04/05/2010 10:00 AM Senate FINANCE

SENATE BILL NO. 301                                                                                                           
                                                                                                                                
     "An   Act  relating   to   the   power  project   fund;                                                                    
     authorizing the  Alaska Energy Authority to  charge and                                                                    
     collect  fees  relating  to  the  power  project  fund;                                                                    
     authorizing  the Alaska  Energy Authority  to sell  and                                                                    
     authorizing  the  Alaska   Industrial  Development  and                                                                    
     Export  Authority  to  purchase   loans  of  the  power                                                                    
     project  fund; providing  legislative approval  for the                                                                    
     sale and  purchase of loans  of the power  project fund                                                                    
     under  the memorandum  of understanding  dated February                                                                    
     17, 2010; and providing for an effective date."                                                                            
                                                                                                                                
11:19:22 AM    AT EASE                                                                                                        
11:20:06 AM    RECONVENE                                                                                                      
                                                                                                                                
SARAH  FISHER-GOAD, DEPUTY  DIRECTOR  OF OPERATIONS,  ALASKA                                                                    
ENERGY  AUTHORITY,  DEPARTMENT  OF COMMERCE,  COMMUNITY  AND                                                                    
ECONOMIC  DEVELOPMENT, stated  that  SB  301 authorizes  the                                                                    
Alaska Energy Authority  (AEA) to sell loans  from the power                                                                    
project  fund   to  raise  capital  for   new  projects  and                                                                    
authorizes  the  Alaska  Industrial Development  and  Export                                                                    
Authority  to purchase  the loan  portfolio.  The bill  also                                                                    
authorizes AEA to establish fees  for the power project fund                                                                    
loans. She  continued that the bill  is straightforward. She                                                                    
provided a sectional analysis.                                                                                                  
                                                                                                                                
     Section  1:   AS  42.45.010(a)  is  amended   to  allow                                                                    
     proceeds from  the sale  of power  project loans  to be                                                                    
     deposited into the power project fund (PPF).                                                                               
                                                                                                                                
     Section 2:   AS  42.45.010(D) repeals and  reenacts AEA                                                                    
     authority  to adopt  regulations relating  to the  loan                                                                    
     program by specifically allowing  AEA to establish fees                                                                    
     for applications and loan originations.                                                                                    
                                                                                                                                
     Section  3:   AS  42.45.010 is  amended  by adding  new                                                                    
     subsections-                                                                                                               
     (k) to  provide that  fees collected will  be deposited                                                                    
     into the general fund.                                                                                                     
     (l) provides authority to AEA  to sell loans fo the PPF                                                                    
     with  legislative approval,  allows  AEA to  repurchase                                                                    
     loans sold under this  subsection which default, allows                                                                    
     proceeds received to be deposited into the fund.                                                                           
                                                                                                                                
     Section  4:  AS  44.88.080  is amended  by  adding  new                                                                    
     subsection (30)  allowing AIDEA  to purchase  from AEA,                                                                    
    as an investment of the revolving fund, PPF loans.                                                                          
                                                                                                                                
     Section 5:   Uncodified law is amended by  adding a new                                                                    
     section providing  for legislative approval for  AEA to                                                                    
     sell and  AIDEA to purchase certain  power project fund                                                                    
     loans. This section references  the 2/17/10 MOU between                                                                    
     AIDEA and  AEA that memorializes the  proposed terms of                                                                    
     the sale and purchase.                                                                                                     
                                                                                                                                
     Section 6:  Provides for an immediate effective date                                                                       
                                                                                                                                
Senator Olson  asked who benefits from  the legislation. Ms.                                                                    
Fisher-Goad  responded   that  the  benefit  is   to  future                                                                    
borrowers of  the power project  fund. Capital is  raised in                                                                    
order to issue  more loans. The authority  to repurchase any                                                                    
loan that would  perhaps default, allows AEA  to receive the                                                                    
highest price possible.  A discount rate is  applied to this                                                                    
purchase. A risk analysis of the projects is not necessary.                                                                     
                                                                                                                                
Senator Olson  asked if  a discount  exists to  purchase the                                                                    
loans  in the  event of  default. Ms.  Fisher-Goad responded                                                                    
that  the rate  for repurchase  is  an annual  rate of  four                                                                    
percent if the loan was not repurchased within 30 days.                                                                         
                                                                                                                                
Co-Chair Stedman discussed the four zero fiscal notes.                                                                          
                                                                                                                                
11:25:29 AM                                                                                                                   
                                                                                                                                
Senator Egan  asked about the  interest rates on  the loans.                                                                    
He pointed  out that none of  the interest rates are  at six                                                                    
percent. Ms.  Fisher-Goad explained  that the  discount rate                                                                    
equals the  six percent  and is applied  to the  purchase of                                                                    
the portfolio. The discount rate  accounts for the long term                                                                    
cash  flow  of the  loan  payments.  The discount  rate  was                                                                    
determined by  running the  cash flow  of the  loan payments                                                                    
out  to  arrive at  a  present  value computation.  The  six                                                                    
percent discount rate accommodates that cash flow.                                                                              
                                                                                                                                
SB  301  was  HEARD  and   HELD  in  Committee  for  further                                                                    
consideration.