Hawaiian Electric Industries Inc.
) provided a financial update and lowered its earnings guidance
for 2013. The lowered guidance reflects Maui Electric Company,
Limited's (MECO) 2012 test year final rate case decision and
order (D&O) issued by the Public Utilities Commission of the
State of Hawaii ("PUC").
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The company expects adjusted earnings per share in the range of
$1.54 to $1.64 and GAAP earnings in the range of $1.52 to $1.62
per share. The guidance reflects $7.8 million lower MECO annual
revenues as a result of the final D&O. With its first quarter
results, the company had declared 2013 earnings guidance in the
range of $1.58 to $1.68 per share.
For Hawaiian Electric Company, Inc., the company expects adjusted
earnings per share in the range of $1.19 to $1.25 and GAAP
earnings per share in the range of $1.17 to $1.23.
On May 31, 2013, the PUC issued a final D&O in the MECO 2012
test year proceeding. It approved an increase in annual revenues
of $5.3 million. However, the increase was $7.8 million less than
the interim increase that had been in effect since Jun 1, 2012.
The decline reflects lower return on average equity, customer
information system expenses, pension and other postretirement
expenses based on a three-year average, integrated resource
planning expenses, and study costs.
Also, PUC has approved the revised annual decoupling filings for
tariffed rates for all subsidiaries that will be effective from
Jun 1, 2013 through May 31, 2014. Decoupling means disassociation
of a utility's profits from its sales of the energy commodity.
Instead, a rate of return is aligned with meeting revenue
targets, and rates are pushed up or down in order to meet the
target at the end of the adjustment period.
The company reported first quarter results last month with
earnings coming in below the year-ago figure and the Zacks
Consensus Estimate. The results reflect higher non-interest
expenses and operation and maintenance expenses.
Going forward, we expect the company to benefit from investment
in local infrastructure. Also, its common stock offering would
bring in capital, and a more modern electric grid and lower-cost
renewable energy would benefit customers. The company is trying
to reduce its dependence on oil and is constantly seeking ways to
increase the use of lower-cost renewables.
However, we remain concerned about the lower electricity volume
sales, a tourism-dependant Hawaiian economy and uncertainty over
the Japanese economy. The company presently retains a short-term
Zacks Rank #3 (Hold).
Stocks worth considering at present are
Companhia Paranaense de Energia
CPFL Energia S.A.
). While Companhia Paranaense and CPFL Energia carry a
Zacks Rank #1 (Strong Buy), ALLETE, Inc. holds a Zacks Rank #2