Hawaiian Electric Industries faces $3.9 billion in potential liabilities if it’s deemed negligent for its role in the Maui wildfires, investment research firm Capstone LLC said in a Friday note.
(Bloomberg) — Hawaiian Electric Industries faces $3.9 billion in potential liabilities if it’s deemed negligent for its role in the Maui wildfires, investment research firm Capstone LLC said in a Friday note.
The hefty potential legal liabilities and still-developing investigations into the deadly blazes add up to a growing risk that a Hawaiian Electric affiliate files for Chapter 11 bankruptcy protection, Capstone analysts said. The research firm included fatalities, missing people, damaged and destroyed structures in its estimate.
The company’s stock rose on Friday after saying in a regulatory filing that its goal isn’t to restructure but to endure as a financially strong utility that Maui and the state needs. Representatives for the company didn’t immediately respond to a request for comment on the Capstone report.
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Nearly $4 billion in wildfire liabilities would dwarf Hawaiian Electric’s current market capitalization and exceed its existing debt load.
“We believe Hawaiian Electric Company’s (HECO) risk of a strategic Chapter 11 filing is growing — given the extent of the potential wildfire-related liabilities, particularly as information emerges on the scope of devastation in Maui — as the parent company (HEI) only has $314 million in cash and $329 million of available capacity on its revolver,” the Capstone analysts wrote. “While no cause of ignition has been determined yet by authorities, mounting data points suggest HE’s infrastructure played a key role.”
Hawaiian Electric has come under criticism for not turning off power despite weather forecasters’ warnings that dry, gusty winds could create critical fire conditions. Lawsuits allege the utility’s equipment was the source of ignition. If the utility is found to be negligent, lawmakers may have to help address the costs, the Capstone analysts said.
On Friday, Moody’s Investors Service cut Hawaiian Electric’s debt rating to Ba3, three steps into junk, from Baa1. Its parent company, Hawaiian Electric Industries Inc., was assigned a B1 grade. Moody’s cited the “heightened uncertainty” around the company and its liabilities if it is found at fault for the fires.
–With assistance from Mark Chediak.
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