Written by Luke Morrison and William Osler
Amidst a backdrop of growing interest from Indigenous communities (ICs) in pursuing ownership stakes in major energy projects, in summer 2019 the Alberta Government announced that it would create the new Alberta Indigenous Opportunities Corporation (AIOC).
Since then, enabling legislation has been passed and the AIOC board of directors is now in place. The AIOC's mandate includes (a) providing legal, technical and financial advice to ICs looking to initiate or participate in energy projects, and (b) allocating up to $1 billion in investment support (such as loans and guarantees) to qualified ICs.
The AIOC is a first-of-its-kind Crown corporation in Canada. It was created by the Alberta government to facilitate investment by ICs in natural resource projects and related infrastructure. This includes increasing access to capital and technical support, which has traditionally been an impediment for many ICs looking to participate in acquisition opportunities. The AIOC will operate at an arm's-length from government, with oversight from the Deputy Minister of Alberta Indigenous Relations and will be subject to regular reporting requirements.
Key criteria for AIOC investment decisions include the following:
- The AIOC will support ICs' investment in natural resource projects and related infrastructure in the energy (both renewable and non-renewable sectors), mining and/or forestry industries.
- Project proposals require a minimum aggregate IC investment of $20 million.
- Projects located in Alberta and in other provinces are eligible for AIOC support. Projects outside the Province must benefit Alberta’s natural resource sector or advance Alberta’s economic interest.
- Indigenous groups outside of Alberta are eligible for AIOC support by partnering with one or more Alberta ICs that have at least 25% of the total combined Indigenous ownership of a project.
- At least initially, preference in allocation of financing will be given to operating projects with existing cash-flows. Proposals for greenfield projects are not categorically ruled out or discouraged, however these types of opportunities will presumably present greater due diligence hurdles for the AIOC than existing substantial projects looking to bring in IC partners.
Considerations for Indigenous Communities and Business
Coalitions: The regulation of the AIOC's enabling legislation confirms that Indigenous communities can form coalitions to meet the $20-million minimum Indigenous investment requirement. ICs who don’t have the balance sheets on their own to fund $20 million can team up with other ICs to get over this hurdle.
Responsiveness/Timeliness: Reading between the lines of the allowable financial tools and the types of advice that the AIOC will be offering to ICs, it becomes clear that one of the gaps that the AIOC is attempting to fill for ICs is around responsiveness/timeliness and capabilities required for interested parties to participate in an opportunity. RFPs/RFQs and commercial bid processes for energy infrastructure opportunities typically have tight timelines that create an immediate disadvantage and impediment for ICs that do not have in-house financial and project development expertise. The AIOC's advisory functions, coupled with the ability for the AIOC to purchase equity or enter into joint ventures or partnerships on behalf of IC proponents, is one example of how the AIOC may be able to help would-be IC owners overcome barriers which have often prevented ICs from participating in such RFPs/RFQs and commercial bid processes.
Commercial Rates: Another game-changing aspect of the AIOC relates to ICs not only having access to Alberta Crown backstops and other financial tools through the AIOC, but to having access to credit and capital at commercial rates which may not otherwise be available for ICs with small asset bases and less robust balance sheets.
Bolstering Existing IC Investments: A less heralded potential application of the AIOC's mandate relates to the AIOC providing advisory and/or financial support to ICs who already own an ownership stake in an energy project. The AIOC's toolkit could be deployed to unlock greater financial benefits for ICs in existing ventures, either by way of the IC owner acquiring an increased ownership stake in the applicable project or by allowing the IC owner to free up cash being held as security for their investment or equity in the existing project.
The AIOC Board
The Alberta government recruited a talented and diverse board of business leaders for the AIOC. Members bring strong experience from the energy and finance sectors, and there is also significant Indigenous representation on the board. Cody Church, CEO and President of Clear North Capital, is AIOC board chair. Vice-chair is Stephen Buffalo, President and CEO of the Indian Resource Council. Mr. Buffalo is a member of the Samson Cree Nation in Alberta. The AIOC board also includes Peter Williams, co-founder of Annapolis Capital (and previously a governor of the Canadian Association of Petroleum Producers). A full list of board members is available on the AIOC website.
Practical Expression to Economic Reconciliation
The implementation of the AIOC is part of Alberta's overall policy objective of giving practical expression to economic reconciliation. IC ownership will provide long-term stable revenue streams that can be used to develop community-level programs for health, education, skilled trades training and housing, and will present opportunities for ICs to exercise their entrepreneurial spirit. The AIOC is an embodiment of a growing consensus among ICs, government and industry that meaningful IC ownership in major energy projects is a critical step to move from a framework of consultation and impact benefit engagement towards a new paradigm of partnership and shared economic prosperity in the development of natural resource projects.