Federally backed loan guarantees aim to unlock Indigenous investment Federally backed loan guarantees aim to unlock Indigenous investment

The Canada Indigenous Loan Guarantee Corporation (the CILGC) is now accepting applications for loan guarantees from Indigenous groups seeking financing for natural resource, energy, infrastructure, transportation and trade projects. The CILGC aims to remove historic economic barriers for Indigenous groups by improving access to capital and reducing borrowing costs.

Roadblocks to Indigenous investments

Indigenous groups have long faced challenges accessing affordable capital due to restrictions in the Indian Act which prevent reserve land from being mortgaged or used as collateral. This has limited the ability of Indigenous groups to finance major projects or finance equity investments in major projects.

Bridging the gap

To assist Indigenous investment in major projects, the Government of Canada has committed to provide up to $10 billion in loan guarantees under the Indigenous Loan Guarantee Program (the program). The guarantees will reduce the lender’s risk such that in the event of a loan default, the CILGC will repay the guaranteed loan, enhancing the ability of Indigenous groups to secure financing at lower rates. The newly established CILGC will administer the Program with support from Natural Resources Canada (NRCan).

Overview of the program

The program offers loan guarantees from $20 million to $1 billion which can be combined with existing provincial Indigenous loan guarantee programs and other federal programs, such as federal grants.

Additionally, some funding will be available through NRCan to support Indigenous groups with investment analysis and due diligence activities for potential projects.

As part of the program, the CILGC will be responsible for determining eligibility, conducting due diligence, negotiating loan guarantee agreements, and monitoring the loan guarantee portfolio to ensure compliance with all key financial and commercial terms.

The final decision on whether to issue a loan guarantee will be made by the Minister of Finance, who will consult with the Minister of Energy and Natural Resources Canada.

Eligibility

Indigenous groups with recognized rights under section 35 of The Constitution Act, 1982 (section 35 rights), or their wholly owned subsidiaries, can apply for loan guarantees to invest in natural resource, energy, infrastructure, transportation and trade projects that impact their section 35 rights. Eligible projects include those related to electricity, carbon management, low carbon fuel production, pipelines, mining and forestry.

How to apply

Indigenous groups interested in applying will be required to complete the CILGC’s Applicant Intake Form.

The application intake form requires applicants to provide detailed information, including:

• Applicant information – details about the Indigenous group applying, evidence of Indigenous ownership or control of the group and a statement of support from the group’s leadership
• Overview of the project or asset – including a description, its objectives, current phase and how the project or asset impacts the section 35 rights of the Indigenous group (for example, how the Indigenous group has been exercising their section 35 rights over the project or project asset area)
• Comprehensive financial details – such as the project’s costs, source of funds, summary of the business model and projected returns
• Other key information – including details on asset ring-fencing, advisors or other entities involved and existing due diligence
• Supporting documents – including details of the benefits to the Indigenous group, business plans, loan term sheets and governance documents

Investments in projects that are more advanced in their development and funding, and with the greatest potential for economic reconciliation, will be prioritized.

An Applicant Guide is available on the CILGC website and the CILGC will proactively work with applicants to address any issues, as appropriate.

Selected applications

Applications selected to advance will move to the due diligence phase, where additional information related to financial, operational, integrity, and Indigenous considerations will be requested. Subsequently, draft terms for a loan guarantee will be negotiated in coordination with the final review and approvals. The CILGC will then issue a loan guarantee.

Looking forward

Investments in natural resources and energy projects is a high growth area in Canada. The CILGC, by administering up to $10 billion in Indigenous loan guarantees, aims to assist Indigenous participation in this high growth area by enabling Indigenous groups to obtain lower cost financing for equity participation in projects that impact their communities.