00 CS FOR HOUSE BILL NO. 357(ENE) 01 "An Act establishing the sustainable energy transmission and supply development 02 program in the Alaska Industrial Development and Export Authority; and relating to 03 the interest rates of the Alaska Industrial Development and Export Authority." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 06 to read: 07 SHORT TITLE. This Act may be known as the Alaska Sustainable Strategy for 08 Energy Transmission and Supply (ASSETS) Act. 09 * Sec. 2. The uncodified law of the State of Alaska is amended by adding a new section to 10 read: 11 LEGISLATIVE INTENT. The legislature intends to appropriate, during fiscal years 12 2013 and 2014, amounts that total $250,000,000 to carry out the purposes of this Act. 13 * Sec. 3. AS 44.88.010(a) is amended to read: 14 (a) The legislature finds, determines, and declares that 01 (1) there exist areas of the state in which seasonal and nonseasonal 02 unemployment exist; 03 (2) this unemployment is a serious menace to the health, safety, and 04 general welfare, not only to the people in those areas, but also to the people of the 05 entire state; 06 (3) the state lacks the basic manufacturing, industrial, energy, export, 07 small business, and business enterprises and the other facilities referred to in this 08 subsection necessary to permit adequate development of its natural resources and the 09 balanced growth of its economy; 10 (4) the establishment and expansion of industrial, manufacturing, 11 energy, export, small business, and business enterprises in the state [ALASKA] and 12 the other facilities referred to in this subsection are essential to the development of the 13 natural resources and the long-term economic growth of the state, and will directly and 14 indirectly alleviate unemployment in the state; 15 (5) the expansion of export trade is vital to the health and growth of the 16 state's economy; 17 (6) many state [ALASKA] businesses could benefit from additional 18 financial and technical assistance with respect to the exportation of their products and 19 services; 20 (7) the [UNITED STATES] Export-Import Bank of the United States 21 has been mandated by the Export-Import Bank Act Amendments of 1983 to provide 22 technical assistance and export financing support to small businesses in cooperation 23 with state export finance agencies; 24 (8) Alaska-based exporters can be effectively assisted through the 25 establishment, as part of the Alaska Industrial Development and Export Authority, of 26 an export financing program designed to work with the [U.S.] Export-Import Bank of 27 the United States and other federal, state, and private institutions; 28 (9) the achievement of the goal of full employment, and of 29 establishment and continuing operation and development of industrial, manufacturing, 30 energy, export, small business, and business enterprises in the state will be accelerated 31 and facilitated by the creation of an instrumentality of the state with powers to incur 01 debt, to own and operate facilities, to make and insure loans to finance and to assist 02 private lenders to make loans to finance the establishment, operation, and development 03 of industrial, manufacturing, energy, export, small business, and business enterprises; 04 (10) it is in the public interest to promote the prosperity and general 05 welfare of all citizens of the state by 06 (A) stimulating commercial and industrial growth and 07 expansion by encouraging an increase of private investment by banks, 08 investment houses, insurance companies, and other financial institutions, 09 including pension and retirement funds, to help satisfy the need for economic 10 expansion; 11 (B) encouraging the production of raw materials and goods for 12 export, the expansion of exports and raw materials and goods, and the 13 rendering of services abroad by residents of the state through the establishment 14 of a program that provides financial assistance in cooperation with federal, 15 state, and private institutions for these purposes in the form provided in this 16 chapter; 17 (C) creating the Alaska Industrial Development and Export 18 Authority with the powers necessary to accomplish the objectives stated in this 19 paragraph, including the power to issue taxable and tax-exempt bonds and to 20 acquire ownership interests in projects as provided in this chapter; 21 (11) it is in the state's interest to import private capital to create new 22 economic activity which would not otherwise take place in the state. 23 * Sec. 4. AS 44.88.010(b) is amended to read: 24 (b) It is declared to be the policy of the state, in the interests of promoting the 25 health, security, and general welfare of all the people of the state, and a public 26 purpose, to increase job opportunities and otherwise to encourage the economic 27 growth of the state, including the development of its natural resources, through the 28 establishment and expansion of manufacturing, industrial, energy, export, small 29 business, and business enterprises and the other facilities referred to in (a) of this 30 section by creating the Alaska Industrial Development and Export Authority with the 31 powers, duties, and functions as provided in this chapter. 01 * Sec. 5. AS 44.88.155(d) is amended to read: 02 (d) A loan participation purchased by the authority with assets of the 03 enterprise development account or with proceeds of bonds secured by assets of the 04 enterprise development account 05 (1) may not exceed $20,000,000; however, in the case of a loan 06 participation for qualified energy development [A POWER TRANSMISSION 07 INTERTIE], the loan participation may exceed $20,000,000 with legislative approval; 08 (2) may not be purchased unless 09 (A) the project applicant is not, or, if the applicant is not a 10 single proprietorship, all members of the business enterprise or enterprises 11 constituting the project applicant are not, in default on another loan made by 12 the state or by a public corporation of the state; and 13 (B) at least 10 percent of the principal amount of the loan is 14 retained by the loan originator, or the loan is for financing improvements in 15 energy efficiency; 16 (3) may not be purchased if the loan to be purchased exceeds 75 17 percent of the appraised value of the collateral offered as security for the loan unless 18 the amount of the loan in excess of this limit is federally insured or guaranteed or is 19 insured by a qualified mortgage insurance company, except that the loan to be 20 purchased under this paragraph may not exceed the total of loan proceeds used to 21 refinance an existing debt plus the cost of new construction, expansion, or acquisition 22 unless the proceeds from the additional amounts of the loan to be purchased are 23 restricted to uses approved by the authority to finance commercial activity in the state 24 by a business enterprise; 25 (4) may not be purchased if the participation in the loan to be 26 purchased is for a term longer than the following, except that a loan under (A) or (C) 27 of this paragraph may not have a term longer than three-quarters of the authority's 28 estimate of the life of the collateral offered as security for the loan: 29 (A) 40 years from the date the loan is made in the case of a 30 loan participation for a project described in AS 44.88.900(9)(E); 31 (B) 50 years from the date the loan is made in the case of a loan 01 participation for qualified energy development [A POWER 02 TRANSMISSION INTERTIE]; 03 (C) 25 years from the date the loan is made in the case of a loan 04 participation for other projects; 05 (5) may be made only if the participation in the loan to be purchased 06 contains amortization provisions; the amortization provisions 07 (A) must be complete and satisfactory to the authority and 08 require periodic payments by the borrower; 09 (B) may allow the loan originator to amortize the portion of the 10 loan retained by the loan originator using a shorter amortization schedule than 11 the amortization schedule for the portion of the loan held by the authority if 12 (i) in the authority's opinion, the project financed can 13 support the increased debt service; and 14 (ii) the accelerated amortization schedule is required to 15 induce the originator to make the loan; 16 (6) may be made only if the participation in the loan to be purchased is 17 in the form and contains the terms and provisions with respect to insurance, repairs, 18 alterations, payment of taxes and assessments, default reserves, delinquency charges, 19 default remedies, acceleration of maturity, secondary liens, and other matters the 20 authority prescribes; and 21 (7) may be made only if the participation in the loan to be purchased is 22 secured as to repayment by a mortgage or other security instrument in the manner the 23 authority determines is feasible to assure timely repayment under the loan documents 24 entered into with the borrower. 25 * Sec. 6. AS 44.88.155(g) is amended to read: 26 (g) Notwithstanding any other provision of this section, the authority may 27 waive or modify the requirements of this section as it considers appropriate and 28 prudent in order to finance a project if the authority intends to own the project or in 29 order to finance qualified energy development [A POWER TRANSMISSION 30 INTERTIE PROJECT]. 31 * Sec. 7. AS 44.88.159(a) is amended to read: 01 (a) The interest rate on a loan purchased from the proceeds of tax-exempt 02 bonds secured by the sustainable energy transmission and supply development 03 fund (AS 44.88.710) under AS 44.88.700 - 44.88.740 or a loan participation 04 purchased from the proceeds of tax-exempt bonds or expected by the authority to be 05 purchased from the proceeds of tax-exempt bonds under AS 44.88.155 shall be 06 determined under the regulations adopted by the authority under 07 AS 44.88.085(g)(2)(C) and shall be not less than the cost of funds to the authority. In 08 this subsection, "cost of funds" means the true interest cost expressed as a rate on tax- 09 exempt bonds of the authority plus an additional percentage as determined by the 10 authority to represent the allocable expenses of operation, costs of issuance, and loan 11 servicing costs. 12 * Sec. 8. AS 44.88.159(b) is amended to read: 13 (b) The interest rate on a loan purchased from the proceeds of taxable 14 bonds secured by the sustainable energy transmission and supply development 15 fund (AS 44.88.710) under AS 44.88.700 - 44.88.740 or a loan participation 16 purchased from the proceeds of taxable bonds under AS 44.88.155 or expected by the 17 authority to be purchased from the proceeds of taxable bonds under AS 44.88.155 18 shall be determined under the regulations adopted by the authority under 19 AS 44.88.085(g)(2)(C) and shall be not less than the cost of funds to the authority. In 20 this subsection, "cost of funds" means the true interest cost expressed as a rate on 21 taxable bonds, plus an additional percentage as determined by the authority to 22 represent the allocable expenses of operation, costs of issuance, and loan servicing 23 costs. 24 * Sec. 9. AS 44.88.159(d) is amended to read: 25 (d) The provisions of this section apply only to a loan participation purchased 26 under AS 44.88.155 - 44.88.159 or to a loan made under AS 44.88.700 - 44.88.740. 27 * Sec. 10. AS 44.88.159(e) is amended to read: 28 (e) The interest rate on a loan made under AS 44.88.700 - 44.88.740 or a 29 loan participation purchased directly from the assets of the authority shall be 30 determined under the regulations adopted by the authority under 31 AS 44.88.085(g)(2)(C) and shall be not less than the total of a percentage as 01 determined by the authority to represent the allocable expenses of operation and costs 02 of loan origination and servicing, plus the cost of funds. In this subsection, 03 (1) "comparable financial security" means a type or category of 04 financial security the authority identifies in the regulations adopted by the authority 05 under AS 44.88.085(g)(2)(C) that has a term and financial conditions comparable to 06 the term and financial conditions of a loan participation or a loan made under 07 AS 44.88.700 - 44.88.740 and for which a regularly published, nationally recognized 08 market index is available; 09 (2) "cost of funds" means the earnings, expressed as an annual interest 10 rate, the authority would receive on a comparable financial security, and, for a loan 11 participation or a loan made under AS 44.88.700 - 44.88.740 with a fixed interest 12 rate, the cost of funds must equal or exceed the minimum interest rate; 13 (3) "minimum interest rate" means the five-year return on investment 14 funds of the authority, expressed as an annual interest rate, achieved by all internal and 15 external investment managers of the authority combined. 16 * Sec. 11. AS 44.88.159(f) is amended to read: 17 (f) In determining an interest rate under the regulations adopted by the 18 authority under AS 44.88.085(g)(2)(C), the authority may determine to disregard the 19 minimum interest rate required under (a), (b), or (e) of this section for a loan 20 participation purchased by the authority or a loan made under AS 44.88.700 - 21 44.88.740 to resolve lending limits or reserve restrictions imposed on the financial 22 institution and may instead determine to retain the interest rate existing at the time the 23 authority makes the loan or purchases the authority's loan participation [A 24 PORTION OF THE LOAN]. 25 * Sec. 12. AS 44.88.159(g) is amended to read: 26 (g) The authority may, in the regulations adopted by the authority under 27 AS 44.88.085(g)(2)(C), establish a program to pay to borrowers of loan participations 28 determined by the authority to meet sufficient job creation, rural development, 29 renewable energy development, or other economic development criteria incentive 30 rate rebates of not more than one percent of the interest rate charged on the authority's 31 portion of a loan participation. The following standards apply to the program: 01 (1) the payment of an incentive rate rebate may reduce the interest rate 02 to a rate that is less than the minimum interest rate required under (a), (b), or (e) of this 03 section; 04 (2) the authority may not commit to pay an incentive rate rebate for a 05 proposed loan participation if the total of the amount of the proposed loan 06 participation plus the combined outstanding balance of all loan participations for 07 which the authority has committed to pay incentive rate rebates would exceed five 08 percent of the total of the amount of the proposed loan participation plus the combined 09 outstanding balance of all loan participations of the authority; 10 (3) an incentive rate rebate may not accrue for more than five years 11 after the date the loan participation is purchased; 12 (4) the authority may establish a separate account for the incentive rate 13 rebate program. 14 * Sec. 13. AS 44.88 is amended by adding new sections to read: 15 Article 7A. Sustainable Energy Transmission and Supply. 16 Sec. 44.88.700. Sustainable energy transmission and supply development 17 program. The sustainable energy transmission and supply development program is 18 created in the authority to promote and provide financing for qualified energy 19 development in the state to alleviate unemployment and contribute to the state's 20 economic welfare, economic diversity, and economic development. 21 Sec. 44.88.710. Alaska Industrial Development and Export Authority 22 sustainable energy transmission and supply development fund. The Alaska 23 Industrial Development and Export Authority sustainable energy transmission and 24 supply development fund is established in the authority. The development fund 25 consists of appropriations made to the development fund by the legislature, money or 26 other assets transferred to the development fund by the authority, and unrestricted loan 27 repayments, interest, or other income earned on loans, investments, or assets of the 28 development fund. The development fund is not an account in the revolving loan fund 29 established in AS 44.88.060, and the authority shall account for the development fund 30 separately from the revolving fund. The authority may create additional accounts in 31 the development fund. Subject to agreements made with the holders of the authority's 01 bonds or with other persons, the authority may transfer amounts in an account in the 02 development fund to another account in the development fund. Amounts deposited in 03 the development fund may be pledged to the payment of bonds of the authority or 04 expended for the purposes of AS 44.88.700 - 44.88.740. The authority has the powers 05 and responsibilities established in AS 37.10.071 with respect to the investment of 06 amounts held in the development fund. 07 Sec. 44.88.720. Use of fund balance. Subject to the requirements of 08 AS 44.88.710 - 44.88.740, the authority may use money in the Alaska Industrial 09 Development and Export Authority sustainable energy transmission and supply 10 development fund to assist in the construction, improvement, rehabilitation, and 11 expansion of qualified energy development. 12 Sec. 44.88.730. Qualified energy development; powers and duties of the 13 authority. (a) Subject to the limitations of AS 44.88.740, for qualified energy 14 development the authority may 15 (1) use the Alaska Industrial Development and Export Authority 16 sustainable energy transmission and supply development fund to finance qualified 17 energy development, insure project obligations, guarantee loans or bonds, and 18 establish reserves; 19 (2) acquire real or personal property by purchase, transfer, or 20 foreclosure when the acquisition is necessary to protect the authority's interest in 21 financing; 22 (3) defer principal payments or capitalize interest on qualified energy 23 development financing; 24 (4) subject to AS 36.30.085(e), enter into lease agreements, sales- 25 lease-back agreements, build-operate-transfer, and operate-transfer agreements, or any 26 similar project financing agreement for a qualified energy development; 27 (5) enter into agreements with government entities for the transfer and 28 control of infrastructure, facilities, rights-of-way, and studies; 29 (6) contract for services with a professional advisor, including an 30 attorney, bond counsel, engineer, or other technical expert necessary to fulfill the 31 purposes of the program; and 01 (7) subject to AS 44.88.090, borrow money and issue bonds. 02 (b) The authority shall adopt regulations to implement AS 44.88.700 - 03 44.88.740, including 04 (1) an application process for acquiring financing under this section; 05 (2) qualifications for qualified energy development projects applying 06 for financing under this section; and 07 (3) fiscal controls and accounting procedures for the development 08 fund. 09 Sec. 44.88.740. Limitations on financing. (a) Unless the authority has 10 obtained legislative approval by law, the authority may not finance or participate in 11 financing of 12 (1) more than one-third of the capital cost of qualified energy 13 development; or 14 (2) a loan guarantee that exceeds $20,000,000. 15 (b) Financing under AS 44.88.730 is limited to the life of qualified energy 16 development, which may not be more than 17 (1) 30 years; or 18 (2) 50 years for a transmission line or hydroelectric qualified energy 19 development. 20 * Sec. 14. AS 44.88.900 is amended by adding new paragraphs to read: 21 (15) "development fund" means the sustainable energy transmission 22 and supply development fund created in AS 44.88.710; 23 (16) "qualified energy development" means a project in the state that 24 involves 25 (A) transmission, generation, conservation, storage, or 26 distribution of heat or electricity; 27 (B) liquefaction, regasification, distribution, storage, or use of 28 natural gas; 29 (C) the chemical, catalytic, or biological upgrade or conversion 30 of natural gas, coal, or biomass to hydrocarbon liquids; 31 (D) processing, refining, or upgrading of oil; 01 (E) distribution or storage of refined petroleum products; 02 (F) enhanced oil recovery or carbon sequestration; 03 (G) gasification of coal or biomass into synthesis gas; 04 (H) the chemical, catalytic, or biological upgrade of synthesis 05 gas into methane; or 06 (I) the manufacture of hydrogen from any feedstock, excluding 07 the mechanical separation from air. 08 * Sec. 15. The uncodified law of the State of Alaska is amended by adding a new section to 09 read: 10 REVISOR'S INSTRUCTION. References to "this chapter" in AS 44.88 apply to sec. 13 of 11 this Act and so should not be changed.