Thank you.
It's my pleasure to be here today on behalf of PPP Canada to answer any questions you may have with respect to access to capital and the challenges and opportunities therein on reserve, and to look at how the use of public-private partnerships could be a way of addressing some of these issues for first nations on reserve.
Let me begin today by explaining a little bit about what P3s are in general, and the role of PPP Canada in supporting P3s.
Public-private partnerships are a long-term performance-based approach to procuring public infrastructure that can enhance the government's ability to hold the private sector accountable and to transfer risk.
P3s transfer a major share of risk associated with infrastructure development, such as the costs associated with overruns, schedule delays, unexpected maintenance, and/or latent defects. This is accomplished by engaging the private sector in a bundled contract for the whole life of the asset. This contract connects ongoing operations and maintenance payments to the ultimate performance of the private sector partner.
PPP Canada's role is to facilitate the execution of P3 projects by acting as a source of expertise on P3 matters through knowledge development and sharing. The crown corporation also provides expertise and advice in assessing and executing P3 opportunities at the federal level, as well as leveraging greater value for money from Government of Canada investments in provincial, territorial, municipal and first nations infrastructure through the P3 Canada Fund.
The P3 Canada Fund was created to improve the delivery of public infrastructure and provide better value, timeliness and accountability through the effective use of P3s. The P3 Canada Fund is a merit-based program, designed to incent innovation in P3s as well as encourage inexperienced governments to consider P3s in public infrastructure procurements. It is the first infrastructure funding program anywhere in Canada that directly targets P3 projects.
To date, $1.3 billion in investments has been announced for more than 20 P3 infrastructure projects across 8 provinces and territories. These projects will, in turn, generate more than $6.5 billion in public infrastructure investments in every part of the country.
There's often confusion, when speaking of P3s, related to funding and financing of projects in particular. To be clear, financing a P3 project is not funding a P3 project. P3s are not a source of funding or capital for procuring authorities. Funding is the source of resources or money that will ultimately pay or be used to pay for such projects. These ultimately come from public sources such as fees and tolls, properly taxes, general tax revenues, and in some cases, private revenues and contributions from senior levels of government.
The P3 approach does replace a fiscal commitment to address infrastructure needs. There will always be an obligation to repay the private financing over the term of the P3 contract.
In Canadian P3s, the repayment of capital and maintenance combined are an availability payment that is subject to deductions for non-performance. In practical terms, this means governments do not pay for the asset until it is built, and a substantial portion is paid for over the life of the asset but only if the performance is met.
The costs are known up front for the life cycle of the asset, meaning that taxpayers are not on the financial hook for cost overruns, or subject to delays or other increases in cost over the life of the asset.
Security for the construction and operating period is achieved indirectly through private financing. During the construction period, the lenders can be expected to require bonding or security from their contractor. They will also perform a higher level of due diligence on projects. They will take action to complete construction and commence receiving capital payments if the contractor flounders. During the operating period, the lenders can be expected to ensure that the contractor's performance meets the project specifications and does not trigger availability payment deductions that could imperil the project and throw it into default.
A notable project in which PPP Canada is currently involved and which is creating direct economic benefits for first nations is the Kokish River hydroelectric project. This is a 45-megawatt run-of-the-river hydroelectric project on the north end of Vancouver Island, located within the 'Namgis First Nation of British Columbia. The project is a green energy project that generates enough clean and sustainable energy to power 13,000 homes, with electricity being sold to British Columbia Hydro under a 40-year electricity power purchase arrangement that provides a secure stream of payments, or funding, which are bankable.
PPP Canada's support in the form of a low-interest loan to the 'Namgis First Nation helped the 'Namgis obtain an equity ownership stake in the project. The 'Namgis own 25% of the overall project, with Brookfield Renewable Energy owning the remaining 75%. While the 'Namgis participated in the decision-making and focused on environmental safeguards and monitoring, they were able to leverage the expertise in hydroelectric development of their partner Brookfield.
The project also includes a community benefit fund for the 'Namgis with 40¢ paid into the fund for every megawatt of power that is generated by the project. This particular project created a unique arrangement between all parties involved, where PPP Canada provided a low-interest loan to allow the 'Namgis to accrue benefits sooner from its participation in the project. These benefits are also being reinvested in additional infrastructure for the community. By entering this long-term partnership agreement the 'Namgis has secured an active role as a partner in the project and this highlights how the public and private sectors can work together to improve energy and develop community infrastructure in the long term.
The success of this project is not to suggest that P3s are right for every first nation community or for every first nation project. Lenders are looking for opportunities to secure long-term revenues, which can be achieved through power purchase arrangements or other such secure mechanisms, such as first nations GST resource revenue sharing arrangements.
One of the challenges with realizing P3s in first nations communities is the inability to provide the same assurance of payment that other levels of governments can have. However, this could be achieved through looking at new mechanisms to securitize Aboriginal Affairs contributions. To help address these challenges faced by first nations, PPP Canada continues to do outreach with first nations communities and work with Aboriginal Affairs on new ways we can advance the P3 model in first nations communities.
On that note, I look forward to hearing from you and I welcome any of your questions.