After much anticipation, on February 22, 2024, British Columbia announced its intention to create a First Nations Equity Financing Framework (Framework) as part of its latest budget and fiscal plan. The Framework aligns with its commitment to "co-develop with First Nations a new fiscal relationship that supports the self-determination and operation of First Nations governments" and to implement the United Nations Declaration on the Rights of Indigenous Peoples.
In its description of the Framework, the government refers to equity financing tools, including equity loan guarantees and supportive measures for a variety of potential projects. The Framework aims to unlock opportunities for First Nation participation, with potential implications for BC Hydro's new call to power and expansion of the transmission network from Prince George to Terrace, as well as other opportunities in the natural resources, energy, tourism, agribusiness and infrastructure sectors.
The Framework
The Framework's aims to facilitate First Nations' meaningful participation in projects on their territories, foster economic partnerships across the business sector, and support First Nations strategic partnerships with others.
The Framework includes a special account with a cumulative loan guarantee limit of $1 billion, to be reviewed annually, with an initial balance of $10 million earmarked for First Nations considering equity participation in priority projects and to finance the implementation of the equity loan guarantee program.
The government will consider a range of potential projects that can be supported by the Framework to reflect the diversity of priorities and needs of First Nations across the province.
Examples of Similar Economic Reconciliation Initiatives
Across Canada, the use of equity loan guarantees as a tool for economic reconciliation is on the rise. Equity loan guarantees assure lenders that they will be repaid by the government if projects fail to generate the income necessary for borrowers to meet their debt obligations. This assurance facilitates more favorable terms to borrowers and opportunities for equity participation for First Nations, which are often underserved by conventional capital markets as a result of regulatory constraints, the legacy of economic restrictions of the Indian Act, reluctance from private lenders, and lack of capacity and capital constraints on Indigenous financial institutions.
The Framework also aligns with initiatives such as the Alberta Indigenous Opportunities Corporation (AIOC), Ontario's Aboriginal Loan Guarantee Program, Saskatchewan's Indigenous Investment Corporation, as well the Canada Infrastructure Bank's Indigenous Equity Initiative and Indigenous Community Infrastructure Initiative, and the proposed National Indigenous Loan Guarantee Program and Benefits Sharing Framework. Projects supported by the AIOC and CIB include:
- The Canada Infrastructure Bank's Indigenous Community Infrastructure Initiative, including the $78.8 million investment into a major clean power project that is majority owned by the Chiniki and Goodstoney First Nations (October 2023), and the commitment of $138.2 million to support the development of Atlantic Canada's largest planned energy storage project by Nova Scotia Power Inc. in collaboration with Wskijinu'k Mtmo'taqnuow Agency Ltd (February 2024).
- The AIOC's $150 million loan guarantee allowing 12 Indigenous communities to purchase equity in oil and gas infrastructure in Northern Alberta and a $20.5 million loan guarantee allowing five Indigenous Nations the opportunity to partner as investors in an emission-reducing cogeneration unit for Alberta gas plant (December 2023).
Next Steps
The Legislature will need to approve budget and fiscal plan, but will engage with rights holders and stakeholders further. In the months ahead, the B.C. government will consult with First Nations and the business community regarding the details of the Framework. Stakeholders with an interest in the Framework should track the project eligibility requirements and other factors that may affect the implementation of the Framework.
To harmonize this provincial initiative with the federal government's efforts to establish a national program, we expect BC will work with the federal government to incorporate feedback received by the federal government on its National Benefits-Sharing Framework. Some of the notable areas of harmonization include intergovernmental coordination on resource development and permitting and technical expertise assistance for First Nations on due diligence, deal negotiations, and best governance practices.
Depending upon the circumstances, First Nations equity ownership has the potential to facilitate the consultations and accommodation process and expedite the regulatory approvals and permits for major natural-resource projects passing through First Nations territories. The Framework, along with other provincial and federal initiatives, has the potential to help reduce some of the systemic barriers hindering Indigenous peoples from accessing economic opportunities, while supporting the federal government's policy goals related to climate action and economic development.
Bennett Jones will continue to update on the British Columbia and the federal equity financing frameworks.
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