HAWAIIAN ELECTRIC INDUSTRIES INC (Form: 10-Q, Received: 05/04/2016 13:24:38)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Exact Name of Registrant as	Commission	I.R.S. Employer
Specified in Its Charter	File Number	Identification No.
HAWAIIAN ELECTRIC INDUSTRIES, INC.	1-8503	99-0208097
and Principal Subsidiary
HAWAIIAN ELECTRIC COMPANY, INC.	1-4955	99-0040500

State of Hawaii

(State or other jurisdiction of incorporation or organization)

Hawaiian Electric Industries, Inc. – 1001 Bishop Street, Suite 2900, Honolulu, Hawaii 96813

Hawaiian Electric Company, Inc. – 900 Richards Street, Honolulu, Hawaii 96813

(Address of principal executive offices and zip code)

Hawaiian Electric Industries, Inc. – (808) 543-5662

Hawaiian Electric Company, Inc. – (808) 543-7771

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Hawaiian Electric Industries, Inc. Yes x No o		Hawaiian Electric Company, Inc. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Hawaiian Electric Industries, Inc. Yes x No o		Hawaiian Electric Company, Inc. Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Hawaiian Electric Industries, Inc. Yes o No x		Hawaiian Electric Company, Inc. Yes o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Hawaiian Electric Industries, Inc.	Large accelerated filer x	Hawaiian Electric Company, Inc.	Large accelerated filer o
	Accelerated filer o		Accelerated filer o
	Non-accelerated filer o		Non-accelerated filer x
	(Do not check if a smaller reporting company)		(Do not check if a smaller reporting company)
	Smaller reporting company o		Smaller reporting company o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.



Class of Common Stock		Outstanding April 28, 2016
Hawaiian Electric Industries, Inc. (Without Par Value)		107,890,279 Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value)		15,805,327 Shares (not publicly traded)

Hawaiian Electric Industries, Inc. (HEI) is the sole holder of Hawaiian Electric Company, Inc. (Hawaiian Electric) common stock.

This combined Form 10-Q is separately filed by HEI and Hawaiian Electric. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to the other registrant, except that information relating to Hawaiian Electric is also attributed to HEI.

Hawaiian Electric Industries, Inc. and Subsidiaries

Hawaiian Electric Company, Inc. and Subsidiaries

Form 10-Q—Quarter ended March 31, 2016

TABLE OF CONTENTS



Page No.
ii	Glossary of Terms
iv	Forward-Looking Statements

	PART I. FINANCIAL INFORMATION
1	Item 1.	Financial Statements

		Hawaiian Electric Industries, Inc. and Subsidiaries
1		Consolidated Statements of Income - three months ended March 31, 2016 and 2015
2		Consolidated Statements of Comprehensive Income - three months ended March 31, 2016 and 2015
3		Consolidated Balance Sheets - March 31, 2016 and December 31, 2015
4		Consolidated Statements of Changes in Shareholders’ Equity - three months ended March 31, 2016 and 2015
5		Consolidated Statements of Cash Flows - three months ended March 31, 2016 and 2015
		Hawaiian Electric Company, Inc. and Subsidiaries
6		Consolidated Statements of Income - three months ended March 31, 2016 and 2015
6		Consolidated Statements of Comprehensive Income - three months ended March 31, 2016 and 2015
7		Consolidated Balance Sheets - March 31, 2016 and December 31, 2015
8		Consolidated Statements of Changes in Common Stock Equity - three months ended March 31, 2016 and 2015
9		Consolidated Statements of Cash Flows - three months ended March 31, 2016 and 2015
10		Notes to Consolidated Financial Statements
61	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
61		HEI consolidated
64		Electric Utilities
74		Bank
80	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
81	Item 4.	Controls and Procedures

	PART II.	OTHER INFORMATION
83	Item 1.	Legal Proceedings
83	Item 1A.	Risk Factors
83	Item 5.	Other Information
84	Item 6.	Exhibits
85	Signatures

Hawaiian Electric Industries, Inc. and Subsidiaries

Hawaiian Electric Company, Inc. and Subsidiaries

Form 10-Q—Quarter ended March 31, 2016

GLOSSARY OF TERMS



Terms		Definitions
AES Hawaii		AES Hawaii, Inc.
AFUDC		Allowance for funds used during construction
AOCI		Accumulated other comprehensive income/(loss)
ARO		Asset retirement obligation
ASB		American Savings Bank, F.S.B., a wholly-owned subsidiary of ASB Hawaii, Inc.
ASB Hawaii		ASB Hawaii, Inc. (formerly American Savings Holdings, Inc.), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
CIP CT-1		Campbell Industrial Park 110 MW combustion turbine No. 1
CIS		Customer Information System
Company		Hawaiian Electric Industries, Inc. and its direct and indirect subsidiaries, including, without limitation, Hawaiian Electric Company, Inc. and its subsidiaries (listed under Hawaiian Electric); ASB Hawaii, Inc. and its subsidiary, American Savings Bank, F.S.B.; HEI Properties, Inc. (dissolved in 2015); and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.).
Consumer Advocate		Division of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
DER		Distributed Energy Resources
D&O		Decision and order
DG		Distributed generation
Dodd-Frank Act		Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DOH		Department of Health of the State of Hawaii
DRIP		HEI Dividend Reinvestment and Stock Purchase Plan
DSM		Demand-side management
ECAC		Energy cost adjustment clause
EGU		Electrical generating unit
EIP		2010 Equity and Incentive Plan, as amended and restated
EPA		Environmental Protection Agency — federal
EPS		Earnings per share
ERISA		Employee Retirement Income Security Act of 1974, as amended
EVE		Economic value of equity
Exchange Act		Securities Exchange Act of 1934
FASB		Financial Accounting Standards Board
FDIC		Federal Deposit Insurance Corporation
federal		U.S. Government
FERC		Federal Energy Regulatory Commission
FHLB		Federal Home Loan Bank
FHLMC		Federal Home Loan Mortgage Corporation
FNMA		Federal National Mortgage Association
FRB		Federal Reserve Board
GAAP		Accounting principles generally accepted in the United States of America
GHG		Greenhouse gas

GLOSSARY OF TERMS, continued



Terms		Definitions
GNMA		Government National Mortgage Association
Hawaii Electric Light		Hawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.
Hawaiian Electric		Hawaiian Electric Company, Inc., an electric utility subsidiary of Hawaiian Electric Industries, Inc. and parent company of Hawaii Electric Light Company, Inc., Maui Electric Company, Limited, HECO Capital Trust III (unconsolidated financing subsidiary), Renewable Hawaii, Inc. and Uluwehiokama Biofuels Corp.
HIE		Hawaii Independent Energy, LLC
HEI		Hawaiian Electric Industries, Inc., direct parent company of Hawaiian Electric Company, Inc., ASB Hawaii, Inc., HEI Properties, Inc. (dissolved in 2015) and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.)
HEIRSP		Hawaiian Electric Industries Retirement Savings Plan
HELOC		Home equity line of credit
Hpower		City and County of Honolulu with respect to a power purchase agreement for a refuse-fired plant
IPP		Independent power producer
Kalaeloa		Kalaeloa Partners, L.P.
KWH		Kilowatthour/s (as applicable)
LNG		Liquefied natural gas
LTIP		Long-term incentive plan
MATS		Mercury and Air Toxics Standards
Maui Electric		Maui Electric Company, Limited, an electric utility subsidiary of Hawaiian Electric Company, Inc.
Merger		As provided in the Merger Agreement, merger of Merger Sub I with and into HEI, with HEI surviving, and then merger of HEI with and into Merger Sub II, with Merger Sub II surviving as a wholly owned subsidiary of NEE
Merger Agreement		Agreement and Plan of Merger by and among HEI, NEE, Merger Sub II and Merger Sub I, dated December 3, 2014
Merger Sub I		NEE Acquisition Sub II, Inc., a Delaware corporation and a wholly owned subsidiary of NEE
Merger Sub II		NEE Acquisition Sub I, LLC, a Delaware limited liability company and a wholly owned subsidiary of NEE
MW		Megawatt/s (as applicable)
NEE		NextEra Energy, Inc.
NEM		Net energy metering
NII		Net interest income
O&M		Other operation and maintenance
OCC		Office of the Comptroller of the Currency
OPEB		Postretirement benefits other than pensions
PPA		Power purchase agreement
PPAC		Purchased power adjustment clause
PSIPs		Power Supply Improvement Plans
PUC		Public Utilities Commission of the State of Hawaii
PV		Photovaltaic
RAM		Rate adjustment mechanism
RBA		Revenue balancing account
RFP		Request for proposals
ROACE		Return on average common equity
RORB		Return on rate base
RPS		Renewable portfolio standards
SAR		Stock appreciation right
SEC		Securities and Exchange Commission
See		Means the referenced material is incorporated by reference
Spin-Off		The distribution to HEI shareholders of all of the common stock of ASB Hawaii immediately prior to the Merger
TDR		Troubled debt restructuring
Trust III		HECO Capital Trust III
Utilities		Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited
VIE		Variable interest entity

iii

FORWARD-LOOKING STATEMENTS

This report and other presentations made by Hawaiian Electric Industries, Inc. (HEI) and Hawaiian Electric Company, Inc. (Hawaiian Electric) and their subsidiaries 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 “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 (collectively, the Company), the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Risks, uncertainties and other important factors that could cause actual results to differ materially from those described in forward-looking statements and from historical results include, but are not limited to, the following:

•

the successful and timely completion of the proposed Merger with NextEra Energy, Inc. (NEE), which could be materially and adversely affected by, among other things, resolving the litigation brought in connection with the proposed Merger, obtaining (and the timing and terms and conditions of) required governmental and regulatory approvals, and the ability to maintain relationships with employees, customers or suppliers and to integrate the businesses;


•	the ability of ASB Hawaii, Inc. (ASB Hawaii) and its subsidiary, American Savings Bank, F.S.B. (ASB), to operate successfully after the Spin-Off;

•

international, national and local economic conditions, including the state of the Hawaii tourism, defense and construction industries, the strength or weakness of the Hawaii and continental U.S. real estate markets (including the fair value and/or the actual performance of collateral underlying loans held by ASB, which could result in higher loan loss provisions and write-offs), decisions concerning the extent of the presence of the federal government and military in Hawaii, the implications and potential impacts of U.S. and foreign capital and credit market conditions and federal, state and international responses to those conditions, and the potential impacts of global developments (including global economic conditions and uncertainties, unrest, the conflict in Syria, terrorist acts by ISIS or others, potential conflict or crisis with North Korea and potential pandemics);


•	the effects of future actions or inaction of the U.S. government or related agencies, including those related to the U.S. debt ceiling and monetary policy;


•	weather and natural disasters (e.g., hurricanes, earthquakes, tsunamis, lightning strikes, lava flows and the potential effects of climate change, such as more severe storms and rising sea levels), including their impact on the Company's and Utilities' operations and the economy;


•	the timing and extent of changes in interest rates and the shape of the yield curve;


•	the ability of the Company and the Utilities to access the credit and capital markets (e.g., to obtain commercial paper and other short-term and long-term debt financing, including lines of credit, and, in the case of HEI, to issue common stock) under volatile and challenging market conditions, and the cost of such financings, if available;


•	the risks inherent in changes in the value of the Company’s pension and other retirement plan assets and ASB’s securities available for sale;


•	changes in laws, regulations, market conditions and other factors that result in changes in assumptions used to calculate retirement benefits costs and funding requirements;


•	the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and of the rules and regulations that the Dodd-Frank Act requires to be promulgated;


•	increasing competition in the banking industry (e.g., increased price competition for deposits, or an outflow of deposits to alternative investments, which may have an adverse impact on ASB’s cost of funds);

•

the potential delay by the Public Utilities Commission of the State of Hawaii (PUC) in considering (and potential disapproval of actual or proposed) renewable energy proposals and related costs; reliance by the Utilities on outside parties such as the state, independent power producers (IPPs) and developers; and uncertainties surrounding technologies, solar power, wind power, proposed undersea cables, biofuels, environmental assessments required to meet renewable portfolio standards (RPS) goals and the impacts of implementation of the renewable energy proposals on future costs of electricity;

•

the ability of the Utilities to develop, implement and recover the costs of implementing the Utilities’ action plans and business model changes proposed and being developed in response to the four orders that the PUC issued in April 2014, in which the PUC: directed the Utilities to develop, among other things, Power Supply Improvement Plans, a Demand Response Portfolio Plan and a Distributed Generation Interconnection Plan; described the PUC’s inclinations on the future of Hawaii’s electric utilities and the vision, business strategies and regulatory policy changes required to align the Utilities’ business model with customer interests and the state’s public policy goals; and emphasized the need to “leap ahead” of other states in creating a 21st century generation system and modern transmission and distribution grids;


•	capacity and supply constraints or difficulties, especially if generating units (utility-owned or IPP-owned) fail or measures such as demand-side management (DSM), distributed generation (DG), combined heat and power or other firm capacity supply-side resources fall short of achieving their forecasted benefits or are otherwise insufficient to reduce or meet peak demand;


•	fuel oil price changes, delivery of adequate fuel by suppliers and the continued availability to the electric utilities of their energy cost adjustment clauses (ECACs);


•	the continued availability to the electric utilities or modifications of other cost recovery mechanisms, including the purchased power adjustment clauses (PPACs), rate adjustment mechanisms (RAMs) and pension and postretirement benefits other than pensions (OPEB) tracking mechanisms, and the continued decoupling of revenues from sales to mitigate the effects of declining kilowatthour sales;


•	the impact of fuel price volatility on customer satisfaction and political and regulatory support for the Utilities;


•	the risks associated with increasing reliance on renewable energy, including the availability and cost of non-fossil fuel supplies for renewable energy generation and the operational impacts of adding intermittent sources of renewable energy to the electric grid;


•	the growing risk that energy production from renewable generating resources may be curtailed and the interconnection of additional resources will be constrained as more generating resources are added to the Utilities' electric systems and as customers reduce their energy usage;


•	the ability of IPPs to deliver the firm capacity anticipated in their power purchase agreements (PPAs);


•	the potential that, as IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units to ensure the availability of their units;


•	the ability of the Utilities to negotiate, periodically, favorable agreements for significant resources such as fuel supply contracts and collective bargaining agreements;


•	new technological developments that could affect the operations and prospects of the Utilities and ASB or their competitors;


•	new technological developments, such as the commercial development of energy storage and microgrids, that could affect the operations of the Utilities;


•	cyber security risks and the potential for cyber incidents, including potential incidents at HEI, ASB and the Utilities (including at ASB branches and electric utility plants) and incidents at data processing centers they use, to the extent not prevented by intrusion detection and prevention systems, anti-virus software, firewalls and other general information technology controls;

•

federal, state, county and international governmental and regulatory actions, such as existing, new and changes in laws, rules and regulations applicable to HEI, the Utilities and ASB (including changes in taxation, increases in capital requirements, regulatory policy changes, environmental laws and regulations (including resulting compliance costs and risks of fines and penalties and/or liabilities), the regulation of greenhouse gas (GHG) emissions, governmental fees and assessments (such as Federal Deposit Insurance Corporation assessments), and potential carbon “cap and trade” legislation that may fundamentally alter costs to produce electricity and accelerate the move to renewable generation);


•	developments in laws, regulations and policies governing protections for historic, archaeological and cultural sites, and plant and animal species and habitats, as well as developments in the implementation and enforcement of such laws, regulations and policies;


•	discovery of conditions that may be attributable to historical chemical releases, including any necessary investigation and remediation, and any associated enforcement, litigation or regulatory oversight;


•	decisions by the PUC in rate cases and other proceedings (including the risks of delays in the timing of decisions, adverse changes in final decisions from interim decisions and the disallowance of project costs as a result of adverse regulatory audit reports or otherwise);


•	decisions by the PUC and by other agencies and courts on land use, environmental and other permitting issues (such as required corrective actions, restrictions and penalties that may arise, such as with respect to environmental conditions or RPS);

•

potential enforcement actions by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC) and/or other governmental authorities (such as consent orders, required corrective actions, restrictions and penalties that may arise, for example, with respect to compliance deficiencies under existing or new banking and consumer protection laws and regulations or with respect to capital adequacy);


•	the ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by RAMs;


•	the risks associated with the geographic concentration of HEI’s businesses and ASB’s loans, ASB’s concentration in a single product type (i.e., first mortgages) and ASB’s significant credit relationships (i.e., concentrations of large loans and/or credit lines with certain customers);


•	changes in accounting principles applicable to HEI, the Utilities and ASB, including the adoption of new U.S. accounting standards, the potential discontinuance of regulatory accounting and the effects of potentially required consolidation of variable interest entities (VIEs) or required capital lease accounting for PPAs with IPPs;


•	changes by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and the results of financing efforts;


•	faster than expected loan prepayments that can cause an acceleration of the amortization of premiums on loans and investments and the impairment of mortgage-servicing assets of ASB;


•	changes in ASB’s loan portfolio credit profile and asset quality which may increase or decrease the required level of provision for loan losses, allowance for loan losses and charge-offs;


•	changes in ASB’s deposit cost or mix which may have an adverse impact on ASB’s cost of funds;


•	the final outcome of tax positions taken by HEI, the Utilities and ASB;


•	the risks of suffering losses and incurring liabilities that are uninsured (e.g., damages to the Utilities’ transmission and distribution system and losses from business interruption) or underinsured (e.g., losses not covered as a result of insurance deductibles or other exclusions or exceeding policy limits); and


•	other risks or uncertainties described elsewhere in this report and in other reports (e.g., “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K) previously and subsequently filed by HEI and/or Hawaiian Electric with the Securities and Exchange Commission (SEC).

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.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Statements of Income (unaudited)



	Three months ended March 31
(in thousands, except per share amounts)	2016			2015
Revenues
Electric utility	$	482,052		$	573,442
Bank	68,840			64,348
Other	68			72
Total revenues	550,960			637,862
Expenses
Electric utility	426,726			515,806
Bank	49,246			43,717
Other	6,137			8,833
Total expenses	482,109			568,356
Operating income (loss)
Electric utility	55,326			57,636
Bank	19,594			20,631
Other	(6,069		)	(8,761		)
Total operating income	68,851			69,506
Interest expense, net—other than on deposit liabilities and other bank borrowings	(20,126		)	(19,100		)
Allowance for borrowed funds used during construction	662			499
Allowance for equity funds used during construction	1,739			1,413
Income before income taxes	51,126			52,318
Income taxes	18,301			19,979
Net income	32,825			32,339
Preferred stock dividends of subsidiaries	473			473
Net income for common stock	$	32,352		$	31,866
Basic earnings per common share	$	0.30		$	0.31
Diluted earnings per common share	$	0.30		$	0.31
Dividends per common share	$	0.31		$	0.31
Weighted-average number of common shares outstanding	107,620			103,281
Net effect of potentially dilutive shares	161			286
Adjusted weighted-average shares	107,781			103,567

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)



	Three months ended March 31
(in thousands)	2016			2015
Net income for common stock	$	32,352		$	31,866
Other comprehensive income, net of taxes:
Net unrealized gains on available-for-sale investment securities:
Net unrealized gains on available-for-sale investment securities arising during the period, net of tax benefits of $4,905 and 2,278 for the respective periods	7,428			3,451
Derivatives qualified as cash flow hedges:
Effective portion of foreign currency hedge net unrealized gain, net of taxes of $638 and nil for the respective periods	1,002			—
Less: reclassification adjustment to net income, net of tax benefits of $35 and $37 for the respective periods	54			59
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $2,257 and $3,486 for the respective periods	3,538			5,459
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $2,052 and $3,127 for the respective periods	(3,222		)	(4,911		)
Other comprehensive income, net of taxes	8,800			4,058
Comprehensive income attributable to Hawaiian Electric Industries, Inc.	$	41,152		$	35,924

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Balance Sheets (unaudited)



(dollars in thousands)	March 31, 2016			December 31, 2015
Assets
Cash and cash equivalents	$	334,743		$	300,478
Accounts receivable and unbilled revenues, net	210,280			242,766
Available-for-sale investment securities, at fair value	906,295			820,648
Stock in Federal Home Loan Bank, at cost	11,218			10,678
Loans receivable held for investment, net	4,589,950			4,565,781
Loans held for sale, at lower of cost or fair value	7,900			4,631
Property, plant and equipment, net of accumulated depreciation of $2,355,984 and $2,339,319 at the respective dates	4,423,567			4,377,658
Regulatory assets	888,408			896,731
Other	415,955			480,457
Goodwill	82,190			82,190
Total assets	$	11,870,506		$	11,782,018
Liabilities and shareholders’ equity
Liabilities
Accounts payable	$	119,288		$	138,523
Interest and dividends payable	27,890			26,042
Deposit liabilities	5,139,932			5,025,254
Short-term borrowings—other than bank	95,485			103,063
Other bank borrowings	329,081			328,582
Long-term debt, net—other than bank	1,578,618			1,578,368
Deferred income taxes	700,782			680,877
Regulatory liabilities	383,793			371,543
Contributions in aid of construction	513,520			506,087
Defined benefit pension and other postretirement benefit plans liability	584,490			589,918
Other	421,155			471,828
Total liabilities	9,894,034			9,820,085
Preferred stock of subsidiaries - not subject to mandatory redemption	34,293			34,293
Commitments and contingencies (Notes 4 and 5)
Shareholders’ equity
Preferred stock, no par value, authorized 10,000,000 shares; issued: none	—			—
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 107,875,779 shares and 107,460,406 shares at the respective dates	1,635,890			1,629,136
Retained earnings	323,751			324,766
Accumulated other comprehensive loss, net of tax benefits	(17,462		)	(26,262		)
Total shareholders’ equity	1,942,179			1,927,640
Total liabilities and shareholders’ equity	$	11,870,506		$	11,782,018

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (unaudited)



	Common stock			Retained			Accumulated other comprehensive
(in thousands, except per share amounts)	Shares	Amount		Earnings			income (loss)			Total
Balance, December 31, 2015	107,460	$	1,629,136	$	324,766		$	(26,262	)	$	1,927,640
Net income for common stock	—	—		32,352			—			32,352
Other comprehensive income, net of taxes	—	—		—			8,800			8,800
Issuance of common stock, net	416	6,754		—			—			6,754
Common stock dividends ($0.31 per share)	—	—		(33,367		)	—			(33,367		)
Balance, March 31, 2016	107,876	$	1,635,890	$	323,751		$	(17,462	)	$	1,942,179
Balance, December 31, 2014	102,565	$	1,521,297	$	296,654		$	(27,378	)	$	1,790,573
Net income for common stock	—	—		31,866			—			31,866
Other comprehensive income, net of taxes	—	—		—			4,058			4,058
Issuance of common stock, net	4,853	103,252		—			—			103,252
Common stock dividends ($0.31 per share)	—	—		(31,840		)	—			(31,840		)
Balance, March 31, 2015	107,418	$	1,624,549	$	296,680		$	(23,320	)	$	1,897,909

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)



Three months ended March 31	2016			2015
(in thousands)
Cash flows from operating activities
Net income	$	32,825		$	32,339
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	48,594			45,865
Other amortization	1,928			2,371
Provision for loan losses	4,766			614
Loans receivable originated and purchased, held for sale	(42,719		)	(79,070		)
Proceeds from sale of loans receivable, held for sale	40,363			78,332
Increase in deferred income taxes	13,008			3,828
Share-based compensation expense	1,013			1,754
Excess tax benefits from share-based payment arrangements	(380		)	(968		)
Allowance for equity funds used during construction	(1,739		)	(1,413		)
Changes in assets and liabilities
Decrease in accounts receivable and unbilled revenues, net	28,108			58,331
Decrease in fuel oil stock	22,812			20,731
Decrease (increase) in regulatory assets	1,585			(10,827		)
Increase in accounts, interest and dividends payable	30,135			22,053
Change in prepaid and accrued income taxes and utility revenue taxes	(14,343		)	(9,461		)
Increase in defined benefit pension and other postretirement benefit plans liability	137			123
Change in other assets and liabilities	4,499			(25,992		)
Net cash provided by operating activities	170,592			138,610
Cash flows from investing activities
Available-for-sale investment securities purchased	(122,387		)	(63,370		)
Principal repayments on available-for-sale investment securities	48,819			28,486
Purchase of stock from Federal Home Loan Bank	(1,373		)	—
Redemption of stock from Federal Home Loan Bank	833			5,590
Net increase in loans held for investment	(28,137		)	(12,524		)
Proceeds from sale of real estate acquired in settlement of loans	232			606
Capital expenditures	(127,818		)	(123,527		)
Contributions in aid of construction	13,761			9,145
Other	819			3,549
Net cash used in investing activities	(215,251		)	(152,045		)
Cash flows from financing activities
Net increase in deposit liabilities	114,678			127,913
Net decrease in short-term borrowings with original maturities of three months or less	(7,578		)	(88,472		)
Net increase in retail repurchase agreements	19,041			21,451
Proceeds from other bank borrowings	20,835			—
Repayments of other bank borrowings	(39,369		)	—
Proceeds from issuance of long-term debt	75,000			—
Repayment of long-term debt	(75,000		)	—
Excess tax benefits from share-based payment arrangements	380			968
Net proceeds from issuance of common stock	3,022			104,468
Common stock dividends	(27,716		)	(31,829		)
Preferred stock dividends of subsidiaries	(473		)	(473		)
Other	(3,896		)	(3,965		)
Net cash provided by financing activities	78,924			130,061
Net increase in cash and cash equivalents	34,265			116,626
Cash and cash equivalents, beginning of period	300,478			175,542
Cash and cash equivalents, end of period	$	334,743		$	292,168

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Statements of Income (unaudited)



	Three months ended March 31
(in thousands)	2016			2015
Revenues	$	482,052		$	573,442
Expenses
Fuel oil	113,740			176,806
Purchased power	115,859			136,007
Other operation and maintenance	103,908			104,002
Depreciation	46,781			44,243
Taxes, other than income taxes	46,438			54,748
Total expenses	426,726			515,806
Operating income	55,326			57,636
Allowance for equity funds used during construction	1,739			1,413
Interest expense and other charges, net	(17,308		)	(16,325		)
Allowance for borrowed funds used during construction	662			499
Income before income taxes	40,419			43,223
Income taxes	14,553			15,850
Net income	25,866			27,373
Preferred stock dividends of subsidiaries	229			229
Net income attributable to Hawaiian Electric	25,637			27,144
Preferred stock dividends of Hawaiian Electric	270			270
Net income for common stock	$	25,367		$	26,874

HEI owns all of the common stock of Hawaiian Electric. Therefore, per share data with respect to shares of common stock of Hawaiian Electric are not meaningful.

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)



	Three months ended March 31
(in thousands)	2016			2015
Net income for common stock	$	25,367		$	26,874
Other comprehensive income, net of taxes:
Derivatives qualified as cash flow hedges:
Effective portion of foreign currency hedge net unrealized gain, net of taxes of $638 and nil for the respective periods	1,002			—
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $2,061 and $3,141 for the respective periods	3,236			4,933
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $2,052 and $3,127 for the respective periods	(3,222		)	(4,911		)
Other comprehensive income, net of taxes	1,016			22
Comprehensive income attributable to Hawaiian Electric Company, Inc.	$	26,383		$	26,896

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Balance Sheets (unaudited)



(dollars in thousands, except par value)	March 31, 2016			December 31, 2015
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	53,207		$	52,792
Plant and equipment	6,356,006			6,315,698
Less accumulated depreciation	(2,284,928		)	(2,266,004		)
Construction in progress	198,004			175,309
Utility property, plant and equipment, net	4,322,289			4,277,795
Nonutility property, plant and equipment, less accumulated depreciation of $1,230 and $1,229 at respective dates	7,375			7,272
Total property, plant and equipment, net	4,329,664			4,285,067
Current assets
Cash and cash equivalents	49,042			24,449
Customer accounts receivable, net	103,739			132,778
Accrued unbilled revenues, net	85,367			84,509
Other accounts receivable, net	6,773			10,408
Fuel oil stock, at average cost	48,404			71,216
Materials and supplies, at average cost	54,256			54,429
Prepayments and other	21,803			36,640
Regulatory assets	89,192			72,231
Total current assets	458,576			486,660
Other long-term assets
Regulatory assets	799,216			824,500
Unamortized debt expense	420			497
Other	74,495			75,486
Total other long-term assets	874,131			900,483
Total assets	$	5,662,371		$	5,672,210
Capitalization and liabilities
Capitalization
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 15,805,327 shares)	$	105,388		$	105,388
Premium on capital stock	578,926			578,930
Retained earnings	1,045,049			1,043,082
Accumulated other comprehensive income, net of income taxes	1,941			925
Common stock equity	1,731,304			1,728,325
Cumulative preferred stock — not subject to mandatory redemption	34,293			34,293
Long-term debt, net	1,278,916			1,278,702
Total capitalization	3,044,513			3,041,320
Commitments and contingencies (Note 4)
Current liabilities
Short-term borrowings from non-affiliates	12,998			—
Accounts payable	95,090			114,846
Interest and preferred dividends payable	27,015			23,111
Taxes accrued	129,239			191,084
Regulatory liabilities	5,416			2,204
Other	75,006			54,079
Total current liabilities	344,764			385,324
Deferred credits and other liabilities
Deferred income taxes	670,126			654,806
Regulatory liabilities	378,377			369,339
Unamortized tax credits	85,902			84,214
Defined benefit pension and other postretirement benefit plans liability	547,517			552,974
Other	77,652			78,146
Total deferred credits and other liabilities	1,759,574			1,739,479
Contributions in aid of construction	513,520			506,087
Total capitalization and liabilities	$	5,662,371		$	5,672,210

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Statements of Changes in Common Stock Equity (unaudited)



	Common stock			Premium on capital			Retained			Accumulated other comprehensive
(in thousands)	Shares	Amount		stock			earnings			income (loss)		Total
Balance, December 31, 2015	15,805	$	105,388	$	578,930		$	1,043,082		$	925	$	1,728,325
Net income for common stock	—	—		—			25,367			—		25,367
Other comprehensive income, net of taxes	—	—		—			—			1,016		1,016
Common stock dividends	—	—		—			(23,400		)	—		(23,400		)
Common stock issuance expenses	—	—		(4		)	—			—		(4		)
Balance, March 31, 2016	15,805	$	105,388	$	578,926		$	1,045,049		$	1,941	$	1,731,304
Balance, December 31, 2014	15,805	$	105,388	$	578,938		$	997,773		$	45	$	1,682,144
Net income for common stock	—	—		—			26,874			—		26,874
Other comprehensive income, net of taxes	—	—		—			—			22		22
Common stock dividends	—	—		—			(22,601		)	—		(22,601		)
Common stock issuance expenses	—	—		(5		)	—			—		(5		)
Balance, March 31, 2015	15,805	$	105,388	$	578,933		$	1,002,046		$	67	$	1,686,434

The accompanying notes are an integral part of these consolidated financial statements.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)



Three months ended March 31	2016			2015
(in thousands)
Cash flows from operating activities
Net income	$	25,866		$	27,373
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	46,781			44,243
Other amortization	1,774			1,698
Increase in deferred income taxes	13,558			15,132
Change in tax credits, net	1,702			2,576
Allowance for equity funds used during construction	(1,739		)	(1,413		)
Changes in assets and liabilities
Decrease in accounts receivable	28,297			29,104
Decrease (increase) in accrued unbilled revenues	(858		)	27,880
Decrease in fuel oil stock	22,812			20,731
Decrease (increase) in materials and supplies	173			(1,357		)
Decrease (increase) in regulatory assets	1,585			(10,827		)
Increase in accounts payable	27,766			15,380
Change in prepaid and accrued income taxes and revenue taxes	(42,018		)	(63,696		)
Increase in defined benefit pension and other postretirement benefit plans liability	205			110
Change in other assets and liabilities	20,967			(9,774		)
Net cash provided by operating activities	146,871			97,160
Cash flows from investing activities
Capital expenditures	(125,183		)	(118,874		)
Contributions in aid of construction	13,761			9,145
Other	45			243
Net cash used in investing activities	(111,377		)	(109,486		)
Cash flows from financing activities
Common stock dividends	(23,400		)	(22,601		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(499		)	(499		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	12,998			30,000
Other	—			(216		)
Net cash provided by (used in) financing activities	(10,901		)	6,684
Net increase (decrease) in cash and cash equivalents	24,593			(5,642		)
Cash and cash equivalents, beginning of period	24,449			13,762
Cash and cash equivalents, end of period	$	49,042		$	8,120

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1 · Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to SEC Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses for the period. Actual results could differ significantly from those estimates. The accompanying unaudited consolidated financial statements and the following notes should be read in conjunction with the audited consolidated financial statements and the notes thereto in HEI’s and Hawaiian Electric’s Form 10-K for the year ended December 31, 2015 .

In the opinion of HEI’s and Hawaiian Electric’s management, the accompanying unaudited consolidated financial statements contain all material adjustments required by GAAP to fairly state consolidated HEI’s and Hawaiian Electric’s financial positions as of March 31, 2016 and December 31, 2015 , the results of their operations and their cash flows for the three months ended March 31, 2016 and 2015 . All such adjustments are of a normal recurring nature, unless otherwise disclosed below or other referenced material. Results of operations for interim periods are not necessarily indicative of results for the full year.

2 · Proposed Merger

On December 3, 2014, HEI, NextEra Energy, Inc., a Florida corporation (NEE), NEE Acquisition Sub I, LLC, a Delaware limited liability company and a wholly owned subsidiary of NEE (Merger Sub II) and NEE Acquisition Sub II, Inc., a Delaware corporation and a wholly owned subsidiary of NEE (Merger Sub I), entered into an Agreement and Plan of Merger (the Merger Agreement). The Merger Agreement provides for Merger Sub I to merge with and into HEI (the Initial Merger), with HEI surviving, and then for HEI to merge with and into Merger Sub II, with Merger Sub II surviving as a wholly owned subsidiary of NEE (the Merger). The Merger is intended to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended, and to be tax-free to HEI shareholders.

Pursuant to the Merger Agreement, upon the closing of the Merger, each issued and outstanding share of HEI common stock will automatically be converted into the right to receive 0.2413 shares of common stock of NEE (the Exchange Ratio). No adjustment to the Exchange Ratio is made in the Merger Agreement for any changes in the market price of either HEI or NEE common stock between December 3, 2014 and the closing of the Merger.

The Merger Agreement contemplates that, immediately prior to the closing of the Merger, HEI will distribute to its shareholders all of the issued and outstanding shares of common stock of ASB Hawaii, Inc. (ASB Hawaii), the direct parent company of ASB (such distribution referred to as the Spin-Off), with ASB Hawaii becoming a new public company. In addition, the Merger Agreement contemplates that, immediately prior to the closing of the Merger, HEI will pay its shareholders a special dividend of $ 0.50 per share.

The closing of the Merger is subject to various conditions, including, among others, (i) the approval of holders of 75% of the outstanding shares of HEI common stock, (ii) effectiveness of the registration statement for the NEE common stock to be issued in the Initial Merger and the listing of such shares on the New York Stock Exchange, (iii) expiration or termination of the applicable Hart-Scott-Rodino Act waiting period, (iv) receipt of all required regulatory approvals from, among others, the Federal Energy Regulatory Commission (FERC), the Federal Communications Commission and the Hawaii Public Utilities Commission, (v) the absence of any law or judgment in effect or pending in which a governmental entity has imposed or is seeking to impose a legal restraint that would prevent or make illegal the closing of the Merger, (vi) the absence of any material adverse effect with respect to either HEI or NEE, (vii) subject to certain exceptions, the accuracy of the representations and warranties of, and compliance with covenants by, each of the parties to the Merger Agreement, (viii) receipt by each of HEI and NEE of a tax opinion of its counsel regarding the tax treatment of the transactions contemplated by the Merger Agreement, (ix) effectiveness of the ASB Hawaii registration statement necessary to consummate the Spin-Off and (x) the determination by each of HEI and NEE that, upon completion of the Spin-Off, HEI will no longer be a savings and loan holding company or be deemed to control ASB for purposes of the Home Owners' Loan Act. The Spin-Off will be subject to various conditions, including, among others, the approval of the Federal Reserve Board (FRB). Some, but not all, of these conditions have been satisfied and certain of these conditions will only be satisfied shortly before closing.

The Merger Agreement contains customary representations, warranties and covenants of HEI and NEE.

The Merger Agreement contains certain termination rights for both HEI and NEE, including the right of either party to terminate the Merger Agreement if the Merger has not been consummated by June 3, 2016, and further provides that upon termination of the Merger Agreement under specified circumstances NEE would be required to pay HEI a termination fee of $ 90 million and reimburse HEI for up to $ 5 million of its documented out-of-pocket expenses incurred in connection with the Merger Agreement.

On January 29, 2015, HEI submitted its application to the FERC requesting all necessary authorizations to consummate the transactions contemplated by the Merger Agreement. The FERC issued its order authorizing the proposed merger on March 27, 2015.

On February 1, 2015, HEI submitted a letter to the FRB advising the FRB of its intent to seek deregistration as a Savings & Loan Holding Company (SLHC) to be effective upon the contemplated Spin-off of ASB Hawaii.

On March 26, 2015, NEE’s Form S-4, which registers NEE common stock expected to be issued in the Initial Merger, was declared effective.

On March 30, 2015, ASB Hawaii filed its Form 10 and, on April 1, 2016, filed Amendment No. 1 thereto. This is the registration statement for the ASB Hawaii shares expected to be distributed in the Spin-Off.

HEI Shareholders approved the proposed merger agreement with NEE on June 10, 2015.

On August 7, 2015, each of HEI and NEE filed their respective notifications pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), with the U.S. Department of Justice and Federal Trade Commission. On September 8, 2015, the mandatory, pre-merger waiting period under the HSR Act expired.

PUC application . In January 2015, NEE and Hawaiian Electric filed an application with the PUC requesting approval of the proposed Merger (under which Hawaiian Electric would become a wholly-owned indirect subsidiary of NEE). The application also requests modification of certain conditions agreed to by HEI and the PUC in 1982 for the merger and corporate restructuring of Hawaiian Electric, and confirmation that with approval of the Merger Agreement, the recommendations in the 1995 Dennis Thomas Report (resulting from a proceeding to review the relationship between HEI and Hawaiian Electric and any impact of HEI’s then diversified activities on the Utilities) will no longer be applicable. The application includes a commitment that, for at least four years following the completion of the transaction, Hawaiian Electric will not submit any applications seeking a general base rate increase and will reduce the RAM, which amounts to approximately $ 60 million in cumulative savings for customers, over the four -year base rate moratorium, subject to certain exceptions and conditions, including that the following remain in effect: the revenue balancing account (RBA) and RAM tariff provisions, the Renewable Energy Infrastructure Program, and Renewable Energy Infrastructure Surcharge, the integrated resource planning/DSM Recovery tariff provisions, the ECAC tariff provisions, the PPAC tariff provision and the Pension and OPEB tracker mechanism. Various governmental, environmental and commercial interests groups have been allowed to intervene in the proceeding.

Twenty-eight interveners filed direct testimonies in the docket in July 2015. Eleven interveners recommended the merger not be approved, eleven recommended approval only with conditions, and six did not specifically make a recommendation either way. The Consumer Advocate filed its direct testimonies on August 10, 2015, stating that the Applicants have not justified that the proposed transaction is in the public interest but that if the Consumer Advocate’s recommended conditions were adopted, the results would reflect substantial net benefits that would support a finding that the proposed transaction is in the public interest. Among its recommended conditions was a rate plan to permanently reduce the Utilities’ rates by approximately $62 million annually. On August 31, 2015, the Applicants filed their responsive testimonies, offering a number of additional commitments, including:


•	subject to PUC approval, completing full smart meter deployment to all customers by December 31, 2019


•	reflecting 100% of all net non-fuel O&M savings achieved by the Utilities and limiting non-fuel O&M expenses to levels no higher than the non-fuel O&M expenses in 2014, adjusted for inflation, in the revenue requirements in the first rate case following the four -year rate case moratorium


•	establishing a funding mechanism of $2.5 million per year during the four -year rate case moratorium to be used for purposes in the public interest at the PUC’s discretion and direction


•	committing to corporate giving of at least $2.2 million for a minimum of 10 years post-closing


•	committing to not selling the Utilities or their holding company for at least 10 years post-closing

On October 7, 2015, the other parties filed rebuttal testimonies, and on October 16, 2015, the Applicants filed their surrebuttal testimonies. Discovery was conducted over a six month period and concluded on October 14, 2015 with the filing of final information request (IR) responses.

On November 27, 2015, pursuant to entering into an agreement with the Department of the Navy on behalf of the Department of Defense (DOD), the Applicants filed a motion to admit revised stipulated commitments into evidence, which revised Applicants’ commitments to include the following 3 main changes:


•	committing to undertake good faith efforts to achieve a consolidated renewable portfolio standard of thirty-five percent of net electricity sales by December 31, 2020, and fifty percent of net electricity sales by December 31, 2030;


•	committing to and specifying in detail how $60 million in total rate credits will be provided over the four-year base rate moratorium period; and


•	committing to (i) establish a new intermediate holding company, Hawaiian Electric Utility Holdings, which will have a voting board of directors and a majority of the members of the board of directors who will be residents of Hawaii, (ii) implement a suite of additional ring fencing commitments, and (iii) develop employees from within the Companies to fill executive vacancies.

In connection with the agreement, on November 27, 2015, the DOD filed a motion to withdraw from the proceeding. Prior to this date, three other parties had withdrawn from the proceeding. On January 4, 2016, the PUC issued an order granting the Applicants’ motion to admit revised stipulated commitments into evidence and permitting additional discovery and testimony by the other parties regarding the revised stipulated commitments, and denying the DOD’s motion to withdraw.

Evidentiary hearings were held over 22 days in November 2015 through March 2016. Post-evidentiary hearing opening briefs were filed in March 2016 and reply briefs were filed in May 2016. A PUC decision is pending.

Pending litigation and other matters.

Litigation . HEI and its subsidiaries are subject to various legal proceedings that arise from time to time. Some of these proceedings may seek relief or damages in amounts that may be substantial. Because these proceedings are complex, many years may pass before they are resolved, and it is not feasible to predict their outcomes. Some of these proceedings involve claims HEI and Hawaiian Electric believe may be covered by insurance, and HEI and Hawaiian Electric have advised their insurance carriers accordingly.

Since the D ecember 3, 2014 announcement of the merger agreement, eight purported class action complaints were filed in the Circuit Court of the First Circuit for the State of Hawaii by alleged stockholders of HEI against HEI, Hawaiian Electric (in one complaint), the individual directors of HEI, NEE and NEE's acquisition subsidiaries. The lawsuits are captioned as follows: Miller v. Hawaiian Electric Industries, Inc., et al ., Case No. 14-1-2531-12 KTN (December 15, 2014) (the Miller Action); Walsh v. Hawaiian Electric Industries, Inc., et al ., Case No. 14-1-2541-12 JHC (December 15, 2014) (the Walsh Action); Stein v. Hawaiian Electric Industries, Inc., et al ., Case No. 14-1-2555-12 KTN (December 17, 2014) (the Stein Action); Brown v. Hawaiian Electric Industries, Inc., et al. , Case No. 14-1-2643-12 RAN (December 30, 2014) (the Brown Action); Cohn v. Hawaiian Electric Industries, Inc., et al. , Case No. 14-1-2642-12 KTN (December 30, 2014) (the Cohn State Action); Guenther v. Watanabe, et al. , Case No. 15-1-003-01 ECN (January 2, 2015) (the Guenther Action); Hudson v. Hawaiian Electric Industries, Inc., et al. , Case No. 15-1-0013-01 JHC (January 5, 2015) (the Hudson Action); Grieco v. Hawaiian Electric Industries, Inc., et al. , Case No. 15-1-0094-01 KKS (January 21, 2015) (the Grieco Action). On January 12, 2015, plaintiffs in the Miller Action, the Walsh Action, the Stein Action, the Brown Action, the Guenther Action, and the Hudson Action filed a motion to consolidate their actions and to appoint co-lead counsel. On January 23, 2015, the Cohn State Action was voluntarily dismissed. On January 27, 2015, Cohn filed a purported class action captioned Cohn v. Hawaiian Electric Industries, Inc., et al., Civil No. 15-00029-JMS-RLP in the United States District Court for the District of Hawaii against HEI, the individual directors of HEI, NEE and NEE’s acquisition subsidiaries (the Cohn Federal Action). On February 13, 2015, the state court orally granted the plaintiffs’ motions to consolidate the seven state court actions and appoint co-lead counsel and entered a written order granting the motions on March 6, 2015. On March 10, 2015, plaintiffs filed a first consolidated complaint in state court that added as a defendant J.P. Morgan Securities, LLC (JP Morgan), the financial advisor to HEI for the Merger, and deleted Hawaiian Electric Company, Inc. as a defendant and concurrently served a first request for production of documents on HEI and the individual directors. On March 17, 2015, plaintiffs filed a motion for limited expedited discovery in the consolidated state action and thereafter on March 25, 2015 withdrew their request for limited discovery and first request for production of documents as a result of the parties’ agreement to conduct certain specified limited discovery which included a stipulated confidentiality agreement and protective order protecting the confidentiality of certain information exchanged between the parties in connection with discovery in the consolidated action that was filed on April 6, 2015. On April 15 and 17, 2015, a deposition of a representative of HEI and a representative of JP Morgan were taken, respectively. On April 21, 2015, plaintiffs confirmed the cancellation of the preliminary injunction hearing that had been scheduled for May 5, 2015 in the consolidated

action and on April 23, 2015, the state court entered a stipulation and order to extend indefinitely the time to answer or otherwise respond to the first amended consolidated complaint. On April 30, 2015, the state court entered a consolidated case management order confirming the consolidated treatment of the state actions for purposes of case management, pretrial discovery, procedural and other matters. On May 27, 2015, the federal court entered a stipulation and order approving the stipulation of the parties to stay the Cohn Federal Action pending the resolution of the state court consolidated action and administratively closing the Cohn Federal Action without prejudice to any party. On May 29, 2015, the state court entered a stipulated order amending the consolidated caption to read IN RE Consolidated HEI Shareholder Cases, Master File No. Civil No. 1CC15-1-HEI, to add JP Morgan as a named defendant in each individual action, add the caption for the Grieco Action, and remove Hawaiian Electric Company, Inc. from the caption in the Brown Action. In October 2015, several depositions of HEI representatives were taken in the state consolidated action. On February 9, 2016, plaintiffs filed an ex parte motion for second extension of time to file the pretrial statement in the state consolidated action from February 15, 2016 to August 15, 2016.

The actions allege, among other things, that members of HEI's Board of Directors (Board) breached their fiduciary duties in connection with the proposed transaction, and that the Merger Agreement involves an unfair price, was the product of an inadequate sales process, and contains unreasonable deal protection devices that purportedly preclude competing offers. The complaints further allege that HEI, NEE and/or its acquisition subsidiaries aided and abetted the purported breaches of fiduciary duty. The plaintiffs in these lawsuits seek, among other things, (i) a declaration that the Merger Agreement was entered into in breach of HEI's directors' fiduciary duties, (ii) an injunction enjoining the HEI Board from consummating the Merger, (iii) an order directing the HEI Board to exercise their duties to obtain a transaction which is in the best interests of HEI's stockholders, (iv) a rescission of the Merger to the extent that it is consummated, and/or (v) damages suffered as a result of the defendants' alleged actions. Plaintiffs in the consolidated state action also allege that JP Morgan had a conflict of interest in advising HEI because JP Morgan and its affiliates had business ties to and investments in NEE. The consolidated state action also alleges that the HEI Board violated its fiduciary duties by omitting material facts from the Registration Statement on Form S-4. In addition, the Cohn Federal Action alleges that the HEI Board violated its fiduciary duties and federal securities laws by omitting material facts from the Registration Statement on Form S-4.

HEI and Hawaiian Electric believe the allegations in the complaints are without merit and intend to defend these lawsuits vigorously.

3 · Segment financial information



(in thousands)	Electric utility		Bank		Other			Total
Three months ended March 31, 2016
Revenues from external customers	$	482,045	$	68,840	$	75		$	550,960
Intersegment revenues (eliminations)	7		—		(7		)	—
Revenues	482,052		68,840		68			550,960
Income (loss) before income taxes	40,419		19,594		(8,887		)	51,126
Income taxes (benefit)	14,553		6,921		(3,173		)	18,301
Net income (loss)	25,866		12,673		(5,714		)	32,825
Preferred stock dividends of subsidiaries	499		—		(26		)	473
Net income (loss) for common stock	25,367		12,673		(5,688		)	32,352
Total assets (at March 31, 2016)	5,662,371		6,140,514		67,621			11,870,506
Three months ended March 31, 2015
Revenues from external customers	$	573,431	$	64,348	$	83		$	637,862
Intersegment revenues (eliminations)	11		—		(11		)	—
Revenues	573,442		64,348		72			637,862
Income (loss) before income taxes	43,223		20,631		(11,536		)	52,318
Income taxes (benefit)	15,850		7,156		(3,027		)	19,979
Net income (loss)	27,373		13,475		(8,509		)	32,339
Preferred stock dividends of subsidiaries	499		—		(26		)	473
Net income (loss) for common stock	26,874		13,475		(8,483		)	31,866
Total assets (at December 31, 2015)*	5,672,210		6,014,755		95,053			11,782,018

* See Note 11 for the impact to prior period financial information of the adoption of Accounting Standards Update (ASU) No. 2015-03.

Intercompany electricity sales of the Utilities to the bank and “other” segments are not eliminated because those segments would need to purchase electricity from another source if it were not provided by the Utilities and the profit on such sales is nominal.

Bank fees that ASB charges the Utilities and “other” segments are not eliminated because those segments would pay fees to another financial institution if they were to bank with another institution and the profit on such fees is nominal.

4 · Electric utility segment

Revenue taxes. The Utilities’ revenues include amounts for the recovery of various Hawaii state revenue taxes. Revenue taxes are generally recorded as an expense in the period the related revenues are recognized. However, the Utilities’ revenue tax payments to the taxing authorities in the period are based on the prior year’s billed revenues (in the case of public service company taxes and PUC fees) or on the current year’s cash collections from electric sales (in the case of franchise taxes). The Utilities included in the three months ended March 31, 2016 and 2015 approximately $43 million and $51 million , respectively, of revenue taxes in “revenues” and in “taxes, other than income taxes” expense.

Recent tax developments. On December 18, 2015, Congress passed, and President Obama signed into law, the “Protecting Americans from Tax Hikes (PATH) Act of 2015” and the “Consolidating Appropriations Act, 2016,” providing government funding and a number of significant tax changes.

The provision with the greatest impact on the Company is the extension of bonus depreciation. The PATH Act retroactively extended 50% bonus depreciation for qualified property acquired and placed in service in 2015 and continues 50% bonus depreciation through 2017. The bonus depreciation percentage decreases to 40% in 2018 and 30% in 2019 and terminates thereafter. The extension of bonus depreciation is expected to result in an increase in 2015 tax depreciation of approximately $117 million , primarily attributable to the Utilities. The PATH Act also made the research credit permanent, providing a 20% credit on the amount that the cost of qualified research expenditures for the tax year exceeds an amount based on prior expenditures.

Additionally, the “Consolidating Appropriations Act, 2016” extended a variety of energy-related credits that were expired or soon to expire. These credits include the production credit for wind facilities and the 30% investment credit for qualified solar energy property, with various phase-out dates through 2021.

Unconsolidated variable interest entities.

HECO Capital Trust III . HECO Capital Trust III (Trust III) was created and exists for the exclusive purposes of (i) issuing in March 2004 2,000,000 6.50% Cumulative Quarterly Income Preferred Securities, Series 2004 (2004 Trust Preferred Securities) ( $50 million aggregate liquidation preference) to the public and trust common securities ( $1.5 million aggregate liquidation preference) to Hawaiian Electric, (ii) investing the proceeds of these trust securities in 2004 Debentures issued by Hawaiian Electric in the principal amount of $31.5 million and issued by Hawaii Electric Light and Maui Electric each in the principal amount of $10 million , (iii) making distributions on these trust securities and (iv) engaging in only those other activities necessary or incidental thereto. The 2004 Trust Preferred Securities are mandatorily redeemable at the maturity of the underlying debt on March 18, 2034, which maturity may be extended to no later than March 18, 2053; and are currently redeemable at the issuer’s option without premium. The 2004 Debentures, together with the obligations of the Utilities under an expense agreement and Hawaiian Electric’s obligations under its trust guarantee and its guarantee of the obligations of Hawaii Electric Light and Maui Electric under their respective debentures, are the sole assets of Trust III. Taken together, Hawaiian Electric’s obligations under the Hawaiian Electric debentures, the Hawaiian Electric indenture, the subsidiary guarantees, the trust agreement, the expense agreement and trust guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of amounts due on the Trust Preferred Securities. Trust III has at all times been an unconsolidated subsidiary of Hawaiian Electric. Since Hawaiian Electric, as the holder of 100% of the trust common securities, does not absorb the majority of the variability of Trust III, Hawaiian Electric is not the primary beneficiary and does not consolidate Trust III in accordance with accounting rules on the consolidation of VIEs. Trust III’s balance sheets as of March 31, 2016 and December 31, 2015 each consisted of $51.5 million of 2004 Debentures; $50.0 million of 2004 Trust Preferred Securities; and $1.5 million of trust common securities. Trust III’s income statements for the three months ended March 31, 2016 and 2015 each consisted of $0.8 million of interest income received from the 2004 Debentures; $0.8 million of distributions to holders of the Trust Preferred Securities; and $25,000 of common dividends on the trust common securities to Hawaiian Electric. As long as the 2004 Trust Preferred Securities are outstanding, Hawaiian Electric is not entitled to receive any funds from Trust III other than pro-rata distributions, subject to certain subordination provisions, on the trust common securities. In the event of a default by Hawaiian Electric in the performance of its obligations under the 2004 Debentures or under its Guarantees, or in the event any of the Utilities elect to defer payment of interest on any of their respective 2004 Debentures, then Hawaiian Electric will be subject to a number of restrictions, including a prohibition on the payment of dividends on its common stock.

Power purchase agreements . As of March 31, 2016 , the Utilities had five PPAs for firm capacity and other PPAs with smaller IPPs and Schedule Q providers (i.e., customers with cogeneration and/or small power production facilities with a capacity of 100 kilowatts or less who buy power from or sell power to the Utilities), none of which are currently required to be consolidated as VIEs. Purchases from all IPPs were as follows:



	Three months ended March 31
(in millions)	2016		2015
AES Hawaii	$	38	$	34
Kalaeloa	29		44
HEP	11		11
Hpower	16		16
Puna Geothermal Venture	7		7
Hawaiian Commercial & Sugar (HC&S)	—		2
Other IPPs	15		22
Total IPPs	$	116	$	136

In October 2015 the amended PPA between Maui Electric and HC&S became effective following PUC approval in September 2015. The amended PPA amends the pricing structure and rates for energy sold to Maui Electric, eliminates the capacity payment to HC&S, eliminates Maui Electric’s minimum purchase obligation, provides that Maui Electric may request up to 4 MW of scheduled energy during certain months, and be provided up to 16 MW of emergency power, and extends the term of the PPA from 2014 to 2017. In 2016 HC&S requested to terminate the PPA in January of 2017, approximately 1 year early due to HC&S ceasing sugar operations.

Some of the IPPs provided sufficient information for Hawaiian Electric to determine that the IPP was not a VIE, or was either a “business” or “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. Other IPPs declined to provide the information necessary for Hawaiian Electric to determine the applicability of accounting standards for VIEs.

Since 2004, Hawaiian Electric has continued its efforts to obtain from the IPPs the information necessary to make the determinations required under accounting standards for VIEs. In each year from 2005 to 2015, the Utilities sent letters to the identified IPPs requesting the required information. All of these IPPs declined to provide the necessary information, except that Kalaeloa later agreed to provide the information pursuant to the amendments to its PPA (see below) and an entity owning a wind farm provided information as required under its PPA. Management has concluded that the consolidation of two entities owning wind farms was not required as Hawaii Electric Light and Maui Electric do not have variable interests in the entities because the PPAs do not require them to absorb any variability of the entities. If the requested information is ultimately received from the remaining IPPs, a possible outcome of future analyses of such information is the consolidation of one or more of such IPPs in the Consolidated Financial Statements. The consolidation of any significant IPP could have a material effect on the Consolidated Financial Statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. If the Utilities determine they are required to consolidate the financial statements of such an IPP and the consolidation has a material effect, the Utilities would retrospectively apply accounting standards for VIEs.

Kalaeloa Partners, L.P. In October 1988, Hawaiian Electric entered into a PPA with Kalaeloa, subsequently approved by the PUC, which provided that Hawaiian Electric would purchase 180 megawatts (MW) of firm capacity for a period of 25 years beginning in May 1991. In October 2004, Hawaiian Electric and Kalaeloa entered into amendments to the PPA, subsequently approved by the PUC, which together effectively increased the firm capacity from 180 MW to 208 MW. The energy payments that Hawaiian Electric makes to Kalaeloa include: (1) a fuel component, with a fuel price adjustment based on the cost of low sulfur fuel oil, (2) a fuel additives cost component and (3) a non-fuel component, with an adjustment based on changes in the Gross National Product Implicit Price Deflator. The capacity payments that Hawaiian Electric makes to Kalaeloa are fixed in accordance with the PPA. Kalaeloa also has a steam delivery cogeneration contract with another customer, the term of which coincides with the PPA. The facility has been certified by the Federal Energy Regulatory Commission as a Qualifying Facility under the Public Utility Regulatory Policies Act of 1978.

Hawaiian Electric and Kalaeloa are in negotiations to address the upcoming end of the PPA term ending on May 23, 2016. The PPA will automatically extend on a month-to-month basis as long as the parties are still negotiating in good faith. The month-to-month term extensions shall end 60 days after either party notifies the other in writing that negotiations have terminated.

Pursuant to the current accounting standards for VIEs, Hawaiian Electric is deemed to have a variable interest in Kalaeloa by reason of the provisions of Hawaiian Electric’s PPA with Kalaeloa. However, management has concluded that Hawaiian Electric is not the primary beneficiary of Kalaeloa because Hawaiian Electric does not have the power to direct the activities that most significantly impact Kalaeloa’s economic performance nor the obligation to absorb Kalaeloa’s expected losses, if any, that could potentially be significant to Kalaeloa. Thus, Hawaiian Electric has not consolidated Kalaeloa in its consolidated financial statements. The energy payments paid by Hawaiian Electric will fluctuate as fuel prices change, however, the PPA does not currently expose Hawaiian Electric to losses as the fuel and fuel related energy payments under the PPA have been approved by the PUC for recovery from customers through base electric rates and through Hawaiian Electric’s ECAC to the extent the fuel and fuel related energy payments are not included in base energy rates. As of March 31, 2016 , Hawaiian Electric’s accounts payable to Kalaeloa amounted to $8 million .

AES Hawaii, Inc. In March 1988, Hawaiian Electric entered into a PPA with AES Barbers Point, Inc. (now known as AES Hawaii, Inc.), which, as amended (through Amendment No. 2) and approved by the PUC, provided that Hawaiian Electric would purchase 180 MW of firm capacity for a period of 30 years beginning in September 1992. In November 2015, Hawaiian Electric entered into an Amendment No. 3, for which PUC approval has been requested. If approved by the PUC, Amendment No. 3 would increase the firm capacity from 180 MW to a maximum of 189 MW. The payments that Hawaiian Electric makes to AES Hawaii for energy associated with the first 180 MW of firm capacity include a fuel component, a variable O&M component and a fixed O&M component, all of which are subject to adjustment based on changes in the Gross National Product Implicit Price Deflator. If Amendment No. 3 is approved by the PUC, payments for energy associated with firm capacity in excess of 180 MW will not include any O&M component or be subject to adjustment based on changes in the Gross National Product Implicit Price Delflator. The capacity payments that Hawaiian Electric makes to AES Hawaii are fixed in accordance with the PPA and, if approved by the PUC, Amendment No. 3.

Pursuant to the current accounting standards for VIEs, Hawaiian Electric is deemed to have a variable interest in AES Hawaii by reason of the provisions of Hawaiian Electric’s PPA with AES Hawaii. However, management has concluded that Hawaiian Electric is not the primary beneficiary of AES Hawaii because Hawaiian Electric does not have the power to control the most significant activities of AES Hawaii that impact AES Hawaii’s economic performance, including operations and maintenance of AES Hawaii’s facility. Thus, Hawaiian Electric has not consolidated AES Hawaii in its consolidated financial statements. As of March 31, 2016 , Hawaiian Electric’s accounts payable to AES Hawaii amounted to $13 million .

Commitments and contingencies.

Fuel contracts . The Utilities have contractual agreements to purchase minimum quantities of fuel oil, diesel fuel and biodiesel for multi-year periods, some through October 2017. Fossil fuel prices are tied to the market prices of crude oil and petroleum products in the Far East and U.S. West Coast and the biodiesel price is tied to the market prices of animal fat feedstocks in the U.S. West Coast and U.S. Midwest.

Hawaiian Electric and Chevron Products Company (Chevron), a division of Chevron USA, Inc., are parties to the Low Sulfur Fuel Oil Supply Contract (LSFO Contract) for the purchase/sale of low sulfur fuel oil (LSFO), which terminates on December 31, 2016 and may automatically renew for annual terms thereafter unless earlier terminated by either party. The PUC approved the recovery of costs incurred under this contract on April 30, 2013.

On August 27, 2014, Chevron and Hawaiian Electric entered into a first amendment of the LSFO Contract. The amendment reduces the price of fuel above certain volumes, allows for increases in the volume of fuel, and modifies the specification of certain petroleum products supplied under the contract. In addition, Chevron agreed to supply a blend of LSFO and diesel as soon as January 2016 (for supply through the end of the contract term, December 31, 2016) to help Hawaiian Electric meet more stringent EPA air emission requirements known as Mercury and Air Toxics Standards. In March 2015, the amendment was approved by the PUC.

The Utilities are also parties to amended contracts for the supply of industrial fuel oil and diesel fuels with Chevron and Hawaii Independent Energy, LLC, (HIE), respectively, which were scheduled to end December 31, 2015, but have been extended through December 31, 2016. Both agreements may be automatically renewed for annual terms thereafter unless earlier terminated by either of the respective parties.

In August 2014, Chevron and the Utilities entered into a third amendment to the Inter-Island Industrial Fuel Oil and Diesel Fuel Supply Contract (Inter-island Fuel Supply Contract), which amendment extended the term of the contract through December 31, 2016 and provided for automatic renewal for annual terms thereafter unless earlier terminated by either party. In February 2015, Hawaiian Electric executed a similar extension, through December 31, 2016, of the corresponding Inter-Island Industrial Fuel Oil and Diesel Fuel Supply Contract with HIE.

In June 2015, the Utilities issued Requests for Proposals (RFP) for most of their fuel needs with supplies beginning in 2017 after the expiration of Chevron LSFO and Chevron/HIE Interisland contracts on December 31, 2016. Proposals were received in July 2015.

On February 18, 2016, Hawaiian Electric and Chevron entered into a fuel supply contract for LSFO, diesel and fuel to meet MATS requirements (2016 LSFO Contract) for the island of Oahu which terminates on December 31, 2019 and may automatically renew for annual terms thereafter unless earlier terminated by either party. Also on February 18, 2016, the Utilities and Chevron entered into a supply contract for industrial fuel oil, diesel and ultra-low sulfur diesel (Petroleum Fuels Contract) for the islands of Oahu, Maui, Molokai and the island of Hawaii , which terminates on December 31, 2019 and may automatically renew for annual terms thereafter unless earlier terminated by either party. Finally, on February 18, 2016, Hawaii Electric Light and Chevron entered into a fuels terminalling agreement which terminates on December 31, 2019 for the island of Hawaii and may automatically renew for annual terms thereafter unless earlier terminated by either party. Currently, terminalling services are provided for under the Inter-island Fuel Supply Contract with Chevron that expires on December 31, 2016. Each of these contracts are for a term of three years and become effective upon PUC approval, which approval has been requested by an application filed in February 2016, and each contract can be terminated if PUC approval is not received by October 1, 2016. Additionally, Chevron is required to comply with the agreed upon fuel specifications as set forth in the 2016 LSFO Contract and the Petroleum Fuels Contract.

The energy charge for energy purchased from Kalaeloa Partners, L.P. (Kalaeloa) under Hawaiian Electric’s PPA with Kalaeloa is based, in part, on the price Kalaeloa pays HIE for LSFO under a Facility Fuel Supply Contract (fuel contract) between them (assigned to HIE upon its purchase of the assets of Tesoro Hawaii Corp. as described above). The term of the fuel contract between Kalaeloa and HIE ends May 31, 2016 and may be extended for terms thereafter unless terminated by one of the parties.

The costs incurred under the Utilities’ fuel contracts are included in their respective ECACs, to the extent such costs are not recovered through the Utilities’ base rates.

AES Hawaii, Inc . Under a PPA entered into in March 1988, as amended, for a period of 30 years beginning September 1992, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. In August 2012, Hawaiian Electric filed an application with the PUC seeking an exemption from the PUC’s Competitive Bidding Framework to negotiate an amendment to the PPA to purchase 186 MW of firm capacity, and amend the energy pricing formula in the PPA. The PUC approved the exemption in April 2013, but Hawaiian Electric and AES Hawaii were not able to reach agreement on an amendment. In June 2015, AES Hawaii filed an arbitration demand regarding a dispute about whether Hawaiian Electric was obligated to buy up to 9 MW of additional capacity based on a 1992 letter. Hawaiian Electric responded to the arbitration demand and, in October 2015, AES Hawaii and Hawaiian Electric entered into a Settlement Agreement to stay the arbitration proceeding. The Settlement Agreement includes certain conditions precedent which, if satisfied, will release the parties from the claims under the arbitration proceeding. Among the conditions precedent is the successful negotiation of an amendment to the existing purchase power agreement and PUC approval of such amendment.

On November 13, 2015, Hawaiian Electric entered into Amendment No. 3 to the AES Hawaii PPA, subject to PUC approval. Amendment No. 3 provides more favorable pricing for the additional 9 MW than the existing pricing, the benefit of which will be passed on to customers, and among other things, provides (1) for an increase in firm capacity of up to 9 MW (the Additional Capacity) above the 180 MW capacity of the AES Hawaii facility, subject to a demonstration of such increased available capacity, (2) for the payment for the Additional Capacity to include a Priority Peak Capacity Charge, a Non-Peak Capacity Charge, a Priority Peak Energy Charge and a Non-Peak Energy Charge and (3) that AES will make certain operational commitments to improve reliability, and Hawaiian Electric will pay a reliability bonus according to a schedule for reduced Full Plant Trips. On January 22, 2016, Amendment No. 3 was filed with the PUC for approval. If such approval is obtained, the final condition to the Settlement Agreement’s release of the parties from the arbitration claims will be satisfied. The arbitration proceeding has been stayed to allow the PUC approval proceeding to proceed.

Liquefied natural gas . On May 31, 2015, the previous August 2014 agreement with FortisBC Energy Inc. (Fortis) for liquefaction capacity for liquefied natural gas (LNG) was superseded with a liquefaction Heads of Agreement by and between FortisBC Holdings Inc. and Hawaiian Electric. The agreement, which is subject to PUC approval, other regulatory approvals and permits and other conditions precedent before it becomes effective, provides for LNG liquefaction capacity purchases of 700,000 tonnes per year for the first five years, 600,000 tonnes per year for the next five years and 500,000 tonnes per year for the last ten years. Fortis must also obtain regulatory and other approvals for the agreement to become effective. The Fortis agreement is assignable and can be assigned to the selected bidder in the Utilities’ RFP for the supply of containerized LNG and will help ensure that liquefaction capacity is available at pricing that management believes will lower customer bills.

Utility projects . Many public utility projects require PUC approval and various permits from other governmental agencies. Difficulties in obtaining, or the inability to obtain, the necessary approvals or permits can result in significantly increased project costs or even cancellation of projects. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.

Renewable energy project matters. In February 2012, the PUC granted Hawaiian Electric’s request for deferred accounting treatment for the inter-island project support costs. The amount of the deferred costs was limited to $5.89 million . Through December 31, 2013, Hawaiian Electric deferred $3.1 million related to outside contractor service costs incurred with the Oahu 200 MW RFP, and began amortizing such costs over 3 years beginning in July 2014.

In May 2012, the PUC instituted a proceeding for a competitive bidding process for up to 50 MW of firm renewable geothermal dispatchable energy (Geothermal RFP) on the island of Hawaii, and in July 2012, Hawaii Electric Light filed an application to defer 2012 costs related to the Geothermal RFP. In November 2015, the PUC approved the deferral of $2.1 million of costs related to the Geothermal RFP, and will review the prudency and reasonableness of the deferred costs in the next Hawaii Electric Light rate case. In February 2013, Hawaii Electric Light issued the Final Geothermal RFP. Six bids were received, but Hawaii Electric Light notified bidders that none of the submitted bids sufficiently met both the low-cost and technical requirements of the Geothermal RFP. In October 2014, Hawaii Electric Light issued Addendum No. 1 (Best and Final Offer) and Attachment A (Best and Final Offer Bidder's Response Package) directly to five eligible bidders. The submittals received in January 2015 were considered for final selection of one project to proceed with PPA negotiations. In February 2015, Ormat Technologies, Inc. was selected for an award and began PPA negotiations with Hawaii Electric Light. In February 2016, Hawaii Electric Light provided the PUC with a status update notifying the PUC that the selected bidder had determined the proposed project not to be economically and financially viable, resulting in conclusion of PPA negotiations. On March 8, 2016, the Independent Observer issued a report on the results of the negotiation phase of the Geothermal RFP.

Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) Implementation Project. The Utilities submitted its Enterprise Information System Roadmap to the PUC in June 2014 and refiled an application for an ERP/EAM implementation project in July 2014 with an estimated cost of $82.4 million . The refiled application addressed the concerns raised by the PUC, about the initial application, regarding the benefits to customers of completing this project. The estimated cost of the project included the cost of ERP software that had been purchased and recorded as a deferred cost.

To address the Consumer Advocate’s position that the proceeding should be stayed to determine if the project as proposed in the application is reasonable and necessary for future operations as an indirect NEE subsidiary, in May 2015, the Utilities filed a report describing the impact the pending merger with NEE would have on the scope, costs and benefits of the ERP/EAM project. The report indicated that the two viable courses of action for replacing its current system are Option A (to proceed with the project as initially scoped in the Application), and Option B (to move the Utilities to NEE’s existing ERP/EAM solutions). Option B is estimated to cost approximately $20.8 million less than Option A, but can only be pursued if the merger is approved. The Utilities requested the PUC to approve the commencement of work on Option B if the merger is approved; and in the alternative, Option A if the merger is not approved.

In October 2015, the PUC issued a D&O (1) finding that there is a need to replace the existing ERP/EAM system, (2) denying the Utilities request to defer the costs for the ERP software purchased in 2012 and (3) deferring any ruling on whether it is reasonable and in the public interest for the Utilities to commence with the project under Options B or A. As a result, the Utilities expensed the ERP software costs of $4.8 million in the third quarter of 2015, and pursuant to the remaining procedural schedule in the docket, in April 2015: (1) the Utilities filed additional information on the cost and benefits of the project, (2) the Consumer Advocate filed comments on that additional information and (3) the Utilities filed a reply to the Consumer Advocate’s comments. There are no steps remaining in the procedural schedule, and the Utilities are awaiting the issuance of a final D&O.

Schofield Generating Station Project. In August 2012, the PUC approved a waiver from the competitive bidding framework to allow Hawaiian Electric to negotiate with the U.S. Army for the construction of a 50 MW utility owned and operated firm, renewable and dispatchable generation facility at Schofield Barracks. In September 2015, the PUC approved Hawaiian Electric’s application to expend $167 million for the project. In approving the project, the PUC placed a cost cap of $167 million for the project, stated 90% of the cap is allowed for cost recovery through cost recovery mechanisms other than base rates, and stated the $167 million cap will be adjusted downward due to any reduction in the cost of the engine contract due to a reduction in the foreign exchange rate. Hawaiian Electric was required to take all necessary steps to lock in the lowest possible exchange rate. On January 5, 2016, Hawaiian Electric executed a window forward agreement which lowered the cost of the engine contract by $9.7 million , resulting in a revised project cost cap of $157.3 million . The generating station is now expected to be placed in service in the first quarter of 2018.

Environmental regulation . The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances. In recent years, legislative, regulatory and governmental activities related to the environment, including proposals and rulemaking under the Clean Air Act and Clean Water Act (CWA), have increased significantly and management anticipates that such activity will continue.

Clean Water Act Section 316(b). On August 14, 2014, the EPA published in the Federal Register the final regulations required by section 316(b) of the CWA designed to protect aquatic organisms from adverse impacts associated with existing power plant cooling water intake structures. The regulations were effective October 14, 2014 and apply to the cooling water systems for the steam generating units at Hawaiian Electric’s power plants on the island of Oahu. The regulations prescribe a process, including a number of required site-specific studies, for states to develop facility-specific entrainment and impingement controls to be incorporated in each facility’s National Pollutant Discharge Elimination System permit. In the case of Hawaiian Electric’s power plants, there are a number of studies that have yet to be completed before Hawaiian Electric and the State of Hawaii Department of Health (DOH) can determine what entrainment or impingement controls, if any, might be necessary at the affected facilities to comply with the new 316(b) rule.

Mercury Air Toxics Standards. On February 16, 2012, EPA published the final rule establishing the National Emission Standards for Hazardous Air Pollutants for fossil-fuel fired steam electrical generating units (EGUs) in the Federal Register. The final rule, known as the Mercury and Air Toxics Standards (MATS), applies to the 14 EGUs at Hawaiian Electric’s power plants. MATS establishes the Maximum Achievable Control Technology standards for the control of hazardous air pollutants emissions from new and existing EGUs. Hawaiian Electric received a one -year extension to comply by April 16, 2016. Hawaiian Electric initially selected a MATS compliance strategy based on switching to lower emission fuels, but has since continued developing and refining its emission control strategy. Hawaiian Electric’s liquid oil-fired steam generating units that are subject to the MATS limits may be able to comply with the new standards without a significant fuel switch in combination with a suite of operational changes.

On April 16, 2012, Hawaiian Electric submitted to the EPA a Petition for Reconsideration and Stay (Petition) that asked the EPA to revise an emissions standard for non-continental oil-fired EGUs on the grounds that the promulgated standard was incorrectly derived. On April 21, 2015, the EPA denied Hawaiian Electric's Petition and Hawaiian Electric subsequently filed a lawsuit on June 29, 2015 appealing EPA’s denial. On April 4, 2016, the D.C. Circuit Court of Appeals granted Hawaiian Electric’s uncontested motion to dismiss the case. Hawaiian Electric believes it can comply with the MATS standards due to the operational changes it has made to reduce emissions.

1-Hour Sulfur Dioxide National Ambient Air Quality Standard. On August 1, 2015, the EPA published the Data Requirements Rule for the 2010 1-Hour Sulfur Dioxide (SO ₂₎ Primary National Ambient Air Quality Standard (NAAQS). Hawaiian Electric is working with the DOH to gather data EPA requires through the installation and operation of two new 1-hour SO ₂ air quality monitoring stations on the island of Oahu. This data will be integrated into the DOH’s statewide monitoring network and will assist the State’s development of its strategy to maintain the NAAQS and comply with the new 1-Hour SO ₂ Rule in its State Implementation Plan.

Recent Settlements . Hawaiian Electric resolved outstanding claims raised by the U.S. Fish and Wildlife Service (USFWS) and the Hawaii Department of Land and Natural Resources, Division of Forestry and Wildlife (DOFAW) in March 2016. The USFWS and DOFAW had alleged that Hawaiian Electric violated the Endangered Species Act of 1973 in April of 2011, by clearing vegetation and impacting the habitat for Achatinella mustelina, an endangered Hawaiian tree snail, while servicing its facilities on Mt. Kaala on Oahu. In the respective final settlements resolving the governments’ claims, Hawaiian Electric did not admit any liability, but paid a penalty of $250 to the U.S. Fish and Wildlife Service, and provided $200,000 to the Division of Forestry and Wildlife to rebuild an aging predator-proof snail enclosure in the Pahole Natural Area Reserve.

Potential Clean Air Act Enforcement. On July 1, 2013, Hawaii Electric Light and Maui Electric (the Utilities) received a letter from the U.S. Department of Justice (DOJ) alleging potential violations of the Prevention of Significant Deterioration and Title V requirements of the Clean Air Act involving the Hill and Kahului Power Plants. In correspondence dated November 4, 2014, the DOJ also identified potential violations by Hawaiian Electric at its Kahe facility and proposed resolving the identified, potential violations by entering into a consent decree pursuant to which the Utilities would install certain pollution controls and pay a penalty. The Utilities continue to negotiate with the DOJ to resolve these issues, but are unable to estimate the amount or effect of a consent decree, if any, at this time.

Former Molokai Electric Company generation site . In 1989, Maui Electric acquired by merger Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983, but continued to operate at the Site under a lease until 1985. The EPA has since identified environmental impacts in the subsurface soil at the Site. Although Maui Electric never operated at the Site or owned the Site property, after discussions with the EPA and the DOH Maui Electric agreed to undertake additional investigations at the Site and an adjacent parcel that Molokai Electric Company had used for

equipment storage (the Adjacent Parcel) to determine the extent of environmental contamination. A 2011 assessment by a Maui Electric contractor of the Adjacent Parcel identified environmental impacts, including elevated polychlorinated biphenyls (PCBs) in the subsurface soils. In cooperation with the DOH and EPA, Maui Electric is further investigating the Site and the Adjacent Parcel to determine the extent of impacts of PCBs, residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $3.6 million as of March 31, 2016 for the additional investigation and estimated cleanup costs at the Site and the Adjacent Parcel; however, final costs of remediation will depend on the results of continued investigation.

Pearl Harbor sediment study . In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party responsible for cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. The Navy has also requested that Hawaiian Electric reimburse the costs incurred by the Navy to date to investigate the area. The Navy has completed a remedial investigation and a feasibility study (FS) for the remediation of contaminated sediment at several locations in Pearl Harbor and issued its Final FS Report on June 29, 2015. On February 2, 2016, the Navy released the Proposed Plan for Pearl Harbor Sediment Remediation and Hawaiian Electric submitted comments. The extent of the contamination, the appropriate remedial measures to address it and Hawaiian Electric’s potential responsibility for any associated costs have not been determined.

On March 23, 2015, Hawaiian Electric received a letter from the EPA requesting that Hawaiian Electric submit a work plan to assess potential sources and extent of PCB contamination onshore at the Waiau Power Plant. Hawaiian Electric submitted a sampling and analysis (SAP) work plan to the EPA and the DOH. Sampling of outfall sediments at the Waiau Power Plant was completed in accordance with the SAP in December 2015. The extent of the onshore contamination, the appropriate remedial measures to address it and any associated costs have not yet been determined.

As of March 31, 2016, the reserve account recorded by Hawaiian Electric to address the PCB contamination stands at $4.3 million . The reserve represents the probable and reasonably estimable cost to complete the onshore and offshore investigations and the remediation of PCB contamination in the offshore sediment. The final remediation costs will depend on the results of the onshore investigation and assessment of potential source control requirements, as well as the further investigation of contaminated sediment offshore from the Waiau Power Plant.

Global climate change and greenhouse gas emissions reduction. National and international concerns about climate change and the contribution of greenhouse gas (GHG) emissions (including carbon dioxide emissions from the combustion of fossil fuels) to climate change have led to federal legislative and regulatory proposals and action by the State of Hawaii to reduce GHG emissions.

In July 2007, the State Legislature passed Act 234, which requires a statewide reduction of GHG emissions by January 1, 2020 to levels at or below the statewide GHG emission levels in 1990. On June 20, 2014, the Governor signed the final regulations required to implement Act 234 (i.e., the final GHG rule), which went into effect on June 30, 2014. In general, Act 234 and the corresponding GHG rule require affected sources (that have the potential to emit GHGs in excess of established thresholds) to reduce their GHG emissions by 16% below 2010 emission levels by 2020. In accordance with the GHG rule, the Utilities submitted their Emissions Reduction Plan (EmRP) to the DOH on June 30, 2015, demonstrating how they will comply. The Utilities have committed to a 16% reduction in GHG emissions company-wide. Pursuant to the State’s GHG rule, the DOH will incorporate the proposed facility-specific GHG emission limits into each facility’s covered source permit based on the 2020 levels specified in Hawaiian Electric’s approved EmRP.

The GHG rule also requires affected sources to pay an annual fee that is based on tons per year of GHG emissions starting on the effective date of the regulations. The fee for the Utilities is estimated to be approximately $0.5 million annually. The latest assessment of the proposed federal and final state GHG rules is that the continued growth in renewable power generation will significantly reduce the compliance costs and risk for the Utilities.

As part of a negotiated amendment to the Power Purchase Agreement between Hawaiian Electric and AES Hawaii (AES), Hawaiian Electric will include the AES facility on Oahu as a partner in the Utilities’ EmRP. Similarly, with the proposed acquisition of the Hamakua Energy Partners (HEP) facility by Hawaii Electric Light, the GHG emissions from the HEP facility will be addressed in the Utilities’ EmRP. Both the AES PPA amendment and the HEP acquisition are subject to PUC approval so the inclusion of these facilities in the Utilities’ EmRP is also subject to PUC approval.

On September 22, 2009, the EPA issued its “Final Mandatory Reporting of Greenhouse Gases Rule,” which requires certain sources that emit GHGs to report their GHG emissions. Following these requirements, the Utilities have submitted the required reports for 2010 through 2015 to the EPA.

The EPA issued the final federal rule for GHG emission reductions from existing EGUs, also known as the Clean Power Plan, on August 3, 2015. The Clean Power Plan set interim state-wide emissions limits for EGUs operating in the 48 contiguous states that must be met on average from 2022 through 2029; final limits will apply from 2030. The final Clean

Power Plan did not set forth guidelines for Alaska, Hawaii, Puerto Rico or Guam, therefore Hawaiian Electric is not currently subject to this Rule.

The Utilities have taken, and continue to identify opportunities to take, direct action to reduce GHG emissions from their operations, including supporting DSM programs that foster energy efficiency, using renewable resources for energy production and purchasing power from IPPs generated by renewable resources, burning renewable biodiesel in Hawaiian Electric’s Campbell Industrial Park combustion turbine No. 1 (CIP CT-1), using biodiesel for startup and shutdown of selected Maui Electric generating units, and testing biofuel blends in other Hawaiian Electric and Maui Electric generating units. The Utilities are also working with the State of Hawaii and other entities to pursue the use of LNG as a cleaner and lower-cost fuel to replace, at least in part, the petroleum oil that would otherwise be used. Management is unable to evaluate the ultimate impact on the Utilities’ operations of more comprehensive GHG regulations that might be promulgated; however, the various initiatives that the Utilities are pursuing are likely to provide a sound basis for appropriately managing the Utilities’ carbon footprint and thereby meet both state and federal GHG reduction goals.

While the timing, extent and ultimate effects of climate change cannot be determined with any certainty, climate change is predicted to result in sea level rise. This effect could potentially result in impacts to coastal and other low-lying areas (where much of the Utilities’ electric infrastructure is sited), and result in increased flooding and storm damage due to heavy rainfall, increased rates of beach erosion, saltwater intrusion into freshwater aquifers and terrestrial ecosystems, and higher water tables in low-lying areas. The effects of climate change on the weather (for example, more intense or more frequent rain events, flooding, or hurricanes), sea levels, and freshwater availability and quality have the potential to materially adversely affect the results of operations, financial condition and liquidity of the Utilities. For example, severe weather could cause significant harm to the Utilities’ physical facilities.

Asset retirement obligations . Asset retirement obligations (AROs) represent legal obligations associated with the retirement of certain tangible long-lived assets, are measured as the present value of the projected costs for the future retirement of specific assets and are recognized in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The Utilities’ recognition of AROs have no impact on their earnings. The cost of the AROs is recovered over the life of the asset through depreciation. AROs recognized by the Utilities relate to obligations to retire plant and equipment, including removal of asbestos and other hazardous materials.

Hawaiian Electric has recorded estimated AROs related to removing retired generating units at its Honolulu and Waiau power plants. These removal projects are ongoing, with activity and expenditures occurring in partial settlement of these liabilities. Both removal projects are expected to continue through 2016.

Changes to the ARO liability included in “Other liabilities” on Hawaiian Electric’s balance sheet were as follows:



	Three months ended March 31
(in thousands)	2016			2015
Balance, beginning of period	$	26,848		$	29,419
Accretion expense	3			6
Liabilities incurred	—			—
Liabilities settled	(138		)	(1,614		)
Revisions in estimated cash flows	—			—
Balance, end of period	$	26,713		$	27,811

Decoupling . In 2010, the PUC issued an order approving decoupling, which was implemented by Hawaiian Electric on March 1, 2011, by Hawaii Electric Light on April 9, 2012 and by Maui Electric on May 4, 2012. Decoupling is a regulatory model that is intended to facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The decoupling model implemented in Hawaii delinks revenues from sales and includes annual rate adjustments for certain other operation and maintenance (O&M) expenses and rate base changes. The decoupling mechanism has three components: (1) a sales decoupling component via a revenue balancing account (RBA), (2) a revenue escalation component via a RAM and (3) an earnings sharing mechanism, which would provide for a reduction of revenues between rate cases in the event the utility exceeds the return on average common equity (ROACE) allowed in its most recent rate case. Decoupling provides for more timely cost recovery and earning on investments.

On May 31, 2013, as provided for in its original order issued in 2010 approving decoupling and citing three years of implementation experience for Hawaiian Electric, the PUC opened an investigative docket to review whether the decoupling mechanisms are functioning as intended, are fair to the Utilities and their ratepayers and are in the public interest. The PUC affirmed its support for the continuation of the sales decoupling (RBA) mechanism and stated its interest in evaluating the RAM to ensure it provides the appropriate balance of risks, costs, incentives and performance requirements, as well as

administrative efficiency, and whether the current interest rate applied to the outstanding RBA balance is reasonable. In October 2013, the PUC issued orders that bifurcated the proceeding (into Schedule A and Schedule B issues).

On February 7, 2014, the PUC issued a decision and order (D&O) on the Schedule A issues, which made certain modifications to the decoupling mechanism. Specifically, the D&O required:


•	An adjustment to the Rate Base RAM Adjustment to include 90% of the amount of the current RAM Period Rate Base RAM Adjustment that exceeds the Rate Base RAM Adjustment from the prior year, to be effective with the Utilities’ 2014 decoupling filing.


•	Effective March 1, 2014, the interest rate to be applied on the outstanding RBA balances to be the short term debt rate used in each Utilities last rate case (ranging from 1.25% to 3.25% ), instead of the 6% that had been previously approved.

As required, the Utilities have made available to the public, on the Utilities’ websites, performance metrics identified by the PUC. The Utilities are updating the performance metrics on a quarterly basis.

On March 31, 2015, the PUC issued an Order (the March Order) related to the Schedule B portion of the proceeding to make certain further modifications to the decoupling mechanism, and to establish a briefing schedule with respect to certain issues in the proceeding. The March Order modified the RAM portion of the decoupling mechanism to be capped at the lesser of the RAM Revenue Adjustment as currently determined (adjusted to eliminate the 90% limitation on the current RAM Period Rate Base RAM adjustment that was ordered in the Schedule A portion of the proceeding) and a RAM Revenue Adjustment calculated based on the cumulative annual compounded increase in Gross Domestic Product Price Index (GDPPI) applied to the 2014 annualized target revenues (adjusted for certain items specified in the Order). The 2014 annualized target revenues represent the target revenues from the last rate case, and RAM revenues, offset by earnings sharing credits, if any, allowed under the decoupling mechanism through the 2014 decoupling filing. The Utilities may apply to the PUC for approval of recovery of revenues for Major Projects (including related baseline projects grouped together for consideration as Major Projects) through the RAM above the RAM cap or outside of the RAM through the Renewable Energy Infrastructure Program (REIP) surcharge or other adjustment mechanism. The RAM was amended on an interim basis pending the outcome of the PUC’s review of the Utilities’ Power Supply Improvement Plans. The triennial rate case cycle required under the decoupling mechanism continues to serve as the maximum period between the filing of general rate cases, and the amendments to the RAM do not limit or dilute the ordinary opportunities for the Utilities to seek rate relief according to conventional/traditional ratemaking procedures.

In making the modifications to the RAM Adjustment, the PUC stated the changes are designed to provide the PUC with control of and prior regulatory review over substantial additions to baseline projects between rate cases. The modifications do not deprive the Utilities of the opportunity to recover any prudently incurred expenditure or limit orderly recovery for necessary expanded capital programs.

The RBA, which is the sales decoupling component, was retained by the PUC in its March Order, and the PUC made no change in the authorized return on common equity. The PUC stated that performance-based ratemaking is not adopted at this time.

As required by the March Order, the Parties filed initial and reply briefs related to the following issues: (1) whether and, if so, how the conventional performance incentive mechanisms proposed in this proceeding should be refined and implemented in this docket; (2) what are the appropriate steps, processes and timing for determining measures to improve the efficiency and effectiveness of the general rate case filing and review process; and (3) what are the appropriate steps, processes and timing to further consider the merits of the proposed changes to the ECAC identified in this proceeding. In identifying the issue on possible changes to the ECAC, the PUC stated that changes to the ECAC should be made with great care to avoid unintended consequences.

In accordance with the March Order, the Utilities and the Consumer Advocate filed on June 15, 2015, their Joint Proposed Modified REIP Framework/Standards and Guidelines regarding the eligibility of projects for cost recovery above the RAM Cap through the REIP surcharge. On the same date, the Utilities filed their proposed standards and guidelines on the eligibility of projects for cost recovery through the RAM above the RAM Cap. On June 30, 2015, the Consumer Advocate filed comments on this proposal, and the County of Hawaii filed comments on both the REIP and the RAM above the RAM Cap proposals. On October 26, 2015, Hawaiian Electric filed an application to recover the revenue requirements associated with 2015 net plant additions in the amount of $40.3 million (later reduced to $35.7 million ) and other associated costs for its Underground Cable Program and the 138kV Transmission and 46kV Sub-Transmission Structures Major Baseline Projects through the RAM above the 2015 RAM Cap. On October 30, 2015, Maui Electric filed an application to recover the revenue requirements associated with 2015 net plant additions in the amount of $4.3 million and other associated costs for its transmission and distribution and generation plant reliability Major Baseline Project through the RAM above the 2015 RAM

Cap. In November 2015, the Consumer Advocate filed preliminary statements of position (PSOPs) on these two applications, recommending that the PUC reject the applications. In December 2015, the Utilities filed responses to the Consumer Advocate’s PSOPs, pointing out that the PUC had already authorized the filing of such applications for recovery of capital costs above the RAM Cap and requesting that the PUC proceed with review of the applications. In March 2016, Maui Electric withdrew its October 30, 2015 application. Maui Electric determined that the application is unnecessary because it could recover the revenue requirements associated with its 2015 net plant additions under the RAM Cap due to: (1) the extension of bonus depreciation in 2015 which resulted in an increased level of accumulated deferred income taxes as an offset to 2015 net plant additions; and (2) the recorded amount of net plant additions in 2015 was less than the estimate of net plant additions in the application. In April 2016, Hawaiian Electric reduced its 2015 net plant additions in its October 26, 2015 application for the same reason as Maui Electric regarding the extension of bonus depreciation in 2015.

Annual decoupling filings . On March 31, 2016, the Utilities submitted to the PUC their annual decoupling filings for tariffed rates that will be effective from June 1, 2016 through May 31, 2017. The net annual incremental amounts to be collected (refunded) were comprised as follows:



($ in millions)	Hawaiian Electric			Hawaii Electric Light			Maui Electric
2016 Annual incremental RAM adjusted revenues	$	11.0		$	2.9		$	2.4
Annual change in accrued earnings sharing credits	$	—		$	—		$	0.5
Annual change in accrued RBA balance as of December 31, 2015 (and associated revenue taxes) (refunded)	$	(13.6	)	$	(2.5	)	$	(4.3	)
Net annual incremental amount to be collected (refunded) under the tariffs	$	(2.6	)	$	0.4		$	(1.4	)
Impact on typical residential customer monthly bill (in dollars) *	$	0.01		$	0.41		$	(0.95	)

* Based on a 500 kilowatthour (KWH) bill for Hawaiian Electric, Maui Electric and Hawaii Electric Light. The bill impact for Lanai and Molokai customers is a decrease of $0.76 , based on a 400 KWH bill. Although Hawaiian Electric’s net annual incremental amount is a refund, the typical residential customer monthly bill will increase $0.01 due to lower anticipated KWH sales.

Potential impact of lava flows . In June 2014, lava from the Kilauea Volcano on the island of Hawaii began flowing toward the town of Pahoa. Hawaii Electric Light monitored utility property and equipment near the affected areas and protected that property and equipment to the extent possible (e.g., building barriers around poles). In March 2015 Hawaii Electric Light filed an application with the PUC requesting approval to defer costs incurred to monitor, prepare for, respond to, and take other actions necessary in connection with the June 2014 Kilauea lava flow such that Hawaii Electric Light can request PUC approval to recover those costs in a future rate case. The Consumer Advocate objected to the request. A PUC decision is pending.

April 2014 regulatory orders. In April 2014, the PUC issued four orders that collectively address certain key policy, resource planning and operational issues for the Utilities. The four orders are as follows:

Integrated Resource Planning . The PUC did not accept the Utilities’ Integrated Resource Plan and Action Plans submission, and, in lieu of an approved plan, has commenced other initiatives to enable resource planning. The PUC directed each of Hawaiian Electric and Maui Electric to file within 120 days its respective Power Supply Improvement Plans (PSIPs), and the PSIPs were filed in August 2014. The PUC also provided its inclinations on the future of Hawaii’s electric utilities in an exhibit to the order. The exhibit provides the PUC’s perspectives on the vision, business strategies and regulatory policy changes required to align the Utilities’ business model with customers’ interests and the state’s public policy goals.

Reliability Standards Working Group . The PUC ordered the Utilities (and in some cases the Kauai Island Utility Cooperative) to take timely actions intended to lower energy costs, improve system reliability and address emerging challenges to integrate additional renewable energy. In addition to the PSIPs mentioned above, the PUC ordered certain filing requirements, which include the following:


•	Distributed Generation Interconnection Plan - the Utilities’ Plan was filed in August 2014.


•	Plan to implement an on-going distribution circuit monitoring program to measure real-time voltage and other power quality parameters - the Utilities’ Plan was filed in June 2014.


•	Action Plan for improving efficiencies in the interconnection requirements studies - the Utilities’ Plan was filed in May 2014.


•	The Utilities are to file monthly reports providing details about interconnection requirements studies.


•	Integrated interconnection queue for each distribution circuit for each island grid - the Utilities’ integrated interconnection queue plan was filed in August 2014 and the integrated interconnection queues were implemented in January 2015.

The PUC also stated it would be opening new dockets to address (1) reliability standards, (2) the technical, economic and policy issues associated with distributed energy resources (see “Distributed Energy Resources (DER) Investigative Proceeding” below) and (3) the Hawaii electricity reliability administrator, which is a third party position which the legislature has authorized the PUC to create by contract to provide support for the PUC in developing and periodically updating local grid reliability standards and procedures and interconnection requirements and overseeing grid access and operation.

Policy Statement and Order Regarding Demand Response Programs . The PUC provided guidance concerning the objectives and goals for demand response programs, and ordered the Utilities to develop an integrated Demand Response Portfolio Plan that will enhance system operations and reduce costs to customers. The Utilities’ Plan was filed in July 2014. Subsequently, the Utilities submitted status updates and an update and supplemental report to the Plan. On July 28, 2015, the PUC issued an order appointing a special advisor to guide, monitor and review the Utility’s Plan design and implementation. On December 30, 2015, the Utilities filed applications with the PUC (1) for approval of their proposed DR Portfolio Tariff Structure, Reporting Schedule and Cost Recovery of Program Costs through the Demand-Side Management (DSM) Surcharge, and (2) for approval to defer and recover certain computer software and software development costs for a Demand Response Management System (DRMS) through the Renewable Energy Infrastructure Program (REIP) Surcharge.

Maui Electric Company 2012 Test Year Rate Case . The PUC acknowledged the extensive analyses provided by Maui Electric in its System Improvement and Curtailment Reduction Plan (SICRP) filed in September 2013. The PUC stated that it is encouraged by the changes in Maui Electric’s operations that have led to a significant reduction in the curtailment of renewables, but stated that Maui Electric has not set forth a clearly defined path that addresses integration and curtailment of additional renewables. The PUC directed Maui Electric to present a PSIP to address present and future system operations so as to not only reduce curtailment, but to optimize the operation of its system for its customers’ benefit. The Maui Electric PSIP was filed in August 2014, and is currently being reviewed by the PUC in a new docket along with the Hawaiian Electric and Hawaii Electric Light PSIPs. Maui Electric filed its second annual SICRP status update in September 2015.

Review of PSIPs . Collectively, the PUC’s April 2014 resource planning orders confirm the energy policy and operational priorities that will guide the Utilities’ strategies and plans going forward.

PSIPs for Hawaiian Electric, Maui Electric and Hawaii Electric Light were filed in August 2014. The PSIPs each include a tactical plan to transform how electric utility services will be offered to meet customer needs and produce higher levels of renewable energy. Each plan contains a diversified mix of technologies, including significant distributed and utility‑scale renewable resources, that is expected to result, on a consolidated basis, in over 65 % of the Utilities’ energy being produced from renewable resources by 2030. Under these plans, the Utilities will support sustainable growth of rooftop solar, expand use of energy storage systems, empower customers by developing smart grids, offer new products and services to customers (e.g., community solar, microgrids and voluntary “demand response” programs), switch from high-priced oil to lower cost liquefied natural gas, retire higher-cost, less efficient existing oil-based steam generators and lower full service residential customer bills in real dollars.

In November 2015, the PUC issued an order in the proceeding to review the PSIPs filed. The order provided observations and concerns on the PSIPs submitted. In November 2015, as required by the order, the Utilities submitted a Proposed Revision Plan, which included a schedule and a work plan to supplement, amend and update the PSIPs in order to address the PUC’s observations and concerns, including an Interim PSIP Update filing in February 2016 and updated PSIPs by April 1, 2016. The parties and participants filed comments on the Utilities Proposed Revision Plan in January 2016. The PUC is expected to provide further guidance regarding the substance and course of the proceeding.

In February 2016, the Utilities filed their PSIP Update Interim Status Report with the PUC, which discusses the status of the Utilities’ ongoing planning and analysis for a diverse mix of energy resources to meet the state’s 100% RPS goal by 2045. The updated PSIPs were filed on April 1, 2016.

Distributed Energy Resources (DER) Investigative Proceeding . In March 2015, the PUC issued an order to address DER issues.

On June 29, 2015, the Utilities submitted their final Statement of Position in the DER proceeding, which included:


(1)	new pricing provisions for future rooftop photovoltaic (PV) systems,


(2)	technical standards for advanced inverters,


(3)	new options for customers including battery-equipped rooftop PV systems,


(4)	a pilot time-of-use rate,


(5)	an improved method of calculating the amount of rooftop PV that can be safely installed, and


(6)	a streamlined and standardized PV application process.

On October 12, 2015, the PUC issued a D&O establishing DER reforms that: (1) promote rapid adoption of the next generation of solar PV and other distributed energy technologies; (2) encourage more competitive pricing of distributed energy resource systems; (3) lower overall energy supply costs for all customers; and (4) help to manage DER in terms of each island’s limited grid capacity.

The D&O approved a customer self-supply tariff and a customer grid supply tariff to govern customer generators connected to the Utilities’ systems. These tariffs replace the Net Energy Metering (NEM) program.

The D&O ordered the Utilities, among other things, (a) to collaborate with inverter manufacturers to develop a test plan by December 15, 2015 for the highest priority advanced inverter functions that are not UL certified and (b) to complete the circuit-level hosting capacity analysis for all islands in the Utilities’ service territories by December 10, 2015. The DER Phase 2 of this docket began in November 2015 and focused on further developing competitive markets for distributed energy resources, including storage.

On October 21, 2015, The Alliance for Solar Choice, LLC (TASC) filed a complaint in Hawaii state court seeking an order enjoining the PUC from implementing the D&O and declaring that the D&O be reversed, modified and/or remanded to the PUC for further proceedings. On January 19, 2016, the Circuit Court entered a final judgment against TASC on all of its claims. TASC has filed a notice of appeal from the final judgment. TASC also filed a second appeal of the D&O directly with the Intermediate Court of Appeals. On April 20, 2016, the Intermediate Court of Appeals approved stipulations to dismiss both appeals with prejudice.

Derivative financial instrument. On January 5, 2016, Hawaiian Electric executed a window forward agreement to hedge the foreign currency risk associated with the anticipated purchase of engines from a European manufacturer to be included as part of the Schofield generating station. This window forward agreement has been designated as a cash flow hedge under which a single guaranteed exchange rate agreed upon on a certain date for future currency transactions scheduled to occur on specific dates with a “window” or range of plus/minus 30 days. Unrealized gains are recorded at fair value as assets in “other current assets,” and unrealized losses are recorded at fair value as liabilities in “other current liabilities,” both for the period they are outstanding. For this window forward agreement, the effective portion is reported as a component of accumulated other comprehensive income until reclassified into net income consistent with any gains or losses recognized on the engines. The generating station is expected to be placed in service in the first quarter of 2018.



	March 31, 2016				December 31, 2015
(dollars in thousands)	Notional amount		Fair value		Notional amount		Fair value
Window forward contract	$	31,335	$	1,640	$	—	$	—

Consolidating financial information. Hawaiian Electric is not required to provide separate financial statements or other disclosures concerning Hawaii Electric Light and Maui Electric to holders of the 2004 Debentures issued by Hawaii Electric Light and Maui Electric to Trust III since all of their voting capital stock is owned, and their obligations with respect to these securities have been fully and unconditionally guaranteed, on a subordinated basis, by Hawaiian Electric. Consolidating information is provided below for Hawaiian Electric and each of its subsidiaries for the periods ended and as of the dates indicated.

Hawaiian Electric also unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric, (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder and (c) relating to the trust preferred securities of Trust III. Hawaiian Electric is also obligated, after the satisfaction of its obligations on its own preferred stock, to make dividend, redemption and liquidation payments on Hawaii Electric Light’s and Maui Electric’s preferred stock if the respective subsidiary is unable to make such payments.

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income

Three months ended March 31, 2016



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	337,175		73,183		71,706		—	(12	)	$	482,052
Expenses
Fuel oil	74,085			14,374		25,281		—	—		113,740
Purchased power	91,917			16,797		7,145		—	—		115,859
Other operation and maintenance	69,558			16,441		17,909		—	—		103,908
Depreciation	31,522			9,449		5,810		—	—		46,781
Taxes, other than income taxes	32,684			6,891		6,863		—	—		46,438
Total expenses	299,766			63,952		63,008		—	—		426,726
Operating income	37,409			9,231		8,698		—	(12	)	55,326
Allowance for equity funds used during construction	1,406			127		206		—	—		1,739
Equity in earnings of subsidiaries	7,929			—		—		—	(7,929	)	—
Interest expense and other charges, net	(11,865		)	(2,965	)	(2,490	)	—	12		(17,308		)
Allowance for borrowed funds used during construction	529			49		84		—	—		662
Income before income taxes	35,408			6,442		6,498		—	(7,929	)	40,419
Income taxes	9,771			2,346		2,436		—	—		14,553
Net income	25,637			4,096		4,062		—	(7,929	)	25,866
Preferred stock dividends of subsidiaries	—			134		95		—	—		229
Net income attributable to Hawaiian Electric	25,637			3,962		3,967		—	(7,929	)	25,637
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	25,367		3,962		3,967		—	(7,929	)	$	25,367

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income

Three months ended March 31, 2016



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	25,367		3,962		3,967		—	(7,929	)	$	25,367
Other comprehensive income, net of taxes:
Derivatives qualified as cash flow hedges:
Effective portion of foreign currency hedge net unrealized gain, net of taxes	1,002			—		—		—	—		1,002
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	3,236			458		418		—	(876	)	3,236
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(3,222		)	(458	)	(418	)	—	876		(3,222		)
Other comprehensive income, net of taxes	1,016			—		—		—	—		1,016
Comprehensive income attributable to common shareholder	$	26,383		3,962		3,967		—	(7,929	)	$	26,383

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Income

Three months ended March 31, 2015



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	399,741		88,055		85,674		—	(28	)	$	573,442
Expenses
Fuel oil	118,403			23,385		35,018		—	—		176,806
Purchased power	103,250			21,893		10,864		—	—		136,007
Other operation and maintenance	70,084			16,399		17,519		—	—		104,002
Depreciation	29,389			9,313		5,541		—	—		44,243
Taxes, other than income taxes	38,201			8,384		8,163		—	—		54,748
Total expenses	359,327			79,374		77,105		—	—		515,806
Operating income	40,414			8,681		8,569		—	(28	)	57,636
Allowance for equity funds used during construction	1,123			145		145		—	—		1,413
Equity in earnings of subsidiaries	7,692			—		—		—	(7,692	)	—
Interest expense and other charges, net	(11,238		)	(2,680	)	(2,435	)	—	28		(16,325		)
Allowance for borrowed funds used during construction	388			53		58		—	—		499
Income before income taxes	38,379			6,199		6,337		—	(7,692	)	43,223
Income taxes	11,235			2,277		2,338		—	—		15,850
Net income	27,144			3,922		3,999		—	(7,692	)	27,373
Preferred stock dividends of subsidiaries	—			134		95		—	—		229
Net income attributable to Hawaiian Electric	27,144			3,788		3,904		—	(7,692	)	27,144
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	26,874		3,788		3,904		—	(7,692	)	$	26,874

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Comprehensive Income

Three months ended March 31, 2015



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	26,874		3,788		3,904		—	(7,692	)	$	26,874
Other comprehensive income, net of taxes:
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	4,933			651		600		—	(1,251	)	4,933
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(4,911		)	(651	)	(600	)	—	1,251		(4,911		)
Other comprehensive income, net of taxes	22			—		—		—	—		22
Comprehensive income attributable to common shareholder	$	26,896		3,788		3,904		—	(7,692	)	$	26,896

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Balance Sheet

March 31, 2016



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,972		6,219		3,016		—	—		$	53,207
Plant and equipment	4,059,986			1,213,924		1,082,096		—	—		6,356,006
Less accumulated depreciation	(1,325,559		)	(490,883	)	(468,486	)	—	—		(2,284,928		)
Construction in progress	163,196			16,648		18,160		—	—		198,004
Utility property, plant and equipment, net	2,941,595			745,908		634,786		—	—		4,322,289
Nonutility property, plant and equipment, less accumulated depreciation	5,762			82		1,531		—	—		7,375
Total property, plant and equipment, net	2,947,357			745,990		636,317		—	—		4,329,664
Investment in wholly owned subsidiaries, at equity	557,885			—		—		—	(557,885	)	—
Current assets
Cash and cash equivalents	29,307			12,070		7,564		101	—		49,042
Advances to affiliates	—			12,500		7,000		—	(19,500	)	—
Customer accounts receivable, net	69,744			18,399		15,596		—	—		103,739
Accrued unbilled revenues, net	60,022			12,857		12,488		—	—		85,367
Other accounts receivable, net	13,180			1,271		1,269		—	(8,947	)	6,773
Fuel oil stock, at average cost	34,553			5,688		8,163		—	—		48,404
Materials and supplies, at average cost	30,543			6,892		16,821		—	—		54,256
Prepayments and other	18,430			2,223		2,436		—	(1,286	)	21,803
Regulatory assets	80,918			5,563		2,711		—	—		89,192
Total current assets	336,697			77,463		74,048		101	(29,733	)	458,576
Other long-term assets
Regulatory assets	586,873			112,052		100,291		—	—		799,216
Unamortized debt expense	304			60		56		—	—		420
Other	47,516			14,129		12,850		—	—		74,495
Total other long-term assets	634,693			126,241		113,197		—	—		874,131
Total assets	$	4,476,632		949,694		823,562		101	(587,618	)	$	5,662,371
Capitalization and liabilities
Capitalization
Common stock equity	$	1,731,304		293,358		264,426		101	(557,885	)	$	1,731,304
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	875,308			213,608		190,000		—	—		1,278,916
Total capitalization	2,628,905			513,966		459,426		101	(557,885	)	3,044,513
Current liabilities
Short-term borrowings from non-affiliates	12,998			—		—		—	—		12,998
Short-term borrowings from affiliate	19,500			—		—		—	(19,500	)	—
Accounts payable	73,021			12,391		9,678		—	—		95,090
Interest and preferred dividends payable	18,543			4,173		4,301		—	(2	)	27,015
Taxes accrued	87,303			22,787		20,435		—	(1,286	)	129,239
Regulatory liabilities	—			4,063		1,353		—	—		5,416
Other	62,307			9,019		12,625		—	(8,945	)	75,006
Total current liabilities	273,672			52,433		48,392		—	(29,733	)	344,764
Deferred credits and other liabilities
Deferred income taxes	477,446			102,039		90,353		—	288		670,126
Regulatory liabilities	259,907			87,514		30,956		—	—		378,377
Unamortized tax credits	55,446			15,555		14,901		—	—		85,902
Defined benefit pension and other postretirement benefit plans liability	405,024			69,103		73,390		—	—		547,517
Other	49,944			13,625		14,371		—	(288	)	77,652
Total deferred credits and other liabilities	1,247,767			287,836		223,971		—	—		1,759,574
Contributions in aid of construction	326,288			95,459		91,773		—	—		513,520
Total capitalization and liabilities	$	4,476,632		949,694		823,562		101	(587,618	)	$	5,662,371

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Balance Sheet

December 31, 2015



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	43,557		6,219		3,016		—	—		$	52,792
Plant and equipment	4,026,079			1,212,195		1,077,424		—	—		6,315,698
Less accumulated depreciation	(1,316,467		)	(486,028	)	(463,509	)	—	—		(2,266,004		)
Construction in progress	147,979			11,455		15,875		—	—		175,309
Utility property, plant and equipment, net	2,901,148			743,841		632,806		—	—		4,277,795
Nonutility property, plant and equipment, less accumulated depreciation	5,659			82		1,531		—	—		7,272
Total property, plant and equipment, net	2,906,807			743,923		634,337		—	—		4,285,067
Investment in wholly owned subsidiaries, at equity	556,528			—		—		—	(556,528	)	—
Current assets
Cash and cash equivalents	16,281			2,682		5,385		101	—		24,449
Advances to affiliates	—			15,500		7,500		—	(23,000	)	—
Customer accounts receivable, net	93,515			20,508		18,755		—	—		132,778
Accrued unbilled revenues, net	60,080			12,531		11,898		—	—		84,509
Other accounts receivable, net	16,421			1,275		1,674		—	(8,962	)	10,408
Fuel oil stock, at average cost	49,455			8,310		13,451		—	—		71,216
Materials and supplies, at average cost	30,921			6,865		16,643		—	—		54,429
Prepayments and other	25,505			9,091		2,295		—	(251	)	36,640
Regulatory assets	63,615			4,501		4,115		—	—		72,231
Total current assets	355,793			81,263		81,716		101	(32,213	)	486,660
Other long-term assets
Regulatory assets	608,957			114,562		100,981		—	—		824,500
Unamortized debt expense	359			74		64		—	—		497
Other	47,731			14,693		13,062		—	—		75,486
Total other long-term assets	657,047			129,329		114,107		—	—		900,483
Total assets	$	4,476,175		954,515		830,160		101	(588,741	)	$	5,672,210
Capitalization and liabilities
Capitalization
Common stock equity	$	1,728,325		292,702		263,725		101	(556,528	)	$	1,728,325
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	875,163			213,580		189,959		—	—		1,278,702
Total capitalization	2,625,781			513,282		458,684		101	(556,528	)	3,041,320
Current liabilities
Short-term borrowings from affiliate	23,000			—		—		—	(23,000	)	—
Accounts payable	84,631			17,702		12,513		—	—		114,846
Interest and preferred dividends payable	15,747			4,255		3,113		—	(4	)	23,111
Taxes accrued	131,668			30,342		29,325		—	(251	)	191,084
Regulatory liabilities	—			1,030		1,174		—	—		2,204
Other	41,083			8,760		13,194		—	(8,958	)	54,079
Total current liabilities	296,129			62,089		59,319		—	(32,213	)	385,324
Deferred credits and other liabilities
Deferred income taxes	466,133			100,681		87,706		—	286		654,806
Regulatory liabilities	254,033			84,623		30,683		—	—		369,339
Unamortized tax credits	54,078			15,406		14,730		—	—		84,214
Defined benefit pension and other postretirement benefit plans liability	409,021			69,893		74,060		—	—		552,974
Other	51,273			13,243		13,916		—	(286	)	78,146
Total deferred credits and other liabilities	1,234,538			283,846		221,095		—	—		1,739,479
Contributions in aid of construction	319,727			95,298		91,062		—	—		506,087
Total capitalization and liabilities	$	4,476,175		954,515		830,160		101	(588,741	)	$	5,672,210

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Changes in Common Stock Equity

Three months ended March 31, 2016



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2015	$	1,728,325		292,702		263,725		101	(556,528	)	$	1,728,325
Net income for common stock	25,367			3,962		3,967		—	(7,929	)	25,367
Other comprehensive income, net of taxes	1,016			—		—		—	—		1,016
Common stock dividends	(23,400		)	(3,302	)	(3,265	)	—	6,567		(23,400		)
Common stock issuance expenses	(4		)	(4	)	(1	)	—	5		(4		)
Balance, March 31, 2016	$	1,731,304		293,358		264,426		101	(557,885	)	$	1,731,304

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Changes in Common Stock Equity

Three months ended March 31, 2015



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2014	$	1,682,144		281,846		256,692		101	(538,639	)	$	1,682,144
Net income for common stock	26,874			3,788		3,904		—	(7,692	)	26,874
Other comprehensive income, net of taxes	22			—		—		—	—		22
Common stock dividends	(22,601		)	(2,505	)	(3,794	)	—	6,299		(22,601		)
Common stock issuance expenses	(5		)	—		—		—	—		(5		)
Balance, March 31, 2015	$	1,686,434		283,129		256,802		101	(540,032	)	$	1,686,434

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Cash Flows

Three months ended March 31, 2016



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	25,637		4,096		4,062		—	(7,929	)	$	25,866
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(7,954		)	—		—		—	7,929		(25		)
Common stock dividends received from subsidiaries	6,592			—		—		—	(6,567	)	25
Depreciation of property, plant and equipment	31,522			9,449		5,810		—	—		46,781
Other amortization	1,045			268		461		—	—		1,774
Increase in deferred income taxes	9,764			1,277		2,517		—	—		13,558
Change in tax credits, net	1,386			154		162		—	—		1,702
Allowance for equity funds used during construction	(1,406		)	(127	)	(206	)	—	—		(1,739		)
Changes in assets and liabilities:
Decrease in accounts receivable	22,606			2,113		3,563		—	15		28,297
Decrease (increase) in accrued unbilled revenues	58			(326	)	(590	)	—	—		(858		)
Decrease in fuel oil stock	14,902			2,622		5,288		—	—		22,812
Decrease (increase) in materials and supplies	378			(27	)	(178	)	—	—		173
Decrease in regulatory assets	79			397		1,109		—	—		1,585
Increase in accounts payable	24,827			1,652		1,287		—	—		27,766
Change in prepaid and accrued income and utility revenue taxes	(31,916		)	(1,634	)	(8,466	)	—	(2	)	(42,018		)
Increase in defined benefit pension and other postretirement benefit plans liability	177			13		15		—	—		205
Change in other assets and liabilities	15,249			5,562		169		—	(13	)	20,967
Net cash provided by operating activities	112,946			25,489		15,003		—	(6,567	)	146,871
Cash flows from investing activities
Capital expenditures	(97,363		)	(16,649	)	(11,171	)	—	—		(125,183		)
Contributions in aid of construction	11,585			969		1,207		—	—		13,761
Other	22			23		—		—	—		45
Advances from affiliates	—			3,000		500		—	(3,500	)	—
Net cash used in investing activities	(85,756		)	(12,657	)	(9,464	)	—	(3,500	)	(111,377		)
Cash flows from financing activities
Common stock dividends	(23,400		)	(3,302	)	(3,265	)	—	6,567		(23,400		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(270		)	(134	)	(95	)	—	—		(499		)
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	9,498			—		—		—	3,500		12,998
Other	8			(8	)	—		—	—		—
Net cash used in financing activities	(14,164		)	(3,444	)	(3,360	)	—	10,067		(10,901		)
Net increase in cash and cash equivalents	13,026			9,388		2,179		—	—		24,593
Cash and cash equivalents, beginning of period	16,281			2,682		5,385		101	—		24,449
Cash and cash equivalents, end of period	$	29,307		12,070		7,564		101	—		$	49,042

Hawaiian Electric Company, Inc. and Subsidiaries

Consolidating Statement of Cash Flows

Three months ended March 31, 2015



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	27,144		3,922		3,999		—	(7,692	)	$	27,373
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(7,717		)	—		—		—	7,692		(25		)
Common stock dividends received from subsidiaries	6,324			—		—		—	(6,299	)	25
Depreciation of property, plant and equipment	29,389			9,313		5,541		—	—		44,243
Other amortization	590			500		608		—	—		1,698
Increase in deferred income taxes	12,048			719		2,365		—	—		15,132
Change in tax credits, net	2,246			200		130		—	—		2,576
Allowance for equity funds used during construction	(1,123		)	(145	)	(145	)	—	—		(1,413		)
Changes in assets and liabilities:
Decrease in accounts receivable	21,703			2,147		4,408		—	846		29,104
Decrease in accrued unbilled revenues	21,726			1,426		4,728		—	—		27,880
Decrease in fuel oil stock	8,654			5,817		6,260		—	—		20,731
Decrease (increase) in materials and supplies	(1,115		)	75		(317	)	—	—		(1,357		)
Increase in regulatory assets	(8,903		)	(1,522	)	(402	)	—	—		(10,827		)
Increase (decrease) in accounts payable	16,520			(2,548	)	1,408		—	—		15,380
Change in prepaid and accrued income and utility revenue taxes	(52,273		)	(1,807	)	(9,616	)	—	—		(63,696		)
Increase in defined benefit pension and other postretirement benefit plans liability	—			—		110		—	—		110
Change in other assets and liabilities	(8,614		)	203		(517	)	—	(846	)	(9,774		)
Net cash provided by operating activities	66,599			18,300		18,560		—	(6,299	)	97,160
Cash flows from investing activities
Capital expenditures	(92,242		)	(14,902	)	(11,730	)	—	—		(118,874		)
Contributions in aid of construction	8,121			758		266		—	—		9,145
Other	175			26		42		—	—		243
Advances from (to) affiliates	3,500			—		—		—	(3,500	)	—
Net cash used in investing activities	(80,446		)	(14,118	)	(11,422	)	—	(3,500	)	(109,486		)
Cash flows from financing activities
Common stock dividends	(22,601		)	(2,505	)	(3,794	)	—	6,299		(22,601		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(270		)	(134	)	(95	)	—	—		(499		)
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	30,000			(500	)	(3,000	)	—	3,500		30,000
Other	(214		)	(1	)	(1	)	—	—		(216		)
Net cash provided by (used in) financing activities	6,915			(3,140	)	(6,890	)	—	9,799		6,684
Net increase (decrease) in cash and cash equivalents	(6,932		)	1,042		248		—	—		(5,642		)
Cash and cash equivalents, beginning of period	12,416			612		633		101	—		13,762
Cash and cash equivalents, end of period	$	5,484		1,654		881		101	—		$	8,120

5 · Bank segment

Selected financial information

American Savings Bank, F.S.B.

Statements of Income Data



	Three months ended March 31
(in thousands)	2016		2015
Interest and dividend income
Interest and fees on loans	$	48,437	$	45,198
Interest and dividends on investment securities	5,017		3,051
Total interest and dividend income	53,454		48,249
Interest expense
Interest on deposit liabilities	1,592		1,260
Interest on other borrowings	1,485		1,466
Total interest expense	3,077		2,726
Net interest income	50,377		45,523
Provision for loan losses	4,766		614
Net interest income after provision for loan losses	45,611		44,909
Noninterest income
Fees from other financial services	5,499		5,355
Fee income on deposit liabilities	5,156		5,315
Fee income on other financial products	2,205		1,889
Bank-owned life insurance	998		983
Mortgage banking income	1,195		1,822
Other income, net	333		735
Total noninterest income	15,386		16,099
Noninterest expense
Compensation and employee benefits	22,434		21,766
Occupancy	4,138		4,113
Data processing	3,172		3,116
Services	2,911		2,341
Equipment	1,663		1,701
Office supplies, printing and postage	1,365		1,483
Marketing	861		841
FDIC insurance	884		811
Other expense	3,975		4,205
Total noninterest expense	41,403		40,377
Income before income taxes	19,594		20,631
Income taxes	6,921		7,156
Net income	$	12,673	$	13,475

American Savings Bank, F.S.B.

Statements of Comprehensive Income Data



	Three months ended March 31
(in thousands)	2016		2015
Net income	$	12,673	$	13,475
Other comprehensive income, net of taxes:
Net unrealized gains on available-for-sale investment securities:
Net unrealized gains on available-for-sale investment securities arising during the period, net of tax benefits of $4,905 and $2,278 for the respective periods	7,429		3,451
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $137 and $259 for the respective periods	208		392
Other comprehensive income, net of taxes	7,637		3,843
Comprehensive income	$	20,310	$	17,318

American Savings Bank, F.S.B.

Balance Sheets Data



(in thousands)	March 31, 2016						December 31, 2015
Assets
Cash and due from banks				$	110,200					$	127,201
Interest-bearing deposits				120,428						93,680
Available-for-sale investment securities, at fair value				906,295						820,648
Stock in Federal Home Loan Bank, at cost				11,218						10,678
Loans receivable held for investment				4,642,276						4,615,819
Allowance for loan losses				(52,326		)				(50,038		)
Net loans				4,589,950						4,565,781
Loans held for sale, at lower of cost or fair value				7,900						4,631
Other				312,333						309,946
Goodwill				82,190						82,190
Total assets				$	6,140,514					$	6,014,755

Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing				$	1,541,402					$	1,520,374
Deposit liabilities—interest-bearing				3,598,530						3,504,880
Other borrowings				329,081						328,582
Other				99,605						101,029
Total liabilities				5,568,618						5,454,865
Commitments and contingencies
Common stock				1						1
Additional paid in capital				341,192						340,496
Retained earnings				240,337						236,664
Accumulated other comprehensive loss, net of tax benefits
Net unrealized gains (losses) on securities	$	5,556					$	(1,872	)
Retirement benefit plans	(15,190		)	(9,634		)	(15,399		)	(17,271		)
Total shareholder’s equity				571,896						559,890
Total liabilities and shareholder’s equity				$	6,140,514					$	6,014,755

Other assets
Bank-owned life insurance				$	138,732					$	138,139
Premises and equipment, net				89,525						88,077
Prepaid expenses				5,329						3,550
Accrued interest receivable				15,723						15,192
Mortgage-servicing rights				8,857						8,884
Low-income housing equity investments				36,450						37,793
Real estate acquired in settlement of loans, net				797						1,030
Other				16,920						17,281
				$	312,333					$	309,946
Other liabilities
Accrued expenses				$	26,055					$	30,705
Federal and state income taxes payable				22,324						13,448
Cashier’s checks				21,542						21,768
Advance payments by borrowers				6,403						10,311
Other				23,281						24,797
				$	99,605					$	101,029

Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death.

Other borrowings consisted of securities sold under agreements to repurchase and advances from the Federal Home Loan Bank (FHLB) of $229 million and $100 million , respectively, as of March 31, 2016 and $229 million and $100 million , respectively, as of December 31, 2015 .

Available-for-sale investment securities. The major components of investment securities were as follows:



	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value			Gross unrealized losses
										Less than 12 months						12 months or longer
(dollars in thousands)										Number of issues	Fair value		Amount			Number of issues	Fair value		Amount
March 31, 2016
Available-for-sale
U.S. Treasury and federal agency obligations	$	215,716	$	3,078	$	(97	)	$	218,697	—	$	—	$	—		2	$	9,511	$	(97	)
Mortgage-related securities- FNMA, FHLMC and GNMA	681,354		7,852		(1,608		)	687,598		9	67,217		(256		)	21	100,991		(1,352		)
	$	897,070	$	10,930	$	(1,705	)	$	906,295	9	$	67,217	$	(256	)	23	$	110,502	$	(1,449	)
December 31, 2015
Available-for-sale
U.S. Treasury and federal agency obligations	$	213,234	$	1,025	$	(1,300	)	$	212,959	13	$	83,053	$	(866	)	3	$	17,378	$	(434	)
Mortgage-related securities- FNMA, FHLMC and GNMA	610,522		3,564		(6,397		)	607,689		38	305,785		(2,866		)	25	125,817		(3,531		)
	$	823,756	$	4,589	$	(7,697	)	$	820,648	51	$	388,838	$	(3,732	)	28	$	143,195	$	(3,965	)

ASB does not believe that the investment securities that were in an unrealized loss position at March 31, 2016, represent an other-than-temporary impairment. Total gross unrealized losses were primarily attributable to rising interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities. The contractual cash flows of the investment securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB did not recognize OTTI for the quarters ended March 31, 2016 and 2015.

U.S. Treasury and federal agency obligations have contractual terms to maturity. Mortgage-related securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.

The contractual maturities of available-for-sale investment securities were as follows:



March 31, 2016	Amortized cost		Fair value
(in thousands)
Due in one year or less	$	—	$	—
Due after one year through five years	111,299		112,991
Due after five years through ten years	66,398		67,413
Due after ten years	38,019		38,293
	215,716		218,697
Mortgage-related securities-FNMA,FHLMC and GNMA	681,354		687,598
Total available-for-sale securities	$	897,070	$	906,295

Allowance for loan losses. The allowance for loan losses (balances and changes) and financing receivables were as follows:



(in thousands)	Residential 1-4 family			Commercial real estate		Home equity line of credit			Residential land			Commercial construction			Residential construction			Commercial loans			Consumer loans			Unallocated		Total
Three months ended March 31, 2016
Allowance for loan losses:
Beginning balance	$	4,186		$	11,342	$	7,260		$	1,671		$	4,461		$	13		$	17,208		$	3,897		$	—	$	50,038
Charge-offs	(45		)	—		—			—			—			—			(1,343		)	(1,570		)	—		(2,958		)
Recoveries	17			—		15			103			—			—			135			210			—		480
Provision	435			464		(103		)	(34		)	1,703			(1		)	991			1,311			—		4,766
Ending balance	$	4,593		$	11,806	$	7,172		$	1,740		$	6,164		$	12		$	16,991		$	3,848		$	—	$	52,326
March 31, 2016
Ending balance: individually evaluated for impairment	$	1,653		$	50	$	629		$	841		$	—		$	—		$	3,643		$	7				$	6,823
Ending balance: collectively evaluated for impairment	$	2,940		$	11,756	$	6,543		$	899		$	6,164		$	12		$	13,348		$	3,841		$	—	$	45,503
Financing Receivables:
Ending balance	$	2,055,020		$	703,661	$	846,467		$	18,940		$	130,487		$	16,241		$	740,596		$	136,244				$	4,647,656
Ending balance: individually evaluated for impairment	$	22,585		$	3,727	$	3,820		$	4,477		$	—		$	—		$	26,099		$	13				$	60,721
Ending balance: collectively evaluated for impairment	$	2,032,435		$	699,934	$	842,647		$	14,463		$	130,487		$	16,241		$	714,497		$	136,231				$	4,586,935
Three months ended March 31, 2015
Allowance for loan losses:
Beginning balance	$	4,662		$	8,954	$	6,982		$	1,875		$	5,471		$	28		$	14,017		$	3,629		$	—	$	45,618
Charge-offs	(156		)	—		(3		)	—			—			—			(46		)	(942		)	—		(1,147		)
Recoveries	12			—		31			49			—			—			341			277			—		710
Provision	403			2,274		(487		)	362			(2,634		)	(7		)	268			435			—		614
Ending balance	$	4,921		$	11,228	$	6,523		$	2,286		$	2,837		$	21		$	14,580		$	3,399		$	—	$	45,795
December 31, 2015
Ending balance: individually evaluated for impairment	$	1,453		$	—	$	442		$	891		$	—		$	—		$	3,527		$	7				$	6,320
Ending balance: collectively evaluated for impairment	$	2,733		$	11,342	$	6,818		$	780		$	4,461		$	13		$	13,681		$	3,890		$	—	$	43,718
Financing Receivables:
Ending balance	$	2,069,665		$	690,561	$	846,294		$	18,229		$	100,796		$	14,089		$	758,659		$	123,775				$	4,622,068
Ending balance: individually evaluated for impairment	$	22,457		$	1,188	$	3,225		$	5,683		$	—		$	—		$	21,119		$	13				$	53,685
Ending balance: collectively evaluated for impairment	$	2,047,208		$	689,373	$	843,069		$	12,546		$	100,796		$	14,089		$	737,540		$	123,762				$	4,568,383

Credit quality . ASB performs an internal loan review and grading on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of its lending policies and procedures. The objectives of the loan review and grading procedures are to identify, in a timely manner, existing or emerging credit trends so that appropriate steps can be initiated to manage risk and avoid or minimize future losses. Loans subject to grading include commercial, commercial real estate and commercial construction loans.

Each loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications: Pass, Special Mention, Substandard, Doubtful and Loss. The AQR is a function of the PD Model rating, the loss given default and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. Pass exposures generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Bank may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The credit risk profile by internally assigned grade for loans was as follows:



	March 31, 2016						December 31, 2015
(in thousands)	Commercial real estate		Commercial construction		Commercial		Commercial real estate		Commercial construction		Commercial
Grade:
Pass	$	655,307	$	110,744	$	679,370	$	642,410	$	86,991	$	703,208
Special mention	16,096		—		12,662		7,710		13,805		7,029
Substandard	32,258		19,743		48,302		40,441		—		47,975
Doubtful	—		—		262		—		—		447
Loss	—		—		—		—		—		—
Total	$	703,661	$	130,487	$	740,596	$	690,561	$	100,796	$	758,659

The credit risk profile based on payment activity for loans was as follows:



(in thousands)	30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Current		Total financing receivables		Recorded investment> 90 days and accruing
March 31, 2016
Real estate:
Residential 1-4 family	$	5,537	$	2,215	$	10,626	$	18,378	$	2,036,642	$	2,055,020	$	—
Commercial real estate	—		—		—		—		703,661		703,661		—
Home equity line of credit	1,218		508		340		2,066		844,401		846,467		—
Residential land	—		—		148		148		18,792		18,940		—
Commercial construction	—		—		—		—		130,487		130,487		—
Residential construction	—		—		—		—		16,241		16,241		—
Commercial	391		984		308		1,683		738,913		740,596		—
Consumer	1,249		579		446		2,274		133,970		136,244		—
Total loans	$	8,395	$	4,286	$	11,868	$	24,549	$	4,623,107	$	4,647,656	$	—
December 31, 2015
Real estate:
Residential 1-4 family	$	4,967	$	3,289	$	11,503	$	19,759	$	2,049,906	$	2,069,665	$	—
Commercial real estate	—		—		—		—		690,561		690,561		—
Home equity line of credit	896		706		477		2,079		844,215		846,294		—
Residential land	—		—		415		415		17,814		18,229		—
Commercial construction	—		—		—		—		100,796		100,796		—
Residential construction	—		—		—		—		14,089		14,089		—
Commercial	125		223		878		1,226		757,433		758,659		—
Consumer	1,383		593		644		2,620		121,155		123,775		—
Total loans	$	7,371	$	4,811	$	13,917	$	26,099	$	4,595,969	$	4,622,068	$	—

The credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due and TDR loans was as follows:



(in thousands)	March 31, 2016		December 31, 2015
Real estate:
Residential 1-4 family	$	21,028	$	20,554
Commercial real estate	3,727		1,188
Home equity line of credit	2,801		2,254
Residential land	698		970
Commercial construction	—		—
Residential construction	—		—
Commercial	17,862		20,174
Consumer	797		895
Total nonaccrual loans	$	46,913	$	46,035
Real estate:
Residential 1-4 family	$	—	$	—
Commercial real estate	—		—
Home equity line of credit	—		—
Residential land	—		—
Commercial construction	—		—
Residential construction	—		—
Commercial	—		—
Consumer	—		—
Total accruing loans 90 days or more past due	$	—	$	—
Real estate:
Residential 1-4 family	$	13,803	$	13,962
Commercial real estate	—		—
Home equity line of credit	2,643		2,467
Residential land	3,779		4,713
Commercial construction	—		—
Residential construction	—		—
Commercial	8,400		1,104
Consumer	—		—
Total troubled debt restructured loans not included above	$	28,625	$	22,246

The total carrying amount and the total unpaid principal balance of impaired loans were as follows:



	March 31, 2016						Three months ended March 31, 2016
(in thousands)	Recorded investment		Unpaid principal balance		Related Allowance		Average recorded investment		Interest income recognized*
With no related allowance recorded
Real estate:
Residential 1-4 family	$	10,502	$	11,606	$	—	$	10,392	$	51
Commercial real estate	1,166		1,429		—		1,173		—
Home equity line of credit	913		1,159		—		849		—
Residential land	1,489		2,185		—		1,590		16
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	5,079		5,831		—		4,999		6
Consumer	—		—		—		—		—
	$	19,149	$	22,210	$	—	$	19,003	$	73
With an allowance recorded
Real estate:
Residential 1-4 family	$	12,083	$	12,286	$	1,653	$	12,018	$	122
Commercial real estate	2,561		2,570		50		854		—
Home equity line of credit	2,907		2,977		629		2,944		27
Residential land	2,988		2,988		841		3,378		67
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	21,020		21,714		3,643		16,970		30
Consumer	13		13		7		13		—
	$	41,572	$	42,548	$	6,823	$	36,177	$	246
Total
Real estate:
Residential 1-4 family	$	22,585	$	23,892	$	1,653	$	22,410	$	173
Commercial real estate	3,727		3,999		50		2,027		—
Home equity line of credit	3,820		4,136		629		3,793		27
Residential land	4,477		5,173		841		4,968		83
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	26,099		27,545		3,643		21,969		36
Consumer	13		13		7		13		—
	$	60,721	$	64,758	$	6,823	$	55,180	$	319



	December 31, 2015						Three months ended March 31, 2015
(in thousands)	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized*
With no related allowance recorded
Real estate:
Residential 1-4 family	$	10,596	$	11,805	$	—	$	11,552	$	89
Commercial real estate	1,188		1,436		—		555		—
Home equity line of credit	707		948		—		400		1
Residential land	1,644		2,412		—		2,637		52
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	5,671		6,333		—		7,295		2
Consumer	—		—		—		—		—
	$	19,806	$	22,934	$	—	$	22,439	$	144
With an allowance recorded
Real estate:
Residential 1-4 family	$	11,861	$	11,914	$	1,453	$	11,510	$	126
Commercial real estate	—		—		—		4,482		—
Home equity line of credit	2,518		2,579		442		626		6
Residential land	4,039		4,117		891		5,189		83
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	15,448		16,073		3,527		4,982		50
Consumer	13		13		7		15		—
	$	33,879	$	34,696	$	6,320	$	26,804	$	265
Total
Real estate:
Residential 1-4 family	$	22,457	$	23,719	$	1,453	$	23,062	$	215
Commercial real estate	1,188		1,436		—		5,037		—
Home equity line of credit	3,225		3,527		442		1,026		7
Residential land	5,683		6,529		891		7,826		135
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	21,119		22,406		3,527		12,277		52
Consumer	13		13		7		15		—
	$	53,685	$	57,630	$	6,320	$	49,243	$	409


*	Since loan was classified as impaired.

Troubled debt restructurings. A loan modification is deemed to be a troubled debt restructuring (TDR) when ASB grants a concession it would not otherwise consider were it not for the borrower’s financial difficulty. When a borrower experiencing financial difficulty fails to make a required payment on a loan or is in imminent default, ASB takes a number of steps to improve the collectability of the loan and maximize the likelihood of full repayment. At times, ASB may modify or restructure a loan to help a distressed borrower improve its financial position to eventually be able to fully repay the loan, provided the borrower has demonstrated both the willingness and the ability to fulfill the modified terms. TDR loans are considered an alternative to foreclosure or liquidation with the goal of minimizing losses to ASB and maximizing recovery.

ASB may consider various types of concessions in granting a TDR including maturity date extensions, extended amortization of principal, temporary deferral of principal payments and temporary interest rate reductions. ASB rarely grants principal forgiveness in its TDR modifications. Residential loan modifications generally involve interest rate reduction, extending the amortization period, or capitalizing certain delinquent amounts owed not to exceed the original loan balance. Land loans at origination are typically structured as a three -year term, interest-only monthly payment with a balloon payment due at maturity. Land loan TDR modifications typically involve extending the maturity date up to five years and converting the payments from interest-only to principal and interest monthly, at the same or higher interest rate. Commercial loan modifications generally involve extensions of maturity dates, extending the amortization period and temporary deferral or

reduction of principal payments. ASB generally does not reduce the interest rate on commercial loan TDR modifications. Occasionally, additional collateral and/or guaranties are obtained.

All TDR loans are classified as impaired and are segregated and reviewed separately when assessing the adequacy of the allowance for loan losses based on the appropriate method of measuring impairment: (1) present value of expected future cash flows discounted at the loan’s effective original contractual rate, (2) fair value of collateral less cost to sell or (3) observable market price. The financial impact of the calculated impairment amount is an increase to the allowance associated with the modified loan. When available information confirms that specific loans or portions thereof are uncollectible (confirmed losses), these amounts are charged off against the allowance for loan losses.

Loan modifications that occurred and the impact on the allowance for loan losses were as follows:



	Three months ended March 31, 2016
	Number of contracts	Outstanding recorded investment ¹				Net increase in allowance
(dollars in thousands)	Number of contracts	Pre-modification		Post-modification		(as of period end)
Troubled debt restructurings
Real estate:
Residential 1-4 family	4	$	1,097	$	1,215	$	161
Commercial real estate	—	—		—		—
Home equity line of credit	10	669		669		74
Residential land	—	—		—		—
Commercial construction	—	—		—		—
Residential construction	—	—		—		—
Commercial	3	16,200		16,200		525
Consumer	—	—		—		—
	17	$	17,966	$	18,084	$	760



	Three months ended March 31, 2015
	Number of contracts	Outstanding recorded investment ¹				Net increase in allowance
(dollars in thousands)	Number of contracts	Pre-modification		Post-modification		(as of period end)
Troubled debt restructurings
Real estate:
Residential 1-4 family	5	$	877	$	895	$	47
Commercial real estate	—	—		—		—
Home equity line of credit	9	429		429		55
Residential land	—	—		—		—
Commercial construction	—	—		—		—
Residential construction	—	—		—		—
Commercial	1	92		92		—
Consumer	—	—		—		—
	15	$	1,398	$	1,416	$	102


¹	The reported balances include loans that became TDR during the period, and were fully paid-off, charged-off, or sold prior to period end.

Loans modified in TDRs that experienced a payment default of 90 days or more during the three months ended March 31, 2016 and 2015, and for which the payment of default occurred within one year of the modification, were as follows:



Three months ended March 31	2016			2015
(dollars in thousands)	Number of contracts	Recorded investment		Number of contracts	Recorded investment
Troubled debt restructurings that subsequently defaulted
Real estate:
Residential 1-4 family	1	$	488	—	$	—
Commercial real estate	—	—		—	—
Home equity line of credit	—	—		—	—
Residential land	—	—		—	—
Commercial construction	—	—		—	—
Residential construction	—	—		—	—
Commercial	—	—		—	—
Consumer	—	—		—	—
	1	$	488	—	$	—

If loans modified in a TDR subsequently default, ASB evaluates the loan for further impairment. Based on its evaluation, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. Commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR totaled $2.3 million at March 31, 2016 .

Mortgage servicing rights . In its mortgage banking business, ASB sells residential mortgage loans to government-sponsored entities and other parties, who may issue securities backed by pools of such loans. ASB retains no beneficial interests in these loans other than the servicing rights of certain loans sold.

ASB received $40.4 million and $78.3 million of proceeds from the sale of residential mortgages for the quarters ended March 31, 2016 and 2015, respectively, and recognized gains on such sales of $1.2 million and $1.8 million for the quarters ended March 31, 2016 and 2015, respectively. Repurchased mortgage loans for the quarters ended March 31, 2016 and 2015 were nil and nil , respectively. The repurchase reserve was $0.1 million and nil for the quarters ended March 31, 2016 and 2015, respectively.

Mortgage servicing fees, a component of other income, net, were $0.7 million and $0.9 million for the three months ended March 31, 2016 and 2015, respectively.

Changes in the carrying value of mortgage servicing rights were as follows:



(in thousands)	Gross carrying amount ¹		Accumulated amortization ¹			Valuation allowance		Net carrying amount
March 31, 2016	$	14,986	$	(6,129	)	$	—	$	8,857
December 31, 2015	14,531		(5,647		)	—		8,884

¹ Reflects the impact of loans paid in full.

Changes related to mortgage servicing rights were as follows:



(in thousands)	2016			2015
Mortgage servicing rights
Balance, January 1	$	8,884		$	11,749
Amount capitalized	455			906
Amortization	(482		)	(647		)
Other-than-temporary impairment	—			(2		)
Carrying amount before valuation allowance, March 31	8,857			12,006
Valuation allowance for mortgage servicing rights
Balance, January 1	—			209
Provision (recovery)	—			(166		)
Other-than-temporary impairment	—			(2		)
Balance, March 31	—			41
Net carrying value of mortgage servicing rights	$	8,857		$	11,965

ASB capitalizes mortgage servicing rights acquired through either the purchase or origination of mortgage loans for sale with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the mortgage servicing rights to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the mortgage servicing rights. ASB’s MSRs are stratified based on predominant risk characteristics of the underlying loans including loan type such as fixed-rate 15 and 30 year mortgages and note rate in bands of 50 to 100 basis points. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Changes in mortgage interest rates impact the value of ASB’s mortgage servicing rights. Rising interest rates typically result in slower prepayment speeds in the loans being serviced for others, which increases the value of mortgage servicing rights, whereas declining interest rates typically result in faster prepayment speeds which decrease the value of mortgage servicing rights and increase the amortization of the mortgage servicing rights. Expected net income streams are estimated based on industry assumptions regarding prepayment expectations and income and expenses associated with servicing residential mortgage loans for others.

ASB uses a present value cash flow model using techniques described above to estimate the fair value of MSRs. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in other income, net in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable.

Key assumptions used in estimating the fair value of ASB’s mortgage servicing rights used in the impairment analysis were as follows:



(dollars in thousands)	March 31, 2016			December 31, 2015
Unpaid principal balance	$	1,114,800		$	1,097,314
Weighted average note rate	4.04		%	4.05		%
Weighted average discount rate	9.6		%	9.6		%
Weighted average prepayment speed	10.8		%	9.3		%

The sensitivity analysis of fair value of MSR to hypothetical adverse changes of 25 and 50 basis points in certain key assumptions was as follows:



(dollars in thousands)	March 31, 2016			December 31, 2015
Prepayment rate:
25 basis points adverse rate change	$	(537	)	$	(561	)
50 basis points adverse rate change	(1,008		)	(1,104		)
Discount rate:
25 basis points adverse rate change	(99		)	(111		)
50 basis points adverse rate change	(196		)	(220		)

The effect of a variation in certain assumptions on fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the changes in the fair value of MSRs typically is not linear.

Other borrowings. Securities sold under agreements to repurchase are accounted for as financing transactions and the obligations to repurchase these securities are recorded as liabilities in the balance sheet. ASB pledges investment securities as collateral for securities sold under agreements to repurchase. All such agreements are subject to master netting arrangements, which provide for conditional right of set-off in case of default by either party; however, ASB presents securities sold under agreements to repurchase on a gross basis in the balance sheet. The following tables present information about the securities sold under agreements to repurchase, including the related collateral received from or pledged to counterparties:



(in millions)	Gross amount of recognized liabilities	Gross amount offset in the Balance Sheet	Net amount of liabilities presented in the Balance Sheet
Repurchase agreements
March 31, 2016	$229	$—	$229
December 31, 2015	229	—	229



	Gross amount not offset in the Balance Sheet
(in millions)	Liabilities presented in the Balance Sheet		Financial instruments		Cash collateral pledged
March 31, 2016
Financial institution	$	50	$	57	$	—
Government entities	37		44		—
Commercial account holders	142		161		—
Total	$	229	$	262	$	—
December 31, 2015
Financial institution	$	50	$	56	$	—
Government entities	56		61		—
Commercial account holders	123		144		—
Total	$	229	$	261	$	—

The securities underlying the agreements to repurchase are book-entry securities and were delivered by appropriate entry into the counterparties’ accounts or into segregated tri-party custodial accounts at the FHLB. Securities sold under agreements to repurchase are accounted for as financing transactions and the obligations to repurchase these securities are recorded as liabilities in the consolidated balance sheets. The securities underlying the agreements to repurchase continue to be reflected in ASB’s asset accounts.

Derivative financial instruments. ASB enters into interest rate lock commitments (IRLCs) with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed securities to investors to hedge against the inherent interest rate and pricing risk associated with selling loans.

ASB enters into IRLCs for residential mortgage loans, which commit ASB to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose ASB to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

ASB enters into forward commitments to hedge the interest rate risk for rate locked mortgage applications in process and closed mortgage loans held for sale. These commitments are primarily forward sales of to-be-announced mortgage backed securities. Generally, when mortgage loans are closed, the forward commitment is liquidated and replaced with a mandatory delivery forward sale of the mortgage to a secondary market investor. In some cases, a best-efforts forward sale agreement is utilized as the forward commitment. These commitments are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

Changes in the fair value of IRLCs and forward commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

The notional amount and fair value of ASB’s derivative financial instruments were as follows:



	March 31, 2016					December 31, 2015
(in thousands)	Notional amount		Fair value			Notional amount		Fair value
Interest rate lock commitments	$	32,135	$	655		$	22,241	$	384
Forward commitments	30,516		(192		)	23,644		(29		)

ASB’s derivative financial instruments, their fair values, and balance sheet location were as follows:



Derivative Financial Instruments Not Designated as Hedging Instruments ¹	March 31, 2016				December 31, 2015
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	655	$	—	$	384	$	—
Forward commitments	—		192		1		30
	$	655	$	192	$	385	$	30

¹ Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.

The following table presents ASB’s derivative financial instruments and the amount and location of the net gains or losses recognized in the statements of income:



Derivative Financial Instruments Not Designated as Hedging Instruments	Location of net gains (losses) recognized in the Statement of Income	Three months ended March 31
(in thousands)		2016			2015
Interest rate lock commitments	Mortgage banking income	$	271		$	445
Forward commitments	Mortgage banking income	(163		)	(159		)
		$	108		$	286

Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were $7.6 million and $10.1 million at March 31, 2016 and December 31, 2015 , respectively. These unfunded commitments were unconditional and legally binding and are recorded in other liabilities with a corresponding increase in other assets. Cash contributions and payments made on commitments to LIHTC investment partnerships are classified as operating activities in the Company’s consolidated statements of cash flows. As of March 31, 2016 , ASB did not have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.

Contingencies. ASB is subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, ASB cannot rule out the possibility that such outcomes could have a material adverse effect on the results of operations or liquidity for a particular reporting period in the future.

6 · Retirement benefits

Defined benefit pension and other postretirement benefit plans information. For the first three months of 2016 , the Company contributed $16 million ($ 16 million by the Utilities) to its pension and other postretirement benefit plans, compared to $21 million ( $21 million by the Utilities) in the first three months of 2015 . The Company’s current estimate of contributions to its pension and other postretirement benefit plans in 2016 is $65 million ( $64 million by the Utilities, $ 1 million by HEI and nil by ASB), compared to $88 million ($ 86 million by the Utilities, $2 million by HEI and nil by ASB) in 2015 . In addition, the Company expects to pay directly $2 million ( $1 million by the Utilities) of benefits in 2016 , compared to $1 million ($ 0.4 million by the Utilities) paid in 2015 .

The components of net periodic benefit cost for HEI consolidated and Hawaiian Electric consolidated were as follows:



	Three months ended March 31
	Pension benefits						Other benefits
(in thousands)	2016			2015			2016			2015
HEI consolidated
Service cost	$	15,391		$	16,466		$	836		$	869
Interest cost	20,277			19,139			2,474			2,235
Expected return on plan assets	(24,664		)	(22,151		)	(3,052		)	(2,907		)
Amortization of net prior service loss (gain)	(14		)	1			(448		)	(448		)
Amortization of net actuarial loss	5,969			8,962			287			430
Net periodic benefit cost	16,959			22,417			97			179
Impact of PUC D&Os	(4,046		)	(9,513		)	189			98
Net periodic benefit cost (adjusted for impact of PUC D&Os)	$	12,913		$	12,904		$	286		$	277
Hawaiian Electric consolidated
Service cost	$	14,933		$	15,983		$	822		$	855
Interest cost	18,603			17,516			2,389			2,159
Expected return on plan assets	(22,932		)	(20,632		)	(3,003		)	(2,859		)
Amortization of net prior service loss (gain)	4			10			(451		)	(451		)
Amortization of net actuarial loss	5,461			8,094			284			422
Net periodic benefit cost	16,069			20,971			41			126
Impact of PUC D&Os	(4,046		)	(9,513		)	189			98
Net periodic benefit cost (adjusted for impact of PUC D&Os)	$	12,023		$	11,458		$	230		$	224

HEI consolidated recorded retirement benefits expense of $9 million ($ 8 million by the Utilities) and $9 million ( $8 million by the Utilities) in the first three months of 2016 and 2015 , respectively, and charged the remaining net periodic benefit cost primarily to electric utility plant.

The Utilities have implemented pension and OPEB tracking mechanisms under which all of their retirement benefit expenses (except for executive life and nonqualified pension plan expenses) determined in accordance with GAAP are recovered over time. Under the tracking mechanisms, these retirement benefit costs that are over/under amounts allowed in rates are charged/credited to a regulatory asset/liability. The regulatory asset/liability for each utility will be amortized over 5 years beginning with the issuance of the PUC’s D&O in the respective utility’s next rate case.

Defined contribution plans information. For the first three months of 2016 and 2015 , the Company’s expense for its defined contribution pension plans under the Hawaiian Electric Industries Retirement Savings Plan (HEIRSP) and the ASB 401(k) Plan was $1.4 million and $1.4 million , respectively, and cash contributions were $2.7 million and $2.5 million , respectively. For the first three months of 2016 and 2015 , the Utilities’ expense for its defined contribution pension plan under the HEIRSP was $ 0.4 million and $0.4 million , respectively, and cash contributions were $ 0.4 million and $0.4 million , respectively.

7 · Share-based compensation

Under the 2010 Equity and Incentive Plan, as amended, HEI can issue shares of common stock as incentive compensation to selected employees in the form of stock options, stock appreciation rights (SARs), restricted shares, restricted stock units, performance shares and other share-based and cash-based awards. The 2010 Equity and Incentive Plan (original EIP) was amended and restated effective March 1, 2014 (EIP) and an additional 1.5 million shares was added to the shares available for issuance under these programs.

As of March 31, 2016 , approximately 3.4 million shares remained available for future issuance under the terms of the EIP, assuming recycling of shares withheld to satisfy minimum statutory tax liabilities relating to EIP awards, including an estimated 0.4 million shares that could be issued upon the vesting of outstanding restricted stock units and the achievement of performance goals for awards outstanding under long-term incentive plans (assuming that such performance goals are achieved at maximum levels).

Under the 2011 Nonemployee Director Stock Plan (2011 Director Plan), HEI can issue shares of common stock as compensation to nonemployee directors of HEI, Hawaiian Electric and ASB. As of March 31, 2016 , there were 141,044 shares remaining available for future issuance under the 2011 Director Plan.

Share-based compensation expense and the related income tax benefit were as follows:



	Three months ended March 31
(in millions)	2016		2015
HEI consolidated
Share-based compensation expense ¹	$	1.0	$	1.8
Income tax benefit	0.3		0.6
Hawaiian Electric consolidated
Share-based compensation expense ¹	0.3		0.5
Income tax benefit	0.1		0.2


¹	For the three months ended March 31, 2016, the Company has not capitalized any share-based compensation. $0.04 million of this share-based compensation expense was capitalized in the three months ended March 31, 2015 .

Stock awards. In the second quarter of each year, HEI grants shares to nonemployee directors of HEI, Hawaiian Electric and ASB under the 2011 Director Plan. The number of shares issued to each nonemployee director of HEI, Hawaiian Electric and ASB is determined based on the closing price of HEI Common Stock on the grant date.

Stock appreciation rights. As of March 31, 2016 and December 31, 2015 , there were no remaining SARs outstanding.

SARs activity and statistics were as follows:



	Three months ended
(dollars in thousands, except prices)	March 31, 2015
Shares underlying SARs exercised	80,000
Weighted-average price of shares exercised	$	26.18
Intrinsic value of shares exercised ¹	502
Tax benefit realized for the deduction of exercises	162

¹ Intrinsic value is the amount by which the fair market value of the underlying stock and the related dividend equivalent rights exceeds the exercise price of the right.

Restricted stock units. Information about HEI’s grants of restricted stock units was as follows:



	Three months ended March 31
	2016					2015
	Shares			(1)		Shares			(1)
Outstanding, beginning of period	210,634			$	28.82	261,235			$	25.77
Granted	94,282			29.90		84,294			33.74
Vested	(78,379		)	27.92		(79,219		)	25.77
Forfeited	—			—		(4,619		)	25.83
Outstanding, end of period	226,537			$	29.59	261,691			$	28.33
Total weighted-average grant-date fair value of shares granted ($ millions)	$	2.8				$	2.8


(1)	Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant.

As of March 31, 2016 , there was $6.1 million of total unrecognized compensation cost related to the nonvested restricted stock units. The cost is expected to be recognized over a weighted-average period of 3.0 years .

For the first three months of 2016 and 2015 , total restricted stock units that vested and related dividends had a fair value of $2.5 million and $3.0 million , respectively, and the related tax benefits were $0.9 million and $1.0 million , respectively.

Long-term incentive plan payable in stock. The 2014-2016 long-term incentive plan (LTIP) provides for performance awards under the original EIP of shares of HEI common stock based on the satisfaction of performance goals considered to be a market condition and service conditions. The number of shares of HEI common stock that may be awarded is fixed on the date the grants are made subject to the achievement of specified performance levels. The potential payout varies from 0% to 200% of the number of target shares depending on achievement of the goals. The LTIP performance goals for the LTIP period includes awards with a market goal based on total return to shareholders (TRS) of HEI stock as a percentile to the Edison Electric Institute Index over the three -year period. In addition, the 2014-2016 LTIP has performance goals related to levels of

HEI consolidated return on average common equity (ROACE), Hawaiian Electric consolidated ROACE and ASB net income — all based on the three -year averages, and ASB return on assets relative to performance peers. The 2015-2017 and the 2016-2018 LTIP provide for performance awards payable in cash, and thus, are not included in the tables below.

LTIP linked to TRS . Information about HEI’s LTIP grants linked to TRS was as follows:



	Three months ended March 31
	2016				2015
	Shares		(1)		Shares		(1)
Outstanding, beginning of period	162,500		$	27.66	257,956		$	28.45
Granted (target level)	—		—		—		—
Vested (issued or unissued and cancelled)	(78,553	)	32.69		(75,915	)	30.71
Forfeited	—		—		(13,264	)	26.00
Outstanding, end of period	83,947		$	22.95	168,777		$	27.63


(1)	Weighted-average grant-date fair value per share determined using a Monte Carlo simulation model.

The grant date fair values of the shares were determined using a Monte Carlo simulation model utilizing actual information for the common shares of HEI and its peers for the period from the beginning of the performance period to the grant date and estimated future stock volatility and dividends of HEI and its peers over the remaining three-year performance period. The expected stock volatility assumptions for HEI and its peer group were based on the three -year historic stock volatility, and the annual dividend yield assumptions were based on dividend yields calculated on the basis of daily stock prices over the same three-year historical period.

For the three months ended March 31, 2016 and 2015 , there were no vested LTIP awards linked to TRS. For the three months ended March 31, 2016 , all of the shares vested (which were granted at target level based on the satisfaction of TRS performance) for the 2013-2015 LTIP lapsed.

As of March 31, 2016 , there was $0.4 million of total unrecognized compensation cost related to the nonvested performance awards payable in shares linked to TRS. The cost is expected to be recognized over a weighted-average period of 0.8 years .

LTIP awards linked to other performance conditions . Information about HEI’s LTIP awards payable in shares linked to other performance conditions was as follows:



	Three months ended March 31
	2016				2015
	Shares		(1)		Shares		(1)
Outstanding, beginning of period	222,647		$	26.02	364,731		$	26.01
Granted (target level)	—		—		—		—
Vested (issued)	(109,097	)	26.89		(121,249	)	26.05
Forfeited	—		—		(13,263	)	25.72
Outstanding, end of period	113,550		$	25.18	230,219		$	26.00


(1)	Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant.

For the three months ended March 31, 2016 and 2015 , total vested LTIP awards linked to other performance conditions and related dividends had a fair value of $3.6 million and $4.7 million and the related tax benefits were $1.4 million and $1.8 million , respectively.

As of March 31, 2016 , there was $0.7 million of total unrecognized compensation cost related to the nonvested shares linked to performance conditions other than TRS. The cost is expected to be recognized over a weighted-average period of 0.8 years .

8 · Shareholders’ equity

Equity forward transaction . On March 19, 2013, HEI entered into an equity forward transaction in connection with a public offering on that date of 6.1 million shares of HEI common stock at $26.75 per share. On March 19, 2013, HEI common stock closed at $27.01 per share. On March 20, 2013, the underwriters exercised their over-allotment option in full and HEI entered into an equity forward transaction in connection with the resulting additional 0.9 million shares of HEI common stock.

The use of an equity forward transaction substantially eliminates future equity market price risk by fixing a common equity offering sales price under the then existing market conditions, while mitigating immediate share dilution resulting from the offering by postponing the actual issuance of common stock until funds are needed in accordance with the Company’s capital investment plans. Pursuant to the terms of these transactions, a forward counterparty borrowed 7 million shares of HEI’s common stock from third parties and sold them to a group of underwriters for $26.75 per share, less an underwriting discount equal to $1.00312 per share. Under the terms of the equity forward transactions, HEI was required to issue and deliver shares of HEI common stock to the forward counterparty at the then applicable forward sale price. The forward sale price was initially determined to be $25.74688 per share at the time the equity forward transactions were entered into, and the amount of cash to be received by HEI upon physical settlement of the equity forward was subject to certain adjustments in accordance with the terms of the equity forward transactions.

The equity forward transactions had no initial fair value since they were entered into at the then market price of the common stock. HEI concluded that the equity forward transactions were equity instruments based on the accounting guidance in Accounting Standards Codification (ASC) Topic 480, “Distinguishing Liabilities from Equity,” and ASC Topic 815, “Derivatives and Hedging,” and that they qualified for an exception from derivative accounting under ASC Topic 815 because the forward sale transactions were indexed to its own stock. On December 19, 2013 and July 14, 2014, HEI settled 1.3 million and 1.0 million shares under the equity forward for proceeds of $32.1 million (net of the underwriting discount of $1.3 million ) and $23.9 million (net of underwriting discount of $ 1.0 million ), respectively, which funds were ultimately used to purchase Hawaiian Electric shares . On March 20, 2015, HEI settled the remaining 4.7 million shares under the equity forward for proceeds of $104.5 million (net of the underwriting discount of $4.7 million ), which funds were used for the reduction of debt and for general corporate purposes. The proceeds were recorded in equity at the time of settlement. Prior to their settlement, the shares remaining under the equity forward transactions were reflected in HEI’s diluted EPS calculations using the treasury stock method.

Accumulated other comprehensive income . Changes in the balances of each component of accumulated other comprehensive income/(loss) (AOCI) were as follows:



	HEI Consolidated												Hawaiian Electric Consolidated
(in thousands)	Net unrealized gains (losses) on securities			Unrealized gains (losses) on derivatives			Retirement benefit plans			AOCI			Unrealized gains on derivatives		Retirement benefit plans		AOCI
Balance, December 31, 2015	$	(1,872	)	$	(54	)	$	(24,336	)	$	(26,262	)	$	—	$	925	$	925
Current period other comprehensive income	7,428			1,056			316			8,800			1,002		14		1,016
Balance, March 31, 2016	$	5,556		$	1,002		$	(24,020	)	$	(17,462	)	$	1,002	$	939	$	1,941
Balance, December 31, 2014	$	462		$	(289	)	$	(27,551	)	$	(27,378	)	$	—	$	45	$	45
Current period other comprehensive income	3,451			59			548			4,058			—		22		22
Balance, March 31, 2015	$	3,913		$	(230	)	$	(27,003	)	$	(23,320	)	$	—	$	67	$	67

Reclassifications out of AOCI were as follows:



	Amount reclassified from AOCI
	Three months ended March 31						Affected line item in the
(in thousands)	2016			2015			Statement of Income
HEI consolidated
Derivatives qualified as cash flow hedges
Interest rate contracts (settled in 2011)	$	54		$	59		Interest expense
Retirement benefit plan items
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost	3,537			5,459			See Note 6 for additional details
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets	(3,222		)	(4,911		)	See Note 6 for additional details
Total reclassifications	$	369		$	607
Hawaiian Electric consolidated
Retirement benefit plan items
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost	$	3,236		$	4,933		See Note 6 for additional details
Less: reclassification adjustment for impact of D&Os of the PUC included in regulatory assets	(3,222		)	(4,911		)	See Note 6 for additional details
Total reclassifications	$	14		$	22

9 · Fair value measurements

Fair value estimates are estimates of the price that would be received to sell an asset, or paid upon the transfer of a liability, in an orderly transaction between market participants at the measurement date. The fair value estimates are generally determined based on assumptions that market participants would use in pricing the asset or liability and are based on market data obtained from independent sources. However, in certain cases, the Company and the Utilities use their own assumptions about market participant assumptions based on the best information available in the circumstances. These valuations are estimates at a specific point in time, based on relevant market information, information about the financial instrument and judgments regarding future expected loss experience, economic conditions, risk characteristics of various financial instruments and other factors. These estimates do not reflect any premium or discount that could result if the Company or the Utilities were to sell its entire holdings of a particular financial instrument at one time. Because no active trading market exists for a portion of the Company’s and the Utilities’ financial instruments, fair value estimates cannot be determined with precision. Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the estimates. In addition, the tax ramifications related to the realization of the unrealized gains and losses could have a significant effect on fair value estimates, but have not been considered in making such estimates.

The Company and the Utilities group their financial assets measured at fair value in three levels outlined as follows:

Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and is used to measure fair value whenever available.

Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Classification in the hierarchy is based upon the lowest level input that is significant to the fair value measurement of the asset or liability. For instruments classified in Level 1 and 2 where inputs are primarily based upon observable market data, there is less judgment applied in arriving at the fair value. For instruments classified in Level 3, management judgment is more significant due to the lack of observable market data.

Fair value is also used on a nonrecurring basis to evaluate certain assets for impairment or for disclosure purposes. Examples of nonrecurring uses of fair value include mortgage servicing rights accounted for by the amortization method, loan impairments for certain loans, goodwill and AROs. The fair value of Hawaiian Electric’s ARO (Level 3) was determined by discounting the expected future cash flows using market-observable risk-free rates as adjusted by Hawaiian Electric’s credit spread (also see Note 4 ).

Fair value measurement and disclosure valuation methodology. Following are descriptions of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not carried at fair value:

Short-term borrowings—other than bank . The carrying amount approximated fair value because of the short maturity of these instruments.

Investment securities . The fair value of ASB’s investment securities is determined quarterly through pricing obtained from independent third-party pricing services or from brokers not affiliated with the trade. The third-party pricing vendors the Company uses for pricing its securities are reputable firms that provide pricing services on a global basis and have processes in place to ensure quality and control. The third-party pricing services use a variety of methods to determine the fair value of securities that fall under Level 2 of the Company’s fair value measurement hierarchy. Among the considerations are quoted prices for similar securities in an active market, yield spreads for similar trades, adjustments for liquidity, size, collateral characteristics, historic and generic prepayment speeds, and other observable market factors.

To enhance the robustness of the pricing process, ASB will on a quarterly basis compare its standard third-party vendor’s price with that of another third-party vendor. If the prices are within an acceptable tolerance range, the price of the standard vendor will be accepted. If the variance is beyond the tolerance range, an evaluation will be conducted by ASB and a challenge to the price may be made. Fair value in such cases will be based on the value that best reflects the data and observable characteristics of the security. In all cases, the fair value used will have been independently determined by a third-party pricing vendor or non-affiliated broker and not by ASB.

Loans held for sale . Residential mortgage loans carried at the lower of cost or market are valued using market observable pricing inputs, which are derived from third party loan sales and securitizations and, therefore, are classified within Level 2 of the valuation hierarchy.

Loans held for investment . Fair value of loans held for investment is derived using a discounted cash flow approach which includes an evaluation of the underlying loan characteristics. The valuation model uses loan characteristics which includes product type, maturity dates and the underlying interest rate of the portfolio. This information is input into the valuation models along with various forecast valuation assumptions including prepayment forecasts, to determine the discount rate. These assumptions are derived from internal and third party sources. Noting the valuation is derived from model-based techniques, ASB includes loans held for investment within Level 3 of the valuation hierarchy.

Impaired loans . At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Fair value is determined primarily by using an income, cost or market approach and is normally provided through appraisals. Impaired loans carried at fair value generally receive specific allocations within the allowance for loan losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Generally, impaired loans are evaluated quarterly for additional impairment and adjusted accordingly.

Other real estate owned . Foreclosed assets are carried at fair value (less estimated costs to sell) and is generally based upon appraisals or independent market prices that are periodically updated subsequent to classification as real estate owned. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. ASB estimates the fair value of collateral-dependent loans and real estate owned using the sales comparison approach.

Mortgage servicing rights . Mortgage servicing rights (MSR) are capitalized at fair value based on market data at the time of sale and accounted for in subsequent periods at the lower of amortized cost or fair value. Mortgage servicing rights are evaluated for impairment at each reporting date. ASB's MSR is stratified based on predominant risk characteristics of the underlying loans including loan type and note rate. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Expected net income streams are estimated based on industry assumptions regarding prepayment expectations and income and expenses associated with servicing

residential mortgage loans for others. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in "Other income, net" in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable. ASB compares the fair value of MSR to an estimated value calculated by an independent third-party. The third-party relies on both published and unpublished sources of market related assumptions and their own experience and expertise to arrive at a value. ASB uses the third-party value only to assess the reasonableness of its own estimate.

Time deposits . The fair value of fixed-maturity certificates of deposit was estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Other borrowings . For fixed-rate advances and repurchase agreements, fair value is estimated using quantitative discounted cash flow models that require the use of interest rate inputs that are currently offered for advances and repurchase agreements of similar remaining maturities. The majority of market inputs are actively quoted and can be validated through external sources, including broker market transactions and third party pricing services.

Long-term debt . Fair value was obtained from third-party financial services providers based on the current rates offered for debt of the same or similar remaining maturities and from discounting the future cash flows using the current rates offered for debt of the same or similar remaining maturities.

Interest rate lock commitments (IRLCs) . The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. IRLCs are classified as Level 2 measurements.

Forward sales commitments . To be announced (TBA) mortgage-backed securities forward commitments are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of ASB’s best efforts and mandatory delivery loan sale commitments are determined using quoted prices in the market place that are observable and are classified as Level 2 measurements.

Window forward contract . The estimated fair value was obtained from a third-party financial services provider based on the effective exchange rate offered for the foreign currency denominated transaction. Window forward contracts are classified as Level 2 measurements.

The following table presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments. For stock in Federal Home Loan Bank, the carrying amount is a reasonable estimate of fair value because it can only be redeemed at par. For bank-owned life insurance, the carrying amount is the cash surrender value of the insurance policies, which is a reasonable estimate of fair value. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings and money market deposits, the carrying amount is a reasonable estimate of fair value as these liabilities have no stated maturity.



			Estimated fair value
	Carrying or notional amount		Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
(in thousands)	Carrying or notional amount		(Level 1)		(Level 2)		(Level 3)		Total
March 31, 2016
Financial assets
Money market funds	$	10	$	—	$	10	$	—	$	10
Available-for-sale investment securities	906,295		—		906,295		—		906,295
Stock in Federal Home Loan Bank	11,218		—		11,218		—		11,218
Loans receivable, net	4,597,850		—		7,938		4,837,177		4,845,115
Mortgage servicing rights	8,857		—		—		11,231		11,231
Bank-owned life insurance	138,732		—		138,732		—		138,732
Derivative assets	63,470		—		2,295		—		2,295
The Utilities’ derivative assets (included in amount above)	31,335		—		1,640		—		1,640
Financial liabilities
Deposit liabilities	5,139,932		—		5,144,128		—		5,144,128
Short-term borrowings—other than bank	95,485		—		95,485		—		95,485
The Utilities’ short-term borrowings (included in amount above)	12,998		—		12,998		—		12,998
Other bank borrowings	329,081		—		333,743		—		333,743
Long-term debt, net—other than bank	1,578,618		—		1,704,567		—		1,704,567
The Utilities’ long-term debt, net (included in amount above)	1,278,916		—		1,397,598		—		1,397,598
Derivative liabilities	30,516		139		53		—		192
December 31, 2015
Financial assets
Money market funds	$	10	$	—	$	10	$	—	$	10
Available-for-sale investment securities	820,648		—		820,648		—		820,648
Stock in Federal Home Loan Bank	10,678		—		10,678		—		10,678
Loans receivable, net	4,570,412		—		4,639		4,744,886		4,749,525
Mortgage servicing rights	8,884		—		—		11,790		11,790
Bank-owned life insurance	138,139		—		138,139		—		138,139
Derivative assets	22,616		—		385		—		385
Financial liabilities
Deposit liabilities	5,025,254		—		5,024,500		—		5,024,500
Short-term borrowings—other than bank	103,063		—		103,063		—		103,063
Other bank borrowings	328,582		—		333,392		—		333,392
Long-term debt, net—other than bank*	1,578,368		—		1,669,087		—		1,669,087
The Utilities’ long-term debt, net (included in amount above)*	1,278,702		—		1,363,766		—		1,363,766
Derivative liabilities	23,269		15		15		—		30

* See Note 11 for the impact to prior period financial information of the adoption of ASU No. 2015-03.

Fair value measurements on a recurring basis. Assets and liabilities measured at fair value on a recurring basis were as follows:



	March 31, 2016						December 31, 2015
	Fair value measurements using						Fair value measurements using
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Money market funds (“other” segment)	$	—	$	10	$	—	$	—	$	10	$	—
Available-for-sale investment securities (bank segment)
Mortgage-related securities-FNMA, FHLMC and GNMA	$	—	$	687,598	$	—	$	—	$	607,689	$	—
U.S. Treasury and federal agency obligations	—		218,697		—		—		212,959		—
	$	—	$	906,295	$	—	$	—	$	820,648	$	—
Derivative assets
Interest rate lock commitments ¹	$	—	$	655	$	—	$	—	$	384	$	—
Forward commitments ¹	—		—		—		—		1		—
Window forward contract ²	—		1,640		—		—		—		—
	$	—	$	2,295	$	—	$	—	$	385	$	—
Derivative liabilities ¹
Interest rate lock commitments	$	—	$	—	$	—	$	—	$	—	$	—
Forward commitments	139		53		—		15		15		—
	$	139	$	53	$	—	$	15	$	15	$	—

¹ Derivatives are carried at fair value with changes in value reflected in the balance sheet in other assets or other liabilities and included in mortgage banking income.

² Asset derivatives are included in other current assets in the balance sheets.

There were no transfers of financial assets and liabilities between Level 1 and Level 2 of the fair value hierarchy during the quarter ended March 31, 2016.

Fair value measurements on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above. These measurements primarily result from assets carried at the lower of cost or fair value or from impairment of individual assets. The carrying value of assets measured at fair value on a nonrecurring basis were as follows:



			Fair value measurements
(in thousands)	Balance		Level 1		Level 2		Level 3
March 31, 2016
Loans	$	82	$	—	$	—	$	82
Real estate acquired in settlement of loans	797		—		—		797
December 31, 2015
Loans	178		—		—		178
Real estate acquired in settlement of loans	1,030		—		—		1,030

At March 31, 2016 and 2015 , there were no adjustments to fair value for ASB’s loans held for sale which were carried at the lower of cost or fair value.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis:

Significant unobservable

input value ⁽¹⁾

($ in thousands)

Fair value

Valuation technique

Significant unobservable input

Range

Weighted

Average

March 31, 2016

Residential loans

Fair value of property or collateral

Appraised value less 7% selling costs

42-66%

54%

Real estate acquired in settlement of loans

797

Fair value of property or collateral

Appraised value less 7% selling costs

100%

December 31, 2015

Residential loans

Fair value of property or collateral

Appraised value less 7% selling costs

N/A (2)

Home equity lines of credit

128

Fair value of property or collateral

Appraised value less 7% selling costs

N/A (2)

Total loans

178

Real estate acquired in settlement of loans

1,030

Fair value of property or collateral

Appraised value less 7% selling cost

100%

(1) Represent percent of outstanding principal balance.


(2)	N/A - Not applicable. There is one loan in each fair value measurement type.

Significant increases (decreases) in any of those inputs in isolation would result in significantly higher (lower) fair value measurements.

10 · Cash flows



Three months ended March 31	2016			2015
(in millions)
Supplemental disclosures of cash flow information
HEI consolidated
Interest paid to non-affiliates	$	20		$	21
Income taxes paid	1			1
Income taxes refunded	45			47
Hawaiian Electric consolidated
Interest paid to non-affiliates	12			13
Income taxes refunded	20			6
Supplemental disclosures of noncash activities
HEI consolidated
Common stock dividends reinvested in HEI common stock ¹	6			—
Real estate transferred from property, plant and equipment to other assets held-for-sale (investing)	—			5
HEI consolidated and Hawaiian Electric consolidated
Additions to electric utility property, plant and equipment - unpaid invoices and accruals (investing)	(48		)	(41		)

¹ The amounts shown represent common stock dividends reinvested in HEI common stock under the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP) in noncash transactions. From January 6, 2016, HEI satisfied the share purchase requirements of the DRIP through new issuances of its common stock. In 2015, HEI satisfied such requirements with cash through open market purchases of its common stock.

11 · Recent accounting pronouncements

Revenues from contracts. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers: (Topic 606).” The core principle of the guidance in ASU No. 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract/s with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

The Company plans to adopt ASU No. 2014-09 (and the clarifying guidance in ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”) in the first quarter of 2018, but has not determined the method of adoption (full or modified retrospective application) nor the impact of adoption on its results of operations, financial condition or liquidity.

Debt issuance costs. In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

The Company retrospectively adopted ASU No. 2015-03 in the first quarter 2016 and the adoption did not have a material impact on the Company’s financial condition and had no impact on the Company’s results of operations or liquidity.

The table below summarizes the impact to the prior period financial statements of the adoption of ASU No. 2015-03:



(in thousands)	As previously filed		Adjustment from adoption of ASU No. 2015-03			As currently reported

December 31, 2015
HEI Consolidated Balance Sheet and Note 3 - Segment financial information (Total assets)
Other assets	$	488,635	$	(8,178	)	$	480,457
Total assets and Total liabilities and shareholders’ equity	11,790,196		(8,178		)	11,782,018
Long-term debt, net-other than bank	1,586,546		(8,178		)	1,578,368
Total liabilities	9,828,263		(8,178		)	9,820,085
Hawaiian Electric Consolidated Balance Sheet and Note 3 - Segment financial information (Total assets)
Unamortized debt expense	8,341		(7,844		)	497
Total other long-term assets	908,327		(7,844		)	900,483
Total assets and Total capitalization and liabilities	5,680,054		(7,844		)	5,672,210
Long-term debt, net	1,286,546		(7,844		)	1,278,702
Total capitalization	3,049,164		(7,844		)	3,041,320
Note 4 - Hawaiian Electric Consolidating Balance Sheet
Hawaiian Electric (parent only)
Unamortized debt expense	5,742		(5,383		)	359
Total other long-term assets	662,430		(5,383		)	657,047
Total assets and Total capitalization and liabilities	4,481,558		(5,383		)	4,476,175
Long-term debt, net	880,546		(5,383		)	875,163
Total capitalization	2,631,164		(5,383		)	2,625,781
Hawaii Electric Light
Unamortized debt expense	1,494		(1,420		)	74
Total other long-term assets	130,749		(1,420		)	129,329
Total assets and Total capitalization and liabilities	955,935		(1,420		)	954,515
Long-term debt, net	215,000		(1,420		)	213,580
Total capitalization	514,702		(1,420		)	513,282
Maui Electric
Unamortized debt expense	1,105		(1,041		)	64
Total other long-term assets	115,148		(1,041		)	114,107
Total assets and Total capitalization and liabilities	831,201		(1,041		)	830,160
Long-term debt, net	191,000		(1,041		)	189,959
Total capitalization	459,725		(1,041		)	458,684

Investments in certain entities that calculate net asset value per share. In May 2015, the FASB issued ASU No. 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent),” which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient and limits certain disclosures to those investments.

The Company retrospectively adopted ASU No. 2015-07 in the first quarter 2016; thus, the fair value disclosures for retirement benefit plan assets will be revised in the SEC Form 10-K for the year ended December 31, 2016.

Financial instruments. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which, among other things:


•	Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.


•	Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.


•	Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).


•	Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.

The Company plans to adopt ASU No. 2016-01 in the first quarter of 2018 and has not yet determined the impact of adoption.

Leases . In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires that lessees recognize a liability to make lease payments (the lease liability) and a right-of-use asset, representing its right to use the underlying asset for the lease term, for all leases (except short-term leases) at the commencement date.

The Company plans to adopt ASU 2016-02 in the first quarter of 2019 (using a modified retrospective transition approach for leases existing at, or entered into after, January 1, 2017) and has not yet determined the impact of adoption.

Stock compensation. In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for share-based payment transactions. For example, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement; excess tax benefits should be classified along with other income tax cash flows as an operating activity on the statement of cash flows; an entity can make an accounting policy election to account for forfeitures when they occur; the threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions; and the cash payments made to taxing authorities on the employees’ behalf for withheld shares should be classified as financing activities on the statement of cash flows.

The Company plans to adopt ASU 2016-09 in the first quarter of 2017 and has not yet determined the impact of adoption. Provisions requiring recognition of excess tax benefits and tax deficiencies in the income statement will be applied prospectively. Provisions related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements and forfeitures will be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of January 1, 2017. Provisions related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement will be applied retrospectively. Provisions related to the presentation of excess tax benefits on the statement of cash flows will be applied either using a prospective transition method or a retrospective transition method.

12 · Credit agreements and long-term debt

Credit agreements.

HEI . On April 2, 2014, HEI and a syndicate of nine financial institutions entered into an amended and restated revolving non-collateralized credit agreement (HEI Facility). The HEI Facility increased HEI’s line of credit to $150 million from $125 million , extended the term of the facility to April 2, 2019, and provided improved pricing compared to HEI’s prior facility. Under the HEI Facility, draws would generally bear interest, based on HEI’s current long-term credit ratings, at the “Adjusted LIBO Rate,” as defined in the agreement, plus 137.5 basis points and annual fees on undrawn commitments of 20 basis points. The HEI Facility contains updated provisions for pricing adjustments in the event of a long-term ratings change based on the HEI Facility’s ratings-based pricing grid. Certain modifications were made to incorporate some updated terms and conditions customary for facilities of this type. In addition, the HEI Consolidated Net Worth covenant, as defined in the original facility, was removed from the HEI Facility, leaving only one financial covenant (relating to HEI’s ratio of funded debt to total capitalization, each on a non-consolidated basis). Under the credit agreement, it is an event of default if HEI fails to maintain an unconsolidated “Capitalization Ratio” (funded debt) of 50% or less (actual ratio of 17% as of March 31, 2016 , as calculated under the agreement) or if HEI no longer owns Hawaiian Electric. HEI currently intends to terminate the HEI Facility if, and when, the proposed Merger closes. The HEI Facility does not contain clauses that would affect access to the facility by reason of a ratings downgrade, nor does it have broad “material adverse change” clauses, but it continues to contain customary conditions which must be met in order to draw on it, including compliance with covenants (such as covenants preventing HEI’s subsidiaries from entering into agreements that restrict the ability of the subsidiaries to pay dividends to, or to repay borrowings from, HEI).

The facility will be maintained to support the issuance of commercial paper, but also may be drawn to repay HEI’s short-term and long-term indebtedness, to make investments in or loans to subsidiaries and for HEI’s working capital and general corporate purposes.

Hawaiian Electric . On April 2, 2014, Hawaiian Electric and a syndicate of nine financial institutions entered into an amended and restated revolving non-collateralized credit agreement (Hawaiian Electric Facility). The Hawaiian Electric Facility increased Hawaiian Electric’s line of credit to $200 million from $175 million . In January 2015, the PUC approved

Hawaiian Electric’s request to extend the term of the credit facility to April 2, 2019. The Hawaiian Electric Facility provided improved pricing compared to its prior facility. Under the Hawaiian Electric Facility, draws would generally bear interest, based on Hawaiian Electric’s current long-term credit ratings, at the “Adjusted LIBO Rate,” as defined in the agreement, plus 125 basis points and annual fees on undrawn commitments of 17.5 basis points. The Hawaiian Electric Facility contains updated provisions for pricing adjustments in the event of a long-term ratings change based on the Hawaiian Electric Facility’s ratings-based pricing grid. Certain modifications were made to incorporate some updated terms and conditions customary for facilities of this type. The Hawaiian Electric Facility does not contain clauses that would affect access to the facility by reason of a ratings downgrade, nor does it have broad “material adverse change” clauses, but it continues to contain customary conditions which must be met in order to draw on it, including compliance with several covenants (such as covenants preventing its subsidiaries from entering into agreements that restrict the ability of the subsidiaries to pay dividends to, or to repay borrowings from, Hawaiian Electric, and restricting its ability as well as the ability of any of its subsidiaries to guarantee additional indebtedness of the subsidiaries if such additional debt would cause the subsidiary’s “Consolidated Subsidiary Funded Debt to Capitalization Ratio” to exceed 65% (ratio of 42% for Hawaii Electric Light and 41% for Maui Electric as of March 31, 2016 , as calculated under the agreement)). In addition to customary defaults, Hawaiian Electric’s failure to maintain its financial ratios, as defined in its credit agreement, or meet other requirements may result in an event of default. For example, under the credit agreement, it is an event of default if Hawaiian Electric fails to maintain a “Consolidated Capitalization Ratio” (equity) of at least 35% (ratio of 57% as of March 31, 2016 , as calculated under the credit agreement), or if Hawaiian Electric is no longer owned by HEI. Under the proposed Merger Agreement, Hawaiian Electric will become a wholly-owned subsidiary of NEE. The terms of the Hawaiian Electric Facility are such that the proposed Merger would constitute a “Change in Control.” Hawaiian Electric has requested, and the financial institutions providing the Hawaiian Electric Facility have consented and agreed, that the proposed Merger shall not constitute a “Change in Control,” as defined in the credit agreement, provided that (i) the Merger is consummated and (ii) Hawaiian Electric becomes and remains a wholly-owned subsidiary of NEE.

The credit facility will be maintained to support the issuance of commercial paper, but also may be drawn to repay Hawaiian Electric’s short-term indebtedness, to make loans to subsidiaries and for Hawaiian Electric’s capital expenditures, working capital and general corporate purposes.

Changes in long-term debt.

HEI . On March 21, 2016, HEI entered into a $75 million term loan agreement with Bank of America, N.A., which matures on March 23, 2018 and includes substantially the same financial covenant and customary conditions as the HEI credit agreement described above. On March 23, 2016, HEI drew an initial $75 million Eurodollar term loan at an initial interest rate of 1.18% for an initial one month interest period (and a subsequent interest rate of 1.19% for a one month interest period). The proceeds from the term loan were used to pay-off HEI’s $75 million 4.41% senior note at maturity on March 24, 2016.

13 · Related party transactions

For general management and administrative services in the first quarters of 2016 and 2015, HEI charged the Utilities $2.1 million and $1.7 million , respectively, and HEI charged ASB $0.8 million and $0.3 million , respectively. The amounts charged by HEI to its subsidiaries for services provided by HEI employees are allocated primarily on the basis of time expended in providing such services.

Mr. Timothy Johns, a member of the Hawaiian Electric Board of Directors, is an executive officer of Hawaii Medical Service Association (HMSA). Ms. Susan Li, an executive of Hawaiian Electric, is the Vice Chairperson of the Hawaii Dental Service (HDS) Board of Directors. The Company’s HMSA costs and expense (for health insurance premiums, claims plus administration expense and stop-loss insurance coverages) and HDS costs and expense (for dental insurance premiums) and the Utilities’ HMSA costs and expense (for health insurance premiums) and HDS costs and expense (for dental insurance premiums) were as follows:



	Three months ended March 31
(in millions)	2016		2015
HEI consolidated
HMSA costs	$	7	$	7
HMSA expense*	5		5
HDS costs	1		1
HDS expense*	1		1
Hawaiian Electric consolidated
HMSA costs	6		6
HMSA expense*	3		4
HDS costs	1		1
HDS expense*	—		—

* Charged the remaining costs primarily to electric utility plant.

The costs and expense in the table above are gross amounts (i.e., not net of employee contributions to employee benefits).

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion updates “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in HEI’s and Hawaiian Electric’s 2015 Form 10-K and should be read in conjunction with such discussion and the 2015 annual consolidated financial statements of HEI and Hawaiian Electric and notes thereto included in HEI’s and Hawaiian Electric’s 2015 Form 10-K, as well as the quarterly (as of and for the three months ended March 31, 2016) financial statements and notes thereto included in this Form 10-Q.

HEI consolidated

RESULTS OF OPERATIONS



(in thousands, except per	Three months ended March 31				%
share amounts)	2016		2015		change		Primary reason(s)*
Revenues	$	550,960	$	637,862	(14	)	Decrease for the electric utility segment, partly offset by increase for the bank segment
Operating income	68,851		69,506		(1	)	Decreases for the electric utility and bank segments, partly offset by lower loss for the “other” segment
Net income for common stock	32,352		31,866		2		Lower net loss for the “other” segment, partly offset by lower net income for the electric utility and bank segments
Basic earnings per common share	$	0.30	$	0.31	(3	)	Higher net income, more than offset by the impact of higher weighted average shares outstanding
Weighted-average number of common shares outstanding	107,620		103,281		4		Issuances of shares under the HEI Dividend Reinvestment and Stock Purchase Plan and other plans


*	Also, see segment discussions which follow.

Notes: The Company’s effective tax rates (combined federal and state income tax rates) for the first three months of 2016 and 2015 were 36% and 38% , respectively. The effective tax rate was lower for the quarter ended March 31, 2016 compared to the same periods in 2015 due primarily to a decrease in the amount of nondeductible merger- and spin-off-related expenses.

HEI’s consolidated ROACE was 8.4% for the twelve months ended March 31, 2016 and 8.5% for the twelve months ended March 31, 2015 .

Dividends. The payout ratios for the first three months of 2016 and full year 2015 were 103% and 82%, respectively. HEI currently expects to maintain its dividend at its present level; however, the HEI Board of Directors evaluates the dividend quarterly and considers many factors in the evaluation, including but not limited to the Company’s results of operations, the

long-term prospects for the Company and current and expected future economic conditions. See Note 2 of the Consolidated Financial Statements for a discussion of a special HEI dividend of $0.50 per share contemplated in the Merger Agreement.

Economic conditions.

Note: The statistical data in this section is from public third-party sources that management believes to be reliable (e.g., Department of Business, Economic Development and Tourism (DBEDT); University of Hawaii Economic Research Organization; U.S. Bureau of Labor Statistics; Department of Labor and Industrial Relations (DLIR); Hawaii Tourism Authority (HTA); Honolulu Board of REALTORS® and national and local newspapers).

Hawaii’s tourism industry, a significant driver of Hawaii’s economy, ended the first three months of 2016 with continued strength in arrivals and visitor expenditures as compared to the same period a year ago. Visitor expenditures increased 2.6% and arrivals increased 3.6% compared to the first three months of 2015. The Hawaii Tourism Authority expects scheduled nonstop seats to Hawaii for the second quarter of 2016 to decrease by 0.2% over the second quarter of 2015 driven by an expected decrease in domestic seats from the East Coast (-7.2%) and international seats from Japan (-5.3%) and Canada (-4.3%).

Hawaii’s unemployment rate continued to decline to 3.1% in March 2016, lower than the state’s 3.9% rate in March 2015 and the March 2016 national unemployment rate of 5.0%.

Hawaii real estate activity, as indicated by the home resale market, experienced growth in median sales prices in the first quarter of 2016. Median sales prices for single family residential homes and condominiums on Oahu increased 7.2% and 4.5%, respectively, over the first quarter of 2015. The number of closed sales was also up slightly above 17% for both housing types in the first quarter of 2016.

Hawaii’s petroleum product prices reflect supply and demand in the Asia-Pacific region and the price of crude oil in international markets. In 2016, prices of all petroleum fuels have continued to fall to historic lows. The price of oil remains volatile with significant market price sensitivity towards increasing global oil stocks and economic uncertainty in China and India.

At its April 2016 meeting, the Federal Open Market Committee (FOMC) maintained the federal funds rate target of 0.25% to 0.5%, given inflation remains to be below the long-term target of 2%. FOMC anticipates the target range to remain stable until further signs of meeting the inflationary and labor market targets.

Overall, Hawaii is expected to see a continuation of 2016’s moderate expansion. Tourism gains will be marginal, with domestic gains being offset by economic weakening in Canada and Japan. Construction remains high, as activity is expected to continue in 2016 as planned and permitted building continues and as new recently approved projects begin. The biggest risk to local economic growth aligns with the risk and uncertainty of the global economy and its potential impact on the U.S. economy as a whole.

Recent tax developments. S ee “Recent tax developments” in Note 4 and income taxes paid and refunded in Note 10 of the Consolidated Financial Statements.

Retirement benefits . For the first three months of 2016, the Company’s defined benefit pension and other postretirement benefit plans’ assets generated a gain, including investment management fees, of 2.1%. The market value of these assets as of March 31, 2016 and December 31, 2015 was $1.5 billion (including $1.3 billion for the Utilities) and $1.4 billion (including $1.3 billion for the Utilities), respectively.

The net periodic pension cost is expected to be higher than the ERISA minimum required contribution for 2016 as it was for 2015. Therefore, to satisfy the requirements of the Utilities’ pension tracking mechanism, net periodic pension cost will be the basis of the cash funding for 2016 as it was for 2015. The Company estimates that the cash funding for its defined benefit pension and other postretirement benefit plans in 2016 will be $65 million ($64 million by the Utilities, $1 million by HEI and nil by ASB), compared to $88 million in 2015. The 2016 contribution is expected to fully satisfy the minimum contribution requirements, including requirements of the Utilities’ pension and OPEB tracking mechanisms and the plans’ funding policies. The decline in the 2016 contribution from 2015 is largely due to the increase in the discount rate and a downward revision to the Mortality Improvement Scale, which resulted in a decline in net periodic pension cost.

Commitments and contingencies. See Note 4 , “Electric utility segment” and Note 5 , “Bank segment,” of the Consolidated Financial Statements.

Recent accounting pronouncements. See Note 11 , “Recent accounting pronouncements,” of the Consolidated Financial Statements.

“Other” segment.



	Three months ended March 31
(in thousands)	2016			2015			Primary reason(s)
Revenues	$	68		$	72
Operating loss	(6,069		)	(8,761		)	Lower administrative and general expenses due to lower merger- and spin-off-related expenses
Net loss	(5,688		)	(8,483		)	Lower operating loss and higher tax benefits relative to the losses in first quarter 2016 (due to non-deductibility of certain merger- and spin-off-related expenses)

The “other” business segment includes results of the stand-alone corporate operations of HEI and ASB Hawaii, Inc. (ASBH), both holding companies; HEI Properties, Inc., a company which held passive, venture capital investments (all of which have been sold or abandoned prior to its dissolution in December 2015); and The Old Oahu Tug Service, Inc., a maritime freight transportation company that ceased operations in 1999; as well as eliminations of intercompany transactions. Expenses related to the pending merger with NEE and spin-off of ASBH of $1.5 million and $4.4 million were included in the results of the stand-alone corporate operations of HEI during the first quarters of 2016 and 2015, respectively.

FINANCIAL CONDITION

Liquidity and capital resources. The Company believes that its ability to generate cash, both internally from electric utility and banking operations and externally from issuances of equity and debt securities, commercial paper and bank borrowings, is adequate to maintain sufficient liquidity to fund its contractual obligations and commercial commitments, its forecasted capital expenditures and investments, its expected retirement benefit plan contributions and other cash requirements for the foreseeable future.

The consolidated capital structure of HEI (excluding deposit liabilities and other bank borrowings) was as follows:



(dollars in millions)	March 31, 2016				December 31, 2015
Short-term borrowings—other than bank	$	95	3	%	$	103	3	%
Long-term debt, net—other than bank	1,579		43		1,578		43
Preferred stock of subsidiaries	34		1		34		1
Common stock equity	1,942		53		1,928		53
	$	3,650	100	%	$	3,643	100	%

HEI’s short-term borrowings and HEI’s line of credit facility were as follows:



	Average balance		Balance
(in millions)	Three months ended March 31, 2016		March 31, 2016		December 31, 2015
Short-term borrowings ¹
Commercial paper	$	88	$	83	$	103
Line of credit draws	—		—		—
Undrawn capacity under HEI’s line of credit facility			150		150

¹ This table does not include Hawaiian Electric’s separate commercial paper issuances and line of credit facilities and draws, which are disclosed below under “Electric utility—Financial Condition—Liquidity and capital resources.” The maximum amount of HEI’s external short-term borrowings during the first three months of 2016 was $103 million. As of April 28, 2016 , HEI had $83 million of outstanding commercial paper, and its line of credit facility was undrawn.

HEI has a line of credit facility, as amended and restated on April 2, 2014, of $150 million. See Note 12 of the Consolidated Financial Statements.

From March 6, 2014 through January 5, 2016, HEI satisfied the share purchase requirements of the HEI Dividend Reinvestment and Stock Purchase Plan (DRIP), HEIRSP and ASB 401(k) Plan through open market purchases of its common stock rather than through new issuances. From January 6 through March 31, 2016, the Company raised $8.7 million through the issuance of approximately 0.3 million shares of common stock under the DRIP, HEIRSP and ASB 401(k) Plan.

In March 2013, HEI entered into equity forward transactions in which a forward counterparty borrowed 7 million shares of

HEI’s common stock from third parties and such borrowed shares were sold pursuant to an HEI registered public offering. See Note 8 of the Consolidated Financial Statements. In March 2015, HEI issued the 4.7 million shares remaining under the equity forward transactions for proceeds of $104.5 million.

In October 2015, HEI amended and extended a two-year $125 million term loan agreement that it entered into on May 2, 2014, which extended term loan now matures on October 6, 2017. In March 2016, HEI entered into a $75 million term loan agreement with Bank of America, N.A., which matures on March 23, 2018. See Note 12 of the Consolidated Financial Statements.

In December 2014, HEI filed an omnibus registration statement to register an indeterminate amount of debt and equity securities.

For the first three months of 2016, net cash provided by operating activities of HEI consolidated was $171 million . Net cash used by investing activities for the same period was $215 million, primarily due to Hawaiian Electric’s consolidated capital expenditures, purchases of ASB’s investment securities, and net increases in ASB’s loans held for investment and stock in FHLB, partly offset by ASB’s repayments and calls of investment securities and Hawaiian Electric’s contributions in aid of construction. Net cash provided by financing activities during this period was $79 million as a result of several factors, including net increases in ASB’s deposit liabilities and retail repurchase agreements and proceeds from the issuance of HEI common stock, partly offset by the payment of common stock dividends and net decreases in short-term borrowings and other bank borrowings. Other than capital contributions from their parent company, intercompany services (and related intercompany payables and receivables), Hawaiian Electric’s periodic short-term borrowings from HEI (and related interest) and the payment of dividends to HEI, the electric utility and bank segments are largely autonomous in their operating, investing and financing activities. (See the electric utility and bank segments’ discussions of their cash flows in their respective “Financial condition—Liquidity and capital resources” sections below.) During the first three months of 2016, Hawaiian Electric and ASB (through ASB Hawaii) paid cash dividends to HEI of $23 million and $9 million, respectively.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION

The Company’s results of operations and financial condition can be affected by numerous factors, many of which are beyond the Company’s control and could cause future results of operations to differ materially from historical results. For information about certain of these factors, see pages 47 to 48, 62 to 64, and 74 to 76 of HEI’s MD&A included in Part II, Item 7 of HEI’s 2015 Form 10-K.

Additional factors that may affect future results and financial condition are described on pages iv and v under “Forward-Looking Statements.”

MATERIAL ESTIMATES AND CRITICAL ACCOUNTING POLICIES

In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ significantly from those estimates.

In accordance with SEC Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” management has identified the accounting policies it believes to be the most critical to the Company’s financial statements—that is, management believes that these policies are both the most important to the portrayal of the Company’s results of operations and financial condition, and currently require management’s most difficult, subjective or complex judgments.

For information about these material estimates and critical accounting policies, see pages 48 to 49, 64 to 65, and 76 to 79 of HEI’s MD&A included in Part II, Item 7 of HEI’s 2015 Form 10-K.

Following are discussions of the results of operations, liquidity and capital resources of the electric utility and bank segments.

Electric utility

RESULTS OF OPERATIONS

Results.



Three months ended March 31				Increase
2016		2015		(decrease)						(dollars in millions, except per barrel amounts)
$	482	$	573	$	(91	)				Revenues. Net decrease largely due to:
							$	(81	)	lower fuel prices
							(18		)	lower purchased power energy costs
							(6		)	lower KWH purchased
							13			higher KWH generated
114		177		(63		)				Fuel oil expense. Decrease largely due to lower fuel prices, partly offset by higher KWH generated
116		136		(20		)				Purchased power expense. Decrease due to lower purchased power energy prices and lower KWH purchased
104		104		—						Operation and maintenance expenses . Net decrease due to:
							(1		)	2015 costs for damage to combined heat and power generating unit
							(1		)	storm repair costs incurred in 2015
							(1		)	bad debt reserve for one customer account in 2015
							3			higher PSIP costs incurred in 2016
							1			higher LNG consulting costs incurred in 2016
93		99		(6		)				Other expenses. Decrease in revenue taxes due to lower revenue, partly offset by higher depreciation expense for plant investments
55		58		(3		)				Operating income. Decrease due to higher depreciation
25		27		(2		)				Net income for common stock. Decrease due to lower operating income

2,085		2,044		41						Kilowatthour sales (millions)
67.3		66.5		0.8						Wet-bulb temperature (Oahu average; degrees Fahrenheit)
884		795		89						Cooling degree days (Oahu)
$	53.99	$	86.60	$	(32.61	)				Average fuel oil cost per barrel
458,464		456,171		2,293						Customer accounts (end of period)

Note: The electric utilities had effective tax rates for the first three months of 2016 and 2015 of 36% and 37% .

Hawaiian Electric’s consolidated ROACE was 7.9 % for the twelve months ended March 31, 2016 and 7.8% for the twelve months ended March 31, 2015 .

The Utilities’ consolidated KWH sales have declined each year since 2007. Based on expectations of additional customer renewable self-generation and energy-efficiency installations, the Utilities’ full year 2016 KWH sales are expected to be below the 2015 level.

Other operation and maintenance expenses (excluding expense covered by surcharges or by third parties) for 2016 are expected to be 4% lower than 2015 as 2015 included significant write-offs and reserves that are not expected to recur in 2016. The Utilities are managing expenses to offset higher than planned PSIP and LNG consultant costs incurred during the first quarter of 2016.

The net book value (cost less accumulated depreciation) of utility property, plant and equipment (PPE) as of March 31, 2016 amounted to $4 billion, of which approximately 26% related to production PPE, 65% related to transmission and distribution PPE, and 9% related to other PPE. Approximately 3% of the total net book value relates to generation PPE that has been deactivated or that the Utilities plan to deactivate or decommission. See “Adequacy of supply” below.

See “Economic conditions” in the “HEI Consolidated” section above.

Transition to renewable energy. The Utilities continue to make significant progress in implementing their renewable energy strategies to support Hawaii’s efforts to reduce its dependence on oil. The Utilities are committed to assisting the State of Hawaii in achieving its Renewable Portfolio Standard goal of 100% renewable energy by 2045. Hawaii’s RPS law was revised in the 2015 Legislature and requires electric utilities to meet an RPS of 15%, 30%, 40%, 70% and 100% by December 31, 2015, 2020, 2030, 2040 and 2045, respectively. Energy savings resulting from DSM energy efficiency programs and solar water heating do not count toward these RPS. The Utilities have been successful in adding significant amounts of renewable energy resources to their electric systems and exceeded their 2015 RPS goal. The Utilities' RPS for 2015 is 23%, exceeding the 2015 RPS goal, and the Utilities led the nation in 2015 in the percentage of its customers who have installed PV systems. (See "Developments in renewable energy efforts” below).

In 2014, Hawaiian Electric, Hawaii Electric Light and Maui Electric filed proposed Power Supply Improvement Plans (PSIPs) with the PUC, as required by PUC orders issued in April 2014 (see “April 2014 regulatory orders” in Note 4 of the Consolidated Financial Statements). Updated PSIPs were filed in April 2016. Under these plans, the Utilities will support sustainable growth of rooftop solar, expand use of energy storage systems, empower customers by developing smart grids, and offer new products and services to customers (e.g., community solar, microgrids and voluntary “demand response” programs), and the Utilities proposed a switch from high-priced oil to lower cost liquefied natural gas.

On October 1, 2015, Hawaiian Electric, Hawaii Electric Light and Maui Electric filed a proposed community-based renewable energy program and tariff with the PUC that will allow customers who cannot, or chose not to, take advantage of rooftop solar to receive the benefits of renewable energy to help offset their monthly electric bills and support clean energy for Hawaii. The program, upon approval by the PUC, will allow customers to buy an interest in electricity generated by community renewable projects on their island without installing systems on their own roofs or property. In November 2015, the PUC suspended the tariff submittal and opened an investigatory docket.

The Utilities are pursuing the transition to renewable energy in a manner that will help stabilize customer bills as they become less dependent on costly and price-volatile fossil fuel, ensure reliable service as more intermittent renewables are integrated to the grid and enable more options for customers as distributed technologies advance. To achieve 100% renewables by 2045, the Utilities seek to achieve a diversified mix of renewable resources, including utility scale and distributed resources. Under the state’s renewable energy strategy, there has been exponential growth in recent years in variable generation (e.g. solar and wind) on Hawaii’s island grids. As more generating resources are added to the Utilities' electric systems and as customers reduce their energy usage, the ability to accommodate additional generating resources and to accept energy from existing resources is becoming more challenging. As a result, there is a growing risk that energy production from generating resources may need to be curtailed and the interconnection of additional resources will need to be closely evaluated. Much of this variable generation is in the form of distributed generators interconnected at distribution circuits that cannot be directly controlled by system operators. As a consequence, grid resiliency in response to events that cause significant frequency and/or voltage excursions has weakened, and the prospects for larger and more frequent service outages have increased. As part of its transition, the Utilities have been progressively making changes in their operating practices, are making investments in grid modernization technologies, and are working with the solar industry to mitigate these risks and continue the integration of more renewable energy.

The Utilities continue to pursue liquefied natural gas (LNG) as a cleaner and lower cost transition fuel to meet the State’s goal to move from oil to renewable energy. Since 2014 the Utilities have been evaluating delivering LNG in specialized shipping containers to their generating stations on a transitional basis, an approach that requires minimal on-island infrastructure. In March 2014, Hawaiian Electric issued a RFP for the supply of containerized LNG and is currently in negotiations to resolve key contractual provisions with the preferred bidder. In August 2015, Hawaii State Governor Ige voiced his opposition to LNG as a replacement fuel for power generation citing (a) the high infrastructure costs, (b) permitting requirements as primary obstacles and (c) the potential to distract Hawaii from achieving the State's renewable energy goals. The Utilities have subsequently filed their updated Power Supply Improvement Plans outlining strategies that integrate LNG with the State’s renewable goals. The Utilities still anticipate finalizing an LNG Fuel Supply Agreement in 2016. The Utilities would seek approval from the PUC for the fuel agreement and for the commitment of funds related to capital improvements at various power plants concurrently.

After launching a smart grid customer engagement plan during the second quarter of 2014. Hawaiian Electric replaced approximately 5,200 residential and commercial meters with smart meters, 160 direct load control switches, fault circuit indicators and remote controlled switches in selected areas across Oahu as part of the Smart Grid Initial Phase implementation. Also under the Initial Phase a grid efficiency measure called Volt/Var Optimization (or Conservation Voltage Reduction) was turned on, customer energy portals were launched and are available for customer use and a PrePay Application was launched. The Initial Phase implementation was completed in 2015. The smart grid provides benefits such as customer

tools to manage their electric bills, potentially shortening outages and enabling the Utilities to integrate more low-cost renewable energy, like wind and solar, which will reduce Hawaii’s dependence on imported oil. In March 2016, the Utilities sought PUC approval to commit funds for an expansion of the smart grid project. The smart grid project is expected to cost $340 million and be implemented over 5 years (beginning in 2017 for Oahu and 2018 for the Hawaii Island and Maui County).

Decoupling. In 2010, the PUC issued an order approving decoupling, which was implemented by the Utilities in 2011 and 2012. The decoupling model implemented delinks revenues from sales and includes annual rate adjustments for certain O&M expenses and rate base changes. On May 31, 2013, as provided for in its original order issued in 2010 approving decoupling, the PUC opened an investigative docket to review whether the decoupling mechanisms are functioning as intended, are fair to the Utilities and their ratepayers and are in the public interest. On March 31, 2015, the PUC issued an Order to make certain modifications to the decoupling mechanism. See "Decoupling" in Note 4 of the Consolidated Financial Statements for a discussion of changes to the RAM mechanism. Under decoupling, as modified by the PUC, the most significant drivers for improving earnings are:

• completing major capital projects within PUC approved amounts and on schedule;

• managing O&M expense and capital additions relative to authorized RAM adjustments; and

• achieving regulatory outcomes that cover O&M requirements and rate base items not recovered in the RAMs.

Actual and PUC-allowed (as of March 31, 2016 ) returns were as follows:



%	Return on rate base (RORB)*						ROACE**						Rate-making ROACE***
Twelve months ended March 31, 2016	Hawaiian Electric		Hawaii Electric Light		Maui Electric		Hawaiian Electric		Hawaii Electric Light		Maui Electric		Hawaiian Electric		Hawaii Electric Light		Maui Electric
Utility returns	7.28		6.80		7.32		7.85		7.26		8.53		9.00		7.66		8.88
PUC-allowed returns	8.11		8.31		7.34		10.00		10.00		9.00		10.00		10.00		9.00
Difference	(0.83	)	(1.51	)	(0.02	)	(2.15	)	(2.74	)	(0.47	)	(1.00	)	(2.34	)	(0.12	)

* Based on recorded operating income and average rate base, both adjusted for items not included in determining electric rates.

** Recorded net income divided by average common equity.

*** ROACE adjusted to remove items not included by the PUC in establishing rates, such as incentive compensation and certain advertising.

The approval of decoupling by the PUC has helped the Utilities to gradually improve their ROACEs when compared to the period prior to the implementation of decoupling. This in turn will facilitate the Utilities’ ability to effectively raise capital for needed infrastructure investments. However, the Utilities continue to expect an ongoing structural gap between their PUC-allowed ROACEs and the ROACEs actually achieved due to the following:

• the timing of general rate case decisions,


•	the effective date of June 1 (rather than January 1) for the RAMs for Hawaii Electric Light and Maui Electric currently, and for Hawaiian Electric beginning in 2017,

• plant additions not recoverable through the RAM or other mechanism outside of the RAM cap,


•	the modification to the RBA interest rate per the PUC's February 2014 decision on decoupling (as discussed in Note 4 of the Consolidated Financial Statements), and

• the PUC’s consistent exclusion of certain expenses from rates.

The structural gap in 2016 is expected to be 90 to 110 basis points. Factors which impact the range of the structural gap include the actual sales impacting the size of the RBA regulatory asset, the actual level of plant additions in any given year relative to the amount recoverable through the RAM, and the timing, nature and size of any general rate case. Between rate cases, items not covered by the annual RAMs could also have a negative impact on the actual ROACEs achieved by the Utilities. Items not likely to be covered by the annual RAMs include the changes in rate base for the regulatory asset for pension contributions in excess of the pension amount in rates, investments in software projects, changes in fuel inventory and O&M and capital additions in excess of indexed escalations. The specific magnitude of the impact will depend on various factors, including changes in the required annual pension contribution, the size of software projects, changes in fuel prices and management’s ability to manage costs within the current mechanisms.

As part of decoupling, the Utilities also track their rate-making ROACEs as calculated under the earnings sharing mechanism, which includes only items considered in establishing rates. At year-end, each utility's rate-making ROACE is compared against its ROACE allowed by the PUC to determine whether earnings sharing has been triggered. Annual earnings of a utility over and above the ROACE allowed by the PUC are shared between the utility and its ratepayers on a tiered basis. The earnings share mechanism was not triggered for any of the utilities in 2015. For 2014, the earnings sharing mechanism was triggered for Maui Electric, and Maui Electric has been crediting $0.5 million to its customers for their portion of the earnings sharing during the period June 2015 to May 2016. Earnings sharing credits are included in the annual decoupling filing for the following year.

Annual decoupling filings . See “Decoupling” in Note 4 of the Consolidated Financial Statements for a discussion of the 2016 annual decoupling filings.

Most recent rate proceedings . Unless otherwise agreed or ordered, each electric utility is currently required by PUC order to initiate a rate proceeding every third year (on a staggered basis) to allow the PUC and the Consumer Advocate to regularly evaluate decoupling and to allow the utility to request electric rate increases to cover rising operating costs and the cost of plant and equipment, including the cost of new capital projects to maintain and improve service reliability. The PUC may grant an interim increase within 10 to 11 months following the filing of an application, but there is no guarantee of such an interim increase and interim amounts collected are refundable, with interest, to the extent they exceed the amount approved in the PUC’s final D&O. The timing and amount of any final increase is determined at the discretion of the PUC. The adoption of revenue, expense, rate base and cost of capital amounts (including the ROACE and RORB) for purposes of an interim rate increase does not commit the PUC to accept any such amounts in its final D&O.

The PUC issued several important regulatory decisions during the last few years, including a number of interim and final rate case decisions. The following table summarizes certain details of each utility’s most recent rate cases, including the details of the increases requested, whether the utility and the Consumer Advocate reached a settlement that they proposed to the PUC and the details of any granted interim and final PUC D&O increases.



Test year (dollars in millions)	Date (filed/ implemented)	Amount		% over rates in effect	ROACE (%)	RORB (%)	Rate base		Common equity %	Stipulated agreement reached with Consumer Advocate
Hawaiian Electric
2011 (1)
Request	7/30/10	$	113.5	6.6	10.75	8.54	$	1,569	56.29	Yes
Interim increase	7/26/11	53.2		3.1	10.00	8.11	1,354		56.29
Interim increase (adjusted)	4/2/12	58.2		3.4	10.00	8.11	1,385		56.29
Interim increase (adjusted)	5/21/12	58.8		3.4	10.00	8.11	1,386		56.29
Final increase	9/1/12	58.1		3.4	10.00	8.11	1,386		56.29
2014 (2)	6/27/14
Hawaii Electric Light
2010 (3)
Request	12/9/09	$	20.9	6.0	10.75	8.73	$	487	55.91	Yes
Interim increase	1/14/11	6.0		1.7	10.50	8.59	465		55.91
Interim increase (adjusted)	1/1/12	5.2		1.5	10.50	8.59	465		55.91
Final increase	4/9/12	4.5		1.3	10.00	8.31	465		55.91
2013 (4)
Request	8/16/12	$	19.8	4.2	10.25	8.30	$	455	57.05
Closed	3/27/13
2016 (5)	6/17/15
Maui Electric
2012 (6)
Request	7/22/11	$	27.5	6.7	11.00	8.72	$	393	56.85	Yes
Interim increase	6/1/12	13.1		3.2	10.00	7.91	393		56.86
Final increase	8/1/13	5.3		1.3	9.00	7.34	393		56.86
2015 (7)	12/30/14

Note: The “Request Date” reflects the application filing date for the rate proceeding. All other line items reflect the effective dates of the revised schedules and tariffs as a result of PUC-approved increases.

(1) Hawaiian Electric filed a request with the PUC for a general rate increase of $113.5 million, based on depreciation rates and methodology as proposed by Hawaiian Electric in a separate depreciation proceeding. Hawaiian Electric’s request was primarily to pay for major capital projects and higher O&M costs to maintain and improve service reliability and to recover the costs for several proposed programs to help reduce Hawaii’s dependence on imported oil, and to further increase reliability and fuel security.

The $53.2 million, $58.2 million and $58.8 million interim increases, and the $58.1 million final increase, include the $15 million in annual revenues that were being recovered through the decoupling RAM prior to the first interim increase.

(2) See “Hawaiian Electric 2014 test year rate case” below.

(3)

Hawaii Electric Light’s request was primarily to cover investments for system upgrade projects, two major transmission line upgrades and increasing O&M expenses. On February 8, 2012, the PUC issued a final D&O, which reflected the approval of decoupling and cost-recovery mechanisms, and on February 21, 2012, Hawaii Electric Light filed its revised tariffs to reflect the increase in rates. On April 4, 2012, the PUC issued an order approving the revised tariffs, which became effective April 9, 2012. Hawaii Electric Light implemented the decoupling mechanism and began tracking the target revenues and actual recorded revenues via a revenue balancing account. Hawaii Electric Light also reset the heat rates and implemented heat rate deadbands and the PPAC, which provides a surcharge mechanism that more closely aligns cost recovery with costs incurred. The revised tariffs reflect a lower increase in annual revenue requirement compared to the interim increase due to factors that became effective concurrently with the revised tariffs (lower depreciation rates and lower ROACE) and therefore, no refund to customers was required.

(4) Hawaii Electric Light’s request was to pay for O&M expenses and additional investments in plant and equipment required to maintain and improve system reliability and to cover the increased costs to support the integration of more renewable energy generation. As a result of the 2013 Agreement (described below), approved by the PUC in March 2013, the rate case was withdrawn and the docket has been closed.


(5)	See “Hawaii Electric Light 2016 test year rate case” below.

(6) Maui Electric’s request was to pay for O&M expenses and additional investments in plant and equipment required to maintain and improve system reliability and to cover the increased costs to support the integration of more renewable energy generation. See discussion on final D&O, including the refund to customers in September and October 2013 required as a result of the final D&O, in Note 4 of the Consolidated Financial Statements.


(7)	See “Maui Electric 2015 test year rate case” below.

Hawaiian Electric 2011 test year rate case . In the Hawaiian Electric 2011 test year rate case, the PUC had granted Hawaiian Electric’s request to defer Customer Information System (CIS) project O&M expenses (limited to $2,258,000 per year in 2011 and 2012) that were to be subject to a regulatory audit of project costs, and allowed Hawaiian Electric to accrue AFUDC on these deferred costs until the completion of the regulatory audit.

On January 28, 2013, the Utilities and the Consumer Advocate entered into the 2013 Agreement to, among other things, write-off $40 million of CIS Project costs in lieu of conducting the regulatory audits of the CIP CT-1 and the CIS projects, with the remaining recoverable costs for the projects of $52 million to be included in rate base as of December 31, 2012. The parties agreed that Hawaii Electric Light would withdraw its 2013 test year rate case and not file a rate case until its next turn in the rate case cycle, for a 2016 test year, and Hawaiian Electric would delay the filing of its scheduled 2014 test year rate case to no earlier than January 2, 2014. The parties also agreed that, starting in 2014, Hawaiian Electric will be allowed to record RAM revenues starting on January 1 (instead of the prior start date of June 1) for the years 2014, 2015 and 2016. For the three months ended March 31, 2016 and 2015, Hawaiian Electric had additional net RAM revenues of $2 million and $5 million, respectively.

Hawaiian Electric 2014 test year rate case . On June 27, 2014, Hawaiian Electric submitted an abbreviated rate case filing (abbreviated filing), stating that it intends to forgo the opportunity to seek a general rate increase in base rates, and if approved, this filing would result in no change in base rates. Hawaiian Electric stated that it is foregoing a rate increase request in recognition that its customers are already in a challenging high electricity bill environment. The abbreviated filing explained that Hawaiian Electric is aggressively attacking the root causes of high rates, by, among other things, vigorously pursuing the opportunity to switch from oil to liquefied natural gas, acquiring lower-cost renewable energy resources, pursuing opportunities to achieve operational efficiencies, and deactivating older, high-cost generation. Instead of seeking a rate increase, Hawaiian Electric stated that it is focused on developing and executing the new business model, plans and strategies required by the PUC’s April 2014 regulatory orders discussed in Note 4 of the Consolidated Financial Statements, as well as other actions that will reduce rates.

Hawaiian Electric further explained that the abbreviated filing satisfies the obligation to file a general rate case under the three-year cycle established by the PUC in the decoupling final D&O. If the PUC determines that additional materials are required, Hawaiian Electric stated it will work with the Consumer Advocate on a schedule to submit additional information as needed. Hawaiian Electric asked for an expedited decision on this filing and stated that if the PUC decides that such a ruling is not in order, Hawaiian Electric reserves the right to supplement the abbreviated filing with additional material to support the increase in revenue requirements forgone by this filing — calculated to be $56 million over revenues at current effective rates. Hawaiian Electric’s revenue at current effective rates includes: (1) the revenue from Hawaiian Electric’s base rates, including the revenue from the energy cost adjustment clause and the purchased power adjustment clause, (2) the revenue that would be included in the decoupling RBA in 2014 based on 2014 test year forecasted sales and (3) the revenue from the 2014 RAM implemented in connection with the decoupling mechanism.

Under Hawaiian Electric’s proposal, the decoupling RBA and RAM would continue, subject to any change to these mechanisms ordered by the PUC in Schedule B of the decoupling proceedings, the DSM surcharge would continue since demand response (DR) program costs would not be rolled into base rates (as required in the April 28, 2014 DR Order) until the

next rate case and the pension and OPEB tracking mechanisms would continue. Hawaiian Electric plans to file its next rate case according to the normal rate case cycle using a 2017 test year. If circumstances change, Hawaiian Electric may file its next rate case earlier.

Management cannot predict whether the PUC will accept this abbreviated filing to satisfy Hawaiian Electric’s obligation to file a rate case in 2014, whether additional material will be required or whether Hawaiian Electric will be required to proceed with a traditional rate proceeding.

Maui Electric 2015 test year rate case . On December 30, 2014, Maui Electric filed its abbreviated 2015 test year rate case filing. In recognition that its customers have been enduring a high bill environment, Maui Electric proposed no change to its base rates, thereby foregoing the opportunity to seek a general rate increase. If Maui Electric were to seek an increase in base rates, its requested increase in revenue, based on its revenue requirement for a normalized 2015 test year, would have been $11.6 million, or 2.8%, over revenues at current effective rates with estimated 2015 RAM revenues. The normalized 2015 test year revenue requirement is based on an estimated cost of common equity of 10.75%. Management cannot predict any actions by the PUC as a result of this filing.

Hawaii Electric Light 2016 test year rate case . On June 17, 2015, Hawaii Electric Light filed its notice of intent to file a general rate case application by December 30, 2016, and simultaneously filed a motion which requested an extension to file its 2016 rate case to no later than December 30, 2016. On November 19, 2015, the PUC issued an order granting Hawaii Electric Light’s motion, extending the deadline to file its 2016 rate case to December 30, 2016 and imposing a number of conditions, including the removal of all HEI non-incentive executive compensation from the Company’s base rates, a demonstration that it substantially reduced its cost structure, a proposal of a set of economic incentive and cost recovery mechanisms to further encourage reductions in rates and an acceleration of its clean energy transformation, and a proposal to modify the ECAC to provide incentives to reduce fuel and purchased power expenses.

Integrated resource planning and April 2014 regulatory orders . See “April 2014 regulatory orders” in Note 4 to the Consolidated Financial Statements.

Developments in renewable energy efforts . Developments in the Utilities’ efforts to further their renewable energy strategy include the following:

•

In July 2011, the PUC directed Hawaiian Electric to submit a draft RFP for the PUC’s consideration for a competitive bidding process for 200 MW or more of renewable energy to be delivered to, or to be sited on, the island of Oahu. In October 2011, Hawaiian Electric filed a draft RFP with the PUC. In July 2013, the PUC issued orders related to the 200-MW RFP, ordering that Hawaiian Electric shall amend its current draft of the Oahu 200-MW RFP to remove references to the Lanai Wind Project, eliminate solicitations for an undersea transmission cable, and amend the draft RFP to reflect other guidance provided in the order.

•

In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua Bioenergy, LLC (Hu Honua) for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. Per the terms of the PPA, the Hu Honua plant was scheduled to be in service in 2016. However, Hu Honua encountered construction delays, failed to meet its current obligations under the PPA and failed to provide adequate assurances that it could perform or had the financial means to perform. Hawaii Electric Light terminated the PPA on March 1, 2016. Hawaii Electric Light and Hu Honua are currently in discussions regarding the possibility of reinstating the PPA under revised terms and conditions.

•

In August 2012, the battery facility at a 30-MW Kahuku wind farm experienced a fire. After the interconnection infrastructure was rebuilt and voltage regulation equipment was installed, the facility came up to full output in January 2014 to perform control system acceptance testing, and energy is being purchased at a base rate until PUC approval of an amendment to the PPA. An application for PUC approval of an amendment to the PPA was filed in April 2014.

•

In August 2012, the PUC approved a waiver from the competitive bidding framework to allow Hawaiian Electric to negotiate with the U.S. Army for construction of a 50-MW utility-owned and operated firm, renewable and dispatchable generation facility at Schofield Barracks on the island of Oahu. In September 2015, the PUC approved Hawaiian Electric's application with conditions and limitations. See "Schofield Generating Station Project" in Note 4 of the Consolidated Financial Statements.

•

In May 2013, Maui Electric requested a waiver from the PUC Competitive Bidding Framework to conduct negotiations for a PPA for approximately 4.5 to 6.0 MW of firm power from a proposed Mahinahina Energy Park, LLC project, fueled with biofuel. The PUC approved the waiver request, provided that an executed PPA must be filed for PUC approval by February 2015. The parties did not execute a PPA by the PUC deadline. In September 2015, Anaergia Services, Maui Energy park and Maui Resource Recovery Facility filed a Petition for Declaratory Order, asking the PUC to find that Hawaiian Electric and Maui Electric have violated Hawaii state law and clear legislative policy by wrongfully refusing and failing to forward several bona fide requests for preferential rates for the purchase

of firm renewable energy produced in conjunction with agricultural activities to the PUC for approval. The PUC held a hearing in March 2016. In April 2016, the PUC’s Hearing Officer issued a recommended D&O that confirms Maui Electric abided by state law.

•

In December 2013, Hawaiian Electric requested PUC approval for a waiver of the Na Pua Makani Power Partners, LLC’s (NPM) proposed 24-MW wind farm located in the Kahuku area on Oahu from the competitive bidding process and the PPA for Renewable As-Available Energy dated October 3, 2013 between Hawaiian Electric and NPM for the proposed 24-MW wind farm. In December 2014, the PUC approved both the waiver request and the PPA. Hawaiian Electric and NPM are currently working on an amendment to the PPA to incorporate the results of the interconnection requirements study.

•

In July 2015, the PUC issued orders approving (with conditions) four PPAs for a combined 137 MW of solar projects. In January 2016, two of the four approved projects (which are SunEdison projects) received notices of default from Hawaiian Electric for failure to meet guaranteed project milestones, and in February 2016 a third project (also a SunEdison project) received a notice of failure to meet a substantial commitment milestone. In January 2016, the PUC reopened proceedings for the three SunEdison projects. In February 2016, Hawaiian Electric filed project status reports with the PUC and terminated the three SunEdison PPAs totaling 109.6 MW. SunEdison maintains that the terminations were improper. SunEdison and the Consumer Advocate filed responses with the PUC regarding Hawaiian Electric’s status reports, and a technical conference was held on March 18, 2016. On April 12, 2016, the PUC issued a staff report concerning the termination of the PPAs. The staff report stated that Hawaiian Electric acted too hastily and without an in-depth analysis, however, the staff report acknowledged that it is within Hawaiian Electric’s management discretion to determine whether or not to terminate the PPAs. The PUC has not yet closed the dockets for these projects. On April 21, 2016, SunEdison filed for Chapter 11 bankruptcy protection.


•	In July 2015, Maui Electric signed two PPAs, with Kuia Solar and South Maui Renewable Resources (which subsequently assigned its PPA to SSA Solar of HI 3, LLC), each for a 2.87-MW solar facility. In February 2016, the PUC approved both PPAs, subject to certain conditions and modifications.

•

In September 2015, the PUC approved Hawaiian Electric’s 2-year biodiesel supply contract with Pacific Biodiesel Technologies, LLC to supply 2 million to 3 million gallons of biodiesel at CIP CT-1 and the Honolulu International Airport Emergency Power Facility beginning in November 2015. Renewable Energy Group has supplied 3 million to 7 million gallons per year to CIP CT-1 under its contract with Hawaiian Electric originally set to expire November 2015. The contract has been extended from November 2015 to November 2016 as a contingency supply contract with no volume purchase requirements.

•

In October 2015, the Utilities filed with the PUC a proposal for a Community-Based Renewable Energy program and tariff that would allow customers who cannot, or chose not to, take advantage of rooftop solar to receive the benefits of renewable energy to help offset their monthly electric bills and support clean energy for Hawaii. In November 2015, the PUC suspended the filing and opened a docket to investigate the matter.


•	The Utilities began accepting energy from feed-in tariff projects in 2011. As of March 31, 2016 , there were 14 MW, 3 MW and 4 MW of installed feed-in tariff capacity from renewable energy technologies at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.


•	As of March 31, 2016 , there were approximately 269 MW, 63 MW and 70 MW of installed NEM capacity from renewable energy technologies (mainly PV) at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.


•	The Utilities began accepting applications for Customer Grid Supply (CGS) and Customer Self Supply (CSS) in October 2015. As of March 31, 2016 there were 0 kW, 36 kW and 0 kW of installed CGS and CSS capacity from renewable energy technologies at Hawaiian Electric, Hawaii Electric Light and Maui Electric, respectively.

Other regulatory matters. In addition to the items below, also see Note 4 of the Consolidated Financial Statements.

Adequacy of supply.

Hawaiian Electric . In January 2016, Hawaiian Electric filed its 2016 Adequacy of Supply (AOS) letter, which indicated that based on its May 2015 sales and peak forecast for the 2016 to 2017 time period, Hawaiian Electric’s generation capacity will be sufficient to meet reasonably expected demands for service and provide reasonable reserves for emergencies through 2017.

In accordance to its planning criteria, Hawaiian Electric deactivated two fossil fuel generating units from active service at its Honolulu Power Plant in January 2014 and anticipates deactivating two additional fossil fuel units at its Waiau Power Plant in the 2022 timeframe. Hawaiian Electric is proceeding with future firm capacity additions in coordination with the State of Hawaii Department of Transportation in 2016, and with the U.S. Department of the Army for a utility owned and operated

renewable, dispatchable, including black start capabilities, generation security project on federal lands, which is expected to be in service in the first quarter of 2018. Hawaiian Electric is continuing negotiations with two firm capacity IPPs on Oahu under PPAs scheduled to expire in 2016 and 2022.

Hawaii Electric Light . In January 2016, Hawaii Electric Light filed its 2016 AOS letter, which indicated that Hawaii Electric Light’s generation capacity through 2018 is sufficient to meet reasonably expected demands for service and provide for reasonable reserves for emergencies. The 2016 AOS letter also indicated that the Company's Shipman plant in Hilo was retired in 2015.

Additional generation from other renewable resources could be added in the 2020-2025 timeframe.

Maui Electric . In January 2016, Maui Electric filed its 2016 AOS letter, which indicated that Maui Electric’s generation capacity for the islands of Lanai and Molokai for the next three years is sufficiently large to meet all reasonably expected demands for service and provide reasonable reserves for emergencies. The 2016 AOS letter also indicated that without the peak reduction benefits of demand response but with the equivalent firm capacity value of wind generation, Maui Electric expects to have a small reserve capacity shortfall from 2017 to 2022 on the island of Maui. Maui Electric is evaluating several measures to mitigate the anticipated reserve capacity shortfall. Maui Electric anticipates needing a significant amount of additional firm capacity on Maui in the 2022 timeframe after the planned retirement of Kahului Power Plant. In February 2014, Maui Electric deactivated two fossil fuel generating units, with a combined rating of 9.5 MW, at its Kahului Power Plant. Due to various system conditions including lack of wind generation, approaching storms, and scheduled and unscheduled outages of generating units, transmission lines, and independent power producers, the two deactivated units at Kahului Power Plant were reactivated for several days in 2015 and 2016. In consideration of the time needed to acquire replacement firm generating capacity, Maui Electric now anticipates the retirement of all generating units at the Kahului Power Plant, which have a combined rating of 32.3 MW, in the 2022 timeframe. A capacity planning analysis is in progress to better define needs and timing. Maui Electric plans to issue one or more RFPs for energy storage, demand response and firm generating capacity, and to make system improvements needed to ensure reliability and voltage support in this timeframe.

April 2014 regulatory orders. In April 2014, the PUC issued four orders that collectively provide certain key policy, resource planning, and operational directives to the Utilities. See “April 2014 regulatory orders” in Note 4 of the Consolidated Financial Statements.

Commitments and contingencies. See Note 4 of the Consolidated Financial Statements.

Recent accounting pronouncements. See Note 11 , “Recent accounting pronouncements,” of the Consolidated Financial Statements.

FINANCIAL CONDITION

Liquidity and capital resources. Management believes that Hawaiian Electric’s ability, and that of its subsidiaries, to generate cash, both internally from operations and externally from issuances of equity and debt securities and commercial paper and draws on lines of credit, is adequate to maintain sufficient liquidity to fund their respective capital expenditures and investments and to cover debt, retirement benefits and other cash requirements in the foreseeable future.

Hawaiian Electric’s consolidated capital structure was as follows:



(dollars in millions)	March 31, 2016				December 31, 2015
Short-term borrowings	$	13	—	%	$	—	—	%
Long-term debt, net	1,279		42		1,279		42
Preferred stock	34		1		34		1
Common stock equity	1,731		57		1,728		57
	$	3,057	100	%	$	3,041	100	%

Information about Hawaiian Electric’s short-term borrowings (other than from Hawaii Electric Light and Maui Electric) and Hawaiian Electric’s line of credit facility were as follows:



	Average balance		Balance
(in millions)	Three months ended March 31, 2016		March 31, 2016		December 31, 2015
Short-term borrowings ¹
Commercial paper	$	26	$	13	$	—
Line of credit draws	—		—		—
Borrowings from HEI	—		—		—
Undrawn capacity under line of credit facility			200		200

¹ The maximum amount of Hawaiian Electric’s external short-term borrowings during the first three months of 2016 was $61 million. As of March 31, 2016 , Hawaiian Electric had short-term borrowings from Hawaii Electric Light and Maui Electric of $12.5 million and $7 million, respectively. As of April 28, 2016 , Hawaiian Electric had no outstanding commercial paper, no draws under its line of credit facility and no borrowings from HEI. Also, as of April 28, 2016 , Hawaiian Electric had short-term borrowings from Hawaii Electric Light and Maui Electric of $12.5 million and $7 million, respectively. Intercompany borrowings are eliminated in consolidation.

Hawaiian Electric has a line of credit facility, as amended and restated on April 2, 2014, of $200 million. In January 2015, the PUC approved Hawaiian Electric’s request to extend the term of the credit facility to April 2, 2019. See Note 12 of the Consolidated Financial Statements.

Special purpose revenue bonds (SPRBs) have been issued by the Department of Budget and Finance of the State of Hawaii (DBF) to finance (and refinance) capital improvement projects of Hawaiian Electric and its subsidiaries, but the sources of their repayment are the non-collateralized obligations of Hawaiian Electric and its subsidiaries under loan agreements and notes issued to the DBF, including Hawaiian Electric’s guarantees of its subsidiaries’ obligations. The payment of principal and interest due on the Series 2007A and Refunding Series 2007B SPRBs are insured by Financial Guaranty Insurance Company (FGIC), which was placed in a rehabilitation proceeding in the State of New York in June 2012. On August 19, 2013 FGIC’s plan of rehabilitation became effective and the rehabilitation proceeding terminated. The S&P and Moody’s ratings of FGIC, which at the time the insured obligations were issued were higher than the ratings of the Utilities, have been withdrawn. Management believes that if Hawaiian Electric’s long-term credit ratings were to be downgraded, or if credit markets further tighten, it could be more difficult and/or expensive to sell bonds in the future.

In May 2015, up to $80 million of Special Purpose Revenue Bonds (SPRBs) ($70 million for Hawaiian Electric, $2.5 million for Hawaii Electric Light and $7.5 million for Maui Electric) were authorized by the Hawaii legislature for issuance, with PUC approval, prior to June 30, 2020 to finance the utilities’ capital improvement programs.

In June 2015, Hawaiian Electric, Hawaii Electric Light and Maui Electric filed an application with the PUC for approval to issue and sell each utility’s common stock in one or more sales in 2016 (Hawaiian Electric’s sale to the owner at the time of each such sale of up to $330 million and Hawaii Electric Light’s and Maui Electric’s sales to Hawaiian Electric of up to $15 million and $45 million, respectively), and the purchase of the Hawaii Electric Light and Maui Electric common stock by Hawaiian Electric in 2016.

In February 2016, Hawaiian Electric and Maui Electric filed an application with the PUC for approval to issue in 2016 unsecured obligations bearing taxable interest (Hawaiian Electric up to $70 million and Maui Electric up to $20 million), with the proceeds expected to be used, as applicable, to finance capital expenditures, repay long-term and/or short term debt used to finance or refinance capital expenditures and/or to reimburse funds used for payment of the capital expenditures.

Cash flows from operating activities generally relate to the amount and timing of cash received from customers and payments made to third parties. Using the indirect method of determining cash flows from operating activities, noncash expense items such as depreciation and amortization, as well as changes in certain assets and liabilities, are added to (or deducted from) net income. In 2016, net cash provided by operating activities increased by $50 million. In 2016, noncash depreciation and amortization amounted to $49 million due to an increase in plant and equipment and deferred income taxes increased $14 million. Further, net cash provided by operating activities included a net decrease of $27 million in accounts receivable and accrued unbilled revenues due largely to the decrease in customer bills as a result of lower fuel oil prices included in rates, a $23 million decrease in fuel oil stock, and a $28 million increase in accounts payable due to the decrease in the fuel oil prices and timing of vendor payments.

For the first three months in 2016, net cash used in investing activities increased by $2 million compared to the prior year. Further in 2016, capital expenditures amounted to $125 million, offset by contributions in aid of construction of $14 million.

Financing activities provide supplemental cash for both day-to-day operations and capital requirements as needed. For the first three months in 2016, cash flows used in financing activities changed by a negative $18 million compared to the prior year.

Further in 2016, cash used in financing activities consisted of $24 million common and preferred stock dividend payments offset by the proceeds received from short-term borrowings of $13 million.

Bank



	Three months ended March 31				Increase
(in millions)	2016		2015		(decrease)			Primary reason(s)
Interest income	$	53	$	48	$	5		The increase in interest income was the result of higher average earning asset balances and an increase in yields on earning assets. ASB’s average loan portfolio balance for the three months ended March 31, 2016 increased by $188 million compared to the same period in 2015 as average commercial real estate, home equity lines of credit and residential balances increased by $174 million, $29 million, and $16 million, respectively. The growth in these loan portfolios was reflective of ASB’s portfolio mix target and loan growth strategy. The yield on earning assets increased by 11 basis points as the adjustable rate loans repriced upward with the increase in the prime rate at end of 2015, which resulted in an increase in loan portfolio yields of 10 basis points. The average investment securities portfolio balance increased by $305 million due to the purchase of investments with excess liquidity. The average FHLB stock balance decreased by $58 million as FHLB stock in excess of the required holdings was repurchased by the FHLB.
Noninterest income	16		16		—			Noninterest income was relatively flat for the three months ended March 31, 2016 compared to noninterest income for the three months ended March 31, 2015. Mortgage banking income decreased $0.6 million as result of a decrease in residential mortgage loan sales volume in first quarter of 2016 compared to the same period in 2015.
Revenues	69		64		5
Interest expense	3		3		—			Interest expense was relatively flat as growth in the deposit liabilities was primarily in low rate core deposits, which had a minimal impact to interest expense. Average deposit balances for the three months ended March 31, 2016 increased by $363 million compared to the same period in 2015 due to an increase in core deposits and term certificates of $297 million and $66 million, respectively. Other borrowings increased by $10 million primarily due to an increase in repurchase agreements. The interest-bearing liability rate increased by 2 basis points.
Provision for loan losses	5		1		4			The provision for loan losses increased by $4.2 million primarily due to increased reserves for growth in the loan portfolio, additional loan loss reserves for the consumer loan portfolio and loan loss reserves for two commercial loans. Credit quality and trends continued to be stable and good, reflecting prudent credit risk management and a strong Hawaii economy. Delinquency rates have decreased from 0.60% at March 31, 2015 to 0.53% at March 31, 2016. The net charge-off ratio for the three months ended March 31, 2016 was 0.21% compared to a net charge-off ratio of 0.04% for the same period in 2015. The increase in net charge-offs were due to an increase in consumer loan portfolio charge-offs as a result of ASB’s strategic expansion of its unsecured consumer loan product offering with risk-based pricing and a loan charge-off related to one commercial borrower.
Noninterest expense	41		40		1			Noninterest expense for the three months ended March 31, 2016 was $1.0 million higher than the noninterest expense for the same period in 2015 primarily due to higher compensation and benefit expenses and higher services expenses for ASB’s electronic banking platform project to enhance online and mobile services for both consumer and business customers.
Expenses	49		44		5
Operating income	20		21		(1		)	Higher net interest income was more than offset by higher provision loan losses, lower noninterest income and higher noninterest expense.
Net income	13		13		—

See Note 5 of the Consolidated Financial Statements and “Economic conditions” in the “HEI Consolidated” section above.

Despite the revenue pressures across the banking industry, management expects ASB’s low-cost funding base and lower-risk profile to continue to deliver strong performance compared to industry peers.

ASB’s return on average assets, return on average equity and net interest margin were as follows:



	Three months ended March 31
(percent)	2016	2015
Return on average assets	0.84	0.96
Return on average equity	8.89	9.96
Net interest margin	3.62	3.52

Average balance sheet and net interest margin. The following tables provides a summary of average balances including major categories of interest, earning assets and interest-bearing liabilities:



Three months ended March 31	2016						2015
(dollars in thousands)	Average balance			Interest income/ expense		Yield/ rate (%)	Average balance			Interest income/ expense		Yield/ rate (%)
Assets:
Interest-earning deposits	$	79,320		$	99	0.49	$	130,294		$	81	0.25
FHLB Stock	10,779			44		1.64	68,626			18		0.11
Available-for-sale investment securities	854,401			4,874		2.28	549,125			2,952		2.15
Loans
Residential 1-4 family	2,076,525			22,320		4.30	2,060,485			22,661		4.40
Commercial real estate	808,407			8,164		4.03	634,251			6,062		3.84
Home equity line of credit	851,329			6,865		3.24	822,510			6,476		3.19
Residential land	18,206			276		6.06	16,381			274		6.69
Commercial	748,774			7,372		3.94	789,329			7,068		3.62
Consumer	128,189			3,440		10.79	120,602			2,657		8.93
Total loans ^1,2	4,631,430			48,437		4.19	4,443,558			45,198		4.09
Total interest-earning assets ¹	5,575,930			53,454		3.84	5,191,603			48,249		3.73
Allowance for loan losses	(50,449		)				(45,929		)
Non-interest-earning assets	497,204						487,233
Total assets	$	6,022,685					$	5,632,907
Liabilities and shareholder’s equity:
Savings	$	2,048,157		$	333	0.07	$	1,943,466		$	300	0.06
Interest-bearing checking	821,868			42		0.02	765,172			33		0.02
Money market	167,244			53		0.13	163,737			50		0.12
Time certificates	499,617			1,164		0.93	433,747			877		0.82
Total interest-bearing deposits	3,536,886			1,592		0.18	3,306,122			1,260		0.15
Advances from Federal Home Loan Bank	102,061			786		3.05	100,000			775		3.10
Securities sold under agreements to repurchase	207,033			699		1.34	198,939			691		1.39
Total interest-bearing liabilities	3,845,980			3,077		0.32	3,605,061			2,726		0.30
Non-interest bearing liabilities:
Deposits	1,506,595						1,374,311
Other	100,175						112,344
Shareholder’s equity	569,935						541,191
Total liabilities and shareholder’s equity	$	6,022,685					$	5,632,907
Net interest income				$	50,377					$	45,523
Net interest margin (%) ³						3.62						3.52


¹	Includes loans held for sale, at lower of cost or fair value.


²	Includes loan fees of $0.8 million and $0.5 million for the three months ended March 31, 2016 and 2015, respectively, together with interest accrued prior to suspension of interest accrual on nonaccrual loans.


³	Defined as net interest income as a percentage of average total interest-earning assets.

Earning assets, interest-bearing liabilities and other factors. Earnings of ASB depend primarily on net interest income, which is the difference between interest earned on earning assets and interest paid on interest-bearing liabilities. The interest rate

environment has been impacted by disruptions in the financial markets over a period of several years and these conditions had a negative impact on ASB’s net interest margin during that period. With the recent interest increase by the Feds, ASB’s net interest margin has increased.

The loan portfolio and mortgage-related securities are ASB’s primary earning assets.

Loan portfolio . ASB’s loan volumes and yields are affected by market interest rates, competition, demand for financing, availability of funds and management’s responses to these factors. The composition of ASB’s loans receivable was as follows:



	March 31, 2016				December 31, 2015
(dollars in thousands)	Balance			% of total	Balance			% of total
Real estate:
Residential 1-4 family	$	2,055,020		44.2	$	2,069,665		44.8
Commercial real estate	703,661			15.1	690,561			14.9
Home equity line of credit	846,467			18.2	846,294			18.3
Residential land	18,940			0.4	18,229			0.4
Commercial construction	130,487			2.8	100,796			2.2
Residential construction	16,241			0.4	14,089			0.3
Total real estate, net	3,770,816			81.1	3,739,634			80.9
Commercial	740,596			16.0	758,659			16.4
Consumer	136,244			2.9	123,775			2.7
	4,647,656			100.0	4,622,068			100.0
Less: Deferred fees and discounts	(5,380		)		(6,249		)
Allowance for loan losses	(52,326		)		(50,038		)
Total loans, net	$	4,589,950			$	4,565,781

Home equity — key credit statistics

Attention has been given by regulators and rating agencies to the potential for increased exposure to credit losses associated with home equity lines of credit (HELOC) that were originated during the period of rapid home price appreciation between 2003 and 2007 as they have reached, or are starting to reach, the end of their 10-year, interest only payment periods. Once the interest only payment period has ended, payments are reset to include principal repayments along with interest. ASB does not have a large exposure to HELOCs originated between 2003 and 2007. Nearly all of the HELOC originations prior to 2008 consisted of amortizing equity lines that have structured principal payments during the draw period. These older equity lines represent 3% of the portfolio and are included in the amortizing balances identified in the table above.



	March 31, 2016			December 31, 2015
Outstanding balance (in thousands)	$	846,467		$	846,294
Percent of portfolio in first lien position	43.2		%	42.9		%
Net charge-off (recovery) ratio	(0.01		)%	0.02		%
Delinquency ratio	0.24		%	0.25		%



							End of draw period – interest only									Current
March 31, 2016	Total			Interest only			2016-2017			2018-2020			Thereafter			amortizing
Outstanding balance (in thousands)	$	846,467		$	649,102		$	10,254		$	145,561		$	493,287		$	197,365
% of total	100		%	77		%	1		%	17		%	59		%	23		%

As of March 31, 2016, the HELOC portfolio comprised 18% of the total loan portfolio and is generally an interest-only revolving loan for a 10-year period, after which time the HELOC outstanding balance converts to a fully amortizing variable rate term loan with a 20-year amortization period. This product type comprises 97% of the total HELOC portfolio and is the current product offering. Within this product type, borrowers also have a “Fixed Rate Loan Option” to convert a part of their available

line of credit into a 5, 7 or 10-year fully amortizing fixed rate loan with level principal and interest payments. As of March 31, 2016 , approximately 20% of the portfolio balances were amortizing loans under the Fixed Rate Loan Option.

Loan portfolio risk elements . See Note 5 of the Consolidated Financial Statements.

Available-for-sale investment securities . ASB’s investment portfolio was comprised as follows:



	March 31, 2016				December 31, 2015
(dollars in thousands)	Balance		% of total		Balance		% of total
U.S. Treasury and federal agency obligations	$	218,697	24	%	$	212,959	26	%
Mortgage-related securities — FNMA, FHLMC and GNMA	687,598		76		607,689		74
Total available-for-sale investment securities	$	906,295	100	%	$	820,648	100	%

Principal and interest on mortgage-related securities issued by Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Government National Mortgage Association (GNMA) are guaranteed by the issuer and, in the case of GNMA, backed by the full faith and credit of the U.S. government.

Deposits and other borrowings . Deposits continue to be the largest source of funds for ASB and are affected by market interest rates, competition and management’s responses to these factors. Deposit retention and growth will remain challenging in the current environment due to competition for deposits and the low level of short-term interest rates. Advances from the FHLB of Des Moines and securities sold under agreements to repurchase continue to be additional sources of funds. As of March 31, 2016 and December 31, 2015, ASB’s interest-bearing liabilities consisted of 94% deposits and 6% other borrowings. The weighted average cost of deposits for the first three months of 2016 and 2015 was 0.13% and 0.11%, respectively.

Federal Home Loan Bank Merger . In the second quarter of 2015, the FHLB of Des Moines and the FHLB of Seattle successfully completed the merger of the two banks and operated as one under the name FHLB of Des Moines as of June 1, 2015. The FHLB of Des Moines will continue to be a source of liquidity for ASB.

Other factors . Interest rate risk is a significant risk of ASB’s operations and also represents a market risk factor affecting the fair value of ASB’s investment securities. Increases and decreases in prevailing interest rates generally translate into decreases and increases in the fair value of the investment securities, respectively. In addition, changes in credit spreads also impact the fair values of the investment securities.

As of March 31, 2016 , ASB had an unrealized gain, net of taxes, on available-for-sale investment securities (including securities pledged for repurchase agreements) in AOCI of $5.6 million compared to an unrealized loss, net of taxes, of $1.9 million at December 31, 2015. See “Item 3. Quantitative and qualitative disclosures about market risk” for a discussion of ASB’s interest rate risk sensitivity.

During the first three months of 2016, ASB recorded a provision for loan losses of $4.8 million primarily due to increased loss reserves for growth in the commercial real estate loan portfolio, additional loan loss reserves for the consumer loan portfolio and loan loss reserves for two commercial loans. During the first three months of 2015, ASB recorded a provision for loan losses of $0.6 million primarily due to increased loss reserves for growth in the loan portfolio and additional loss reserves for the consumer loan portfolio. Financial stress on ASB’s customers may result in higher levels of delinquencies and losses.



	Three months ended March 31						Year ended December 31,
(in thousands)	2016			2015			2015
Allowance for loan losses, January 1	$	50,038		$	45,618		$	45,618
Provision for loan losses	4,766			614			6,275
Less: net charge-offs	2,478			437			1,855
Allowance for loan losses, end of period	$	52,326		$	45,795		$	50,038
Ratio of net charge-offs during the period to average loans outstanding (annualized)	0.21		%	0.04		%	0.04		%

Legislation and regulation. ASB is subject to extensive regulation, principally by the Office of the Comptroller of the Currency (OCC) and the FDIC. Depending on ASB’s level of regulatory capital and other considerations, these regulations could restrict the ability of ASB to compete with other institutions and to pay dividends to its shareholder. See the discussion below under “Liquidity and capital resources.”

Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) . Regulation of the financial services industry, including regulation of HEI, ASB Hawaii and ASB, has changed and will continue to change as a result of the enactment of the Dodd-Frank Act, which became law in July 2010. Importantly for HEI, ASB Hawaii and ASB, under the Dodd-Frank Act,

on July 21, 2011, all of the functions of the Office of Thrift Supervision transferred to the OCC, the FDIC, the FRB and the Consumer Financial Protection Bureau (Bureau). Supervision and regulation of HEI and ASB Hawaii, as thrift holding companies, moved to the FRB, and supervision and regulation of ASB, as a federally chartered savings bank, moved to the OCC. While the laws and regulations applicable to HEI and ASB did not generally change, the applicable laws and regulations are being interpreted, and new and amended regulations may be adopted, by the FRB, OCC and the Bureau. In addition, HEI will continue to be required to serve as a source of strength to ASB in the event of its financial distress. If the Spin-Off of ASB Hawaii occurs as contemplated by the Merger Agreement, HEI (or its successor) will no longer be required to serve as a source of strength to ASB. The Dodd-Frank Act also imposes new restrictions on the ability of a savings bank to pay dividends should it fail to remain a qualified thrift lender.

More stringent affiliate transaction rules now apply to ASB in the securities lending, repurchase agreement and derivatives areas. Standards were raised with respect to the ability of ASB to merge with or acquire another institution. In reviewing a potential merger or acquisition, the approving federal agency will need to consider the extent to which the proposed transaction will result in “greater or more concentrated risks to the stability of the U.S. banking or financial system.”

The Dodd-Frank Act established the Bureau. It has authority to prohibit practices it finds to be unfair, deceptive or abusive, and it may also issue rules requiring specified disclosures and the use of new model forms. On January 10, 2013, the Bureau issued the Ability-to-Repay rule which closed for comment on February 25, 2013. For mortgages, under the proposed Ability-to-Repay rule, among other things, (i) potential borrowers will have to supply financial information, and lenders must verify it, (ii) to qualify for a particular loan, a consumer will have to have sufficient assets or income to pay back the loan, and (iii) lenders will have to determine the consumer’s ability to repay both the principal and the interest over the long term - not just during an introductory period when the rate may be lower.

ASB may also be subject to new state regulation because of a provision in the Dodd-Frank Act that acknowledges that a federal savings bank may be subject to state regulation and allows federal law to preempt a state consumer financial law on a “case by case” basis only when (1) the state law would have a discriminatory effect on the bank compared to that on a bank chartered in that state, (2) the state law prevents or significantly interferes with a bank’s exercise of its power or (3) the state law is preempted by another federal law.

The Dodd-Frank Act also adopts a number of provisions that will impact the mortgage industry, including the imposition of new specific duties on the part of mortgage originators (such as ASB) to act in the best interests of consumers and to take steps to ensure that consumers will have the capability to repay loans they may obtain, as well as provisions imposing new disclosure requirements and requiring appraisal reforms.

Also, the Dodd-Frank Act directs the Bureau to publish rules and forms that combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the Truth in Lending Act and the Real Estate Settlement Procedures Act. Consistent with this requirement, the Bureau amended Regulation X (Real Estate Settlement Procedures Act) and Regulation Z (Truth in Lending) to establish new disclosure requirements and forms in Regulation Z for most closed-end consumer credit transactions secured by real property. In addition to combining the existing disclosure requirements and implementing new requirements, the final rule provides extensive guidance regarding compliance with those requirements. This rule was effective October 3, 2015.

The “Durbin Amendment” to the Dodd-Frank Act required the FRB to issue rules to ensure that debit card interchange fees are “reasonable and proportional” to the processing costs incurred. In June 2011, the FRB issued a final rule establishing standards for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. Under the final rule, effective October 1, 2011, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is 21-24 cents, depending on certain components. Financial institutions and their affiliates that have less than $10 billion in assets are exempt from this Amendment; however, on July 1, 2013, ASB became non-exempt as the consolidated assets of HEI exceeded $10 billion. The debit card interchange fees received by ASB have been lower as a result of the application of this Amendment.

Final Capital Rules . On July 2, 2013, the FRB finalized its rule implementing the Basel III regulatory capital framework. The final rule would apply to banking organizations of all sizes and types regulated by the FRB and the OCC, except bank holding companies subject to the FRB’s Small Bank Holding Company Policy Statement and Savings & Loan Holding Companies (SLHCs) substantially engaged in insurance underwriting or commercial activities. HEI currently meets the requirements of the exemption as a top-tier grandfathered unitary SLHC that derived, as of June 30 of the previous calendar year, either 50% or more of its total consolidated assets or 50% or more of its total revenues on an enterprise-wide basis (calculated under GAAP) from activities that are not financial in nature pursuant to Section 4(k) of the Bank Holding Company Act. The FRB is temporarily excluding these SLHCs from the final rule while it considers a proposal relating to capital and other requirements for SLHC intermediate holding companies (such as ASB Hawaii). The FRB indicated that it would release a proposal on intermediate holding companies that would specify the criteria for establishing and transferring activities to

intermediate holding companies and propose to apply the FRB’s capital requirements to such intermediate holding companies. The FRB has not yet issued such a proposal, or a proposal on how to apply the Basel III capital rules to SLHCs that are substantially engaged in commercial or insurance underwriting activities, such as grandfathered unitary SLHCs like HEI.

Pursuant to the final rule and consistent with the proposals, all banking organizations, including covered holding companies, would initially be subject to the following minimum regulatory capital requirements: a common equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6%, a total capital ratio of 8% of risk-weighted assets and a tier 1 leverage ratio of 4%, and these requirements would increase in subsequent years. In order to avoid restrictions on capital distributions and discretionary bonus payments to executive officers, the final rule requires a banking organization to hold a buffer of common equity tier 1 capital above its minimum capital requirements in an amount greater than 2.5% of total risk-weighted assets (capital conservation buffer). In addition, a countercyclical capital buffer would expand the capital conservation buffer by up to 2.5% of a banking organization’s total risk-weighted assets for advanced approaches banking organizations. The final rule would establish qualification criteria for common equity, additional tier 1 and tier 2 capital instruments that help to ensure their ability to absorb losses. All banking organizations would be required to calculate risk-weighted assets under the standardized approach, which harmonizes the banking agencies’ calculation of risk-weighted assets and address shortcomings in capital requirements identified by the agencies. The phased-in effective dates of the capital requirements under the final rule are:

Minimum Capital Requirements



Effective dates	1/1/2015		1/1/2016		1/1/2017		1/1/2018		1/1/2019
Capital conservation buffer			0.625	%	1.25	%	1.875	%	2.50	%
Common equity Tier-1 ratio + conservation buffer	4.50	%	5.125	%	5.75	%	6.375	%	7.00	%
Tier-1 capital ratio + conservation buffer	6.00	%	6.625	%	7.25	%	7.875	%	8.50	%
Total capital ratio + conservation buffer	8.00	%	8.625	%	9.25	%	9.875	%	10.50	%
Tier-1 leverage ratio	4.00	%	4.00	%	4.00	%	4.00	%	4.00	%
Countercyclical capital buffer — not applicable to ASB			0.625	%	1.25	%	1.875	%	2.50	%

The final rule was effective January 1, 2015 for ASB. As of March 31, 2016 , ASB met the new capital requirements with a Common equity Tier-1 ratio of 12.0%, a Tier-1 capital ratio of 12.0%, a Total capital ratio of 13.2% and a Tier-1 leverage ratio of 8.7%.

Subject to the timing and final outcome of the FRB’s SLHC intermediate holding company proposal, HEI anticipates that the capital requirements in the final rule will eventually be effective for HEI or ASB Hawaii as well. If the Spin-Off of ASB Hawaii occurs as contemplated by the Merger Agreement, HEI (or its successor) will no longer be subject to the final capital rules as applied to SLHCs. If the fully phased-in capital requirements were currently applicable to HEI, management believes HEI would satisfy the capital requirements, including the fully phased-in capital conservation buffer. Management cannot predict what final rule the FRB may adopt concerning intermediate holding companies or their impact on ASB Hawaii, if any.

Commitments and contingencies. See Note 5 of the Consolidated Financial Statements.

Potential impact of lava flows . In June 2014, lava from the Kilauea Volcano on the island of Hawaii began flowing toward the town of Pahoa. ASB had been monitoring its loan exposure on properties most likely to be impacted by the projected path of the lava flow. At March 31, 2015, the outstanding amount of the residential, commercial real estate and home equity lines of credit loans collateralized by property in areas most likely affected by the lava flow totaled $13 million. For residential 1-4 mortgages in the area, ASB required lava insurance to cover the dwelling replacement cost as a condition of making the loan. As of December 31, 2014, ASB provided $1.8 million reserves for a commercial real estate loan impacted by the lava flows. Although the lava threat was downgraded from a warning to a watch in March 2015 and the immediate threat to homes and businesses in Pahoa had receded, the lava flow remained active upslope and the reserves for the commercial real estate loan remained in place at March 31, 2015. In May 2015, the flow front near Pahoa remained cold and hard, no longer threatening any homes or businesses. All major tenants of the commercial center had returned by the end of March, and property occupancy stabilized soon thereafter. As a result, at the end of May 2015 the commercial real estate loan was restored to performing status and the reserves for lava risk were reversed.

FINANCIAL CONDITION

Liquidity and capital resources.



(dollars in millions)	March 31, 2016		December 31, 2015		% change
Total assets	$	6,141	$	6,015	2
Available-for-sale investment securities	906		821		10
Loans receivable held for investment, net	4,590		4,566		1
Deposit liabilities	5,140		5,025		2
Other bank borrowings	329		329		—

As of March 31, 2016 , ASB was one of Hawaii’s largest financial institutions based on assets of $6.1 billion and deposits of $5.1 billion .

As of March 31, 2016 , ASB’s unused FHLB borrowing capacity was approximately $1.7 billion. As of March 31, 2016 , ASB had commitments to borrowers for loans and unused lines and letters of credit of $1.9 billion. Commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings totaled $2.3 million at March 31, 2016 . Management believes ASB’s current sources of funds will enable it to meet these obligations while maintaining liquidity at satisfactory levels.

For the three months ended March 31, 2016 , net cash provided by ASB’s operating activities was $11 million. Net cash used during the same period by ASB’s investing activities was $104 million, primarily due to purchases of investment securities of $122 million, a net increase in loans receivable of $28 million and additions to premises and equipment of $3 million, partly offset by repayments and calls of investment securities of $49 million. Net cash provided by financing activities during this period was $102 million, primarily due to increases in deposit liabilities of $115 million and a net increase in retail repurchase agreements of $19 million, partly offset by maturities of securities sold under agreements to repurchase of $19 million, a net decrease in mortgage escrow deposits of $4 million and $9 million in common stock dividends to HEI (through ASB Hawaii).

ASB believes that maintaining a satisfactory regulatory capital position provides a basis for public confidence, affords protection to depositors, helps to ensure continued access to capital markets on favorable terms and provides a foundation for growth. FDIC regulations restrict the ability of financial institutions that are not well-capitalized to compete on the same terms as well-capitalized institutions, such as by offering interest rates on deposits that are significantly higher than the rates offered by competing institutions. As of March 31, 2016 , ASB was well-capitalized (minimum ratio requirements noted in parentheses) with a Common equity Tier-1 ratio of 12.0% (6.5%), a Tier-1 capital ratio of 12.0% (8.0%), a Total capital ratio of 13.2% (10.0%) and a Tier-1 leverage ratio of 8.7% (5.0%). As of December 31, 2015, ASB was well-capitalized with a Common equity Tier-1 ratio of 12.1%, Tier-1 capital ratio of 12.1%, a Total capital ratio of 13.3% and a Tier-1 leverage ratio of 8.8%. FRB approval is required before ASB can pay a dividend or otherwise make a capital distribution to HEI (through ASB Hawaii).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company considers interest-rate risk (a non-trading market risk) to be a very significant market risk for ASB as it could potentially have a significant effect on the Company’s results of operations, financial condition and liquidity. For additional quantitative and qualitative information about the Company’s market risks, see HEI’s and Hawaiian Electric’s Quantitative and Qualitative Disclosures About Market Risk in Part II, Item 7A of HEI’s 2015 Form 10-K (pages 80 to 82).

ASB’s interest-rate risk sensitivity measures as of March 31, 2016 and December 31, 2015 constitute “forward-looking statements” and were as follows:



Change in interest rates	Change in NII (gradual change in interest rates)				Change in EVE (instantaneous change in interest rates)
(basis points)	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
+300	2.0	%	1.6	%	(9.6	)%	(9.3	)%
+200	0.8		0.6		(5.2	)	(5.3	)
+100	—		(0.1	)	(1.5	)	(1.9	)
-100	(0.3	)	(0.5	)	(3.3	)	(1.2	)

Management believes that ASB’s interest rate risk position as of March 31, 2016 represents a reasonable level of risk. The NII profile under the rising interest rate scenarios was slightly more asset sensitive for all rate increases as of March 31, 2016 compared to December 31, 2015. The repricing assumption of certain core deposits was updated and resulted in slower repricing of those deposit balances in the twelve-month simulation period. This shift to less rate sensitive deposits increased ASB’s asset sensitivity.

ASB’s base EVE increased to $987 million as of March 31, 2016 compared to $974 million as of December 31, 2015 due to growth in capital and flattening of the yield curve.

The change in EVE to rising rates became less sensitive for 100 and 200 basis point increases and slightly more sensitive for a 300 basis point increase as of March 31, 2016 compared to December 31, 2015. In the first quarter of 2016, the residential fixed rate mortgage portfolio repayment history was analyzed and prepayment assumptions were updated to reflect the current interest rate environment and ASB’s residential mortgage repayment behavior. In rising rate scenarios, the price sensitivity for the residential portfolio increased as the portfolio extended in average life due to the slower prepayment expectations. The liability side of the balance sheet offsets this increase in sensitivity as core deposit balances grew $74 million, primarily in longer duration products. Additionally, the repricing assumption of certain core deposits was updated, resulting in longer duration deposit liabilities.

The computation of the prospective effects of hypothetical interest rate changes on the NII sensitivity and the percentage change in EVE is based on numerous assumptions, including relative levels of market interest rates, loan prepayments, balance changes and pricing strategies, and should not be relied upon as indicative of actual results. To the extent market conditions and other factors vary from the assumptions used in the simulation analysis, actual results may differ materially from the simulation results. Furthermore, NII sensitivity analysis measures the change in ASB’s twelve-month, pretax NII in alternate interest rate scenarios, and is intended to help management identify potential exposures in ASB’s current balance sheet and formulate appropriate strategies for managing interest rate risk. The simulation does not contemplate any actions that ASB management might undertake in response to changes in interest rates. Further, the changes in NII vary in the twelve-month simulation period and are not necessarily evenly distributed over the period. These analyses are for analytical purposes only and do not represent management’s views of future market movements, the level of future earnings or the timing of any changes in earnings within the twelve month analysis horizon. The actual impact of changes in interest rates on NII will depend on the magnitude and speed with which rates change, actual changes in ASB’s balance sheet and management’s responses to the changes in interest rates.

Item 4. Controls and Procedures

HEI:

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of March 31, 2016, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Management, including the Company’s Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective, as of March 31, 2016, at the reasonable assurance level.

Material Weakness Previously Identified

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. As discussed in the Company’s 2015 Annual Report on Form 10-K, the Company did not maintain effective controls over the preparation and review of its Consolidated Statement of Cash Flows. Specifically, controls were not designed to ensure that non-cash transactions were properly identified, evaluated and presented in the Statement of Cash Flows, and management’s review process was not effective. The control deficiency resulted in the restatement of the net cash provided by operating activities and the net cash used in investing activities for the year ended December 31, 2013 and for the three months ended March 31, 2015 and 2014, and the six months ended June 30, 2015 and 2014. The control deficiency also resulted in the revision of the net cash provided by operating activities and the net cash used in investing activities for the year ended December 31, 2014 and for the nine months ended September 30, 2014.

Remediation of Previously Identified Material Weakness

The Company’s management, with oversight from its Audit Committee of the Board of Directors of HEI, has completed the remediation of the material weakness related to the preparation and review of its Consolidated Statement of Cash Flows. In order to address this material weakness, effective for the year ended December 31, 2015, management enhanced existing controls and implemented new controls relating to the preparation and review of the Statement of Cash Flows. The enhanced controls included improved spreadsheet templates that facilitated the identification and classification of the non-cash items for the Statement of Cash Flows, and an expanded roll forward reconciliation and review of cash capital expenditures. Management also implemented new review controls, specifically an additional review of non-cash items and significant transactions to ensure that they are properly evaluated and presented in the Statement of Cash Flows and an additional review of the Statement of Cash Flows for overall reasonableness. Management has assessed that these new controls have operated effectively for two quarters and therefore concluded that the material weakness related to the preparation and review of its Consolidated Statement of Cash Flows is remediated.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the first quarter of 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Hawaiian Electric:

Disclosure Controls and Procedures

Hawaiian Electric maintains a set of disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by Hawaiian Electric in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms, and that such information is accumulated and communicated to Hawaiian Electric’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of March 31, 2016, an evaluation was performed under the supervision and with the participation of Hawaiian Electric’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Hawaiian Electric’s disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act. Management, including Hawaiian Electric’s Chief Executive Officer and Chief Financial Officer, concluded that Hawaiian Electric’s disclosure controls and procedures were effective, as of March 31, 2016, at the reasonable assurance level.

Material Weakness Previously Identified

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. As discussed in Hawaiian Electric’s 2015 Annual Report on Form 10-K, Hawaiian Electric did not maintain effective controls over the preparation and review of its Consolidated Statement of Cash Flows. Specifically, controls were not designed to ensure that non-cash transactions were properly identified, evaluated and presented in the Statement of Cash Flows, and management’s review process was not effective. The control deficiency resulted in the restatement of the net cash provided by operating activities and the net cash used in investing activities for the year ended December 31, 2013 and for the three months ended March 31, 2015 and 2014, and the six months ended June 30, 2015 and 2014. The control deficiency also resulted in the revision of the net cash provided by operating activities and the net cash used in investing activities for the year ended December 31, 2014 and for the nine months ended September 30, 2014.

Remediation of Previously Identified Material Weakness

Hawaiian Electric’s management, with oversight from its Audit Committee of the Board of Directors of Hawaiian Electric, has completed the remediation of the material weakness related to the preparation and review of its Consolidated Statement of Cash Flows. In order to address this material weakness, effective for the year ended December 31, 2015, management enhanced existing controls and implemented new controls relating to the preparation and review of the Statement of Cash Flows. The enhanced controls included improved spreadsheet templates that facilitated the identification and classification of the non-cash items for the Statement of Cash Flows, and an expanded roll forward reconciliation and review of cash capital expenditures. Management also implemented new review controls, specifically an additional review of non-cash items and significant transactions to ensure that they are properly evaluated and presented in the Statement of Cash Flows and an additional review of the Statement of Cash Flows for overall reasonableness. Management has assessed that these new controls have operated effectively for two quarters and therefore concluded that the material weakness related to the preparation and review of its Consolidated Statement of Cash Flows is remediated.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the first quarter of 2016 that have materially affected, or are reasonably likely to materially affect, Hawaiian Electric’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The descriptions of legal proceedings (including judicial proceedings and proceedings before the PUC and environmental and other administrative agencies) in HEI’s and Hawaiian Electric’s 2015 Form 10-K (see “Part I. Item 3. Legal Proceedings” and proceedings referred to therein) and this Form 10-Q (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 2 , 4 and 5 of the Consolidated Financial Statements) are incorporated by reference in this Item 1. With regard to any pending legal proceeding, alternative dispute resolution, such as mediation or settlement, may be pursued where appropriate, with such efforts typically maintained in confidence unless and until a resolution is achieved. Certain HEI subsidiaries (including Hawaiian Electric and its subsidiaries and ASB) may also be involved in ordinary routine PUC proceedings, environmental proceedings and litigation incidental to their respective businesses.

Item 1A. Risk Factors

For information about Risk Factors, see pages 25 to 35 of HEI’s and Hawaiian Electric’s 2015 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk” and the Consolidated Financial Statements herein. Also, see “Forward-Looking Statements” on pages iv and v herein.

Item 5. Other Information

A. Ratio of earnings to fixed charges .



	Three months ended March 31		Years ended December 31
	2016	2015	2015	2014	2013	2012	2011
HEI and Subsidiaries
Excluding interest on ASB deposits	3.07	3.21	3.68	3.80	3.55	3.30	3.24
Including interest on ASB deposits	2.94	3.10	3.54	3.65	3.42	3.15	3.04
Hawaiian Electric and Subsidiaries	3.12	3.39	3.97	4.04	3.72	3.37	3.52

See HEI Exhibit 12.1 and Hawaiian Electric Exhibit 12.2.

Item 6. Exhibits



HEI Exhibit 12.1		Hawaiian Electric Industries, Inc. and Subsidiaries Computation of ratio of earnings to fixed charges, three months ended March 31, 2016 and 2015 and years ended December 31, 2015, 2014, 2013, 2012 and 2011

HEI Exhibit 31.1		Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Constance H. Lau (HEI Chief Executive Officer)

HEI Exhibit 31.2		Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of James A. Ajello (HEI Chief Financial Officer)

HEI Exhibit 32.1		HEI Certification Pursuant to 18 U.S.C. Section 1350

HEI Exhibit 101.INS		XBRL Instance Document

HEI Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document

HEI Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

HEI Exhibit 101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

HEI Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document

HEI Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Hawaiian Electric Exhibit 10.1		Inter-island Supply Contract for Petroleum Fuels by and between Chevron U.S.A. Inc. and Hawaiian Electric, Hawaii Electric Light and Maui Electric dated February 18, 2016 (confidential treatment has been requested for portions of this exhibit)

Hawaiian Electric Exhibit 10.2		Supply Contract for LSFO, Diesel and MATS Fuel by and between Hawaiian Electric and Chevron U.S.A. Inc. dated February 18, 2016 (confidential treatment has been requested for portions of this exhibit)

Hawaiian Electric Exhibit 10.3		Fuels Terminalling Agreement by and between Chevron U.S.A. Inc. and Hawaii Electric Light dated February 18, 2016 (confidential treatment has been requested for portions of this exhibit)

Hawaiian Electric Exhibit 12.2		Hawaiian Electric Company, Inc. and Subsidiaries Computation of ratio of earnings to fixed charges, three months ended March 31, 2016 and 2015 and years ended December 31, 2015, 2014, 2013, 2012 and 2011

Hawaiian Electric Exhibit 31.3		Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Alan M. Oshima (Hawaiian Electric Chief Executive Officer)

Hawaiian Electric Exhibit 31.4		Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Tayne S. Y. Sekimura (Hawaiian Electric Chief Financial Officer)

Hawaiian Electric Exhibit 32.2		Hawaiian Electric Certification Pursuant to 18 U.S.C. Section 1350

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. The signature of the undersigned companies shall be deemed to relate only to matters having reference to such companies and any subsidiaries thereof.



HAWAIIAN ELECTRIC INDUSTRIES, INC.		HAWAIIAN ELECTRIC COMPANY, INC.
(Registrant)		(Registrant)


By	/s/ Constance H. Lau	By	/s/ Alan M. Oshima
	Constance H. Lau		Alan M. Oshima
	President and Chief Executive Officer		President and Chief Executive Officer
	(Principal Executive Officer of HEI)		(Principal Executive Officer of Hawaiian Electric)


By	/s/ James A. Ajello	By	/s/ Tayne S. Y. Sekimura
	James A. Ajello		Tayne S. Y. Sekimura
	Executive Vice President and		Senior Vice President
	Chief Financial Officer		and Chief Financial Officer
	(Principal Financial and Accounting		(Principal Financial Officer of Hawaiian Electric)
	Officer of HEI)


Date: May 4, 2016		Date: May 4, 2016

Exhibit 10.1

INTER-ISLAND SUPPLY CONTRACT FOR PETROLEUM FUELS

This Inter-island Supply Contract for Petroleum Fuels (“ Contract ”) pertaining to Industrial Fuel Oil (“ IFO ”), No. 2 Diesel (“ Diesel ”), and/or Ultra-Low Sulfur Diesel (“ ULSD ”) is made this 18th day of February, 2016, by and between HAWAIIAN ELECTRIC CO., INC ., (“ Hawaiian Electric ”), HAWAII ELECTRIC LIGHT COMPANY, INC. (“ Hawaii Electric Light ”), and MAUI ELECTRIC COMPANY, LIMITED (“ Maui Electric ”), all Hawaii corporations, (individually a “ Company ” and collectively, the “ Companies ”) and Chevron U.S.A. Inc., through its division Chevron Products Company, (“ Seller ”), with a place of business and mailing address at 91-480 Malakole Street, Kapolei, HI 96707. The Companies and Seller are each a “ Party ” and collectively the “ Parties ” to this Contract. This Contract shall become effective as provided in Section 2.3 below.

WHEREAS, the Companies are in the business of generation, transmission and distribution of electrical power on the islands of Oahu, Hawaii, Maui, Molokai, and Lanai, State of Hawaii; and

WHEREAS, Seller is a supplier of IFO, Diesel, and/or ULSD (collectively “ Fuel ”) with delivery and transportation capabilities and desires to supply and deliver to the Companies Fuel that meets the Companies’ utility generation requirements; and

WHEREAS, Seller represents that it is equipped and has the ability to supply Fuel of such suitable type and quality and in a quantity sufficient to meet the Companies’ requirements; and

WHEREAS, Seller is willing to sell and deliver such suitable Fuel to the Companies and the Companies are willing to purchase and receive such Fuel from Seller under the terms and conditions set forth hereinafter.

NOW, THEREFORE, it is mutually agreed by the Parties hereto as follows:

ARTICLE I

DEFINITIONS

Except where otherwise indicated, the following definitions shall apply throughout this Contract.

1.1.

“ Affiliate ”, except where otherwise expressly provided, means an entity controlling, controlled by or under common control with Seller or Hawaiian Electric, Hawaii Electric Light and Maui Electric, as the case may be. For the purpose of this definition “control” (including with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such entity, directly or indirectly, whether through the ownership of a majority of voting securities, by contract or otherwise, and it being understood and agreed that with respect to a corporation, limited liability company, or partnership, control shall mean direct or indirect ownership of equal to or more than 50% of the voting stock or limited liability company interest or general partnership interest or voting interest in any such corporation, limited liability company or partnership.


1.2.	“ API ” means American Petroleum Institute, a long-established petroleum industry organization.


1.3.	“ API Gravity ” refers to the API’s standard measurement of gravity for petroleum products using ASTM test method.


1.4.	“ ASTM ” means the American Society for Testing and Materials, a long-established source of standard testing and evaluation methods for petroleum.


1.5.	“ barrel ” means 42 American bulk gallons at 60 degrees Fahrenheit (“ DF ”).


1.6.	“ BTU ” and “ BTU content ” means British Thermal Unit and refers to the standard assessment of fuel’s gross heating value or gross heat content.


1.7.	“ business day ” shall mean Monday through Friday, except for a day as to which physical locations of commercial banks in Honolulu, Hawaii are closed for business to the public due to a scheduled holiday.


1.8.	“ Certificate of Quality ” or “ Quality Certificate ” means the formal document recording the Seller’s laboratory determination of quality and BTU content of a particular sample which represents a specific Delivery, said laboratory determinations having been performed in accordance with the test methods specified herein.


1.9.	“ Commission ” means the State of Hawaii Public Utilities Commission


1.10.	“ Commission Approval Order ” is defined in Section 2.2 below.


1.11.	“ Consumer Advocate ” means the Division of Consumer Advocacy of the Department of Commerce and Consumer Affairs of the State of Hawaii.


1.12.	“ Contract ” means this Inter-island Petroleum Fuel Supply Contract between Seller and the Companies.


1.13.	“ day ” or “ days ” means a calendar day of 24 hours.


1.14.	“ Deliver ”, “ Delivery ”, “ Deliveries ” or “ Delivered ” refers to the transfer of title or physical movement of Fuel by Seller and purchased by the Companies.


1.15.	“ DF ” means degrees Fahrenheit.


1.16.	“ Diesel ” means No. 2 Diesel produced in conformity with the provisions of the quality in the Specification which are set forth herein.


1.17.	“ DOT ” means the Department of Transportation of the State of Hawaii and/or of the United States, as the case may be.


1.18.	“ Effective Date ” is defined in Section 2.3 below.


1.19.	“ ETA ” means estimated time of arrival.


1.20.	“ Extension ” means any Contract term in addition to and after the Original Term, each of which is a 12-Month period beginning January 1.


1.21.	“ Fuel ” means singularly and collectively IFO, Diesel and/or ULSD suitable for use as a fuel for utility power generation of the quality specifications described herein.


1.22.	“ gallon ” means a United States liquid gallon of 231 cubic inches at 60 DF.


1.23.	“ Governmental Authority ” means any international, foreign, federal, state, regional, county, or local Person having governmental or quasi-governmental authority or subdivision thereof, including recognized courts of Law, or other body or entity of competent jurisdiction.


1.24.	“ G.S.V. ” means gross standard volume in U.S. Barrels at 60 DF.


1.25.	“ IFO ” means Industrial Fuel Oil produced in conformity with the provisions of the quality in the Specifications which are set forth herein.


1.26.	[...]


1.27.	“ Independent Inspector ” means a qualified third-party petroleum inspection contractor acceptable to both Parties providing petroleum sampling, measurement and other services before, during and after a Delivery.


1.28.	“ Law ” means any law, decree, directive, judgment, order, decision, interpretation, enforcement, statute, code, ordinance, rule, regulation, treaty, convention, or any action, direction or intervention or other requirement of any Governmental Authority.


1.29.	“ month ” means a calendar month.


1.30.	“ Nominated ” and “Nomination” means the amount of Fuel specified by the Companies to be sold and Delivered by Seller and purchased and received by the Companies for a specified Month.


1.31.	“ Original Term ” is defined in Section 2.1 below.


1.32.	“ Party ” and “ Parties ” are defined in the first paragraph above


1.33.	“ Receiving Facility ” means any of the Companies’ generating facilities, storage facilities and/or other facilities used to receive, transport, store, or otherwise handle Fuel located on the islands of Oahu, Hawaii, Maui, or Molokai as designated by the Companies.


1.34.	“ Refinery ” means Seller’s oil refining, and related facilities located in the Barbers Point area of Oahu, in the Campbell Estate Industrial Park, Kapolei, Hawaii.


1.35.	“ Specification ” means the fuel quality specifications applicable to Fuel as set forth herein and described in Exhibit A .


1.36.	“ Tank Final Sample ” is defined in Section 6.5 below.


1.37.	“ Term ” means the Original Term and any Extension(s).


1.38.	“ Terminalling Agreement ” means that certain Fuels Terminalling Agreement, dated February 18, 2016, by and between Chevron U.S.A. Inc. (through its division Chevron Products Company) and Hawaii Electric Light Company, Inc.


1.39.	“ ULSD ” means Ultra-Low Sulfur Diesel produced in conformity with the provisions of the quality in the Specification which are set forth herein.


1.40.	“ USD ” means currency denominated in U.S. dollars.


1.41.	“ Year ” means a calendar year.

ARTICLE II

TERM

Section 2.1: Term . The initial term of this Contract (the “ Original Term ”) shall be from the Effective Date through and including December 31, 2019, and shall continue in succession thereafter for one or more Extensions, each a period of twelve (12)-months, beginning each successive January 1, unless the Companies or Seller give written notice of termination at least one hundred twenty (120) days before the beginning of any Extension.

Section 2.2: Regulatory Approval .

(a) The Companies will file an application with the Commission requesting approval of this Contract following its execution. This Contract is contingent upon the issuance of a decision and order by the Commission that (i) approves this Contract and its pricing and terms and conditions, (ii) is in a form deemed to be reasonable by the Companies, in their sole discretion; and (iii) allows the Companies to include the reasonable costs incurred by the Companies pursuant to this Contract in their revenue requirements for ratemaking purposes and for the purposes of determining the reasonableness of the Companies’ rates and/or for cost recovery above those fuel costs included in base rate through the Companies’ respective Energy Cost Adjustment Clause, hereinafter, the “ Commission Approval Order ”.

(b) Without limiting the foregoing, Seller understands that the Commission Approval Order may not be in a form deemed to be reasonable to the Companies if it (i) contains terms and conditions deemed to be unacceptable to the Companies, in their sole discretion, or (ii) it denies or defers ruling on any part of the application, or (iii) is not final (or deemed to be final by the Companies, in their sole discretion), because the Commission Approval Order has been appealed or the Companies are not satisfied that no party to the proceeding in which the Commission Approval Order is issued, or other aggrieved person with the right to appeal, intends to seek a change in such Commission Approval Order through motion or appeal.

(c) If the Companies have not received a final or interim Commission Approval Order and provided Seller written notice of the same by October 1, 2016 or if the Companies’ request for Commission approval of this Contract is denied in whole or in part, then either Seller or the Companies may terminate this Contract by providing written notice of such termination delivered to the other prior to

the Effective Date, as it is defined in Section 2.3 . In such event of termination, each Party shall bear its own respective fees, costs and expenses incurred prior to termination, if any, in preparation for performance hereunder, and the Parties shall have no further obligation to each other with respect to this Contract except for indemnity and any confidentiality obligations assumed by the Parties hereunder.

Section 2.3: Effective Date . This Contract shall become effective on the date (the “ Effective Date ”) of receipt by the Companies of the Commission’s final or interim Commission Approval Order, and the Companies will provide Seller with written notice of the same within five (5) business days from receipt by the Companies. Alternatively, the Parties may agree in writing that some other date shall be deemed the Effective Date. Neither Party shall have any binding obligations under this Contract until the Effective Date, except that the Parties agree that upon full execution of this Contract they will be bound by Sections 2.2 (Regulatory Approval), Section 11.1 (Force Majeure), Section 12.1 (Compliance with Laws and Regulations), Section 14.1 (Indemnity) and all provisions in Article XVII .

ARTICLE III

QUANTITY

Section 3.1: Quantity of Fuel To Be Delivered . Subject to the terms and conditions herein, Seller shall sell and Deliver to the Companies, and the Companies shall purchase and receive from Seller Fuel as ordered by the Companies. Delivery shall commence hereunder as of January 1, 2017.

Section 3.2: Purchase Volumes . During each Year that this Contract is in effect, Seller shall sell and Deliver to the Companies, and the Companies shall purchase and receive from Seller:

(a) […]

(b) […]

Annual Aggregate in Physical Barrels

Fuel Minimum Maximum

[…]

The volumes set forth herein shall apply for the Term of this Contract, and the annual volumes of Fuel to be sold and Delivered by Seller and to be Nominated, purchased and received by the Companies during the Term of this Contract shall remain as stated herein unless otherwise mutually agreed to in writing. Subject to availability and mutual agreement of the Parties, Seller will sell and Deliver and the Companies shall purchase and receive such additional volumes in excess of the maximum volumes set forth above for IFO and ULSD.

ARTICLE IV

QUALITY

Section 4.1: Quality Of Fuel To Be Supplied/Delivered . The quality of Fuel to be sold and Delivered hereunder shall comply with the Specifications attached hereto as Exhibit A and made a part hereof, and meet all Applicable Laws. If the quality does not comply with the Specifications, Seller will bear all costs associated with its failure to comply, which for greater certainty is subject to Section 15.2 . Costs will be determined at the reasonable discretion of the Companies.

Section 4.2: […]

ARTICLE V

PRICE

Section 5.1: Pricing . Pricing of Fuel under this Contract shall be as set forth on the attached Exhibit B .

Section 5.2: Rounding . All prices, price formula component value averages and other sums payable with respect to Fuel purchased hereunder shall be stated in the nearest hundredths of a dollar unless specifically provided otherwise as in Exhibit B and Exhibit C .

Section 5.3: Fees, Taxes, Assessments, Levies and Imposts . In addition to all other amounts payable by the Companies under this Contract, the Companies shall reimburse Seller for all taxes, assessments, levies, and imposts of whatsoever kind or nature imposed on Seller by any governmental or quasi-governmental body, as adjusted, modified or revised from time to time, including without limitation the Hawaii General Excise Tax, the Hawaii Use Tax, the Hawaii Environmental Response, Energy, Food Security Tax, and Hawaii Liquid Fuel Tax, Federal Oil Spill Recovery Fee, and U.S. Customs duties pertaining to importation and sale of Fuel, its feedstocks or its components, with respect to the execution or performance of this Contract or the receipt by Seller of payments hereunder. Notwithstanding the foregoing and any illustrative price calculation, such as contained in Exhibit B , the Companies shall not be required to reimburse Seller for any tax measured by or based on the net income of Seller or for real property taxes or to duplicate any item of expense of Seller which is recovered by Seller under the Fuel prices provided for in Section 5.1. The Companies shall not be required to reimburse Seller under this Article V for any item expressly mentioned in a publication by a reputable quotation service. At the execution of this Contract, the taxes, assessments, levies or imposts which are currently in effect include the Hawaii General Excise Tax (4.712% for Oahu, 4.166% for Maui and Hawaii), the Environmental Response, Energy, and Food Security Tax and pertaining to Fuel, the Hawaii Liquid Fuel Tax. Also at the execution of this Contract, the Environmental Response, Energy, and Food Security Tax and Hawaii Liquid Fuel Tax are not subject to Hawaii General Excise Tax.

ARTICLE VI

DELIVERY

Section 6.1: Forecast . […] Such schedule shall show the expected place, date and time of the commencement of the vessel’s loading subject to the limitations in Exhibit B , and the volume for each Fuel to be loaded on each voyage. Each of the Companies should update Seller of any changes as they might occur. […]

Section 6.2: Delivery of Fuel . The Companies shall provide a three (3) month Fuel forecast to Seller and shall coordinate Deliveries of Fuel with Seller:

(a) Deliveries in Bulk to Company’s Barge from Seller’s Pipeline or Terminal: Seller agrees to Deliver and the Companies agree to receive Fuel in bulk into the Companies’ Nominated Barge at Kalaeloa Barbers Point Harbor and/or Honolulu Marine Terminal (“ HMT ”) as mutually agreed by both Parties. Bulk ULSD shall be delivered into Companies Nominated Barge from Seller at HMT.

Deliveries of Fuel shall be made at a minimum rate of 3,000 barrels per hour, provided the barge is capable of receiving same. Seller agrees to make a reasonable good faith effort to coordinate its loading of the Companies’ Fuel in concert with the Companies’ concurrent loading of any other petroleum products, provided however that the Companies’ Nominated Barge is capable of receiving same and in operating its current IFO Delivery systems to Deliver IFO into said Nominated Barge at a […]


1.	Liftings from truck rack: Seller agrees to Deliver and the Companies agree to receive ULSD into the Companies’ Nominated tanker trucks from Seller’s nominated terminal truck rack as listed in Exhibit B at a minimum Delivery rate of 190 barrels per hour.


2.	Deliveries by Seller to Company Sites : Seller agrees to Deliver and the Companies agree to receive Diesel Delivered by pipeline, or Diesel and/or ULSD Delivered by Seller’s barge to Companies designated storage as listed in Exhibit B , provided however that the size and capability of Seller’s delivery equipment is satisfactory to the Companies. […]

Section 6.3: Determination of Quantity .

(a) Quantity determination of Fuel Delivered by Seller in bulk on Oahu shall be made by the Independent Inspector gauging […] before and after Delivery.

(b) Quantity determination of Fuel Delivered by Seller in bulk to the Companies’ Nominated Marine Terminal at Kaunakakai, Molokai, shall be determined at the time of each Delivery by the Independent Inspector gauging the receiving tanks at said marine terminal before and after Delivery. Such accounting shall include all pipeline flush activity for Companies account.

(c) Quantity determination of Fuel Delivered by Seller at Seller’s Nominated terminal to the Companies’ Nominated truck(s) or in Seller’s Nominated truck(s) to the Companies Site Locations shall be determined at the time of each Delivery by Seller’s calibrated load rack meters, converted in each instance to volume at 60 DF by the automated rack control system. Meters shall be calibrated on an annual basis or as required and agreed by Seller and the Companies. The Companies shall have the right at its expense, and in accordance with procedures at Seller’s Nominated terminal to independently certify said calibration. The Companies and Seller shall have the right to have one representative present to witness such meter calibration.

Section 6.4: Failure to Supply .

(a) Except in the event of Force Majeure or an agreement by the Parties to the contrary, if Seller’s anticipated Deliveries cannot be made or does not meet the quantity ordered, Seller shall give prompt written notice to the Companies.

(b) In the event that the Seller fails to supply the Companies’ anticipated Deliveries and the Companies elect to purchase Fuel elsewhere, both the Companies and Seller shall attempt to minimize the impact of the failed Delivery such that it does not impose an unreasonable risk to the Companies. […]

Section 6.5: Disputes Regarding Quantity or Quality .

(a) Quantity Disputes .

(1) Quantities of Fuel sold and Delivered shall be determined at the time of each Delivery by gauging the Seller’s tanks before and after pumping under the supervision of the Independent Inspector.

(2) Quantity determination of Fuel Delivered will be made in accordance with applicable API, ASTM and IP guidelines and shall be expressed in G.S.V., U.S. barrels @ 60 DF and U.S. gallons @ 60 DF.

(3) For Delivery of Fuel in bulk, the Independent Inspector shall (i) prepare and sign a Certificate of Quantity stating the quantity of Fuel determined according to the provisions of this Section 6.5 to have been Delivered to the Companies, (ii) furnish the Companies and Seller each with a copy of such Certificate, and (iii) advise by facsimile or electronic mail the quantity of Fuel Delivered. The data in the Independent Inspector’s Certificate of Quantity prepared as provided herein shall, absent fraud or errors and omissions, be binding and conclusive upon both Parties, and shall be used for verification of the invoice and Bill of Lading for barge deliveries.

(4) If the Companies or Seller has reason to believe that the quantity of Fuel for a particular Delivery is incorrect, the Party shall within five (5) days of the date of Delivery, present the other Party with documentation supporting such determination and the Parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quantity, if justified, for the Delivery in question as specified in Section 6.3 .

(b) Quality Disputes .

(1) The quality of Fuel Delivered by Seller to the Companies’ Nominated truck(s) shall be determined on the basis of a volumetric weighted average composite of samples drawn by an Independent Inspector or Seller representative from Seller’s Nominated terminal issuing tank(s) after the completion of each bulk receipt into such terminal tanks in such a manner as to be representative of the volume of the tank inventory from that time until the time of the next bulk receipt. Such samples of Fuel shall be divided into a minimum of two (2) parts one of which shall be sealed and dated and retained by Seller,

or an Independent Inspector at the option of Seller, for a period of not less than three (3) months.

(2) The quality of Fuel Delivered by Seller to the Companies’ Nominated Barge or by Seller to the Harbor terminal piping or by Seller from its Nominated Barge to the Companies’ Nominated terminal shall be determined on the basis of a volumetric weighted average composite of samples drawn by an Independent Inspector or Seller representative from Seller’s Nominated terminal or Refinery issuing tank(s) in such a manner as to be representative of the volume of the tank inventory. Such tank samples of Fuel shall be divided into a minimum of two (2) parts one of which shall be sealed and dated and retained by Seller, or an Independent Inspector at the option of Seller, for a period of not less than three (3) months.

The quality of the “vessel composite sample” for Diesel and IFO Delivered by Seller to Companies’ Nominated Barge at Kalaeloa Barber’s Point Harbor shall also conform to the Specifications in Exhibit A for “Confirmation Test Items”. A “vessel composite sample” shall be drawn by an Independent Inspector separately for all Diesel and IFO Delivered by Seller to the Companies’ at this location in such a manner as to be representative of the volume delivered. If the Companies’ laboratory results of the vessel composite sample result in any items out of Specification, then the Seller will test their vessel composite sample for the full Specification and remedy any Specification deviation following Section 6.5(b)(4) . Such “vessel composite sample” shall be divided into three (3) parts one which will be sealed and dated and retained by the Independent Inspector for a period of not less than (3) months for any quality discrepancies, one part for Companies’ designated laboratory for testing and one part for Chevron laboratory for confirmation testing.

(3) If Seller or the Companies have reason to believe that the quality of Fuel stated for a specific Delivery fails to conform to the Specifications in Exhibit A , of this Contract, that Party shall within five (5) days after the later of the date of the completed Certificate of Quality or the date of the final determination of quality, present the other Party with documents supporting such determination and the Parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quality, if justified, for the Delivery in question. In the event of an unresolved difference between Seller and the Companies, the sealed part of the representative sample in the possession of the Independent Inspector shall be provided to an independent laboratory for an official determination, which shall be final. Seller and the Companies shall share equally the cost for such independent laboratory determination.

(4) If the quality of the Fuel received by the Companies fails to conform to the quality Specifications in Exhibit A , of this Contract, the Companies and Seller shall attempt to minimize the impact of any quality problem. […] Seller may attempt to remedy the quality problem by Delivering higher quality Fuel in a timely manner to produce a Specification quality blend in the Companies’ storage tank(s) at the Companies’ Receiving Facility. If all such and similar efforts fail to resolve the quality problem, then the Companies may return non-Specification Fuel to Seller, in which case Seller shall replace the non-Specification Fuel by Delivering an equal volume of the Companies’ verified on-Specification Fuel to the Companies in a timely manner. Notwithstanding the preceding, the Companies shall always have the right to refuse Delivery of any Fuel with

prior written notice to Seller or its permitted agents if the Companies in good faith shall have reason to believe that the Fuel does not meet the Specification. […]

(5) All reasonable costs and expenses, including testing, transportation, re-refining, and handling costs incurred in returning, replacing or otherwise correcting off-specification Fuel shall be the responsibility of the Seller.

Section 6.6: Records/Right to Audit. Seller shall retain any and all documents and records regarding the Delivery, quantity and quality of Fuel sold and purchased under the terms of this Contract for the twelve (12) months after the date of the invoice for such Fuel, or until any dispute regarding such Delivery, quantity and quality is resolved. Seller shall promptly make such records available for review to the Companies at its request.

Section 6.7: Inspection. The Companies may be represented and participate in all sampling, quality, inspection, measurements and tests of Fuel which may be conducted pursuant to this Contract and to inspect any equipment owned or controlled by Seller and used in determining the quantity, quality or heat content of Fuel, provided that any such participation by the Companies shall not materially interfere with or otherwise disrupt such inspection, measurement and tests conducted by Seller. The Companies may, upon reasonable notice to Seller and during normal business hours and at the Companies’ expense, inspect and audit any sample analysis of Fuel, including records and data used in the preparation of such analysis.

Section 6.8: I ndependent Inspector. Seller and the Companies shall mutually agree on the Independent Inspector. Seller shall be responsible to draw all samples, including determination samples, and at Companies’ request, said samples shall be drawn under the supervision of the Independent Inspector, All measurements with respect to each designated Delivery and any other provision of this Contract shall be conducted by an Independent Inspector, who shall attend designated Fuel Deliveries. Reasonable charges for services rendered by the Independent Inspector shall be borne equally by the Companies and Seller.

Section 6.9: Vessels . Seller and Companies shall be solely responsible for its owned, hired, or chartered vessels or barges used in connection with marine Deliveries and receipts hereunder, including the operation of such vessels or barges. Seller and Companies shall ensure that such vessels and barges are at all times in compliance with all Law, including the rules and regulations of the U.S. Coast Guard and the relevant port authority, as well as pier operator’s standards for vessel acceptance quality, pollution mitigation, required pollution liability, Protection and Indemnity Insurance (“P&I”) and other insurance coverages, pier operators Operations Manual and accept liability for dues and other charges on said vessel and barge. Seller and Companies shall be solely responsible for any demurrage costs or similar costs associated with marine Deliveries, unless such costs directly result from the other Party’s sole negligence or willful misconduct.

ARTICLE VII

SELLER’S REPRESENTATIONS AND WARRANTIES

Section 7.1: Seller’s Representations and Warranties . The Companies are willing to purchase Fuel on the condition that Seller agrees, represents and warrants as follows:

(a) Ability to Supply . During the Term of this Contract, Seller shall maintain in full force and affect the capability to supply Fuel sufficient to meet Seller’s obligation under this Contract. Upon the Companies’ reasonable request, Seller shall provide the Companies assurances of Seller’s ability to perform under this Contract.

1. Quality . All Fuel Delivered hereunder shall comply with the terms of this Contract.

2. Ability to Deliver .


(i)	For Truck Rack Deliveries, Seller shall own, lease or have the right to use facilities sufficient to meet Seller’s Delivery obligations under this Contract.

(ii)

For Barge Deliveries, Seller and Companies shall own, lease, or have the right to use vessels/barges to meet each Party’s Delivery or receipt obligations under this Contract. Each nominated vessel employed to Deliver or receive Fuel shall comply with all regulations, pier and terminal operator’s standards for vessel acceptance quality, pollution mitigation, required pollution liability, Protection and Indemnity Insurance (“P&I”) and other insurance coverages, pier operators Operations Manual and accept liability for dues and other charges on said vessel.


(iii)	[…]

ARTICLE VIII

INVOICING AND PAYMENT

Section 8.1: Invoicing .

(a) Invoices, which will show the price per physical barrel of Fuel, will be prepared and dated following Delivery and shall be tendered from time to time each month. Original invoices shall include full documentation, as approved by both Parties including Certificate of Quality, report of the Independent Inspector, and price calculation; such documentation may, however, be provided by Seller to the Companies separately.

(b) Invoices will be prepared and dated following Delivery of Fuel to the Companies and shall be sent by mail to each respective Company at the following address:

Hawaiian Electric: Hawaiian Electric Co., Ltd.

P. O. Box 2750

Honolulu, Hawaii 96840-0001

Attn: Director of Fuel Operations, mailstop: CIP3- IF

Facsimile: […]

Hawaii Electric Light : Hawaii Electric Light Co., Inc.

P. O. Box 1027

Hilo, Hawaii 96721-1027

Attn: Production Department

Facsimile: […]

Maui Electric: Maui Electric Company, Ltd.

P. O. Box 398

Kahului, Hawaii 96732

Attn: Production Department

Facsimile: […]

(c) Invoices, invoice documentation, laboratory analyses and other documents having to do with the quality, quantity and Delivery of Fuel or otherwise with the Fuel sold and purchased hereunder may be sent by first class mail, postage prepaid, by electronic transmission (facsimile or electronic mail) or by personal Delivery. The Parties may substitute other addresses upon the giving of proper notice. Correspondence and documents of a similar nature may be sent to Seller to the following address or as otherwise instructed:

Chevron Products Company

Attn: Finance Manager

91-480 Malakole Street

Kapolei, HI 96707

Section 8.2: Payment .

(a) Payment of Seller’s invoices shall […]. Details about the Seller’s banking information will be mailed directly to Hawaiian Electric’s Treasury Division before the first invoice is postmarked.

[…] If the due date falls on a Friday, holiday or a Saturday, the payment shall be due on the preceding business day. If such date falls on a Sunday or a holiday falling other than on a Friday, payment shall be due the following business day.

(b) If an invoice incorporating an item which is disputed has been sent to Hawaiian Electric, then Hawaiian Electric shall make payment in accordance with Section 8.3 for such invoice items or that portion of the invoiced Delivery which is not disputed by Hawaiian Electric and in which case Hawaiian Electric shall make such adjustment to taxes and other value-dependent items as are reasonable under the circumstances.

(c) The […] invoice or invoice incorporating items in dispute shall be adjusted in accordance with the terms of Article V by subsequent invoicing or by issuing a credit or debit with respect to the original invoice […] of receipt of the independent laboratory determination pursuant to Article VI or other resolution of the issue in dispute. Hawaiian Electric shall make payment for such subsequent invoices or debits in accordance with Section 8.2 . Hawaiian Electric shall have the option to apply such credit against payments to be made subsequent to the receipt of the credit, or if such payments are not expected to be made […] Hawaiian Electric shall be able to receive said credit in immediately available funds […] of Seller’s receipt of Hawaiian Electric’s written instructions.

Section 8.3: Method of Payment . […] to such Seller bank account as designated by Seller in writing.

Section 8.4: […]

Section 8.5: […]

ARTICLE IX

TITLE, CUSTODY AND RISK OF LOSS

Section 9.1: Title, Custody and Risk of Loss .

(a) Deliveries to the Companies’ nominated site locations - For Fuel Delivered to the Companies’ Site Locations, title to the Fuel and the risk of loss of Fuel Delivered shall pass from Seller to the Companies at the Companies’ Site Locations, at the flange of the receiving hose of the Companies’ receiving storage tanks from Seller’s Nominated truck. If Delivery is made to a Company Site Location where Seller’s hose is employed in the Delivery, then title to the Fuel and the risk of loss of Fuel Delivered shall pass from Seller to the Companies at the connection flange of the receiving facility’s piping, and all Diesel and/or ULSD shall be dyed by Seller in accordance with State and Federal requirements for tax-exempt, off-road diesel fuel. If Delivery is made to a Company Site Location by pipeline, then title to the Fuel and risk of loss of Fuel Delivered shall pass from Seller to the Companies at the connection flange of the Seller’s facility to the Companies’ pipeline.

(b) Deliveries at Seller’s Nominated Terminals Truck Rack - For Fuel lifted from Seller’s Nominated terminal truck rack into the Companies’ Nominated truck(s), title to the Fuel and the risk of loss of Fuel so Delivered shall pass from Seller to the Companies at the flange connecting the load rack arm/hose at Seller’s Nominated terminal’s truck loading facility to the receiving equipment of the Companies’ Nominated truck(s), and Diesel and/or ULSD shall be dyed by Seller in accordance with State and Federal requirements for tax-exempt, off-road diesel fuel.

(c) Deliveries to the Companies’ Nominated Barge or to the Harbor Terminal piping (e.g., for delivery to Molokai) - For Fuel delivered in bulk to the Companies’ Nominated Barge at either (i) Seller’s loading pier, (ii) a third-party pier, or (iii) Harbor Terminal piping, title, custody and risk of loss of Fuel so Delivered shall pass from Seller to the Companies at (for i and ii) the flange of the receiving hoses of the Companies’ Nominated Barge at Seller’s loading pier or third-party pier, and (for iii) , title, custody and risk of loss of Fuel so Delivered shall pass from Seller to the Companies at the flange of the pipeline segment interconnection junction between Seller and Harbor Terminal piping. If required by the Companies, the Diesel and/or ULSD shall be dyed by Seller, in accordance with State and Federal requirements for tax-exempt, off-road diesel fuel.

(d) Deliveries by Seller’s Nominated Barge -For Fuel delivered in bulk to the pier, title, custody and risk of loss of Fuel so Delivered shall pass from Seller to the Companies at the connection flange of the receiving pipeline at Companies’ Nominated Marine Terminal. If required by the Companies, the Diesel and/or ULSD shall be dyed by Seller, in accordance with State and Federal requirements for tax-exempt, off-road diesel fuel.

Section 9.2: Seller Warranty . Seller represents and warrants to the Companies that, as of the date of Delivery of Fuel under this Contract, it has good and marketable title to the Fuel sold and Delivered pursuant to this Contract, free and clear of any security interests, mortgage, pledge, liens, or other encumbrances, and that it has full right and authority to transfer such title and effect Delivery of such Fuel to the Companies.

ARTICLE X

INSURANCE

Section 10.1: Insurance Requirements .

(a) Chevron and the Companies and/or anyone acting under either Party’s direction or control or on either Party’s behalf shall at its own expense procure and maintain in full force and effect at all times during the Term of this Contract the following insurance and all other forms of insurance that may be required by any applicable Law:

1. Marine and War Risk Hull & Machinery coverage (including 4/4ths Collision Liability) subject to an Amount Insured not less than the full value of the vessel.

2. Full form Protection & Indemnity Insurance, including Excess Collision, pollution/ environmental risk coverage, upon the vessel pursuant to a standard Protection & Indemnity Club entry, with a Club which is a member of the International Group of Protection and Indemnity Clubs, with minimum limits for pollution/environmental risks to be […] per occurrence or the maximum commercially available, whichever is greater. Such insurance shall cover all of the risks covered under a standard Lloyd’s Maritime Insurance policy, including all the denominated “ Institute Cargo Clauses ” (Free of Particular Average, F.P.A. and clauses referring to wars, strikes, riots and civil disturbances).

3. Standard Workers Compensation and Employers Liability Insurance endorsed to be applicable to the State of Hawaii as well as the Longshore Act, with statutory limits for workers compensation and limits of […] per occurrence for employers liability.

4. Commercial General Liability Insurance with a bodily injury and property damage combined single limit per occurrence of at least […].

5. Automobile Liability Insurance on all owned, non-owned and hired vehicles used in conjunction with the Delivery of Fuel to the Companies with a bodily injury and property damage combined single limit per occurrence of at least […].

6. Other Coverage. Each Party and anyone acting under its direction or control or on its behalf shall at its own expense procure and maintain in full force and effect at all times during the Term of this Contract on all owned, non-owned and hired vehicles used in conjunction with the Delivery of Fuel to the Companies, any other insurance or surety bonding that may be required under the laws, ordinances and regulations of any governmental authority, including the Federal Motor Carrier Act of 1980 and all rules and regulations of the DOT and/or the USDOT.

(b) […]

Section 10.2 : Insurance Paid. […] as determined in Section 5.1 . No special payments shall be made by the Companies to Seller in respect to such premiums.

Section 10.3: Waiver of Subrogation . Each Party and anyone acting under its direction or control or on its behalf will cause its insurers (except for Workers Compensation insurance) to waive all rights of subrogation which the Party or its insurers may have against the other Party,.

Section 10.4: The Other Party As Additional Insured . Insurance policies (except for Workers Compensation insurance) providing the insurance coverage required in this Contract will name the other Party, its agents or its employees as an additional insured. Coverage must be primary in respect to the additional insured. Any other insurance carried by a Party will be excess only and not contribute with this insurance.

Section 10.5: Certificates of Insurance . Before performance of this Contract […] each Party shall file with the other Party designated representative certificates of insurance, or other documentary evidence acceptable to the the other Party, certifying that each of the foregoing insurance coverages is in force, and further providing that the Companies will be given thirty (30) days’ written notice of any material change in, cancellation of, or intent not to renew any of the required policies. Each Party shall provide new insurance certificates reflecting the required policies prior to the expiration date of any coverage. Receipt of any certificate showing less coverage than required is not a waiver of a Party’s obligation to fulfill the coverage requirements.

Section 10.6 : Failure to Procure Insurance . In the event either Party fails to procure and/or maintain an insurance as required above, an insurance fails for any reason (including, without limitation, breach of policy condition or warranty) and/or an insurer otherwise refuses or is unable to pay, the Party required to procure that insurance shall be deemed an insurer or self-insurer, shall accept and pay claims which would have otherwise been submitted to the failed insurance and shall indemnify and hold harmless (including legal fees and costs) the other Party of and from any loss, damage, expense, claim, liability and/or suit resulting from such failure.

ARTICLE XI

FORCE MAJEURE

Section 11.1: […]

[…]

ARTICLE XII

COMPLIANCE WITH LAWS AND REGULATIONS

Section 12.1: Compliance with Laws and Regulations .

(a) This Contract is subject to all applicable present and future Laws, statutes, orders, rules, and regulations of Governmental or quasi‑Governmental Authorities having jurisdiction over the Parties. Both Parties shall fully comply with all statutes, ordinances, rules, regulations, and requirements of all city, county, state, federal and other applicable Government Authorities which are now or may hereafter be in force.

(b) If the Delivery or supply of Fuel pursuant to this Contract conflicts with or is limited or prohibited by any Law or permit then to the extent of such conflict, limitation or prohibition, Seller shall have no obligation to Deliver or supply the Companies with the Fuel under this Contract and the Companies shall have no obligation to purchase or receive the Fuel under this Contract. The Companies, in the Companies’ discretion, may elect to complete and file any and all required Federal or State regulatory forms to permit, facilitate, or enable the supply of Fuel to the Companies under this Contract. Seller shall fully cooperate with the Companies in the completion and filing of the foregoing forms. If the Companies’ purchase, receipt or use of Fuel pursuant to this Contract, or the Companies’ emissions from the Companies’ use of Fuel conflicts with or is limited or prohibited by any Federal, State or local regulations, statutes, rules or permits then to the extent of such conflict, limitation or prohibition, the Companies shall have no obligation to purchase and receive the Fuel under this Contract.

Section 12.2 : Material Safety Compliance . Seller warrants that it is fully informed concerning the nature and existence of risks posed by transporting, storing, using, handling and being exposed to Fuel. Seller shall furnish to the Companies health, safety and environmental information (including without limitation Material Safety Data Sheets, (“ HSE Data ”) concerning health, safety and environmental aspects of the Fuel purchased by the Companies, including health, safety and environmental warnings, if any, required by applicable Law. Seller shall not be entitled to rely upon such HSE Data as being an inclusive presentation of all potential health, safety and environmental risks associated with the Fuel to be Delivered. Seller shall furnish HSE Data to, and otherwise inform, Seller’s nominated vessel of all such risks, and the Master shall advise and instruct all crew, seamen and employees about the hazards, if any, associated with the Fuel and the safe and proper methods of handling and storing of the Fuel. Compliance by the Seller with recommendations in HSE Data shall not excuse the Seller from its obligations under Article XIV and this Section 12.2 .

Section 12.3: Permits and Licenses . Seller shall secure and pay for all required permits and licenses, and shall comply with all federal, state and local statutes, regulations and public ordinances applicable to this Contract, (including the provisions of the Occupational Safety and Health Act of 1970 and all amendments thereto, and the DOT Hazardous Materials Regulations), and shall indemnify, defend and save the Companies harmless from any and all liability, fines, damage, cost and expense, including but not limited to reasonable attorneys' fees and costs, arising from Seller’s failure to do so.

Section 12.4: […]

Section 12.5: […]

ARTICLE XIII

RELEASES

Section 13.1: Spills/Environmental Pollution . In the event any spill or discharge occurs from any nominated vessel, truck or pipeline, utilized by Seller in the performance of this Contract, or if any spill, discharge, or pollution damage is caused by or is threatened in connection with the loading, transportation or Delivery of Fuel by Seller, then all regulatory notifications and filings, as well as all efforts and costs of containment and clean up shall be the sole responsibility of Seller, except to the extent that such spill, discharge, or pollution damage is directly attributable to the sole negligence, gross negligence, comparative negligence, or willful misconduct of the Companies in which case the Companies shall then participate in the efforts and costs of containment and cleanup.

Section 13.2: Pollution Mitigation .

(a) When an escape or discharge of oil or any polluting substance occurs in connection with or is caused by Seller’s or its agent's vessel or occurs from or is caused by discharging operations, Seller or its agents shall promptly take whatever measures are necessary or reasonable to prevent or mitigate environmental damage, without regard to whether or not said escape or discharge was caused by the negligence or willful misconduct of Seller’s equipment or Seller or the Companies or others. Failing such action by Seller or its agents, the Companies, on Seller’s behalf, may promptly take whatever measures are reasonably necessary to prevent or mitigate pollution damage and notify Seller as soon as practicable thereafter of such actions. Each Party in good faith shall keep the other advised of the nature and results of the measures taken, and if time permits, the nature of the measures intended to be taken.

(b) The cost of all such measures taken shall be borne by Seller except to the extent such escape or discharge was caused or contributed to by the negligence or willful misconduct of the Companies, and prompt reimbursement shall be made as appropriate; provided, however, that should Seller or its agents give notice to the Companies to discontinue said measures (and to the extent government authorities allow the Companies to discontinue said measures) the continuance of the Companies’ actions will no longer be deemed to have been taken pursuant to the provisions of this clause. Each Party in good faith shall provide written notice to the other of such actions and measures taken.

(c) Notwithstanding any other provision in this Contract, the foregoing provisions shall be applicable only between Seller and the Companies and shall not affect, as between Seller and the Companies, any liability that either Seller or the Companies shall have to any third parties, including the State of Hawaii and the U.S. Government, if either Party shall have such liability.

Section 13.3: Release Liability . Should the Companies incur any liability under Chapter 128D of the Hawaii Revised Statutes as a result of a spill from Seller’s nominated vessel during discharge, Seller shall indemnify and hold the Companies harmless to the extent not caused by the Companies’ negligence or willful misconduct.

Section 13.4: Operational Contacts . Promptly following the Effective Date (and thereafter as staffing changes warrant updates), the Parties will exchange lists of personnel (and their contact information) who shall be immediately contacted in the event of any accident, spill, or reportable incident incurred under the performance of this Contract.

ARTICLE XIV

INDEMNITY

Section 14.1: Indemnity .

(a) Indemnification. Except as provided herein, each Party to this Contract shall with respect to the other Party’s “Indemnitees” (consisting of the other Party, its Affiliates and each of their respective directors, officers, employees, agents, representatives, and the successors and assigns of any of the foregoing), defend, indemnify, release, reimburse and hold harmless the Indemnitees for, from and against any claims, demands, expenses (including penalties, interest and reasonable attorneys’ fees), and causes of action asserted against them by any third Person (including without limitation employees of either Party or any Governmental Authority) for personal injury or death, or the loss or damage to property, to the extent arising out of or resulting from the indemnifying Party’s operations or performance hereunder (including any failure to perform or default by the indemnifying Party), the willful or negligent acts or omissions of the indemnifying Party, or from the indemnifying Party’s failure to comply with Laws relevant and applicable to the Delivery or receipt of Fuel. Where such personal injury, death or loss of or damage to property is the result of the negligence or misconduct of both the Parties hereto, the Parties expressly agree to indemnify in proportion to each Party’s share of such negligence or misconduct.

(b) Notice of Claims . Each Party agrees to promptly notify the other of any matter as to which rights are asserted under this Article XIV and to provide the other Party with information to the extent reasonably requested and reasonable assistance related to any such matter, including the defense thereof.

(c) Indemnitee’s Right to Control its Defense . At its election, an Indemnitee who is entitled hereunder to a defense of a matter may control that defense (including the selection of qualified counsel) and the Party responsible hereunder for indemnification in the matter shall pay for and reimburse the Indemnitee for reasonable defense expenses, including attorneys' fees, arbitration related fees, expert witness fees and other defense costs.

(d) Survival of Provisions . The provisions of this Article XIV shall survive the termination or expiration of this Contract to the extent they apply to events that occurred during the Term of this Contract.

ARTICLE XV

DEFAULT

Section 15.1: Default .

( a) Breach by Seller of any of its representations and warranties in this Contract or failure of either Party to promptly perform any obligation under this Contract shall constitute default. If the Companies or Seller considers the other Party (the “ Defaulting Party ”) to be in default under this Contract, such Party (the “ Non-Defaulting Party ”) shall give the Defaulting Party prompt notice thereof, describing the particulars of such default. The Defaulting Party shall thereafter have […] from the receipt of said notice in which to remedy such default. […]

[…]

(b) […]

(c) The Defaulting Party shall indemnify and hold the Non-Defaulting Party harmless from all costs and expenses, including reasonable attorneys’ fees, incurred in connection with the enforcement of, suing for or collecting any amounts payable by the Defaulting Party. The Defaulting Party shall indemnify and hold harmless the Non-Defaulting Party for any damages, losses and expenses incurred by the Non-Defaulting Party as a result of the Default.

(d) The Parties intend that this Contract and all of the transactions hereunder shall constitute a “forward contract” under the U.S. bankruptcy code.

Section 15.2: Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CONTRACT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR, AND EACH PARTY SHALL RELEASE THE OTHER PARTY FROM AND AGAINST, ANY PUNITIVE DAMAGES, EXEMPLARY DAMAGES, LOST USE, LOSS OF PROFITS OR REVENUE, LOSS OF OPPORTUNITY, LOSS OF PRODUCTION, OR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR CONTINGENT DAMAGES OF ANY KIND WHETHER BASED IN CONTRACT, TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE OR STRICT LIABILITY), WARRANTY OR OTHERWISE WHICH MAY BE SUFFERED BY SUCH PARTY IN CONNECTION WITH THIS CONTRACT; THIRD PARTY DAMAGES SUBJECT TO INDEMNIFICATION UNDER THIS CONTRACT ARE NOT LIMITED BY THIS SECTION.

ARTICLE XVI

NOTICE

Section 16.1 Notices . Except as otherwise expressly provided in this Contract, all notices shall be given in writing, by facsimile or first class mail, postage prepaid, to the following addresses, or such other address as the Parties may designate by notice:

Chevron Products Company

Attn: VCO Coordinator

91-480 Malakole Street

Kapolei, HI 96707-1807

Facsimile: […]

With a copy to:

Chevron Products Company

Attn: Downstream & Chemicals Law Department

6001 Bollinger Canyon Road

San Ramon, CA 94583

Facsimile: […]

Hawaiian Electric Company, Inc.

P.O. Box 2750

Honolulu, Hawaii 96840-0001

Attention: Director of Fuel Operations - mailstop CIP3-IF

Facsimile: […]

Hawaii Electric Light Co., Inc.

P. O. Box 1027

Hilo, Hawaii 96721-1027

Attn: Production Department

Facsimile: […]

Maui Electric Company, Limited

P. O. Box 398

Kahului, Hawaii 96732

Attn: Production Department

Facsimile: […]

Notice shall be deemed to have been delivered upon the earlier to occur of actual receipt or two (2) days after sending.

Section 16.2: Routine Communications . The Parties may from time to time by notice hereunder designate persons or parties to whom routine communications may be directed, including via email, with a view to facilitating mutual and expeditious performance by the Parties hereunder.

ARTICLE XVII

GENERAL PROVISIONS

Section 17.1 Waiver and Severability . If any section or provision of this Contract or any exhibit or rider hereto is held by any court or other competent authority or be illegal, unenforceable or invalid, the remaining terms, provisions, rights and obligations of this Contract shall not be affected. The failure of a Party hereunder to assert a right or enforce an obligation of the other Party shall not be deemed a waiver of such right or obligation. In no event shall any waiver by either Party of any default under this Contract operate as a waiver of any further default.

Section 17.2: […]

Section 17.3: Conflicts of Interest . Conflicts of interest related to this Contract are strictly prohibited. Except as otherwise expressly provided herein, no Party, nor any director, employee, or agent of a Party shall give to or receive from any director, employee or agent of the other Party any gift, entertainment or other favor of significant value, or any commission, fee or rebate. Likewise, no Party nor any director, employee or agent of a Party shall enter into any business arrangement with any director, employee or agent of the other Party (or any Affiliate), unless such person is acting for and on behalf of the other Party, without prior written notification thereof to the other Party.

(a) Option to Terminate . In the event of any violation of Section 17.3 , including any violation occurring prior to the Effective Date of this Contract which resulted directly or indirectly in one Party’s consent to enter into this Contract with the other Party, such Party may, at its sole option, terminate this Contract at any time and, except for obligations to pay in full in United States currency for the outstanding payment obligations hereunder, shall be relieved of any further obligation under this Contract.

(b) Notice of Violation . Both Parties agree to immediately notify the other of any violation of Section 17.3 .

(c) Records . The Parties shall maintain true and correct records in connection with their obligations under this Contract and all related transactions and shall retain all such records for at least twenty-four (24) months after termination of this Contract. An independent auditor appointed and paid for by Chevron may upon reasonable notice after the Effective Date of this Contract until twenty-four (24) months after termination of this Contract make an audit of the records of the Companies for the sole purpose of determining compliance with Section 17.3 . The auditor shall be advised to not reveal information from any audit to Seller except if there has been a breach of Section 17. 3 and if so, on that topic, and nothing more.

Section 17.4: Applicable Law/Venue . This Contract shall be construed in accordance with, and all disputes arising hereunder shall be determined in accordance with, the Law of the State of Hawaii,

U.S.A. Hawaii shall be the exclusive venue for any litigation arising hereunder. Each Party agrees and consents that any dispute, litigation, action or proceeding arising out of this Contract, however defined, shall be brought exclusively in the State of Hawaii in a court of competent jurisdiction.

Section 17.5: Entire Agreement/Modification . This Contract shall constitute the entire understanding between the Parties with respect to all matters and things herein mentioned. It is expressly acknowledged and agreed by and between the Parties that neither Party is now relying upon any collateral, prior or contemporaneous agreement, assurance, representation or warranty, written or oral, pertaining to the subject matter contained herein. This Contract shall not be modified or changed except by written instrument executed by the duly authorized representatives of the Parties hereto.

Section 17.6: Contract Is Not an Asset . This Contract shall not be deemed to be an asset of either Party, and, at the option of a Party, shall terminate in the event of any voluntary or involuntary receivership, bankruptcy or insolvency proceedings affecting the other Party.

Section 17.7: Status of the Parties .

(a) Nothing in this Contract shall be construed to constitute either Party as a joint venturer, co-venturer, joint lessor, joint operator or partner of the other. In performing services pursuant to this Contract, Seller is acting solely as an independent contractor maintaining complete control over its employees and operations. Unless otherwise provided in this Contract, neither the Companies nor Seller is authorized to take any action in any way whatsoever for or on behalf of the other, except as may be necessary to prevent injury to persons or property, or, in accordance with Section 13.2, to contain, reduce or clean up any spills that may occur.

(b) Chevron U.S.A Inc. concludes some of its business (including the transactions contemplated hereunder) in the name of its division, Chevron Products Company. So long as Seller is a division or an Affiliate of Chevron U.S.A. Inc., Chevron U.S.A. Inc. shall be fully responsible and liable for the performance of all of Seller’s obligations hereunder.

(c) Any of the Companies (either individually, in combination or collectively) may enforce the terms of this Contract against Seller subject to and in accordance with the provisions of this Contract.

Section 17.8: Headings . The headings or captions are for convenient reference only and have no force or effect or legal meaning in the construction or enforcement of this Contract.

Section 17.9: Confidentiality and Non-Disclosure .

(a) Each Party may have a proprietary interest or other need for confidentiality in information that may be furnished to the other pursuant to this Contract, including the pricing, volume, duration or other commercial terms under this Contract (collectively, “ Confidential Information ”). The Party disclosing such information shall be referred to in this section as the “ Disclosing Party ,” and the Party receiving such information shall be referred to as the “ Receiving Party .”

confidentiality; (D) is to a third party who is required to maintain the confidentiality of the information under a written confidentiality agreement and the disclosure is made in connection with a potential (i) sale of the stock or partnership interests in a Party, as applicable, or (ii) sale or other disposition of all or substantially all of the assets or facilities which would primarily benefit from or support performance of the Contract; or (E) is to a third party who is required to maintain the confidentiality of the information under Law or a written confidentiality agreement and the disclosure is made to prospective lenders or actual lenders. In the event Confidential Information is required to be disclosed by the Receiving Party pursuant to Law, provided that the Receiving Party shall disclose only that part of the Confidential Information that it is required to disclose and shall notify the Disclosing Party prior to such disclosure in a timely fashion in order to permit the Disclosing Party to lawfully attempt to prevent or restrict such disclosure should it so elect, and shall take all other reasonable and lawful measures to ensure the continued confidential treatment of the same by the Party to which the Confidential Information is disclosed. Without limiting the foregoing, the Receiving Party agrees that it will exercise at least the same standard of care in protecting the confidentiality of the Disclosing Party’s Confidential Information as it does with its own Confidential Information of a similar nature, but in any event, no less than reasonable care.

(c) Confidential Information for purposes of this Contract shall not include information if and only to the extent that the Receiving Party establishes that the information: (i) is or becomes a part of the public domain through no act or omission of the Receiving Party; (ii) was in the Receiving Party’s lawful possession prior to the disclosure and had not been obtained by the Receiving Party either directly or indirectly from the Disclosing Party; or (iii) is lawfully disclosed to the Receiving Party by a third party without restriction on disclosure.

(d) Any provision herein to the contrary notwithstanding, Hawaiian Electric may disclose Confidential Information to the Commission, the Consumer Advocate, and/or any other governmental regulatory agency with notice to, but without need of prior consent by Seller, provided that Hawaiian Electric takes reasonable steps to obtain approval to submit the same under seal or under other procedures designed to preserve the confidentiality of the Confidential Information.

Section 17.10 Financial Compliance/Capital Lease/No Consolidation:

(a) Seller shall provide or cause to be provided to Hawaiian Electric on a timely basis, as reasonably determined by Hawaiian Electric, all information, including but not limited to information that may be obtained in any audit referred to below (the “ Information ”), reasonably requested by Hawaiian Electric for purposes of permitting Hawaiian Electric and its parent company, Hawaiian Electric Industries (“ HEI ”), to comply with the requirements (initial and on-going) of (a) identifying variable interest entities and determining primary beneficiaries under the accounting principles of Financial Accounting Standards Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) 810, Consolidation (“ FASB ASC 810 ”), (b) Section 404 of the Sarbanes-Oxley Act of 2002 (“ SOX 404 ”), (c) FASB ASC 840 Leases (“ FASB ASC 840 ”), and (d) all clarifications, interpretations and revisions of and regulations implementing FASB ASC 810, SOX 404, and FASB ASC 840, Securities and Exchange Commission, the Public Company Accounting Oversight Board, Emerging Issues Task Force or other governing agencies. In addition, if required by Hawaiian Electric in order to meet its compliance obligations, Seller shall allow Hawaiian Electric or its independent auditor, to audit, to the extent reasonably required, Seller’s financial records, including its system of internal controls over financial reporting; provided that Hawaiian Electric shall be responsible for all costs associated with the foregoing, including but not limited to Seller's reasonable internal costs.

Hawaiian Electric’s fault, then the Parties will take all commercially reasonable steps, including modification of the Contract, to eliminate the consolidation, while preserving the economic “benefit of the bargain” to both Parties. Notwithstanding the foregoing, if for any reason, at any time during the Term, Hawaiian Electric (and/or Hawaiian Electric’s Affiliates or HEI) in their good faith analysis and sole discretion are required to consolidate Seller into its financial statements in accordance with U.S. generally accepted accounting principles, then Hawaiian Electric may take any and all action necessary to eliminate consolidation, including without limitation, by immediately terminating this Contract without fault or liability.

(c) If there is a change in circumstances during the Term that would trigger the treatment of this Contract as a capital lease under FASB ASC 840, and such treatment is not attributable to Hawaiian Electric’s fault, then the Parties will take all commercially reasonable steps, including modification of the Contract, to eliminate the capital lease treatment, while preserving the economic “benefit of the bargain” to both Parties. Notwithstanding the foregoing, if for any reason, at any time during the Term, Hawaiian Electric’s (and/or Hawaiian Electric’s Affiliates, or HEI) in their good faith analysis and sole discretion are required to treat this Contract as a capital lease under FASB ASC 840, then Hawaiian Electric may take any and all action necessary to eliminate this capital lease treatment, including without limitation, by immediately terminating this Contract without fault or liability.

(d) Hawaiian Electric shall, and shall cause HEI to, maintain the confidentiality of the Information as provided in this Section 17.10 . Hawaiian Electric may share the Information on a confidential basis with HEI and the independent auditors and attorneys for Hawaiian Electric and HEI. (Hawaiian Electric, HEI, and their respective independent auditors and attorneys are collectively referred to in this Section 17.10 as “ Recipient .”) If either Hawaiian Electric or HEI, in the exercise of their respective reasonable judgments, concludes that consolidation or financial reporting with respect to Seller and/or this Contract is necessary, Hawaiian Electric and HEI each shall have the right to disclose such of the Information as Hawaiian Electric or HEI, as applicable, reasonably determines is necessary to satisfy applicable disclosure and reporting or other requirements and give Seller prompt written notice thereof (in advance to the extent practicable under the circumstances). If Hawaiian Electric or HEI disclose Information pursuant to the preceding sentence, Hawaiian Electric and HEI shall, without limitation to the generality of the preceding sentence, have the right to disclose Information to the Commission and the Consumer Advocate in connection with the Commission’s rate making activities for Hawaiian Electric, and other HEI affiliated entities, provided that, if the scope or content of the Information to be disclosed to the Commission exceeds or is more detailed than that disclosed pursuant to the preceding sentence, such Information will not be disclosed until the Commission first issues a protective order to protect the confidentiality of such Information. Neither Hawaiian Electric nor HEI shall use the Information for any purpose other than as permitted under this Section 17.10 .

(e) In circumstances other than those addressed in the immediately preceding paragraph, if any Recipient becomes legally compelled under applicable Law or by legal process (e.g., deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose all or a portion of the Information, such Recipient shall undertake reasonable efforts to provide Seller with prompt notice of such legal requirement prior to disclosure so that Seller may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Section 17.10 . If such protective order or other remedy is not obtained, or if Seller waives compliance with the provisions of this Section 17.10 , Recipient shall furnish only that portion of the Information which it is legally required to so furnish and shall use reasonable efforts to obtain assurance that confidential treatment will be accorded to any disclosed material.

(f) The obligation of nondisclosure and restricted use imposed on each Recipient under this Section 17.10 shall not extend to any portion(s) of the Information which (a) was known to such

Recipient prior to receipt, or (b) without the fault of such Recipient is available or becomes available to the general public, or (c) is received by such Recipient from a third party not bound by an obligation or duty of confidentiality.

Section 17.11: Miscellaneous . No use of the pipelines, facilities or equipment used in connection with this Contract shall be construed as having been dedicated to public use and it is hereby acknowledged by the Parties that the owner of any pipelines used to transport Fuel under this Contract retains the rights to determine who, other than the Parties to this Contract, shall use said pipelines, facilities, and equipment. If any action is taken or threatened by any Governmental Authority to declare the usage herein granted to either Party a public use, then and in that event, the Parties shall enter into good faith negotiations to restructure and restate the Contract provided that such restructuring and restatement does not increase the charges that Companies is obligated to pay hereunder. In the event that the Parties are unable to agree to any such restructuring within forty (40) days after the commencement of negotiations, either Party will have the right to terminate this Contract effective ninety (90) days’ after giving written notice of termination to the other Party.

Section 17.12: Counterparts . This Contract may be executed in as many counterparts as desired by the Parties, any one of which shall have the force and effect of any original but all of which together shall constitute the same instrument. This Contract may also be executed by exchange of executed copies via facsimile or other electronic means, such as PDF, in which case - but not as a condition to the validity of the Contract - each Party shall subsequently send the other Party by mail the original executed copy. A Party's signature transmitted by facsimile or similar electronic means shall be considered an “original” signature for purposes of this Contract.

[ Signatures Follow ]

IN WITNESS WHEREOF, the Parties hereto have executed this Contract on the day and year first above written.


HAWAIIAN ELECTRIC COMPANY, INC.	CHEVRON PRODUCTS COMPANY ,

a division of Chevron U.S.A. Inc.

By /s/ Ronald R. Cox By /s/ Billy Liu

Its Ronald R. Cox Its Billy Liu

Vice President, Power Supply Hawaii VCO Coordinator

By /s/ Scott Seu

Its Scott Seu

Vice President, System Operation

HAWAII ELECTRIC LIGHT COMPANY, INC. MAUI ELECTRIC LIGHT CO., LTD.

By /s/ Jay Ignacio By /s/ Sharon M. Suzuki

Its Jay Ignacio Its Sharon M. Suzuki

President President

By /s/ Tayne Sekimura By /s/ Lyle J. Matsunaga

Its Tayne Sekimura Its Lyle J. Matsunaga

Sr. VP & Chief Financial Officer Assistant Treasurer

EXHIBIT A

(Specifications)

The IFO to be supplied hereunder shall be a regular commercial grade of Industrial Fuel Oil No. 6, having the following specifications:



Item	Specifications	ASTM Test Method
Gravity @ 60° F, API	6.5 min.	D1298 or D4052-86
Flash, °F	150 min.	D93, D6450
Viscosity, SSF @ 122°F	179 min., 226 max.	D445/D2161
Pour Point, °F	55 max.	D97
Sulfur, % Wt.	2.00 max.	D1552, D2622 or D4294
Sediment & Water, % Vol.	0.5 max.	D1796
BTU content *, MM BTU/BBL	6.0	D240
Vanadium **, PPM wt.	100	D5863
Nitrogen ***, PPM wt.	6500	D5762 or D4629

* Typical Value is 6.3 MM BTU/bbl, value is typical; it is not guaranteed.
** Typical Value is shown, value is not a specification limit.
*** Typical Value is shown, value is not a specification limit.

IFO Confirmation Test Items: Gravity @ 60 DF, Flash Point, Viscosity, and Sulfur.

DIESEL NO. 2 FUEL SPECIFICATION

The Diesel to be supplied hereunder shall be of regular commercial grade of Diesel Fuel No. 2 and have the following specifications:



Item	Units	Specification Limits	Test Method
Gravity @ 60°F	°API, Specific	30.0 min., .88 min.	D1298 or D4052-86
Viscosity @ 100 DF	SSU	32.3 - 40.0	D445, D2161
BTU content *	MM BTU/BBL	5.84	Calculated or D240
Heat Value, Net	MM BTU/BBL	Report	Calculated or D240
Flash Point, PM	°F	150 min.	D93, D6450
Pour Point *	°F	35	D97
Ash	PPM, wt.	100 max.	D482
Cetane Index		40 min.	D4737
Carbon Residue,
10% Residuum	%, wt.	0.35 max.	D524
Sediment & Water	%, vol.	0.05 max.	D1796
Sulfur	%, wt.	0.40 max.	D1552, D2622 or
			D4294
Distillation
90% Recovered	°F	540 - 650	D86
Sodium+Potassium	PPM, wt.	0.5 max.	D3605
Sodium+Pot+Lithium	PPM, wt.	Report	D3605
Vanadium **	PPM, wt.	0.8	D3605
Nitrogen ***	PPM, wt.	120	D4629 or D5762

* Typical values is shown.
** Typical values is shown.
*** Typical values is shown.

Diesel Confirmation Test Items: Gravity @ 60 DF, Flash Point and color to determine dye content is within legal parameters. Sulfur shall also be tested if the refinery issuing tank sulfur is higher than 0.2% Wt. Sulfur.

ULTRA LOW SULFUR DIESEL SPECIFICATIONS



Test Property	Test Method	Unit of Measure	Min	Max

APPEARANCE	(None)	Visual

ASH	ASTM D482	% mass		0.01

CARBON RESIDUE: RAMS 10%
BOTTOMS	ASTM D524-04	% mass		0.35

CETANE INDEX	ASTM D4737-04	Number	40.0


One of the following must be met:
CETANE INDEX	ASTM D976-06	Number	40.0
Or
AROMATICITY	ASTM D1319	Vol %		35

COPPER STRIP CORROSION: 3 HR
@ 50C	ASTM D130-04e1	Classification		3


DISTILLATION: 90% RECOVERED	ASTM D86-07a	*C	282	338

DYE

FLASH POINT: P-M	ASTM D93-07	*C	52

FLASH POINT: P-M	ASTM D93-07	*F	125

LUBRICITY, 60C, WSD	ASTM D6079	Mcrons		520

SULFUR	ASTM D5453	ppm by WT		15

CONDUCTIVITY	ASTM D2624/D 4308	pS/m pr C.U.	25

VISCOSITY: KIN @ 40C	ASTM D445-06	eSt	1.9	4.1

WATER & SEDIMENT	ASTM D1796-04	% vol		0.05

[ End of Exhibit A ]

EXHIBIT B

(Pricing)

[…]

[ End of Exhibit B ]

EXHIBIT C

(Pricing Examples)

[…]

[ End of Exhibit C ]

Exhibit 10.2

SUPPLY CONTRACT FOR LSFO, DIESEL AND MATS FUEL

This Supply Contract for LSFO, Diesel and MATS Fuel (“ Contract ”) is made as of this 18th day of February, 2016, by and between Hawaiian Electric Company, Inc. (“ Hawaiian Electric ”) and Chevron U.S.A. Inc., through its division Chevron Products Company (“ Seller ”). Hawaiian Electric and Seller are each a “ Party ” and collectively the “ Parties ” to this Contract. This Contract shall become effective as provided in Section 2.3 below.

WHEREAS, Hawaiian Electric is in the business of generation, transmission and distribution of electrical power on the island of Oahu, State of Hawaii; and

WHEREAS, Seller is a supplier of low sulfur fuel oil (“ LSFO ”), low sulfur diesel (“ Diesel ”), and Mercury and Air Toxic Standards (“ MATS ”) compliant fuel (“ MATS Fuel ”) (singularly and collectively, “ Fuel ”) with delivery and transportation capabilities and desires to supply and deliver to Hawaiian Electric Fuel that meets Hawaiian Electric’s utility generation requirements; and

WHEREAS, Hawaiian Electric will purchase from Seller 100% of its Fuel volume requirements for O’ahu, equaling approximately 6.5 million barrels per year of LSFO and/or MATS Fuel as required to meet the Environmental Protection Agency’s MATS rules for use at Hawaiian Electric’s Kahe Power Plant located in Kapolei, Hawaii (“ Kahe ”) and Waiau Power Plant located in Pearl City, Hawaii (“ Waiau ”); and

WHEREAS, Seller represents that it is equipped and has the ability to supply Fuel of such suitable type and quality and in a quantity sufficient to meet all of Hawaiian Electric’s Oahu Fuel volume requirements; and

WHEREAS, Seller is willing to sell and deliver such suitable Fuel to Hawaiian Electric and Hawaiian Electric is willing to purchase and receive such Fuel from Seller under the terms and conditions set forth hereinafter.

NOW, THEREFORE, it is mutually agreed by the Parties hereto as follows:

ARTICLE I

DEFINITIONS

Except where otherwise indicated, the following definitions shall apply throughout this Contract.

1.1

“ Affiliate ”, except where otherwise expressly provided, means an entity controlling, controlled by or under common control with Seller or Hawaiian Electric, as the case may be. For the purposes of this definition “control” (including with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such entity, directly or indirectly, whether through the ownership of a majority of voting securities, by contract or otherwise, and it being understood and agreed that with respect to a corporation, limited liability company, or partnership, control shall mean direct or indirect ownership of equal to or more than 50% of the voting stock or limited liability company interest or general partnership interest or voting interest in any such corporation, limited liability company or partnership.


1.2	“ API ” means American Petroleum Institute, a long-established petroleum industry organization.


1.3	“ ASTM ” means the American Society for Testing and Materials, a long-established source of standard testing and evaluation methods for petroleum.


1.4	“ barrel ” means 42 American bulk gallons at 60 degrees Fahrenheit (“ DF ”).


1.5	“ BPTF ” means Hawaiian Electric’s Barbers Point Tank Farm, a fuel receiving, storage and

distribution facility located in Barbers Point area of O’ahu, in Campbell Estate Industrial Park, Kapolei, Hawaii.


1.6	“ BTU ” and “ BTU content ” means British Thermal Unit and refers to the standard assessment of Fuel’s gross heating value or gross heat content of Fuel determined in accordance with the test method specified in this Contract.


1.7	“ business day ” shall mean Monday through Friday, except for a day as to which physical locations of commercial banks in Honolulu, Hawaii are closed for business to the public due to a scheduled holiday.


1.8	“ Certificate of Quality ” or “ Quality Certificat e” means the formal document recording the Seller’s laboratory determination of quality and BTU content of a particular sample which represents a specific Delivery, said laboratory determinations having been performed in accordance with the test methods described herein.


1.9	“ Commission ” means the State of Hawaii Public Utilities Commission.


1.10	“ Commission Approval Order ” is defined in Section 2.2 below.


1.11	“ Consumer Advocate ” means the Division of Consumer Advocacy of the Department of Commerce and Consumer Affairs of the State of Hawaii.


1.12	“ Contract ” means this Supply Contract for LSFO, Diesel and MATS Fuel between Seller and Hawaiian Electric.


1.13	“ day ” or “ days “ means a calendar day of 24 hours.


1.14	“ Delive r”, “ Delivery ”, “ Deliveries ” or “ Delivered ” refers to the transfer of title or physical movement of Fuel by Seller and purchased by Hawaiian Electric.


1.15	“ Delivery Status Against Ratable ” means the calculated figure equal to cumulative Deliveries of Fuel as of a specific day in a month where said Deliveries for the month which includes the specified day less the cumulative Nominations on a Contract-to-date basis as of that same specific day in a month.


1.16	“ DF ” means degrees Fahrenheit.


1.17	“ Diesel ” means low sulfur diesel, of the quality specified herein, which may be blended with LSFO to produce MATS Fuel.


1.18	“ DOT ” means the Department of Transportation of the State of Hawaii and/or of the United States, as the case may be.


1.19	“ Effective Date ” is defined in Section 2.3 below.


1.20	“ Extensio n” means any Contract term in addition to and after the Original Term, each of which is a consecutive 12-month period beginning January 1.


1.21	“ Final Sample ” is defined by the mode of delivery which is detailed in Section 6.4 below.


1.22	“ Fuel ” means singularly and collectively LSFO, Diesel, and MATS Fuel suitable for use as a boiler fuel of the quality specifications described herein.


1.23	“ gallon ” means a United States liquid gallon of 231 cubic inches at 60 DF.


1.24	“ Governmental Authority ” means any international, foreign, federal, state, regional, county, or local Person having governmental or quasi-governmental authority or subdivision thereof, including recognized courts of Law, or other body or entity of competent jurisdiction.


1.25	“ G.S.V. ” means gross standard volume in U.S. Barrels at 60 DF.


1.26	“ Independent Inspector ” means a qualified third-party petroleum inspection contractor acceptable to both Parties providing petroleum sampling, measurement and other services before, during and after a Delivery.


1.27	“ Inter-island Supply Contract ” means that certain Inter-island Supply Contract for Petroleum Fuels, dated February 18, 2016, by and between Hawaiian Electric Co., Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited, and Chevron U.S.A. Inc. (through its division Chevron Products Company).


1.28	“ Law ” means any law, decree, directive, judgment, order, decision, interpretation, enforcement, statute, code, ordinance, rule, regulation, treaty, convention or any action, direction or intervention or other requirement of any Governmental Authority.

1.29

“ Line Displacement Stock ” means Fuel Delivered (i) to displace Fuel from BPTF piping to Hawaiian Electric’s Kahe or Waiau pipelines during any shutdown of operations of such facilities for reasons including but not limited to emergency, inspection, repair, or maintenance; (ii) to heat up BPTF piping, Hawaiian Electric’s Kahe or Waiau Pipelines subsequent to any shutdown; or (iii) to be used as reasonably required for the use or operation of such facilities in order to facilitate the movement of Fuel into Hawaiian Electric’s tankage at BPTF, Kahe and Waiau.


1.30	“ LSFO ” means low sulfur fuel oil produced in conformity with the provisions of the quality specified herein.


1.31	“ Marine Delivery ” or “ Marine Deliveries ” means a Delivery of Fuel and/or the components thereof, including blendstock, all or part of which are Delivered by Seller from a marine vessel to Hawaiian Electric’s receiving and storage tanks.


1.32	“ MATS Fue l” means a liquid-based fuel, namely LSFO proportionately blended with Diesel, intended by Hawaiian Electric to satisfy the Environmental Protection Agency’s MATS rules and regulations or any similar rules and/or regulations.


1.33	“ month ” means a calendar month.


1.34	“ Nominated ” and “ Nomination ” means the amount of Fuel specified by Hawaiian Electric to be sold and Delivered by Seller and purchased and received by Hawaiian Electric for a specified month. All Nominated volumes shall specify the type and quantity, including the ratio of LSFO and Diesel for MATS Fuel required.


1.35	“ Original Term ” is defined in Section 2.1 below.


1.36	“ Person ” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity.


1.37	“ Party ” and “ Parties ” are defined in the first paragraph above.


1.38	“ Pipeline Blend ” means a mixture of Seller’s Pipeline Fill and Fuel.


1.39	“ Pipeline Delivery ” or “ Pipeline Deliveries ” means a Delivery of Fuel and/or the components thereof, including blendstock, all or part of which are Delivered by Seller to Hawaiian Electric’s receiving and storage tanks at BPTF.


1.40	“ Pipeline Fill ” means the petroleum residing in the pipelines through which Seller makes Delivery of Fuel to Hawaiian Electric.


1.41	“ Ratable ” means a volume that is proportional, able to be rated or estimated.


1.42	“ Representatives ” of a Party shall mean the respective officers, directors, members, managers, employees, and agents of such Party or its Affiliates.


1.43	“ Refinery ” means Seller’s oil refining and related facilities located in the Barbers Point area of O’ahu, in Campbell Estate Industrial Park, Kapolei, Hawaii.


1.44	“ Reverse Line Displacement ” means an operation where Hawaiian Electric pumps Hawaiian Electric’s Fuel into the pipeline which Seller uses to Deliver Fuel to Hawaiian Electric in order to displace Seller’s Pipeline Fill.


1.45	“ Specification ” means the fuel quality specifications applicable to Fuel as described herein and stated in Exhibit A.


1.46	“ Term ” means the Original Term and any Extension(s).


1.47	“ Terminalling Agreement ” means that certain Fuels Terminalling Agreement, dated February 18, 2016, by and between Chevron U.S.A. Inc. (through its division Chevron Products Company) and Hawaii Electric Light Company, Inc.


1.48	“ USD ” means currency denominated in U.S. dollars.


1.49	“ Year ” means a calendar year.

ARTICLE II

TERM

Section 2.1: Term . The initial term of this Contract (“ Original Term ”) shall be from the Effective Date through and including December 31, 2019, and shall continue in succession thereafter for one or more Extensions, each a period of twelve (12) months, beginning each successive January 1, unless Hawaiian Electric or Seller gives written notice of termination at least one hundred twenty (120) days before the beginning of an Extension.

Section 2.2: Regulatory Approval .

(a) Hawaiian Electric will file an application with the Commission requesting approval of this Contract following its execution. This Contract is contingent upon the issuance of a decision and order by the Commission that (i) approves this Contract and its pricing and terms and conditions, (ii) is in a form deemed to be reasonable by Hawaiian Electric, in its sole discretion; and (iii) allows Hawaiian Electric to include the reasonable costs incurred by Hawaiian Electric pursuant to this Contract in its revenue requirements for ratemaking purposes and for the purposes of determining the reasonableness of Hawaiian Electric’s rates and/or for cost recovery above those fuel costs included in the base rate through Hawaiian Electric’s Energy Cost Adjustment Clause, hereinafter, the “ Commission Approval Order ”.

(b) Without limiting the foregoing, Seller understands that the Commission Approval Order may not be in a form deemed to be reasonable to Hawaiian Electric if it (i) contains terms and conditions deemed to be unacceptable to Hawaiian Electric, in its sole discretion, or (ii) it denies or defers ruling on any part of the Commission application, or (iii) is not final (or deemed to be final by Hawaiian Electric, in its sole discretion), because the Commission Approval Order has been appealed or Hawaiian Electric is not satisfied that no party to the proceeding in which the Commission Approval Order is issued, or other aggrieved person with the right to appeal, intends to seek a change in such Commission Approval Order through motion or appeal.

(c) If Hawaiian Electric has not received a final or interim Commission Approval Order and provided Seller written notice of the same by October 1, 2016 or if Hawaiian Electric’s request for Commission approval of this Contract is denied in whole or in part, then either Seller or Hawaiian Electric may terminate this Contract by providing written notice of such termination delivered to the other prior to the Effective Date, as it is defined in Section 2.3 . In such event of termination, each Party shall bear its own respective fees, costs and expenses incurred prior to termination, if any, in preparation for performance hereunder, and the Parties shall have no further obligation to each other with respect to this Contract except for indemnity and any confidentiality obligations assumed by the Parties hereunder.

Section 2.3: Effective Date . This Contract shall become effective on the date (“ Effective Date ”) of receipt by Hawaiian Electric of the Commission’s final or interim Commission Approval Order, and Hawaiian Electric will provide Seller with written notice of the same within five (5) business days from receipt by Hawaiian Electric. Alternatively, the Parties may agree in writing that some other date shall be deemed the Effective Date. Neither Party shall have any binding obligations under this Contract until the Effective Date, except that the Parties agree that upon full execution of this Contract they will be bound by Section 2.2 (Regulatory Approval), Section 11.1 (Force Majeure), Section 12.1 (Compliance with Laws and Regulations), Section 14.1 (Indemnity) and all provisions of Article XVI and Article XVII .

ARTICLE III

QUANTITY

Section 3.1: Quantity of Fuel To Be Delivered . Subject to the terms and conditions herein, Seller shall sell and Deliver to Hawaiian Electric, and Hawaiian Electric shall purchase and receive from Seller, 100% of Hawaiian Electric’s volume requirements for Fuel on O’ahu at a reasonably uniform rate during each month. […] If Seller agrees to deliver the additional volume(s) requested, the pricing for such volume(s) will be determined as specified in Exhibit B .

Section 3.2: Transitioning To and From MATS Fuel . In addition to the other requirements of Section 3 , including with regard to Nomination, Hawaiian Electric will notify Seller a […] of the requested first Delivery date each time a specific generating unit transitions to or from MATS Fuel. This notification will include the average expected daily consumption for each generating unit being transitioned and the ratio of Diesel and LSFO for MATS Fuel for each production train being transitioned to MATS Fuel.

Section 3.3: Nomination and Designation of Delivery Amounts .

(a) Hawaiian Electric shall provide Seller with written notice of Hawaiian Electric’s Nominated volume of Delivery for each month at least […] prior to the beginning of that month. In addition to the volume Nomination, Hawaiian Electric shall also provide a written indication of the volume Hawaiian Electric anticipates purchasing for the calendar month following the month for which the Nomination is provided. All Nominated volumes shall specify the type and quantity of Fuel and Diesel and LSFO ratios for MATS Fuel.

(b) No later than […], Seller will in writing, via email, provide Hawaiian Electric with a proposed schedule of Pipeline Deliveries and Marine Deliveries (“ Delivery Schedule ”) to be made for the following […]. The proposed Delivery Schedule shall specify the type of Delivery, whether Pipeline Delivery or Marine Delivery, approximate quantity and the approximate date. The Deliveries are to be made at reasonably regular intervals. Hawaiian Electric shall notify Seller of its acceptance or rejection of the proposed Delivery Schedule […] of receipt. Should Hawaiian Electric fail to provide notice to Seller of its acceptance, conditional acceptance or rejection of the Delivery Schedule prior to the end of […], Hawaiian Electric shall be deemed to have accepted the Delivery Schedule. If Hawaiian Electric rejects the proposed Delivery Schedule because the date or volume of an individual Delivery is unacceptable, Hawaiian Electric shall advise Seller in writing as soon as possible thereafter of a satisfactory alternate Delivery date or alternate Delivery quantity.

(c) Seller shall notify Hawaiian Electric in writing of any change in the accepted Delivery Schedule due to any of the following causes with respect to each individual Delivery as soon as practicable after it shall become known to Seller:


(1)	A change in the volume of an individual Pipeline Delivery, if such change is in excess of […] of the previously advised Delivery volume or a change in the

volume of an individual Marine Delivery, if such change is in […] barrels of the previously advised Delivery volume; or


(2)	A change in the date of an individual Delivery, if such change is greater than […] from the previously advised date.

(d) Hawaiian Electric shall not be required to take Delivery of more than […] of a month’s Nominated volume in any […]. Seller shall not be required to make Delivery of more than […]of a month’s Nominated volume in any […] consecutive day period. Seller will make commercially reasonable efforts to plan its Pipeline Deliveries and Marine Deliveries such that it shall have a […].

(e) Seller and Hawaiian Electric shall make commercially reasonable efforts to coordinate their separate marine and pipeline shipments into and out of Hawaiian Electric’s BPTF to minimize operational difficulties and costs, including but not limited to tankage availability and vessel demurrage.

(f) Unless waived by Hawaiian Electric and subject to tank availability, the physical volume of Seller’s Marine Deliveries of Fuel shall be limited to […] of any month, except during months when Seller’s Fuel production facilities at the Refinery are not operating or when Hawaiian Electric’s Nominated rate of Delivery for the month of the Marine Delivery is in excess of the maximum quantity Seller is obligated to supply.

(g) If due to reasons other than an event of Force Majeure, the Delivery schedule provided by Seller indicates that anticipated Pipeline Deliveries and Marine Deliveries of Fuel for the cumulative quantity of its Deliveries to Hawaiian Electric during a given period of this Contract will […].

(h) […]

ARTICLE IV

QUALITY

Section 4.1: Quality of Fuel To Be Delivered . The quality of Fuel to be sold and Delivered hereunder shall comply with the Specifications for Fuel, attached hereto as Exhibit A, and made a part hereof (the “ Specifications ”), and meet all applicable Laws.

ARTICLE V

PRICE

Section 5.1: Pricing . Pricing of Fuel under this Contract shall be as set forth on the attached Exhibit B .

Section 5.3: Fees, Taxes, Assessments, Levies and Imposts .

(a) In addition to all other amounts payable by Hawaiian Electric under this Contract, Hawaiian Electric shall reimburse Seller for all taxes, assessments, levies and imposts of whatsoever kind or nature imposed on Seller by any governmental or quasi-governmental body, as adjusted, modified or revised from time to time, including without limitation the Hawaii General Excise Tax, the Hawaii Use Tax, the Hawaii Environmental Response Tax and U.S. Customs duties with respect to the importation and sale of Fuel, its feedstock or its components under this Contract or the receipt by Seller of payments hereunder. Notwithstanding the foregoing and any illustrative schedule of prices herein, Hawaiian Electric shall not be required to reimburse Seller under this Section 5.3 for any tax measured by or based on the net income of Seller or for real property taxes or to duplicate any item of expense of Seller which is recovered by Seller under the billing pricing under Section 5.1 .

(b) As to the reimbursement of Seller for U.S. Customs duties, the per barrel amount to be reimbursed by Hawaiian Electric shall be equal to the actual per barrel rate of U.S. Customs duties charged Seller for Fuel, its feedstock or its components imported from sources outside of the U.S. during in the calendar quarter immediately preceding the calendar quarter of the Nominated month of Delivery. If the foregoing is imported from sources subject to different customs duty rates, the reimbursement fee per barrel shall be based on the average of the U.S. Customs duty per barrel rates weighted by the respective volume of material imported from the various sources during the calendar quarter in question. The accuracy of the reimbursement per barrel payable by Hawaiian Electric pursuant to this Section 5.3(b) may upon written request be verified by an independent auditor chosen by Seller and subject to Hawaiian Electric’s acceptance, such acceptance not to be unreasonably withheld. Seller and Hawaiian Electric shall share equally the cost of such independent verification to the extent that such verification would not otherwise have been routinely performed for Seller by the independent auditor.

Section 5.4: […]

ARTICLE VI

DELIVERY

Section 6.1: Notification of Marine Delivery .

(a) Seller shall provide Hawaiian Electric with updates on the anticipated arrival date of its vessel and expected date for commencing the Marine Delivery and otherwise comply with the notice provisions of Section 3.3 .

(b) The Parties shall mutually coordinate the Delivery of Fuel. With regard to Marine Deliveries, Seller shall provide Hawaiian Electric a proposed […] shipment period or window for Delivery of Fuel no later than […]. Hawaiian Electric shall use reasonable efforts to accommodate Seller’s proposed […]shipment period, however, should Hawaiian Electric be unable to accommodate Seller’s proposed […]shipment period:


1.	Hawaiian Electric may reject Seller’s proposed […]upon providing Seller notice no later than […] from the receipt of Seller’s notification.


2.	Seller may propose an alternate […] period, where such alternate shipment period is within five (5) days of the date of Seller’s first proposed […] day shipment period. Notice may be given by email or telephone.


3.	Seller shall provide Hawaiian Electric the intended volume of Fuel to be Delivered to Hawaiian Electric via marine vessel subject to a variation of […] with respect to the actual physical volume Delivered and a proposed […]. Notices may be given by email or telephone.

(d) Delivery of Marine Cargo.


1.	Seller may Deliver LSFO, LSFO blendstock, MATS Fuel, MATS Fuel blendstock, or Diesel Fuel from Seller’s vessel into Hawaiian Electric’s BPTF. The volume of Seller’s Marine Delivery shall conform to the provisions of Section 3.3 herein unless

it has received prior written approval from Hawaiian Electric.

If requested by Hawaiian Electric and in order to verify proper line-ups and procedures, for the first Marine Delivery under the Term of this Contract, Seller’s control operator shall be present at Hawaiian Electric’s control room for the entire duration of the Marine Delivery, at no cost to Hawaiian Electric. For all subsequent Marine Deliveries and at Hawaiian Electric’s option and cost, Seller’s control operator shall be present at Hawaiian Electric’s control room for the entire duration of the Marine Delivery, or at Hawaiian Electric’s option, the control operator may be present only for the beginning and end of the Marine Delivery. […].

(e) Title and Risk of Loss for a Marine Delivery. Title to the Fuel and the risk of loss of the Fuel and components Delivered from Seller’s vessel or from the Refinery in conjunction with a Marine Delivery shall pass from Seller to Hawaiian Electric at the BPTF as soon as the quality of the Fuel so Delivered is determined by Seller to meet the specifications set forth in this Contract, subject to Hawaiian Electric’s timely verification, or at Hawaiian Electric’s option, Hawaiian Electric’s verbal notice to Seller allowing release for shipment prior to verification.

(f) Determination of Quantity and Quality. The quantity and quality Delivered by marine vessel shall be determined in the manner specified in Section 6.4 of this Contract, except as follows:


1.	Seller agrees to advise the Independent Inspector, prior to commencing a Marine Delivery of Fuel or any component thereof from Seller’s vessel, the API gravity and flash point in degrees Fahrenheit shown on the port of loading Quality Certificate representing the quality of said Fuel or component thereof.

In order to reduce the likelihood of Seller’s Marine Delivery of Fuel, Fuel blendstock, or component thereof resulting in quality problems occurring in Hawaiian Electric’s receiving tank(s), Seller agrees to test a volumetric weighted average composite of samples representative of the Fuel, Fuel blendstock or component thereof to be shipped to Hawaiian Electric’s receiving tanks (“ Precautionary Sample ”). The Precautionary Sample shall be drawn after the arrival of the vessel in Hawaii state waters, but prior to the commencement of the Marine Delivery, and shall be tested by Refinery’s laboratory. Seller agrees that should a pre-discharge computer blend simulation representing the quality of a volumetric weighted average mixture of the Precautionary Sample, components of the Marine Delivery in questions previously shipped to Hawaiian Electric’s receiving tanks and other Fuel, Fuel blendstock or components available to be shipped from the Refinery reasonably indicate the Marine Delivery in question will not conform to the quality specified in Exhibit A . Seller will instruct the vessel operator not to commence Delivery of its cargo to Hawaiian Electric’s receiving tanks without Hawaiian Electric’s express permission.

The quality and BTU content of the Fuel Delivered shall be determined on the basis of a volumetric weighted average composite of samples drawn from Hawaiian Electric’s receiving tank(s) in such manner as to be representative of the entire Marine Delivery (“ Tank Final Sample ”). The Tank Final Sample shall be divided and otherwise handled in accordance with the provisions of Section 6.4(c) .

Quantity of the Fuel Delivered via a Marine Delivery shall be determined at the time of each Marine Delivery by gauging Hawaiian Electric’s tank(s) before and after pumping. Quantities sold and Delivered pursuant to this Section 6.1 . shall be calculated in accordance with the current measurement standards adopted by industry, ASTM, API and other recognized standard-setting bodies as are applicable in the opinion of the Independent Inspector and shall be expressed in G.S.V., U.S. barrels at 60 DF.

Section 6.2: Pipeline Deliveries .

(a) No later than […].

(b) Seller shall notify Hawaiian Electric of any change in the proposed Delivery Schedule due to any of the following causes with respect to any Delivery when it shall become known to Seller:


1.	A change in the volume of an individual Pipeline Delivery if such change […] of the previously advised Delivery volume; or


2.	A change in the date of an individual Delivery, if such change is […]from the previously advised date; or


3.	[…].

(c) Pipeline Delivery of Fuel, […] from the Refinery shall be made by pipeline from the Refinery into Hawaiian Electric’s BPTF. Title and risk of loss shall pass to Hawaiian Electric where Refinery pipelines interconnect with Hawaiian Electric’s BPTF pipelines at the point where the pipelines intersect the boundary line between the Refinery property and Hawaiian Electric’s BPTF property.

(d) Pipeline Delivery of Diesel Fuel […] from Refinery tankage made by Seller’s distribution pipeline from the Refinery to Hawaiian Electric’s Waiau or an existing direct connection to a third-party diesel pipeline employed under an appropriate throughput agreement with Hawaiian Electric. Title and risk of loss of such Diesel shall pass to Hawaiian Electric as Diesel passes the flange connecting Seller’s distribution pipeline to Hawaiian Electric’s BPTF, Hawaiian Electric’s Waiau, or existing third-party diesel pipeline as applicable.

Section 6.3: Delivery Rates .

(a) Hawaiian Electric shall not be required to take Delivery, and Seller shall not be required to make Delivery of more than […]. Seller shall make reasonable good faith efforts to plan its Pipeline Deliveries such that it shall have a Ratable Delivery […].

(b) Unless waived in advance by Hawaiian Electric, and subject to Hawaiian Electric tank

availability, the physical volume of Seller’s Deliveries of Fuel shall be limited to […] for any individual Pipeline Delivery.

Section 6.4: Quality Determination .

(a) All samples, measurements and determinations drawn, taken and made, respectively, under this Section 6.4 shall be for Fuel in Seller’s tank prior to Pipeline Delivery, however the quality determination for MATS Fuel Deliveries will be based on […]. All such samples shall be considered Final Sample and will be drawn by Seller unless Hawaiian Electric elects to have samples drawn under the supervision of the Independent Inspector. Seller and Hawaiian Electric will share equally the cost of the Independent Inspector

(b) The quality and BTU Content of the Fuel Delivered shall be determined on the basis of a volumetric weighted average composite of samples drawn from Seller’s issuing tank(s) at Seller’s Refinery for Pipeline Deliveries, or the vessel’s composite sample for Marine Deliveries, in such manner as to be representative of each individual Delivery (“ Final Sample ”).


1.	One part shall be provided to Seller’s laboratory for analysis to determine quality including BTU Content per barrel.


2.	One part shall be provided to Hawaiian Electric for the purpose of verifying Seller’s determinations.


3.	At least one part shall be sealed and provided to the Independent Inspector to be retained for a period of at least three (3) months.

(d) Seller agrees to provide Hawaiian Electric with a copy of Seller’s Certificate of Quality of Fuel Final Sample, and shall provide this prior to shipment of the Fuel. Seller agrees to provide API gravity to Independent Inspector prior to the shipment of the Fuel.

(e) Hawaiian Electric shall have the right to perform laboratory analyses in order to verify the results of Seller’s laboratory analyses; provided however, that such verification analyses shall be performed in a timely manner. Seller and Hawaiian Electric will make reasonable good faith efforts to evaluate BTU Content and exchange results within […] of the completion of the Pipeline Delivery.

(f) In order to eliminate or minimize the volume of […].

(g) If Hawaiian Electric elects not to commence Pipeline Delivery operations by displacing Seller’s Pipeline Fill with Hawaiian Electric’s Fuel, or if such displacement is operationally unfeasible or impractical for any other cause, Seller and Hawaiian Electric recognize that the Fuel received by Hawaiian Electric in a Pipeline Delivery may be a blend which includes some amount of Seller’s Pipeline Fill (“ Pipeline Blend ”). In such instance, the specification of Seller’s Pipeline Fill shall be determined by Seller on the basis of Seller’s samples representative of the contents of the storage tank from which Seller’s Pipeline Fill was issued. Seller agrees to provide Hawaiian Electric, Hawaiian Electric’s representative and the Independent Inspector with a copy of its laboratory analysis of the quality of Seller’s Pipeline Fill prior to commencing the Pipeline Delivery.

(h) If the pipeline fill between Seller and Hawaiian Electric does not meet the specifications listed in Exhibit A , Seller agrees to perform a pre-shipment computer blend simulation representing the quality of Seller’s Fuel from the issuing tank(s) as indicated in the relevant Certificates of Quality or preliminary laboratory analyses of the Final Samples and the quality of Seller’s Pipeline Fill as indicated in the relevant laboratory analyses. The computer blend simulation shall provide preliminary confirmation of the Pipeline Blend’s conformance with the limits for API gravity, viscosity and percent by weight sulfur content specified in Article IV . Seller agrees to provide Hawaiian Electric or Hawaiian Electric’s representative and the Independent Inspector a copy of the computer blend simulation results prior to shipment. Seller agrees that under no circumstances shall it make a Delivery of Fuel to Hawaiian Electric should the computer blend simulation or any other information available to Seller indicate a quality problem with the Fuel or Pipeline Blend, without Hawaiian Electric’s express written permission.

(i) The quantity of Fuel in a Pipeline Delivery shall be determined at the time of each Pipeline Delivery by gauging Seller’s issuing tank(s) immediately before and after pumping under the supervision of the Independent Inspector. Should Hawaiian Electric elect to perform a Reverse Line Displacement, the total quantity of Fuel Delivered to Hawaiian Electric shall be reduced by reference to the rise in Seller’s tank(s) receiving Seller’s Pipeline Fill, determined by gauging such tank(s) immediately before and after pipeline displacement under the supervision of the Independent Inspector. Both Hawaiian Electric and Seller agree that if measurement of Seller’s tank(s) is, in the opinion of the Independent Inspector, considered to have been rendered inaccurate for reasons including, but not limited to, operational constraints or inadvertent transfer of Fuel or of Seller’s Pipeline Fill within Seller’s facilities, then the quantity of Fuel or Seller’s Pipeline Fill may be determined by gauging Hawaiian Electric’s receiving tank(s) before and after pumping under the supervision of the Independent Inspector

(j) Quantities of Fuel sold and Delivered by Seller and purchased and received by Hawaiian Electric hereunder shall be calculated in accordance with the current measurement standards adopted by industry, ASTM, API and other recognized standard-setting bodies as are applicable in the opinion of the Independent Inspector and shall be expressed in U.S. barrels at 60 DF.

Section 6.5: Disputes Regarding Quality or Quantity .

(a) Quantity Disputes . If Hawaiian Electric or Seller has reason to believe that the quantity of Fuel for a particular Delivery is incorrect, the Party shall within five (5) days of the date of Delivery, present the other Party with documentation supporting such determination and the Parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quantity, if justified, for the Delivery in question as specified in this Section 6.5 , Section 8.2 and Section 17.4 .

(b) Quality Disputes.


1.	The quality of Fuel sold and Delivered to Hawaiian Electric shall be determined on the basis of Seller’s Certificate of Quality of the Fuel provided by the Seller. Each shipment of Fuel to Hawaiian Electric shall comply with the Specifications subject to Section 4.1 .

The official BTU Content determination shall be as reported in Seller’s Certificate of Quality, provided that the arithmetic difference between Seller’s and Hawaiian Electric’s laboratory results is equal to or less than the then existing ASTM reproducibility standard (currently 0.4 MJ/kg, which the Parties shall deem to be equivalent to a fixed standard of 60,000 BTU per barrel) for test D-240. If the difference between Seller’s and Hawaiian Electric’s determinations of BTU Content

should fall outside the ASTM reproducibility standard for ASTM test D-240, the sealed sample in the possession of the Independent Inspector shall be provided to an independent laboratory for an official determination, which shall be binding upon the Parties. Seller and Hawaiian Electric shall share equally the costs of independent tests and determinations.

If Seller or Hawaiian Electric has reason to believe that the quality of Fuel stated for a specific Delivery fails to conform to the Specifications in Article IV or the fuel specifications in Exhibit A, that Party shall within five (5) days after the later of the date of the completed Certificate of Quality or the date of the final determination of BTU Content, present the other Party with documents supporting such determination and the Parties will confer, in good faith, on the causes for the discrepancy and shall proceed to correct such causes and adjust the quality, if justified, for the Delivery in question. In the event of an unresolved difference between Seller and Hawaiian Electric, the sealed part of the representative sample in the possession of the Independent Inspector shall be provided to an independent laboratory for an official determination, which shall be final. Seller and Hawaiian Electric shall share equally the cost for such independent laboratory determination.

If the quality of the Fuel received by Hawaiian Electric fails to conform to the quality Specifications, both Hawaiian Electric and Seller shall attempt to minimize the impact of any quality problem. […]. Or, Seller may attempt to remedy the quality problem by Delivering higher quality Fuel in a timely manner to produce a Specifications quality blend in Hawaiian Electric’s storage tank(s) at Hawaiian Electric’s BPTF or at Hawaiian Electric’s O’ahu generating plants. If all such and similar efforts fail to resolve the quality problem, then Hawaiian Electric may return non-Specifications Fuel to Seller, in which case Seller shall replace the non-Specifications Fuel by Delivering an equal volume of Hawaiian Electric verified on-Specifications Fuel to Hawaiian Electric in a timely manner. Notwithstanding the preceding, Hawaiian Electric shall always have the right to refuse Delivery of any Fuel with prior written notice to Seller or its permitted agents if Hawaiian Electric in good faith shall have reason to believe that the Fuel does not meet the Specifications. […].


5.	All reasonable costs and expenses concerning testing, transportation, re-refining, and handling incurred in returning, replacing or otherwise correcting off-Specification Fuel shall be for the account of Seller.

Section 6.6: Records/Right to Audit . Seller shall retain any and all documents and records regarding the Delivery, quantity and quality of Fuel sold and purchased under the terms of this Contract for the twelve (12) months after the date of the invoice for such Fuel, or until any dispute regarding such Delivery, quantity and quality is resolved. Seller shall promptly make such records available for review to Hawaiian Electric at its request.

Section 6.7: Inspection . Hawaiian Electric may be represented and participate in all sampling, quality, inspection, measurements and tests of Fuel which may be conducted pursuant to this Contract and to inspect any equipment owned or controlled by Seller and used in determining the quantity, quality or heat content of Fuel, provided that any such participation by Hawaiian Electric shall not materially interfere with or otherwise disrupt such inspection, measurement and tests conducted by Seller. Hawaiian Electric may, upon reasonable notice to Seller and during normal business hours and at Hawaiian Electric’s expense, inspect and audit any sample analysis of Fuel, including records and data used in the preparation of such analysis.

Section 6.8: Independent Inspector . Hawaiian Electric and Seller shall agree on the Independent Inspector. All samples, measurements and determinations samples shall be drawn, taken and made, respectively, with respect to each designated Delivery and any other provision of this Contract shall be under the supervision of the Independent Inspector, who shall attend designated fuel Deliveries. Reasonable charges for services rendered by the Independent Inspector shall be borne equally by the Companies and Seller.

Section 6.9: Vessels . Seller shall be solely responsible for its owned, hired or chartered vessels or barges used in connection with Marine Deliveries hereunder, including the operation of such vessels and barges. Seller shall ensure that such Vessels are at all times in compliance with all Law, including the rules and regulations of the U.S. Coast Guard and the relevant port authority, as well as pier operator’s standards for vessel acceptance quality, pollution mitigation, required pollution liability, Protection and Indemnity Insurance and other required insurance coverages, pier operator’s operations manuals and accept liability for dues and other charges on said vessel or barge. Seller shall be solely responsible for any demurrage costs or similar costs associated with Marine Deliveries, unless such costs directly result from Hawaiian Electric’s sole negligence or willful misconduct.

ARTICLE VII

SELLER’S REPRESENTATIONS AND WARRANTIES

Section 7.1: Seller’s Representations and Warranties . Hawaiian Electric is willing to purchase the Fuel on the condition that Seller agrees, represents and warrants as follows:

(a) Ability to Supply. During the Original Term and any Extension, Seller shall maintain in full force and effect the capability to supply Fuel sufficient to meet Seller’s obligations under this Contract. Upon Hawaiian Electric’s reasonable request, Seller shall provide Hawaiian Electric assurances of Seller’s ability to perform under this Contract.

(b) Quality. All Fuel Delivered hereunder shall comply with the terms of this Contract.

(c) Ability to Deliver. During the Original Term and any Extension for Pipeline Deliveries, Seller shall own, lease or have the right to use facilities sufficient to meet Seller’s Delivery obligations under this Contract.

ARTICLE VIII

INVOICING AND PAYMENT

Section 8.1: Invoicing .

(b) Invoices will be prepared and dated following Delivery of Fuel to Hawaiian Electric and shall be sent to Hawaiian Electric at the following address:

Via e-mail to:

Wendy.Watanabe@hawaiianelectric.com and

Lara.Won@hawaiianelectric.com

Or via USPS mail to:

Hawaiian Electric Company

P.O. Box 2750

Honolulu, HI 96840-0001

Attn: Director of Fuel Operations, mailstop CIP3-IF

(c) Invoices, invoice documentation, laboratory analyses and other documents having to do with the quality, quantity and Delivery of Fuel or otherwise with the Fuel sold and purchased hereunder may be sent by first class mail, postage prepaid, by electronic transmission (facsimile or email) or by personal Delivery. The Parties may substitute other addresses upon the giving of proper notice. Correspondence and documents of a similar nature may be sent to Seller to the following address or as otherwise instructed:

Attn: Finance Manager

Chevron Hawaii Refinery

91-480 Malakole St.

Kapolei, HI 96707

(d) […].

Section 8.2: Payment .

(a) Payment of Seller’s invoices shall be made by bank wire transfer of immediately available funds in USD. Timing of payments for sales and Deliveries received shall be based upon […], which shall be the later of the invoice date or, if applicable, the

postmarked mailing date of the invoice. Due dates are dates payments are to reach Seller. If the due date falls on a Friday, holiday or a Saturday, the payment shall be due on the preceding business day. If such date falls on a Sunday or a holiday falling other than on a Friday, payment shall be due the following business day.

(b) […].

(d) The […] invoice incorporating items in dispute shall be adjusted in accordance with the terms of Article V by subsequent invoicing or by issuing a credit or debit with respect to the original invoice […] of receipt of the independent laboratory determination pursuant to Article VI or other resolution of the issue in dispute. Hawaiian Electric shall make payment for such subsequent invoices or debits in accordance with Section 8.2 . Hawaiian Electric shall have the option to apply such credit against payments to be made subsequent to the receipt of the credit, or if such payments are not expected to be made […], Hawaiian Electric shall be able to receive said credit in immediately available funds within […] of Seller’s receipt of Hawaiian Electric’s written instructions.

Section 8.3: Method of Payment . Payment shall be made without discount in USD within […] from the receipt of invoice by wire transfer of immediately available funds to such Seller bank account as designated by Seller in writing.

Section 8.4: Credit Extension . […]

Section 8.5: […]

ARTICLE IX

TITLE, CUSTODY AND RISK OF LOSS

Section 9.1: Title, Custody and Risk of Loss . Title to Fuel and the risk of loss of Fuel Delivered by Pipeline Delivery shall pass from Seller to Hawaiian Electric at the property line at Hawaiian Electric’s BPTF.

Section 9.2: Seller Warranty . Seller represents and warrants to Hawaiian Electric that, as of the date of Delivery of Fuel under this Contract, it has good and marketable title to the Fuel sold and delivered pursuant to this Contract, free and clear of any security interests, mortgage, pledge, liens or other encumbrances, and that it has full right and authority to transfer such title and effect delivery of such Fuel to Hawaiian Electric.

ARTICLE X

INSURANCE

Section 10.1: Insurance Requirements .

(a) Seller and anyone acting under its direction or control or on its behalf shall at its own expense procure and maintain in full force and effect at all times during the Term of this Contract the following insurance and all other forms of insurance that may be required by any applicable Law:


1.	Marine and War Risk Hull & Machinery coverage (including 4/4ths Collision Liability) subject to an Amount Insured not less than the full value of the vessel.

Full form Protection & Indemnity Insurance, including Excess Collision, pollution/ environmental risk coverage, upon the vessel pursuant to a standard Protection & Indemnity Club entry, with a Club which is a member of the International Group of Protection and Indemnity Clubs, with minimum limits for pollution/environmental risks to be [...] per occurrence or the maximum commercially available, whichever is greater. Such insurance shall cover all of the risks covered under a

standard Lloyd’s Maritime Insurance policy, including all the denominated “Institute Cargo Clauses” (Free of Particular Average, F.P.A. and clauses referring to wars, strikes, riots and civil disturbances).


3.	Standard Workers Compensation and Employers Liability Insurance endorsed to be applicable to the State of Hawaii as well as the Longshore Act, with statutory limits for workers compensation and limits of [...] per occurrence for employers liability.


4.	Commercial General Liability Insurance with a bodily injury and property damage combined single limit per occurrence of at least [...].


5.	Automobile Liability Insurance on all owned, non-owned and hired vehicles used in conjunction with the Delivery of Fuel to Hawaiian Electric with a bodily injury and property damage combined single limit per occurrence of at least [...].

Other Coverage. Seller and anyone acting under its direction or control or on its behalf shall at its own expense procure and maintain in full force and effect at all times during the Term of this Contract on all owned, non-owned and hired vehicles used in conjunction with the Delivery of Fuel to Hawaiian Electric, any other insurance or surety bonding that may be required under the laws, ordinances and regulations of any governmental authority, including the Federal Motor Carrier Act of 1980 and all rules and regulations of the DOT and/or the USDOT.

(b) […].

Section 10.2 Insurance Paid . Premiums for all necessary insurance policies are included in the Delivered price of Fuel as determined in Section 5.1 . No special payments shall be made by Hawaiian Electric to Seller in respect to such premiums.

Section 10.3: Waiver of Subrogation . Seller and anyone acting under its direction or control or on its behalf will cause its insurers (except for Workers Compensation insurance) to waive all rights of subrogation which Seller or its insurers may have against Hawaiian Electric, Hawaiian Electric’s agents, or Hawaiian Electric’s employees.

Section 10.4: Hawaiian Electric As Additional Insured . Insurance policies (except for Workers Compensation insurance) providing the insurance coverage required in this Contract will include Hawaiian Electric, Hawaiian Electric’s agents or Hawaiian Electric’s employees as an additional insured. Coverage must be primary in respect to the additional insured. Any other insurance carried by Hawaiian Electric will be excess only and not contribute with this insurance.

Section 10.5: Certificates of Insurance . Before performance of this Contract [...], Seller shall file with Hawaiian Electric’s designated

representative certificates of insurance, or other documentary evidence acceptable to Hawaiian Electric, certifying that each of the foregoing insurance coverages is in force, and further providing that Hawaiian Electric will be given thirty (30) days’ written notice of any material change in, cancellation of, or intent not to renew any of the required policies. Seller shall provide new insurance certificates reflecting the required policies prior to the expiration date of any coverage. Receipt of any certificate showing less coverage than required is not a waiver of Seller’s obligation to fulfill the coverage requirements.

Section 10.6 : Failure to Procure Insurance . In the event Seller fails to procure and/or maintain an insurance as required above, an insurance fails for any reason (including, without limitation, breach of policy condition or warranty) and/or an insurer otherwise refuses or is unable to pay, the Party required to procure that insurance shall be deemed an insurer or self-insurer, shall accept and pay claims which would have otherwise been submitted to the failed insurance and shall indemnify and hold harmless (including legal fees and costs) the other Party of and from any loss, damage, expense, claim, liability and/or suit resulting from such failure.

ARTICLE XI

FORCE MAJEURE

Section 11.1: […]

[…]

ARTICLE XII

COMPLIANCE WITH LAWS AND REGULATIONS

Section 12.1: Compliance with Laws and Regulations .

(a) This Contract is subject to all applicable present and future Laws, statutes, orders, rules, and regulations of Governmental or quasi-Governmental Authorities having jurisdiction over the Parties. Both Parties shall fully comply with all statutes, ordinances, rules, regulations, and requirements of all city, county, state, federal and other applicable Governmental Authorities which are now or may hereafter be in force.

(b) If the Delivery or supply of Fuel pursuant to this Contract conflicts with or is limited or prohibited by any Law or permit then to the extent of such conflict, limitation or prohibition, Seller shall have no obligation to Deliver or supply Hawaiian Electric with the Fuel under this Contract and Hawaiian Electric shall have no obligation to purchase or receive the Fuel under this Contract. Hawaiian Electric, in Hawaiian Electric’s discretion, may elect to complete and file any and all required federal or state regulatory forms to permit, facilitate, or enable the supply of Fuel to Hawaiian Electric under this Contract. Seller shall fully cooperate with Hawaiian Electric in the completion and filing of the foregoing forms. If Hawaiian Electric’s purchase, receipt or use of Fuel pursuant to this Contract, or Hawaiian Electric’s emissions from Hawaiian Electric’s use of Fuel conflicts with or is limited or prohibited by any Law or permit then to the extent of such conflict, limitation or prohibition, Hawaiian Electric shall have no obligation to purchase and receive the Fuel under this Contract.

Section 12.2 : Material Safety Compliance . Seller warrants that it is fully informed concerning the nature and existence of risks posed by transporting, storing, using, handling and being exposed to Fuel. Seller shall furnish to Hawaiian Electric health, safety and environmental information (including without limitation Material Safety Data Sheets, “ HSE Data ”) concerning health, safety and environmental aspects of Fuel purchased by Hawaiian Electric, including health, safety and environmental warnings, if any, required by applicable Law. Seller shall not be entitled to rely upon such HSE Data as being an inclusive presentation of all potential health, safety and environmental risks associated with the Fuel to be Delivered. Seller shall furnish HSE Data to, and otherwise inform, Seller’s nominated vessel of all such risks, and the Master shall advise and instruct all crew, seamen and employees about the hazards, if any, associated with Fuel, and the safe and proper methods of handling and storing Fuel. Compliance by the Seller with recommendations in HSE Data shall not excuse the Seller from its obligations under Article XIV and this Section 12.2 .

Section 12.3: Permits and Licenses . Seller shall secure and pay for all required permits and licenses, and shall comply with all federal, state and local statutes, regulations and public ordinances applicable to this Contract, (including the provisions of the Occupational Safety and Health Act of 1970 and all amendments thereto, and the DOT Hazardous Materials Regulations), and shall indemnify, defend and save Hawaiian Electric harmless from any and all liability, fines, damage, cost and expense, including but not limited to reasonable attorneys’ fees and costs, arising from Seller’s failure to do so.

Section 12.4: […] .

Section 12.5: […]

ARTICLE XIII

RELEASES

Section 13.1: Spills/Environmental Pollution . In the event any spill or discharge occurs from any of Seller’s nominated vessel, Seller’s pipeline, or Seller’s tank utilized in the performance of this Contract, or if any spill, discharge, or pollution damage is caused by or is threatened in connection with the loading, transportation or Delivery of Fuel by Seller, then all regulatory notifications and filings, as well as all efforts and costs of containment and clean up shall be the sole responsibility of Seller, except to the extent that such spill, discharge, or pollution damage is directly attributable to the sole negligence, gross negligence, comparative negligence, or willful misconduct of Hawaiian Electric in which case Hawaiian Electric shall then participate in the efforts and costs of containment and cleanup.

Section 13.2: Pollution Mitigation .

(a) When an escape or discharge of oil or any polluting substance occurs in connection with or is caused by Seller’s or its agent’s vessel or occurs from or is caused by discharging operations, Seller or its agents shall promptly take whatever measures are necessary or reasonable to prevent or mitigate environmental damage, without regard to whether or not said escape or discharge was caused by the negligence or willful misconduct of Seller’s equipment or Seller or Hawaiian Electric or others. Failing such action by Seller or its agents, Hawaiian Electric, on Seller’s behalf, may promptly take whatever measures are reasonably necessary to prevent or mitigate pollution damage and notify Seller as soon as practicable thereafter of such actions. Each Party in good faith shall keep the other advised of the nature and results of the measures taken, and if time permits, the nature of the measures intended to be taken.

notice to Hawaiian Electric to discontinue said measures (and to the extent government authorities allow Hawaiian Electric to discontinue said measures) the continuance of Hawaiian Electric’s actions will no longer be deemed to have been taken pursuant to the provisions of this clause. Each Party in good faith shall provide written notice to the other of such actions and measures taken.

(c) Notwithstanding any other provision in this Contract, the foregoing provisions shall be applicable only between Seller and Hawaiian Electric and shall not affect, as between Seller and Hawaiian Electric, any liability that either Seller or Hawaiian Electric shall have to any third parties, including the State of Hawaii and the U.S. Government, if either Party shall have such liability.

Section 13.3: Operational Contacts . Promptly following the Effective Date (and thereafter as staffing changes warrant updates), the Parties will exchange lists of personnel (and their contact information) who shall be immediately contacted in the event of any accident, spill, or reportable incident incurred under the performance of this Contract.

Section 13.4: […] .

ARTICLE XIV

INDEMNITY

Section 14.1: Indemnity .

(a) Indemnification. Except as provided herein, each Party to this Contract shall with respect to the other Party’s “ Indemnitees ” (consisting of the other Party, its Affiliates and each of their respective directors, officers, employees, agents, representatives, and the successors and assigns of any of the foregoing), defend, indemnify, release, reimburse and hold harmless the Indemnitees for, from and against any claims, demands, expenses (including penalties, interest and reasonable attorneys’ fees), and causes of action asserted against them by any third Person (including without limitation employees of either Party or any Governmental Authority) for personal injury or death, or the loss or damage to property, to the extent arising out of or resulting from the indemnifying Party’s operations or performance hereunder (including any failure to perform or default by the indemnifying Party), the willful or negligent acts or omissions of the indemnifying Party, or from the indemnifying Party’s failure to comply with Laws relevant and applicable to the Delivery or receipt of Fuel. Where such personal injury, death or loss of or damage to property is the result of the negligence or misconduct of both the Parties hereto, the Parties expressly agree to indemnify in proportion to each Party’s share of such negligence or misconduct.

(b) Notice of Claims. Each Party agrees to promptly notify the other of any matter as to which rights are asserted under this Article XIV and to provide the other Party with information to the extent reasonably requested and reasonable assistance related to any such matter, including the defense thereof.

(c) Indemnitee’s Right to Control its Defense. At its election, an Indemnitee who is entitled hereunder to a defense of a matter may control that defense (including the selection of qualified counsel) and the Party responsible hereunder for indemnification in the matter shall pay for and reimburse the Indemnitee for reasonable defense expenses, including attorneys' fees, arbitration related fees, expert witness fees and other defense costs.

(d) Survival of Provisions. The provisions of this Article XIV shall survive the termination or expiration of this Contract to the extent they apply to events that occurred during the Term of this Contract.

ARTICLE XV

DEFAULT

Section 15.1: Default .

(a) Breach by Seller of any of its representations and warranties in this Contract or failure of either Party to promptly perform any obligation under this Contract shall constitute default. If Hawaiian Electric or Seller considers the other Party (the “ Defaulting Party ”) to be in default under this Contract, such Party (the “ Non-Defaulting Party ”) shall give the Defaulting Party prompt notice thereof, describing the particulars of such default. The Defaulting Party shall thereafter have […] from the receipt of said notice in which to remedy such default. […].

(b) […]

(d) The Parties intend that this Contract and all of the transactions hereunder shall constitute a “forward contract” under the U.S. bankruptcy code.

Section 15.2: Limitation of Liability . NOTWITHSTANDING ANY OTHER PROVISION OF THIS CONTRACT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR, AND EACH PARTY SHALL RELEASE THE OTHER PARTY FROM AND AGAINST, ANY PUNITIVE DAMAGES, EXEMPLARY DAMAGES, LOST USE, LOSS OF PROFITS OR REVENUE, LOSS OF OPPORTUNITY, LOSS OF PRODUCTION, OR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR CONTINGENT DAMAGES OF ANY KIND WHETHER BASED IN CONTRACT, TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE OR STRICT LIABILITY), WARRANTY OR OTHERWISE WHICH MAY BE SUFFERED BY SUCH PARTY IN CONNECTION WITH THIS

CONTRACT; THIRD PARTY DAMAGES SUBJECT TO INDEMNIFICATION UNDER THIS CONTRACT ARE NOT LIMITED BY THIS SECTION.

ARTICLE XVI

NOTICE

Section 16.1: Notices . Except as otherwise expressly provided in this Contract, all notices shall be given in writing, by facsimile, or first class mail, postage prepaid, to the following addresses, or such other address as the Parties may designate by notice. Notice shall be deemed to have been delivered upon the earlier to occur of actual receipt or two (2) days after sending.

To Seller:

Chevron Products Company

Attn: VCO Coordinator

91-480 Malakole Street

Kapolei, HI 96707-1807

Facsimile: […]

With a copy to:

Chevron Products Company

Attn: Downstream & Chemicals Law Department

6001 Bollinger Canyon Road

San Ramon, CA 94583

Facsimile: […]

To Hawaiian Electric:

Hawaiian Electric Company, Inc.

PO Box 2750

Honolulu, Hawaii 96840-0001

Attention: Director of Fuels Operations - mailstop CIP3-IF

Facsimile: […]

ARTICLE XVII

GENERAL PROVISIONS

Section 17.1: Waiver and Severability . If any section or provision of this Contract or any exhibit or rider hereto is held by any court or other competent authority or be illegal, unenforceable or invalid, the remaining terms, provisions, rights and obligations of this Contract shall not be affected. The failure of a Party hereunder to assert a right or enforce an obligation of the other Party shall not be deemed a waiver of such right or obligation. In no event shall any waiver by either Party of any default under this Contract operate as a waiver of any further default.

Section 17.2: […]

(a) Option to Terminate. In the event of any violation of Section 17.3 , including any violation occurring prior to the Effective Date of this Contract which resulted directly or indirectly in one Party’s consent to enter into this Contract with the other Party, such Party may, at its sole option, terminate this Contract at any time and, except for obligations to pay in full in United States currency for the outstanding payment obligations hereunder, shall be relieved of any further obligation under this Contract.

(b) Notice of Violation. Both Parties agree to immediately notify the other of any violation of Section 17.3 .

(c) Records. The Parties shall maintain true and correct records in connection with their obligations under this Contract and all related transactions and shall retain all such records for at least twenty-four (24) months after termination of this Contract. An independent auditor appointed and paid for by Chevron may upon reasonable notice after the Effective Date of this Contract until twenty-four (24) months after termination of this Contract make an audit of the records of Hawaiian Electric for the sole purpose of determining compliance with Section 17.3 . The auditor shall be advised to not reveal information from any audit to Seller except if there has been a breach of S ection 17.3 and if so, on that topic, and nothing more.

Section 17.4: Applicable Law/Venue . This Contract shall be construed in accordance with, and all disputes arising hereunder shall be determined in accordance with, the law of the State of Hawaii, U.S.A. Hawaii shall be the exclusive venue for any litigation arising hereunder. Each Party agrees and consents that any dispute, litigation, action or proceeding arising out of this Contract, however defined, shall be brought exclusively in the State of Hawaii in a court of competent jurisdiction.

Section 17.7: Status of the Parties .

(a) Nothing in this Contract shall be construed to constitute either Party as a joint venturer, co-venturer, joint lessor, joint operator or partner of the other. In performing services pursuant to this Contract, Seller is acting solely as an independent contractor maintaining complete control over its employees and operations. Unless otherwise provided in this Contract, neither Hawaiian Electric nor Seller is authorized to take any action in any way whatsoever for or on behalf of the other, except as may be necessary to prevent injury to persons or property, or, in accordance with Section 13.2 , to contain, reduce or clean up any spills that may occur.

(b) Chevron U.S.A. Inc. concludes some of its business (including the transactions contemplated hereunder) in the name of its division, Chevron Products Company. So long as Seller is a division or an Affiliate of Chevron U.S.A. Inc., Chevron U.S.A. Inc. shall be fully responsible and liable for the performance of all of Seller’s obligations hereunder.

Section 17.8: Headings . The headings or captions are for convenient reference only and have no force or effect or legal meaning in the construction or enforcement of this Contract.

Section 17.9: Confidentiality and Non-Disclosure .

is required to maintain the confidentiality of the information under a written confidentiality agreement and the disclosure is made in connection with a potential (i) sale of the stock or partnership interests in a Party, or (ii) sale or other disposition of all or substantially all of the assets or facilities which would primarily benefit from or support performance of the Contract; or (e) is to a third party who is required to maintain the confidentiality of the information under Law or a written confidentiality agreement and the disclosure is made to prospective lenders or actual lenders. In the event Confidential Information is required to be disclosed by the Receiving Party pursuant to Law, the Receiving Party shall disclose only that part of the Confidential Information that it is required to disclose and shall notify the Disclosing Party prior to such disclosure in a timely fashion in order to permit the Disclosing Party to lawfully attempt to prevent or restrict such disclosure should it so elect, and shall take all other reasonable and lawful measures to ensure the continued confidential treatment of the same by the Party to which the Confidential Information is disclosed. Without limiting the foregoing, the Receiving Party agrees that it will exercise at least the same standard of care in protecting the confidentiality of the Disclosing Party’s Confidential Information as it does with its own Confidential Information of a similar nature, but in any event, no less than reasonable care.

Section 17.10: Financial Compliance/Capital Lease/No Consolidation .

(a) Seller shall provide or cause to be provided to Hawaiian Electric on a timely basis, as reasonably determined by Hawaiian Electric, all information, including but not limited to information that may be obtained in any audit referred to below (the “ Information ”), reasonably requested by Hawaiian Electric for purposes of permitting Hawaiian Electric and its parent company, Hawaiian Electric Industries (“ HEI ”), to comply with the requirements (initial and on-going) of (a) identifying variable interest entities and determining primary beneficiaries under the accounting principles of Financial Accounting Standards Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) 810, Consolidation (“ FASB ASC 810 ”), (b) Section 404 of the Sarbanes-Oxley Act of 2002 (“ SOX 404 ”), (c) FASB ASC 840 Leases (“F ASB ASC 840 ”), and (d) all clarifications, interpretations and revisions of and regulations implementing FASB ASC 810, SOX 404, and FASB ASC 840, Securities and Exchange Commission, the Public Company Accounting Oversight Board, Emerging Issues Task Force or other governing agencies. In addition, if required by Hawaiian Electric in order to meet its compliance obligations, Seller shall allow Hawaiian Electric or its independent auditor, to audit, to the extent reasonably required. Seller’s financial records, including its system of internal controls over financial reporting; provided that Hawaiian Electric shall be responsible for all costs associated with the foregoing, including but not limited to Seller’s reasonable internal costs.

(b) If there is a change in circumstances during the Term that would trigger consolidation of Seller’s finances on to Hawaiian Electric’s balance sheet, and such consolidation is not attributable to Hawaiian Electric’s fault, then the Parties will take all commercially reasonable steps, including modification of the Contract, to eliminate the consolidation, while preserving the economic “benefit of the bargain” to both

Parties. Notwithstanding the foregoing, if for any reason, at any time during the Term, Hawaiian Electric (and/or Hawaiian Electric’s Affiliates or HEI) in their good faith analysis and sole discretion are required to consolidate Seller into its financial statements in accordance with U.S. generally accepted accounting principles, then Hawaiian Electric may take any and all action necessary to eliminate consolidation, including without limitation, by immediately terminating this Contract without fault or liability.

(c) If there is a change in circumstances during the Term that would trigger the treatment of this Contract as a capital lease under FASB ASC 840, and such treatment is not attributable to Hawaiian Electric’s fault, then the Parties will take all commercially reasonable steps, including modification of the Contract, to eliminate the capital lease treatment, while preserving the economic “benefit of the bargain” to both Parties. Notwithstanding the foregoing, if for any reason, at any time during the Term, Hawaiian Electric (and/or Hawaiian Electric’s Affiliates, or HEI) in their good faith analysis and sole discretion are required to treat this Contract as a capital lease under FASB ASC 840, then Hawaiian Electric may take any and all action necessary to eliminate this capital lease treatment, including without limitation, by immediately terminating this Contract without fault or liability.

(d) Hawaiian Electric shall, and shall cause HEI to, maintain the confidentiality of the Information as provided in this Section 17.10 . Hawaiian Electric may share the Information on a confidential basis with HEI and the independent auditors and attorneys for Hawaiian Electric and HEI. (Hawaiian Electric, HEI, and their respective independent auditors and attorneys are collectively referred to in this Section 17.10 as “ Recipient ”). If either Hawaiian Electric or HEI, in the exercise of their respective reasonable judgments, concludes that consolidation or financial reporting with respect to Seller and/or this Contract is necessary, Hawaiian Electric and HEI each shall have the right to disclose such of the Information as Hawaiian Electric or HEI, as applicable, reasonably determines is necessary to satisfy applicable disclosure and reporting or other requirements and give Seller prompt written notice thereof (in advance to the extent practicable under the circumstances). If Hawaiian Electric or HEI disclose Information pursuant to the preceding sentence, Hawaiian Electric and HEI shall, without limitation to the generality of the preceding sentence, have the right to disclose Information to the Commission and the Consumer Advocate in connection with the Commission’s rate making activities for Hawaiian Electric and other HEI affiliated entities, provided that, if the scope or content of the Information to be disclosed to the Commission exceeds or is more detailed than that disclosed pursuant to the preceding sentence, such Information will not be disclosed until the Commission first issues a protective order to protect the confidentiality of such Information. Neither Hawaiian Electric nor HEI shall use the Information for any purpose other than as permitted under this Section 17.10 .

(f) The obligation of nondisclosure and restricted use imposed on each Recipient under this Section 17.10 shall not extend to any portion(s) of the Information which (a) was known to such Recipient prior to receipt, or (b) without the fault of such Recipient is available or becomes available to the general public, or (c) is received by such Recipient from a third party not bound by an obligation or duty of confidentiality.

Section 17.11: Miscellaneous . No use of the pipelines, facilities or equipment used in connection with this Contract, shall be construed as having been dedicated to public use, and it is hereby acknowledged by the Parties that the owner of any pipelines used to transport Fuel under this Contract retains the rights to determine who, other than the Parties under the terms of this Contract, shall use said pipelines, facilities, and equipment. If any action is taken or threatened by any Governmental Authority to declare the usage herein granted to either Party a public use, then and in that event, the Parties shall enter into good faith negotiations to restructure and restate the Contract provided that such restructuring and restatement does not increase the charges that Hawaiian Electric is obligated to pay hereunder. In the event that the Parties are unable to agree to any such restructuring within forty (40) days after the commencement of negotiations, either Party will have the right to terminate this Contract effective ninety (90) days’ after giving written notice of termination to the other Party.

Section 17.12: Counterparts . This Contract may be executed in as many counterparts as desired by the Parties, any one of which shall have the force and effect of any original but all of which together shall constitute the same instrument. This Contract may also be executed by exchange of executed copies via facsimile or other electronic means, such as PDF, in which case - but not as a condition to the validity of the Contract - each Party shall subsequently send the other Party by mail the original executed copy. A Party’s signature transmitted by facsimile or similar electronic means shall be considered an “original” signature for purposes of this Contract.

[ Signatures follow ]

IN WITNESS WHEREOF, the Parties hereto have executed this Contract as of the day and year first above written.



CHEVRON PRODUCTS COMPANY , a division of Chevron U.S.A. Inc
Signature:
/s/ Billy Liu
Name: Billy Liu Title: Hawaii VCO Coordinator

HAWAIIAN ELECTRIC COMPANY, INC.		HAWAIIAN ELECTRIC COMPANY, INC.
Signature:		Signature:
/s/ Jay Ignacio		/s/ Ronald Cox
Name: Jay Ignacio Title: Assistant Secretary		Name: Ronald R. Cox Title: Vice President, Power Supply

EXHIBIT A

(Specifications for Fuel)

LSFO and LSFO portion of MATS Fuel

LSFO and the LSFO portion of MATS Fuel Delivered hereunder shall comply with the following Specifications:



Test Property	Test Method	Unit Of Measure	LSFO Fuel Min Max
Gravity @ 60 Degrees F.	ASTM D-4052	Degrees API	12	24
Viscosity	ASTM D-445, D-2161	SSU at 210 DF	100	450
Heat Value, Gross	ASTM D-240, D-4868	MM BTU/BBL	6.0
Flash Point	ASTM D-93	Degrees F.	150
Pour Point	ASTM D-97, D-5949	Degrees F.		125
Ash	ASTM D-482	Percent, Weight		0.05
Sediment & Water***	ASTM D-1796	Percent, Weight		0.50
Sulfur	ASTM D-4294	Percent, Weight		0.50
Nitrogen	ASTM D-4629, D5762	Percent, Weight		0.50
Vanadium	ASTM D-5863, AES, Oxford Test Method MDMET017	PPM, Weight		50.0
Carbon Residue	ASTM D-4530	Percent, Weight		[…]

Diesel and Diesel portion of MATS Fuel

Diesel and the Diesel portion of MATS Fuel Delivered hereunder shall comply with the following Specifications:



Specification Item	Test Units	Diesel Fuel Limits	Test Method **
Gravity @ 60°F	API, Specific Gravity	25.7 min., .9 max.	D1298 or D4052-86
Viscosity	@ 40C CST	1.7 - 5.5	D445, D2161
BTU content *	MM BTU/BBL	Report	Calculated or D240
Heat Value, Net*	MM BTU/BBL	Report	MM BTU/BBL
Flash Point	PM°F	140 min.	D93 or D6450
Pour Point *	°F	35min	D97
Ash	PPM, wt.	100 max.	D482
Cetane Index		30 min.	D4737
Carbon Residue, 10% Residuum	%, wt.	0.35 max.	D524



Sediment & Water***	%, vol.	0.05 max.	D2709
Sulfur	%, wt.	0.10 max.	D1552, D2622 or D4294
Distillation 90% Recovered	°F	540 - 698	D86
Water by Distillation*1	PPM, wt.	Report	D95
Nitrogen*	PPM, wt.	Report	D5762 or D4629

* Seller does not provide specifications on these items. Values are typical; they are not guaranteed.

**Use of the most recent ASTM test methods must be employed.

***Seller will provide Hawaiian Electric with certification that all Fuel sold is less than 1% water by ASTM (D-95/D-4006).

¹ Note: This result shall be reported to Hawaiian Electric […] after Delivery of the Fuel from Refinery production. For Fuel Delivered via import marine vessel, results shall be provided […].

[ End of Exhibit A ]

EXHIBIT B

(Pricing)

[…]

[ End of Exhibit B ]

EXHIBIT C

(Pricing Examples)

[…]

[ End of Exhibit C ]

Exhibit 10.3

FUELS TERMINALLING AGREEMENT

HILO, HAWAII

This Fuels Terminalling Agreement (“ Agreement ”) is made as of this 18th day of February, 2016, by and between Chevron U.S.A. Inc., through its division Chevron Products Company (“ Chevron ”) whose address is 91-480 Malakole St., Kapolei, Hawaiʿi 96707, and Hawaii Electric Light Company, Inc. (“Hawaii Electric Light”) whose principal place of business is at 1200 Kilauea Avenue, Hilo, Hawaiʿi 96720 and whose mailing address is P.O. Box 1027, Hilo, Hawaiʿi 96721, (Chevron and Hawaii Electric Light collectively referred to as “ Parties ” or individually as “ Party ”) covers Terminalling of the Products described below at the Chevron Facility effective as of the Effective Date set forth below.

WHEREAS, Hawaii Electric Light is in the business of generation, transmission and distribution of electrical power on the island of Hawai’i, State of Hawaii;

WHEREAS, Chevron represents that it is equipped and has the ability to receive, store, deliver, and discharge industrial fuel oil (“ IFO ”) and no. 2 diesel (“ Diesel ”) utilizing fuel storage tanks at Chevron’s Hilo Harbor Terminal; and

WHEREAS, Chevron is willing to receive barge deliveries of IFO and Diesel for storage and discharge to Hawai’i Electric Light via Chevron’s truck loading rack or through Hawai’i Electric Light’s pipeline to its Kanoelehua Hill Generating Station (“ Hill Plant ”) located at 54 Halekauila Street, Hilo, Hawaii.

NOW, THEREFORE, it is mutually agreed by the Parties hereto as follows:

ARTICLE I

DEFINITIONS

Except where otherwise indicated, the following definitions shall apply throughout this Agreement.

1.1

“ Affiliate ”, except where otherwise expressly provided, means an entity controlling, controlled by or under common control with Chevron or Hawaii Electric Light, as the case may be. For the purposes of this definition “control” (including with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such entity, directly or indirectly, whether through the ownership of a majority of voting securities, by contract or otherwise, and it being understood and agreed that with respect to a corporation, limited liability company, or partnership, control shall mean direct or indirect ownership of equal to or more than 50% of the voting stock or limited liability company interest or general partnership interest or voting interest in any such corporation, limited liability company or partnership.


1.2	“ API ” means American Petroleum Institute, a long-established petroleum industry organization.


1.3	“ ASTM ” means the American Society for Testing and Materials, a long-established source of standard testing and evaluation methods for petroleum.


1.4	“ barrel ” “ BBLS ” means 42 American bulk gallons at 60 degrees Fahrenheit (“ DF ”).


1.5	“ BTU ” and “BTU Content” means British Thermal Unit and refers to the standard assessment of Fuel’s gross heating value or gross heat content of Fuel determined in accordance with the test method specified in this Agreement.

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1.6	“ business day ” shall mean Monday through Friday, except for a day as to which physical locations of commercial banks in Honolulu, Hawaii are closed for business to the public due to a scheduled holiday.


1.7	“ Certificate of Quality ” means the formal document recording the Chevron’s laboratory determination of quality and BTU content of a particular sample which represents a specific delivery, said laboratory determinations having been performed in accordance with the test methods described herein.


1.8	“ Chevron Facility ” means the Chevron’s Hilo, Hawaii Terminal, located at 666 Kalanianaole Ave., Hilo, Hawaii 96720.


1.9	“ Commissio n” means the State of Hawaii Public Utilities Commission.


1.10	“ Commission Approval Order ” is defined in Section 2.2 below.


1.11	“ Consumer Advocate ” means the Division of Consumer Advocacy of the Department of Commerce and Consumer Affairs of the State of Hawaii.


1.12	“ day ” or “ days ” means a calendar day of 24 hours.


1.13	“ Diesel ” means No. 2 Diesel produced in conformity with the provisions of the quality in the Specification which are set forth herein.


1.14	“ DOT ” means the Department of Transportation of the State of Hawaii and/or of the United States, as the case may be.


1.15	“ Effective Date ” is defined in Section 2.3 below.


1.16	“ Extension ” means any Agreement term in addition to and after the Original Term, each of which is a 12-Month period beginning January 1.


1.17	“ Fuel ” means singularly and collectively Industrial Fuel Oil (“IFO”) and No. 2 Diesel (“Diesel”) meeting the Specifications described in Exhibit A.


1.18	“ gallon ” means a United States liquid gallon of 231 cubic inches at 60 DF.


1.19	“ Governmental Authority ” means any international, foreign, federal, state, regional, county, or local Person having governmental or quasi-governmental authority or subdivision thereof, including recognized courts of Law, or other body or entity of competent jurisdiction.


1.20	“ Independent Inspector ” means a qualified third-party petroleum inspection contractor acceptable to both Parties providing petroleum sampling, measurement and other services before, during and after a delivery.


1.21	“ Inter-island Supply Contract ” means that certain Inter-island Supply Contract for Petroleum Fuels, dated February 18, 2016, by and between Hawaiian Electric Co., Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited, and Chevron U.S.A. Inc. (through its division Chevron Products Company).


1.22	“ Law ” means any law, decree, directive, judgment, order, decision, interpretation, enforcement, statute, code, ordinance, rule, regulation, treaty, convention, or any action, direction or intervention or other requirement of any Governmental Authority.


1.23	“ Line Displacement Stock ” means Fuel used to displace or flush or move existing Fuel in a pipeline.


1.24	“ LSFO Supply Contract ” means that certain Supply Contract for LSFO, Diesel and MATS Fuel, dated February 18, 2016, by and between Hawaiian Electric Company, Inc. and Chevron U.S.A. Inc. (through its division Chevron Products Company).


1.25	“ MATS Fuel ” means Fuel that is compliant with the Environmental Protection Agency’s (“EPA”) rule to reduce emissions of toxic air pollutants from power plants, specifically Mercury and Air Toxics Standards (MATS).


1.26	“ month ” means a calendar month.


1.27	“ Original Term ” is defined in Section 2.1 below.


1.28	“ Party ” and “ Parties ” are defined in the first paragraph above.

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1.29	“ Person ” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity.


1.30	“ Pipeline Delivery ” means a delivery of Product which is delivered by pipeline from the Chevron Facility to Hawaii Electric Light’s power plants.


1.31	“ Product(s) ” means Industrial Fuel Oil (“IFO”) and/or No. 2 Diesel (“Diesel”) which shall be stored, received, delivered or piped into and from the Chevron Facility.


1.32	“ Representatives ” of a Party shall mean the respective officers, directors, members, managers, employees, and agents of such Party or its Affiliates.


1.33	“ Specification” means the fuel quality specifications applicable to Fuel as described herein and stated in Exhibit A.


1.34	“ Term ” means the Original Term and any Extension(s).


1.35	“ Terminalling Services ” means the receipt, storage, delivery, blending and handling of Hawaii Electric Light’s Products, as further described in Article III .


1.36	“ Terminalling Services Fee ” or [ … ] means the per barrel fee (set forth on Exhibit B ) paid in exchange for Chevron’s storage and handling of fuel products which includes all associated services, Chevron Facility personnel costs, operations and maintenance, and any miscellaneous expenses, excluding taxes.


1.37	“ Unavailable Day ” means each 24 consecutive hour period during which Chevron is unable (other than due to the fault of Hawaii Electric Light) to provide any of the Terminalling Services including (but not limited to): (i) receive Products at the Chevron Facility and/or (ii) deliver Hawaii Electric Light’s Product at the Chevron Facility.


1.38	“ USD ” means currency denominated in U.S. dollars.


1.39	“ year ” means a calendar year.

ARTICLE II

TERM

Section 2.1: Term . The initial term of this Agreement (“ Original Term ”) shall be from the Effective Date through and including December 31, 2019, and shall continue in succession thereafter for one or more Extensions, each a period of twelve (12) months, beginning each successive January 1, unless Hawaii Electric Light or Chevron gives written notice of termination at least one hundred twenty (120) days before the beginning of an Extension.

Section 2.2: Regulatory Approval .

(a) Hawaii Electric Light will file an application with the Commission requesting approval of this agreement following its execution. This agreement is contingent upon the issuance of a decision and order by the Commission that: (i) approves this agreement and its pricing and terms and conditions, (ii) is in form deemed to be reasonable by Hawaii Electric Light, in its sole discretion; and (iii) allows Hawaii Electric Light to include the reasonable costs incurred by Hawaii Electric Light pursuant to this agreement in its revenue requirements for ratemaking purposes and for the purposes of determining the reasonableness of Hawaii Electric Light’s rates and/or for cost recovery above those fuel costs included in the base rate through Hawaii Electric Light’s Energy Cost Adjustment Clause, hereinafter, the “ Commission Approval Order ”.

(b) Without limiting the foregoing, Chevron understands that the Commission Approval Order may not be in a form deemed to be reasonable to Hawaii Electric Light if it: (i) contains terms and conditions deemed to be unacceptable to Hawaii Electric Light, in its sole discretion, or; (ii) it denies or defers ruling on any part of the application, or (iii) is not final (or deemed to be final by Hawaii Electric Light, in its sole discretion), because the Commission Approval Order has been appealed or Hawaii Electric Light

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is not satisfied that no party to the proceedings in which the Commission Approval Order is issued, or other aggrieved person with the right to appeal, intends to seek a change in such Commission Approval Order through motion or appeal.

(c) If Hawaii Electric Light has not received a final or interim Commission Approval Order and provided Chevron written notice of the same by October 1, 2016 or if Hawaii Electric Light’s request for Commission approval of this Agreement is denied in whole or in part, then either Chevron or Hawaii Electric Light may terminate this Agreement by providing written notice of such termination delivered to the other prior to the Effective Date, as it is defined in Section 2.3 . In such event of termination, each Party shall bear its own respective fees, costs and expenses incurred prior to termination, if any, in preparation for performance hereunder, and the Parties shall have no further obligation to each other with respect to this Agreement except for indemnity and any confidentiality obligations assumed by the Parties hereunder.

Section 2.3: Effective Date . This Agreement shall become effective on the date (“ Effective Date ”) of receipt by Hawaii Electric Light of the Commission’s final or interim Commission Approval Order, and Hawaii Electric Light will provide Chevron with written notice of the same within five (5) business days from receipt by Hawaii Electric Light . Alternatively, the Parties may agree in writing that some other date shall be deemed the Effective Date. Neither Party shall have any binding obligations under this Agreement until the Effective Date, except that the Parties agree that upon full execution of this Agreement they will be bound by Section 2.2 (Regulatory Approval), Section 12.1 (Force Majeure), Section 13.1 (Compliance with Laws and Regulations), Section 15.1 (Indemnity) and all provisions of Article XVII and Article XVIII .

ARTICLE III

TERMINALLING SERVICES

Chevron agrees to provide the following Terminalling Services to Hawaii Electric Light in accordance with the terms and conditions of this Agreement.

Section 3.1: Scope of Services . Chevron agrees to provide the Chevron Facility for the storage and handling of Hawaii Electric Light’s Products. When instructed by Hawaii Electric Light, Chevron agrees to receive Hawaii Electric Light’s Products into the Chevron Facility, to store such Product, and to deliver same from the Chevron Facility. Chevron shall provide dedicated storage tanks and receive, store and hold in Chevron’s custody, handle, and deliver Hawaii Electric Light’s Products as described in this Agreement. Services shall include all personnel labor, operational and maintenance costs of the Chevron Facility, and any miscellaneous costs associated with providing Terminalling Services to Hawaii Electric Light. Chevron shall provide Terminalling Services in accordance with Good Industry Practice and in compliance with all applicable laws. For purposes of this Agreement, “ Good Industry Practice ” means the generally recognized standards for operation and maintenance of petroleum terminal facilities.

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Section 3.2: Storage . Chevron will maintain throughout the Original Term and any Extension(s) of this Agreement dedicated storage of Hawaii Electric Light’s Product, with minimum volumes of storage capacity as listed below:

[ … ]

Section 3.3: Receipt and Delivery Modes . Subject to Section 4.2 (Quantity) Products will enter and exit the Chevron Facility as follows:

Product Receipts Into the Chevron Facility :

(a) Hawaii Electric Light ’s Chartered Barge.

Product receipts from Hawaii Electric Light’s Chartered Barge shall contain a […] barrels of combined Products and shall arrive at regular intervals.

(b) Chevron’s Chartered Barge.

(d) Hawaii Electric Light ’s receipt of Product into the Chevron Facility is subject to Section 8.2 (Chevron Facility hours of operation).

Product Deliveries Out of the Chevron Facility :

(a) Into Hawaii Electric Light designated tanker trucks at Chevron Facility’s loading rack.

(b) Into pipeline owned and operated by Hawaii Electric Light to its Hill Plant.

Hawai’i Electric Light’s receipt of Product from Chevron Facility is subject to Section 8.2 (Chevron Facility Hours of Operation).

The quality of Products to be delivered hereunder shall comply with the Specifications for Fuel, attached hereto as Exhibit A .

Section 3.4: Terminalling for Third Parties. Hawaii Electric Light shall not have the right to provide third party Terminalling Services at the Chevron Facility without the prior written consent of Chevron […]

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ARTICLE IV

DETERMINATION OF QUANTITY AND QUALITY

For the purpose of this Agreement, a barrel shall consist of forty-two (42) U.S. gallons and a gallon shall contain two hundred thirty-one (231) cubic inches when corrected to 60° DF. All measurements shall be in accordance with API standards. All measured volumes shall be adjusted to those conditions in accordance with the latest ASTM or API test methods.

Section 4.1: Quality Determination .

(a) After loading Hawaii Electric Light's nominated barge with Product destined for Chevron’s Facility, an independent inspector shall take a minimum of three (3) sealed vessel composite samples of each Product from the delivering barge with one part for the Chevron Facility’s designated laboratory for Chevron’s retention, one part for Hawaii Electric Light’s designated laboratory for testing, which shall be Hawaiian Electric’s laboratory and one to be retained by the Independent Inspector for a period of not less than three (3) months for any quality discrepancies.

(b) All Product received into the Chevron Facility shall conform with the Product Specifications set forth in Exhibit A hereto, and/or other specifications as may be mutually agreed to by the Parties. The quality of the Product received into the Chevron Facility shall be determined by analysis of the test sample in accordance with the specifications in Exhibit A . Whenever Hawaii Electric Light purchases Product (to be delivered into the Chevron Facility) from a Party other than Chevron, Hawaii Electric Light shall provide or direct independent inspector to provide Chevron with both a preliminary analysis (API gravity, appearance and, in the case of diesel fuel, flash point), and final Certificate of Analysis from the results of the vessel composite sample at load port prior to discharge into the Chevron Facility.

(c) A “ vessel composite” sample shall also be taken of the each Product by the independent inspector after the barge reaches Hilo and before it is unloaded. Sealed test samples will be provided to Hawaiian Electric’s lab, Chevron, and retained by the independent inspector for no less than three (3) months.

(d) A “ running tank composite” sample shall be taken of the shore receiving tanks by Chevron after the barge contents are received and Chevron will test this sample to determine API, flash point and record this information on the “Chevron Petroleum Delivery Receipt Record”. The final API and loading temperature is used to determine “net loaded” amounts for subsequent truck lifting’s from the Chevron Facility.

(e) If Chevron becomes aware that any sample for Product owned by Hawaii Electric Light indicates the presence of contamination or Product that does not meet the established Product Specifications, Chevron shall immediately notify Hawaii Electric Light. Chevron shall also have the right but not the obligation to verify the results of Hawaiian Electric’s laboratory analyses. The determination of quality for purposes of this Agreement shall be based on Hawaiian Electric’s laboratory results provided that the arithmetic difference between Hawaiian Electric’s and Chevron’s laboratory results is equal to or less than the then existing reproducibility standard for the appropriate test method referenced in Exhibit A . If the difference between Hawaiian Electric’s and Chevron’s laboratory results is greater than this reproducibility standard, the Parties will confer, in good faith, to resolve the difference. If any dispute by Chevron regarding Hawaiian Electric’s quality determination is not promptly resolved, Chevron may request analysis of the sample retained by the independent inspector by an independent laboratory, whose determination shall be final and binding on both Parties (absent manifest error or fraud). Chevron and Hawaii Electric Light shall share equally the cost of such independent analysis.

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(f) Any difference between such inspector’s findings and those of Chevron shall be promptly discussed by Chevron and Hawaii Electric Light and, if an agreement cannot be reached as to whether the Product is contaminated or otherwise non-conforming, then Chevron shall have the right to reject the delivery unless Hawaii Electric Light provides a waiver of responsibility to Chevron’s satisfaction.

(g) Chevron shall not be obligated to accept Product into the Chevron Facility if such Product does not meet the specifications set forth in this Agreement or as otherwise agreed to by the Parties or does not fully comply with all legal requirements at the time of delivery but will notify Hawaii Electric Light immediately of the situation.

(h) Hawaii Electric Light ’s storage of Product hereunder is segregated and Chevron shall not commingle or introduce Product into the Chevron Facility storage dedicated to Hawaii Electric Light’s Product from any source (including third parties using the Chevron Facility or Chevron’s own product) without the express written permission of Hawaii Electric Light.

(i) Chevron shall perform water draws of its Chevron Facility tank(s) after each receipt of Product by way of barge, and record the results of such draws for Hawaii Electric Light’s review, at no additional cost to Hawaii Electric Light.

(j) [ … ]

(k) [ … ]

Section 4.2: Quantity .

(a) The quantity of Product shall be determined by the Independent Inspector at the time of the receipt at the Chevron Facility by gauging Chevron’s shore tanks before and after loading or, at Hawaii Electric Light’s option and expense, by use of a meter capable of measuring the volume discharged from the barge. The charges for the Independent Inspector shall be paid by Hawaii Electric Light unless otherwise specified in this Agreement.

(b) Each barge delivery quantity of Product received into the Chevron Facility shall be recorded on the Independent Inspector’s report. The Independent Inspector shall separately gauge the barge tanks upon the barge’s arrival at Hilo harbor before and after loading and record such quantity on the report.

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(c) The Parties agree that if the measurement of Product received into or issued from the Chevron Facility shore receiving tank is, in the opinion of the Independent Inspector, considered to have been rendered inaccurate for any reason including, but not limited to, operational constraints, physical loss of Product or inadvertent transfer of Product within the Chevron Facility, then the quantity of Product received into the Chevron Facility by way of barge delivery may be determined by the Independent Inspector’s recorded measurement of the barge tanks before and after discharge.

(d) To the extent it is necessary to refill the pipeline with a fuel Product that existed in the pipeline immediately prior to each shipment of Hawaii Electric Light’s Product, including line flushes (“ Line Displacement Stock ”), Hawaii Electric Light shall pay the supplier of such Line Displacement Stock directly. When pipeline flushes are necessary and require manpower by Chevron, the supplier of the Line Displacement Stock will make a reasonable effort to coordinate with the Chevron Facility and perform the tank watch, tank gauging, and Product sampling. [ …]

(e) Hawaii Electric Light shall not be invoiced for the quantity of Product loaded into Hawaii Electric Light’s tanker trucks. Such quantities are measured for recordkeeping purposes only. For truck loadings, the quantity of Product loaded into Hawaii Electric Light’s contracted tanker trucks shall be determined at the time of the loading of each such truck at the Chevron Facility load rack based on the Chevron Facility’s meters, converted to 60 DF by the Chevron Facility’s automated rack control system as reflected on the Bills of Lading, or in the case of meter failure or absence of meters, tanker truck calibration charts shall be used and the volume converted to 60 degrees Fahrenheit on the basis of manual temperature measurement of the receiving tanker truck. Chevron shall maintain seals on its meters and shall test and calibrate its meters on a semi-annual basis or within a period otherwise in accordance with industry standards, whichever is less. Chevron shall give Hawaii Electric Light a written schedule of calibration test times, and Hawaii Electric Light shall have the right to have its representative present to observe such calibration test and to review such test results.

ARTICLE V

EVAPORATION OR HANDLING LOSS

Hawaii Electric Light recognizes that normal handling of Product within the Chevron Facility may result in losses in Product volume due to evaporation, shrinkage, line loss, clingage, etc.

Section 5.1: Responsibility for Loss, Damage or Contamination . Chevron shall be responsible for any type of loss of or damage to (including contamination) the Product while it is in Chevron’s custody to the extent such loss or damage is caused by Chevron’s (i) failure to use reasonable care in receiving, handling, storing, and/or delivering the Product, (ii) negligence or willful misconduct, (iii) failure to use Good Industry Practice or comply with applicable Law, or (iv) breach of this Agreement. Chevron shall not in any event be liable for more than the actual cost of the Product (delivered to the Chevron Facility) to Hawaii Electric Light for any contamination, damage or loss of Product, nor for special or consequential damages arising out of any contamination or loss of Product, no matter how such contamination, damages or loss shall have occurred or been caused, provided, however, that Chevron shall, subject to Section 16.2 , indemnify Hawaii Electric Light against any actual, reasonable and necessary costs and expenses directly incurred by Hawaii Electric Light as a result of any contamination of the Product, as well as any fines, and penalties actually levied against and paid by Hawaii Electric Light by reason of Product contamination for which Chevron is responsible hereunder. At Hawaii Electric Light’s option, Chevron may in lieu of payment (at its sole cost and expense) either (1) replace the lost, damaged or contaminated Product with Product of the same quality and quantity delivered to the Chevron Facility or (2) restore the damaged or contaminated Product to original receipt quality. Any salvage or residual value received or credited for the lost or damaged Product shall revert to or be credited to the Party which replaced the lost or

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damaged Product in the event that Chevron or Hawaii Electric Light replaces any portion or the entire lost or damaged Product.

Section 5.2: Normal Losses and Abnormal Losses . Subject to the immediately following sentence, Hawaii Electric Light shall be responsible for normal evaporation or handling losses, except to the extent such losses are caused by Chevron’s (i) failure to use reasonable care in receiving, handling, storing and/or delivering the Product, (ii) negligence or willful misconduct, (iii) failure to use Good Industry Practice or comply with applicable Law, or (iv) breach of this Agreement (any losses, resulting from the events described in (i) through (iv), an “ Abnormal Loss ”). Notwithstanding the foregoing, Hawaii Electric Light’s share of losses (other than Abnormal Losses) [ … ] of Hawaii Electric Light’s total quantity of Product received at the Chevron Facility during the relevant calendar year. Losses shall be settled within thirty (30) days after each calendar year and at the expiration of this Agreement.

Section 5.3: Loss Allowance and Settlement of Normal Losses . Chevron shall be responsible for any terminalling losses of Product [ …] based on the losses as a percentage of total quantity received into the Chevron Facility during the period for which the losses are being determined; provided, however, that the […] shall not apply to Abnormal Losses, in which case Chevron shall be responsible for the entire volume of the lost, damaged or contaminated Product. The net losses for evaporation and handling shall be determined and mutually agreed to monthly by comparing the month-end Product book inventory with the month-end Product physical inventory. Settlement of any net losses (other than Abnormal Losses) shall be handled by Chevron at the end of each calendar year and at the termination or expiration of this Agreement through: (a) a credit to Hawaii Electric Light’s account against the next invoice following the end of the calendar year, or (b) if at the expiration or termination of this Agreement, payment to Hawaii Electric Light shall be within thirty (30) days of the end of expiration or termination of this Agreement. The price of the Product shall be based upon Hawaii Electric Light’s actual average calendar month purchase price of the grade of Product delivered to the Chevron Facility, as documented by Hawaii Electric Light for the calendar month in which the losses were incurred.

Section 5.4: Notification and Settlement of Abnormal Losses . Chevron shall notify Hawaii Electric Light upon Chevron’s discovery or knowledge of any Abnormal Loss as soon as practicable (but in no event later than forty-eight (48) hours from Chevron’s initial discovery or knowledge thereof). Chevron’s notification to Hawaii Electric Light shall include the volume of the Abnormal Loss, together with any other known pertinent information related thereto. Abnormal Losses shall be settled at the end of the calendar month in which they occurred. The price of the Product to be paid by Chevron for any Abnormal Loss shall be in accordance with the last sentence in Section 5.3 above.

ARTICLE VI

PRICE

Section 6.1: Pricing . Pricing of Terminalling Services under this Agreement shall be as set forth on the attached Exhibit B.

Section 6.2: Rounding . All prices, price formula component value averages and other sums payable with respect to Terminalling Services and Terminalling Services Fees or the Discounted Terminalling Services Fees (as applicable) hereunder shall be stated in the nearest hundredths of a dollar unless specifically provided otherwise.

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ARTICLE VII

PRODUCT RECEIPTS AND DELIVERIES

Section 7.1: Product Receipts into Chevron Facility . The Parties shall mutually coordinate the receipt of Product into the Chevron Facility. […] Hawaii Electric Light will provide notice of its proposed barge delivery schedule for the upcoming calendar month to Chevron and Chevron will notify Hawaii Electric Light […] after receipt of the schedule if Chevron will not be able to meet the schedule for any reason. If Hawaii Electric Light does not receive notification, Chevron shall staff the Chevron Facility as required for the barge deliveries according to Hawaii Electric Light’s schedule and the Parties will mutually coordinate the deliveries of Product by barge into the Chevron Facility. […]

(a) […]

(b) On the day before the scheduled barge load date, Hawaii Electric Light will provide Chevron with a cargo load plan.

(c) Once barge loading is complete, Hawaii Electric Light will notify Chevron of an Estimated Time of Arrival (“ ETA ”) at Hilo Harbor, and any changes to the ETA by email or telephone.

(d) Upon arrival of the barge at Hilo, Chevron Facility personnel shall meet with the Independent Inspector and the barge tankermen for a pre-transfer conference and to complete the transfer document. Chevron shall provide the independent inspector with access to the Chevron Facility for shore tank gauging and shall also assist in testing the shore tank sample for final API, temperature and flash point.

(e) Chevron shall record the start time and end time of the Product transfer on a Tank Receiving Log. Chevron shall also record the hourly receiving tank gauge readings, the barrels received per hour, and the total barrels received. This information shall be provided to the independent inspector and the barge tankermen during Product receipt.

(f) Hawaii Electric Light’s nominated barge shall meet all internal requirements set by Chevron for barges or vessels calling on the Chevron Facility as well as comply with all applicable Law, the vessel acceptance standards as may be applicable to unmanned petroleum tank barges and shall be fit in every way to carry and deliver the Product. Chevron shall provide Hawaii Electric Light with the Chevron Facility’s operations manual and any other applicable safety and operations procedures, and any amendments thereto, during the Term of this Agreement.

Section 7.2: Pipeline Deliveries from the Chevron Facility . Deliveries of Hawaii Electric Light’s Products made by pipeline from the Chevron Facility to Hill Plant shall be mutually coordinated between Chevron Facility personnel and Hawaii Electric Light’s personnel. Chevron shall ensure that one of the Chevron Facility personnel is monitoring the pumping controls at all times while the pipeline is in operation. […]

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Section 7.3: Truck Deliveries from the Chevron Facility . Chevron shall grant Hawaii Electric Light or its agent access to the loading portion or side of the Chevron Facility’s truck loading rack for the purpose of loading the Product from the Chevron Facility. Chevron shall not be responsible for any demurrage resulting from Chevron’s delayed access to the loading portion or side of the Chevron Facility’s truck loading rack.

Section 7.4: Demurrage . Neither Hawaii Electric Light nor Chevron assumes any liability to the other for any demurrage on marine vessels or truck equipment which occurs as a result of their respective operations, unless such demurrage is caused by the relevant Party’s negligence or failure to comply with this Agreement.

Section 7.5: Reports . Chevron agrees to provide (a) reports summarizing receipts and deliveries of Hawaii Electric Light’s Product, into and out of storage, including the quantities of Product received and delivered, the date of each such transaction, (b) reports of the actual inventory of Hawaii Electric Light’s Product in each of the storage tanks covered by this Agreement, (c) volumetric additive reports (“ VAR ”) when requested by Hawaii Electric Light, up to a limit of one (1) such report per day (Monday through Friday). At the end of each calendar month and prior to the fourth work day of the following month, during the term hereof, Chevron shall provide to Hawaii Electric Light a report, summarizing for such month receipts and deliveries of Hawaii Electric Light’s Product into and out of storage, the beginning storage inventory, the ending inventory, and any Product gain or loss of actual physical inventory over computed inventory. Chevron shall not be obligated to perform any additional administrative duties for Hawaii Electric Light that are not a part of Chevron’s customary administrative duties, as determined by Chevron, other than those reporting duties set forth in this Section, unless Chevron and Hawaii Electric Light agree in writing to such additional duties and compensation, if any, for their performance.

ARTICLE VIII

TERMINAL OPERATING REQUIREMENTS

Section 8.1: Chevron’s Representation and Warranties .

(a) C hevron’s Representations and Warranties. During the Term of this Agreement, Chevron shall maintain in full force and effect, the capability to receive, store, deliver and handle Hawaii Electric Light’s Products sufficient to meet Chevron’s obligations under this Agreement. Upon Hawaii Electric Light’s reasonable request, Chevron shall provide Hawaii Electric Light assurances of Chevron’s ability to perform under this Agreement.

Chevron represents and warrants as to the Effective Date that: (i) the Chevron Facility and the tanks used to store Hawaii Electric Light’s Product are in good serviceable condition, (ii) the Chevron Facility and such tanks are structurally sound, and (iii) the Chevron Facility and such tanks have been and are being operated and maintained in accordance with Good Industry Practice and in compliance with applicable law.


1.	Storage tanks shall be available for incoming barge deliveries of Product.

Subject to Section 7.1 and Section 7.2 , Operators and Chevron Facility personnel shall be available for any and all incoming and outgoing Product receipts and deliveries, including loading of Hawaii Electric Light’s tanker trucks at the truck rack and the operation of the pipeline from the Chevron Facility to Hawaii Electric Light’s power plant(s). Once the barge unloading begins, the Chevron

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Facility personnel shall continue the unloading through completion of the delivery. Once a pipeline delivery begins, the Chevron Facility personnel shall continue to monitor the pipeline flow through completion of the delivery, including Line Displacement Stock flushes (as required).

Section 8.2: Chevron Facility Hours of Operation . Except when the Chevron Facility may be closed due to scheduled or necessary but unscheduled maintenance or closure for any reason by a regulatory authority:

(a) The Chevron Facility shall remain open […]

(b) Receipt of Hawaii Electric Light’s Product into the Chevron Facility shall be per Section 7.1 . […] Chevron shall ensure that one of the Chevron Facility personnel is monitoring the pumping controls at all times while the pipeline is in operation. In the event of an emergency, Chevron shall make reasonable effort to accommodate Hawai’i Electric Light’s request to extend deliveries outside the Normal Pipeline Delivery Schedule.

Chevron shall provide advance notice of all maintenance activities which may result in closure of the Chevron Facility, such as tank inspections and maintenance.

Section 8.3: Chevron Facility Operating Requirements .

(a) Hawaii Electric Light , and its agents, contractors or subcontractors, including those providing transportation services from the Chevron Facility shall adhere to all Chevron’s rules and regulations for the Chevron Facility, and to complete and execute such forms and agreements, as Chevron may from time to time require in connection with Chevron Facility safety or operating procedures. Hawaii Electric Light agrees to provide all of its carriers with all safety, equipment, inspection, training and operating procedures and requirements as may be established by Chevron for the Chevron Facility or instructed by Chevron Facility personnel, including any supplements or amendments thereto, and shall cause all of its carriers to conduct themselves in accordance with such procedures and requirements at all times when in or around the Chevron Facility. Each Party agrees that its agents and employees shall comply with all safety regulations of the other when such agents or employees are upon the premises of the other in connection with the performance of this Agreement. Nothing in this Agreement will be construed to deny or otherwise limit Chevron's right to refuse entry to, or to remove immediately from a Chevron Facility, any person or equipment, which in the sole discretion of Chevron, poses a hazard to Chevron Facility personnel or property. If Chevron determines that an unsafe condition exists, Chevron may, in its absolute discretion, temporarily cease operations at the Chevron Facility until such unsafe condition has been remedied or corrected. Hawaii Electric Light acknowledges that the Chevron Facility may be inaccessible or inoperative for periods of time, due to Maritime Security (“ MARSEC ”) compliance or other similar circumstances, and that in such event Chevron, subject to Section 8.5 below, will not be responsible for any purported damages of any kind due to the unavailability of the Chevron Facility or related equipment.

Section 8.4: […]

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Chevron will be responsible for keeping operating records and performing the maintenance work required by Title 49, Part 195, Code of Federal Regulations, on the United States Department of Transportation Pipeline and Hazardous Materials Safety Administration jurisdiction pipeline and tanks within Chevron's facility unless owned by Hawai’i Electric Light in which case Hawai’i Electric Light shall maintain in accordance with this Section. Documents verifying that the operating and maintenance work has been done must be provided to Hawaii Electric Light.

Section 8.5: [ …]

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Section 8.6: Notice Addresses . Promptly following the Effective Date (and thereafter as staffing changes warrant updates), the Parties will exchange lists of personnel (and their contact information) who shall be contacted for coordination of operational matters, such as scheduling, nominations, and receipt and delivery of Products.

ARTICLE IX

INVOICING AND PAYMENT

Commencing with the Effective Date specified in this Agreement, Hawai’i Electric Light agrees to pay Chevron the following charges as specified in this Agreement and according to Exhibit B (Pricing):

Section 9.1: Invoicing .

(a) Subject to the quarterly true-up mechanism described in Exhibit B , Chevron shall invoice Hawaii Electric Light monthly for the Terminalling Services Fee or the Discounted Terminalling Services Fee (as applicable) multiplied by the total of volume of Hawaii Electric Light’s Product actually delivered into storage at the Chevron Facility during the immediately preceding month. Original invoices shall include full documentation, as approved by both Parties, including reports of the independent inspector, any laboratory analyses, price calculation, and any other documents having to do with the quality, quantity and receipt of Product. This may include other fees and charges as set forth in this Agreement and as may be agreed upon in a signed writing between the Parties from time to time during the Term of this Agreement. Invoices and documentation shall be prepared and sent each calendar month.

(b) If applicable to any consideration due under this Agreement, the invoice shall also include the amount of any transaction taxes which Chevron proposes to collect or for which it will seek reimbursement from Hawaii Electric Light, and Chevron’s tax registration number. Chevron shall separately state invoice items to reduce transaction taxes if requested by Hawaii Electric Light and as permitted by applicable Laws.

(c) Invoices and documentation shall be prepared and sent each calendar month by U.S. first class mail, postage prepaid, by electronic transmission (electronic mail, with receipt confirmed) to Hawai’i Electric Light at the following address:

Via email to : Curtis.Hong@hawaiianelectriclight.com

And via USPS mail to :

Hawaii Electric Light Company, Inc.

P. O. Box 1027

Hilo, Hawaiʿi 96721

Attention: Production Fuel Department, Chenoa Haa

Ph: [...]

Section 9.2: Payment . All payments under this Agreement shall be due payable within […]

from Hawaii Electric Light’s receipt of Chevron’s monthly invoice. Payment due date is the date payments are to reach Chevron. If such date falls on a Sunday or a holiday, payment shall be received the following business day. Any payment not made within […] after receipt of such monthly invoice will begin bearing interest at an annual rate of interest equal to the “Base Rate” of interest

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published by […] but not to exceed the maximum allowed by law, until such payment is made.

For Payment of Invoices and questions concerning invoices shall be directed as provided in the invoice or to the following:

Chevron Products Company

Chevron Business Support Center S.A.

Attn: Diego Tomas Erdocia

Email: nalstock@chevron.com

Section 9.3: Method of Payment . […]

Section 9.4: Chevron’s Lien . Chevron reserves, and is hereby granted by Hawaii Electric Light, a lien and security interest (which shall be in addition to and not in lieu of any rights otherwise provided by law) on such amount of Hawaii Electric Light’s Product stored at the Chevron Facility whose market value equals any amounts owed to Chevron hereunder which have not been paid when due under this Agreement (only to that extent and not further), which lien and security interest may be enforced upon thirty (30) days prior written notice by Chevron in any reasonable manner including private or public sale.

Section 9.5: […]

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ARTICLE X

TITLE, CUSTODY AND RISK OF LOSS

Section 10.1: Title and Custody . Title to the Product stored and/or handled hereunder shall always remain with Hawaii Electric Light. Chevron shall be deemed to have custody of and responsibility, including risk of loss and damage for purposes of Article V , for the Product starting from the time during receipt when it passes (a) the last valve prior to the Chevron Facility tank on marine receipts into the Chevron Facility; and (b) on the date of book or stock transfers. Hawaii Electric Light shall be deemed to have regained custody of any responsibility for the Product during delivery from the Chevron Facility starting from the time when Product passes the Chevron Facility’s last flange connecting to Hawaii Electric Light’s designated truck or into Hawaii Electric Light’s owned pipeline. Chevron shall not have responsibility or custody of any Product while in any pipeline that is not owned or used exclusively by Chevron.

ARTICLE XI

INSURANCE

Section 11.1: Insurance Requirements .

(a) The Terminalling Services Fee or Discounted Terminalling Services Fee (as applicable) does not include any costs for first party property insurance covering damage to or loss of Hawaii Electric Light’s Product while it is in the custody of Chevron, it being expressly understood and agreed that such insurance, if desired by Hawaii Electric Light, shall be carried by Hawaii Electric Light at its own expense.

(b) Chevron and Hawaii Electric Light and/or anyone acting under either Party’s direction or control or on either Party’s behalf shall maintain, at its sole cost, at all times while performing under this Agreement, the following insurance coverage with providers satisfactory to each Party with limits not less than but not limited to those limits required below (the “ Insurance ”):


1.	Commercial General Liability Insurance (including but not limited to coverage for each Party’s obligation hereunder to defend and/or indemnify each Party) with limits of not less than [...] each occurrence and [...] general aggregate; CG 2503, or its equivalent, amending aggregate limits shall apply.

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2.	Business Automobile Liability Insurance covering all vehicles used by each Party in their operations with a limit of liability of not less than: [...] each occurrence for bodily injury and property damage combined, such policy to be endorsed with MCS-90 and CA 99 48, or its equivalent, when hazardous material transportation is involved.


3.	Workers’ Compensation Insurance and/or Longshoremen’s and Harbor workers’ Compensation Insurance as required by laws and regulations applicable to and covering employees of each Party performing under this Agreement.


4.	Employers’ Liability Insurance protecting each Party against common law liability, in the absence of statutory liability, for employee bodily injury arising out of the master-servant relationship with a limit of not less than [...] Each Accident, [...] Disease-Policy Limit, [...] Disease-Each Employee.

(c) Chevron and Hawaii Electric Light and/or anyone acting under either Party’s direction or control or on either Party’s behalf shall maintain all coverage required pursuant to the Oil Pollution Act of 1990 and the regulations promulgated thereunder, as the same may be in effect from time to time. Pollution Legal Liability Insurance (including but not limited to coverage for their obligation hereunder to defend and/or indemnify the other Party with limits of not less than [...] each occurrence.

(d) Each Party’s Insurance policies shall provide a blanket waiver of subrogation in favor of the other Party, allow for the separation of insureds and give written notice of cancellation or material change. Notice of cancellation or change shall not affect the insurance until thirty (30) days after written notice is received by either Party. Any deductible or retention of insurable risks shall be for the other Party’s account.

(e) The Insurance required in Section 11.1 (b), subsections (1) through (4), shall name the other Party (and its members, subsidiaries, Affiliates and joint venture partners to the extent of their interest) as additional insureds to the extent of the other Party’s indemnity obligations under this Agreement.

(f) Failure of either Party to provide evidence of the Insurance or purchase Insurance in compliance with this Section shall not relieve each Party of its obligations in this Section.

(g) […]

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ARTICLE XII

FORCE MAJEURE

Section 12.1: [...]

ARTICLE XIII

COMPLIANCE WITH LAWS AND REGULATIONS

Section 13.1: Compliance with Laws and Regulations .

(a) Chevron and Hawaii Electric Light hereby agree to comply fully in the performance of this Agreement with all current industry and ASTM rules and regulations, and all applicable Laws, including but not limited to the inspection, testing and maintenance of tanks, pipelines and related Chevron Facility infrastructure, fuel spills, and emergency response plans and drills. In addition, Hawaiʿi

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Electric Light and Chevron each agree to file all reports as may be required by state and local jurisdictions which are applicable to Hawaii Electric Light and/or Chevron.

(b) In the event, at any time after the date this Agreement is entered into, any Governmental Authority shall require the installation or modification of the facilities or fixtures of the Chevron Facility used in the storage and handling of Hawaii Electric Light’s Product during the Term of this Agreement, as required by new Laws, or require changes in Chevron’s normal operating procedures related to the storage and handling of Hawaii Electric Light’s Product, Chevron shall notify Hawaii Electric Light of the necessity and cost of such installation of facilities or fixtures or changes in operating procedures, and Chevron and Hawaii Electric Light shall work, in good faith, to allow such installation of facilities or fixtures or to make such necessary changes to Chevron’s operating procedures and to adjust the compensation under this Agreement to reflect Chevron’s additional costs of compliance should the cost of compliance be solely attributed to providing Hawaii Electric Light the Terminalling Services described herein. In the event Hawaii Electric Light decides that such increase in costs or change in operating procedure is too onerous or prohibitive, Hawaii Electric Light may, upon thirty (30) days written notice to Chevron, terminate this Agreement or cancel those portions of this Agreement which are affected. To the extent that Hawaii Electric Light cancels portions of this Agreement, there shall be an equivalent reduction of the fees due under this Agreement and Hawaii Electric Light expressly relieves Chevron of any and all obligations hereunder to provide facilities and/or Terminalling Services covered by those cancelled portions of this Agreement .

Section 13.2 : Material Safety Compliance for Third Party Products . In the event Chevron is not the fuel supplier for the Products, Hawaii Electric Light shall furnish to Chevron health, safety and environmental information (including without limitation Material Safety Data Sheets, “ HSE Data ”) concerning health, safety and environmental aspects of Hawaii Electric Light’s Products, including health, safety and environmental warnings, if any, required by applicable Law. Chevron shall not be entitled to rely upon such HSE Data as being an inclusive presentation of all potential health, safety and environmental risks associated with Hawaii Electric Light’s Products. Each Party shall furnish HSE Data to, and otherwise inform, its respective nominated vessels of all such risks, and the request the master to advise and instruct all crew, seamen and employees about the hazards, if any, associated with Hawaii Electric Light’s Products, and the safe and proper methods of handling and storing fuel. Compliance by Chevron with recommendations in HSE Data shall not excuse the Chevron from its obligations under Article XV and this Section 13.2 .

Section 13.3: Permits and Licenses . Chevron shall secure and pay for all required permits and licenses, and shall comply with all applicable Law (including the provisions of the Occupational Safety and Health Act of 1970 and all amendments thereto, and the DOT Hazardous Materials Regulations), and shall indemnify, defend and save Hawaii Electric Light harmless from any and all liability, fines, damage, cost and expense, including but not limited to reasonable attorneys’ fees and costs, arising from Chevron’s failure to do so.

Section 13.4: […]

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ARTICLE XIV

RELEASES

Section 14.1: Spills/Environmental Pollution . In the event of any Product spill or discharge or other environmental pollution caused by or in connection with Hawaii Electric Light’s delivery or receiving operations, prior to the time that Chevron has obtained custody of the Product or after Hawaii Electric Light has received product and regained custody of product in accordance with Article IX (Title, Custody and Risk of Loss) of this Agreement, Chevron may commence containment or clean-up operations as deemed appropriate or necessary by Chevron or required by any Governmental Authorities and shall notify Hawaii Electric Light immediately of such operations. Except to the extent such spill or discharge caused by or in connection with Hawaii Electric Light’s delivery or receiving operations (where Chevron does not have custody of the Product) is the result of Chevron’s negligence or willful misconduct or Chevron’s failure to use Good Industry Practice or comply with applicable Law, all reasonable costs of containment or clean-up shall be borne by Hawaii Electric Light. In the event of any Product spill or discharge or other environment pollution caused by or in connection with Chevron’s storage and transfer operations at the Chevron Facility or while Chevron has custody of the Product in accordance with Article X (Title, Custody and Risk of Loss), Chevron shall commence containment or clean-up operations as deemed appropriate or necessary by Chevron or required by any Governmental Authorities and shall notify Hawaii Electric Light immediately of such operations. In the event of any Product spill or discharge or other environmental pollution caused by or in connection with Chevron’s storage and transfer operations at the Chevron Facility or any other time after Chevron has obtained custody of the Product in accordance with Article X of this Agreement, all reasonable costs or clean-up shall be borne by Chevron, except to the extent such spill or discharge caused by or in connection with Chevron’s storage or transfer operations at the Chevron Facility is the result of Hawaii Electric Light’s gross negligence or willful misconduct. In the event a third party is legally liable for costs and expenses borne by Chevron or Hawaii Electric Light under this Section, either Party shall reasonably cooperate with the other for the purpose of obtaining reimbursement.

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Section 14.2: Pollution Mitigation .

(a) When an escape or discharge of Product, oil or any polluting substance occurs in connection with or is caused by Chevron’s or its agent’s vessel or occurs from or is caused by discharging operations, Chevron or its agents shall promptly take whatever measures are necessary or reasonable to prevent or mitigate environmental damage, without regard to whether or not said escape or discharge was caused by the negligence or willful misconduct of Chevron’s equipment or Chevron or Hawaiian Electric or others. Failing such action Chevron or its agents, Hawaiian Electric, on Chevron’s behalf, may promptly take whatever measures are reasonably necessary to prevent or mitigate pollution damage and notify Chevron as soon as practicable thereafter of such actions. Each Party in good faith shall keep the other advised of the nature and results of the measures taken, and if time permits, the nature of the measures intended to be taken.

(b) [...]

(c) Notwithstanding any other provision in this Agreement, the foregoing provisions shall be applicable only between Chevron and Hawaiian Electric and shall not affect, as between Chevron and Hawaiian Electric, any liability that either Chevron or Hawaiian Electric shall have to any third parties, including the State of Hawaii and the U.S. Government, if either Party shall have such liability.

Section 14.3: Operational Contacts . Promptly following the Effective Date (and thereafter as staffing changes warrant updates), the Parties will exchange lists of personnel (and their contact information) who shall be immediately contacted in the event of any accident, spill, or reportable incident incurred under the performance of this Agreement.

ARTICLE XV

INDEMNITY

Section 15.1: Indemnity . To the fullest extent permitted by applicable Law and except as specified otherwise elsewhere in this Agreement:

Chevron shall defend, indemnify and hold harmless Hawaii Electric Light, its parent, Affiliates and subsidiary companies and their directors, employees and agents for and against any loss, damage, claim, suit, liability, fine, penalty, judgment and/or expense (including attorneys’ fees and other costs of litigation) (collectively “ Liability(ies) ”), arising from injury, disease or death of any persons, damage to or loss of any property, or discharges or spills or leaks of Product, to the extent that any of the foregoing is caused by, arises out of, or results from (i) the negligent acts or omissions or willful misconduct of Chevron, its employees, agents, or contractors in the performance of this Agreement or operation of the Chevron Facility (ii) Chevron’s, its agents’ or contractors’ failure to comply with all applicable Laws, or (iii) Chevron’s breach of this Agreement (including Chevron’s failure to provide Terminalling Services in accordance with Good Industry Practice).

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Hawaii Electric Light shall defend, indemnify and hold harmless Chevron, its members, subsidiaries, Affiliates and joint venture partners and their directors, employees and agents for and against any Liabilities, arising from injury, disease or death of any persons, damage to or loss of any property (including, but not limited to Chevron’s facilities), or discharges or spills or leaks of product, to the extent that any of the foregoing is caused by, arises out of or results from the (i) negligent acts or omissions or willful misconduct of Hawaii Electric Light , its employees, agents, or contractors, Hawaiʿi in the exercise of any of the rights granted to Hawaii Electric Light hereunder or in the operation, loading or unloading of any motor vehicle or vessel owned or hired by Hawaii Electric Light , its agent or contractors (ii) Hawaii Electric Light’s, its agents’, or contractors’ failure to comply with all applicable Laws, or (iii) Hawaii Electric Light’s breach of this Agreement.

In the event Hawaii Electric Light and Chevron are jointly responsible for any liability(ies), then the Parties shall jointly share responsibility and indemnify each other for the liability(ies) in proportion to each Party’s contribution to the injury, disease, or death of any persons, damage to or loss of property, or discharge, leak, or spill of Product.

Any action by either Party must be brought within two (2) years after the cause of action arose.

Chevron or Hawaii Electric Light, as soon as practicable after receiving notice of any suit brought against it within this indemnity, shall furnish to the other full particulars within its knowledge thereof and shall render all reasonable assistance requested by the other in the defense. Each shall have the right, but not the duty to participate, at its own expense, with counsel of its own selection, in the defense and/or settlement thereof without relieving the other of any obligations hereunder. The Parties’ obligations under this Section shall survive any termination of this Agreement.

ARTICLE XVI

DEFAULT

Section 16.1: Default . A material breach of any of the terms and conditions of this Agreement by either Party shall constitute a default hereunder. Upon default, the non-defaulting Party shall, within [...] of knowledge thereof, notify, in writing, the defaulting Party of the particulars of such default and (unless a different cure period is provided herein, including under Section 9.5(a) ) the defaulting Party shall have [...] thereafter to cure such default. In the event of default and defaulting Party’s failure to cure during the cure period, the non-defaulting Party shall also have the option to terminate this Agreement upon written notice to the defaulting Party. The waiver by the non-defaulting Party of any right hereunder shall not operate to waive any other right nor operate as waiver of that right at any future date upon another default by either Party hereunder.

Section 16.2: Limitation of Liability . NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR, AND EACH PARTY SHALL RELEASE THE OTHER PARTY FROM AND AGAINST, ANY PUNITIVE DAMAGES, EXEMPLARY DAMAGES, LOST USE, LOSS OF PROFITS OR REVENUE, LOSS OF OPPORTUNITY, LOSS OF PRODUCTION, OR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR CONTINGENT DAMAGES OF ANY KIND WHETHER BASED IN CONTRACT, TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE OR STRICT LIABILITY), WARRANTY OR OTHERWISE WHICH MAY BE SUFFERED BY SUCH PARTY IN CONNECTION WITH THIS AGREEMENT; THIRD PARTY DAMAGES SUBJECT TO INDEMNIFICATION UNDER THIS AGREEMENT ARE NOT LIMITED BY THIS SECTION.

ARTICLE XVII

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NOTICE

Section 17.1: Notices . Any notice required or permitted hereunder by one Party to the other shall be in writing and the same shall be given and shall be deemed to be served and given if (1) delivered in person to the address set forth in this Agreement for the Party to whom the notice is given, or (2) if placed in the United States mail, postage prepaid, addressed to the Party at the address set forth in this Agreement, or (3) sent by facsimile with receipt acknowledged. The addresses for Hawaiian Electric, Hawaii Electric Light and Chevron shall be as specified in this Agreement. From time to time, either Party may designate another address for the purpose of this Agreement by giving to the other Party notice of such change of address, which shall be effective fifteen (15) days after the giving of such notice.

Hawaiian Electric :

Hawaiian Electric Company, Inc.

P. O. Box 2750

Honolulu, Hawaiʿi 96840-0001

Attention: Director of Fuels Operations - mailstop CIP3-IF

Facsimile: [...]

Hawaii Electric Light:

Hawaii Electric Light Company, Inc.

P. O. Box 1027

Hilo, Hawaiʿi 96721

Attn: Environmental Fuels Office, Curtis Hong

Tel: [...]

Cell: [...]

Facsimile: [...]

Chevron :

Chevron Products Company

91-480 Malakole Street

Kapolei, HI 96813

Attn: Coordinator, Value Chain Optimization

Tel: [...]

Facsimile: [...]

Section 17.2: Routine Communications . The Parties may from time to time by notice hereunder designate persons or parties to whom routine communications may be directed, including via email, with a view to facilitating mutual and expeditious performance by the Parties hereunder.

ARTICLE XVIII

GENERAL PROVISIONS

Section 18.1: Waiver and Severability . If any section or provision of this Agreement or any exhibit or rider hereto is held by any court or other competent authority or be illegal, unenforceable or invalid, the remaining terms, provisions, rights and obligations of this Agreement shall not be affected. The failure of a Party hereunder to assert a right or enforce an obligation of the other Party shall not be deemed a waiver of such right or obligation. In no event shall any waiver by either Party of any default under this Agreement operate as a waiver of any further default.

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Section 18.2: […] this Agreement effective immediately upon notice to the Party attempting such assignment or transfer.

Section 18.3: Conflicts of Interest .

(a) Conflicts of interest related to this Agreement are strictly prohibited. Except as otherwise expressly provided herein, no Party, nor any director, employee, or agent of a Party shall give to or receive from any director, employee or agent of the other Party any gift, entertainment or other favor of significant value, or any commission, fee or rebate. Likewise, no Party nor any director, employee or agent of a Party shall enter into any business arrangement with any director, employee or agent of the other Party (or any Affiliate), unless such person is acting for and on behalf of the other Party, without prior written notification thereof to the other Party.

(b) In the event of any violation of Section 18.3(a) , including any violation occurring prior to the Effective Date of this Agreement which resulted directly or indirectly in one Party’s consent to enter into this Agreement with the other Party, such Party may, at its sole option, terminate this Agreement at any time and shall be relieved of any further obligation under this Agreement.

(d) Option to Terminate. In the event of any violation of Section 18.3 , including any violation occurring prior to the Effective Date of this Agreement which resulted directly or indirectly in one Party’s consent to enter into this Agreement with the other Party, such Party may, at its sole option, terminate this Agreement at any time and, except for obligations to pay in full in United States currency

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for the outstanding payment obligations hereunder, shall be relieved of any further obligation under this Agreement.

(e) Notice of Violation. Both Parties agree to immediately notify the other of any violation of Section 18.3 .

(f) Records. The Parties shall maintain true and correct records in connection with their obligations under this Agreement and all related transactions and shall retain all such records for at least twenty-four (24) months after termination of this Agreement. An independent auditor appointed and paid for by Chevron may upon reasonable notice after the Effective Date of this Agreement until twenty-four (24) months after termination of this Agreement make an audit of the records of Hawaii Electric Light for the sole purpose of determining compliance with Section 18.3 . The auditor shall be advised to not reveal information from any audit to Chevron except if there has been a breach of Section 18.3 and if so, on that topic, and nothing more.

(g) Auditing and Inspection. Hawaii Electric Light , at its expense, shall have the right during the Term of this Agreement: (a) to make periodic operational inspections of the Chevron Facility, (b) to conduct audits of any pertinent records including meter proving and additive calibration records and including those that substantiate Chevron’s charges to Hawaii Electric Light, and (c) to conduct physical verifications of the amount of Product stored at the Chevron Facility provided all such inspections shall be made during Chevron’s normal working hours and after reasonable notice to Chevron such that performance of said inspections will not disrupt Chevron’s operations.

Section 18.4: Governing Law and Jurisdiction . This Agreement shall be construed in accordance with, and all disputes arising hereunder shall be determined in accordance with, the laws of the State of Hawaiʿi, U.S.A. Hawaiʿi shall be the exclusive venue for any litigation arising hereunder. Each Party agrees and consents that any dispute, litigation, action or proceeding arising out of this Agreement, however defined, shall be brought exclusively in the State of Hawaiʿi in a court of competent jurisdiction.

Section 18.5: Entire Agreement/Modification . This Agreement shall constitute the entire understanding between the Parties with respect to all matters and things herein mentioned. It is expressly acknowledged and agreed by and between the Parties that neither Party is now relying upon any collateral, prior or contemporaneous agreement, assurance, representation or warranty, written or oral, pertaining to the subject matter contained herein. This Agreement shall not be modified or changed except by written instrument executed by the duly authorized representatives of the Parties hereto.

Section 18.6: Agreement Is Not an Asset . This Agreement shall not be deemed to be an asset of either Party, and, at the option of a Party, shall terminate in the event of any voluntary or involuntary receivership, bankruptcy or insolvency proceedings affecting the other Party.

Section 18.7: Status of the Parties .

(a) Independent Contractor . Nothing in this Agreement shall be construed to constitute either Party as a joint venturer, co-venturer, joint lessor, joint operator or partner of the other. In performing services pursuant to this Agreement, Chevron is acting solely as an independent contractor maintaining complete control over its employees and operations. Neither Chevron nor Hawaii Electric Light is authorized to take any action in any way whatsoever for or on behalf of the other, except as may be necessary to prevent injury to persons or property, or, in accordance with Section 14.2 , to contain, reduce or clean up any spills that may occur.

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(b) Chevron U.S.A. Inc. concludes some of its business (including the transactions contemplated hereunder) in the name of its division, Chevron Products Company. So long as Chevron Products Company is a division or an Affiliate of Chevron U.S.A. Inc., Chevron U.S.A. Inc. shall be fully responsible and liable for the performance of all of Chevron Product Company’s obligations hereunder.

Section 18.8: Headings . The headings or captions are for convenient reference only and have no force or effect or legal meaning in the construction or enforcement of this Agreement.

Section 18.9: Confidentiality and Non-Disclosure .

(a) Each Party may have a proprietary interest or other need for confidentiality in information that may be furnished to the other pursuant to this Agreement, including the pricing, volume, duration or other commercial terms under this Agreement (collectively, “ Confidential Information ”). The Party disclosing such information shall be referred to in this Section as the “ Disclosing Party ,” and the Party receiving such information shall be referred to as the “ Receiving Party .”

(b) The Receiving Party will hold in confidence and, without the consent of the Disclosing Party, will not use, reproduce, distribute, transmit, or disclose, directly or indirectly, the Confidential Information of the Disclosing Party except as permitted herein. A Party may disclose Confidential Information if, but only to the extent, the disclosure: (i) is required by Law; (ii) is required to enable a Party to enforce its rights or remedies under this Agreement; (iii) is made to a Party’s officers, directors, employees, professional advisors, independent contractors or consultants, who are subject to a duty of confidentiality; (iv) is to a third party who is required to maintain the confidentiality of the information under a written confidentiality agreement and the disclosure is made in connection with a potential (1) sale of the stock or partnership interests in a Party, or (2) sale or other disposition of all or substantially all of the assets or facilities which would primarily benefit from or support performance of this Agreement; or (3) is to a third party who is required to maintain the confidentiality of the information under Law or a written confidentiality agreement and the disclosure is made to prospective lenders or actual lenders. In the event Confidential Information is required to be disclosed by the Receiving Party pursuant to Law, the Receiving Party shall disclose only that part of the Confidential Information that it is required to disclose and shall notify the Disclosing Party prior to such disclosure in a timely fashion in order to permit the Disclosing Party to lawfully attempt to prevent or restrict such disclosure should it so elect, and shall take all other reasonable and lawful measures to ensure the continued confidential treatment of the same by the Party to which the Confidential Information is disclosed. Without limiting the foregoing, the Receiving Party agrees that it will exercise at least the same standard of care in protecting the confidentiality of the Disclosing Party’s Confidential Information as it does with its own Confidential Information of a similar nature, but in any event, no less than reasonable care.

(c) Confidential Information for purposes of this Agreement shall not include information to the extent that the Receiving Party establishes that the information: (i) is or becomes a part of the public domain through no act or omission of the Receiving Party; (ii) was in the Receiving Party’s lawful possession prior to the disclosure and had not been obtained by the Receiving Party either directly or indirectly from the Disclosing Party; or (iii) is lawfully disclosed to the Receiving Party by a third party without restriction on disclosure.

(d) Any provision herein to the contrary notwithstanding, Hawaii Electric Light may disclose Confidential Information to the Commission, the Consumer Advocate, and/or any other governmental regulatory agency with notice to, but without need of prior consent by Chevron, provided that Hawaii Electric Light takes reasonable steps to obtain approval to submit the same under seal or under other procedures designed to preserve the confidentiality of the Confidential Information.

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Section 18.10: Financial Compliance/Capital Lease/No Consolidation .

(a) Chevron shall provide or cause to be provided to Hawaiian Electric on a timely basis, as reasonably determined by Hawaiian Electric, all information, including but not limited to information that may be obtained in any audit referred to below (the “ Information ”), reasonably requested by Hawaiian Electric for purposes of permitting Hawaiian Electric and its parent company, Hawaiian Electric Industries (“ HEI ”), to comply with the requirements (initial and on-going) of (i) identifying variable interest entities and determining primary beneficiaries under the accounting principles of Financial Accounting Standards Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) 810, Consolidation (“ FASB ASC 810 ”), (ii) Section 404 of the Sarbanes-Oxley Act of 2002 (“ SOX 404 ”), (iii) FASB ASC 840 Leases (“F ASB ASC 840 ”), and (iv) all clarifications, interpretations and revisions of and regulations implementing FASB ASC 810, SOX 404, and FASB ASC 840, Securities and Exchange Commission, the Public Company Accounting Oversight Board, Emerging Issues Task Force or other governing agencies. In addition, if required by Hawaiian Electric in order to meet its compliance obligations, Chevron shall allow Hawaiian Electric or its independent auditor, to audit, to the extent reasonably required Chevron’s financial records, including its system of internal controls over financial reporting; provided that Hawaiian Electric shall be responsible for all costs associated with the foregoing, including but not limited to Chevron’s reasonable internal costs.

(b) If there is a change in circumstances during the Term that would trigger consolidation of Chevron’s finances on to Hawaiian Electric’s balance sheet, and such consolidation is not attributable to Hawaiian Electric’s fault, then the Parties will take all commercially reasonable steps, including modification of this Agreement, to eliminate the consolidation, while preserving the economic “benefit of the bargain” to both Parties. Notwithstanding the foregoing, if for any reason, at any time during the Term, Hawaiian Electric (and/or Hawaiian Electric’s Affiliates or HEI) in their good faith analysis and sole discretion are required to consolidate Chevron into its financial statements in accordance with U.S. generally accepted accounting principles, then Hawaiian Electric may take any and all action necessary to eliminate consolidation, including without limitation, by immediately terminating this Agreement without fault or liability.

(c) If there is a change in circumstances during the Term that would trigger the treatment of this Agreement as a capital lease under FASB ASC 840, and such treatment is not attributable to Hawaiian Electric’s fault, then the Parties will take all commercially reasonable steps, including modification of this Agreement, to eliminate the capital lease treatment, while preserving the economic “benefit of the bargain” to both Parties. Notwithstanding the foregoing, if for any reason, at any time during the Term, Hawaiian Electric (and/or Hawaiian Electric’s Affiliates, or HEI) in their good faith analysis and sole discretion are required to treat this Agreement as a capital lease under FASB ASC 840, then Hawaiian Electric may take any and all action necessary to eliminate this capital lease treatment, including without limitation, by immediately terminating this Agreement without fault or liability.

(d) Hawaiian Electric shall, and shall cause HEI to, maintain the confidentiality of the Information as provided in this Section 18.10 . Hawaiian Electric may share the Information on a confidential basis with HEI and the independent auditors and attorneys for Hawaiian Electric and HEI. (Hawaiian Electric, HEI, and their respective independent auditors and attorneys are collectively referred to in this Section 18.10 as “ Recipient ”). If either Hawaiian Electric or HEI, in the exercise of their respective reasonable judgments, concludes that consolidation or financial reporting with respect to Chevron and/or this Agreement is necessary, Hawaiian Electric and HEI each shall have the right to disclose such of the Information as Hawaiian Electric or HEI, as applicable, reasonably determines is necessary to satisfy applicable disclosure and reporting or other requirements and give Chevron prompt

Page 27 of 34

written notice thereof (in advance to the extent practicable under the circumstances). If Hawaiian Electric or HEI disclose Information pursuant to the preceding sentence, Hawaiian Electric and HEI shall, without limitation to the generality of the preceding sentence, have the right to disclose Information to the Commission and the Consumer Advocate in connection with the Commission’s rate making activities for Hawaiian Electric and other HEI affiliated entities, provided that, if the scope or content of the Information to be disclosed to the Commission exceeds or is more detailed than that disclosed pursuant to the preceding sentence, such Information will not be disclosed until the Commission first issues a protective order to protect the confidentiality of such Information. Neither Hawaiian Electric nor HEI shall use the Information for any purpose other than as permitted under this Section 18.10 .

(e) In circumstances other than those addressed in the immediately preceding paragraph, if any Recipient becomes legally compelled under applicable Law or by legal process (e.g., deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose all or a portion of the Information, such Recipient shall undertake reasonable efforts to provide Chevron with prompt notice of such legal requirement prior to disclosure so that Chevron may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Section 18.10 . If such protective order or other remedy is not obtained, or if Chevron waives compliance with the provisions of this Section 18.10 , Recipient shall furnish only that portion of the Information which it is legally required to so furnish and shall use reasonable efforts to obtain assurance that confidential treatment will be accorded to any disclosed material.

(f) The obligation of nondisclosure and restricted use imposed on each Recipient under this Section 18.10 shall not extend to any portion(s) of the Information which (a) was known to such Recipient prior to receipt, or (b) without the fault of such Recipient is available or becomes available to the general public, or (c) is received by such Recipient from a third party not bound by an obligation or duty of confidentiality.

Section 18.11: Miscellaneous . If any section or provision of this Agreement or any exhibit hereto shall be determined to be invalid by applicable law, then for such period that the same is invalid, it shall be deemed to be deleted from this Agreement and the remaining portions of this Agreement shall remain in full force and effect.

The failure of a Party hereunder to assert a right to enforce an obligation of the other Party shall not be deemed a waiver of such right or obligation.

This Agreement shall be deemed to have been entered into in the State of Hawaiʿi and the laws of the State of Hawaiʿi shall be applicable in the construction of the terms and provisions hereof and in the determination of the rights and obligations of the Parties hereunder.

This Agreement constitutes the entire agreement of the Parties regarding the matters contemplated herein or related thereto, and no representations or warranties shall be implied or provisions added hereto in the absence of a written agreement to such effect between the Parties hereafter.

Section 18.12: Counterparts .

This Agreement may be executed in as many counterparts as desired by the Parties, any one of which shall have the force and effect of any original but all of which together shall constitute the same instrument. This Agreement may also be executed by exchange of executed copies via facsimile or other electronic means, such as PDF, in which case - but not as a condition to the validity of this Agreement - each Party shall subsequently send the other Party by mail the original executed copy. A Party’s signature

Page 28 of 34

transmitted by facsimile or similar electronic means shall be considered an “original” signature for purposes of this Agreement.

[ Signatures follow ]

Page 29 of 34

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written.



CHEVRON PRODUCTS COMPANY , a division of Chevron U.S.A. Inc.
Signature: /s/ Billy Liu Name: Billy Liu Title: Hawaii VCO Coordinator

HAWAII ELECTRIC LIGHT, INC.	HAWAII ELECTRIC LIGHT, INC.
Signature: /s/ Jay Ignacio ___________________________________ Name: Jay Ignacio Title: President	Signature: /s/ Tayne Sekimura ________________________________________ Name: Tayne Sekimura Title: Sr. VP & Chief Financial Officer

Page 30 of 34

EXHIBIT A

DIESEL SPECIFICATIONS

The Diesel to be supplied hereunder shall be of regular commercial grade of Diesel Fuel No. 2 and have the following specifications:



Item	Units	Specification Limits	Test Method
Gravity @ 60°F	°API, Specific	30.0 min., .88 min.	D1298 or D4052-86
Viscosity @ 100 DF	SSU	32.3 - 40.0	D445, D2161
BTU content *	MM BTU/BBL	5.84	Calculated or D240
Heat Value, Net	MM BTU/BBL	Report	Calculated or D240
Flash Point, PM	°F	150 min.	D93, D6450
Pour Point *	°F	35	D97
Ash	PPM, wt.	100 max.	D482
Cetane Index		40 min.	D4737
Carbon Residue,
10% Residuum	%, wt.	0.35 max.	D524
Sediment & Water	%, vol.	0.05 max.	D1796
Sulfur	%, wt.	0.40 max.	D1552, D2622 or
			D4294
Distillation
90% Recovered	°F	540 - 650	D86
Sodium+Potassium	PPM, wt.	0.5 max.	D3605
Sodium+Pot+Lithium	PPM, wt.	Report	D3605
Vanadium **	PPM, wt.	0.8	D3605
Nitrogen ***	PPM, wt.	120	D4629 or D5762

Page 31 of 34

IFO SPECIFICATIONS

The IFO to be supplied hereunder shall be a regular commercial grade of Industrial Fuel Oil No. 6, having the following specifications:



Item	Specifications	ASTM Test Method
Gravity @ 60°F, API	6.5 min.	D1298 or D4052-86
Flash, °F	150 min.	D93, D6450
Viscosity, SSF @ 122°F	179 min., 226 max.	D445/D2161
Pour Point, °F	55 max.	D97
Sulfur, % Wt.	2.00 max	D1552, D2622 or D4294
Sediment & Water, % Vol.	0.5 max.	D1796
BTU content *, MM BTU/BBL	6.0	D240
Vanadium **, PPM wt.	100	D5863
Nitrogen ***, PPM wt.	6500	D5762 or D4629

[ End of Exhibit A ]

Page 32 of 34

EXHIBIT B

(Pricing)

[ … ]

Page 33 of 34

[ … ]

[ End of Exhibit B ]

Page 34 of 34

HEI Exhibit 12.1 (page 1 of 2)

Hawaiian Electric Industries, Inc. and Subsidiaries

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(unaudited)



Three months ended March 31	2016 (1)			2016 (2)			2015 (1)			2015 (2)
(dollars in thousands)
Fixed charges
Total interest charges	$	21,772		$	23,364		$	20,788		$	22,048
Interest component of rentals	1,546			1,546			1,548			1,548
Pretax preferred stock dividend requirements of subsidiaries	737			737			765			765
Total fixed charges	$	24,055		$	25,647		$	23,101		$	24,361
Earnings
Pretax income from continuing operations	$	50,653		$	50,653		$	51,845		$	51,845
Fixed charges, as shown	24,055			25,647			23,101			24,361
Interest capitalized	(823		)	(823		)	(721		)	(721		)
Earnings available for fixed charges	$	73,885		$	75,477		$	74,225		$	75,485
Ratio of earnings to fixed charges	3.07			2.94			3.21			3.10



Years ended December 31	2015 (1)			2015 (2)			2014 (1)			2014 (2)			2013 (1)			2013 (2)
(dollars in thousands)
Fixed charges
Total interest charges	$	83,936		$	89,284		$	83,458		$	88,535		$	85,315		$	90,407
Interest component of rentals	6,065			6,065			6,366			6,366			6,345			6,345
Pretax preferred stock dividend requirements of subsidiaries	2,977			2,977			2,952			2,952			2,886			2,886
Total fixed charges	$	92,978		$	98,326		$	92,776		$	97,853		$	94,546		$	99,638
Earnings
Pretax income from continuing operations	$	252,898		$	252,898		$	263,708		$	263,708		$	247,946		$	247,946
Fixed charges, as shown	92,978			98,326			92,776			97,853			94,546			99,638
Interest capitalized	(3,265		)	(3,265		)	(3,954		)	(3,954		)	(7,097		)	(7,097		)
Earnings available for fixed charges	$	342,611		$	347,959		$	352,530		$	357,607		$	335,395		$	340,487
Ratio of earnings to fixed charges	3.68			3.54			3.80			3.65			3.55			3.42

See notes on page 2 of 2.

HEI Exhibit 12.1 (page 2 of 2)

Hawaiian Electric Industries, Inc. and Subsidiaries

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(unaudited)

(continued)



Years ended December 31	2012 (1)			2012 (2)			2011 (1)			2011 (2)
(dollars in thousands)
Fixed charges
Total interest charges (3)	$	83,020		$	89,443		$	87,592		$	96,575
Interest component of rentals	6,493			6,493			4,757			4,757
Pretax preferred stock dividend requirements of subsidiaries	2,943			2,943			2,944			2,944
Total fixed charges	$	92,456		$	98,879		$	95,293		$	104,276
Earnings
Pretax income from continuing operations	$	217,064		$	217,064		$	215,686		$	215,686
Fixed charges, as shown	92,456			98,879			95,293			104,276
Interest capitalized	(4,355		)	(4,355		)	(2,498		)	(2,498		)
Earnings available for fixed charges	$	305,165		$	311,588		$	308,481		$	317,464
Ratio of earnings to fixed charges	3.30			3.15			3.24			3.04


(1)	Excluding interest on ASB deposits.


(2)	Including interest on ASB deposits.

For purposes of calculating the ratio of earnings to fixed charges, “earnings” represent the sum of (i) pretax income from continuing operations (before adjustment for undistributed income or loss from equity investees) and (ii) fixed charges (as hereinafter defined, but excluding capitalized interest). “Fixed charges” are calculated both excluding and including interest on ASB’s deposits during the applicable periods and represent the sum of (i) interest, whether capitalized or expensed, (ii) amortization of debt expense and discount or premium related to any indebtedness, whether capitalized or expensed, (iii) the estimate of the interest within rental expense and (iv) the non-intercompany preferred stock dividend requirements of HEI’s subsidiaries, increased to an amount representing the pretax earnings required to cover such dividend requirements.

Hawaiian Electric Exhibit 12.2

Hawaiian Electric Company, Inc. and Subsidiaries

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(unaudited)



	Three months ended March 31						Years ended December 31
(dollars in thousands)	2016			2015			2015			2014			2013			2012			2011
Fixed charges
Total interest charges	$	17,469		$	16,547		$	67,178		$	66,132		$	64,130		$	62,056		$	60,031
Interest component of rentals	777			798			3,060			3,244			2,793			2,690			2,152
Pretax preferred stock dividend requirements of subsidiaries	357			361			1,443			1,444			1,421			1,467			1,468
Total fixed charges	$	18,603		$	17,706		$	71,681		$	70,820		$	68,344		$	66,213		$	63,651
Earnings
Net income attributable to Hawaiian Electric	$	25,637		$	27,144		$	136,794		$	138,721		$	124,009		$	100,356		$	101,066
Fixed charges, as shown	18,603			17,706			71,681			70,820			68,344			66,213			63,651
Income taxes	14,553			15,850			79,422			80,725			69,117			61,048			61,584
Interest capitalized	(823		)	(721		)	(3,265		)	(3,954		)	(7,097		)	(4,355		)	(2,498		)
Earnings available for fixed charges	$	57,970		$	59,979		$	284,632		$	286,312		$	254,373		$	223,262		$	223,803
Ratio of earnings to fixed charges	3.12			3.39			3.97			4.04			3.72			3.37			3.52

For purposes of calculating the ratio of earnings to fixed charges, “earnings” represent the sum of (i) pretax income before preferred stock dividends of Hawaiian Electric and before adjustment for undistributed income or loss from equity investees and (ii) fixed charges (as hereinafter defined, but excluding interest capitalized). “Fixed charges” represent the sum of (i) interest, whether capitalized or expensed, (ii) amortization of debt expense and discount or premium related to any indebtedness, whether capitalized or expensed, (iii) the estimate of the interest within rental expense and (iv) the preferred stock dividend requirements of Hawaii Electric Light and Maui Electric, increased to an amount representing the pretax earnings required to cover such dividend requirements.

HEI Exhibit 31.1

Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Constance H. Lau (HEI Chief Executive Officer)

I, Constance H. Lau, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended March 31, 2016 of Hawaiian Electric Industries, Inc. (“registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 4, 2016
	/s/ Constance H. Lau
	Constance H. Lau
	President and Chief Executive Officer

HEI Exhibit 31.2

Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of James A. Ajello (HEI Chief Financial Officer)

I, James A. Ajello, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended March 31, 2016 of Hawaiian Electric Industries, Inc. (“registrant”);

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 4, 2016
	/s/ James A. Ajello
	James A. Ajello
	Executive Vice President and Chief Financial Officer

Hawaiian Electric Exhibit 31.3

Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Alan M. Oshima

(Hawaiian Electric Chief Executive Officer)

I, Alan M. Oshima, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended March 31, 2016 of Hawaiian Electric Company, Inc. (“registrant”);

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 4, 2016
	/s/ Alan M. Oshima
	Alan M. Oshima
	President and Chief Executive Officer

Hawaiian Electric Exhibit 31.4

Certification Pursuant to Rule 13a-14 promulgated under the Securities Exchange Act of 1934 of Tayne S. Y. Sekimura (Hawaiian Electric Chief Financial Officer)

I, Tayne S. Y. Sekimura, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended March 31, 2016 of Hawaiian Electric Company, Inc. (“registrant”);

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 4, 2016
	/s/ Tayne S. Y. Sekimura
	Tayne S. Y. Sekimura
	Senior Vice President and Chief Financial Officer

HEI Exhibit 32.1

Hawaiian Electric Industries, Inc.

Certification Pursuant to

18 U.S.C. Section 1350

In connection with the Quarterly Report of Hawaiian Electric Industries, Inc. (HEI) on Form 10-Q for the quarter ended March 31, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the Report), we, Constance H. Lau and James A. Ajello, Chief Executive Officer and Chief Financial Officer, respectively, of HEI, certify, pursuant to 18 U.S.C. Section 1350, that to the best of our knowledge:

(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HEI and its subsidiaries as of, and for, the periods presented in this report.

Date: May 4, 2016

/s/ Constance H. Lau

Constance H. Lau

President and Chief Executive Officer

/s/ James A. Ajello

James A. Ajello

Executive Vice President and Chief Financial Officer

A signed original of this written statement has been provided to HEI and will be retained by HEI and furnished to the Securities and Exchange Commission or its staff upon request.

Hawaiian Electric Exhibit 32.2

Hawaiian Electric Company, Inc.

Certification Pursuant to

18 U.S.C. Section 1350

In connection with the Quarterly Report of Hawaiian Electric Company, Inc. (Hawaiian Electric) on Form 10-Q for the quarter ended March 31, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the Hawaiian Electric Report), we, Alan M. Oshima and Tayne S. Y. Sekimura, Chief Executive Officer and Chief Financial Officer, respectively, of Hawaiian Electric, certify, pursuant to 18 U.S.C. Section 1350, that to the best of our knowledge:

(1) The Hawaiian Electric Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The Hawaiian Electric information contained in the Hawaiian Electric Report fairly presents, in all material respects, the financial condition and results of operations of Hawaiian Electric and its subsidiaries as of, and for, the periods presented in this report.

Date: May 4, 2016

/s/ Alan M. Oshima

Alan M. Oshima

President and Chief Executive Officer

/s/ Tayne S. Y. Sekimura

Tayne S. Y. Sekimura

Senior Vice President and Chief Financial Officer

A signed original of this written statement has been provided to Hawaiian Electric and will be retained by Hawaiian Electric and furnished to the Securities and Exchange Commission or its staff upon request.