ISI Group Reiterates Neutral Rating, $26 50 PT on Hawaiian Electric Industries on Settlement Agreement

In a report published Friday, ISI Group analyst Greg Gordon reiterated a Neutral rating and $26.50 price target on Hawaiian Electric Industries HE. In the report, Gordon noted, “HE priced 6.1m shares at $26.75/shr through a forward sale agreement that must be settled in 24 months, with a potential additional 900k shares to be issued if HE decides to cover any over-allotments. Also On 3/19/13, the Hawaii PUC approved the settlement agreement that allows HECO to record RAM revenues on 1/1 of each year in '14-'16 vs. the current RAM implementation date of 6/1 each year, eliminating 5 months of regulatory lag. In return, HECO will delay its GRC filing from mid'13 to at least Jan'14 and HELCO's 2013 GRC will be withdrawn. HELCO will still use its revenue balancing account and O&M RAM, although some extra cost management will be necessary to offset the full impact of the delayed rate review. As part of the deal, HE will record a $24mm after-tax write-off and include $52mm of recoverable costs in rate base for its investment in a new combustion turbine and a customer information system.” Hawaiian Electric Industries closed on Thursday at $27.29.