Short-term borrowings

12 Months Ended

Dec. 31, 2020


Note 5 · Short-term borrowings

Commercial paper and bank term loan. As of December 31, 2020 and 2019, HEI had $65 million and $97 million of commercial paper outstanding, respectively. On April 20, 2020, HEI closed on a $65 million 364-day term loan (HEI term loan) from a syndicate of two banks. The HEI term loan bears interest at a floating rate at HEI’s option of either (i) a rate equal to an alternate base rate as defined in the agreement or (ii) a rate equal to an adjusted London interbank offered rate, as defined in the agreement, plus an applicable margin, and matures on April 19, 2021. The proceeds of the HEI term loan were used to pay down the balance on the HEI Facility, which increased the available borrowing capacity on the HEI Facility by $65 million. The HEI term loan contains provisions requiring the maintenance by HEI of certain financial ratios substantially consistent with those in HEI’s existing, amended and restated revolving unsecured credit agreement. The HEI term loan may be prepaid without penalty at any time, but proceeds from any debt capital market transactions over $50 million must first be applied to pay down the HEI term loan. HEI drew $50 million of unsecured senior notes on December 29, 2020 and used the proceeds to pay down the HEI term loan on December 30, 2020. On January 29, 2021, the remaining HEI term loan balance of $15 million was repaid. The weighted-average interest rate of HEI’s outstanding commercial paper, as of December 31, 2020 and 2019 was 0.8% and 2.3%, respectively. The interest rate of HEI’s term loan, as of December 31, 2020, was 1.9%.

As of December 31, 2020 and 2019, Hawaiian Electric had nil and $39 million of commercial paper outstanding, respectively. Additionally, on May 19, 2020, Hawaiian Electric paid off and terminated the $100 million term loan credit agreement dated as of December 23, 2019. In addition, Hawaiian Electric entered into a 364-day, $50 million term loan credit agreement that matures on April 19, 2021. The term loan credit agreement includes substantially the same financial covenant and customary representations and warranties, affirmative and negative covenants, and events of default (the occurrence of which may result in the loan outstanding becoming immediately due and payable) consistent with those in Hawaiian Electric’s existing, amended and restated revolving unsecured credit agreement. The loan may be prepaid without penalty at any time, but must be paid down if Hawaiian Electric receives proceeds from any debt capital market transactions over $75 million. Hawaiian Electric drew the full $50 million on May 19, 2020. On January 15, 2021, Hawaiian Electric paid off the $50 million term loan in conjunction with the terms of the loan credit agreement. The weighted-average interest rate of Hawaiian Electric’s outstanding commercial paper and bank term loan as of December 31, 2020 was 1.9%.

As of December 31, 2020 and 2019, HEI had three letters of credit outstanding in the aggregate amount of $6 million, on behalf of Hamakua Energy.

Credit agreements. HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of eight financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Credit Facilities), effective July 3, 2017, to amend and restate their respective previously existing revolving unsecured credit agreements. The $150 million HEI Facility and $200 million Hawaiian Electric Facility both will terminate on June 30, 2022. None of the facilities are collateralized. As of December 31, 2020 and 2019, no amounts were outstanding under the Credit Facilities.

Under the Credit Facilities, draws would generally bear interest, based on each company’s respective current long-term credit ratings, at the “Adjusted LIBO Rate,” as defined in the agreement, plus 1.375% and annual fees on undrawn commitments, excluding swingline borrowings, of 20 basis points. The Credit Facilities contain provisions for pricing adjustments in the event of a long-term ratings change based on the respective Credit Facilities’ ratings-based pricing grid, which includes the ratings by Fitch, Moody’s and S&P. Certain modifications were made to incorporate some updated terms and conditions customary for facilities of this type. The Credit Facilities continue to contain customary conditions that must be met in order to draw on them, including compliance with covenants (such as covenants preventing HEI’s/Hawaiian Electric’s subsidiaries from entering into agreements that restrict the ability of the subsidiaries to pay dividends to, or to repay borrowings from, HEI/Hawaiian Electric; and a covenant in Hawaiian Electric’s facility restricting Hawaiian Electric’s ability, as well as the ability of any of its subsidiaries, to guarantee additional indebtedness of the subsidiaries if such additional debt would cause the subsidiary’s “Consolidated Subsidiary Funded Debt to Capitalization Ratio” to exceed 65%).

Under the HEI Facility, it is an event of default if HEI fails to maintain an unconsolidated “Capitalization Ratio” (funded debt) of 50% or less or if HEI no longer owns Hawaiian Electric or ASB. Under the Hawaiian Electric Facility, it is an event of default if Hawaiian Electric fails to maintain a “Consolidated Capitalization Ratio” (equity) of at least 35%, or if Hawaiian Electric is no longer owned by HEI.

The Credit Facilities will be maintained to support each company’s respective short-term commercial paper program, but may be drawn on to meet each company’s respective working capital needs and general corporate purposes.

On April 20, 2020, Hawaiian Electric closed on a $75 million 364-day revolving credit agreement (364-day Revolver) with a syndicate of four banks. Under the 364-day Revolver, draws bear interest at a floating rate at Hawaiian Electric’s option of either (i) a rate equal to an alternate base rate as defined in the agreement or (ii) a rate equal to an adjusted London interbank offered rate, as defined in the agreement, plus an applicable margin, requires annual fees for undrawn amounts, and terminates on April 19, 2021. The 364-day Revolver includes substantially the same financial covenant and customary representations and warranties, affirmative and negative covenants, and events of default (the occurrence of which may result in the loan outstanding becoming immediately due and payable) consistent with those in Hawaiian Electric’s existing, amended and restated revolving unsecured credit agreement. As of December 31, 2020, Hawaiian Electric had no amounts outstanding on this revolving credit agreement.