Hawaiian Electric Downgrade Highlights Event Risk

The loss of human life far overshadows all other impacts of wildfire disaster in Lahaina, Hawaii. Investors who were far removed from physical danger, however, have also been harmed. It has been suggested that Hawaiian Electric Industries failed to take appropriate safety precautions despite warnings of high winds and dangerous fire conditions. In light of the massive liability that could result, the utility’s shares plummeted by 54% between August 11 and August 15, 2023.

An unusually sharp reaction to the Lahaina calamity also occurred in the area of credit ratings. Standard & Poor’s downgraded Hawaiian Electric all the way from BBB- to BB-, three rating notches at once. By contrast, it took four separate moves of one notch each for the rating agency to lower Hawaiian Electric from A to BBB- between 1988 and 2010: A to A-, A- to BBB+, BBB+ to BBB, and BBB to BBB-.