Item 1.01 Entry into a Material Definitive Agreement.
On October 29, 2021, Hawaiian Electric and Kalaeloa Partners L.P. (Kalaeloa), a
limited partnership, entered into an Amended and Restated Power Purchase
Agreement for Firm Dispatchable Capacity and Energy (Amended and Restated PPA).
The Amended and Restated PPA amends and restates in its entirety the agreement
between Hawaiian Electric and Kalaeloa dated October 1988 (Original Agreement),
as amended by amendments number one through six, the most recent of which was
entered into on October 12, 2004 (the Original Agreement as so amended, Amended
Agreement). The Kalaeloa facility, which was completed in 1991, is a
combined-cycle operation, consisting of two oil-fired combustion turbines (CTs)
burning low sulfur fuel oil and a steam turbine that utilizes waste heat from
the CTs (Facility). The Facility is designed to sell sufficient steam to be a
qualifying facility under the Public Utility Regulatory Policies Act of 1978.
The Facility provides essential reliability services, as Hawaiian Electric
increases its reliance on intermittent renewable sources of energy. The Amended
and Restated PPA also provides Hawaiian Electric with a mechanism to require the
Facility to convert to the use of an alternative fuel, subject to certain
conditions, should Hawaiian Electric deem it necessary or desirable, including
for the purpose of meeting the requirements of the renewable portfolio standards
law, greenhouse gas reduction requirements, or State of Hawaii energy policy
objectives.
The Amended and Restated PPA provides for a term of 10 years from the date of
approval of the Amended and Restated PPA from the Hawaii Public Utilities
Commission (PUC), with the continued obligation during the term for Hawaiian
Electric to purchase 208 megawatts (MW) of firm capacity, with the fixed
capacity charge being reduced to $100/kilowatts (kW) per year for the full 208
MW, as compared to $164.35/kW per year for the first 180 MW and $112/kW per year
for the additional 28 MW, under the Amended Agreement. Additionally, the price
and structure for operations and maintenance charges under the Amended Agreement
were replaced in the Amended and Restated PPA with a variable operations and
maintenance charge of $0.005/kilowatt-hours (kWh) in 2022 dollars, escalating
with the gross domestic product implicit price deflator (GDPIPD), a fixed
operations and maintenance charge of $90/kW per year for 208 MW, and an overhaul
component charge of $425/hour (in 2022 dollars) that each combustion turbine
generation unit is operated plus the number of times that each combustion
turbine starts multiplied by 20 during the calendar month, escalating with
GDPIPD. In exchange, requirements for a minimum energy purchase were removed.
The Amended and Restated PPA also (i) includes updates and additions to the
performance standards in the Amended Agreement which provide greater flexibility
to Hawaiian Electric's system operators in the dispatch of the Facility, (ii)
requires Hawaiian Electric to reimburse Kalaeloa for any carbon (or similar) tax
imposed in connection with its operation of the Facility, subject to the
qualification that any order from the PUC approving the Amended and Restated PPA
will not be acceptable to Hawaiian Electric if it does not allow Hawaiian
Electric to recover such amounts through Hawaiian Electric's Purchase Power
Adjustment Clause, (iii) requires Kalaeloa to substitute the parent guaranty
provided as operating period security with a letter of credit, (iv) requires
Kalaeloa to engage in certain community engagement and outreach activities, and
(v) updates the cybersecurity provisions.
Subject to limited exceptions, the effectiveness of the Amended and Restated PPA
is subject to the satisfaction of certain conditions, including issuance by the
PUC of an order approving the Amended and Restated PPA that is acceptable to
Hawaiian Electric. When all such conditions have been satisfied, the Amended and
Restated PPA will become effective and supersede the Amended Agreement. Before
that time, the Amended and Restated PPA may be declared null and void by (A)
either party if (i) PUC approval is not received, under certain conditions,
within 12 months of submittal of the application for approval to the PUC, or
within 18 months in the event of an appeal, or (ii) if the request for PUC
approval
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is denied; or (B) Hawaiian Electric if Kalaeloa is in breach of any of its
representations, warranties or covenants, which in the Company's reasonable
judgment, either has a material adverse effect on Kalaeloa's ability to perform
under the Amended and Restated PPA, or materially increases Hawaiian Electric's
operational, financial or reputational risk associated with the Amended and
Restated PPA. Until the Amended and Restated PPA becomes effective and
supersedes the Amended Agreement, the Amended Agreement will remain in effect.
The foregoing description of the Amended and Restated PPA is a summary and
therefore does not include all of the terms and conditions of the agreement;
thus, it is qualified in its entirety by reference to the full text of the
Amended and Restated PPA, which will be filed as an exhibit to the registrant's
Annual Report on Form 10-K for fiscal year 2021.
HEI and Hawaiian Electric intend to continue to use HEI's website, www.hei.com,
as a means of disclosing additional information. Such disclosures will be
included on HEI's website in the Investor Relations section. Accordingly,
investors should routinely monitor such portions of HEI's website, in addition
to following HEI's, Hawaiian Electric's and American Savings Bank, F.S.B.'s
(ASB's) press releases, HEI's and Hawaiian Electric's SEC filings and HEI's
public conference calls and webcasts. The information on HEI's website is not
incorporated by reference in this document or in HEI's and Hawaiian Electric's
Securities and Exchange Commission (SEC) filings unless, and except to the
extent, specifically incorporated by reference. Investors may also wish to refer
to the PUC website at dms.puc.hawaii.gov/dms (Docket No. 2011-0351 for the
Kalaeloa Amended and Restated PPA proceeding) in order to review documents filed
with and issued by the PUC. No information on the PUC website is incorporated by
reference in this document or in HEI's and Hawaiian Electric's other SEC
filings.
Forward-looking statements

This report may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "will," "expects," "anticipates," "intends," "plans," "believes," "predicts," "estimates" or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic, political and market factors, among other things. These forward-looking statements are not guarantees of future performance. Forward-looking statements in this report should be read in conjunction with the "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" discussions (which are incorporated by reference herein) set forth in HEI's and Hawaiian Electric's Annual Report on Form 10-K for the year ended December 31, 2020 and HEI's and Hawaiian Electric's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 and HEI's other periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, ASB and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


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