Hawaiian Electric’s stock slides 26% as S&P downgrades credit to junk on risk from Maui wildfire lawsuits

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Hawaiian Electric Industries Inc.’s stock added to losses Tuesday, tumbling 26% after S&P Global Ratings downgraded its rating on the utility company to junk.

S&P Global Ratings cut its rating on the company
HE,
+2.86%
to BB- and placed it on CreditWatch negative, meaning the rating agency could downgrade it again in the near term.

The devastating wildfires in Maui have killed nearly 100 people, with the death toll expected to rise in the coming days, and destroyed about 2,200 structures. S&P Global cited FEMA putting damages at more than $5.5 billion, or more than twice the company’s book equity of $2.2 billion.

Class-action lawsuits have been filed against Hawaiian Electric Industries and subsidiaries, including Maui Electric Co. Ltd., which “has increased the risk of a material deterioration in HEI’s credit quality, should the plaintiffs prevail,” S&P Global said.

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

Moreover, the wildfires “destroyed a significant segment of HEI’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, despite the company’s use of a revenue decoupling mechanism for normal sales volume variations.”

The stock has fallen about 62% in the year to date, while the S&P 500
SPX,
-0.16%
has gained 16%.

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