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Hawaiian Electric Industries Inc. Stock Plummets in Wake of Wildfire Lawsuits

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The stock of Hawaiian Electric Industries Inc. (HEI) took a significant hit on Tuesday, falling by 23%, following the filing of class-action lawsuits against the company and its subsidiaries in the aftermath of the devastating wildfires on Maui.

The rating agency S&P Global Rating responded to this development by downgrading HEI’s rating to BB- and placing it on CreditWatch negative, indicating the possibility of further downgrades in the near future. According to S&P’s estimates, the fires have destroyed around 2,200 structures, with FEMA valuing the damages at more than $5.5 billion, exceeding twice the company’s book equity of $2.2 billion.

Given the potential impact of these lawsuits, S&P highlights the increased risk of a notable deterioration in HEI’s credit quality if the plaintiffs successfully prevail. S&P further underscores the severity of the wildfires, stating that they reveal a higher wildfire risk for the company than previously anticipated. The extensive destruction of a significant portion of HEI’s customer base is expected to take several years to restore, significantly weakening the company’s long-term profitability measures. Despite HEI’s utilization of a revenue decoupling mechanism to account for normal sales volume fluctuations, this event is likely to have a lasting negative impact on the company’s financial performance.

As a result of these developments, HEI’s stock has plummeted by 61% year-to-date, in stark contrast to the 16% gain experienced by the broader market represented by the S&P 500 index.

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