The Exchanges

Q Yeah, and as a result, you've been pretty diversified in your approach, focused on everything from fusion to geothermal to carbon capture to hydrogen. How would you characterize this overall approach? Portfolio strategy.

A I think we're really trying to take a practical approach at decarbonization and understanding that you have to have energy intensity as well for certain types of manufacturing, other types of activity, but that also means we've passed the strictest oil and gas regulatory regime really in the country, if not the world, here in New Mexico. So we've got the lowest carbon intense barrel of oil and unit of natural gas anywhere. That was where we started, because that's what the energy mix we had already. We're number two in oil production, number three in natural gas production in the United States. We have the only uranium enrichment plant in the United States today is in New Mexico. We have the most productive geothermal well now operating in the US happening in New Mexico. So we're looking at what are those needs around firm load in particular? Um, we've done great on, on wind, we do great on solar, but also where can we invest R&D side on, on deployment side? That's going to create that firm load that really creates the opportunity for reshoring for, uh, whether it's data centers or other heavy users that allow us to grow our economy while ensuring we're meeting our climate goals as well.

AI assessment note: “we're really trying to take a practical approach at decarbonization”

Q And if I understand it correctly, New Mexico has the nation's second largest sovereign wealth fund. How big is that fund, and how, how is it directly investing in, like, deep tech and energy innovation?

A Steven, it, it, it's very exciting to talk about what the SIC, the State Investment Council, is doing. So, uh, it, it, it's now about sixty-five billion dollars in this fund. It's, it is the second largest in, in the U.S., only behind Alaska, and we think we'll probably surpass Alaska in the next three years or so. What they've done is they've taken about two billion of that and put it into a venture fund that is working with the 25 to 30 largest deep tech venture funds in the world. Think groups like Lower Carbon, Antler, Colesla, Up, and they're investing in those areas that align with the state's strategy. Our strategy, where we think we have the right to win in New Mexico, is around advanced energy Advanced computing, edge computing, space and defense. These are all areas because of Sandia National Lab, Los Alamos National Lab, Air Force Research Lab, all located here, our universities. We have a unique competitive advantage. So now the State Investment Council is funding these funds who have portfolio companies who are aligned with that strategy. Think Pacific Fusion. Pacific Fusion It has three different funds that are funded by the State Investment Council funding that company, and part of the direction of the State Investment Council is give us a return, but also deploy capital or create jobs in New Mexico. There are very few places in the world that have created this d…

AI assessment note: “it's now about sixty-five billion dollars in this fund.”

Q So you've got this capitalization strategy. How does that pair with tax credits, R&D tax credits, jobs credits, equipment credits? Like, how do you put this package together?

A That's a great question. And if you think about What happens with the State Investment Council, right? They're taking state dollars, putting them into company as equity investors. So now my job is to help that company be successful in New Mexico, because that's going to give us a return to our investment, but it's also going to create jobs. It's going to create economic opportunity on the ground. So we, we have a research and development tax credit, which can pay up to 10% on qualified research expenses. We have a high-wage jobs tax credit that's refundable at eight and a half percent of your employees' wages for four years. We're going to pay between 50 and 90% of your employees' wages for the first six months that are in New Mexico on new hires, depending on where you do it and the type of job. And then we have industrial revenue bonds, which can waive property and equipment taxes for up to 30 years. We also will help build capital infrastructure with our Local Economic Development Act Uh, program which could help you build a building, rent a building, or make improvements. So when you layer all of those things on with a capital stack, that means if you leave California, you don't leave Silicon Valley capital, because we're going to make sure those folks are paying attention to you. It creates a really robust incentive structure.

AI assessment note: “when you layer all of those things on with a capital stack”

Q I'm really interested to hear more about what is happening in fusion. You know, you want to make New Mexico the center of the fusion industry, right? What does that vision look like through the end of the decade, and what kind of activity are you seeing right now?

A Well, we expect, we, we want New Mexico to be the center of fusion, if not for the US, for the world. You know, we're very pleased to announce that Pacific Fusion was moving their R&D facility here. Um, we're in conversations with a variety of other fusion companies, and again, this late, this talks a little bit about how we're doing it. So, just a month ago, the State Investment Council Created a new fund of over three hundred million dollars, part with lower carbon energy, uh, to fund fusion and advanced energy projects in New Mexico. So, you know, we're bringing that equity to the table. Uh, we've got Sandino National Labs and Los Alamos National Labs. So, if you think about companies like Pacific Fusion, who use magnet-based fusion technologies based off of the Z machine, uh, which again was the first place to do Kind of fusion here on, on Earth. That alignment and that proximity to be, work with those scientists is a big draw for New Mexico. Los Alamos National Labs, on the other hand, is really key to the laser-based fusion approach. So, I think bringing those sort of aspects together gives us a very powerful, unique value proposition, and then you layer that on with access to capital, and New Mexico becomes very attractive.

AI assessment note: “Pacific Fusion was moving their R&D facility here. Um, we're in conversations with a variety”

Q we've talked about some of the building blocks. I want to hear more about what companies are looking for, and I know it's really highly dependent on the type of company and industry we're talking about, but are there any commonalities around what, when companies are looking at a place to locate their facilities, their headquarters, build their businesses, what do they need, and particularly in the clean energy industry?

A So they need access to power. Uh, and they want green power. So again, having a renewable portfolio standard means if you're locating a company here, you're going to get that from in New Mexico. They need, uh, to be able to build and get to market quickly. So they want sites to be ready to go. And so that's why we've created a site readiness strategy where we're investing in advance, even before a company shows up, and making sure we've got industrial sites that can be quick to market, you know, less than a year to market, as opposed to two or three years out. Um, we mentioned regulatory certainty. That's really important. Um, if you're a renewable energy company, we've got a demand side for you as well, right? Because we've got, we need to help meeting our renewable portfolio standards. Our utilities do, our co-ops do. So you've got a place to deploy here as well. And then I'm going to make you the best tax deal you can in the country to manufacture your equipment.

AI assessment note: “So they need access to power. Uh, and they want green power.”

Q When did you start really pursuing the clean energy market, and what's at stake if you don't continue to attract these companies?

A The path to this policy approach around renewable energy started as a state policy really with the Energy Transition Act, I believe in 2019. The governor led that as an effort to create a renewable portfolio standard, really set the stage to create a regulatory path For decarbonization of the electricity and energy sector. That was how we then said, here's now, we're gonna, we're gonna build around this, and we're gonna focus on areas, both from an R&D perspective, but also deployment perspective, where we're not only doing the research and development, which New Mexico has done really well for a hundred years. I mean, when you look back to, uh, Sandia National Labs, Los Alamos National Labs, the things that we've built here, Fission, fusion, and fracking were all invented in New Mexico. And how do we integrate that into a lower carbon energy economy? And doing it in a way where we're doing the R&D here, but also then deploying the technology here. And so that, I think, from a state government perspective, really started in 2019.

AI assessment note: “started as a state policy really with the Energy Transition Act, I believe in 2019.”