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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: May 30, 1997
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<TABLE>
<CAPTION>
Exact Name of Registrant Commission I.R.S. Employer
as Specified in Its Charter File Number Identification No.
- ---------------------------------------- ----------- ------------------
<S> <C> <C>
Hawaiian Electric Industries, Inc. 1-8503 99-0208097
Hawaiian Electric Company, Inc. 1-4955 99-0040500
</TABLE>
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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 - Hawaiian Electric Industries, Inc.
(808) 543-7771 - Hawaiian Electric Company, Inc.
None
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
Except for historical information contained herein, the matters set below
are forward-looking statements that involve certain risks and uncertainties that
could cause actual results to differ materially from those in the forward-
looking statements. Potential risks and uncertainties include, but are not
limited to, such factors as the effect of economic conditions; product demand
and market acceptance risks; competitive products and pricing; governmental and
regulatory actions; the adjustments made pursuant to the acquisition agreement;
the results of integration of the Bank of America, FSB - Hawaii operations with
the operations of American Savings Bank, F. S. B. (ASB); the results of
financing efforts; and the timing and extent of changes in interest rates.
Investors are also directed to consider other risks and uncertainties discussed
in other periodic reports filed by Hawaiian Electric Industries, Inc. (HEI) with
the Securities and Exchange Commission.
PURCHASE AND ASSUMPTION AGREEMENT BETWEEN BANK OF AMERICA, FSB (BoA) AND ASB
On May 26, 1997, ASB entered into a Purchase and Assumption Agreement with
BoA for the purchase of certain assets (including branches in Hawaii and Hawaii-
based loans) and assumption of certain liabilities (including most Hawaii
deposits and branch lease and contract obligations) of BoA, subject to approval
of the Office of Thrift Supervision. On May 27, 1997, HEI issued a news release
about the agreement and on May 30, 1997, Robert F. Clarke, HEI President and
CEO, further announced that "the acquisition of Bank of America's Hawaii
operations has the potential to add zero to 50 basis points to HEI's return on
average common equity in 1998 and up to another 50 basis points in 1999."
Robert F. Clarke also discussed ASB's projection of: (1) assets to be
purchased and liabilities assumed and (2) interest rate spread on acquisition:
<TABLE>
<CAPTION>
ASB/BoA - HAWAII ACQUISITION *
($ in millions)
Assets to be purchased (at historical book value)
<S> <C>
Loans $ 892
Less - reserves (7)
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885
Cash and due from banks 669
Fixed and other assets 29
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$1,583
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Deposit and other liabilities assumed
(at historical book value) $1,583
======
</TABLE>
* Amounts are based on information available as of February 28, 1997
and are subject to adjustments at closing.
In addition, ASB will pay a premium amounting to 7% of certain deposits assumed
(currently projected to approximate $96 million based on information available
as of February 28, 1997), subject to certain adjustments.
To maintain its "well-capitalized" classification after the acquisition, it is
anticipated HEI Diversified, Inc. (a subsidiary of HEI and parent company of
ASB), with capital provided to it by HEI, will need to contribute approximately
$160 million of capital to ASB.
<TABLE>
<CAPTION>
Interest Rate Spread on Acquisition
(does not reflect impact of purchase accounting adjustments)
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($ in millions)
Yield on Assets (Stated Rate)
- ----------------------------------------
<S> <C> <C>
Loans $ 892 8.92%
MBS purchases ** 635 7.10
------ ----
$1,527 8.16%
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Cost of Liabilities (Stated Rate)
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Core deposits $1,010 2.39%
Certificates 552 5.17
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$1,562 3.37%
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Interest Rate Spread 4.79%
====
</TABLE>
** Mortgage-backed securities expected to be purchased upon closing by ASB.
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REGULATION OF ELECTRIC UTILITY RATES - MAUI ELECTRIC COMPANY, LIMITED (MECO)
In May 1996, MECO filed a request to increase rates based on a 1997 test
year, primarily to recover the costs related to the anticipated 1997 addition of
new generating unit M17. MECO requested an increase of 13%, or $18.9 million in
annual revenues over rates in effect at the time of filing, based on a 12.9%
return on average common equity (ROACE). On November 7, 1996, MECO filed a
motion with the Public Utilities Commission of the State of Hawaii (PUC) to
approve a stipulation between MECO and the Consumer Advocate which would close
the MECO 1997 rate case and would provide MECO with an increase in annual
revenues of $1.5 million over revenues at currently effective rates at that
time, based on an 11.65% ROACE. The stipulation stated that the increase would
be effective January 1, 1997, but it has not and will not become effective
unless and until the PUC approves the stipulation. On May 23, 1997, the
stipulated increase was revised to $1.3 million after considering the final
decision in the 1996 test year case. The primary reason for the stipulation was
a delay in the expected in-service date for MECO's generating unit M17, from the
second half of 1997 to the first half of 1998, which resulted from delays in
obtaining the necessary Prevention of Significant Deterioration/Covered Source
Permit (PSD) from the Department of Health of the State of Hawaii/Environmental
Protection Agency. MECO now anticipates that it will obtain the PSD permit
necessary to place M17 in service in late 1998, in which event it is likely that
MECO will file a request to increase rates based on a 1999 test year.
UPDATE OF HAWAII ELECTRIC LIGHT COMPANY, INC. (HELCO) POWER SITUATION
On April 1, 1997, Hilo Coast Processing Company (HCPC) filed a complaint
against HELCO with the PUC, requesting an immediate hearing on HCPC's offer for
a new 20-year power purchase contract for its existing facility, which is
proposed to be expanded from 22 MW to 32 MW. HCPC's existing power purchase
agreement is scheduled to terminate at the end of 1999. On May 27, 1997, HELCO
filed its response to HCPC's complaint. The PUC has converted the complaint to a
purchased power contract negotiation proceeding. The procedural steps and
schedule have not yet been established.
On June 2, 1997, HELCO filed a motion with the PUC for approval of a
settlement agreement reached with an independent power producer, Enserch
Development Corporation (Enserch), regarding a power purchase agreement. The
motion asks for: (1) approval of a settlement reached on avoided cost issues,
and (2) a finding that it is prudent for HELCO to continue to pursue, in
parallel with Enserch, the installation of its Keahole units to meet both the
immediate need for power and the projected requirement for additional generation
in 1999, realizing that there may be delays encountered by either or both
projects. Upon the PUC's approval of the settlement agreement, the power
purchase agreement and an interconnection agreement will be executed by the
appropriate parties and submitted to the PUC for approval.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized. The signature of the undersigned
companies shall be deemed to relate only to matters having reference to such
companies and any subsidiaries thereof.
HAWAIIAN ELECTRIC INDUSTRIES, INC. HAWAIIAN ELECTRIC COMPANY, INC.
(Registrant) (Registrant)
/s/ Robert F. Mougeot /s/ Paul Oyer
- ---------------------------------- -------------------------------
Robert F. Mougeot Paul A. Oyer
Financial Vice President and Financial Vice President and
Chief Financial Officer of HEI Treasurer of HECO
(Principal Financial Officer of HEI) (Principal Financial Officer of HECO)
Date: June 13, 1997 Date: June 13, 1997
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