Shares of Hawaiian Electric Industries (HE.N) plunged 31% on Tuesday after S&P Global Ratings downgraded the utility to junk status. The downgrade was triggered by the wildfires in Maui, which have killed at least 110 people and destroyed the coastal town of Lahaina.
The S&P downgrade puts Hawaiian Electric at “BB-,” and the credit agency placed the company on watch for further downgrades. The downgrade is a reflection of the increased risk that Hawaiian Electric faces from wildfires, as well as the potential liabilities that the company could face as a result of the Maui wildfires.
The wildfires destroyed a significant segment of Hawaiian Electric’s customer base, and the company expects it will take many years to restore. This will weaken the company’s profitability measures in the long term.
In addition, Hawaiian Electric is facing proposed class-action lawsuits filed by residents affected by the wildfires. The lawsuits allege that the company is responsible for the wildfires because it failed to shut off power lines despite warnings from the National Weather Service that high winds could blow those lines down and spark fast-spreading wildfires.
If the plaintiffs prevail in these lawsuits, Hawaiian Electric could face billions of dollars in liabilities. This would further weaken the company’s financial position and could even force it into bankruptcy.
The sell-off in Hawaiian Electric’s stock is a reflection of the uncertainty surrounding the company’s future. Investors are concerned about the potential liabilities that the company faces, and they are also concerned about the impact of the wildfires on the company’s customer base and profitability.
It is still too early to say what the ultimate impact of the Maui wildfires will be on Hawaiian Electric. However, the downgrade by S&P Global Ratings is a clear sign that the company is facing significant challenges.
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- The Maui wildfires are the deadliest in more than 100 years, and they have caused an estimated $5.5 billion in damage.
- The proposed class-action lawsuits against Hawaiian Electric could be worth billions of dollars.
- Hawaiian Electric is not the only utility company that is facing potential liabilities from wildfires. PG&E Corp (PCG.N) filed for bankruptcy protection in 2019, and subsequently restructured, citing potential liabilities exceeding $30 billion stemming from California wildfires that were blamed on its equipment.
- The uncertainty surrounding the future of Hawaiian Electric is likely to continue for some time. The company is still investigating the cause of the Maui wildfires, and it is also facing the challenge of rebuilding its customer base.
Shayne Heffernan
