Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

Note 9 · 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.

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 (FHLB) of Des Moines 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 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 $6.4 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.

The Utilities account for the battery portion of renewable energy plus storage and energy storage PPAs as leases at their commencement dates. As of December 31, 2023, the Utilities recognized additional finance lease liabilities with corresponding right-of-use assets of $293.8 million, including Waiawa Solar, AES Waikoloa Solar and Kapolei Energy Storage project that began commercial operations during the year. The timing of the Utilities’ recognition of the 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 are 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 consolidated									Hawaiian Electric consolidated
Year ended December 31, 2023	Other leases			PPAs classified as leases			Total			Other leases			PPAs classified as leases			Total
(dollars in thousands)
Operating lease cost	$	21,882		$	4,071		$	25,953		$	15,947		$	4,071		$	20,018
Variable lease cost	8,491			202,556			211,047			5,605			202,556			208,161
Sublease income	(3,031)			—			(3,031)			(3,031)			—			(3,031)
Total operating lease cost	$	27,342		$	206,627		$	233,969		$	18,521		$	206,627		$	225,148
Finance lease costs:
Amortization of right-of-use assets	$	390		$	5,591		$	5,981		$	—		$	5,591		$	5,591
Interest on lease liabilities	32			6,350			6,382			—			6,350			6,350
Total finance lease cost	$	422		$	11,941		$	12,363		$	—		$	11,941		$	11,941
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	23,076		$	4,071		$	27,147		$	17,729		$	4,071		$	21,800
Operating cash flows from financing leases	$	32		$	6,350		$	6,382		$	—		$	6,350		$	6,350
Financing cash flows from financing leases	$	391		$	3,128		$	3,519		$	—		$	3,128		$	3,128
Weighted-average remaining lease term (in years):
Operating leases	7.9			4.0			7.4			6.8			4.0			6.3
Finance leases	1.5			20.1			20.0			—			20.1			20.1
Weighted-average discount rate:
Operating leases	3.04		%	3.50		%	3.11		%	2.92		%	3.50		%	3.03		%
Finance leases	3.77		%	8.18		%	8.18		%	—			8.18		%	8.18		%

	HEI consolidated									Hawaiian Electric consolidated
Year ended December 31, 2022	Other leases			PPAs classified as leases			Total			Other leases			PPAs classified as leases			Total
(dollars in thousands)
Operating lease cost	$	20,811		$	46,160		$	66,971		$	15,030		$	46,160		$	61,190
Variable lease cost	8,931			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 liabilities	20			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 leases	8.1			5.0			7.7			7.3			5.0			6.8
Finance leases	2.4			19.6			19.2			—			19.6			19.6
Weighted-average discount rate:
Operating leases	2.96		%	3.50		%	3.04		%	2.94		%	3.50		%	3.05		%
Finance leases	3.77		%	3.92		%	3.92		%	—			3.92		%	3.92		%

The following table summarizes the maturity of our operating lease liabilities as of December 31, 2023:

	HEI consolidated						Hawaiian Electric consolidated
(in millions)	Other leases		PPAs classified as leases		Total		Other leases		PPAs classified as leases		Total
2024	$	21	$	4	$	25	$	15	$	4	$	19
2025	16		4		20		12		4		16
2026	16		4		20		12		4		16
2027	9		4		13		6		4		10
2028	7		—		7		5		—		5
Thereafter	33		—		33		21		—		21
Total lease payments	102		16		118		71		16		87
Less: Imputed interest	(13)		(1)		(14)		(7)		(1)		(8)
Total present value of lease payments1	$	89	$	15	$	104	$	64	$	15	$	79

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 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, 2023:

	HEI consolidated		Hawaiian Electric consolidated
(in millions)	PPAs classified as leases		PPAs classified as leases
2024	$	34	$	34
2025	34		34
2026	34		34
2027	34		34
2028	34		34
Thereafter	511		511
Total lease payments	681		681
Less: Imputed interest	(343)		(343)
Total present value of lease payments	$	338	$	338

Note: Other finance leases are not material.

Leases

Note 9 · 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.

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 (FHLB) of Des Moines 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 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 $6.4 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.

The Utilities account for the battery portion of renewable energy plus storage and energy storage PPAs as leases at their commencement dates. As of December 31, 2023, the Utilities recognized additional finance lease liabilities with corresponding right-of-use assets of $293.8 million, including Waiawa Solar, AES Waikoloa Solar and Kapolei Energy Storage project that began commercial operations during the year. The timing of the Utilities’ recognition of the 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 are 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 consolidated									Hawaiian Electric consolidated
Year ended December 31, 2023	Other leases			PPAs classified as leases			Total			Other leases			PPAs classified as leases			Total
(dollars in thousands)
Operating lease cost	$	21,882		$	4,071		$	25,953		$	15,947		$	4,071		$	20,018
Variable lease cost	8,491			202,556			211,047			5,605			202,556			208,161
Sublease income	(3,031)			—			(3,031)			(3,031)			—			(3,031)
Total operating lease cost	$	27,342		$	206,627		$	233,969		$	18,521		$	206,627		$	225,148
Finance lease costs:
Amortization of right-of-use assets	$	390		$	5,591		$	5,981		$	—		$	5,591		$	5,591
Interest on lease liabilities	32			6,350			6,382			—			6,350			6,350
Total finance lease cost	$	422		$	11,941		$	12,363		$	—		$	11,941		$	11,941
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	23,076		$	4,071		$	27,147		$	17,729		$	4,071		$	21,800
Operating cash flows from financing leases	$	32		$	6,350		$	6,382		$	—		$	6,350		$	6,350
Financing cash flows from financing leases	$	391		$	3,128		$	3,519		$	—		$	3,128		$	3,128
Weighted-average remaining lease term (in years):
Operating leases	7.9			4.0			7.4			6.8			4.0			6.3
Finance leases	1.5			20.1			20.0			—			20.1			20.1
Weighted-average discount rate:
Operating leases	3.04		%	3.50		%	3.11		%	2.92		%	3.50		%	3.03		%
Finance leases	3.77		%	8.18		%	8.18		%	—			8.18		%	8.18		%

	HEI consolidated									Hawaiian Electric consolidated
Year ended December 31, 2022	Other leases			PPAs classified as leases			Total			Other leases			PPAs classified as leases			Total
(dollars in thousands)
Operating lease cost	$	20,811		$	46,160		$	66,971		$	15,030		$	46,160		$	61,190
Variable lease cost	8,931			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 liabilities	20			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 leases	8.1			5.0			7.7			7.3			5.0			6.8
Finance leases	2.4			19.6			19.2			—			19.6			19.6
Weighted-average discount rate:
Operating leases	2.96		%	3.50		%	3.04		%	2.94		%	3.50		%	3.05		%
Finance leases	3.77		%	3.92		%	3.92		%	—			3.92		%	3.92		%

The following table summarizes the maturity of our operating lease liabilities as of December 31, 2023:

	HEI consolidated						Hawaiian Electric consolidated
(in millions)	Other leases		PPAs classified as leases		Total		Other leases		PPAs classified as leases		Total
2024	$	21	$	4	$	25	$	15	$	4	$	19
2025	16		4		20		12		4		16
2026	16		4		20		12		4		16
2027	9		4		13		6		4		10
2028	7		—		7		5		—		5
Thereafter	33		—		33		21		—		21
Total lease payments	102		16		118		71		16		87
Less: Imputed interest	(13)		(1)		(14)		(7)		(1)		(8)
Total present value of lease payments1	$	89	$	15	$	104	$	64	$	15	$	79

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 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, 2023:

	HEI consolidated		Hawaiian Electric consolidated
(in millions)	PPAs classified as leases		PPAs classified as leases
2024	$	34	$	34
2025	34		34
2026	34		34
2027	34		34
2028	34		34
Thereafter	511		511
Total lease payments	681		681
Less: Imputed interest	(343)		(343)
Total present value of lease payments	$	338	$	338

Note: Other finance leases are not material.

Leases

Note 9 · 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.

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 (FHLB) of Des Moines 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 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 $6.4 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.

The Utilities account for the battery portion of renewable energy plus storage and energy storage PPAs as leases at their commencement dates. As of December 31, 2023, the Utilities recognized additional finance lease liabilities with corresponding right-of-use assets of $293.8 million, including Waiawa Solar, AES Waikoloa Solar and Kapolei Energy Storage project that began commercial operations during the year. The timing of the Utilities’ recognition of the 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 are 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 consolidated									Hawaiian Electric consolidated
Year ended December 31, 2023	Other leases			PPAs classified as leases			Total			Other leases			PPAs classified as leases			Total
(dollars in thousands)
Operating lease cost	$	21,882		$	4,071		$	25,953		$	15,947		$	4,071		$	20,018
Variable lease cost	8,491			202,556			211,047			5,605			202,556			208,161
Sublease income	(3,031)			—			(3,031)			(3,031)			—			(3,031)
Total operating lease cost	$	27,342		$	206,627		$	233,969		$	18,521		$	206,627		$	225,148
Finance lease costs:
Amortization of right-of-use assets	$	390		$	5,591		$	5,981		$	—		$	5,591		$	5,591
Interest on lease liabilities	32			6,350			6,382			—			6,350			6,350
Total finance lease cost	$	422		$	11,941		$	12,363		$	—		$	11,941		$	11,941
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	23,076		$	4,071		$	27,147		$	17,729		$	4,071		$	21,800
Operating cash flows from financing leases	$	32		$	6,350		$	6,382		$	—		$	6,350		$	6,350
Financing cash flows from financing leases	$	391		$	3,128		$	3,519		$	—		$	3,128		$	3,128
Weighted-average remaining lease term (in years):
Operating leases	7.9			4.0			7.4			6.8			4.0			6.3
Finance leases	1.5			20.1			20.0			—			20.1			20.1
Weighted-average discount rate:
Operating leases	3.04		%	3.50		%	3.11		%	2.92		%	3.50		%	3.03		%
Finance leases	3.77		%	8.18		%	8.18		%	—			8.18		%	8.18		%

	HEI consolidated									Hawaiian Electric consolidated
Year ended December 31, 2022	Other leases			PPAs classified as leases			Total			Other leases			PPAs classified as leases			Total
(dollars in thousands)
Operating lease cost	$	20,811		$	46,160		$	66,971		$	15,030		$	46,160		$	61,190
Variable lease cost	8,931			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 liabilities	20			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 leases	8.1			5.0			7.7			7.3			5.0			6.8
Finance leases	2.4			19.6			19.2			—			19.6			19.6
Weighted-average discount rate:
Operating leases	2.96		%	3.50		%	3.04		%	2.94		%	3.50		%	3.05		%
Finance leases	3.77		%	3.92		%	3.92		%	—			3.92		%	3.92		%

The following table summarizes the maturity of our operating lease liabilities as of December 31, 2023:

	HEI consolidated						Hawaiian Electric consolidated
(in millions)	Other leases		PPAs classified as leases		Total		Other leases		PPAs classified as leases		Total
2024	$	21	$	4	$	25	$	15	$	4	$	19
2025	16		4		20		12		4		16
2026	16		4		20		12		4		16
2027	9		4		13		6		4		10
2028	7		—		7		5		—		5
Thereafter	33		—		33		21		—		21
Total lease payments	102		16		118		71		16		87
Less: Imputed interest	(13)		(1)		(14)		(7)		(1)		(8)
Total present value of lease payments1	$	89	$	15	$	104	$	64	$	15	$	79

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 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, 2023:

	HEI consolidated		Hawaiian Electric consolidated
(in millions)	PPAs classified as leases		PPAs classified as leases
2024	$	34	$	34
2025	34		34
2026	34		34
2027	34		34
2028	34		34
Thereafter	511		511
Total lease payments	681		681
Less: Imputed interest	(343)		(343)
Total present value of lease payments	$	338	$	338

Note: Other finance leases are not material.