Indigenous Leadership in the Energy Transition

Roman Dubczak: Hello everyone. I’m Roman Dubczak, Deputy Chair of CIBC Capital Markets. On today’s webcast, we will discuss the role of Indigenous partnership in driving Canada’s energy transition. In order to make meaningful progress, Canada’s shift to a net zero economy has to have, at its core, a commitment to inclusive collaboration with our Indigenous communities. We’ve seen successful examples of this in natural resources, transportation and telecommunications. From the Cascade Power Project in Wood Buffalo to the Oneida Battery Storage Project in southern Ontario, among many other recent examples. Indigenous communities are central to resource development and will help define the future of energy development in Canada. Joining me here today to help unpack some of these complex issues are the Honorable Lisa Raitt and Mark Podlasly. Mark is the Chief Sustainability Officer at the First Nations Major Projects Coalition and as a member of the Cook’s Ferry Indian Band, Nlaka’pamux Nation in British Columbia, FNMPC is a national nonprofit organization established by First Nations to enhance the economic wellbeing of its members. The current project portfolio exceeds a combined total cost of $45 billion, with 17 major projects and over 155 members. Mark also sits on the boards of Hydro One and CIBC. Lisa, you all know well. Lisa is the Vice Chair of Global Investment Banking at CIBC. She has deep expertise in Indigenous issues, is instrumental in advising our Capital Markets teams on energy and infrastructure projects, and is the Co-Chair of CIBC’s Internal Reconciliation Action Committee. Lisa, Mark, thanks for joining me here today. There’s lots to cover, but let’s start with recent developments. There are a couple of major conferences that caught my attention in recent weeks. Mark, you’ve been with the FNMPC for about a decade now, maybe give us a bit of background about your role, a brief history of the FNMPC for our clients who aren’t as familiar with FNMPC, and perhaps give us some background on the conference.

Mark Podlasly: So the FNMPC started about ten years ago in northern British Columbia. At that time, 16 First Nations had an opportunity to take a 30% equity stake in a natural gas pipeline. But because of the way the country’s set up and the history of Indigenous people in this country, we don’t actually own any assets. All our land, our personal property is all held in trust by the federal government for our use. So you can imagine what happens when someone goes to a bank or a financial institution and tries to leverage assets to raise capital. The price was astronomical in terms of the risk factor, so those nations lost the opportunity to acquire that 30%. Those nations realized that this will happen again, so they set up the First Nations Major Projects Coalition as an organization that can provide technical expertise to nations to prepare for the next time an equity position might come up in a major project. It is, as you pointed out, over 155 nations now voluntarily joining the coalition, because across this country, in energy resources and critical minerals, major projects, anything over $100 million, nations are being asked to participate. And we have all had the same challenges. Number one, how do you find the capital at an affordable rate? And the second is how do you organize yourselves in a structure that is recognized by markets in a commercial sense?

Roman Dubczak: Kudos to you, Mark, and your team at FNMPC, because you recently held the conference in Toronto. And I would say huge convening power is what you’ve achieved now. I think there are 1600 delegates here, and it got a lot of press. Perhaps, give us a summary of some of the key takeaways from the conference.

Mark Podlasly: The conference itself was held here in Toronto for the first time. Our first conference seven years ago had 50 people in Terrace, British Columbia, at a roadside motel. So it’s a huge leap from that point. But the conference theme this year was “Indigenous Consent: Our Collective Advantage.” And one of the things that’s come forward very clearly to us as Indigenous people is that Canada wishes to participate in climate change projects, and the estimates for North America right now are $6 trillion of investment required. All of those projects are going to be on lands claimed by Indigenous people across lands that are considered Indigenous lands. So we’re vital to the competitiveness of Canada in participating in those projects. So the conference was very much focused on that. Our conferences usually have one third Indigenous participation, one third corporate, one third government. So we had a number of keynote speakers from the Chair of Rio Tinto, Dominic Barton. We had the Chair of Valley Based Metals Mark Cutifani, tribal leaders from across Canada, the United States and increasingly now from other countries, New Zealand and Australia sent delegations as well. The question that comes up for Indigenous people is how do we participate in projects so that commercial values and Indigenous values are an advantage to both parties? And that’s the main focus of the coalition.

Roman Dubczak: Thanks, Mark. And we’ll unpack some of this later in the conversation. But Lisa, you just returned from the UK and there was the inaugural Canadian Indigenous Investment Summit in London just recently. You spoke there and you were there. CIBC was a lead partner for the event. Maybe some of the takeaways from London on the topic.

Lisa Raitt: So CIBC was a lead partner and was so happy that we became involved in this project. I was a moderator because the purpose of this conference was to bring Indigenous communities to London. A lot of times, as Mark will know, the government will take along people who on these kinds of missions where they get to introduce people. This was an opportunity for Indigenous communities to come and meet investors on their own, and the facilitation was to explain the opportunities and the upside of investing with Indigenous communities on major resource projects or on any projects, quite frankly. And as well, to explain the cultural differences, to explain the regulatory benefits of actually engaging with Indigenous communities. And it’s all about helping Indigenous communities find more investment that is competitively priced. And a lot of times it starts with just conversations, as you know, at these conferences, people will strike up a conversation and suddenly you have a relationship and a deal may come further down the road. I have much hope from what Mark talks about in terms of starting small and growing big. And certainly it is the hope that this is the inaugural, it will continue on, and just more communities have that outlet of going to the City of London with the Lord Mayor of the City of London presiding over it, and with the High Commissioner from Canada coming in to speak to the importance of these gatherings. The feedback has been fantastic, and Mccarthy Tetrault, of course, was a lead sponsor as well, and we worked really well with them on it.

Roman Dubczak: Fantastic. And how did it play with investors?

Lisa Raitt: One thing I would say is that investors are curious, but they’re also not necessarily up to speed or up to date on the differences in having investments with Indigenous communities versus having the investments that they’re normally used to. And quite frankly, I mean, there is no more patient capital in the world than Indigenous capital because Indigenous projects are planned for seven generations. And as a result, you kind of have to get away from these transaction based, I’m in with my money, I’m out with my money, kind of notions. Instead, it was those who showed up, were there to truly understand. They have a great interest and quite frankly, so much opportunity in Canada for an investment dollar to grow. And as a result, the communities were there and they weren’t pitching necessarily all the big projects, The Canadian Aboriginal Business Council was there talking about the smaller businesses that are available for investment in Canada.

Roman Dubczak: Thanks, Lisa. Mark, in your earlier comments, you mentioned cost of capital as an impediment to achieving some of the objectives for First Nations communities. Perhaps expand on that point.

Mark Podlasly: So the Indian Act, which is an act that was passed by the federal government in the 1800s, governs our affairs. They set up the Indian reserves and also governs every aspect of our lives. One provision in there transferred our assets to the Crown as Crown property. The effect of that now is that we don’t own anything. We may have access to land access to material goods, but it’s not ours. It’s all held in trust by the federal government. So the effect of that is that when we go out to try and raise capital, like every other Canadian, we have no assets. So the price of the capital that we can access is astronomical. We’re considered a high risk borrower. That’s the challenge. So for First Nations to participate in major projects, now we need to find a way to access capital at affordable rates that will make it feasible for us to become investors.

Roman Dubczak: Thanks, Mark, on that point, and Lisa, perhaps I’ll ask the question to you – a significant talking point in the last few years, in any case, and leading up to this year’s budget, was the Indigenous Loan Guarantee Program.

Lisa Raitt: Right.

Roman Dubczak: And that was introduced in the recent federal budget a couple of months ago. Perhaps touch on that as to its efficacy and, you know, the role that will play on building out Canada’s energy infrastructure.

Lisa Raitt: So it’s not like resource projects haven’t happened with Indigenous communities because they have. But what’s normally happened is the company will end up doing the loan for the equity and paying back. But to truly be on your own in an equity investment, as Mark pointed out, it’s hard to get competitively priced capital. So in Alberta, a number of years ago, Jason Kenney, when he was the Premier, came up with the Alberta Indigenous Opportunities Corporation. And what they do is they actually provide those loan guarantees. But it’s a very small scale and obviously oversubscribed, but it works, and we’ve seen some great announcements coming out of that space. So the federal government has been under pressure by people and by organizations like the FNMPC to come up with a program federally, obviously much better resourced, and finally, they did come out with it. It’s $5 billion. There hasn’t been an announcement yet of intake, but I’m sure it’s going to be oversubscribed in the very first year, given that it’s only 5 billion, however, the deputy Prime Minister has said that it’s a beginning and maybe it’ll go more. And that’s really good news, I think, for a for a lot of Indigenous communities. One last thing on this loan guarantee. At the beginning, the federal government had in its idea that they didn’t want a loan guarantee to necessarily be available for fossil fuel projects. That was a big fight, and people actually took a lot of effort, including the FNMPC, writing op-eds and communicating that it didn’t make sense for the federal government to tell Indigenous communities what it is they’re going to be allowed to invest in. So much to my great happiness and surprise, it is sector agnostic, meaning that it is going to be available for any of the projects that any Indigenous community views as appropriate for their cultural reasons and for their revenue reasons.

Roman Dubczak: Just on that energy theme, Mark, very powerful comment has been repeated many, many times. The road to net zero runs through Indigenous lands, which I think we can all agree on. Perhaps tell us what success ends up looking like as the funding, the cost of capital becomes more accessible, becomes more workable, the deals actually start coming together. What does near-term success look like? Medium-term success look like, and how would investors who are in our audience today, you know, how would they look at that as an opportunity?

Mark Podlasly: Lisa’s right. These projects have already started with Indigenous partners and they’re small. In some cases, they are 20% ownership in everything from green generation of energy to examples in Ontario, where Hydro One has announced a policy of 50% as a minimum equity option to First Nations are impacted by the lines. You’re starting to see geothermal plants being proposed in the West. So they’re happening. So in the near term, you’re going to start to see an increase in First Nations wanting to become equity owners in these projects. And I just like to point out this loan guarantee program is not equity given by the federal government, it’s a loan guarantee to raise the capital on projects that are viable, financially viable. In the long term, you’re going to start to see Indigenous people starting to move towards majority ownership of these types of projects with partners, but that’s what we’re seeing happening now, and it’s going to continue. At the coalition, we highlight at the conferences worldwide examples where we’ve seen the best cases of this happening. Last year we had a project from Australia which was initiated by a First Nation, 100 billion AUD, 62 gigawatt green hydrogen production facility when complete, 3000 wind turbines, 25 million solar panels and they will be the largest exporter of green hydrogen in Japan. So the scale of these things is not small, and it’s the ambition of First Nations working with partners, commercial partners, to make that happen.

Roman Dubczak: What would be your message to commercial partners? You know, the business leaders in Canada in particular?

Mark Podlasly: Canada has the natural resources that the world needs for a climate solution. The question is, how do we get them to market and how do we do it fast? 2050 is the target that we’re aiming for net zero. Canada will miss that window if we cannot get to market, and Indigenous people in this country are not against development. Indigenous people are pro smart development and that means seeing Indigenous values show up and something in it for Indigenous people in financial returns. So for us as Indigenous people, we see this as a massive double win. If we can work together with corporate and government to get across the line, that’s the big win.

Roman Dubczak: Lisa, Mark, terrific conversation today. Clearly this is just, a précis of the conversation that we could be having. And we’ll continue. So I look forward to further conversations on this with you, because it is very exciting to see this development, but also very satisfying as a Canadian to see the progress finally. So thank you. Thanks for that. And we want to thank all of you for joining us here today for this important conversation. Thanks for participating in conversations on this topic, and we look forward to have you join us again for one of our webcasts soon. Thank you.