State energy board votes on nearly $5 million solar loan for Red Dog Mine

The Alaska Energy Authority board votes Thursday on a state loan of nearly $5 million for a solar and battery project at Red Dog Mine, after the agency's loan committee unanimously approved it and staff recommended the board do the same.

The loan would cover part of the roughly $35 million project, an 8.8-megawatt solar array and battery at the zinc mine in the Northwest Arctic Borough. Tugliq Red Dog1 LLC, a subsidiary of Canadian company Tugliq Energy Corp., would own it and sell all of its power to mine operator Teck Alaska. Those sales would repay the loan, according to the loan memo in the board packet.

The deal isn't done even if the board approves it. Before the loan can close, Tugliq has to line up the rest of the project's money, formally sign its power contract with Teck and get its parent company to guarantee the loan.

Red Dog runs on diesel, and in summer Teck's generators have to cut power to other parts of the mine so they can supply the mill, Teck told the state. Agency staff wrote that the solar project would give Teck room to ease those cuts, burn less diesel and lower workers' exposure to airborne particulates.

The project is "in no way intended to displace all or a majority" of the mine's diesel power, staff wrote. As Alaska News reported Oct. 29, it would supply about 5% of the mine's power through 2031, when its current ore is expected to run out, but about 90% of the site's needs if the mine closes.

Staff also tied the loan to the region's economy. The mine is the largest employer of borough residents and supplies more than 80% of the borough's revenue through payments in lieu of taxes, the memo says. Red Dog is down to one pit, with zinc output expected to fall by nearly half by 2028, and Teck is exploring nearby deposits to extend its life. Staff wrote that the project is "fully supported under a mine closure scenario."

The loan is $4,955,444, over 19 years at 5.57% interest. Tugliq first asked for just under $5 million, and staff trimmed it because the company wanted total state involvement to stay under $5 million. Above that, the Legislature would have to approve. The state would be repaid only after the project's senior lenders.

The loan would come from the Power Project Fund, which lends to energy projects around the state. Staff put its uncommitted balance at $3.6 million and wrote that it "will not be sufficient to meet future loan requests," noting that the two most recent applications each sought nearly $5 million. The other is a pending request of nearly $5 million from the Alutiiq Tribe of Old Harbor for a hydroelectric project.