§940a. Privatization program

The Secretary shall establish a privatization demonstration program which shall permit borrowers to prepay loans made by the Federal Financing Bank and guaranteed under section 936 of this title by paying the outstanding principal balance due on the loans. No sums in addition to the payment of the outstanding principal balance due on the Federal Financing Bank loans may be charged as the result of such prepayment against the borrower, the fund, or the Secretary. Federal Financing Bank loans shall be refinanced using the existing section 936 loan guarantee, with private capital, in an amount not to exceed the outstanding principal amount prepaid: Provided, That such guarantee of private capital shall be 90% of the principal amount of the loan or any portion thereof plus accrued interest outstanding at any time during the maturity period of the loan and shall be fully transferable and assignable. Notwithstanding any other provision of law, borrowers may prepay Federal Financing Bank loans under this section, except that such borrowers shall be required to prepay all of their outstanding loans made or guaranteed under this chapter within one year of prepayment of the first loan. A direct or insured loan prepaid under this section shall be prepaid by the borrower at the lesser of the outstanding principal balance due on the loan or the loan's present value discounted from the face value at maturity at the rate set by the Secretary. A Rural Telephone Bank loan shall be prepaid by paying the outstanding principal balance on the loan. No guarantee or other financial assistance shall be available to the borrowers to refinance outstanding loans prepaid hereunder. In the case of an electric borrower prepaying under this section or otherwise prepaying a loan at less than the outstanding principal balance due on the loan, after the date of prepayment, no loans, loan guarantees or other financial assistance shall be provided pursuant to this chapter to the borrower or its successors or for the purpose of financing the construction or operation of generating plants or bulk transmission lines for the purpose of furnishing electric energy in the area served on a retail or wholesale basis by such borrower. In the case of a telephone borrower prepaying under this section, or otherwise prepaying a loan at less than the outstanding principal balance due on the loan, after the date of prepayment, no loans, loan guarantees or other financial assistance shall be provided pursuant to this chapter to the borrower or its successors or for the purpose of furnishing or improving telephone service in the area served by such borrower. In determining the service area of electric borrowers, the Secretary shall make allowances and adjustments to avoid adversely affecting the eligibility of other borrowers for financial assistance under this chapter where such borrowers are currently providing electric supply services for retail loads in the same area and which are reasonably expected to continue providing electric supply services for retail loads in such areas. In the event that the borrower prepaying under this section shall be using a majority of its generating capacity to directly serve its retail consumers, other borrowers which are purchasing power from such borrower as of September 30, 1986, shall continue to remain eligible for financing under this chapter for needs in their service area. Nothing in this section shall prohibit a borrower which has prepaid pursuant to this section from participating in generation and transmission projects with borrowers which have not prepaid, so long as the borrower which has prepaid utilizes private capital financing without financial assistance under this chapter: Provided further, That nothing in this section shall prohibit short-term power purchases by borrowers which have prepaid under this section from borrowers which have not prepaid. The Secretary shall issue regulations to implement this section within 60 days.

(May 20, 1936, ch. 432, title III, §311, as added Oct. 18, 1986, Pub. L. 99–500, §101(m) [title VI, §623], 100 Stat. 1783–308 , 1783-333, and Oct. 30, 1986, Pub. L. 99–591, §101(m) [title VI, §623], 100 Stat. 3341–308 , 3341-333; amended Oct. 13, 1994, Pub. L. 103–354, title II, §235(a)(7), (13), 108 Stat. 3221 .)

Codification

Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Amendments

1994-Pub. L. 103–354 substituted "Secretary" for "Administrator" wherever appearing and "Secretary" for "Rural Electrification Administration" in second sentence.

Applicability of Section Limited to Alaska

Section 115 of Pub. L. 99–591, Oct. 30, 1986, 100 Stat. 3341–352 , provided in part that: "notwithstanding this or any other provision of this Act, Section 623 of the Treasury, Postal Service, and General Government Appropriations Act as contained in this Act [enacting this section] shall apply only to the rural electrification program in the State of Alaska."

Section Referred to in Other Sections

This section is referred to in title 26 section 501.