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Share-based compensation | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Share-based compensation |
Note 11 · Share-based compensation
Under the 2010 Equity and Incentive Plan, as amended, HEI can issue shares of common stock as incentive compensation to selected employees in the form of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares and other share-based and cash-based awards. The 2010 Equity and Incentive Plan (original EIP) was amended and restated effective March 1, 2014 (EIP) and an additional 1.5 million shares were added to the shares available for issuance under these programs. As of December 31, 2021, approximately 2.9 million shares remained available for future issuance under the terms of the EIP, assuming recycling of shares withheld to satisfy statutory tax liabilities relating to EIP awards, including an estimated 0.5 million shares that could be issued upon the vesting of outstanding restricted stock units and the achievement of performance goals for awards outstanding under long-term incentive plans (assuming that such performance goals are achieved at maximum levels). Restricted stock units awarded under the EIP in 2021, 2020, 2019 and 2018 will vest and be issued in unrestricted stock in three (2021) or four (2020, 2019, 2018) equal annual increments on the anniversaries of the grant date and are forfeited to the extent they have not become vested for terminations of employment during the vesting period, except that pro-rata vesting is provided for terminations due to death, disability and retirement. Restricted stock units expense has been recognized in accordance with the fair-value-based measurement method of accounting. Dividend equivalent rights are accrued quarterly and are paid at the end of the restriction period when the associated restricted stock units vest. Stock performance awards granted under the 2021-23, 2020-22 and 2019-21 long-term incentive plans (LTIP) entitle the grantee to shares of common stock with dividend equivalent rights once service conditions and performance conditions are satisfied at the end of the three-year performance period. LTIP awards are forfeited for terminations of employment during the performance period, except that pro-rata participation is provided for terminations due to death, disability and retirement based upon completed months of service after a minimum of 12 months of service in the performance period. Compensation expense for the stock performance awards portion of the LTIP has been recognized in accordance with the fair-value-based measurement method of accounting for performance shares. Under the 2011 Nonemployee Director Stock Plan (2011 Director Plan), HEI can issue shares of common stock as compensation to nonemployee directors of HEI, Hawaiian Electric and ASB. In June 2019, an additional 300,000 shares were made available for issuance under the 2011 Director Plan. As of December 31, 2021, there were 244,347 shares remaining available for future issuance under the 2011 Director Plan. Share-based compensation expense and the related income tax benefit were as follows:
(in millions) | 2021 |  | 2020 |  | 2019
HEI consolidated |  |  |  |  |
Share-based compensation expense 1 | $ | 9.1 |  |  | $ | 5.8 |  |  | $ | 10.0 |
Income tax benefit | 1.4 |  |  | 1.0 |  |  | 1.4 |
Hawaiian Electric consolidated |  |  |  |  |
Share-based compensation expense 1 | 2.7 |  |  | 1.8 |  |  | 3.2 |
Income tax benefit | 0.6 |  |  | 0.4 |  |  | 0.6 |
1 For 2021, 2020 and 2019, the Company has not capitalized any share-based compensation. Stock awards. HEI granted HEI common stock to nonemployee directors under the 2011 Director Plan as follows:
(dollars in millions) | 2021 |  | 2020 |  | 2019
Shares granted | 29,816 |  |  | 36,100 |  |  | 36,344 |
Fair value | $ | 1.3 |  |  | $ | 1.3 |  |  | $ | 1.6 |
Income tax benefit | 0.3 |  |  | 0.3 |  |  | 0.4 |
The number of shares issued to each nonemployee director of HEI, Hawaiian Electric and ASB is determined based on the closing price of HEI common stock on the grant date. Restricted stock units. Information about HEI’s grants of restricted stock units was as follows:
| 2021 |  | 2020 |  | 2019
| Shares |  | (1) |  | Shares |  | (1) |  | Shares |  | (1)
Outstanding, January 1 | 193,939 |  |  | $ | 40.89 |  |  | 207,641 |  |  | $ | 35.36 |  |  | 200,358 |  |  | $ | 33.05 |
Granted | 137,582 |  |  | 34.66 |  |  | 78,595 |  |  | 47.99 |  |  | 96,565 |  |  | 37.82 |
Vested | (79,623) |  |  | 38.51 |  |  | (77,719) |  |  | 34.19 |  |  | (76,813) |  |  | 32.61 |
Forfeited | (18,450) |  |  | 39.92 |  |  | (14,578) |  |  | 36.20 |  |  | (12,469) |  |  | 34.20 |
Outstanding, December 31 | 233,448 |  |  | $ | 38.10 |  |  | 193,939 |  |  | $ | 40.89 |  |  | 207,641 |  |  | $ | 35.36 |
Total weighted-average grant-date fair value of shares granted (in millions) | $ | 4.8 |  |  |  |  | $ | 3.8 |  |  |  |  | $ | 3.7 |  |  |
(1)Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant. For 2021, 2020 and 2019, total restricted stock units and related dividends that vested had a fair value of $3.0 million, $4.2 million and $3.2 million, respectively, and the related tax benefits were $0.6 million, $0.7 million and $0.5 million, respectively. As of December 31, 2021, there was $4.6 million of total unrecognized compensation cost related to the nonvested restricted stock units. The cost is expected to be recognized over a weighted-average period of 2.0 years. Long-term incentive plan payable in stock. The 2019-21, 2020-22 and 2021-23 LTIPs provide for performance awards under the EIP of shares of HEI common stock based on the satisfaction of performance goals, including a market condition goal. The number of shares of HEI common stock that may be awarded is fixed on the date the grants are made, subject to the achievement of specified performance levels and calculated dividend equivalents. The potential payout varies from 0% to 200% of the number of target shares, depending on the achievement of the goals. The market condition goal is based on HEI’s total shareholder return (TSR) compared to the Edison Electric Institute Index over the relevant three-year period. The other performance condition goals relate to EPS growth, return on average common equity (ROACE), renewable portfolio standards, Hawaiian Electric’s net income growth, ASB’s efficiency ratio and strategic initiatives and Pacific Current’s EBITDA growth and return on average invested capital. LTIP linked to TSR. Information about HEI’s LTIP grants linked to TSR was as follows:
| 2021 |  | 2020 |  | 2019
| Shares |  | (1) |  | Shares |  | (1) |  | Shares |  | (1)
Outstanding, January 1 | 89,222 |  |  | $ | 42.10 |  |  | 96,402 |  |  | $ | 39.62 |  |  | 65,578 |  |  | $ | 38.81 |
Granted | 46,024 |  |  | 41.12 |  |  | 24,630 |  |  | 48.62 |  |  | 35,215 |  |  | 41.07 |
Vested (issued or unissued and cancelled) | (32,355) |  |  | 38.20 |  |  | (29,409) |  |  | 39.51 |  |  | — |  |  | — |
Forfeited | (11,917) |  |  | 43.07 |  |  | (2,401) |  |  | 41.22 |  |  | (4,391) |  |  | 39.19 |
Outstanding, December 31 | 90,974 |  |  | $ | 42.86 |  |  | 89,222 |  |  | $ | 42.10 |  |  | 96,402 |  |  | $ | 39.62 |
Total weighted-average grant-date fair value of shares granted (in millions) | $ | 1.9 |  |  |  |  | $ | 1.2 |  |  |  |  | $ | 1.4 |  |  |
(1)Weighted-average grant-date fair value per share determined using a Monte Carlo simulation model. The grant date fair values of the shares were determined using a Monte Carlo simulation model utilizing actual information for the common shares of HEI and its peers for the period from the beginning of the performance period to the grant date and estimated future stock volatility of HEI and its peers over the remaining three-year performance period. The expected stock volatility assumptions for HEI and its peer group were based on the three-year historic stock volatility. A dividend assumption is not required for the Monte Carlo simulation because the grant payout includes dividend equivalents and projected returns include the value of reinvested dividends. The following table summarizes the assumptions used to determine the fair value of the LTIP awards linked to TSR and the resulting fair value of LTIP awards granted:
| 2021 |  | 2020 |  | 2019
Risk-free interest rate | 0.19 | % |  | 1.39 | % |  | 2.48 | %
Expected life in years | 3 |  | 3 |  | 3
Expected volatility | 29.9 | % |  | 13.1 | % |  | 15.8 | %
Range of expected volatility for Peer Group | 25.6% to 102.9% |  | 13.6% to 95.4% |  | 15.0% to 73.2%
Grant date fair value (per share) | $ | 41.12 |  |  | $ | 48.62 |  |  | $ | 41.07 |
For 2021 and 2020, total vested LTIP awards linked to TSR and related dividends had a fair value of $0.8 million and $2.6 million, respectively, and the related tax benefits were $0.2 million and $0.4 million, respectively. There were no share-based LTIP awards linked to TSR with a vesting date in 2019. As of December 31, 2021, there was $1.0 million of total unrecognized compensation cost related to the nonvested performance awards payable in shares linked to TSR. The cost is expected to be recognized over a weighted-average period of 1.6 years. LTIP awards linked to other performance conditions. Information about HEI’s LTIP awards payable in shares linked to other performance conditions was as follows:
| 2021 |  | 2020 |  | 2019
| Shares |  | (1) |  | Shares |  | (1) |  | Shares |  | (1)
Outstanding, January 1 | 220,715 |  |  | $ | 41.03 |  |  | 403,768 |  |  | $ | 35.15 |  |  | 276,169 |  |  | $ | 33.80 |
Granted | 184,102 |  |  | 34.37 |  |  | 98,522 |  |  | 48.10 |  |  | 140,855 |  |  | 37.78 |
Vested | (43,155) |  |  | 34.12 |  |  | (135,804) |  |  | 33.48 |  |  | — |  |  | — |
Increase above target (cancelled) | (7,646) |  |  | 39.06 |  |  | (136,163) |  |  | 36.44 |  |  | 4,314 |  |  | 33.53 |
Forfeited | (47,674) |  |  | 38.74 |  |  | (9,608) |  |  | 38.36 |  |  | (17,570) |  |  | 34.66 |
Outstanding, December 31 | 306,342 |  |  | $ | 38.42 |  |  | 220,715 |  |  | $ | 41.03 |  |  | 403,768 |  |  | $ | 35.15 |
Total weighted-average grant-date fair value of shares granted (at target performance levels) (in millions) | $ | 6.3 |  |  |  |  | $ | 4.7 |  |  |  |  | $ | 5.3 |  |  |
(1)Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant. For 2021 and 2020, total vested LTIP awards linked to other performance conditions and related dividends had a fair value of $1.7 million and $7.6 million, respectively, and the related tax benefits were $0.4 million and $1.2 million, respectively. There were no share-based LTIP awards linked to other performance conditions with a vesting date in 2019. As of December 31, 2021, there was $3.4 million of total unrecognized compensation cost related to the nonvested shares linked to performance conditions other than TSR. The cost is expected to be recognized over a weighted-average period of 1.7 years.

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