We have maintained our Neutral recommendation on
Hawaiian Electric Industries Inc.
) on Jun 12, 2013 based on the company's constructive regulatory
structure and strong regulated growth opportunities partially
offset by lower electricity volume sales and uncertainty over the
Japanese economy. Also, the company has recently lowered its
earnings guidance for 2013.
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Why the Reiteration?
Hawaiian Electric is the largest provider of electricity in the
state of Hawaii supplying to more than 95% of the state's
population. The prospects of the company arise from the fact that
its two major industries, tourism and construction, are
Meanwhile, the company is on track to comply with the Hawaii
Clean Energy Initiative that calls for generating 70% of its
energy needs from renewable sources by 2030. With a distinct
focus on renewable energy projects, the company targets capital
expenditure of approximately $2.9 billion over the next five
years. Also, the company expects annual rate base growth in the
range of 5% to 10%.
The company's recent move towards underwriting public offering of
its common stock will fulfill all equity needs through 2014. The
company intends to use the net proceeds for investment in its
utility subsidiaries, to repay borrowings incurred to finance
capital expenditures and for working capital purposes.
Unlike its peers, the company is also engaged in providing
banking services to individual and commercial customers. Its
banking subsidiary is one of the largest banks in Hawaii.
During the quarter, American Savings Bank delivered strong loan
growth that helped in offsetting the impact of the low interest
rate environment and gained market share in its mortgage banking
business. The bank was one of the top ranked lenders in the state
for the quarter.
Apart from the company's focus on improving operational
excellence, we expect the company's other approved cost recovery
mechanisms and constructive regulatory outcomes in its rate cases
to keep the growth story intact.
Despite these positives, the company's dull first quarter
performance as a result of higher non-interest and operation and
maintenance expenses, lower electricity volume sales, a
tourism-dependant Hawaiian economy, lowered guidance and
uncertainty over the Japanese economy remain matters of concern
for the company.
Other Stocks to Consider
Hawaiian Electric currently has a Zacks Rank #3 (Hold). Stocks
that are well placed in the energy space are
El Paso Electric Co.
DTE Energy Company
), all with a Zacks Rank #2 (Buy).