HAWAIIAN ELECTRIC INDUSTRIES INC (HE)

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion updates “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in HEI’s and Hawaiian Electric’s 2025 Form 10-K and should be read in conjunction with such discussion and the 2025 annual consolidated financial statements of HEI and Hawaiian Electric and notes thereto included in HEI’s and Hawaiian Electric’s 2025 Form 10-K, as well as the quarterly condensed consolidated financial statements and notes thereto included in Item 1 of this Form 10-Q.

HEI consolidated

Recent developments. For discussion of the impacts of inflation and other macro-economic factors impacting the Utilities, see also “Recent developments” in Hawaiian Electric’s MD&A. See also “Economic conditions” below for further discussion of the economic impact of recent events, and Note 2 of the Condensed Consolidated Financial Statements for recent updates and disclosures relating to the Maui windstorm and wildfires.

RESULTS OF OPERATIONS

1    Also, see the all other segment discussion below.

The Company’s effective tax rates for the first six months of 2026 and 2025 were 24% and 27%, respectively. For the second quarters of 2026 and 2025, the Company’s effective tax rates were 25% and 34%, respectively. The lower effective tax rates for the first six months and the second quarter of 2026, compared with the same periods in 2025, were primarily attributable to the lesser impact of discrete tax items in 2026 than in 2025. The primary discrete tax item affecting the 2026 periods was the Utilities’ remeasurement of the remaining wildfire tort-related settlement liability to present value. In contrast, the primary discrete tax item affecting the 2025 periods was the recapture of investment tax credits.

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Maui windstorm and wildfires related items, net. For the three and six months ended June 30, 2026 and 2025, the Company’s incremental items related to the Maui windstorm and wildfires as discussed in Note 2 of the Condensed Consolidated Financial Statements, were as follows:

1 Includes $8.5 million recognized as an adjustment to the Wildfire tort-related claims for the three and six months ended June 30, 2026.

2 Represents an adjustment related to remeasuring the remaining settlement liability at present value in accordance with Accounting Standards Codification Topic 835-30 Imputation of Interest.

3 Represents accretion expense related to remeasuring the remaining settlement liability. For the three and six months ended June 30, 2026, the accretion expense amounted to $18 million, which is included in “Interest expense, net” and “Interest expense and other charges, net” in HEI’s and the Utilities’ Condensed Consolidated Statements of Income, respectively.

4    Includes adjustments related to costs that are no longer probable of recovery under insurance policies. For the three and six months ended June 30, 2025, adjustments amount to $6.6 million, of which, $4.0 million was deferred to a regulatory asset and is reported in the “Deferral treatment approved by the PUC” category above.

5    Pursuant to the PUC order received on February 12, 2025, deferral accounting treatment limited to insurance premiums and outside services and legal costs associated with the asset-based lending facility credit agreement incurred in 2025 was granted. Applicable amounts were deferred to a regulatory asset. See “Risk Factors” in Item 1A. for further discussion of regulatory risks. See Note 2 of the Condensed Consolidated Financial Statements.

Note: The all other segment Maui windstorm and wildfires related expenses (legal, outside services and other) and insurance recoveries are included in “Expenses-Other” and interest expense is included in “Interest expense, net” on the HEI and subsidiaries Condensed Consolidated Statements of Income. See Electric utility section below for more detail.

From August 8, 2023 through June 30, 2026, HEI and its subsidiaries have incurred approximately $2.14 billion of Maui windstorm and wildfires related expenses, including the Utilities’ estimate of the losses related to a settlement of all wildfire tort-related legal claims and cross claims, the One ‘Ohana Initiative contribution and $47.8 million related to the securities class action settlement. Certain of these costs are reimbursable under excess liability insurance, professional liability insurance and directors and officers liability insurance policies. As of June 30, 2026, HEI and its subsidiaries have recovered the remaining

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unpaid insurance claim proceeds owed under its excess liability and professional liability insurance policies, and approximately $71 million of insurance coverage is remaining under the directors and officers liability policy, after deducting applicable retention amounts and amounts expected to be recovered for incurred costs such as the securities class action settlement that is recognized as a receivable as of the quarter end.

On April 10, 2026, the last condition to the finalization of the tort settlement agreements and first installment payment was satisfied when the last insurer agreed to a stipulation withdrawing with prejudice the appeal of the December 30, 2025 summary judgment entered in favor of HEI, Hawaiian Electric and other defendants. As a result, the Company paid the first of its four equal annual $479 million installments pursuant to the settlement agreements.

Economic conditions.

Note: The statistical data in this section is from public third-party sources that management believes to be reliable (e.g., Board of Governors of the Federal Reserve System, Department of Business, Economic Development and Tourism, University of Hawaii Economic Research Organization (UHERO), U.S. Bureau of Labor Statistics, and U.S. Energy Information Administration).

In the second quarter of 2026, the average daily passenger count was 1.4% higher than the comparable period in the prior year. The recovery in total passenger counts from the low levels in 2020, which occurred under COVID-19 restrictions, thus far has been driven by domestic travelers, with international travelers, including Japanese travelers, remaining at lower levels. In the second quarter, international visitor arrivals (excluding Japan) remained 27.8% below 2019 levels. Due to the weak yen, Japanese visitors are 39.4% below 2019 levels.

Hawaii’s preliminary seasonally adjusted unemployment rate in June 2026 was 2.6%, which was a slight increase from the June 2025 rate of 2.3%. The national unemployment rate in June 2026 was 4.2%, slightly higher than the June 2025 rate of 4.1%. According to a recent forecast by UHERO, issued on May 15, 2026, jobs in the State will increase by 0.1% in 2026.

Hawaii’s petroleum product prices are correlated to the crude oil price in international markets. The price of crude oil has increased 51.9% over the same quarter in the prior year.

At its July 29, 2026 meeting, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range at 3.5% to 3.75%. The FOMC noted that economic activity is expanding despite uncertainty around the conflict in the Middle East.

UHER

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

HEI and Hawaiian Electric (in the case of Hawaiian Electric, only the information related to Hawaiian Electric and its subsidiaries):

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related Notes that appear in Item 8 of this report. For information on factors that may cause HEI’s and Hawaiian Electric’s actual future results to differ from those currently contemplated by the relevant forward-looking statements, see “Cautionary Note Regarding Forward-Looking Statements” at the front of this report and “Risk Factors” in Item 1A. The general discussion of HEI’s consolidated results should be read in conjunction with the Electric utility discussion that follows.

HEI Consolidated

Executive overview and strategy.  HEI is a holding company with operations primarily focused on Hawaii’s electric utility sector after selling its bank operations on December 31, 2024. In 2017, HEI formed Pacific Current to make investments in non-regulated renewable energy and sustainable infrastructure projects. On December 30, 2024, HEI, ASB, and ASB Hawaii, a wholly owned subsidiary of HEI and ASB’s parent holding company, entered into investment agreements to sell 90.1% of the common stock of ASB to various investors, including certain ASB officers and directors of ASB. The sale transaction closed on December 31, 2024 and no investor acquired more than 9.9% of the common stock of ASB. The proceeds from the sale were used to repay a ratable portion of each of HEI’s senior notes in April 2025. Subsequent to the sale, HEI has one reportable segment: Electric utility. HEI and its other subsidiaries which are not reportable segments are grouped and reported as an “All Other” non-reportable segment.

Electric utility. Hawaiian Electric, Hawaii Electric Light and Maui Electric (Utilities) are regulated operating electric public utilities engaged in the production, purchase, transmission, distribution and sale of electricity on the islands of Oahu; Hawaii; and Maui, Lanai and Molokai, respectively.

All Other. The All Other segment primarily comprises the results of Pacific Current, which invested in non-regulated clean energy and sustainable infrastructure in the State of Hawaii to help reach the state’s sustainability goals, and HEI’s corporate-level operating, general and administrative expenses. Subsequent to the Maui windstorm and wildfires, HEI and Pacific Current have suspended new investments and undertook a comprehensive review of strategic options for the assets of Pacific Current. As part of HEI’s comprehensive review of strategic options for Pacific Current, all investments of Pacific Current that were made through its subsidiaries were sold in 2025, except for Mahipapa, its remaining operating subsidiary which is in the process of being sold. The All Other segment also includes ASB Hawaii, which previously owned ASB, and a 40% interest in GLST1, an entity created for the specific purpose of holding HEI’s and Hawaiian Electric’s first liability installment payment pursuant to the settlement agreements to settle the tort-related claims in the litigation arising out of the Maui windstorm and wildfires.

A major focus of HEI’s financial strategy is to grow core earnings/profitability at the Utilities in a controlled risk manner and optimize operating, capital and tax efficiencies in order to support its dividend and deliver shareholder value. HEI also continues to work on strategic financing plans to raise capital necessary to fund the settlement of wildfire tort claims.

Recent developments. See also “Recent developments” in Hawaiian Electric’s MD&A and Note 2 of the Consolidated Financial Statements which includes recent updates and disclosures relating to the Maui windstorm and wildfires.

On September 5, 2025, HEI and Hawaiian Electric each amended their senior unsecured revolving credit facility (the HEI Revolving Facility and the Hawaiian Electric Revolving Facility, respectively) resulting in increased borrowing capacities and available liquidity. HEI increased its revolving commitments available under the HEI Revolving Facility to $300 million from $175 million and extended the termination date to September 5, 2030 from May 14, 2027. Hawaiian Electric increased its revolving commitments available under the Hawaiian Electric Revolving Facility to $300 million from $200 million and extended the termination date to September 4, 2026, subject to an automatic extension to the earlier of (i) such date specified in a final order or approval of the PUC and (ii) if such order or approval is obtained, September 5, 2030. The Hawaiian Electric Revolving Facility also allows for commitment increases of up to an additional $75 million, subject to customary conditions. Refer to Note 6 of the Consolidated Financial Statements for additional terms of the amended credit facilities.

In addition, on September 18, 2025, Hawaiian Electric issued $500 million in unsecured senior notes with an interest rate of 6.00% and maturing on October 1, 2033 (refer to Note 7 of the Consolidated Financial Statements for additional terms of the unsecured senior notes). A portion of the proceeds was used to repay the outstanding balance of the Utilities’ revolving and term loan facilities and the remaining proceeds are intended to be used to 1) finance capital expenditures, 2) repay long-term debt and short-term debt used to finance or refinance capital expenditures, and 3) reimburse funds used for the payment of capital expenditures.

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In June 2025, the Utilities submitted a request with the PUC to terminate or suspend the ATRs. Beginning in 2024 and continuing into 2026, HEI has embarked on a strategy to divest all of its affiliated companies other than the Utilities, intending for the Utilities to be HEI’s sole operating companies. Termination of the ATRs would allow implementation of a corporate integration, under which all HEI employees would move to Hawaiian Electric. A few officer positions would manage and operate both HEI and Hawaiian Electric (dual-hatted executives) and the HEI and Hawaiian Electric boards of directors would be composed of a single set of individuals. In September 2025, the PUC dismissed the request without prejudice. In its order, the PUC provided guidance on the topics to be addressed in any future request. On October 31, 2025 HEI and Hawaiian Electric filed a revised request with the PUC to terminate or suspend the ATRs. After responding to information requests from the Consumer Advocate, the Consumer Advocate issued its statement of position on February 4, 2026. The Consumer Advocate supported the approval of the request with the condition that before any recovery of expenses related to HEI, the Utilities should give the Consumer Advocate and the PUC advance notice of likely changes to recovery. HEI and Hawaiian Electric informed the PUC that the docket was ready for decision making on February 5, 2026.

Following a hearing on December 17, 2025, at which the court orally granted final approval of the Class Settlement Agreement and no class member objected, the Maui Circuit Court entered a written order granting such final approval on January 26, 2026. The deadline to file appeals from that order was February 25, 2026, and as of February 26, 2026, no appeal appeared on the docket. As it appears no party appealed the final approval of the Class Settlement Agreement, it appears that such final approval order is now final and unappealable.

The tort Settlement Agreements do not resolve claims with insurers who have asserted or could assert subrogation claims in separate lawsuits, and such insurers are not parties to the Settlement Agreements, but resolving such claims in the manner set forth in the Settlement Agreements (summarized below) is a condition that must be satisfied before any payment is due from the defendants. On December 30, 2025, the court entered judgment in favor of the defendants in the two principal direct subrogation actions brought by various insurers as to all direct subrogation claims except for 16 such claims associated with insureds who had opted out of the class settlement and had not yet settled. On January 21, 2026, certain plaintiff insurers appealed the grant of summary judgment in these two actions. No briefing schedules in these appeals have been set. On November 5, 2025, the parties signed a binding term sheet to settle the Securities Action (the Securities Action Term Sheet) following negotiations facilitated by a mediator. On January 5, 2026, the parties executed a definitive stipulation of settlement (the Securities Action Stipulation of Settlement) that will provide for the complete resolution of the Securities Action in exchange for a payment by the Company of $47.8 million as part of the overall settlement described below. The settlement of the Securities Action is conditioned on, among other things, approval by the boards of the Company and Hawaiian Electric; the finalization and court approval of the Securities Actions stipulation of settlement; the finalization by February 26, 2026 and subsequent court approval of the stipulation of settlement in the Derivative Actions (defined and discussed below); and entry of a judgment of dismissal following final court approval. In connection with the settlement of the Securities Action, there will be no admission of liability by the Company or any defendants and the Company, the defendants, and related persons will receive a customary full release of all claims. On February 26, 2026, the United States District Court for the Northern District of California held a hearing to determine whether to preliminarily approve the Securities Action Stipulation of Settlement. Following the hearing, the court indicated that it will issue an order and set a hearing date for the final approval of the settlement.

In connection with the execution of the Securities Action Term Sheet, HEI accrued, as of December 31, 2025, $47.8 million, and concurrently recorded an insurance reimbursement receivable of an equivalent amount as the recovery of the agreed settlement payment under its directors and officers liability insurance policy is deemed probable.

In addition, on November 5, 2025, the parties signed a binding term sheet (the Derivative Litigation Term Sheet) to settle all of the outstanding derivative actions described above (the Derivative Actions). The Derivative Litigation Term Sheet was signed following negotiations facilitated by a mediator. On December 31, 2025, the parties executed a definitive settlement agreement (the Derivative Litigation Settlement Agreement) that provides for a complete resolution of the claims asserted in the Derivative Actions in exchange for a payment on behalf of the individual defendants by the Company’s insurers in the amount of $100 million, which will be used in part to pay the $47.8 million for the Securities Action Stipulation of Settlement and fees and expenses for plaintiffs’ counsel. The settlement of the Derivative Actions is conditioned on, among other things, the approval by the boards of HEI and Hawaiian Electric (including their independent directors) of the Derivative Litigation Settlement Agreement; final court approval of the Derivative Litigation Settlement Agreement; and entry of final judgment and orders of dismissal in the Derivative Actions. The plaintiffs’ counsel intends to request court approval for attorneys’ fees of 25% of the settlement proceeds, plus expenses not to exceed $475,000. In connection with the settlement of the Derivative Actions, there will be no admissions of liability, and the defendants and related persons will receive a customary full release of all claims. On March 9, 2026, the United States District Court for the District of Hawaii is scheduled to hold a hearing to determine whether to preli

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