Shares of Hawaiian Electric Industries (NYSE:HE), a utility company based in the Hawaiian islands, plunged by over 35% Monday morning on concerns related to its potential role in fires that killed more than 90 people on Maui last week.
The tragedy that took so many lives and devastated the historic town of Lahaina caused an estimated $6 billion in damages, and there was worry on Wall Street that Hawaiian Electric Industries could be partly liable if its equipment sparked the fires.
Officials haven’t determined the cause of the fires but plaintiffs’ attorneys believe Hawaiian Electric’s equipment was a possible source, and the company has faced criticism for not turning off power despite warnings about weather conditions.
“While the cause is under investigation, fingers are being pointed at the utility,” said Wells Fargo analysts.
It remains unclear if any of Hawaiian Electric’s equipment directly caused any of the wildfires, but analysts think it is prudent to account for the risk given recent wildfire-related claims in California, Colorado and Oregon that have all exceeded $1B.
Discussing potential liability for the company, Wells Fargo analysts said, “The utility’s insurance will provide some protection but HE has not disclosed the deductibles or limits. We think the coverage is likely under $1B based on much larger utilities’ limits. Further, HE’s ability to ring-fence Maui Electric is unclear – Hawaiian Electric unconditionally guarantees Maui’s obligations per HE’s 10-K – and any attempt to do so would likely face legal challenges.”
Analysts said factoring in $1B of liabilities for Hawaiian Electric does not seem unreasonable given early damage estimates.