The application portal is now open for the newly launched Canada Indigenous Loan Guarantee Corporation, which will provide qualifying recipients with backing to acquire equity stakes in energy or other resource-related ventures. This will leverage a $5-billion kitty, announced in the 2024 federal budget, to convey loan guarantees of $20 million to $1 billion.
This is meant to help address one of the primary obstacles that Indigenous loan proponents face because, under the federal Indian Act, they do not hold legal title to their reserve lands and cannot use them as collateral to obtain private capital. The backing should also translate into more favourable borrowing rates.
“Loan guarantees will enable Indigenous groups to overcome historic barriers and to become meaningful equity partners and owners of natural resource and energy projects,” a backgrounder from the federal finance department states. “This commitment is aligned with the government of Canada’s broader objectives of economic reconciliation, fostering Indigenous economic development and supporting self-determination.”
The new loan guarantee corporation will operate as a subsidiary of the Canada Development Investment Corporation (CDEV). It follows after the establishment of similar programs in Alberta, Saskatchewan and Ontario, and it’s proposed that Indigenous proponents could stack federal-provincial loan guarantees to back up to 100 per cent of the acquisition costs of an equity stake in an eligible project. Natural Resources Canada may also provide additional funding to help applicants with the costs of advisory services for investment analysis and due diligence of their proposed deals.
To qualify for a loan guarantee, proponents must be an Indigenous group with rights to territory as defined in Section 35 of the Canadian Constitution Act or a wholly owned subsidiary of such a group. The loan guarantee will apply to the portion of debt capital attributable to obtaining an equity stake in an energy or resource-related venture, not other project costs. Indigenous groups’ equity investments must also be structured to be financially separate — known as ring-fenced assets — from other partners in the venture. Proponents will be expected to show that the investment can generate stable cash flow with evidence such as power purchase agreements, delivery contracts or offtake agreements.
The loan guarantee program will accept applications on a ongoing basis, and priority will be given to projects at an advanced stage of development. It is promised that decisions will be made “at the speed of business”. However, the new corporation will serve to recommend loan guarantee candidates to the Minister of Finance, who will make the final decision.
