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SB 123: "An Act establishing the Alaska energy independence program and the Alaska energy independence fund in the Alaska Industrial Development and Export Authority; and providing for an effective date."

00 SENATE BILL NO. 123 01 "An Act establishing the Alaska energy independence program and the Alaska energy 02 independence fund in the Alaska Industrial Development and Export Authority; and 03 providing for an effective date." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 44.88.070 is amended to read: 06 Sec. 44.88.070. Purpose of the authority. The purpose of the authority is to 07 promote, develop, and advance the general prosperity and economic welfare of the 08 people of the state, to relieve problems of unemployment, and to create additional 09 employment by 10 (1) providing various means of financing and means of facilitating the 11 financing, in cooperation with federal, state, and private institutions, of industrial, 12 manufacturing, energy, sustainable energy development, export, small business, and 13 business enterprises and the other facilities referred to in AS 44.88.010(a) in the state; 14 (2) owning and operating or providing development project financing

01 for the enterprises and other facilities described in AS 44.88.172; 02 (3) fostering the expansion of exports of goods, services, and raw 03 materials of the state; 04 (4) cooperating and acting in conjunction with other organizations, 05 public and private, the objects of which are the promotion and advancement of export 06 trade activities in the state; 07 (5) establishing a source of funding credit guarantees and insurance, 08 not otherwise available, to support export development; 09 (6) providing and cooperating or participating with federal, state, and 10 private institutions to provide actual and potential state exporters, particularly small- 11 and medium-sized exporters, with financial assistance in support of export 12 transactions. 13 * Sec. 2. AS 44.88.159(a) is amended to read: 14 (a) The interest rate on a loan purchased from the proceeds of tax-exempt 15 bonds secured by the Alaska Industrial Development and Export Authority sustainable 16 energy transmission and supply development fund (AS 44.88.660) under 17 AS 44.88.650 - 44.88.690, [OR] by the Arctic infrastructure development fund 18 (AS 44.88.810) under AS 44.88.800 - 44.88.840, or by the Alaska energy 19 independence fund (AS 44.88.452) under AS 44.88.450 - 44.88.456, or a loan 20 participation purchased from the proceeds of tax-exempt bonds or expected by the 21 authority to be purchased from the proceeds of tax-exempt bonds under AS 44.88.155 22 shall be determined under the regulations adopted by the authority under 23 AS 44.88.085(g)(2)(C) and shall be not less than the cost of funds to the authority. In 24 this subsection, "cost of funds" means the true interest cost expressed as a rate on tax- 25 exempt bonds of the authority plus an additional percentage as determined by the 26 authority to represent the allocable expenses of operation, costs of issuance, and loan 27 servicing costs. 28 * Sec. 3. AS 44.88.159(b) is amended to read: 29 (b) The interest rate on a loan purchased from the proceeds of taxable bonds 30 secured by the Alaska Industrial Development and Export Authority sustainable 31 energy transmission and supply development fund (AS 44.88.660) under

01 AS 44.88.650 - 44.88.690, [OR] by the Arctic infrastructure development fund 02 (AS 44.88.810) under AS 44.88.800 - 44.88.840, or by the Alaska energy 03 independence fund (AS 44.88.452) under AS 44.88.450 - 44.88.456, or a loan 04 participation purchased from the proceeds of taxable bonds under AS 44.88.155 or 05 expected by the authority to be purchased from the proceeds of taxable bonds under 06 AS 44.88.155 shall be determined under the regulations adopted by the authority 07 under AS 44.88.085(g)(2)(C) and shall be not less than the cost of funds to the 08 authority. In this subsection, "cost of funds" means the true interest cost expressed as a 09 rate on taxable bonds, plus an additional percentage as determined by the authority to 10 represent the allocable expenses of operation, costs of issuance, and loan servicing 11 costs. 12 * Sec. 4. AS 44.88.159(g) is amended to read: 13 (g) The authority may, in the regulations adopted by the authority under 14 AS 44.88.085(g)(2)(C), establish a program to pay to borrowers of loan participations 15 determined by the authority to meet sufficient job creation, rural development, Arctic 16 infrastructure development, renewable energy development, sustainable energy 17 development, or other economic development criteria incentive rate rebates of not 18 more than one percent of the interest rate charged on the authority's portion of a loan 19 participation. The following standards apply to the program: 20 (1) the payment of an incentive rate rebate may reduce the interest rate 21 to a rate that is less than the minimum interest rate required under (a), (b), or (e) of this 22 section; 23 (2) the authority may not commit to pay an incentive rate rebate for a 24 proposed loan participation if the total of the amount of the proposed loan 25 participation plus the combined outstanding balance of all loan participations for 26 which the authority has committed to pay incentive rate rebates would exceed five 27 percent of the total of the amount of the proposed loan participation plus the combined 28 outstanding balance of all loan participations of the authority; 29 (3) an incentive rate rebate may not accrue for more than five years 30 after the date the loan participation is purchased; 31 (4) the authority may establish a separate account for the incentive rate

01 rebate program. 02 * Sec. 5. AS 44.88.178 is amended to read: 03 Sec. 44.88.178. Creation of subsidiaries. The authority may create one or 04 more subsidiary corporations, limited liability companies, or limited partnerships 05 for the purpose of acquiring, constructing, owning, operating, or financing a project 06 financed under AS 44.88.172 or for the purpose of administering, operating, or 07 expanding the Alaska energy independence program. A subsidiary corporation 08 created under this section may be incorporated under AS 10.20.146 - 10.20.166. 09 Subject to limitations for the use of the economic development account under 10 AS 44.88.172 and the Alaska energy independence fund under AS 44.88.450 - 11 44.88.456, the [THE] authority may transfer assets of the authority to a subsidiary 12 created under this section. A subsidiary created under this section may borrow money 13 and issue bonds as evidence of that borrowing, and has all the powers of the authority 14 that the authority grants to it. Unless otherwise provided by the authority, the debts, 15 liabilities, and obligations of a subsidiary corporation, limited liability company, or 16 limited partnership created under this section are not the debts, liabilities, or 17 obligations of the authority. 18 * Sec. 6. AS 44.88 is amended by adding new sections to read: 19 Sec. 44.88.450. Alaska energy independence program. (a) The Alaska 20 energy independence program is created in the authority to make loans and provide 21 other forms of financing for sustainable energy development in the state. 22 (b) An advisory board is established and consists of the following five 23 members: 24 (1) the governor or the governor's designee; and 25 (2) four public members appointed by the governor with expertise in 26 one or more of the following: 27 (A) finance; 28 (B) marketing of financial products; 29 (C) construction science and efficiencies; 30 (D) renewable energy, electric transportation, and other 31 sustainable energy development.

01 (c) The advisory board established under (b) of this section shall make 02 recommendations to the authority regarding 03 (1) the design of the Alaska energy independence program; 04 (2) a public education program for the Alaska energy independence 05 program; 06 (3) best practices of funds designed to address sustainable energy 07 development; and 08 (4) other matters intended to increase the use and viability of the 09 Alaska energy independence fund. 10 (d) A member of the advisory board appointed under (b) of this section serves 11 without compensation but is entitled to travel and per diem expenses as provided in 12 AS 39.20.180. 13 Sec. 44.88.452. Alaska energy independence fund. (a) The Alaska energy 14 independence fund is established in the authority. The Alaska energy independence 15 fund is for the uses and purposes of AS 44.88.450 - 44.88.456. 16 (b) The fund consists of appropriations made by the legislature, loans or other 17 assets transferred to the fund by the authority, unrestricted loan repayments, interest, 18 or other income earned on loans, investments, or assets of the fund, and available 19 federal funding. 20 (c) The fund is not an account in the revolving loan fund established in 21 AS 44.88.060. The authority shall account for the fund separately from the revolving 22 fund. The authority may create additional accounts in the Alaska energy independence 23 fund. Subject to agreements made with the holders of the authority's bonds or with 24 other persons, the authority may transfer amounts in an account in the fund to another 25 account in the fund. 26 (d) The authority shall have custody of the fund and shall be responsible for its 27 management. The authority is the fiduciary of the fund under AS 37.10.071 and may 28 invest amounts in the fund in accordance with an investment policy adopted by the 29 authority. In order to promote sustainable energy development in the state, the 30 investment policy adopted by the authority may deviate from the prudent investor rule 31 and traditional institutional financing criteria. Notwithstanding AS 37.10.010 -

01 37.10.050, the authority may make disbursements from the fund in accordance with 02 AS 37.25.050. Notwithstanding AS 37.05.130 and 37.05.140, the authority shall report 03 disbursements from the fund annually in accordance with AS 44.88.205(b)(2). An 04 appropriation made to the fund by the legislature shall be transferred to the authority 05 for deposit in the fund. 06 (e) Nothing in this section creates a dedicated fund. 07 Sec. 44.88.454. Sustainable energy development; powers and duties of the 08 authority. (a) Subject to the requirements of AS 44.88.450 - 44.88.456, the authority 09 may 10 (1) establish a subsidiary entity subject to the requirements of 11 AS 44.88.178; 12 (2) in consultation with the advisory board established in 13 AS 44.88.450, establish financing programs and products that the authority determines 14 are necessary to encourage and promote sustainable energy development in the state; 15 (3) invest in eligible sustainable energy development alone or with 16 other investors, including private capital providers; 17 (4) provide capital and fund management to eligible sustainable energy 18 development in the form of 19 (A) senior, mezzanine, and subordinated debt; 20 (B) loan guarantees on third-party financing; 21 (C) credit enhancements, including loan loss reserves and 22 interest rate buy-downs; 23 (D) aggregation and warehousing; 24 (E) equity capital; 25 (F) securitization of financings; 26 (G) financing techniques that utilize loan liquidity; and 27 (H) any other financial product or service approved by the 28 authority; 29 (5) make and execute contracts and other instruments to implement 30 AS 44.88.450 - 44.88.456; 31 (6) charge reasonable fees that the authority may establish by

01 regulation for the products and services it provides under AS 44.88.450 - 44.88.456; 02 (7) acquire real or personal property by purchase, transfer, or 03 foreclosure when the acquisition is necessary to protect the authority's interest in a 04 loan or other financial product; 05 (8) subject to AS 36.30.085, enter into lease-purchase agreements; 06 (9) defer principal payments or capitalize interest on loans; 07 (10) provide financing and services to municipal energy improvement 08 assessment programs established in accordance with AS 29.55.100; and 09 (11) exercise any other power necessary to implement AS 44.88.450 - 10 44.88.456. 11 (b) The authority shall adopt regulations to implement AS 44.88.450 - 12 44.88.456, including 13 (1) an application process for acquiring financing under the Alaska 14 energy independence program; 15 (2) qualifications for applicants applying for financing under the 16 Alaska energy independence program; 17 (3) record keeping requirements in order for the authority to 18 accumulate and track measurable data related to the Alaska energy independence fund; 19 and 20 (4) fiscal controls for the Alaska energy independence fund. 21 Sec. 44.88.456. Limitations on financing; use as security. (a) Unless the 22 authority has obtained legislative approval, the authority may not use the Alaska 23 energy independence fund established in AS 44.88.452 to make a loan guarantee if the 24 amount of the guarantee exceeds $20,000,000. 25 (b) Financing under AS 44.88.454 is limited to the life of eligible sustainable 26 energy development, with financing limited by the estimated useful life of the project. 27 (c) Notwithstanding (a) of this section, the authority may use the Alaska 28 energy independence fund established in AS 44.88.452 as security for a bond 29 guarantee. 30 (d) A guarantee or other security provided by the authority under 31 AS 44.88.450 - 44.88.456 does not constitute a debt, liability, or obligation of the state

01 or political subdivision of the state. 02 * Sec. 7. AS 44.88.900 is amended by adding new paragraphs to read: 03 (20) "sustainable energy development" means 04 (A) renewable energy generation from sources that are 05 continually replenished by nature, such as the sun, wind, water, and biological 06 processes; 07 (B) building energy efficiency, including fuel switching to 08 renewable fuels and electrification; 09 (C) industrial decarbonization; 10 (D) electrical infrastructure incorporating 11 (i) energy storage to support clean energy distribution, 12 including remote and non-remote microgrids and smart-grid 13 applications; and 14 (ii) other sustainable technologies including distributed 15 generation, advanced battery, and combined heat and power; 16 (E) greenhouse gas emissions reduction through processes 17 including regenerative agriculture, reforestation, afforestation, and forestry 18 management; 19 (F) clean transportation, including battery electric vehicles, 20 hydrogen vehicles, plug-in hybrid electric vehicles, and other zero-emissions 21 vehicles for consumers, businesses, government, and public transit; 22 (G) electric vehicle charging and fueling infrastructure; and 23 (H) any other emissions reduction or energy efficiency 24 technology the authority determines to be consistent with the Alaska energy 25 independence program; 26 (21) "eligible sustainable energy development" means activity 27 approved by the authority to be consistent with the Alaska energy independence 28 program and for which the authority will issue a loan or other financial product. 29 * Sec. 8. This Act takes effect January 1, 2022.