State Bank Acquistion of Interest in Wind Energy

On May 1, 2008, the Governor signed Senate File 2405 into law.  SF 2405 provides for state bank acquisition of an equity interest in wind energy production facilities and eligibility for production tax credits.  It also permits manufacturing facilities to acquire such credtis for on-site consumption of wind energy.  The new Act will amend Chapter 476B and 476C of the Iowa Code.

A bank's ability to take a financial position in a wind facility is subject to some conditions: 1) creditworthiness review; 2) the bank may not participate in the operation of the facility or the production or sale of energy; 3) if the facility does not perform as projected the bank may sell its interest or liquidate; 4) the bank may not share in any appreciation in value of its interest or in the customer's assets; 5) at the end of the maximum 10 year holding period, the bank must sell at book value. 

In Interpretive Letters 1048 and 1048a the OCC approved a bank's acquisition of an equity interest with similar conditions.  The OCC concluded that a bank's acquisition of such interests was an integral part of an authorized banking activity.

For a copy of S.F. 2405, click here (redirect to Iowa Legislature site).

If you have any questions regarding this law, contact Paul Horvath at Dickinson Mackaman Tyler & Hagen, P.C.