Eligibility and Evaluation Criteria
In order to be eligible to apply for a loan guarantee under the ALGP, an applicant must be a corporation that is
wholly-owned by an Aboriginal community and the applicant must use the loan proceeds to fund its equity investment
in a project (up to 75 per cent, to a maximum of $50 million).
In order to be eligible, projects are required to meet the criteria listed below. Note that this list is not exhaustive
or binding on the OFA or the Province, and the evaluation of a particular application may include further or different
analysis as the OFA and the Province deem appropriate in their sole discretion. The OFA administers the program on
behalf of the Province.
Experienced proponents and project partners or contractors with track records in construction and operation.
An agreement in place to purchase energy in the case of generation projects or regulatory approvals in the case of transmission projects.
Financial plan submitted by the applicant that is satisfactory to the Province.
During its review and evaluation of the financial plan, the Province will consider the following criteria:
- The availability of sufficient cash to service the guaranteed loan and other obligations of the applicant under the proposed
size and term of the loan.
The Province will analyze the debt service coverage ratio, taking into account all obligations of the project and applicant, under
a base case and various stress cases. The base case for the financial evaluation uses conservative assumptions. For example, in
analyzing wind projects, the base case considers resource availability at the P-90 level. The Province will also analyse stress
cases based on the specifics of the project.
- Reasonable and appropriate budgeted project costs (e.g., adequate contingency amounts have been included).
- A reserve account that could be used by the applicant to make scheduled debt service payments in periods where project cash
flow is insufficient service the guaranteed loan, in an amount that is satisfactory to the Province. The required size of the
debt service reserve account may be lower than would otherwise be the case if the guaranteed loan has flexible repayment options
(e.g., 'payment holidays').
- Terms and conditions of other debt obligations satisfactory to the Province. It is generally expected that other debt
obligations of the applicant will rank behind the guaranteed loan, in order of repayment and priority of security.
Loan agreement for the guaranteed loan with a lender financial institution satisfactory to the Province and ancillary documents,
on terms and conditions that are satisfactory to the Province.
During its review of the loan agreement, the Province will consider the following criteria:
- Guaranteed loan is not subject to refinancing risk (e.g., the term matches the amortization period).
- Guaranteed loan is not subject to interest rate exposure (i.e., the loan has a fixed interest rate without the use
of an interest rate swap).
- In the case of generation, the amortization period on the guaranteed loan is no longer than three-quarters the
length of the Power Purchase Agreement.
- Confirmation of support of the Aboriginal community for the project and the loan guarantee (for example, a Band Council Resolution).
- Security pledged in support of the guaranteed loan, satisfactory to the Province.
- Satisfactory review of terms and conditions of senior project financing by the Province.
- Satisfactory review of the financial status of the applicant and any project partners by the Province.
Project agreements in place for supply, construction, management, operation and connection, and corporate structure satisfactory
to the Province, including partnership or joint venture agreements.
The Province’s review of these agreements will include an evaluation of whether the following protections are in place:
- The applicant has the ability to influence key decisions of the project which could adversely impact its income from
the project, such as assumption of debt or other significant liabilities, significant changes in the budget, and changes
to the operator/manager.
- Risk mitigation measures are in place to protect against regulatory, construction and operational risk. For example,
agreements are based on a fixed price, agreements contain milestone dates that will allow the project to achieve its
target commercial operation date, and agreements contain warranties and performance guarantees.