Hawaiian Electric shares drop as S&P downgrades utility to junk.

Hawaiian Electric shares drop as S&P downgrades utility to junk.

Hawaiian Electric Industries Faces Downgrade and Lawsuits Amid Wildfires in Maui

Shares of Hawaiian Electric Industries (HE.N) have taken a major hit, plunging 20.3% in afternoon trading on Tuesday. This follows a sharp decline earlier in the week, as S&P downgraded the credit rating of the electric utility to junk status. The downgrade comes in the wake of devastating wildfires that have ravaged Maui, causing significant damage to the company’s customer base and resulting in class-action lawsuits filed against Hawaiian Electric Industries. The situation is dire, with the credit agency now placing the company on watch for further downgrades.

The severity of the wildfires has demonstrated a higher wildfire risk for the company than previously thought. S&P Global Ratings, in its downgrade report, expressed concern over the long-term impact on Hawaiian Electric Industries’ profitability measures. The destruction of a significant segment of their customer base will take years to restore, leading to a weakening financial outlook for the company.

Proposed class-action lawsuits filed by affected Hawaii residents seek to hold Hawaiian Electric responsible for its alleged failure to shut off power lines despite warnings of high winds from the National Weather Service. The lawsuits claim that these power lines contributed to the rapid spread of the wildfires. While the resolution of these lawsuits may take years, a favorable outcome for the plaintiffs would significantly erode the company’s financial position.

The consequences of these developments have been harsh for Hawaiian Electric Industries. On Monday, the company’s stock plummeted over 30%, reaching a 13-year low. The ongoing scrutiny regarding the company’s equipment and its potential involvement in the deadly wildfires has had a devastating impact on its market value. Currently, the stock is down about 48% for the week.

Hawaiian Electric Vice President Jim Kelly has refrained from commenting on the pending litigation. He did, however, state that the company is cooperating with the investigation into the cause of the fires. It is worth noting that Hawaiian Electric does not have a formal shut-off program, and any precautionary shut-offs have to be arranged with first responders.

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In addition to the downgrade and lawsuits, brokerage firm Guggenheim has cut its price target on the company’s stock to $18 from $32. Similarly, Wells Fargo and Morningstar reduced their price targets for Hawaiian Electric. The Guggenheim analysts have expressed doubts about the company’s ability to emerge from this tragic incident in its current form, given its size and potential liabilities.

The situation faced by Hawaiian Electric Industries is undoubtedly challenging. The impact of the wildfires, coupled with the downgrade and mounting lawsuits, paints a bleak picture for the company’s future. However, it is important to remember that this is an evolving situation. The investigation into the cause of the fires is ongoing, and the resolution of the lawsuits will take time. The road ahead will surely be difficult, but Hawaiian Electric Industries has an opportunity to address the concerns raised and work towards rebuilding its reputation and financial stability.

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