Quarterly earnings down 30 percent at HEI

Advertiser Staff

•	Hawaiian Electric Industries 2nd quarter earnings Sales: $448.8 million, up 9.7 percent Expenses: $387.3 million, up 14.5 percent Net income: $21.9 million, down 30.4 percent Earnings per share: 59 cents, down 32.2 percent

HEI, which provides electric power to about 95 percent of Hawai'i's residents and owns American Savings Bank, reported net income for the three months that ended June 30 of $21.9 million, or 59 cents a share, down from $31.5 million, or 87 cents per share, in the second quarter of 2002. Revenue rose 9.7 percent to $448.8 million, but expenses climbed 14.5 percent to $387,303.

Robert Clarke, HEI president and CEO, said in a statement, "Several factors worked against more positive second quarter results, including the effects of a weak Japanese economy and fear of terrorism and SARS on tourism, increased retirement benefits expense resulting from poor stock market performance in 2000 through 2002 and a tightening interest rate spread caused by the lowest interest rates in 45 years."

Clarke said electricity sales were up 1.2 percent in the second quarter compared with a year earlier "due to slightly warmer weather and increased commercial usage on the Big Island and Maui."

But increased retirement benefits expense lowered electric utility net income by $3.9 million, Clarke said. Electric utility net income was $18.6 million in the quarter versus $23.9 million a year ago.

American Savings Bank reported net income in the second quarter was $13.5 million compared to $14.8 million a year ago.

The company said the drop in bank earnings was due to a less favorable interest rate environment. The interest rate spread — or difference between what the bank pays for money it borrows and what it gets when it lends money — was 3.02 percent in the second quarter, down from 3.31 percent in the same quarter a year ago.

HEI also reported a $3.9 million loss in the first half of this year from the company's discontinued international power operations. Most of that was a failed investment in CEPALCO, a Philippine electric distribution company in northern Mindanao. HEI said that investment has lost value because of political and economic turmoil in the Philippines.

HEI discontinued its international operations in the third quarter of 2001 and has been trying to sell its investment in CEPALCO.

Without the loss from discontinued operations, HEI's profit would have been down only 18 percent in the second quarter at $25.8 million.

HEI stock fell 17 cents to $43.60 in trading yesterday. The company's earnings were released after the close of trading.