Wednesday, May 08, 2013

 

LNG and CEO Compensation top issues at HEI's Annual Meeting


By Henry Curtis

On May 7, 2013 Hawaiian Electric Industries (HEI) held their 30th Annual Shareholder Meeting. 

HEI is the holding company created in 1981-83. HEI  owns American Savings Bank (ASB) and Hawaiian Electric Company (HECO). HECO owns MECO and HELCO.

About 130 people converged on downtown Honolulu. Perhaps a quarter were HEI, HECO and ASB board members and/or employees.

Each year HEI proposes a slate of candidates and then they get voted into office, this year with 96% approval. Then the auditor is re-hired, this year with 98% approval.

This year a Resolution to approve HEI’s Compensation was also voted on. The vote was advisory only. Wedged between taking the vote and announcing the results of the vote was the question and answer period.  The Advisory Resolution received 83% support.

A few questions were asked about the $5-6 million compensation received by HEI President and CEO Constance ("Connie") Lau.

Jeffrey Watanabe, Chair of the HEI Board, made a few interesting comments: Since Connie is partially paid with future stock awards, “her take home pay is significantly less than what is reported in the papers,” and that “not a penny of Connie’s salary goes into O`ahu’s rates.” Watanabe added that “she has not taken an increase in the last two to three years” implying that she has made $5-6 million per year for several years.

Connie Lau stated that HECO has over 1000 MW of renewable energy contracts “in service, under construction or in active negotiations.” I assume that includes the 100 MW OTEC plant that is often referred to but never actually filed for approval.

Ms. Lau mentioned that HECO has “clean energy conservation” projects and that oil prices are “volatile and unpredictable.”

Ms. Lau added that HECO has a diverse portfolio of renewable energy resources including wave. While the military is testing wave projects at the Marine Base, MECO has the only proposed pilot wave project, and they appeared to have broken off negotiations with the proposer on that project.

Ms. Lau noted  that Hawai`i law requires than  by 2030, at least 40% of electricity has to be generated by “clean locally generated resources.” That would be nice, but the statement suffers from two caveats. First, the energy does not have to be locally generated.

And second, HECO recently stated for the first time that the Renewable Portfoli Standard goal of requiring that 40% of electricity to be from renewable energy resources by 2030 had a strange trait.

The numerator (Renewable Energy Use in the State excluding Kauai) is not a subset of the  denominator (HECO, MECO and HELCO electricity sales) and therefore HECO can rely on some fossil fuels and yet have an RPS above 100%.

Life of the Land has sought in recent years, without success, to amend this corrupted definition.

Ms. Lau stated that “on the banking side we would love to see interest rates go up.”

The other interesting issue that received attention was Liquefied Natural Gas (LNG).  HECO President and CEO Richard M. Rosenblum answered a number of questions about LNG.

Rosenblum stated that LNG “is cleaner than what we burn today but it’s not carbon zero.”

He noted that HECO was investigating LNG because the Governor asked HECO to take the lead.

HECO wouldn’t be importing or distributing LNG, but would use LNG that was brought to HECO plants. The entity that brings LNG into the State might be a cooperative of LNG-users, The Gas Company, or a Third Party.

HECO would be the largest LNG user in the State. LNG would also be used by the Gas Company and for transportation.

When asked whether HECO was taken a risk by spending money building an LNG infrastructure for a fuel that might “come into vogue for a while” and then lose its appeal, Mr. Rosenblum stated that everything points to it being a “wise choice.”

LNG is the “least expensive fuel.” There is an infrastructure approach which is not costly to construct and that is the approach HECO will take. When he worked on the Mainland a few years ago, you couldn’t get a contract for longer than 3-6 months. There is currently a glut of LNG supply that can last more than 100 years. Gas producers are willing to lock in 20-year contracts.  He concluded that “our interests are completely in line with our customers interest.”


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