-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H1v4fizu1aJiwSW6zxpZ2DOC6q6jjs/Yl4Y6DDWaCbJLxACrK6i3PW9fTUx7YQcc Cy5pzWm7fWKZoUNsL4uojQ== /in/edgar/work/20000726/0000898430-00-002131/0000898430-00-002131.txt : 20000921 0000898430-00-002131.hdr.sgml : 20000921 ACCESSION NUMBER: 0000898430-00-002131 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000724 ITEM INFORMATION: FILED AS OF DATE: 20000726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWAIIAN ELECTRIC INDUSTRIES INC CENTRAL INDEX KEY: 0000354707 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 990208097 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08503 FILM NUMBER: 679374 BUSINESS ADDRESS: STREET 1: 900 RICHARDS ST CITY: HONOLULU STATE: HI ZIP: 96813 BUSINESS PHONE: 8085435662 MAIL ADDRESS: STREET 1: 900 RICHARDS STREET CITY: HONOLULU STATE: HI ZIP: 96813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWAIIAN ELECTRIC CO INC CENTRAL INDEX KEY: 0000046207 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 990040500 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-04955 FILM NUMBER: 679375 BUSINESS ADDRESS: STREET 1: 900 RICHARDS ST CITY: HONOLULU STATE: HI ZIP: 96813 BUSINESS PHONE: 8085437771 MAIL ADDRESS: STREET 1: 900 RICHARDS STREET CITY: HONOLULU STATE: HI ZIP: 96813 FORMER COMPANY: FORMER CONFORMED NAME: HAWAIIAN ELECTRIC CO LTD DATE OF NAME CHANGE: 19670212 8-K 1 0001.txt FORM 8-K ================================================================================ 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 24, 2000 ================================================================================ Exact Name of Registrant Commission I.R.S. Employer as Specified in Its Charter File Number Identification No. - --------------------------- ----------- ------------------ Hawaiian Electric Industries, Inc. 1-8503 99-0208097 Hawaiian Electric Company, Inc. 1-4955 99-0040500 ================================================================================ State of Hawaii ---------------------------------------------- (State or other jurisdiction of incorporation) 900 Richards Street, Honolulu, Hawaii 96813 ---------------------------------------------------------------- (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (808) 543-5662 - Hawaiian Electric Industries, Inc. (HEI) (808) 543-7771 - Hawaiian Electric Company, Inc. (HECO) None -------------------------------------------------------------- (Former name or former address, if changed since last report.) ================================================================================ Item 5. Other Events Forward-looking statements - -------------------------- 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 - ------------ On July 24, 2000, Hawaiian Electric Industries, Inc. (HEI) issued the following news release: HAWAIIAN ELECTRIC INDUSTRIES, INC. REPORTS SECOND QUARTER 2000 EARNINGS HONOLULU -- Hawaiian Electric Industries, Inc. (NYSE - HE) today reported net income for the three months ended June 30, 2000 of $19.1 million, or 59 cents per share, compared with $22.8 million, or 71 cents per share, in the same quarter of 1999. For the six months ended June 30, 2000, net income was $48.1 million, or $1.49 per share, compared with $43.5 million, or $1.35 per share, in the same period last year. "We had a disappointing second quarter. Earnings were down primarily due to a loss in our international power group. However, results at our utilities and savings bank continue to benefit from Hawaii's improving economy. Utility net income was up 25% mainly due to higher kilowatthour sales and lower other operation expenses when compared to the same quarter last year. In addition, net income at our savings bank was up 4%," said Robert F. Clarke, HEI chairman, president and chief executive officer. 1 Electric utility net income during the quarter was $24.0 million versus $19.2 million in the same quarter last year. Net income for the six months was $47.7 million versus $36.3 million in the same period of 1999. Kilowatthour sales increased by 2% during the quarter compared to the same quarter last year. Hawaii visitor days were up 11% and 9% in April and May 2000, respectively, compared to the same months in 1999. Savings bank net income in the second quarter was $9.4 million compared to $9.1 million in the same quarter last year. Net income for the six months was $20.6 million versus $17.6 million in the same period of 1999. The bank's average earning assets were up 6% compared to the same quarter of last year. The bank's interest rate spread - the difference between the yield on earning assets and the cost of funds - was 3.18% in the recent quarter versus 3.21% in the same quarter of 1999. The net loss for the international power operation during the quarter was $8.8 million compared to $1.4 million in the same quarter last year. The net loss for the six months was $9.7 million versus $2.2 million in the same period of 1999. The higher net loss this quarter is primarily attributable to results from the investment in East Asia Power Resources Corporation (EAPRC), a Philippine power company. An effective 46% interest in EAPRC was acquired from El Paso Energy International in early March 2000. Higher fuel oil prices and the weakened value of the Philippine peso negatively impacted EAPRC results. The financial results of HEI's other subsidiaries and the corporate parent this quarter reflect a larger net loss than during the same period last year due to higher interest expense at the corporate parent. HEI is a diversified holding company. Its core businesses are electric utilities, a savings bank and an international power subsidiary. 2 Hawaiian Electric Industries, Inc. and subsidiaries CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three months Six months Twelve months (in thousands, ended June 30, ended June 30, ended June 30, except per share amounts) 2000 1999 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues Electric utility $ 307,845 $ 252,272 $ 597,250 $ 490,063 $ 1,162,391 $ 1,003,536 Savings bank 108,699 101,759 218,966 202,039 426,840 408,827 International power (3,950) 1,332 (2,285) 2,324 (145) 4,741 Other 542 14,325 1,080 27,509 27,280 54,473 -------------- --------------- -------------- -------------- --------------- ---------------- 413,136 369,688 815,011 721,935 1,616,366 1,471,577 -------------- --------------- -------------- -------------- --------------- ---------------- Expenses Electric utility 256,230 207,936 494,005 404,826 969,669 825,108 Savings bank 92,384 85,970 183,461 171,119 361,903 352,938 International power 4,482 2,828 6,597 4,436 11,356 8,404 Other 2,914 14,244 5,620 28,812 26,981 58,314 -------------- --------------- -------------- -------------- --------------- ---------------- 356,010 310,978 689,683 609,193 1,369,909 1,244,764 -------------- --------------- -------------- -------------- --------------- ---------------- Operating income (loss) Electric utility 51,615 44,336 103,245 85,237 192,722 178,428 Savings bank 16,315 15,789 35,505 30,920 64,937 55,889 International power (8,432) (1,496) (8,882) (2,112) (11,501) (3,663) Other (2,372) 81 (4,540) (1,303) 299 (3,841) -------------- --------------- -------------- -------------- --------------- ---------------- 57,126 58,710 125,328 112,742 246,457 226,813 -------------- --------------- -------------- -------------- --------------- ---------------- Interest expense-- other than savings bank (20,156) (19,000) (39,228) (36,888) (74,971) (71,668) Allowance for borrowed funds used during construction 722 599 1,413 1,239 2,750 3,835 Preferred stock dividends of subsidiaries (506) (499) (1,004) (1,126) (2,013) (4,123) Preferred securities distributions of trust subsidiaries (4,009) (4,008) (8,018) (8,007) (16,036) (14,372) Allowance for equity funds used during construction 1,328 987 2,597 2,026 4,799 6,490 -------------- --------------- -------------- -------------- --------------- ---------------- Income from continuing operations before income taxes 34,505 36,789 81,088 69,986 160,986 146,975 Income taxes 15,409 14,033 33,016 26,476 63,530 54,577 -------------- --------------- -------------- -------------- --------------- ---------------- Income from continuing operations 19,096 22,756 48,072 43,510 97,456 92,398 -------------- --------------- -------------- -------------- --------------- ---------------- Discontinued operations, net of income taxes Loss from operations - - - - - (12,474) Net gain on disposals - - - - 3,953 3,781 -------------- --------------- -------------- -------------- --------------- ---------------- Gain (loss) from discontinued operations - - - - 3,953 (8,693) -------------- --------------- -------------- -------------- --------------- ---------------- Net income $ 19,096 $ 22,756 $ 48,072 $ 43,510 $ 101,409 $ 83,705 ============= ============== ============== ============== =============== ================ Per common share Basic earnings (loss) Continuing operations $ 0.59 $ 0.71 $ 1.49 $ 1.35 $ 3.02 $ 2.88 Discontinued operations - - - - 0.12 (0.27) -------------- --------------- -------------- -------------- --------------- ---------------- $ 0.59 $ 0.71 $ 1.49 $ 1.35 $ 3.14 $ 2.61 ============= =============== ============== ============== =============== ================ Diluted earnings (loss) Continuing operations $ 0.59 $ 0.71 $ 1.48 $ 1.35 $ 3.01 $ 2.87 Discontinued operations - - - - 0.12 (0.27) ------------- --------------- -------------- -------------- --------------- ---------------- $ 0.59 $ 0.71 $ 1.48 $ 1.35 $ 3.13 $ 2.60 ============= =============== ============== ============== =============== ================ Dividends $ 0.62 $ 0.62 $ 1.24 $ 1.24 $ 2.48 $ 2.48 ============= =============== ============== ============== =============== ================ Weighted-average number of common shares outstanding 32,403 32,183 32,335 32,168 32,271 32,106 ============= =============== ============== ============== =============== ================ Adjusted weighted-average shares 32,542 32,275 32,457 32,266 32,396 32,227 ============= =============== ============== ============== =============== ================ Income (loss) from continuing operations by segment Electric utility $ 24,014 $ 19,224 $ 47,739 $ 36,305 $ 86,656 $ 79,130 Savings bank 9,396 9,057 20,617 17,582 38,447 32,133 International power (8,794) (1,437) (9,715) (2,226) (12,578) (4,155) Other (5,520) (4,088) (10,569) (8,151) (15,069) (14,710) ------------- --------------- -------------- -------------- --------------- ---------------- Income from continuing operations $ 19,096 $ 22,756 $ 48,072 $ 43,510 $ 97,456 $ 92,398 ============= =============== ============== ============== =============== ================
This information should be read in conjunction with the consolidated financial statements and the notes thereto incorporated by reference in HEI's Annual Report on SEC Form 10-K for the year ended December 31, 1999 and the consolidated financial statements and the notes thereto in HEI's Quarterly Report on SEC Form 10-Q for the quarters ended March 31, 2000 and June 30, 2000 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year. ###(End of news release)### 3 Private placement of subsidiary preferred stock - ----------------------------------------------- It is anticipated that American Savings Bank, F.S.B. (ASB) will resell, in a private placement currently scheduled for early August of 2000, 60 shares of the Series B Preferred Stock of its subsidiary, ASB Realty Corporation. These shares have an aggregate liquidation preference of $60 million and the proceeds of the sale will be used by ASB to make or purchase additional loans and to purchase mortgage/asset-backed securities and other assets. A preliminary offering memorandum with respect to the private placement of this preferred stock is expected to be circulated to qualified institutional buyers on or about July 28, 2000. The following portions of this Form 8-K provide certain financial information for HEI and its subsidiaries for the second quarter and the six months ended June 30, 2000, and other updated information, which is intended to be included in the preliminary offering memorandum in advance of the filing by HEI and HECO of their jointly-filed Form 10-Q for the quarter ended June 30, 2000. HEI The following is a brief summary of certain information regarding HEI. This summary should be read in conjunction with the detailed information about HEI and its subsidiaries contained in the periodic reports it has filed with the Commission under the Exchange Act, including its audited and unaudited consolidated financial statements and related notes. General HEI was incorporated in 1981 under the laws of the State of Hawaii and is a holding company with subsidiaries engaged in the electric utility, savings bank and other businesses operating primarily in the State of Hawaii, and in independent power and integrated energy services projects in Asia and the Pacific. HEI's predecessor, HECO, was incorporated under the laws of the Kingdom of Hawaii (now the State of Hawaii) on October 13, 1891. As a result of a 1983 corporate reorganization, HECO became an HEI subsidiary and common shareholders of HECO became common shareholders of HEI. As of December 31, 1999, HEI had consolidated assets of $8.3 billion. HEI had $1.5 billion in consolidated revenues and net income from continuing operations of $92.9 million for the year ended December 31, 1999 compared with $94.6 million for the year ended December 31, 1998. Net income amounted to $96.8 million for 1999 compared with $84.8 million for year ended December 31, 1998. In 1999, HEI reversed $4.0 million of a reserve established in 1998 for the discontinuance of its residential real estate operation. In 1998, the after-tax loss recorded for the discontinuance of its residential real estate operation was offset in part by an after-tax gain from the settlement of HEI's claims against three insurance carriers. In 1999, utility kilowatthour sales were up. However, due to increases in maintenance and depreciation expenses, utility earnings were down 7% for the year. Electric utility net income in 1999 amounted to $75.2 million compared with $80.8 million in 1998. Kilowatthour sales for the year were 1% higher than in 1998. The Bank reported net income available for common stockholder of $35.4 million in 1999 compared with $30.3 million in 1998. The Bank's earnings were up 17% primarily due to higher net interest income resulting from a higher volume of business and an improved interest rate spread. HEIPC reported a net loss of $5.1 million in 1999 compared with a $4.0 million net loss in 1998, reflecting higher business development expenses. HEI had consolidated revenues of $413.1 million and net income of $19.1 million for the quarter ended June 30, 2000 compared to consolidated revenues of $369.7 million and net income of $22.8 million for the quarter ended June 30, 1999. The increase in revenues was primarily due to increases for the electric utility and savings bank segments, partially offset by decreases for the international power and "other" segments. The decrease in net income was primarily due to the increase in the net loss of the international power segment. The electric utilities had 22% higher revenues primarily due to 4 higher fuel oil and purchased energy prices, the effects of which are passed on to customers, and 2.1% higher kilowatthour sales. The electric utilities' 25% increase in net income (from $19.2 million in the second quarter of 1999 to $24.0 million in the second quarter of 2000) was primarily due to the higher kilowatthour sales and lower other operation expenses (including lower retirement benefits expenses), partially offset by higher depreciation expense. The Bank had 7% higher revenues primarily due to higher interest income as a result of higher weighted-average yields on MABS and loan balances and a 6% higher average interest-earning asset balance. The Bank's 4% increase in net income available for common stockholder (from $9.1 million in the second quarter of 1999 to $9.4 million in the second quarter of 2000) was primarily due to higher net interest income, partially offset by the impact of reclassifying four debt securities from "held-to-maturity" status to "available-for-sale" status. Although the Bank's interest rate spread declined to 3.18% in the second quarter of 2000 from 3.21% in the same quarter of 1999, the Bank's net interest income increased due to higher average earning assets. The Bank realized a net loss of $2.1 million to record the reclassified securities at their estimated fair value and a net loss of $1.2 million to reverse the related interest accrual. The international power segment's net loss for the quarter ended June 30, 2000 was $8.8 million compared to $1.4 million for the same period in 1999. See "-- Philippines Investment." The "other" segment had 96% lower revenues primarily due to the sale by Hawaiian Tug & Barge Corp. ("HTB") of the stock of its subsidiary, Young Brothers, Limited ("YB"), and substantially all of HTB's operating assets for a nominal gain in November 1999. Higher interest expense resulting from higher average borrowings due to the HEIPC Group's $87.0 million investment in the Philippines in March 2000 also contributed to the higher net loss. HEI had consolidated revenues of $815.0 million and net income of $48.1 million for the six months ended June 30, 2000 compared to consolidated revenues of $721.9 million and net income of $43.5 million for the six months ended June 30, 1999. The increase in revenues and net income was primarily due to increases for the electric utility and savings bank segments, partially offset by decreases for the international power and "other" segments. The electric utilities had 22% higher revenues primarily due to higher fuel oil and purchased energy prices, the effects of which are passed on to customers, and 2.6% higher kilowatthour sales. The electric utilities' 31% increase in net income (from $36.3 million in the first half of 1999 to $47.7 million in the first half of 2000) was primarily due to the higher kilowatthour sales and lower other operation and maintenance expenses (including lower retirement benefits expenses), partially offset by higher depreciation expense. The Bank had 8% higher revenues primarily due to higher interest income as a result of higher weighted-average yields on MABS and loan balances and a 5% higher average interest-earning asset balance. The Bank's 17% increase in net income available for common stockholder (from $17.6 million in the first half of 1999 to $20.6 million in the first half of 2000) was primarily due to higher net interest income, partly offset by lower other income and higher income taxes. The Bank's interest rate spread was 3.19% in the first half of 2000 compared to 3.14% in the first half of 1999. The international power segment's net loss for the six months ended June 30, 2000 was $9.7 million compared to $2.2 million for the same period in 1999. See "--Philippines Investment." Due to losses attributed to this investment, HEI expects its consolidated earnings for 2000 to be lower than consolidated earnings for 1999. The "other" segment had 96% lower revenues primarily due to HTB's sale of YB and substantially all of its operating assets for a nominal gain in November 1999. The higher consolidated operating income due to the electric utility and savings bank segments for the six months ended June 30, 2000 compared to the same period in 1999 was partially offset by higher interest expense resulting from higher average borrowings due to the HEIPC Group's $87.0 million investment in the Philippines in March 2000. HEI will not be responsible or otherwise obligated for the payment of dividends or the liquidation preference with respect to the Series B Preferred Shares (or, upon the occurrence of an Exchange Event, the Bank B Preferred Shares). HEI will enter into an Undertaking, however, in which it will make certain covenants for the benefit of the holders from time to time of the Series B Preferred Shares (and, upon the occurrence of an Exchange Event, the Bank B Preferred Shares). See "Description of Series B Preferred Shares--Certain Covenants of HEI." 5 The principal executive offices of HEI are located at 900 Richards Street, Honolulu, Hawaii 96813 and its telephone number is (808) 543-5662. Operating Companies Other than the Bank and its Subsidiaries HECO and its operating subsidiaries, MECO and HELCO, are regulated public electric utilities providing the only public electric utility service on the islands of Oahu, Maui, Lanai, Molokai and Hawaii. Besides HECO and its subsidiaries, HEI also owns directly or indirectly several additional active subsidiaries, the principal ones of which are the following: HEIDI, which currently is only a holding company of the Bank and its subsidiaries, including the Company; HEIPC and its subsidiaries; and, prior to November 11, 1999, Hawaiian Tug & Barge Corp. and its subsidiary. HEIPC was formed in 1995 to pursue, directly or through its subsidiaries or affiliates, independent power and integrated energy services projects in Asia and the Pacific. A subsidiary of HEIPC operates generating units at a facility in Guam and another subsidiary has a 75% interest in a joint venture to construct and operate a 200 megawatts ("MW") (net) coal-fired power plant in China. HEIPC also has invested $9.7 million to acquire cumulative nonparticipating 8% preferred shares and 5% of the outstanding common stock of CEPALCO, an electric distribution company in the Philippines, and in March 2000 made an additional $87.0s million investment in the Philippines. See "--China Project" and "--Philippines Investment". On November 10, 1999, HTB's name changed to The Old Oahu Tug Service, Inc. HTB was acquired in 1986 and provided ship assist and charter towing services and owned YB, a regulated intrastate public carrier of waterborne freight among the Hawaiian Islands. On November 10, 1999, HTB sold substantially all of its operating assets and all of the capital stock of YB for a nominal gain. China Project In 1998 and 1999, the HEIPC Group acquired what is now a 75% interest in a joint venture, Baotou Tianjiao Power Co., Ltd., formed to design, construct, own, operate and manage a 200 MW (net) coal-fired power plant to be located in Inner Mongolia, People's Republic of China. The power plant is being built "inside the fence" for Baotou Iron & Steel (Group) Co., Ltd. ("Baotou Steel"). The project has received approval from both the National and Inner Mongolia governments. Construction had commenced and the first of the two units had been expected to be online by early 2001, and the second six months later. However, the Inner Mongolia Power Company ("IMPC"), which owns and operates the electricity grid in Inner Mongolia, has refused to enter into an interconnection arrangement with the joint venture. The HEIPC Group does not believe that it is prudent to continue construction without an interconnection arrangement whose terms are consistent with the project as approved by the National and Inner Mongolia governments. Under the power purchase contract between the joint venture and Baotou Steel, it is Baotou Steel's responsibility to secure an interconnection arrangement with IMPC. The HEIPC Group continues to work with Baotou Steel and IMPC to secure a satisfactory interconnection arrangement. If such an arrangement is not obtained, the HEIPC Group intends to withdraw from the project (including the HEIPC Group's commitment to invest up to an additional $86 million toward the project, subject to certain conditions) and seek recovery of its investment of approximately $25 million to date. HEI's management cannot predict the outcome of such efforts, nor estimate its impairment loss, if any, at this time. HEI's financial statements do not include any adjustments that might result from the outcome of this uncertainty. Philippines Investment 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 East Asia Power Resources Corporation ("EAPRC") and its subsidiaries (the "EAPRC Group"). 6 EPHC owns approximately 91.7% of the common shares of EAPRC, a Philippines holding company primarily engaged in the electric generation business in Manila and Cebu through its direct and indirect subsidiaries, using land and barge- based generating facilities fired by bunker fuel oil, with total installed capacity of approximately 390 MW. In connection with and subsequent to the HEIPC Group's investment in EPHC, HEI has guaranteed up to $35 million of existing and potential obligations related to this investment 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. The HEIPC Group recorded a $9.7 million net loss for the six months ended June 30, 2000, compared with a $2.2 million net loss in the same period in 1999. The HEIPC Group's net loss for the quarter ended June 30, 2000 was $8.8 million compared to $1.4 million for the same period in 1999. The higher net losses are primarily attributable to results from the HEIPC Group's indirect investment in 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 $9.7 million net loss for the six months ended June 30, 2000 thus reflects results of the HEIPC Group's operations for the months of December 1999 and January through May 2000 and the $8.8 million net loss for the quarter ended June 30, 2000 thus reflects results for the months of March, April and May 2000. Higher fuel oil prices and the weakened value of the Philippine peso were the primary causes of the losses incurred by the EAPRC Group 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 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 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, as of June 30, 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 18, 2000, the exchange rate had further deteriorated to PhP44.600 = $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. 7 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/ Curtis Y. Harada /s/ Paul Oyer - -------------------------------- ---------------------------- Curtis Y. Harada Paul A. Oyer Controller Financial Vice President and Treasurer of HECO (Principal Accounting Officer of HEI) (Principal Financial Officer of HECO) Date: July 26, 2000 Date: July 26, 2000 8 -----END PRIVACY-ENHANCED MESSAGE-----