102,880	$	541,452		$	948,624		$	608	$	1,593,564
Net income for common stock	—	—		—			108,529			—		108,529
Other comprehensive income, net of taxes	—	—		—			—			32		32
Common stock dividends	—	—		—			(66,369		)	—		(66,369		)
Common stock issuance expenses	—	—		(5		)	—			—		(5		)
Balance, September 30, 2014	15,429	$	102,880	$	541,447		$	990,784		$	640	$	1,635,751

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)



Nine months ended September 30	2015			2014
(in thousands)
Cash flows from operating activities
Net income	$	104,217		$	110,025
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	132,840			124,790
Other amortization	9,827			4,289
Increase in deferred income taxes	58,211			67,392
Change in tax credits, net	4,247			5,816
Allowance for equity funds used during construction	(5,366		)	(4,933		)
Change in cash overdraft	—			(1,038		)
Changes in assets and liabilities
Increase in accounts receivable	(4,464		)	(19,731		)
Decrease in accrued unbilled revenues	13,796			971
Decrease in fuel oil stock	35,942			15,784
Increase in materials and supplies	(1,723		)	(1,595		)
Increase in regulatory assets	(23,458		)	(17,531		)
Decrease in accounts payable	(40,375		)	(53,280		)
Change in prepaid and accrued income taxes and revenue taxes	(61,635		)	(18,075		)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	331			(748		)
Change in other assets and liabilities	(20,804		)	(41,969		)
Net cash provided by operating activities	201,586			170,167
Cash flows from investing activities
Capital expenditures	(265,521		)	(253,718		)
Contributions in aid of construction	34,627			21,740
Other	778			713
Net cash used in investing activities	(230,116		)	(231,265		)
Cash flows from financing activities
Common stock dividends	(67,804		)	(66,369		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(1,496		)	(1,496		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	94,995			84,987
Other	(223		)	(462		)
Net cash provided by financing activities	25,472			16,660
Net decrease in cash and cash equivalents	(3,058		)	(44,438		)
Cash and cash equivalents, beginning of period	13,762			62,825
Cash and cash equivalents, end of period	$	10,704		$	18,387

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1 · Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to SEC Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses for the period. Actual results could differ significantly from those estimates. The accompanying unaudited consolidated financial statements and the following notes should be read in conjunction with the audited consolidated financial statements and the notes thereto in HEI’s and Hawaiian Electric’s Form 10-K, as amended by Amendment No. 1 on Form 10-K/A, for the year ended December 31, 2014.

In the opinion of HEI’s and Hawaiian Electric’s management, the accompanying unaudited consolidated financial statements contain all material adjustments required by GAAP to fairly state consolidated HEI’s and Hawaiian Electric’s financial positions as of September 30, 2015 and December 31, 2014, the results of their operations for the three and nine months ended September 30, 2015 and 2014, and their cash flows for the nine months ended September 30, 2015 and 2014. All such adjustments are of a normal recurring nature, unless otherwise disclosed below or elsewhere in this Form 10-Q (see “Revision of previously issued financial statements” below) or other referenced material. Results of operations for interim periods are not necessarily indicative of results for the full year.

Prior period financial statements reflect the retrospective application of Accounting Standards Update (ASU) No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” which was adopted as of January 1, 2015 and did not have a material impact on the Company’s financial condition or results of operations. See “Investments in qualified affordable housing projects” in Note 11.

Revision of previously issued financial statements. Management discovered that the Utilities’ capital expenditures on HEI’s and Hawaiian Electric’s Consolidated Statements of Cash Flows did not correctly account for the beginning of period unpaid invoices and accruals (that were paid in cash during the period) and is revising its previously filed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 to correct for such misstatement by adjusting cash used for “Capital expenditures” (investing activity) and change in accounts payable (operating activity).

Management also discovered that the eliminating journal entry to offset the Hawaiian Electric consolidated net operating loss deferred tax asset did not properly reflect the adjustment on the components of income taxes (current and deferred federal income taxes) and is revising its previously filed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 to correct for such misstatement by adjusting “Increase in deferred income taxes” and “Change in other assets and liabilities” (operating activities).

Management determined it needed to correct the presentation for share-based compensation expense on the Company’s Consolidated Statement of Cash Flows, resulting in a corresponding change in the “Change in other assets and liabilities” amount.

These revisions to correct for such misstatements and other immaterial items do not impact HEI’s and Hawaiian Electric’s previously reported overall net change in cash and cash equivalents in their Consolidated Statements of Cash Flows for any period presented. Additionally, these revisions do not impact HEI’s and Hawaiian Electric’s Consolidated Balance Sheets or Consolidated Statements of Income for any period presented. The Company and Hawaiian Electric have concluded that the impact of the misstatements is not material to the previously issued Consolidated Statements of Cash Flows for the nine months ended September 30, 2014.

The table below illustrates the effects of the revisions on the previously filed financial statements:



	As previously			As
(in thousands)	filed			revised			Difference
Nine months ended September 30, 2014
Consolidated Statements of Cash Flows
HEI consolidated
Cash flows from operating activities
Other amortization	$	5,454		$	5,081		$	(373	)
Increase in deferred income taxes (1)	49,270			50,296			1,026
Share-based compensation expense	—			7,200			7,200
Decrease in accounts, interest and dividends payable	(75,812		)	(51,199		)	24,613
Change in other assets and liabilities (1)	(47,760		)	(56,326		)	(8,566		)
Net cash provided by operating activities	173,410			197,310			23,900
Cash flows from investing activities
Capital expenditures	(236,003		)	(260,616		)	(24,613		)
Cash flows from investing activities-Other	(39		)	674			713
Net cash used in investing activities	(376,992		)	(400,892		)	(23,900		)
Hawaiian Electric consolidated
Cash flows from operating activities
Other amortization	4,662			4,289			(373		)
Decrease in accounts payable	(77,893		)	(53,280		)	24,613
Change in other assets and liabilities	(41,629		)	(41,969		)	(340		)
Net cash provided by operating activities	146,267			170,167			23,900
Cash flows from investing activities
Capital expenditures	(229,105		)	(253,718		)	(24,613		)
Cash flows from investing activities-Other	—			713			713
Net cash used in investing activities	(207,365		)	(231,265		)	(23,900		)
Note 10
HEI consolidated and Hawaiian Electric consolidated
Additions to electric utility property, plant and equipment - unpaid invoices and accruals (investing) (in millions)	40			15			(25		)

(1) As previously filed and adjusted by ASU No. 2014-01 (see Note 11).

2 · Proposed Merger

On December 3, 2014, HEI, NextEra Energy, Inc., a Florida corporation (NEE), NEE Acquisition Sub I, LLC, a Delaware limited liability company and a wholly owned subsidiary of NEE (Merger Sub II) and NEE Acquisition Sub II, Inc., a Delaware corporation and a wholly owned subsidiary of NEE (Merger Sub I), entered into an Agreement and Plan of Merger (the Merger Agreement). The Merger Agreement provides for Merger Sub I to merge with and into HEI (the Initial Merger), with HEI surviving, and then for HEI to merge with and into Merger Sub II, with Merger Sub II surviving as a wholly owned subsidiary of NEE (the Merger). The Merger is intended to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended, and to be tax-free to HEI shareholders.

Pursuant to the Merger Agreement, upon the closing of the Merger, each issued and outstanding share of HEI common stock will automatically be converted into the right to receive 0.2413 shares of common stock of NEE (the Exchange Ratio). No adjustment to the Exchange Ratio is made in the Merger Agreement for any changes in the market price of either HEI or NEE common stock between December 3, 2014 and the closing of the Merger.

The Merger Agreement contemplates that, immediately prior to the closing of the Merger, HEI will distribute to its shareholders all of the issued and outstanding shares of common stock of ASB Hawaii, the direct parent company of ASB (such distribution referred to as the Spin-Off), with ASB Hawaii becoming a new public company. In addition, the Merger Agreement contemplates that, immediately prior to the closing of the Merger, HEI will pay its shareholders a special dividend of $0.50 per share.

The closing of the Merger is subject to various conditions, including, among others, (i) the approval of holders of 75% of the outstanding shares of HEI common stock, (ii) effectiveness of the registration statement for the NEE common stock to be issued in the Initial Merger and the listing of such shares on the New York Stock Exchange, (iii) expiration or termination of the applicable Hart-Scott-Rodino Act waiting period, (iv) receipt of all required regulatory approvals from, among others, the Federal Energy Regulatory Commission (FERC), the Federal Communications Commission and the Hawaii Public Utilities

Commission, (v) the absence of any law or judgment in effect or pending in which a governmental entity has imposed or is seeking to impose a legal restraint that would prevent or make illegal the closing of the Merger, (vi) the absence of any material adverse effect with respect to either HEI or NEE, (vii) subject to certain exceptions, the accuracy of the representations and warranties of, and compliance with covenants by, each of the parties to the Merger Agreement, (viii) receipt by each of HEI and NEE of a tax opinion of its counsel regarding the tax treatment of the transactions contemplated by the Merger Agreement, (ix) effectiveness of the ASB Hawaii registration statement necessary to consummate the Spin-Off, and (x) the determination by each of HEI and NEE that, upon completion of the Spin-Off, HEI will no longer be a savings and loan holding company or be deemed to control ASB for purposes of the Home Owners' Loan Act. The Spin-Off will be subject to various conditions, including, among others, the approval of the Federal Reserve Board (FRB).

The Merger Agreement contains customary representations, warranties and covenants of HEI and NEE.

The Merger Agreement contains certain termination rights for both HEI and NEE, including the right of either party to terminate the Merger Agreement if the Merger has not been consummated by December 3, 2015 (subject to a 6-month extension if required to obtain necessary regulatory approvals), and further provides that upon termination of the Merger Agreement under specified circumstances NEE would be required to pay HEI a termination fee of $90 million and reimburse HEI for up to $5 million of its documented out-of-pocket expenses incurred in connection with the Merger Agreement.

On March 26, 2015, NEE’s Form S-4, which registers NEE common stock expected to be issued in the Initial Merger, was declared effective. HEI Shareholders approved the proposed merger agreement with NEE on June 10, 2015.

On March 30, 2015, ASB Hawaii filed its Form 10, the registration statement for the ASB Hawaii shares expected to be distributed in the Spin-Off.

On August 7, 2015, each of HEI and NEE filed their respective notifications pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), with the U.S. Department of Justice and Federal Trade Commission. On September 8, 2015, the mandatory, pre-merger waiting period under the HSR Act expired. Accordingly, the condition to the closing of the Merger with respect to the expiration of the applicable waiting period under the HSR Act has been satisfied.

PUC application. In January 2015, NEE and Hawaiian Electric filed an application with the PUC requesting approval of the proposed Merger (under which Hawaiian Electric would become a wholly-owned indirect subsidiary of NEE). The application also requests modification of certain conditions agreed to by HEI and the PUC in 1982 for the merger and corporate restructuring of Hawaiian Electric, and confirmation that with approval of the Merger Agreement, the recommendations in the 1995 Dennis Thomas Report (resulting from a proceeding to review the relationship between HEI and Hawaiian Electric and any impact of HEI’s then diversified activities on the Utilities) will no longer be applicable. The application includes a commitment that, for at least four years following the completion of the transaction, Hawaiian Electric will not submit any applications seeking a general base rate increase and will reduce the RAM, which amounts to approximately $60 million in cumulative savings for customers, over the four-year base rate moratorium, subject to certain exceptions and conditions, including that the following remain in effect: the revenue balancing account (RBA) and RAM tariff provisions, the Renewable Energy Infrastructure Program, and Renewable Energy Infrastructure Surcharge, the integrated resource planning/DSM Recovery tariff provisions, the ECAC tariff provisions, the PPA tariff provision and the Pension and OPEB tracker mechanism. Various parties, including governmental, environmental and commercial interests, have been allowed to intervene in the proceeding.

Twenty-eight interveners filed testimonies in the docket in July 2015. Eleven interveners recommended the merger not be approved, eleven recommended approval only with conditions, and six did not specifically make a recommendation either way. The Consumer Advocate filed its testimonies on August 10, 2015, stating that the Applicants have not justified that the proposed transaction is in the public interest but that if the Consumer Advocate’s recommended conditions were adopted, the results would reflect substantial net benefits that would support a finding that the proposed transaction is in the public interest. Among its recommended conditions was a rate plan to permanently reduce the Utilities’ rates by approximately $62 million annually. On August 31, 2015, the applicants filed their responsive testimonies, offering a number of additional commitments, including:


•	subject to PUC approval, completing full smart meter deployment to all customers by December 31, 2019


•	reflecting 100% of all net non-fuel O&M savings achieved by the Utilities and limiting non-fuel O&M expenses to levels no higher than the non-fuel O&M in 2014, adjusted for inflation, in the revenue requirements in the first rate case following the four-year rate case moratorium


•	establishing a funding mechanism of $2.5 million per year during the four-year rate case moratorium to be used for purposes in the public interest at the PUC’s discretion and direction


•	commiting to corporate giving of at least $2.2 million for a minimum of 10 years post-closing


•	committing to not selling the Utilities or their holding company for at least 10 years post-closing

On October 7, 2015, the other parties filed rebuttal testimonies. On October 16, 2015, the Applicants filed surrebuttal testimonies. Evidentiary hearings are scheduled from November 30 to December 16, 2015.

Other requests. On January 29, 2015, HEI submitted its application to the FERC requesting all necessary authorization to consummate the transactions contemplated by the Merger Agreement. The FERC issued its order authorizing the proposed merger on March 27, 2015.

On February 1, 2015, HEI submitted a letter to the FRB advising the FRB of its intent to seek deregistration as a Savings & Loan Holding Company (SLHC).

Pending litigation and other matters.

Litigation. HEI and its subsidiaries are subject to various legal proceedings that arise from time to time. Some of these proceedings may seek relief or damages in amounts that may be substantial. Because these proceedings are complex, many years may pass before they are resolved, and it is not feasible to predict their outcomes. Some of these proceedings involve claims HEI and Hawaiian Electric believe may be covered by insurance, and HEI and Hawaiian Electric have advised their insurance carriers accordingly.

Since the December 3, 2014 announcement of the merger agreement, eight purported class action complaints were filed in the Circuit Court of the First Circuit for the State of Hawaii by alleged stockholders of HEI against HEI, Hawaiian Electric (in one complaint), the individual directors of HEI, NEE and NEE's acquisition subsidiaries. The lawsuits are captioned as follows: Miller v. Hawaiian Electric Industries, Inc., et al., Case No. 14-1-2531-12 KTN (December 15, 2014) (the Miller Action); Walsh v. Hawaiian Electric Industries, Inc., et al., Case No. 14-1-2541-12 JHC (December 15, 2014) (the Walsh Action); Stein v. Hawaiian Electric Industries, Inc., et al., Case No. 14-1-2555-12 KTN (December 17, 2014) (the Stein Action); Brown v. Hawaiian Electric Industries, Inc., et al., Case No. 14-1-2643-12 RAN (December 30, 2014) (the Brown Action); Cohn v. Hawaiian Electric Industries, Inc., et al., Case No. 14-1-2642-12 KTN (December 30, 2014) (the Cohn State Action); Guenther v. Watanabe, et al., Case No. 15-1-003-01 ECN (January 2, 2015) (the Guenther Action); Hudson v. Hawaiian Electric Industries, Inc., et al., Case No. 15-1-0013-01 JHC (January 5, 2015) (the Hudson Action); Grieco v. Hawaiian Electric Industries, Inc., et al., Case No. 15-1-0094-01 KKS (January 21, 2015) (the Grieco Action). On January 12, 2015, plaintiffs in the Miller Action, the Walsh Action, the Stein Action, the Brown Action, the Guenther Action, and the Hudson Action filed a motion to consolidate their actions and to appoint co-lead counsel. The Court held a hearing on this motion on February 13, 2015 and granted consolidation and appointment of co-lead counsel on March 6, 2015. On March 10, 2015, plaintiffs in the consolidated state action filed an amended complaint, and added J.P. Morgan Securities, LLC (JP Morgan), which was HEI’s financial advisor for the Merger, as a defendant. On March 17, 2015, plaintiffs in the consolidated state action moved for limited expedited discovery. After limited discovery, the parties in the consolidated state action stipulated and the Court ordered that the deadline for defendants to respond to the amended complaint is extended indefinitely. On April 30, 2015, the Court consolidated the seven state actions under the caption, In re Consolidated HEI Shareholder Cases. On January 23, 2015, the Cohn State Action was voluntarily dismissed. Thereafter, the same alleged stockholder plaintiff filed a purported class action complaint in the United States District Court for the District of Hawaii against HEI, the individual directors of HEI, NEE and NEE's acquisition subsidiaries. The lawsuit is captioned as Cohn v. Hawaiian Electric Industries, Inc. et al., 15-cv-00029-JMS-KSC (January 27, 2015) (the Cohn Federal Action). On May 28, 2015, the parties agreed to stay the Cohen Federal Action pending the outcome of the consolidated state action.

The actions allege, among other things, that members of HEI's Board breached their fiduciary duties in connection with the proposed transaction, and that the Merger Agreement involves an unfair price, was the product of an inadequate sales process, and contains unreasonable deal protection devices that purportedly preclude competing offers. The complaints further allege that HEI, NEE and/or its acquisition subsidiaries aided and abetted the purported breaches of fiduciary duty. The plaintiffs in these lawsuits seek, among other things, (i) a declaration that the Merger Agreement was entered into in breach of HEI's directors' fiduciary duties, (ii) an injunction enjoining the HEI Board from consummating the Merger, (iii) an order directing the HEI Board to exercise their duties to obtain a transaction which is in the best interests of HEI's stockholders, (iv) a rescission of the Merger to the extent that it is consummated, and/or (v) damages suffered as a result of the defendants' alleged actions. Plaintiffs in the consolidated state action also allege that JP Morgan had a conflict of interest in advising HEI because JP Morgan and its affiliates had business ties to and investments in NEE. The consolidated state action also alleges that the HEI board of directors violated its fiduciary duties by omitting material facts from the Registration Statement on Form S-4. In addition, the Cohn Federal Action alleges that the HEI board of directors violated its fiduciary duties and federal securities laws by omitting material facts from the Registration Statement on Form S-4.

HEI and Hawaiian Electric believe the allegations of the complaints are without merit and intend to defend these lawsuits vigorously.

3 · Segment financial information



(in thousands)	Electric utility		Bank		Other			Total
Three months ended September 30, 2015
Revenues from external customers	$	648,121	$	69,091	$	(36	)	$	717,176
Intersegment revenues (eliminations)	6		—		(6		)	—
Revenues	648,127		69,091		(42		)	717,176
Income (loss) before income taxes	68,894		20,802		(9,036		)	80,660
Income taxes (benefit)	25,390		7,351		(3,225		)	29,516
Net income (loss)	43,504		13,451		(5,811		)	51,144
Preferred stock dividends of subsidiaries	498		—		(27		)	471
Net income (loss) for common stock	43,006		13,451		(5,784		)	50,673
Nine months ended September 30, 2015
Revenues from external customers	$	1,779,708	$	199,222	$	20		$	1,978,950
Intersegment revenues (eliminations)	24		—		(24		)	—
Revenues	1,779,732		199,222		(4		)	1,978,950
Income (loss) before income taxes	164,568		61,159		(36,347		)	189,380
Income taxes (benefit)	60,351		21,382		(11,327		)	70,406
Net income (loss)	104,217		39,777		(25,020		)	118,974
Preferred stock dividends of subsidiaries	1,496		—		(79		)	1,417
Net income (loss) for common stock	102,721		39,777		(24,941		)	117,557
Assets (at September 30, 2015)	5,683,992		5,855,497		33,977			11,573,466
Three months ended September 30, 2014
Revenues from external customers	$	803,559	$	63,536	$	1		$	867,096
Intersegment revenues (eliminations)	6		—		(6		)	—
Revenues	803,565		63,536		(5		)	867,096
Income (loss) before income taxes	62,419		20,506		(7,382		)	75,543
Income taxes (benefit)	23,042		7,253		(3,031		)	27,264
Net income (loss)	39,377		13,253		(4,351		)	48,279
Preferred stock dividends of subsidiaries	498		—		(27		)	471
Net income (loss) for common stock	38,879		13,253		(4,324		)	47,808
Nine months ended September 30, 2014
Revenues from external customers	$	2,262,038	$	187,771	$	(307	)	$	2,449,502
Intersegment revenues (eliminations)	18		—		(18		)	—
Revenues	2,262,056		187,771		(325		)	2,449,502
Income (loss) before income taxes	174,711		60,994		(23,110		)	212,595
Income taxes (benefit)	64,686		21,806		(10,190		)	76,302
Net income (loss)	110,025		39,188		(12,920		)	136,293
Preferred stock dividends of subsidiaries	1,496		—		(79		)	1,417
Net income (loss) for common stock	108,529		39,188		(12,841		)