Hawaiian Electric shares plunge further as S&P downgrades utility to junk - CNBC

Hawaiian Electric shares plunge further as S&P downgrades utility to junk

Shares of Hawaiian Electric Industries were down 20.3% in afternoon trading Tuesday, extending this week's sharp losses, as S&P downgraded the credit rating on the electric utility to junk status in the wake of wildfires in Maui.

The S&P Global Ratings downgrade puts Hawaiian Electric at "BB-," and the credit agency placed the company on watch for further downgrades, citing damage caused to the company's customer base and class-action lawsuits filed against the company alleging it was responsible for the fires.

Hawaiian Electric did not immediately respond to a request for comment on the downgrade. The cause of the wildfires, which have killed at least 99 people and destroyed the coastal Maui town of Lahaina, is under investigation.

"The severity of these wildfires demonstrate higher wildfire risk for the company than previously contemplated," S&P wrote.

"The wildfires destroyed a significant segment of (Hawaiian Electric's) customer base that will take many years to restore, and as such, we expect a long-term weakening in the company's profitability measures."

Proposed class-action lawsuits filed on Saturday in state courts seek to represent Hawaii residents affected by the wildfires — the deadliest in more than 100 years, causing an estimated $5.5 billion in damage.

Lahaina residents in one of the lawsuits claimed Hawaiian Electric is responsible for the fires after failing to shut off power lines despite warnings from the National Weather Service that high winds could blow those lines down and spark fast-spreading wildfires.

"While the full resolution of these lawsuits may take years, should the plaintiffs prevail, the company's financial measures would materially deteriorate," S&P wrote.

On Monday, Hawaiian Electric's stock fell more than 30% and hit a 13-year low amid increasing scrutiny over whether the utility company's equipment might have played any role in the deadly wildfires. Its shares are down about 48% for the week to date.

Hawaiian Electric Vice President Jim Kelly told CNN on Sunday that the company does not comment on pending litigation and that the company was cooperating with the investigation into the cause of the fires. He added that Hawaiian Electric does not have a formal shut-off program and precautionary shut-offs have to be arranged with first responders, CNN reported.

The company has not responded to multiple requests from Reuters about the lawsuits.

Also on Tuesday, brokerage Guggenheim cut its price target on the company's stock to $18 from $32. The stock was last at $17.11. Wells Fargo and Morningstar cut their price targets for Hawaiian Electric on Monday.

"Given the size of the utility and the potential liabilities in front of it, it's hard for us to imagine if the company will emerge from this tragic incident in its current form," the Guggenheim analysts said.