Partners, Not Impediments

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Industry and governments are now increasingly recognizing that it is more advantageous to view First Nations as potential business partners rather than as potential legal impediments to commercial development. First Nations in Canada, therefore, often possess a unique ability to access and secure equity positions and other economic opportunities on attractive terms in project developments undertaken in their territories. More importantly, many First Nations have indicated a strong desire to do so. However, many, if not most, First Nations lack the internal financial resources to properly take advantage of these opportunities or, where available at all, cannot access the necessary financing on commercially effective terms.

 

Indemnities as an Alternative to Guarantees as a Risk Transfer Strategy

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Loan guarantees have been proposed as a solution to facilitate access to required capital. Governments, however, have been reluctant to make such guarantees broadly available. Financing structures secured by contracts of indemnity can provide an alternative and, in some ways, a more attractive alternative to government loan guarantees as a risk transfer strategy to reduce the effective cost of capital for First Nations seeking to acquire meaningful equity positions in project developments.