Legislature(2015 - 2016)SENATE FINANCE 532
04/12/2016 09:00 AM FINANCE
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CS FOR HOUSE BILL NO. 143(FIN) "An Act authorizing the Alaska Industrial Development and Export Authority to issue bonds to finance the infrastructure and construction costs of the Sweetheart Lake hydroelectric project." 10:02:15 AM REPRESENTATIVE CATHY MUNOZ, SPONSOR, discussed the bill: House Bill 143 authorizes the Alaska Industrial Development and Export Authority to issue up to $120 million in conduit issuance bonds to finance a hydroelectric project at Sweetheart Lake, approximately 43 miles south of Juneau. Conduit issuances do not impact AIDEA bonding capacity and would solely be based on the merits of the project. AIDEA would act as a facilitator by vetting and performing due diligence on the project to determine whether it qualifies for such financing. Hydroelectric power is a clean, effective, and affordable source of energy in coastal, rainforest Alaska - a region that can use it to offset high costs of industries such as mining, processing fish, and forest products. Mining, tourism, and fish processing are vital to the area's economy. Affordable energy is a keystone of a healthy and sustainable economy. It ensures Alaska families, businesses, and job-creating industries may grow and thrive. HB 143 would help a region take steps toward unlocking its great energy and resource potential and move toward having a stronger and more diversified economy. 10:05:07 AM TERRY HARVEY, STAFF, REPRESENTATIVE CATHY MUNOZ, discussed the sectional analysis (copy on file): Section 1 (a) Provides legislative approval for the Alaska Industrial Development and Export Authority to issue bonds for the Sweetheart Lake hydroelectric project in an amount not to exceed $120,000,000 payable exclusively from the revenue derived from the project. (b) Provides that the bond authorization in this section does not constitute a general obligation of the state or authority. (c) Provides that the bonds authorized by this section may not be considered in calculating the authority's 12-month bonding limitation under AS 44.88.095(a). Section 2 Repeals sec. 1 on June 30, 2020. 10:06:25 AM Senator Dunleavy wondered whether the bill had any cost to the state. Representative Munoz reiterated that the bill had no cost to the state. 10:06:46 AM Senator Olson wondered what would occur if the mine shut down. Representative Munoz related that Kensington had invested in an 8,000 foot tunnel, and there were reserves that were available for low cost power. Senator Olson asked about the potential ramifications if Kensington were to shut down. Representative Munoz replied that the other large customer was the downtown district heating project. Vice-Chair Micciche wondered why the bond authorization did not constitute a general obligation to the state. 10:09:19 AM JOHN SPRINGSTEEN, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA) (via teleconference), explained that the clause was included so the project would not be against the 12-month rolling limit of $400 million. Co-Chair MacKinnon announced that the bond debt report had zero cash available for future bond under the legislature's debt calculation. She wondered if the limit would be exceeded by $120 million. Mr. Springsteen replied that it was a conduit issuance and relied solely on the revenue of the project. Co-Chair MacKinnon wondered whether other projects were counted against the debt limit of the rolling average with backed revenue bonds. Mr. Springsteen stated that current statute dictated that the only bond issuances that were not counted toward the $400 million 12-month rolling cap were refunding bonds. Co-Chair MacKinnon wondered if the legislation was raising the cap by $120 million. Mr. Springsteen replied that the legislation was a one-time approval. Co-Chair MacKinnon asked how long it would take to fund the project. Mr. Springsteen stated that the project had not yet come forward with a feasibility study. Co-Chair MacKinnon asked if such projects were typically 10 years, 20 years, 30 years, or 50 years. Mr. Springsteen thought that hydroelectric projects were typically 50 years, and the project could be up to 100 years. Vice-Chair Micciche surmised that the bill was not against AIDEA's bonding limitation because the securities were based upon the financial backing of another entity. Mr. Springsteen iterated that the assets and revenue of the project provided a security for the bond issuance. Co-Chair MacKinnon asked if there was a moral obligation with the revenue bond. Mr. Springsteen stated that in the instance there was not a moral obligation. Co-Chair MacKinnon opened public testimony. Co-Chair MacKinnon CLOSED public testimony. 10:15:27 AM AT EASE 10:15:37 AM RECONVENED 10:16:19 AM Vice-Chair Micciche wanted to support the Kensington mine. He stated that the heat pump technology was fascinating. He hoped to expand heat pump technology. Co-Chair MacKinnon commented that she would like to discuss the reason for the language. HB 143 was HEARD and HELD in committee for further consideration.