Hawaiian Electric credit risk leads Clearway to cancel solar power project agreements

Hawaiian Electric credit risks tied to wildfires and the costs associated with them resulted in Clearway Energy canceling power purchase agreements that the renewable power project developer had with the utility, Leo Asuncion, chairman of the Hawaii Public Utilities Commission, said Nov. 10.

If more clean energy project developers follow that path, Hawaii risks missing renewable portfolio standard targets, Asuncion said on a panel at the National Association of Regulatory Utility Commissioners' annual meeting in Anaheim, California.

Hawaiian Electric had issued a request for proposals from clean energy developers, and Clearway was working on three solar projects among the 15 clean energy projects selected in the RFP process while negotiating with the utility, Asuncion said in a brief interview after speaking on the panel. "I thought they would come to some agreement" after Clearway expressed concern about the credit of Hawaiian Electric amid wildfire lawsuits and costs in excess of $1 billion, he said.

The three solar project PPAs covered about 200 MW of power supply, Asuncion said.

While speaking on a panel about risk mitigation strategies for utilities and regulators, Asuncion did not identify Clearway but noted that a project developer decided to pull out of the PPAs with Hawaiian Electric a few weeks ago. The utility is trying to build up its creditworthiness, Asuncion said, noting that parent company Hawaiian Electric Industries recently disclosed agreements involving payment of $1.99 billion to settle lawsuits related to the August 2023 wildfires on Maui, one of which destroyed the town of Lahaina and killed at least 102 people.

Hawaiian Electric is "disappointed we couldn't reach agreement on a contract with this developer," but "there are still 12 projects that are in our final award group that we're negotiating with to bring on projects between 2026 and 2033," said Darren Pai, spokesperson for the utility.

Hawaiian Electric is on track to meet clean energy goals and expects to top 40% renewable resources in its supply portfolio well before 2030, Pai said in a Nov. 11 email.

In addition, "the company will be seeking legislation that creates a mechanism to give developers of future projects confidence they will continue to get paid for the electricity they sell to Hawaiian Electric," Pai said.

Clearway and the utility in October "made the difficult decision to end the current round of contract negotiations" for the Makana La Solar, Kaiwiki Solar and Puako Solar projects, said Zadie Oleksiw, spokesperson for Clearway. "While we can't move forward right now, we remain hopeful that we will be able to restart these efforts and bring these projects online in the near future," Oleksiw said in a Nov. 11 email responding to questions.

Clearway is committed to Hawaii and operates four clean energy projects on Oahu, Oleksiw added. "We hope to participate in future Hawaiian Electric solicitations once the utility's financial situation has been resolved," she said.

Referring to Clearway's decision to cancel the PPAs during the interview, Asuncion questioned whether the move was unique to Clearway and its financing requirements, or if the other 12 renewable power project developers in the RFP shared similar concerns. "Is this the start of a trend of the other 12 possibly pulling out? Which would then set us back on our renewable energy goals," he asked.

The PUC is trying to help utilities mitigate wildfire risks and make the costs that are passed on to customers manageable, Asuncion said. The PUC has a working group on wildfire mitigation, with studies to improve wildfire forecasting, and it has ordered utilities to file wildfire mitigation plans by January 2025, he noted.

In August, HEI reported a $1.71 billion pretax loss for the second quarter and said there was "substantial doubt" over it and its utility subsidiaries' ability to continue as a "going concern" because of uncertainties around wildfire litigation and funding for an agreement in principle that had been reached at the time.

On Nov. 8, HEI reported a net loss of $104.4 million for the third quarter, including additional losses accrued for estimated wildfire liabilities and legal claims. Agreements reached with plaintiffs were announced Nov. 5, and HEI is "moving forward with a clearer line of sight toward resolution of the wildfire-related tort litigation," Scott Seu, president and CEO of HEI, said in a statement.

HEI in September closed an offering of newly issued shares of common stock, which resulted in $557.7 million in proceeds that the company intends to use to pay for the litigation agreements in four installments, the company said. "As a result, management has determined that the conditions that led to the substantial doubt regarding HEI's ability to continue as a going concern have been mitigated," the company said in its earnings statement.