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Canadian Power – Key Developments in 2019, Trends to Watch for in 2020: Wataynikaneyap Power Transmission Project

The following is a chapter from our Power Group's fifth annual Canadian power industry retrospective Canadian Power Key Developments in 2019, Trends to Watch for in 2020. A PDF request form is available at the end of the article.

2019 saw the financial close of what has been billed as the largest First-Nations-led infrastructure project in Canadian history: the Wataynikaneyap Power Transmission Project (the “Project”). Officially closed on October 29, 2019, the construction and project financing will fund a total project cost of up to $1.9 billion. The Project is being led by Wataynikaneyap Power, a partnership between FortisOntario Inc. and First Nations LP (“FNLP”), which is in turn a partnership wholly owned by 24 First Nations. Through FNLP, these First Nations will maintain majority ownership and control of the Project.

The Project

The Project will see the construction of approximately 1,800 kilometres of transmission lines throughout a large swath of northwestern Ontario that will connect 17 First Nations communities to the Ontario power grid. Once completed, the Project will supply reliable energy to thousands of residents across northwestern Ontario who currently rely on diesel generation for electricity. In doing so, the Project will avoid an estimated 6.6 million tonnes of CO2 equivalent greenhouse gas emissions over 40 years. The Project is also expected to create an estimated 769 jobs during construction and close to $900 million in socio-economic value.

Valard was engaged as the engineering, procurement and construction contractor for the Project in September 2019. The Pikangikum First Nation community was the first to be connected and the remaining communities are projected to be connected upon completion of the Project by the end of 2023. The notice to proceed for construction immediately followed the financial close for the Project.

The Financing

The financing of the Project was very complex and consisted of a multi-layer debt financing, all of which needed to be synchronized on many fronts and required all involved parties to work jointly with the common goal of achieving financial close. In addition to the financing, the Project required extensive commercial, regulatory and strategic considerations at all levels of involvement in the Project.

At the Project level, there was a construction financing comprised of a $1.34 billion loan from the Ontario government and a $680 million loan from a syndicate of five Canadian Schedule I banks. At the FNLP ownership level, there was a complex equity financing comprised of a $220 million loan from a syndicate of two Canadian life insurance companies (represented by McCarthy Tétrault) that is supported by a guarantee provided by the Ontario Ministry of Finance under the Aboriginal Loan Guarantee Program. The Project had also previously secured financial support from the Canadian government in July 2019.

Going Forward

The Project presents a compelling model for partnerships between First Nations and the private and public sectors. In addition, it presents a unique and sustainable solution to the challenge of connecting northern communities to Ontario’s southern grid. As the push continues to reduce the isolation of northern communities while maintaining a limited environmental impact, we may not have seen the last of ambitious projects of this nature.

Click here  to download a copy of the publication: McCarthy Tétrault’s fifth edition of Canadian Power



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