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TORONTO – Canada is poised to see significant growth in funding for indigenously-related projects, international credit rating agency Morningstar DBRS said Monday.
In a report released on the fourth annual national day for Truth and Reconciliation, the credit rating agency said domestic-related capital markets activity is on a steady upward trend with “significant potential” for more.
“We have seen a gradual increase in capital markets activity from indigenously-linked institutions and we anticipate that this part of funding will grow significantly in the coming years, supported by more federal government guarantees and provincial and other forms of support,” says the Morningstar report .
Indigenous communities across Canada are showing increasing interest in acquiring equity positions in major infrastructure projects as a means of generating revenue and economic opportunity for their people.
But historically, one of the biggest barriers preventing indigenous partners from pursuing equity ownership has been a lack of access to capital. The Canadian Indian Act prohibits First Nations from using their land as collateral, meaning that indigenous communities have struggled to access competitive interest rates through mainstream capital markets.
But the federal and provincial governments are increasingly accepting the need to provide indigenous communities and organizations access to capital to facilitate economic development, Morningstar said.
The report notes more than $13 billion in federal and provincial programs available, such as loan guarantees, which lead to more funding activities from communities and indigenous groups.
Morningstar pegs the value of Indigenous financing activity, including government loan guarantees, at nearly $800 million annually over the past five years.
He also notes that a number of high-profile transactions involving Indigenous communities are on the horizon, including Ottawa’s proposed sale of the Trans Mountain pipeline to Indigenous groups, the proposed sale of TC Energy Corp. from its NGTL pipeline system to the Indigenous consortium, and the development of the Cedar LNG project by Genedl Haisla and Pembina Pipeline Corp.
“We believe there is significant growth potential for Indigenous-related financein the coming years,” Morningstar said, adding Indigenincreased participation in capital markets is a win-win situation.
This report was first published by The Canadian Press on September 30, 2024.
Companies in this story: (TSX: TRP, TSX: PPL)
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