Hawaiian Electric embraced by activist investor focused on renewables

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Aiming to accelerate Hawaiian Electric Industries’ renewables transition, ValueAct Capital Management purchased about $42 million of the firm’s stock by the end of September—just over one percent of the company—as shown in a Securities and Exchange Commission filing.

ValueAct founder Jeffrey Ubben announced the position at a Toronto investor conference last month and cited a Rhodium Group study showing that Hawaii could attain 80 percent renewable generation by 2030, saving $6.5 billion by displacing oil imports, Bloomberg reported.

Mr. Ubben envisions Hawaii’s utility providing a “smart, open network to allow for plug-and-play third party energy developers as well as rooftop solar and storage, plus electric vehicles,” he told Bloomberg. “Through cheaper distributed energy solutions and efficiencies, the grid grows by lowering the cost of electricity to stimulate more use cases.”

“We think that Hawaiian Electric will be rewarded by the markets for pulling forward a sustainable business model,” Mr. Ubben told Bloomberg. “By future-proofing its business and using technology, it has the potential to be the utility of the future.” As a possible indication of such market rewards, Hawaiian Electric’s share price jumped three percent on the news.

ValueAct’s investment in Hawaii’s utility comes from its Spring Master Fund, named after Rachel Carson’s book Silent Spring, which cautioned that DDT was killing songbirds, reported CNBC. Previously, the Spring fund purchased a stake in global power firm AES and Mr. Ubben took a seat on the AES board, per a January SEC filing, in order to promote a cleaner energy mix, reported Bloomberg.

Activist investors such as ValueAct operate by consulting with management and seeking a seat on the board; some go beyond such collaborative efforts, if needed, by waging a proxy fight to gain increasing board representation. Ultimately, with a majority of board votes, an activist coalition could replace the CEO.

On Hawaiian Electric’s quarterly earnings call on November 7, in response to a question about “new investors in the stock,” CEO Constance Lau said “Hawaii has been on the forefront of renewable energy,” adding “we don’t have any major changes that we’re looking at…we’re just trying to move as fast as we can.”

ValueAct’s overall investments total over $10 billion, and range up to a 24% holding in Trinity Industries, with other major holdings including 13% of Alliance Data Systems, 10% of Seagate Technology, and 10% of SLM Corporation, according to a Securities and Exchange Commission filing, based on recent share prices.

Hawaii has a 100% renewables mandate by 2045.