Hawaiian Electric Co. has aims to raise $500 million through the sale of senior notes, or bonds, that will mature in eight years. The sale is expected to close next week.
The utility will use the net proceeds from the offering to finance capital expenditures, as well as repay or refinance debt, according to an announcement Thursday from its parent company, Hawaiian Electric Industries.
Bloomberg reported earlier this week, citing unnamed sources with knowledge of the matter, that JPMorgan Chase & Co. was "holding meeting with investors over a possible high-yield bond sale for Hawaiian Electric Industries Inc."
"The electricity supplier commenced calls with investors in the fixed-income market on Monday to discuss a potential $400 million senior, unsecured junk-bond deal, Hawaiian Electric said in a regulatory filing," Bloomberg wrote. "The bonds, which would mature in eight years, are expected to help fund capital expenditures and refinance debt."
You can find that filing with the U.S. Securities and Exchange Commission, or SEC, here.
"Like other electric utilities, raising debt to fund capital expenditures and refinance maturing debt is a routine part of running our business," Darren Pai, manager of external communications for Hawaiian Electric, told Aloha State Daily in an email. "This kind of issuance is slightly unique for us in that it is a 'high yield' issuance; this just means it is 'higher interest rate' than it would be if our credit ratings were better (e.g., 'investment grade'). Our credit ratings were downgraded to sub-investment grade following the Maui wildfires because we are now considered higher risk — in the way that a person with perceived higher repayment risk would have a higher credit card interest rate. You can think of the term 'high yield' to essentially mean slightly higher interest rate."
As far as capital expenditures go, Pai says that electric utilities are "capital intensive," and constantly making investments into their infrastructure — thats why "regularly raising debt, as well as equity, to fund the investments is so routine across the industry."
"Last year, for example, Hawaiian Electric invested about $330 million of capital," he explained. "The capital we invest strengthens the resilience of our electricity grid, protects our communities from wildfires and other extreme weather events, improves the reliability of our power plants and increases the amount of clean energy power generation — among other things."
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Stephanie Salmons can be reached at stephanie@alohastatedaily.com.
