NEW YORK — Shares of Hawaiian Electric Co.'s parent fell more than 18% by market close Friday, one day after the utility was sued by Maui County over the fires that devastated Lahaina earlier this month.
Maui County accused Hawaiian Electric of negligently failing to shut off power despite exceptionally high winds and dry conditions — saying that the destruction from the deadly Aug. 8 fires could have been avoided if the company had taken essential actions. Outrage towards Hawaiian Electric grew as witness accounts and video indicated that sparks from power lines ignited fires as utility poles snapped in the winds, which were driven by a passing hurricane.
In the weeks since the fires — which killed at least 115 people and left an unknown number of others missing — broke out, Hawaiian Electric Industries Inc.'s market capitalization has fallen from $4.1 billion to $1.1 billion.
Late Thursday, the company said it would suspend its quarterly dividend of 36 cents per share, starting in the third quarter, in order to improve its cash position.
In a Friday report, analysts at Wells Fargo said that Hawaiian Electric is “potentially under severe financial duress” and “could face a future liquidity event” — pointing to the company's struggles to bring in external funds, recent downgrading of credit ratings from the S&P, as well as the costs of normal operating expenses and an upcoming $100 million debt maturity for the utility.
“The investigative and legal processes needed to potentially absolve the utility of the mounting wildfire-related liabilities are likely multiyear," the analysts wrote. "As such, we remain of the opinion that a bankruptcy reorganization is still perhaps the most plausible path forward given what appears to be an inevitable liquidity crunch.”
Beyond litigation from Maui County, Hawaiian Electric is also facing several lawsuits from Lahaina residents as well as one from some of its own investors, who accused it of fraud in a federal lawsuit Thursday, alleging that it failed to disclose that its wildfire prevention and safety measures were inadequate. Hawaiian Electric serves 95% of Hawaii’s electric customers.
“Nobody likes to turn the power off — it’s inconvenient — but any utility that has significant wildfire risk, especially wind-driven wildfire risk, needs to do it and needs to have a plan in place,” Michael Wara, a wildfire expert who is director of the Climate and Energy Policy Program at Stanford University, told The Associated Press last week. “In this case, the utility did not.”
A drought in the region had also left plants, including invasive grasses, dangerously dry. In Thursday's suit, Maui County alleged that Hawaiian Electric knew that high winds “would topple power poles, knock down power lines, and ignite vegetation" — pointing the utility's duty to properly maintain and repair equipment, as well as trim vegetation to prevent contact.
In response to Thursday’s suit, Hawaiian Electric said that it was “very disappointed that Maui County chose this litigious path while the investigation is still unfolding" — adding that the company's “primary focus in the wake of this unimaginable tragedy has been to do everything we can to support not just the people of Maui, but also Maui County.”
Wells Fargo's analysts on Friday also called Maui County's lawsuit “troublesome” — writing that “Maui County’s preparation for the high wind event and response after fires broke out was less than perfect,” based on media reports.