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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 13, 2000
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<TABLE>
<CAPTION>
Exact Name of Registrant Commission I.R.S. Employer
as Specified in Its Charter File Number Identification No.
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<S> <C> <C>
Hawaiian Electric Industries, Inc. 1-8503 99-0208097
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State of Hawaii
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(State or other jurisdiction of incorporation)
900 Richards Street, Honolulu, Hawaii 96813
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (808) 543-5662
None
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
Forward-looking information
---------------------------
This current report contains "forward-looking statements", which include
statements which are predictive in nature, which depend upon or refer to future
events or conditions, which include words such as "expects", "anticipates",
"intends", "plans", "believes", "estimates" or similar expressions. In
addition, any statements concerning future financial performance (including
future revenues, earnings or growth rates), ongoing business strategies or
prospects and possible future actions, which may be provided by management, 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 assumptions about Hawaiian Electric Industries, Inc. (HEI) and
its subsidiaries, the performance of the industries in which they do business
and economic and market factors, among other things. These statements are not
guaranties of future performance. Such risks, uncertainties and other important
factors could cause actual results to differ materially from those in the
forward-looking statements and include, but are not limited to, the following:
the effect of international, national and local economic conditions, including
the condition of the Hawaii tourist and construction industries and the Hawaii
housing market; the effects of weather and natural disasters; product demand and
market acceptance risks; increasing competition in the electric utility, banking
and international power industries; capacity and supply constraints or
difficulties; fuel oil price changes; new technological developments;
governmental and regulatory actions, including changes in laws, rules and
regulations applicable to HEI and its subsidiaries, decisions in rate cases and
on permitting issues and changes in taxation; the results of financing efforts;
the timing and extent of changes in interest rates; the timing and extent of
changes in foreign currency exchange rates; the convertibility and availability
of foreign currency; the availability and pricing of forward contracts;
political and business risks inherent in doing business in developing countries;
the risks associated with the installation of new computer systems; the risk
that ASB Realty Corporation fails to qualify as a real estate investment trust
for federal income tax purposes, in which case it would be subject to regular
corporate income taxation; and other risks or uncertainties described elsewhere
in this current report and in other periodic reports previously and subsequently
filed by HEI and/or Hawaiian Electric Company, Inc. with the Securities and
Exchange Commission.
Forward-looking statements speak only as of the date of this current report.
News release
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On July 13, 2000, HEI issued the following news release:
HAWAIIAN ELECTRIC INDUSTRIES, INC.'S INTERNATIONAL OPERATION ESTIMATES SECOND
QUARTER NET LOSS
HONOLULU -- Hawaiian Electric Industries, Inc. (NYSE - HE) announced today that
for the second quarter of 2000 it has estimated an $8.8 million net loss for HEI
Power Group (HEIPG), its international operation, compared with a $1.4 million
net loss in the same quarter of 1999. The higher loss is primarily attributable
to results from HEIPG's investment in East Asia Power Resources Corporation
(EAPRC), a Philippine power company. HEIPG acquired an effective 46% interest
in EAPRC from El Paso Energy International in early March 2000. Higher fuel oil
prices and the weakened value of the Philippine peso mainly impacted EAPRC
results. EAPRC is in the process of implementing strategies to reduce its
exposure to fuel price fluctuations and has bought fuel price forward contracts
for 80% of its anticipated purchases through the end of 2000. In addition,
EAPRC is evaluating strategies to reduce its exposure to foreign exchange
fluctuations.
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Based on these developments, management currently expects to incur a loss for
the year 2000 from its investment in EAPRC and no longer expects to achieve its
previously targeted returns for EAPRC in 2001 and 2002 absent a significant
improvement in fuel oil prices and currency exchange rates.
Management continues to be encouraged by the impact of Hawaii's improving
economy on the results of its electric utilities and banking subsidiaries.
However, due to the losses at EAPRC, management now expects consolidated HEI
earnings in the second quarter of 2000 to be lower than the same quarter of 1999
and consolidated HEI earnings for the year 2000 to be lower than 1999.
None of the funds invested in HEIPG have come from HEI's utility, banking or
other subsidiaries.
HEI is a diversified holding company. Its core businesses are electric
utilities, a savings bank and an international power subsidiary formed to pursue
independent power and integrated energy projects in Asia and the Pacific.
### (End of news release) ###
International power
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Philippines investment
HEI has estimated an $8.8 million net loss from the operations of HEI Power
Corp. (HEIPC, a wholly-owned subsidiary of HEI) and its subsidiaries (the HEIPC
Group) which will be included in the HEI consolidated financial statements for
the quarter ended June 30, 2000, compared with a $1.4 million net loss in the
same quarter of 1999. The higher net loss is primarily attributable to results
from the HEIPC Group's investment in East Asia Power Resources Corporation
(EAPRC), a Philippines holding company primarily engaged in the electric
generation business in Manila and Cebu through its direct and indirect
subsidiaries (the EAPRC Group), using land and barge-based generating facilities
fired by bunker fuel oil, with total installed capacity of approximately 390 MW.
On March 7, 2000, an indirect subsidiary of HEIPC acquired a 50% interest in El
Paso Philippines Holding Company, Inc. (EPHC), an indirect subsidiary of El Paso
Energy Corporation (EPEC), for $87 million plus up to an additional $6 million
of payments that are contingent upon future earnings of the EAPRC Group. EPHC
owns approximately 91.7% of the common shares of EAPRC.
The HEIPC Group accounts for its investment in EPHC under the equity method of
accounting. The accounts of the HEIPC Group are consolidated by HEI on a one-
month lag due to the time needed to consolidate HEIPC's subsidiaries. The
estimated $8.8 million net loss for the quarter ended June 30, 2000 thus
reflects results of the HEIPC Group's operations for the months of March, April
and May 2000.
Higher fuel oil prices and the weakened value of the Philippine peso impacted
EAPRC Group's results for the second quarter of 2000. The EAPRC Group is
implementing strategies to reduce its exposure to fuel oil price fluctuations
and evaluating strategies to reduce its exposure to foreign currency
fluctuations.
The rates charged by the EAPRC Group under its purchase power agreements are
generally at a discount to the rates charged by the National Power Corporation,
a government owned and controlled corporation of the Philippines. Most of the
fluctuation in fuel oil prices is not recovered in rates charged by the EAPRC
Group. The EAPRC Group's average price of fuel oil per metric ton for March,
April, May and June 2000 was approximately $143, $170, $153 and $175,
respectively. To reduce its near-term exposure to higher fuel oil prices, the
EAPRC Group has purchased nondeliverable forward contracts for fuel oil (HSFO
180) at an average price of $155 per metric ton for approximately 80% of its
anticipated purchases from August 1 to December 31, 2000.
As of June 30, 2000, the EAPRC Group had approximately $200 million in U.S.
dollar denominated debt. From March 7, 2000 (acquisition date) to May 31, 2000,
the high and low Philippine peso
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exchange rate was PhP40.823 = $1 and PhP43.250 = $1, respectively, a 6%
fluctuation. Due to the deterioration of the exchange rate from March 7 to May
31, 2000, the HEIPC Group incurred a loss of approximately $3 million related to
the EAPRC Group's U.S. dollar denominated debt position. As of July 12, 2000,
the exchange rate further deteriorated to PhP44.750 = $1.
Based on prevailing and hedged fuel oil prices and trends in currency exchange
rates, management expects that the HEIPC Group will incur net losses for the
remainder of 2000.
In connection with and subsequent to the acquisition of EAPRC, HEI has
guaranteed up to $35 million of existing and potential obligations related to
the HEIPC Group's investment in EAPRC and has approved an indemnity of up to
approximately $16 million related to title issues on real property securing a
debt of two EAPRC subsidiaries.
Savings bank
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The Office of Thrift Supervision (OTS) recently advised American Savings Bank,
F.S.B. (ASB) that four debt securities in the original principal amount of $114
million were impermissible investments under regulations applicable to federal
savings banks. The securities are trust certificates which are rated Aaa as to
principal repayment but are not rated as to interest. Subject to further
guidance from the OTS, ASB plans to re-classify these trust certificates from a
"held-to-maturity" status to "available-for-sale" status in its financial
statements for the quarter ended June 30, 2000, and to record these securities
at their estimated fair value. As a result of this reclassification, ASB will
realize a net loss of $2.1 million on these securities and will also reverse the
related interest accrual for a net loss of $1.2 million. ASB may realize
additional loss or gain upon the ultimate disposition of these securities.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HAWAIIAN ELECTRIC INDUSTRIES, INC.
(Registrant)
/s/ Robert F. Mougeot
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Robert F. Mougeot
Financial Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: July 13, 2000
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