Legislature(2009 - 2010)BUTROVICH 205

03/15/2010 03:30 PM Senate RESOURCES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                   SB 301-POWER PROJECT FUND                                                                                
3:36:02 PM                                                                                                                    
CO-CHAIR MCGUIRE announced SB 301 to be up for consideration.                                                                   
3:36:09 PM                                                                                                                    
SARAH FISCHER-GOAD, Deputy Director, Operations, Alaska Energy                                                                  
Authority (AEA), and the Alaska Industrial Development and                                                                      
Export Authority (AIDEA), thanked them for scheduling SB 301.                                                                   
3:37:06 PM                                                                                                                    
SENATOR STEVENS joined the committee.                                                                                           
MS. GOAD explained that the bill  does two things relating to the                                                               
Power Project Fund. It will allow  AEA to charge and collect fees                                                               
for loans  for the  Power Project Fund,  which they  currently do                                                               
not do.   Also  it will allow  AEA to sell  loans from  the Power                                                               
Project Fund to  AIDEA. This will provide about  $20.6 million of                                                               
additional  loans for  AEA  to issue  through  the Power  Project                                                               
Fund. She  noted the  committee has  copies of  the MOU  that was                                                               
executed  between AEA  and AIDEA  that outline  the terms  of the                                                               
The one issue that they made  sure to include in the sale process                                                               
is that AEA  will retain the risk by repurchasing  the loans that                                                               
are sold to AIDEA if they default.  Right now AEA has the risk if                                                               
any of  these loans  go bad.  It allows them  to have  a discount                                                               
closer to the par amount of the loans that would be sold.                                                                       
CO-CHAIR MCGUIRE said  that she liked the bill and  had touted it                                                               
in different speeches she had given on energy.                                                                                  
3:38:40 PM                                                                                                                    
BRUCE CHERTKOW, no  stated affiliation, said he  was available to                                                               
answer questions.                                                                                                               
3:39:13 PM                                                                                                                    
CO-CHAIR  MCGUIRE   noted  that  Senator  Linda   Menard  was  in                                                               
3:39:25 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI  asked Ms. Goad  to describe what  types of                                                               
projects are funded under this program.                                                                                         
MS. GOAD replied  a variety of energy  projects, lately renewable                                                               
energy projects. Loans  that would be sold to AIDEA  are for wind                                                               
and hydro electric projects.                                                                                                    
CO-CHAIR WIELECHOWSKI asked the repayment rate.                                                                                 
MS. GOAD  answered the repayment  rate is based upon  the average                                                               
weekly yield  of muni bonds  for the 12 months  preceding period,                                                               
currently at  5.32 percent. The rate  has varied and they  can go                                                               
down  to zero  percent if  a  project warrants  a lower  interest                                                               
CO-CHAIR WIELECHOWSKI asked if they had any loan defaults.                                                                      
MS. GOAD answered none currently,  but one when the Power Project                                                               
Fund was  inherited from  the Division of  Energy. About  five or                                                               
six years ago,  appropriations have been made to  turn loans into                                                               
CO-CHAIR WIELECHOWSKI  asked if  this is essentially  a revolving                                                               
loan fund  and if it  has had any  delinquencies in the  last few                                                               
MS. GOAD answered  that the program had been  very successful and                                                               
has a very low delinquency and default rate.                                                                                    
CO-CHAIR WIELECHOWSKI asked  how they decide where  to loan these                                                               
MS. GOAD  answered that  it is  really a  first come  first serve                                                               
basis for qualifying  projects for which the  agency goes through                                                               
a  due diligence  analysis for  providing a  loan. Sometimes  the                                                               
agency   requires  loan   guarantees  or   collateral  from   the                                                               
3:42:54 PM                                                                                                                    
SENATOR FRENCH asked  the basic advantage in  shifting these from                                                               
AEA over to AIDEA.                                                                                                              
MS. GOAD answered  that the Power Project Fund is  running out of                                                               
cash. In  February it  had a  cash balance  of slightly  above $5                                                               
million. There is  an expectation that as they  do more renewable                                                               
energy funds that  this is a source for  matching dollar amounts.                                                               
So cash is needed in the fund.   AIDEA is purchasing the loans as                                                               
an investment.                                                                                                                  
SENATOR FRENCH asked  if AIDEA would give cash money  to AEA; AEA                                                               
transfers the loans to AIDEA; and  then AEA uses the cash it gets                                                               
from AIDEA to begin the process anew by loaning money out.                                                                      
MS. GOAD said that was correct.                                                                                                 
3:44:59 PM                                                                                                                    
CO-CHAIR MCGUIRE said SB 301 would be held over.                                                                                

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