ITEM 1. Business --------
Hawaiian Electric Industries Capital Trust I (the Trust) is a statutory business trust formed under the Delaware Business Trust Act, as amended, pursuant to a trust agreement and a certificate of trust filed with the Secretary of State of Delaware on December 19, 1996. The Trust Agreement was subsequently amended by an amended and restated trust agreement dated as of February 1, 1997. The Trust exists for the exclusive purposes of (i) issuing trust securities (the Trust Securities), consisting of 8.36% Trust Originated Preferred Securities (the Trust Preferred Securities) and trust common securities (the Trust Common Securities), representing undivided beneficial ownership interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in 8.36% Partnership Preferred Securities (the Partnership Preferred Securities) issued by HEI Preferred Funding, LP (the Partnership), and (iii) engaging in only those other activities necessary or incidental thereto. The Trust has no employees.
Hawaiian Electric Industries, Inc. (the Company), holds all of the Trust Common Securities. The Company was incorporated in 1981 under the laws of the State of Hawaii and is a holding company with its principal subsidiaries engaged in the electric utility, banking and other businesses operating primarily in the State of Hawaii. The Company's predecessor, Hawaiian Electric Company, Inc. (HECO), was incorporated under the laws of the Kingdom of Hawaii (now the State of Hawaii) on October 13, 1891. As a result of a 1983 corporate reorganization, HECO became a subsidiary of the Company, and common shareholders of HECO became common shareholders of the Company. The Company (File No. 1-8503) is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and thus files reports, proxy statements and other information with the Securities and Exchange Commission.
The Partnership is a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act, as amended, pursuant to an agreement of limited partnership and the filing of a certificate of limited partnership with the Secretary of State of Delaware on December 23, 1996, which was subsequently amended by an amended and restated agreement of limited partnership dated as of February 1, 1997. Hycap Management, Inc. (Hycap), a wholly owned subsidiary of the Company, is the sole general partner of the Partnership. The Partnership is managed by the general partner and exists for the exclusive purposes of (a) purchasing certain eligible debt instruments of the Company and the wholly owned subsidiaries of the Company (collectively, the Affiliate Investment Instruments) and certain U.S. government obligations and commercial paper of unaffiliated entities (Eligible Debt Securities) with the proceeds from (i) the sale of its Partnership Preferred Securities, representing limited partner interests in the Partnership, to the Trust and (ii) a capital contribution in exchange for the general partner interest in the Partnership, (b) receiving interest and other payments on the Affiliate Investment Instruments and the Eligible Debt Securities held by the Partnership from time to time, (c) making distributions on the Partnership Preferred Securities and distributions on the general partner interest in the Partnership if, as, and when declared by the general partner in its sole discretion, (d) subject to the restrictions and conditions contained in the agreement of limited partnership, making additional investments in Affiliate Investment Instruments and Eligible Debt Securities and disposing of any such investments, and (e) except as otherwise limited in the agreement of limited partnership, entering into, making and performing all contracts and other undertakings, and engaging in those activities and transactions as the general partner deems necessary or advisable for carrying out the purposes of the Partnership.
The Trust's activities are limited to issuing securities and investing the proceeds as described above. Since the Trust was organized on December 19, 1996, its activities, as specified in its declaration of trust, have been limited to the issuance of the Trust Preferred Securities and the Trust Common Securities, the investing of the proceeds in the Partnership Preferred Securities, and the payment of distributions on the Trust Preferred Securities and the Trust Common Securities in accordance with their terms. All of the foregoing activities of the Trust occurred in or after February 1997.
The information set forth under the headings "The Hawaiian Electric Industries Capital Trusts", "The Partnership", "Description of the Trust Preferred Securities", "Description of the Trust Guarantees", "Description of the Partnership Preferred Securities", "Description of the Partnership Guarantee", and "Description of Investment Guarantees" in the Prospectus dated January 24, 1997, and the information set forth under the headings "Description of the Trust", "Description of the Partnership", "Supplemental Description of the Trust Preferred Securities", "Supplemental Description of the Trust Guarantee", "Supplemental Description of the Partnership Preferred Securities", and "Supplemental Description of the Partnership Guarantee" in the Prospectus Supplement dated January 29, 1997, of the Trust and the Partnership is incorporated by reference herein.
ITEM 2.
ITEM 2. Properties ----------
None.
ITEM 3.
ITEM 3. Legal Proceedings -----------------
The Registrant knows of no legal proceedings involving the Trust or its assets.
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------
During the fourth quarter of 2001, no matter was submitted to a vote of holders of any securities of the Trust.
PART II -------
ITEM 5.
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters ---------------------------------------------------------------------
(a) There is no established public market for the Trust Common Securities.
(b) All the Trust Common Securities are owned by the Company.
(c) The Company, as holder of the Trust Common Securities, is entitled to receive cumulative cash distributions accumulating from February 4, 1997 and payable quarterly in arrears on each March 30, June 30, September 30, and December 30, commencing March 30, 1997, at an annual rate of 8.36% of the liquidation amount of the Trust Common Securities. Distributions not paid on the scheduled payment date will accumulate and compound quarterly at a rate per annum equal to 8.36%. The dividends declared and paid on the Trust Common Securities for the four quarters of 2001 and 2000 were $64,644 per quarter.
ITEM 6.
ITEM 6. Selected Financial Data -----------------------
The Registrant's activities are limited to issuing securities and investing the proceeds as described in Item 1. "Business," above. Accordingly, the financial statements included herein in response to Item 8. "Financial Statements and Supplementary Data," are incorporated by reference in response to this item.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations ---------------------
The Registrant's activities are limited to issuing securities and investing the proceeds as described in Item 1. "Business," above.
Since the Trust was organized on December 19, 1996, its activities, as specified in its declaration of trust, have been limited to the issuance and sale in February 1997 of the Trust Preferred Securities and the Trust Common Securities, the investing of the proceeds from such sales in the aggregate amount of $103,093,000 in the Partnership Preferred Securities, and the payment of distributions on the Trust Preferred Securities and the Trust Common Securities in accordance with their terms. During 2001, 2000 and 1999, the Trust received distributions on the Partnership Preferred Securities in the full amount to which it was entitled, aggregating $8,619,000, and in turn made distributions to the holders of the Trust Preferred Securities in the aggregate amount of $8,360,000 and to the holders of the Common Securities in the amount of $259,000.
All expenses of organizing the Trust, carrying out the issuance of its securities, and conducting its limited activities during 2001, 2000 and 1999 were borne by the Company, either directly or through Hycap, its wholly owned subsidiary.
ITEM 7A.
ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk ---------------------------------------------------------
In February 1997, the Trust invested the gross proceeds from the sale of the Trust Preferred Securities and the Trust Common Securities in the Partnership Preferred Securities. This investment is accounted for under the equity method. The Partnership, in turn, invested the proceeds from the sale of the Partnership Preferred Securities and a capital contribution from Hycap in the Affiliate Investment Instruments and Eligible Debt Securities. To the extent the Partnership has funds available from the Affiliate Investment Instruments and Eligible Debt Securities, the general partner of the Partnership may declare distributions to the Trust, as holder of the Partnership Preferred Securities. The Trust's ability to pay distributions to the holders of the Trust Preferred Securities is dependent on its receipt of distributions on the Partnership Preferred Securities from the Partnership. The Partnership distributions are in turn dependent on the receipt of payments from the Affiliate Investment Instruments and Eligible Debt Securities. The principal risk to the Trust is thus the credit risk associated with the Affiliate Investment Instruments.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data -------------------------------------------
In response to this Item 8, the financial statements and notes thereto and the independent auditors' report set forth on pages through are incorporated by reference herein.
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting ----------------------------------------------------------- and Financial Disclosure ------------------------
None.
PART III --------
ITEM 10.
ITEM 10. Directors and Executive Officers of the Registrant --------------------------------------------------
The Trust has no directors or executive officers. The Trustees of the Trust are as follows:
Regular Trustees: Robert F. Clarke Robert F. Mougeot Suzy A. P. Hollinger
Property Trustee: The Bank of New York
Delaware Trustee: The Bank of New York (Delaware)
Robert F. Clarke is the Chairman (since September 1998), President and Chief Executive Officer (since January 1991) and a Director (since April 1989) of the Company. Robert F. Mougeot is the Financial Vice President and Chief Financial Officer (since April 1989) and Treasurer (since November 2000) of the Company. Effective November 9, 2000, Edwina H. Kawamoto resigned as Treasurer of the Company and Robert F. Mougeot was named Treasurer (in addition to his existing positions) on November 10, 2000. Also, effective November 9, 2000, Edwina H. Kawamoto resigned as Trustee of the Trust. On May 30, 2001, Suzy A. P. Hollinger, Manager, Investor Relations (since December 2000) of the Company, was named a Trustee of the Trust replacing Edwina H. Kawamoto.
Mr. Clarke and Mr. Mougeot have served as Trustees since the Trust was organized on December 19, 1996. The Trustees serve at the pleasure of the Company, as the holder of the Trust Common Securities.
ITEM 11.
ITEM 11. Executive Compensation ----------------------
As indicated above, the Trust has no executive officers. No employee of the Company receives any compensation for serving as a Regular Trustee or acting in any capacity for the Trust separate from his or her compensation as an employee of the Company.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management --------------------------------------------------------------
The information in Item 1. "Business" and Item 5. "Market for Registrant's Common Equity and Related Stockholder Matters" with respect to ownership of the Trust Common Securities is incorporated by reference in response to this item.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions ---------------------------------------------- Intercompany charges from Hawaiian Electric Industries, Inc. to Hycap for general management and accounting services for Hycap, the Trust and the Partnership were approximately $2,000 for the year ended December 31, 2001.
PART IV -------
ITEM 14.
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ---------------------------------------------------------------
(a) Documents filed as part of this Report:
1. Financial Statements
The contents of the financial statements are listed on page hereof, and the financial statements and accompanying independent auditors' report appear on pages through.
2. Financial Statement Schedules
None.
3. Exhibits
The exhibits designated by an asterisk (*) are filed herein. The exhibits not so designated are incorporated by reference to the indicated filing. A copy of any exhibit may be obtained upon written request for a $0.20 per page charge from the Financial Vice President, Treasurer and Chief Financial Officer of HEI, P.O. Box 730, Honolulu, Hawaii 96808-0730.
Index to Exhibits -----------------
Exhibit 4.1 Certificate of Trust dated as of December 19, 1996 (incorporated by reference to Exhibit 4(a)(i) to Registration Statement on Form S-3 (Nos. 333-18809, 333-18809-01, 333-18809-02, 333-18809-03 and 333- 18809-04) (the "Registration Statement"))
Exhibit 4.2 Amended and Restated Trust Agreement of the Trust dated as of February 1, 1997 (incorporated by reference to Exhibit 4(f) to the Current Report on Form 8-K of Hawaiian Electric Industries, Inc. dated February 4, 1997, File No. 1-8503 (the "February 4, 1997 Form 8-K"))
Exhibit 4.3 Amended and Restated Certificate of Limited Partnership of the Partnership dated as of December 23, 1996 (incorporated by reference to Exhibit 4(c) to the Registration Statement)
Exhibit 4.4 Amended and Restated Agreement of Limited Partnership of the Partnership dated as of February 1, 1997 (incorporated by reference to Exhibit 4(e) to the February 4, 1997 Form 8-K)
Exhibit 4.5 Trust Preferred Securities Guarantee Agreement with respect to the Trust dated as of February 1, 1997 (incorporated by reference to Exhibit 4(o) to the February 4, 1997 Form 8-K)
Exhibits (continued)
Exhibit 4.6 Partnership Guarantee Agreement with respect to the Partnership dated as of February 1, 1997 (incorporated by reference to Exhibit 4(p) to the February 4, 1997 Form 8-K)
Exhibit 4.7 Junior Indenture between HEI and The Bank of New York, as Trustee, dated as of February 1, 1997 (incorporated by reference to Exhibit 4(i) to the February 4, 1997 Form 8-K)
Exhibit 4.8 Officers' Certificate in connection with issuance of 8.36% Junior Subordinated Debenture, Series A, Due 2017 under Junior Indenture of HEI (incorporated by reference to Exhibit 4(l) to the February 4, 1997 Form 8-K)
Exhibit 4.9 Affiliate Investment Instruments Guarantee Agreement with respect to 8.36% Junior Subordinated Debenture of HEI Diversified, Inc. dated as of February 1, 1997 (incorporated by reference to Exhibit 4(q) to the February 4, 1997 Form 8-K)
Exhibit 4.10 8.36% Trust Originated Preferred Security (Liquidation Amount $25 Per Trust Preferred Security) of the Trust (incorporated by reference to Exhibit 4(m) to the February 4, 1997 Form 8-K)
Exhibit 4.11 8.36% Junior Subordinated Debenture Series A, Due 2017, of HEI (incorporated by reference to Exhibit 4(n) to the February 4, 1997 Form 8-K)
Exhibit 4.12 Certificate Evidencing Trust Common Securities of the Trust dated February 4, 1997 (incorporated by reference to Exhibit 4.12 to the Quarterly Report on Form 10-Q of Hawaiian Electric Industries Capital Trust I, File No. 1-8503-01, and HEI Preferred Funding, LP, File No. 1-8503-02, for the quarter ended March 31, 1997)
Exhibit 4.13 Certificate Evidencing Partnership Preferred Securities of the Partnership dated February 4, 1997 (incorporated by reference to Exhibit 4.13 to the Quarterly Report on Form 10-Q of Hawaiian Electric Industries Capital Trust I, File No. 1-8503-01, and HEI Preferred Funding, LP, File No. 1-8503-02, for the quarter ended March 31, 1997)
*Exhibit 12 Computation of ratio of earnings to combined fixed charges and preferred securities distributions, for the years ended December 31, 2001, 2000, 1999 and 1998 and period from February 4, 1997 (inception) to December 31, 1997.
*Exhibit 23 Accountants' Consent
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 20th day of March, 2002.
HAWAIIAN ELECTRIC INDUSTRIES CAPITAL TRUST I *
By: /s/ Robert F. Clarke ---------------------------- Name: Robert F. Clarke Title: Regular Trustee
By: /s/ Robert F. Mougeot ---------------------------- Name: Robert F. Mougeot Title: Regular Trustee
By: /s/ Suzy A. P. Hollinger ---------------------------- Name: Suzy A. P. Hollinger Title: Regular Trustee
* There is no principal executive officer, principal financial officer, controller, principal accounting officer or board of directors of the Registrant. The Trustees of the Registrant (which include the Regular Trustees, the Property Trustee and the Delaware Trustee) together exercise all powers and perform all functions with respect to the Registrant.
Hawaiian Electric Industries Capital Trust I Form 10-K--for the year ended December 31, 2001
ITEM 14(a)(1)
Hawaiian Electric Industries Capital Trust I Balance sheets
Hawaiian Electric Industries Capital Trust I Statements of earnings
Note: Hawaiian Electric Industries, Inc. owns all of Hawaiian Electric Industries Capital Trust I's common securities. Therefore, per share data is not meaningful.
See accompanying notes to financial statements.
Hawaiian Electric Industries Capital Trust I Statements of changes in stockholders' equity
Hawaiian Electric Industries Capital Trust I Statements of cash flows
See accompanying notes to financial statements.
Hawaiian Electric Industries Capital Trust I NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) Organization and purpose - ----------------------------
Hawaiian Electric Industries Capital Trust I (the Trust) is a statutory business trust formed under the laws of the State of Delaware on December 19, 1996 for the exclusive purposes of (i) issuing its 8.36% Trust Originated Preferred Securities (TOPrS) and its 8.36% Common Securities (the Trust Preferred Securities and the Trust Common Securities, respectively), (ii) purchasing the 8.36% Partnership Preferred Securities (the Partnership Preferred Securities), representing the limited partner interests in HEI Preferred Funding, LP (the Partnership), with the proceeds from the sale of Trust Preferred Securities and Common Securities, and (iii) engaging in only those other activities necessary or incidental thereto.
Hycap Management, Inc. (Hycap), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. (the Company) and sole general partner of the Partnership, has paid compensation to the underwriters in connection with the offering of the Trust Preferred Securities, which closed on February 4, 1997. The Company or Hycap has paid all expenses relating to the issuance of the securities and the operation of the Trust. Thus, these expenses of the Trust are not reflected on the Trust's financial statements. The Company has agreed to (i) pay all fees and expenses related to the organization and operations of the Trust (including taxes, duties, assessments, or government charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon the Trust) and the offering of the Trust Preferred Securities, (ii) be responsible for all debts and other obligations of the Trust (other than with respect to the Trust Preferred Securities and the Trust Common Securities) and (iii) indemnify the trustees and certain other persons. The Company has invested capital in Hycap as needed.
(2) Summary of significant accounting policies - ----------------------------------------------
Basis of presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the Trust's 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 earnings for the period. Actual results could differ significantly from those estimates.
The Trust was formed under Delaware law on December 19, 1996, but engaged in no activity until it was capitalized through the issuance of the Trust Preferred Securities and the Trust Common Securities on February 4, 1997 (inception) with the proceeds from the sale of the Trust Preferred Securities and the Common Securities.
Investment
The investment in Partnership Preferred Securities represents limited partner interests in the Partnership and is accounted for under the equity method.
Income taxes
The Trust does not incur any income tax liabilities. Such liabilities are incurred directly by the security holders.
(3) Investment in Partnership Preferred Securities - --------------------------------------------------
The Trust holds 4,123,720 8.36% Partnership Preferred Securities, $25 liquidation preference per security. The scheduled distribution payment dates and redemption provisions of the Partnership Preferred Securities, which are redeemable on or after February 4, 2002 at the option of the Partnership, correspond to the distribution payment dates and redemption provisions of the Trust Preferred Securities. Upon any redemption of the Partnership Preferred Securities, the Trust Preferred Securities will be redeemed. The Company has guaranteed, on a subordinated basis, the payment of distributions by the Partnership on the Partnership Preferred Securities if, as, and when declared by the general partner of the Partnership out of funds legally available therefor, and payments upon liquidation of the Partnership or the redemption of the Partnership Preferred Securities to the extent the Partnership has funds legally available therefor. At December 31, 2001, Partnership assets consisted primarily of cash and cash equivalents ($1.2 million) and investments in debt instruments issued by the Company and its subsidiary ($120.1 million). These assets were funded by the general partner ($18.2 million) and limited partner ($103.1 million). Partnership activity during 2001 included interest income on the previously mentioned cash and cash equivalents and debt instruments ($10.1 million) and distributions on the limited partner ($8.6 million) and general partner ($1.5 million) interests.
(4) Stockholders' equity - ------------------------
Trust Preferred Securities
The Trust issued 4,000,000 8.36% Trust Preferred Securities, $25 liquidation amount per security, in a public offering which closed on February 4, 1997 for an aggregate purchase price of $100 million. The Company or Hycap paid all the expenses of the offering. The Trust Preferred Securities are redeemable on or after February 4, 2002 at the option of the Trust, in whole or in part, at a redemption price equal to $25 per security. Holders of the Trust Preferred Securities shall be given not less than 30 nor more than 60 days' notice of such redemption. Distributions on the Trust Preferred Securities are cumulative from the date of original issue and are payable quarterly if, as, and when the Trust has funds available for payment. Holders of the Trust Preferred Securities have limited voting rights and are not entitled to vote, to appoint, remove or replace, or to increase or decrease the number of trustees, which voting rights are vested exclusively in the holder of the Trust Common Securities. Under certain circumstances, the Trust Preferred Securities have preferential rights to payment relative to the Trust Common Securities.
The Company has guaranteed, on a subordinated basis, the payment in full of all distributions and other payments on the Trust Preferred Securities to the extent that the Trust has funds legally available therefor. This guarantee and the partnership distribution guarantee are subordinated to all other liabilities of the Company and rank pari passu with the Company's most senior preferred stock, of which there is none currently outstanding.
Trust Common Securities
The Trust issued 123,720 8.36% Trust Common Securities, $25 liquidation amount per security, to the Company on February 4, 1997 for an aggregate purchase price of $3,093,000. The Trust Common Securities are redeemable on or after February 4, 2002 at the option of the Trust, in whole or in part, at a redemption price equal to $25 per security. Holders of the Trust Preferred Securities shall be given not less than 30 nor more than 60 days' notice of such redemption.
[KPMG LLP letterhead]
INDEPENDENT AUDITORS' REPORT
To the Trustees of Hawaiian Electric Industries Capital Trust I:
We have audited the accompanying balance sheets of Hawaiian Electric Industries Capital Trust I (the "Trust") as of December 31, 2001 and 2000, and the related statements of earnings, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2001. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hawaiian Electric Industries Capital Trust I as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
Honolulu, Hawaii January 23, 2002