Indigenous equity ownership in new energy projects in Canada is fast becoming the norm and is expected to grow as the clean energy transition accelerates.

But when it comes to types of equity ownership and the terms of a deal, the “devil is in the details,” stakeholders said during a webinar presented by the Transition Accelerator, a pan-Canadian organization that works with others to identify and advance viable pathways to a prosperous, competitive and net-zero emissions Canada in 2050.

“What does equity really mean? The devil is in the details. It all depends on terms,” said Chris Henderson (photo at right), founding executive director of Indigenous Clean Energy (ICE) and author of the book Aboriginal Power: Clean Energy and the Future of Canada’s First Peoples.

“At the end of the day, if someone says, ‘I’ve got 50-percent interest’ . . . 50-percent interest can mean almost nothing if the terms aren’t there,” he said.

ICE, a not-for-profit organization headquartered in Kelowna, B.C., helps equip First Nations, Métis and Inuit communities with the know-how to negotiate the terms of a deal.

Such terms, which Henderson said must be negotiated as part of Indigenous equity ownership in projects, include: who makes the decisions on a project; what capital is required to operate it; what’s the performance of the project; what’s the financial return on capital; and what are the procurement and employment rights.

There are currently about 300 medium- to large-sized renewable energy projects across Canada that are co-owned or owned by Indigenous communities, along with approximately 3,000 smaller projects, Henderson said.

“At the heart of it, equity ownership means [First Nations] have decision-making rights,” he said. “It’s a reflection of First Nations’ sovereign rights.”

When an Indigenous community has equity ownership, it means being at the decision-making table “to decide if the project should happen . . . to decide when it should happen and in what way it should happen [and] how it should be designed,” Henderson said.

Indigenous communities with equity ownership share decisions with the project developer on how the project will be financed and how it will provide benefits, he added.

“In this way, when you have equity you are affirming reciprocity. You are affirming the equality of reconciliation that has to happen as we develop natural resources in the country and clean energy in particular.”

Hydro One in Ontario has an industry-leading 50/50 equity partnership model for First Nations on new, large-scale electricity transmission projects, offering them a 50-percent equity stake in the transmission line component of projects valued at over $100 million.

Ontario historically required Indigenous equity ownership in new electricity transmission line projects, said Penny Favel (photo at right), vice-president of Indigenous relations and sustainability at Hydro One. “The problem is that there wasn’t a really good set of parameters on what the equity should look like.”

Hydro One worked with First Nations to design those parameters, which led to the company’s equity partnership model.

Hydro One is regulated by the Ontario Energy Board, which requires the company to have 40 percent of a project’s value as the equity portion, along with 60 percent financed through debt.

 “That 40-percent portion is generally going to get a return of nine to 10 percent, which is a pretty decent return,” Favel said.

Through Hydro One’s equity partnership model, nine First Nations have agreements to invest a 50-percent equity stake in the Waasigan Transmission Line in the northeastern corner of Ontario. The project, which broke ground last November, is a new double-circuit 230-kilovolt line from Shuniah to Atikokan, and a new single-circuit 230-volt line from Atikokan to Dryden.

Favel said it is crucial to start any conversation about equity ownership with First Nations by focusing on going forward as true partners and figuring out how to partner in a way that allows First Nations to make the co-decisions they want.

“The way I approach Indigenous relations and engagement generally is it has to be community-led,” she said. “If a project comes in and a company comes in and they say, ‘Oh, we have a great solution for you,’ I virtually guarantee you you’re going to fail.”

B.C. legislation is driving reconciliation, including Indigenous equity ownership

The B.C. government in 2019 passed the Declaration on the Rights of Indigenous Peoples Act (DRIPA), which confirmed that the province will use the United Nations Declaration on the Rights of Indigenous Peoples as the framework for Indigenous reconciliation.

Following the passage of DRIPA, Crown corporation BC Hydro worked collaboratively with First Nations in B.C. to develop an implementation plan.

BC Hydro also established an advisory committee of six prominent First Nations leaders to monitor BC Hydro’s progress in achieving the plan’s objectives, said Patrick Tomlinson (photo at right), Indigenous relations project manager at BC Hydro.

DRIPA, he said, “has been a game changer. I’d say that in a good way DRIPA has created some uncertainty and disruption for everyone, Indigenous and non-Indigenous people alike.”

“It has brought about a long-overdue emphasis towards co-development of new and better ways of working together,” Tomlinson added.

There are more than 200 First Nations with acknowledged traditional territories in B.C., where only a few areas are covered by modern or historic treaties.

For BC Hydro’s most recent call for 3,000 gigawatt-hours of clean energy projects, Tomlinson met with 99 First Nations across the province and worked with them to design a First Nations economic participation model. The final model consisted of a First Nations equity eligibility requirement and several project evaluation credits tied to the proposal’s ability to show economic partnership with First Nations.

BC Hydro’s model also includes a 25-percent First Nations ownership requirement for new clean energy projects.

“First Nations ended up owning majority stakes in eight of the nine winning projects,” Tomlinson noted.

BC Hydro is currently negotiating potential Indigenous equity ownership in a $4-billion project to construct a 450-kilometre, 500-kilovolt electricity transmission line to connect the Williston substation near Prince George with the Skeena substation near Terrace.

Eight First Nations, including the Haisla, Nisga’a and Wet’suwet’en, are founding members of K’uul Power, which proposes to create a special purpose vehicle company that would build and co-own the new transmission line.

Saga Williams (photo at right), senior advisor at the Vancouver-headquartered not-for-profit First Nations Major Projects Coalition, said from the coalition’s perspective “any development that happens in Canada is happening on the lands of Indigenous peoples.”

Williams pointed out that the Kirk Lake First Nation in Ontario, of which she’s a member, had no constitutionally protected rights until 2018, despite signing a post-Confederation treaty and many pre-Confederation treaties with Canada. There were many “challenges and barriers that we faced in terms of participating in the economy around us and the development around us,” she said.

They included barriers in the federal Indian Act that prevented the Kirk Lake First Nation (and other First Nations) from leveraging reserve land in order to create a system of accessing capital.

The First Nations Major Projects Coalition helped eliminate that barrier by pushing for a $5-billion federal government Indigenous national loan guarantee program, announced in Budget 2024, that would enable First Nations communities to access capital for equity investments in natural resource and energy projects.

Also, Williams said, the evolution of legal principles such as the duty to consult and accommodate First Nations on development projects “allowed communities to be able to have the conversations about what are their unique needs and how do we utilize our constitutionally protected right to be able to pivot to the conversations where equity ownership is possible.”

Report offers guidance on supporting Indigenous equity ownership

“The historic barriers are vast and they come in the form of economic suppression,” Williams noted. This is why economic reconciliation and making initiatives and empowering communities and building their capacity are so important in terms of allowing them to have conversations about equity ownership, she said.

The members of the First Nations Major Projects Coalition have said they need the capacity to understand the opportunities in the energy sector, “including how they can participate in gaining equity shares in the projects that are developing around them,” Williams said.

The coalition has published a report on a National Indigenous Electrification Strategy, which outlines a framework that Indigenous communities – in partnership with governments and the private sector – can use to explore opportunities in equity ownership.

The report notes that Canada’s clean energy sector is forecast to grow 58 percent in GDP terms by 2030. “The capital cost of this opportunity between now and 2050 is estimated at $1.7 trillion.”

The report’s 18 recommendations for governments and regulators include:

• Support Indigenous access to capital via loan guarantees and other programs.
• Fund foundational and comprehensive Indigenous capacity supports.
• Create opportunities along the value chain of electrification for Indigenous nations.
• Provinces and territories should implement a policy and investment framework to incentivize Indigenous partnerships.
• Governments, regulators and utilities should present Indigenous nations with risk-mitigating options to participate in clean energy project ownership.
• Prioritize Indigenous participation or ownership in electricity assets over electricity rates.
• Take the regulatory steps needed to support the formation of Indigenous utilities, at all scales.

The report also has 26 recommendations for the private sector, including:

• Create a detailed reconciliation action plan in partnership with Indigenous nations and implement the plan as part of corporate strategy.
• De-risk investments and attract more capital for proposed projects by conducting early, informed, relationship-based, and well-resourced partnerships with impacted Indigenous nations.
• Develop priority Indigenous procurement policies for all projects to support Indigenous businesses and incentivize industry-Indigenous partnerships.
• Hire and appoint Indigenous people into board and leadership positions in companies and on projects, particularly Indigenous women.
• Fund Indigenous capacity supports.
• Support Indigenous access to capital.
• Support and prioritize Indigenous leadership in projects.
• Create opportunities for eventual majority or full Indigenous ownership of net-zero projects.

The First Nations Major Projects Coalition also has developed the Indigenous Cultural Rights and Interests Toolkit, a series of integrated policy and technical guidelines for characterizing and exploring compensation for project-specific and cumulative effects on Indigenous cultural rights.

The “Spirit of the Land” toolkit is meant to support consent-based decision-making on major projects and the protection and promotion of Indigenous cultural rights.

Different ways to leverage capital for Indigenous equity ownership

Henderson said Indigenous communities can leverage capital for equity ownership in three different ways: carried interest, partner capital provision, and public capital.

Carried interest refers to the fact that Indigenous communities have an inherent right because any new energy project is using traditional Indigenous land. “That creates that interest [they] gain in equity, without capital investment,” he said.

Secondly is private capital investment that comes from partners in the project and must be negotiated.

Henderson pointed out that “the more capable companies in the sector” understand they can come to the table with their own financial balance sheets and senior debt financing from lenders, to help Indigenous communities gain equity and backstop some of the equity capital they need.

Thirdly is the leverage of public financing, which could be grants, sovereign debt guarantees and sovereign debt at lower cost.

“All three [forms of capital] are relevant. In fact, the more you leverage all three, the higher the gains are,” Henderson said.

He said the two messages he would underscore for First Nations interested in equity ownership are: 1) maximize capital by leveraging all three forms of capital; and 2) examine how the terms are configured so you know what benefits are being received and you’re trying to maximize those benefits. “Both those things go together.”

“Construction employment benefits add to the equity benefits,” Henderson noted. “In some cases, they actually outstrip the equity benefits in terms of the net benefit to the community.”

Favel said Hydro One, in some of the company’s largest projects, has been very open about opportunities for First Nations in procurement.

“The commitments we’ve made on the last big project have been 30-percent procurement [for First Nations]. That’s huge. Nobody else is doing 30-percent procurement or talking about it.”

Favel also emphasized that Hydro One doesn’t discourage or prevent Indigenous communities from having important input into decisions about a project even if they don’t activate their equity investment.

This approach isn’t just because there’s a regulatory requirement and a constitutional imperative to engage First Nations, Favel said. “We are engaging with Indigenous communities on linear infrastructure because it makes the project better.”

Indigenous equity ownership in clean energy projects is expanding

More than 20 percent of Indigenous communities in Canada are involved in renewable energy projects, with wind power having high Indigenous equity ownership compared with other clean energy assets.

Indigenous equity ownership in renewable energy projects is growing because these projects have a long duration term and, once a project is built, the rates of return and financing are locked in, Henderson said.

Renewable energy development “stands uniquely in a way to leverage equity that benefits Indigenous communities,” he said.

In addition to Indigenous ownership in energy generation and transmission, Indigenous Clean Energy is now helping First Nations with opportunities in energy storage projects, district energy projects and others.

There is also a $7-billion to $9-billion opportunity for First Nations to invest in the area of energy-efficient housing, as well as in further reducing the use of harmful diesel-fueled power in rural and Northern communities, Henderson said.

“As we move [through] the energy transition, we’re going to need new models of financing, new models of relationship and partnership,” he said.

The nature of energy projects is changing dramatically, he added. “But generically they will lend themselves to long-term partnerships that are stable, that are generative, and that are positive.”

 Henderson said that with the clean energy transition, there’s a need to further integrate electricity systems in Canada and the U.S. ICE is seeing more shared interests between tribal communities in the U.S. and First, Nation, Métis and Inuit communities in Canada.

 Despite U.S. President Donald Trump’s intention to roll back clean energy incentives, “we are going to electrify the economy,” Henderson said. “That electrification will be more and more connected between provinces and territories and between Canada and the U.S.”

“That makes for a stronger grid, it makes for a more economic grid and will get us to our net-zero future faster,” he said.

Favel pointed out that the size of Ontario’s electricity transmission grid is set to double in the next 10 years and every single piece of new transmission will be on First Nations’ traditional territory.

“In Ontario, I think Indigenous communities are increasingly going to be part of clean energy projects because this is a race to get energy where it needs to be in a way that is efficient and effective,” she said.

Tomlinson noted that B.C.’s electricity grid is undergoing transformative change, and BC Hydro recently announced a $36-billion capital plan over the next 10 years.

 “I think it’s imperative that First Nations and their allies really think hard about the opportunities that are on the table, because there are a lot of them,” he said. “BC Hydro is very open to explore ways to make sure that First Nations get in on the ground floor and stay all the way up to the penthouse of these opportunities.”

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