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Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases
Note 8 · Leases
The Company leases certain real estate and equipment for various terms under long-term lease agreements. The agreements expire at various dates through 2054 and provide for renewal options up to 10 years. The periods associated with the renewal options are excluded for the purpose of determining the lease term unless the exercise of the renewal option is reasonably certain. In the normal course of business, it is expected that many of these agreements will be replaced by similar agreements. Certain real estate leases require the Company to pay for operating expenses such as common area maintenance, real estate taxes and insurance, which are recognized as variable lease expense when incurred and are not included in the measurement of the lease liability. The Company elected the short-term lease recognition exemption for all of its leases that qualify, and accordingly, does not recognize lease liabilities and ROU assets for all leases that have lease terms that are 12 months or less. The amounts related to short-term leases are not material. The Company elected the practical expedient to not separate lease and non-lease components for its real estate and equipment and fossil fuel and renewable energy PPAs and to separate lease components from non-lease components for renewable energy plus battery storage PPAs.
The Utilities contract with independent power producers to supply energy under long-term power purchase agreements. Certain PPAs are treated as operating leases under the lease standard because the Company elected the practical expedient package under which prior conclusions about lease identification were not reassessed. The fixed capacity payments under the PPAs are included in the lease liability, while the variable lease payments (e.g., payments based on kWh) are excluded from the lease liability. Several as-available PPAs have variable-only payment terms based on production. For PPAs with no minimum lease payments, the Utilities do not recognize any lease liabilities or ROU assets, and the related costs are reported as variable lease costs. In the first quarter of 2021, PGV returned to service with firm capacity of 13 MW and ramped up to 25.7 MW in the second quarter of 2022. Hawaii Electric Light is required to make fixed capacity payments based on 25.7 MW. As of December 31, 2022, Hawaii Electric Light has a total of $19 million in lease liability with a corresponding ROU asset for the PGV PPA.
The Utilities’ lease payments for each operating lease agreement were discounted using its estimated unsecured borrowing rates for the appropriate term, reduced for the estimated impact of collateral, which is a reduction of approximately 20 basis points. ASB’s lease payments for each operating lease agreement were discounted using Federal Home Loan Bank of Des Moines (FHLB) fixed rate advance rates, which are collateralized, for the appropriate term. The FHLB is ASB’s primary wholesale funding source and can provide collateralized borrowing rates for various terms starting at overnight borrowings to 30-year borrowing terms.
In December 2020, Hawaiian Electric entered into an agreement with an unrelated party to sublease out approximately 64,000 square feet of the downtown Honolulu office space commencing in January 2021. The sublease is an operating lease for six and a half years with an option to extend the term for an additional two years. Estimated base rent revenue is approximately $8.3 million for the entire lease term. In addition to the base rent, Hawaiian Electric will also collect from the sublessee its proportionate share of all operating expenses, utilities, and taxes, which will be recognized as an additional rent revenue.
    In August 2021, the Utilities entered into an agreement with an unrelated party for exclusive use of a barge and tug to transport fuels between islands, commencing in January 2022. The contract is an operating lease with a term of five years with an option to extend the term for an additional five years. Annual base rent expense is approximately $6.2 million and the operating lease liability recorded upon commencement was $32 million. In addition to the annual base payment, there are additional payments for operating expenses, such as inspection expense, wharfage and pipeline tolls, which are recognized as variable lease cost when incurred.
On July 31, 2022, Mililani I Solar, the first utility-scale solar-plus-storage project reached commercial operations on Oahu. The project is for a 20-year term and generates 39 MW, including a 156 MWh battery. The Utilities have accounted for battery portion of the project as a finance lease and recorded a lease liability with a corresponding right-of-use asset of $48 million. The timing of the Utilities’ recognition of the lease expense conforms to ratemaking treatment for the Utilities’ recovery of the cost of electricity and is included in purchased power for the interest and amortization of financing leases related to PPAs. Any material differences between expense recognition and timing of payments is deferred as a regulatory asset or liability in order to match what is being recovered for ratemaking purposes.
Amounts related to the Company’s total lease cost and cash flows arising from lease transactions are as follows:
HEI consolidatedHawaiian Electric consolidated
Year ended December 31, 2022Other leasesPPAs classified as leasesTotalOther leasesPPAs classified as leasesTotal
(dollars in thousands)
Operating lease cost$20,811 $46,160 $66,971 $15,030 $46,160 $61,190 
Variable lease cost8,931 241,199 250,130 6,152 241,199 247,351 
Sublease income(2,675)— (2,675)(2,675)— (2,675)
Total operating lease cost$27,067 $287,359 $314,426 $18,507 $287,359 $305,866 
Finance lease costs:
Amortization of right-of-use assets$188 $1,008 $1,196 $— $1,008 $1,008 
Interest on lease liabilities20 786 806 — 786 786 
Total finance lease cost$208 $1,794 $2,002 $— $1,794 $1,794 
Other information
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$19,143 $40,050 $59,193 $14,068 $40,050 $54,118 
   Operating cash flows from financing leases$20 $786 $806 $— $786 $786 
   Financing cash flows from financing leases$179 $670 $849 $— $670 $670 
Weighted-average remaining lease term (in years):
   Operating leases8.15.07.77.35.06.8
   Finance leases2.419.619.2— 19.619.6
Weighted-average discount rate:
   Operating leases2.96 %3.50 %3.04 %2.94 %3.50 %3.05 %
   Finance leases3.77 %3.92 %3.92 %— 3.92 %3.92 %
HEI consolidatedHawaiian Electric consolidated
Year ended December 31, 2021Other leasesPPAs classified as leasesTotalOther leasesPPAs classified as leasesTotal
(dollars in thousands)
Operating lease cost$14,184 $66,070 $80,254 $8,578 $66,070 $74,648 
Variable lease cost14,360 257,472 271,832 11,586 257,472 269,058 
Sublease income(2,515)— (2,515)(2,515)— (2,515)
Total lease cost$26,029 $323,542 $349,571 $17,649 $323,542 $341,191 
Other information
Cash paid for amounts included in the measurement of lease liabilities—Operating cash flows from operating leases$11,239 $62,136 $73,375 $6,168 $62,136 $68,304 
Weighted-average remaining lease term—operating leases (in years)9.12.56.110.02.55.9
Weighted-average discount rate—operating leases2.84 %3.63 %3.18 %2.98 %3.63 %3.31 %
The following table summarizes the maturity of our operating lease liabilities as of December 31, 2022:
HEI consolidatedHawaiian Electric consolidated
(in millions)Other leasesPPAs classified as leasesTotalOther leasesPPAs classified as leasesTotal
2023$24 $4 $28 $18 $4 $22 
202421 4 25 15 4 19 
202516 4 20 12 4 16 
202615 4 19 12 4 16 
20279 4 13 6 4 10 
Thereafter38 — 38 25 — 25 
Total lease payments123 20 143 88 20 108 
Less: Imputed interest(15)(1)(16)(9)(1)(10)
Total present value of lease payments1
$108 $19 $127 $79 $19 $98 
1The fixed capacity payment related to the existing PPA with PGV, which will expire on December 31, 2027, is included as a lease liability as of December 31, 2021. The PGV facility returned to service with firm capacity in the first quarter of 2021. The annual capacity payment based on the most recent accepted output is approximately $4 million. The lease liability will be remeasured when PGV ramps back up to the original contracted firm capacity.
The following table summarizes the maturity of our finance lease liabilities for PPAs as of December 31, 2022:
HEI consolidatedHawaiian Electric consolidated
(in millions)PPAs classified as leasesPPAs classified as leases
20233 $3 
20243 3 
20253 3 
20264 4 
20274 4 
Thereafter52 52 
Total lease payments69 69 
Less: Imputed interest(21)(21)
Total present value of lease payments$48 $48 
Note: Other finance leases are not material.
Leases
Note 8 · Leases
The Company leases certain real estate and equipment for various terms under long-term lease agreements. The agreements expire at various dates through 2054 and provide for renewal options up to 10 years. The periods associated with the renewal options are excluded for the purpose of determining the lease term unless the exercise of the renewal option is reasonably certain. In the normal course of business, it is expected that many of these agreements will be replaced by similar agreements. Certain real estate leases require the Company to pay for operating expenses such as common area maintenance, real estate taxes and insurance, which are recognized as variable lease expense when incurred and are not included in the measurement of the lease liability. The Company elected the short-term lease recognition exemption for all of its leases that qualify, and accordingly, does not recognize lease liabilities and ROU assets for all leases that have lease terms that are 12 months or less. The amounts related to short-term leases are not material. The Company elected the practical expedient to not separate lease and non-lease components for its real estate and equipment and fossil fuel and renewable energy PPAs and to separate lease components from non-lease components for renewable energy plus battery storage PPAs.
The Utilities contract with independent power producers to supply energy under long-term power purchase agreements. Certain PPAs are treated as operating leases under the lease standard because the Company elected the practical expedient package under which prior conclusions about lease identification were not reassessed. The fixed capacity payments under the PPAs are included in the lease liability, while the variable lease payments (e.g., payments based on kWh) are excluded from the lease liability. Several as-available PPAs have variable-only payment terms based on production. For PPAs with no minimum lease payments, the Utilities do not recognize any lease liabilities or ROU assets, and the related costs are reported as variable lease costs. In the first quarter of 2021, PGV returned to service with firm capacity of 13 MW and ramped up to 25.7 MW in the second quarter of 2022. Hawaii Electric Light is required to make fixed capacity payments based on 25.7 MW. As of December 31, 2022, Hawaii Electric Light has a total of $19 million in lease liability with a corresponding ROU asset for the PGV PPA.
The Utilities’ lease payments for each operating lease agreement were discounted using its estimated unsecured borrowing rates for the appropriate term, reduced for the estimated impact of collateral, which is a reduction of approximately 20 basis points. ASB’s lease payments for each operating lease agreement were discounted using Federal Home Loan Bank of Des Moines (FHLB) fixed rate advance rates, which are collateralized, for the appropriate term. The FHLB is ASB’s primary wholesale funding source and can provide collateralized borrowing rates for various terms starting at overnight borrowings to 30-year borrowing terms.
In December 2020, Hawaiian Electric entered into an agreement with an unrelated party to sublease out approximately 64,000 square feet of the downtown Honolulu office space commencing in January 2021. The sublease is an operating lease for six and a half years with an option to extend the term for an additional two years. Estimated base rent revenue is approximately $8.3 million for the entire lease term. In addition to the base rent, Hawaiian Electric will also collect from the sublessee its proportionate share of all operating expenses, utilities, and taxes, which will be recognized as an additional rent revenue.
    In August 2021, the Utilities entered into an agreement with an unrelated party for exclusive use of a barge and tug to transport fuels between islands, commencing in January 2022. The contract is an operating lease with a term of five years with an option to extend the term for an additional five years. Annual base rent expense is approximately $6.2 million and the operating lease liability recorded upon commencement was $32 million. In addition to the annual base payment, there are additional payments for operating expenses, such as inspection expense, wharfage and pipeline tolls, which are recognized as variable lease cost when incurred.
On July 31, 2022, Mililani I Solar, the first utility-scale solar-plus-storage project reached commercial operations on Oahu. The project is for a 20-year term and generates 39 MW, including a 156 MWh battery. The Utilities have accounted for battery portion of the project as a finance lease and recorded a lease liability with a corresponding right-of-use asset of $48 million. The timing of the Utilities’ recognition of the lease expense conforms to ratemaking treatment for the Utilities’ recovery of the cost of electricity and is included in purchased power for the interest and amortization of financing leases related to PPAs. Any material differences between expense recognition and timing of payments is deferred as a regulatory asset or liability in order to match what is being recovered for ratemaking purposes.
Amounts related to the Company’s total lease cost and cash flows arising from lease transactions are as follows:
HEI consolidatedHawaiian Electric consolidated
Year ended December 31, 2022Other leasesPPAs classified as leasesTotalOther leasesPPAs classified as leasesTotal
(dollars in thousands)
Operating lease cost$20,811 $46,160 $66,971 $15,030 $46,160 $61,190 
Variable lease cost8,931 241,199 250,130 6,152 241,199 247,351 
Sublease income(2,675)— (2,675)(2,675)— (2,675)
Total operating lease cost$27,067 $287,359 $314,426 $18,507 $287,359 $305,866 
Finance lease costs:
Amortization of right-of-use assets$188 $1,008 $1,196 $— $1,008 $1,008 
Interest on lease liabilities20 786 806 — 786 786 
Total finance lease cost$208 $1,794 $2,002 $— $1,794 $1,794 
Other information
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$19,143 $40,050 $59,193 $14,068 $40,050 $54,118 
   Operating cash flows from financing leases$20 $786 $806 $— $786 $786 
   Financing cash flows from financing leases$179 $670 $849 $— $670 $670 
Weighted-average remaining lease term (in years):
   Operating leases8.15.07.77.35.06.8
   Finance leases2.419.619.2— 19.619.6
Weighted-average discount rate:
   Operating leases2.96 %3.50 %3.04 %2.94 %3.50 %3.05 %
   Finance leases3.77 %3.92 %3.92 %— 3.92 %3.92 %
HEI consolidatedHawaiian Electric consolidated
Year ended December 31, 2021Other leasesPPAs classified as leasesTotalOther leasesPPAs classified as leasesTotal
(dollars in thousands)
Operating lease cost$14,184 $66,070 $80,254 $8,578 $66,070 $74,648 
Variable lease cost14,360 257,472 271,832 11,586 257,472 269,058 
Sublease income(2,515)— (2,515)(2,515)— (2,515)
Total lease cost$26,029 $323,542 $349,571 $17,649 $323,542 $341,191 
Other information
Cash paid for amounts included in the measurement of lease liabilities—Operating cash flows from operating leases$11,239 $62,136 $73,375 $6,168 $62,136 $68,304 
Weighted-average remaining lease term—operating leases (in years)9.12.56.110.02.55.9
Weighted-average discount rate—operating leases2.84 %3.63 %3.18 %2.98 %3.63 %3.31 %
The following table summarizes the maturity of our operating lease liabilities as of December 31, 2022:
HEI consolidatedHawaiian Electric consolidated
(in millions)Other leasesPPAs classified as leasesTotalOther leasesPPAs classified as leasesTotal
2023$24 $4 $28 $18 $4 $22 
202421 4 25 15 4 19 
202516 4 20 12 4 16 
202615 4 19 12 4 16 
20279 4 13 6 4 10 
Thereafter38 — 38 25 — 25 
Total lease payments123 20 143 88 20 108 
Less: Imputed interest(15)(1)(16)(9)(1)(10)
Total present value of lease payments1
$108 $19 $127 $79 $19 $98 
1The fixed capacity payment related to the existing PPA with PGV, which will expire on December 31, 2027, is included as a lease liability as of December 31, 2021. The PGV facility returned to service with firm capacity in the first quarter of 2021. The annual capacity payment based on the most recent accepted output is approximately $4 million. The lease liability will be remeasured when PGV ramps back up to the original contracted firm capacity.
The following table summarizes the maturity of our finance lease liabilities for PPAs as of December 31, 2022:
HEI consolidatedHawaiian Electric consolidated
(in millions)PPAs classified as leasesPPAs classified as leases
20233 $3 
20243 3 
20253 3 
20264 4 
20274 4 
Thereafter52 52 
Total lease payments69 69 
Less: Imputed interest(21)(21)
Total present value of lease payments$48 $48 
Note: Other finance leases are not material.