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Segment financial information
 12 Months Ended
Dec. 31, 2017
Segment Reporting [Abstract]  
Segment financial information
2 · Segment financial information
The electric utility and bank segments are strategic business units of the Company that offer different products and services and operate in different regulatory environments. The accounting policies of the segments are the same as those described for the Company in the summary of significant accounting policies, except as otherwise indicated and except that federal and state income taxes for each segment are calculated on a “stand-alone” basis. HEI evaluates segment performance based on net income. Each segment accounts for intersegment sales and transfers as if the sales and transfers were to third parties, that is, at current market prices. Intersegment revenues consist primarily of Hamakua Energy revenues, interest, rent and preferred stock dividends.
Electric utility
Hawaiian Electric and its wholly-owned operating subsidiaries, Hawaii Electric Light and Maui Electric, are public electric utilities in the business of generating, purchasing, transmitting, distributing and selling electric energy on all major islands in Hawaii other than Kauai, and are regulated by the PUC. The utility subsidiaries are aggregated within the electric utility segment because they: (1) are involved in the business of supplying electric energy in the same geographical location (i.e., the State of Hawaii), (2) have similar production processes that include electric generators (e.g., conventional oil-fired steam units and combustion turbines), (3) serve similar customers within their franchise territories (e.g., residential, commercial and industrial customers), (4) use similar electric grids to distribute the energy to their customers, (5) are regulated by the PUC and undergo similar rate-making processes, (6) have similar economic characteristics and (7) perform financial reporting oversight and management of the business at the consolidated level.
Bank
ASB is a federally chartered savings bank providing a full range of banking services to individual and business customers through its branch system in Hawaii. ASB is subject to examination and comprehensive regulation by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), and is subject to reserve requirements established by the Board of Governors of the Federal Reserve System.
Other
“Other” includes amounts for the holding companies (HEI and ASB Hawaii, Inc.), other subsidiaries not qualifying as reportable segments and intercompany eliminations.
Acquisition of Hamakua power plant. In September 2017, HEI formed new 100% owned subsidiaries--Pacific Current, LLC and its subsidiary Hamakua Holdings, LLC and its subsidiary, Hamakua Energy, LLC. On November 24, 2017, Hamakua Energy, LLC acquired Hamakua Energy Partners, L.P.’s 60-MW combined cycle power plant and other assets from affiliates of ArcLight Capital Partners, a private equity firm focused on energy infrastructure investments. The plant sells the power it produces only to Hawaii Electric Light under an existing power purchase agreement (PPA) that expires in 2030. On December 26, 2017, Hamakua Energy, LLC closed on $67 million of non-recourse project financing in the form of 4.02% senior secured notes due December 31, 2030.
Acquisition of a Solar + Storage Power Purchase Agreement (PPA). In November 2017, HEI, through its wholly-owned subsidiary Pacific Current, LLC, formed a new subsidiary, Mauo Holdings, LLC and its subsidiary Mauo, LLC. On February 2, 2018, Mauo, LLC executed definitive agreements to acquire a solar-plus-storage PPA for a multi-site, commercial-scale project that will provide 8.6 MW of solar capacity and 42.3 MWH of storage capacity on the islands of Maui and Oahu. The PPA has a 15-year term with an option to extend for an additional five years. The system will be constructed by a third party contractor under an Engineering, Procurement and Construction (EPC) contract that was contemporaneously negotiated and executed by Mauo, LLC. The EPC contract provides a fixed price for the purchase of the completed system, a project completion schedule and performance obligations designed to match the requirements of the PPA. Mauo, LLC plans to fund the construction of the project with a construction facility that will be repaid at the commercial operation date (ultimately with cash from investment tax credits, state renewable tax credits and non-recourse project debt). The facilities are expected to be operational in 2019.
Segment financial information was as follows:
(in thousands)
Electric utility
 
Bank

 
Other

 
Total

2017
 

 
 

 
 

 
 

Revenues from external customers
$
2,257,455

 
$
297,640

 
$
530

 
$
2,555,625

Intersegment revenues (eliminations)
111

 
—

 
(111
)
 
—

Revenues
2,257,566

 
297,640

 
419

 
2,555,625

Depreciation and amortization
201,282

 
19,416

 
1,300

 
221,998

Interest expense, net
69,637

 
12,156

 
9,335

 
91,128

Income (loss) before income taxes
205,145

 
98,716

 
(27,281
)
 
276,580

Income taxes (benefit)
83,199

 
31,719

 
(5,525
)
 
109,393

Net income (loss)
121,946

 
66,997

 
(21,756
)
 
167,187

Preferred stock dividends of subsidiaries
1,995

 
—

 
(105
)
 
1,890

Net income (loss) for common stock
119,951

 
66,997

 
(21,651
)
 
165,297

Capital expenditures
441,598

 
53,272

 
317

 
495,187

Assets (at December 31, 2017)
6,196,281

 
6,798,659

 
104,888

 
13,099,828

2016
 

 
 

 
 

 
 

Revenues from external customers
$
2,094,224

 
$
285,924

 
$
506

 
$
2,380,654

Intersegment revenues (eliminations)
144

 
—

 
(144
)
 
—

Revenues
2,094,368

 
285,924

 
362

 
2,380,654

Depreciation and amortization
193,996

 
9,813

 
937

 
204,746

Interest expense, net
66,824

 
12,755

 
8,979

 
88,558

Income before income taxes
229,113

 
87,352

 
57,376

 
373,841

Income taxes
84,801

 
30,073

 
8,821

 
123,695

Net income
144,312

 
57,279

 
48,555

 
250,146

Preferred stock dividends of subsidiaries
1,995

 
—

 
(105
)
 
1,890

Net income for common stock
142,317

 
57,279

 
48,660

 
248,256

Capital expenditures
320,437

 
9,394

 
212

 
330,043

Assets (at December 31, 2016)
5,975,428

 
6,421,357

 
28,721

 
12,425,506

2015
 

 
 

 
 

 
 

Revenues from external customers
$
2,335,135

 
$
267,733

 
$
114

 
$
2,602,982

Intersegment revenues (eliminations)
31

 
—

 
(31
)
 
—

Revenues
2,335,166

 
267,733

 
83

 
2,602,982

Depreciation and amortization
186,319

 
7,928

 
1,338

 
195,585

Interest expense, net
66,370

 
11,326

 
10,780

 
88,476

Income (loss) before income taxes
217,131

 
83,812

 
(46,155
)
 
254,788

Income taxes (benefit)
79,422

 
29,082

 
(15,483
)
 
93,021

Net income (loss)
137,709

 
54,730

 
(30,672
)
 
161,767

Preferred stock dividends of subsidiaries
1,995

 
—

 
(105
)
 
1,890

Net income (loss) for common stock
135,714

 
54,730

 
(30,567
)
 
159,877

Capital expenditures
350,161

 
13,470

 
173

 
363,804

Assets (at December 31, 2015)
5,672,210

 
6,014,755

 
95,053

 
11,782,018


Intercompany electricity sales of the Utilities to the bank and “other” segments are not eliminated because those segments would need to purchase electricity from another source if it were not provided by the Utilities and the profit on such sales is nominal.
Bank fees that ASB charges the Utilities and “other” segments are not eliminated because those segments would pay fees to another financial institution if they were to bank with another institution and the profit on such fees is nominal.
Hamakua Energy's profit on electricity sales to Hawaii Electric Light are not eliminated because profit on sales to regulated affiliates is not required to be eliminated because the PPA was approved by the PUC and it is probable that, through the ratemaking process, future revenue from Hawaii Electric Light’s sale of the electricity will approximate its purchase price from Hamakua Energy under the PPA.