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How Indigenous communities can achieve equity ownership in major energy projects

How Indigenous communities can achieve equity ownership in major energy projects

Synopsis
5 Minute Read

Indigenous communities face numerous challenges when navigating large infrastructure transactions with energy companies — including balancing different interests and a limited time availability to manage the process.

Our extensive industry experience enables MNP to work closely with Indigenous communities and energy companies to help them both achieve their goals and create long-term mutually beneficial partnerships. The following steps can help you overcome obstacles and ensure the transaction benefits your community both now and in the future:

  • Explore funding opportunities
  • Consider a financial advisor and/or debt placement monitor
  • Establish clear roles and responsibilities
  • Develop a communication plan
  • Seek independent advice

Explore each of these five steps and read a case study showing how our advisors helped Northern Lakeland Indigenous Alliance navigate a large transaction with Wolf Midstream to achieve their objectives. 

Business Advisor, Oil & Gas, Indigenous Services Provincial Director (AB, YT, NT & NU), Indigenous Services
Partner, National Energy Leader
Vice President, Indigenous Services
Managing Director, Corporate Finance

Navigating large transactions with infrastructure companies is a complex process, and you may be wondering how to ensure the deal will support the financial and development goals of your community. You want to negotiate the best deal possible while protecting your rights and interests — no matter whether you have received an offer to buy into a pipeline or other infrastructure. What steps can you take to achieve a successful outcome?

Based on our experience over the past four decades, MNP has assisted Indigenous Nations in negotiating, financing, supporting, and closing some of the largest Indigenous partnerships with energy companies in Canada. Our extensive experience in the energy sector also helps energy companies foster relationships with Indigenous communities to ensure they both reach their goals and create long-term mutually beneficial partnerships.

Let’s review several of the most common challenges facing Indigenous communities who may be considering large transactions today. We’ll also share several best practices and explore a case study showing how MNP helped five Indigenous communities successfully navigate a large transaction with an oil and gas pipeline company.

What are the challenges of navigating a large transaction?

Transactions with energy infrastructure companies have the potential to bring many benefits to your community — both now and in the future. However, Indigenous communities also face many challenges during the transaction process, including:

Balancing different interests

Large transactions may include several Indigenous communities during the process. These transactions may impact different communities in different ways, and each group involved may have a different perspective about what they want the deal to achieve.

Access to capital

Indigenous communities may face difficulty accessing capital to buy into partnerships for infrastructure opportunities. If you are unable to raise enough capital, your community may need to seek debt financing opportunities, which require additional debt structuring considerations.

Industry timelines

Your community has different events that occur throughout the year — and industry timelines may not align with the needs of your community. It may be challenging to negotiate timelines that work best for your community during the transaction process.

Limited time availability

Members of your community likely will be appointed to a committee(s) during the transaction process to help guide the terms of the deal. However, these positions often come with a considerable time commitment. Committee members may lack the time availability to handle this commitment — especially if they are also in leadership roles in their community.

Navigating confidentiality agreements

You want to be transparent with your community — however, large infrastructure transactions often involve confidentiality agreements. It may be difficult to balance the needs of transparency and confidentiality throughout the process.

Financial considerations

Accepting an offer to buy into an energy infrastructure project comes with complex financial considerations. This includes negotiating and structuring distributions that are best for your community, raising the funds, navigating the legal documents, and tax planning. You may require outside guidance to assess the rate of return on your investment and ensure that your community achieves its financial goals.

What steps can you take to make the most of a large transaction?

You want to ensure that the deal will support your community’s long-term financial needs and create a stable cash flow for generations to follow — and you need to take the right steps to achieve your goals. Our advisors at MNP have supported many Indigenous communities and energy companies as they navigate the large transaction process.

These steps can help your community navigate the process successfully:

Explore funding opportunities

Many Indigenous communities face challenges with raising the capital required to buy into large infrastructure projects. Organizations such as the Alberta Indigenous Opportunities Corporation (AIOC) and their equivalent programs both federally and in other provincial jurisdictions may be able to provide guarantees to raise money in the debt financing market. Additionally, these programs often offer capacity grant funding to hire professional service providers to help evaluate as well as facilitate the transaction.

Consider a financial advisor and/or a debt placement monitor

You need to ensure favourable financing terms when your debt placement agent approaches the debt financing market to raise funds for your investment. Often, you will need to engage external support to raise the capital — and to ensure that the project financing received is competitive in the context of the current market. A financial advisor and/or debt placement monitor can provide an independent assessment of the responses from potential lenders to your committee(s).

Establish clear roles and responsibilities

Members of your community may be nominated to join a committee(s) to help navigate the transaction process — and may be further appointed to guide conversations between your community, its Indigenous partners, and the energy company. Ensure that the roles and responsibilities of these positions are outlined clearly to manage the process effectively.

Create a communication plan

It is essential to update your community stakeholders on the progress of the deal to ensure that everybody is working together on the same page. Schedule regular meetings between your committee representatives and community leaders to discuss recent developments. Open dialogue can help you balance different interests, make informed decisions, and minimize conflict.

Seek independent advice

The transaction process involves many complex factors — including the capital raise, negotiation of deal terms, structuring of distributions, risk management, tax planning, and financial reporting. It may be beneficial to seek advice from a neutral third party to ensure your community has access to the insights it needs throughout the process. An independent advisor can also help you overcome limited time availability, negotiate timelines that work best for your community, and navigate confidentiality agreements.

Indigenous Services

MNP is a leading national accounting, tax, and consulting firm for Indigenous Nations in Canada. For the past 40 years, we have invested significant time and resources developing and delivering practical services to meet the unique needs of our First Nations, Métis, and Inuit clients. 

Case study: Northern Lakeland Indigenous Alliance and Wolf Midstream

Wolf Midstream presented an opportunity to five Alberta-based First Nations and Métis Settlements to acquire equity ownership in the Access NGL Pipeline System. These communities brought MNP on board to help navigate the transaction process.

The challenge

This partnership would help support the long-term prosperity of these communities through a subscription agreement that would enable them to acquire interest in the Access NGL Pipeline System. However, the communities needed support to raise capital to buy into the pipeline, structure distributions, and receive an optimal rate of return on their investment.

The solution

The five communities formed a legal partnership — Northern Lakeland Indigenous Alliance Limited Partnership (NLIA) — to enter into the deal with Wolf Midstream. Each community nominated a representative to become part of the committee that would navigate the transaction process. Two members from the committee were further appointed to a committee that interacted more frequently with the communities’ advisors and Wolf Midstream.

Once formed, NLIA hired an independent and experienced deal support team to help them navigate the complex transaction process. This team included legal advisors, financial advisors, and tax advisors. MNP’s Corporate Finance team acted in the financial advisor role and MNP’s Tax Services team acted in the tax advisor role to support NLIA throughout the deal. 

The AIOC helped support the transaction by providing a $103 million loan guarantee to NLIA. This would help these communities raise money in the capital market. Members of MNP’s Corporate Finance team acted as the financial advisor and debt placement monitor to provide oversight and an independent assessment of the responses from potential lenders.

Additionally, MNP structured the distributions, evaluated the rate of return associated with the transaction, and provided tax planning to ensure the transaction would meet NLIA’s financial goals. We provided regular updates to the committees on specific activities such as tax, risk management, and financial reporting to enable them to make informed decisions and empower them to lead the discussions with Wolf Midstream.

The results

NLIA acquired approximately 43 percent interest in the Access NGL Pipeline System through the partnership with Wolf Midstream. The distributions from this investment will be used to benefit their communities both now and in the future.

“Indigenous equity ownership in major infrastructure projects is a signal from industry and government of their commitment to economic reconciliation for Indigenous Peoples,” said Tony Bagga, President and Director of Northern Lakeland Indigenous Alliance. “For First Nations and Métis Settlements involved in these types of partnerships it means improved quality of life and long-term economic stability and prosperity.”

Energy Services

Canada’s dynamic energy industry is a major contributor to the national economy. MNP’s team of multi-disciplinary specialists provide insights and solutions to help you enhance value and find efficiencies to prosper in the long term.

Take the next steps

Indigenous communities may face multiple challenges during large transactions with energy companies — including limited time availability and negotiating timelines that work best for their community. Taking steps to delegate clear roles and responsibilities and communicate openly throughout the process can help ensure that your community achieves its goals for the deal.

Contact Clayton Norris | Vice President, Indigenous Services

Learn more about how we can help your community navigate the large transaction process. 

Contact Jason Kingshott | National Energy Leader

Learn more about how we can help your energy company build mutually beneficial partnerships with Indigenous communities.

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