Hawaiian Electric’s Stock Plunges After Lawsuit Over Wildfires Ravaging Lahaina

The parent company of Hawaiian Electric Co. is reeling from an 18 percent drop in its stock value as of market close on Friday, just one day after Maui County filed a lawsuit against the utility in connection with the devastating fires that swept through Lahaina earlier this month.

The lawsuit accuses Hawaiian Electric of gross negligence by failing to shut off power despite extreme high winds and dry conditions, ultimately attributing the catastrophic Aug. 8 fires to the utility’s lack of crucial preventative actions. As scrutiny intensifies, eyewitness accounts and videos suggest that fires were ignited by sparks from power lines as utility poles succumbed to the ferocious winds driven by an approaching hurricane.

The aftermath of the fires, which tragically claimed at least 115 lives with many still missing, has dealt a severe blow to Hawaiian Electric Industries Inc.’s market capitalization, plummeting from $4.1 billion to $1.1 billion.

In response to these challenges, the company announced on Thursday its decision to suspend its quarterly dividend of 36 cents per share, starting from the third quarter, in an effort to bolster its cash reserves.

Market analysts at Wells Fargo have weighed in on the situation, expressing concern over Hawaiian Electric’s potential financial strain. They highlighted the utility’s struggles to secure external funds, recent credit rating downgrades by S&P, routine operational expenditures, and an upcoming $100 million debt maturity, all contributing to a precarious financial outlook. The analysts pointed to a probable liquidity crunch and even raised the prospect of bankruptcy reorganization, given the mounting wildfire-related liabilities and protracted investigative and legal processes.

Aside from Maui County’s legal action, Hawaiian Electric faces additional lawsuits from Lahaina residents and its own investors. The latter, in a federal lawsuit filed Thursday, alleged fraud on the company’s part, claiming it concealed inadequate wildfire prevention and safety measures. Covering 95 percent of Hawaii’s electric customers, Hawaiian Electric has come under heightened scrutiny for its handling of the crisis.

Wildfire expert Michael Wara of Stanford University emphasized that utilities facing substantial wildfire risk, particularly wind-driven, should prioritize safety measures, including power shut-offs when necessary. The lawsuit alleges that Hawaiian Electric was aware of the risk of toppling power poles and lines due to high winds, thus failing in its duty to properly maintain equipment and trim vegetation to prevent contact.

Hawaiian Electric’s response to Maui County’s suit expressed disappointment over the litigation’s timing amidst ongoing investigations. The company stressed its commitment to supporting the affected community and assisting Maui County in the aftermath of the tragedy.

Wells Fargo’s analysts questioned Maui County’s lawsuit, citing media reports that suggested the county’s preparation and response to the high wind event were less than optimal.

As the legal battle unfolds, the incident underscores the complexities of utility responsibilities in mitigating the impact of extreme weather events and the profound consequences of such failures on communities and financial stability.

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