Welcome to Drum Beats, the must listen to podcast for investors exploring indigenous investment opportunities in Canada.
Born from the Canadian Indigenous Investment Summit, our show focuses on the nexus of indigenous economic strategies and investment potential.
I'm Mark McNacca and I'm joined by my co-host Robert Brent.
Today we discuss British Columbia Hydro's call for power and the strong response from producers, including their indigenous stakeholders,
as well as a report from the Conference Board of Canada on Indigenous Trusts Across the Country.
Join us to uncover how these discussions shape economic development within indigenous communities and beyond.
Good afternoon. Rob, welcome back to London.
Thank you. You've been back in Canada across the country.
I have. I've been in Vancouver and Calgary, but it's great to be back in London for December and the run up to Christmas.
What's going on? Christmas is always special here. I've always felt that.
I grew up reading Dickens Christmas Carols and when I first arrived, it was like, where's the snow?
Which rarely comes here, but I'm sure if you were in Alberta, you probably had some snow in Canada.
A lot of Canada is getting some cold weather. It was minus 20 in Calgary last week and a foot of snow.
Wow. So it didn't miss anything.
Right. Here we went down. I think we nearly got to zero. We had some frost and then it's back up at 15 again.
That's absolutely crazy. Very typical English weather.
Anyway, so you spent some time in Canada and what were you up to over there?
Well, one of the things we did, we hosted a little conference in our Vancouver offices for our clients
and the focus was on the recent BC hydro call for power. We talked to clients about what that meant
and also some lessons learned because they're with all of these proposals for power.
There's an Indigenous equity component that's required.
Okay. And BC, of course, being British Columbia.
Absolutely.
North of California for some of our listeners who haven't been there before.
That's right.
Okay.
It was BC Hydro who put out the call to power in April of this year.
And BC Hydro is the only power company in BC?
Yeah. Yes, they are.
Pervince owners?
Absolutely.
And they put out a call. This is their first call for new power in 15 years in British Columbia.
Wow.
And they have requested approximately 3,000 gigawatt hours per year of new clean electricity was the call.
And is it, sorry, just with that, is that because they're running up to their limits or it's for what they see as the expansion plans
because 15 years with no new capacity coming online?
Yeah. No, there's a bit of urgency to this call.
The BC government revised their forecast for their needs for power into the future.
And so they had been forecasting a surplus of about 500 gigawatts in 2030.
And they revised that figure to be a deficit of 3,500 gigawatts by 2030.
And so the call to power went out earlier this year.
And they are looking for projects that would come on stream with commercial operation dates by 2028, 2031.
Wow, that's pretty quick. Power projects, isn't it?
Yeah, it is.
Wow, points to the need.
And if they all come on stream, that'll add about 5% to British Columbia's current power supply.
And BC hydro estimates that this call will lead to total public and private capital investments of approximately $40 billion.
So their focus is on big projects.
Yes.
And we talked about the urgency of the request.
But the other unique aspect of the call for power was the requirement that all proposals include indigenous ownership in the proponent making the proposal.
Is that the first time that's happened in a...
It is, yes.
In 2008, which was the last time British Columbia called for power, there was only a passing reference to indigenous consultations.
But this time the call to power was quite explicit.
And it was requiring that indigenous communities that are affected by any of the proposals have at least 25% of the equity in the project.
That's a minimum 25%.
And I guess that should make the process of bringing the power on stream quicker, right?
Because the indigenous parties are stakeholders from the get-go, not at the end of it, oh, now we've got to get their approval and they're not bought in and just slows it down.
So actually this should help it come online as quick as they want.
Yeah, absolutely.
British Columbia is one of the provinces in Canada who have adopted the UN Declaration on the Rights of Indigenous Peoples, meaning effectively there's a...
not just a consultation requirement, but a consent requirement when it comes to projects that affect indigenous peoples.
And what better, in a clear way, to show consent than to have an ownership stake in the project.
And so we mentioned 25% as a minimum, proponents will get additional credit in the process if there's a bigger stake than 25% ownership.
And so I know there are some proposals that will have a majority of indigenous...
And a bigger credit.
What do you mean?
Well, when they're assessing these proposals and they did receive 21 proposals for a combined 9,000 gigawatt hours of those 21 proposals from independent power producers throughout BC,
about 70% were for wind, new wind projects, 20% for solar, and 10% included biomass.
And so many proposals being assessed, contracts are going to be awarded next week, so this is happening right now.
And the review process in assessing the different 21 proposals, picking the winners, some of the criteria they will look at are how big a percentage of equity ownership is there from local indigenous communities.
And I guess a couple factors.
So BC, if you will correct me if I'm wrong, I think it's one of the provinces who has the most non-treaty territory that's never been resolved.
Yeah, right.
It's all unceded territory.
The province of British Columbia.
One of the last Indicant Federation, right?
So there's a good way to start solving those issues is, okay, we know we have to solve this, so you're going to get a stake in it.
And that will help hopefully come along with that.
I guess the other interesting thing is the amount of wind power, the hydro opportunities in BC, I guess most of the dams have been built.
I think everybody thinks that there won't be any more dams built.
There is one site C, which has been under construction for many years and proposed for many years in the northeast British Columbia.
That is actually completed and expected to come on line next year.
I think it's, the dam is complete.
The reservoir is filled.
It's filled at the moment.
And power starting next year, I believe.
And once it's up and running, there's about 4,500 gigawatt hours of power from that one dam.
It'll be the fourth largest, I think, producer of hydro power in British Columbia.
But I think that most people figure that is probably the last one.
And so when you're talking about clean energy projects, there's lots of scope for more wind.
I guess for that site C dam, if I remember correctly, it's down from another dam, the WAC Bennett Dam.
And he's a former Premier of British Columbia, but since most people think Canadians are very conservative, his nickname was actually Wacky Bill Bennett.
And the Social Credit Party of British Columbia.
So Western Canada has always had these populace come through, which is different where Canada was formed in Upper and Lower Canada,
between New France and Ontario and Quebec.
And it's like in Alberta, there's some of this as well.
So Canadians are not as conservative as one thinks.
If you have a Premier named Wacky Bill Bennett.
Yeah, I know. And politics in British Columbia is interesting, left and right.
Yes.
So there was also election in BC.
That's right. Just in the last few weeks in the ruling New Democratic Party, Socialist Party just hung on.
They had a large majority going into the election.
They want a very, very slim majority by one or two seats.
And so Indigenous peoples were watching that election closely because the opposition party conservatives were proposing to rescind the UN Declaration on Rights of Indigenous Indigenous Peoples,
promising to replace that with something even better.
Something better.
I mean, it's crazy what comes up in politics because I think Canada is well on its road to resolving this issue by including Charter of Rights and Freedoms,
the rights of the Indigenous peoples, the recognition of their treaty rights.
And also when the federal government signed up for UNDRIV, it set a standard across the country.
And so, yeah, we would have been back to court cases and delays to projects and fights.
But government continues in place in British Columbia and people expect as regards Indigenous communities and energy policy that it's business as usual.
I always thought the NDP was like a European Social Democratic Party, but obviously you're very North American and they're socialists.
Right? Is that it?
I guess that's perspective from here.
Everything in North America is right of here, but everything in Canada is actually left of what's in America.
So when they say somebody's left of center networks, use the term socialist, they usually think of Canada in America.
But it's not.
But there's a lot of people who are right of center too, you know, if you look what goes on the Prairie Provinces or Alberta, you know, in particular.
Okay, so through the election, BC Hydro, and we're talking about the amount of clean energy in the wind power projects.
Where are the wind power projects going in BC along the coast? Do you know?
I don't know, to be honest, the valleys.
Yeah, of course, right with the Rockies.
But I don't know specifically where.
I know of the 21 proposals that it is, they are spread quite broadly across the province.
And solar energy in BC? BC always reminds me a bit of England.
Right? Where does the sun shine all the time in BC? Somebody's figured it out.
Yeah, I'd be surprised in some places, British Columbia, in the interior, for example, Eret and quite sunny conditions.
Right, can be future retirement destinations.
Absolutely.
And you'll have power, clean power too. What a better place to end up than a place like that in BC interior, sunny, close to the coast, close to the Rockies.
Can't ask for a better life. That's why everyone goes to BC, right?
That's right.
Very nice lifestyle.
And natural resources.
Okay, super.
And any other issues coming out from Eret trip to BC?
No, I guess just to highlight again as part of these equity packages in the hydro call, there is a standard financing package offered by Canada's infrastructure bank, government owned bank that has a pretty standard package now of loan guarantees,
which help finance that equity stake that indigenous communities will be required to have in those projects.
So government loans at the federal level, Canada infrastructure banks federal institution and provinces have similar loan guarantee packages.
There are some grants private sector is doing some interesting things helping to finance these equity stakes, not just for power, but in other situations too, talking to one of the Canadian mining companies who are in London this week for the resourcing tomorrow conference.
That's actually tomorrow, I think.
It's on now this week.
Oh, so it's not it's resourcing tomorrow, but it's yesterday as well as tomorrow.
And today, right, resourcing for it's the old mines and money conference, which has been going in London for many years and attracts mining companies from around the world.
Why did they give up on such a good name like mines and money that kind of put it all together right now today and tomorrow, you know, no way, mines and money.
And it's part of an image rebrand.
Yes, not just digging up, digging up the ground, right.
But that's what it is.
I mean, and a lot of people don't appreciate, you know, if you actually fly over where resources are being extracted, it isn't a pretty sight.
But, you know, this has been man on planet Earth since the beginning.
It's all necessary.
Yes.
I mean, these green projects all require minerals and they have to come out of the ground.
Somehow mining companies are getting much better at using clean power to get those minerals out of the ground, but you have to get them out and use them to generate the clean clean power and other products that we all use.
And what about so couple issues on that is that financing capacity that you just alluded to, is it sufficient or is there concern that the indigenous peoples are kind of coming up to barriers in terms of what they're doing.
In terms of what they can get to invest in opportunities that they have, they're there.
But it's, do they have enough financial resources yet to be able to do that and who's going to fill that gap?
Not at the moment.
There is a concern that the needs are great and there's only so much capacity for funding in Canada, whether it's government or private sector.
And when you look at the projects that are in the pipeline and all requiring indigenous equity, then these are pretty daunting numbers.
And so that's why some are looking outside of Canada for that investment.
Yes.
That's one of the reasons for the summit here in London.
Absolutely.
And there are different novel ways that people are coming up to find those funds to finance the equity.
Again, talking to one of these Canadian miners, there's a structure in Canada that's used called Flow Through Shares.
Yes.
And Flow Through Shares effectively allow the investor to use the deductions that the company would otherwise be able to use.
So a typical example is an exploration company spending a lot of money to explore but years away from actually generating revenue and income.
And so in those early years, being able to deduct expenses doesn't really help the company.
Correct.
Canadian system.
No, that's right.
Canadian system allows certain companies to issue what are called these Flow Through Shares. And so if I invest in my Flow Through Shares from your company, I can use the deductions against my tax bill that that company would otherwise be able to use.
Yes.
And so you have Flow Through Shares, very popular for many years in Canada.
I think they were attached with MERS, multiple urban residential developments.
Probably they can use them in many circumstances.
Yes, it's very popular in Canada actually.
Yes.
And then one twist on the Flow Through Shares structure is something called charitable Flow Through Structures.
And that's where investors who want to donate their shares to a charity are able to buy the Flow Through Shares from the company, use the deductions for tax purposes, and then sell those shares on or donate them to a charity.
And so the charity can hold the shares. It doesn't get to use the deductions. They can only be used once, but it's a charity. It doesn't need the deductions.
And so a common structure is the investor buys from the company, the Flow Through Shares, donates those shares to a charity.
The charity then has a buyer, usually an institutional buyer, who again doesn't get to use the deductions, but is able to pay cash to that charity.
And it wants the shares. The charity gets its cash. The original investor has put money into the company. It uses the tax deductions.
And there's a multiplier effect on what we've been able to do with a similar amount of money and donate.
It becomes quite attractive.
Everybody wins with that one. Who doesn't win? I guess the Canadian taxpayer picks up the bill for that one.
Well, they're trying to encourage exploration in allowing somebody to use those deductions that other businesses would otherwise be allowed to use.
So it's an incentive to get investment in.
It's an innovation.
Encourage exploration.
Absolutely. And when you look at all the parties who get to benefit from that, you've got a lot of important stakeholders.
And so in some cases, you could have that charity be the indigenous community, local indigenous community, and you could have an investor invest in the company, then donate those shares to the indigenous community, who could either hold the shares because they want their equity,
Yes.
Or they could sell them to an institution and just take the cash at that point.
I'm sure that's going to be used quite a bit with a lot of these projects since it's another way for the indigenous communities to get access.
Just to again, another example of some pretty innovative ideas and all indigenous communities to get their equity stakes.
Great. And you also, so when you finish up, I think you were in Alberta as well.
Went to Calgary, yeah, cold, snowy Calgary.
Yes.
About like middle of February.
Well, when you're in the prairies, you know, it comes in October and leaves in April or May, right? Kind of consistent.
What's it like today? What do you mean? What's it like? It's cold.
And you've always had a plug in your car on the prairies. And it's not because they're all electric, but if you don't plug in your engine block, you know, the oil will freeze in the other cracked engine block.
So people have been plugging in their vehicles for years on the prairies. It's nothing new.
So these guys from California come in. Oh, you get to plug in your car.
So, and was there any indigenous issues?
Well, I was catching up with some contacts and then just on my own time took a drive out to Susina, the first nation that borders Calgary on the southwestern edge of Calgary.
And they've just opened a new ring road highway around Calgary that goes through Susina territory. So they were compensated for that, allowing that road to be built.
And they're doing some really interesting things about that.
So then the lawyers show up.
Well, they're trying to develop the land in there so well situated right on the edge of Calgary.
There's a massive property development going on there with shopping residential plan.
Who's behind that development?
Number of parties.
It's Tutina nation.
Yes, first nation.
Okay. And of course, for those of our listeners and viewers who don't know, actually the largest stampede in the world is held every year in Calgary.
World famous Calgary stampede all over North America.
All the Cowboys go to Calgary in the summer. That is the biggest.
Now we have a new president elect in the US, Trump.
I don't know if he's heard that the biggest and greatest rodeo is in Calgary.
Maybe they'll invite him.
Okay. Excellent.
Yeah, there's a lot of affinity between the Albertans and the new government to be in the United States because there are all kinds of pipelines and the oil and gas and other fuels that the US needs.
It's a natural market straight down from into the US market.
Yes. So this might raise the Keystone pipeline again, which was approved in President Trump's first term and then Biden shut it down again. Environmental concerns.
And that actually, without that pipeline, Canadian oil that goes down is actually cheaper than what's the refinery up down the States anyway, where it goes in it because there's restrictions and how much can go in.
You can't get the best price for it because there's a lack of capacity to get the oil down.
So the prices held back.
But with that pipeline, you know, that might come alive again.
It could. And I don't pretend to know the politics and the issues of Keystone, but Canada, a new route to the West Coast and Asian markets last year, the Trans Mountain pipeline.
Yes.
It's now open.
And so that has been a big boost to capacity that Canada can export.
Yes.
And get that product to market closer to the global global prices for the product.
Yes, which is important because obviously the US and Canada are very close trading nations and a lot of commas go down to the US market and oil in particular.
But this gives Canada with the West Coast pipeline now some negotiating leverage because the pipelines don't only go south anymore, right?
They can go across to Asia, which continues to grow and has huge demands.
And again, Canadian oil reliable supplier was like when the Germans came looking for natural gas, they first came to Canada because they thought perfect country to supply us with.
That decision wasn't made at the time.
But now with this new pipeline, it gives Canada opportunity to participate in global energy markets and have alternative sources for the products, which is good for any commodities coming out of Canada.
Right?
Reinforcing the strategic importance of Canada.
I think it's a good news story for Canada shows big projects can get done.
Yes.
And the next step is for the government, the federal government who had stepped in and bought the pipeline.
At one point it's now for them to sell it to the private sector.
And there's an expectation that indigenous communities in British Columbia, all along the pipeline will be buyers and bidding for that pipeline or at least a big piece of the pipeline.
Yes.
And one of our chiefs who came to last summit, Chief David Jimmy, is one of those people that they have been talking to or he's been talking to.
Yeah.
He's a teacher and alliance of indigenous communities, I forget how many they are, but they are one of the, they will be one of the bidders for that pipeline when it comes up for sale.
Okay.
So very productive visit.
And now that we're making our way from the west, we've talked a little bit about what's going on in Washington.
So of course we have to talk what's going on in Ottawa.
Right?
Mm-hmm.
And of course in Canada there's something called the IDIB, the Indigenous, I think it's the IDIB.
It's a list of indigenous owned businesses.
Right?
And if you get on this list, the Canadian government, the federal government has said we're going to give, I think it's 5% of total federal government contracts for indigenous businesses.
Yeah.
The indigenous people represent in Canada about 5% of the population and so federal government has targeted, the goal is that 5% of their projects and their spend should be directed towards the indigenous economy.
Right.
And a few weeks ago when we were talking on the podcast, you know, it was in the news that there was all these IT companies set up in the suburbs of Ottawa who claim to be indigenous but weren't.
And then it was announced in Parliament last week or the week before by the Indigenous Service Canada Minister, Patty Haji, that 1,100 companies have been removed from the list.
There's still approximately 3,000 but nearly 20% have been removed because they didn't really qualify.
Yeah.
I mean this is...
It's a big, big...
What a mess.
It's a big issue.
It's been controversial.
Some high-profile contracts awarded to some questionable companies.
But like a lot of programs where there's money to be made, you will find people trying to game the system.
And so, yeah, the number of companies claiming indigenous ownership that really weren't indigenous owned.
And so groups like Canadian Council on Indigenous Business is setting some criteria and some standards.
And so is the National Aboriginal Capital Corporation.
Okay.
So both groups trying to set a standard for what should be considered a proper indigenous owned business eligible for things like government procurement contracts.
Yes.
So this inability to count or identify reminds me a bit of the border issues in the United Kingdom.
We don't know how many people come in or out.
And I think Canada has similar challenges.
But I'm sure as you are indigenous, Rob, when you hear something set up like this and they restricted you.
Or restricted your rights even and your ancestors rights about where you could live, what you could do, who you could meet.
They seem to have tight control of that.
And then something like this comes up.
They lose control of the purse strings.
It, you know, for me it's.
There was there was there was lax oversight and then apparently it was widely known within the procurement community that there were a lot of companies gaming that system.
But hopefully the light shone on it in recent times will.
Yes.
Will reduce that.
Yes.
But that's where that's where everybody gets frustrated in every country with their government because they think their governments are spending money effectively.
And when examples like this come out and go on for a period of time, that's when people start to lose faith in the system.
So it's really important that's got that's got addressed.
Okay.
Well, that's good.
That's happening.
And the conference board of Canada also came out with a recent report talking about indigenous trust about investing and adapting and indigenous trust in Canada.
Imagine estimate 20 billion in assets impacting over 300 First Nations in your committee.
And 20 billion is the current number.
And that number sounds low to me because there are a number of settlements in different areas, child welfare settlement of the first part of that case.
I think the settlement was worth 23 billion dollars.
There are settlements for treaty violations that run into the billions of dollars.
And so all of this money has to be managed.
Yes.
And most often it's a trust that's set up to manage these settlement funds.
So I think that reinforced one, okay, where is all that other money?
Because the conference board of Canada is pretty good at getting their facts, right?
But I think what it also demonstrates is the indigenous peoples are just not looking for financing.
They have assets.
Sometimes it's about how can they actually leverage them because of Indian Act and historic legislation that prevent them from doing so.
But that is only going to grow over time when you talk about flow through and revenue streams from commodities and, you know, just what we're talking about in BC.
They are managing and today and will continue and these are going to grow as assets.
It's almost like a sovereign wealth fund or perhaps more appropriate for Canada compared to the Canadian pension plan.
CPP, everybody knows about it or the Ontario teachers.
You know, these become important vehicles and, you know, you have to go talk to them because you want to manage the money.
So this, the importance for the indigenous peoples of Canada, they have assets and over time they're going to get complete control of them.
And they are looking for who are the partners who've worked with us over time, right?
And, you know, the thinking is always about seven generations, right?
Who's going to be with us?
They don't want a quick deal today.
They want to know who's going to work with us over time.
So although working with indigenous peoples because they have this philosophy, which of course all of us would like that somebody's thinking,
what's the future of our community and our lands?
You know, it reinforces you have to work at building relationships.
As you do in any successful business, it's not just a single transaction.
There's a long memory.
So that holds a lot of opportunity.
Absolutely long term engagement, early engagement as necessary.
This DC power call for power was made in April of this year.
Bids were due by September.
Contracts awarded any day now.
That's not a lot of time to establish a relationship.
I was like giving my partner.
And finalize the deal on that. You need to be in the market getting to know some of these groups so that you can respond to these opportunities.
True. And I think that's just one example because all the infrastructure projects, which Canada, like many western countries,
has to invest in this infrastructure gain.
The life of these legacy assets is coming to the end of their functional life and they need to be replaced.
And when these projects are announced, this is, you know, BC hydro, all of a sudden, hey, we've got constraints, we've got our forecast.
So when something like this comes along, it then becomes an example as you're saying, Rob, if you don't have the relationships, it's tough to build it right away.
And they're going to look on you. Oh, you're only here because you need that.
So if you have long term interests in infrastructure, commodity, energy projects, you need to be developing these relationships with the Indigenous peoples now.
So when the call comes in for something, you're already halfway there.
And we learned that from an earlier conversation on Cedar LNG, right?
They've worked with a lot of people over time and knew exactly what they're looking for.
And Pemina, you know, delivered that for them. So excellent.
Any other news?
That's maybe enough for now. I can't think of anything else. Mark.
How's your hockey team?
The Leafs are doing okay.
Yeah, well, it doesn't count until the playoffs though, right?
Yeah, so that's why I'm not paying too close attention.
Yes, none of us are waiting for the playoffs. Okay. There we go.
So Rob, great to see you again.
Thanks, Mark.
It's super to be here in McCarthy's offices in the City of London, right?
Looking across at the city buildings.
So look forward to speaking with you soon.
Absolutely.
Great. Have a good week.
You too, Mark.
Today's discussion delved into Indigenous economic strategies and investment opportunities, with a special focus on BC's hydro call for power and its mandate inclusion of Indigenous communities.
We also explored the report from the Conference Board of Canada on trust and investing.
These conversations are essential in understanding how economic development with Indigenous communities are shaping Canada's investment landscape.
Stay with us next time for even more discussions on impactful Indigenous leadership and economic opportunities shaping Canada's economic future.
Mark McNacca, thank you for listening.