All the public discussion of the pending global settlement of Lahaina Fire litigation has made one thing clear: Hawaiian Electric, one of the nation’s smallest electrical utilities, has limited financial resources to contribute to the overall settlement. This “ability to pay” apparently was taken into account during settlement negotiations, which recognized that pushing Hawaiian Electric into bankruptcy would create a whole new set of problems for the entire state.
That sends me back to a question I raised a year ago: Would Hawaii have been better off if Next Era Energy’s proposed purchase of Hawaiian Electric in 2014 had gone through?
You may recall that Next Era, one of the country’s largest energy corporations, offered to purchase Hawaiian Electric for a bit over $4 billion. The deal was nixed by the Public Utilities Commission in July 2016 in the face of almost united political opposition from the state’s political establishment.
Admittedly, I never understood exactly what was behind the politics of the opposition. To me, it seemed a lot like the 1950s when the Big Five companies, at the center of the island’s suger-era power structure through their network of interlocking directorates, tried to keep national retailers from pushing into Hawaii. Sears was the first major firm to break through the political and economic blockade and open up a store in Honolulu in 1941.
Although I never heard it discussed, there may have been deep concern within Hawaii’s Democratic-controlled power structure that NextEra, based in Florida, would be pushing far more conservative political ideas reflecting those Florida roots and the far-Right slide of Florida policy makers?
But as a much larger entity, NextEra would have brought its deep corporate pockets into Hawaii, which would have undoubtedly rattled existing relationships in business and government.
But it would also have brought the financial strength to borrow funds at lower costs, meaning additional resources that could have potentially been available to mitigate fire risks, and would have certainly been able to fund a larger contribution to the Lahaina Fire settlement.
Given the experience of the past year, would a different decision be made today?
See:
In hindsight, was it a mistake to reject NextEra Energy? August 20, 2023
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Limited resources? Then how can they pay their CEO more than a million per year and several officers nearly as much? And how have they been able year after year to pay rr.investors huge distributions?
They just think they should always make a profit no matter how poorly they perform
On your last point regulation insures they will make a profit and how much and at what price. And its set up so its based on return to investment meaning money put into the system that improves its functioning. This short circuited because it has paid a dividend of $1.20 a share forever. Meaning out of profits most, sometimes less, goes to shareholders, leaving less for use in reinvesrment. And in case you are wondering a lot maybe most shares are held locally. See my comment below.
On your last point regulation insures they will make a profit and how much and at what price. And its set up so its based on return to investment meaning money put into the system that improves its functioning. This short circuited because it has paid a dividend of $1.20 a share forever. Meaning out of profits most, sometimes less, goes to shareholders, leaving less for use in reinvesrment. And in case you are wondering a lot maybe most shares are held locally. See my comment below.
I supported the Next Era takeover and both the oppo to it and the problem with HECO boils down to one thing, HECO paid a dividend of $1.20 a share. And it paid it for like 70 years, no matter what, even in years where the didn’t earn a profit. And this has meant that the primary means most companies (like Next Era) use for investment, retained earnings was greatly diminished. So for example rotting poles were not replaced, generators were not replaced with the latest technology. HECO has underinvested in the electricity infrastructure for 100 years. That is one reason for, probably the main reason, for its failing in the fire. But likewise for everyone else. Large landowners are just letting their land sit while it appreciattes in value. On the other hand HECO stock was like a “widows and orphins stock” here. A large swath of the community, especially locals, did not want to give up that dividend. No amount of buy out for shares would have been enough because that was a prmary vehicle for retirement savings, people could clip their coupons, so 10,000 shares would produce $12,000 annually in income. There was nothing equivelent to that. So underlying that opposition was not that Next Era would be a conservative force but that it would not provide anything close to that dividend.
Wonder if local politicians would be more amicable to outsiders showing interest in HECO now? And if so, wonder who would even consider paying for HECO now after Lahaina?
Why did NextEra want to buy HECO in the first place?
Because they wanted to develop renewable electricity in Hawaii. It would have given them valuable lessons in moving to renewable energy elsewhere. Lots of utilities see the handwriting on the wall and want to get a competitive leg up. I know that this is the case with American Electric power and the utility in North Carolina (which might also be AEP).
Ah, so sad. It sounds like a smart move.
Why is it that most States and Nations are thrilled to get foreign direct investment but the State of Hawaii rejects it?
Isn’t colonialism often another way of saying foreign investment?
The PUC in Hawaii consists of only three people. One of them who was previously an attorney who represented HECO for rate increase, and was installed by Gov Ige.
My recollection, informed mainly by local news broadcasts and the Star Advertiser, is that there was concern that NextEra, based on their track record in Florida, would be unfriendly to residential rooftop solar and small scale solar in general, and would focus mainly on large scale projects.
I think the local solar industry may have seen them as an existential threat.
I think there was also concern at the individual ratepayer level that we would be locked out of the financial benefits of residential rooftop solar.