[co-authors: Harpar Gill and Phillip Hanna - Articling Students]
On April 16, 2024, the Canadian Government released the 2024 federal budget, including details on the much-anticipated federal Indigenous Loan Guarantee Program (ILG Program). First announced in the government's 2023 Fall Economic Statement, the ILG Program will provide up to $5 billion in loan guarantees to Indigenous communities, and support Indigenous communities to "share in Canada's prosperity and benefit from the new opportunities ahead".1
ILG Program
The ILG Program is structured to enable greater access by Indigenous communities to affordable capital, which will increase opportunities for their equity ownership in major projects. Under the ILG Program, loans provided by financial institutions or other lenders will be guaranteed by the Government of Canada, resulting in the borrower benefitting from the government’s AAA credit ratings to receive a lower interest rate than what it may otherwise be entitled to.
The key aspects of the ILG Program are:
- The ILG Program will provide up to $5 billion in loan guarantees for Indigenous communities, creating economic opportunities and supporting Indigenous communities' economic development priorities.
- The ILG Program will be sector-agnostic for natural resource and energy projects, meaning that conventional oil and gas and mining projects are eligible projects under the program. The ability to include oil and gas projects in particular, reflects the significant amount of equity partnerships between industry and Indigenous communities that have occurred in recent years, and the continued exponential growth expected in such types of transactions in the sector in the near term.
- Applicant eligibility would recognize Indigenous governments and their wholly owned and controlled entities.
- Natural Resources Canada will be responsible for intake and capacity building, and the Canada Development Investment Corporation (CDEV), a Crown corporation in the Department of Finance Canada portfolio, would create a new subsidiary to provide due diligence on the applications and administer the portfolio of loan guarantees.
- The allocation of $16.5 million over two years, starting in 2024-2025, to Natural Resources Canada, including $3.5 million over two years to support capacity funding for Indigenous communities and applicants and delivery of the ILG Program by CDEV. This investment will provide capacity building supports to assist eligible Indigenous communities in making applications for loans through the program.
For further information regarding equity investment by Indigenous communities in major projects in Canada, please refer to the authors' paper on this topic here: Indigenous Ownership of Natural Resource Projects: A Framework For Partnership and Economic Development.
Existing Provincial Indigenous Loan Guarantee Programs
The ILG Program will be in addition to the several existing and proposed provincial Indigenous loan guarantee programs in Alberta, British Columbia, Saskatchewan and Ontario. A brief synopsis of the current parameters for each program is set out below.
Alberta Indigenous Opportunities Corporation (AIOC)
The AIOC promotes equity participation by Indigenous communities in natural resources, agriculture, telecommunication and transportation projects, by providing loan guarantees for Indigenous communities in Alberta to access capital, improve lending terms and make financing more affordable. Since its inception in 2019, the AIOC has supported seven transactions and provided over $680 million in loan guarantees to 42 separate Indigenous communities in Alberta, facilitating investment of over $1.5 billion and the acquisition of meaningful equity stakes in major energy projects in Alberta. Examples of projects that have received AIOC loan guarantee backstop support include the Cascade Power Project and the Enbridge Athabasca Trunkline. Links to our previous blogs providing further information on the AIOC framework, program guidelines and successful project support are here:
British Columbia's First Nations Equity Financing Framework
On February 22, 2024, British Columbia announced its intention to create a $1 billion First Nations Equity Financing Framework as part of its latest budget and fiscal plan. The framework plans to provide opportunities for participation by Indigenous communities in the natural resources, energy, tourism, agribusiness and infrastructure sectors. British Columbia’s First Nations Equity Financing Framework is still subject to legislative approval. A link to our previous blog providing further background on the announcement and framework is here: B.C. $1-Billion First Nations Equity Financing Framework.
Saskatchewan Indigenous Investment Finance Corporation (SIIFC)
The SIIFC provides loan guarantees of at least $5 million to Indigenous communities for equity investment in eligible natural resource development and value-added agriculture projects. Eligible projects may be in Saskatchewan or in other Canadian jurisdictions if the project provides significant economic benefit to Saskatchewan. Of note, mineral exploration and conventional upstream oil and gas projects are ineligible for loan guarantees under the SIIFC.
Ontario's Aboriginal Loan Guarantee Program (ALGP)
Ontario's $1 billion ALGP supports participation by Indigenous communities in electricity infrastructure projects, including renewable energy infrastructure in Ontario and transmission projects. The program provides provincial loan guarantees to Indigenous entities to finance a portion of their equity investment (which is noted in ALGP guidelines as typically being 75 percent) in an eligible project. Since 2009, the ALGP has provided 11 loan guarantees for a total of approximately $500 million.
Conclusion
Although many details regarding the eligibility requirements and other aspects of the ILG Program remain outstanding (such as when the ILG Program will go into effect, the term/duration of the guarantees, how long the program will run, what the rules, requirements and regulations will be, and how it will be administered), the ILG Program will provide additional economic opportunities for participation by Indigenous communities across various industries. Alongside existing and proposed provincial Indigenous loan guarantee programs, the ILG Program provides increased opportunities for Indigenous investment and equity participation in major projects, including energy projects and natural resource developments across Canada.
1 Government of Canada, "A Fair Future for Indigenous Peoples", online: <https://budget.canada.ca/2024/report-rapport/chap6-en.html>.
