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Economic Development Investment StrategiesSeptember 2014
CANDO National Conference
Travis Seymour, Chris Hild, andRobert Campbell
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Weacknowledge
the traditionalCoast Salish
Territory
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Discussion Topics
• Introductions and Expectations• Opportunities for Investment• Corporate Investment Planning• Discussion on First Nations ‘Equity’ and
‘Financing’.• Next Steps
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Introductions
• Travis Seymour
• Chris Hild
• Rob Campbell
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Founded in1945,MNP is now the6th largestcharteredaccountancy andbusiness advisoryfirm in Canada
MNP has over 75offices and 3,000team membersacross Canada
In BC, MNP hasmore than 450staff located in 16offices across theprovince
We serve moreAboriginal clients inCanada than any
other CA andadvisory firm
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Expectations
• As planners or economic developmentofficers, learn about what is a ‘CorporateInvestment Plan’, and how it can be used tohelp formulate economic developmentstrategies.
• Learn about different methods of financingeconomic development ventures.
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OPPORTUNITIES FORINVESTMENT
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New Landscape of Opportunity
• Investment Interest• Major resource
projects• Aboriginal tourism
• First Nations TitleVictory: Tsilhqot’inruling
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Increase in Economic Activity –Examples include:
• Oil & Gas: Alberta andBC
• Mining Activity: NorthernOntario
• Forestry• Fishing• Tourism• Shipbuilding: East Coast
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Economic Self-Sufficiency
• Balancing growingcommunity needswith transferfunding fromFed/Prov . sources
• Increased need forOwn SourceRevenues
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Community Needs
• UnemploymentLevels
• Education Levels• Income Levels• Housing and
Infrastructure• Business
Development
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Group Participation (Part 1)
• On a piece of paper, write down some of thebusiness opportunities that your community isconsidering (large or small).
• Pass the paper on to the group facilitator.
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CORPORATE INVESTMENTPLAN
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Corporate Investment Plan
• Overview: What is it?– Nations have a number of projects/investments
to consider:• E.g. Energy, Forestry, Infrastructure, Tourism
– Usually can’t fund all projects, requiring projectsto be prioritized
– Therefore, review priority projects based onquantitative (economic) and qualitative(community fit) metrics
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Corporate Investment Plan
• Why Do It?– Maximizes return on investment within
community priorities– Helps build consensus and support for
projects– Develops a framework to measure future
opportunities– Better prepared for funding applications
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Corporate Investment Plan
• Approach tocreate aCorporateInvestment Plan:
1. ReviewOpportunities
2. Assess forProject Economics
3. Assess forCommunity Fit
4. Rank Projects &Consider Synergies
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Corporate Investment Plan
• Sector of interest• Opportunity timeframe
– Current– Future– Long-term
• Influenced by communityplans– Economic development
strategies– CCP’s– Community engagement– Secondary industry research
1. ReviewOpportunities
2. Assess forProject Economics
3. Assess forCommunity Fit
4. Rank Projects &Consider Synergies
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Review Opportunities ExampleSector Opportunities Sector
OpportunitiesEnergy Fisheries Forestry Mining Tourism Construction Other
Current Operations
1) IPP Projects
2) Energy RelatedContractingOpportunities
1) Company investment
2) Stock Assessment
3) Ice Production
1) Forestry Limited Co.
1) CampgroundManagement Services
2) Current LodgeOperations
1) Transmission LineProject
2) x Construction &Consulting Ltd.
1) Community Store andGas Bar
2) Natural ResourceManagement - ManageForest Tenure
Future Opportunities1) x project investment
1) Aquaculture/SalmonEnhancement
2) Added Value FishProducts
3) Logistics Services withProject Partners
1) Future ForestryLimited Co. Operations2) Log Turning
3) Further Engineering,Road Building, and OtherContractingOpportunities
1) Additional lodgeinvestment
2) Renovate lodge
1) Transmission LineConstruction (ProposedJV)
2) x Nations Construction& Consulting Ltd.
1) Health Centre
2) Natural ResourcesManagement /ContractingOpportunities
Long-Term Opportunities1) Future IPP Projects inthe Territory
1) ScientificInvestigations
2) Habitat Stewardship
3) Elementary-LevelConservation School
1) Partnership with othercompanies
1) Aggregate miningopportunity
1) Eco-Centreshowcasing fish program
2) PartnershipOpportunities
3) Observatory
4) Sport Fishing
1) Green Landfill /composting idea
1
2
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Corporate Investment Plan
• Approach - take expected:– Capital investment, capital
sources, and forecastedfuture net income
• Provide analysis for:– Total profits– 10-year Internal Rate of
Return– Return on assets– Return on equity– Leverage (debt/total capital)
1. ReviewOpportunities
2. Assess forProject Economics
3. Assess forCommunity Fit
4. Rank Projects &Consider Synergies
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Project Economics Example
Profits (5 years) 10-Year ReturnReturn on Assets
(Year 5)Return on Equity
Debt/CapitalRatio
Risk (Highestto Lowest)
Total Score Rank
Future Forestry Ltd. $1,720,000 0% 0% 0% 0% 2 1.245084093 2Engineering/Road
Building$525,000 0% 0% 0% 0% 3 -2.431177307 3
Log Turning $489,250 9% 19% 25% 25% 15 -17.3165565 11
Energy IPP Additional Equity $2,160,000 2% 14% 14% 0% 1 5.864561303 1EcoLodge and RV Park $2,174,344 6% 17% 19% 11% 17 -14.20754673 10Renovation of lodge $109,000 7% 15% 15% 0% 12 -10.88011215 8
Aquaculture/Salmon Enhancement$120,000 0% 5% 0% 100% 13 -34.50328156 13Added Value Fish Products $444,600 0% 44% 0% 100% 14 -30.54054054 12
Logistics Services $200,000 80% 40% 80% 50% 11 -8.024375888 6Transmission Line Construction $625,250 0% 0% 0% 0% 10 -10.45676094 7
x Nations Construction $0 0% 0% 0% 0% 4 -4.705882353 4Health Centre $2,390,200 -12% 5% 5% 0% 16 -13.71249726 9
Natural Resource Management $147,500 0% 0% 0% 0% 5 -5.573801356 5
EvaluationStrength of Future Cash FlowsCriteria
Opportunity
FutureOpportun
ities
Forestry
Tourism
Fisheries
Construction
Other
1 2
3 4
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Corporate Investment Plan
• Does the opportunitymeet community fit?1. Culture2. Environment3. Partnerships and
relationships4. Profile of
organization5. Employment6. Community support7. Increase asset base
1. ReviewOpportunities
2. Assess forProject Economics
3. Assess forCommunity Fit
4. Rank Projects &Consider Synergies
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• As a group help us toselect 4 items fromthe list of communityfit criteria.
• We will use thesecriteria to assess 3businessopportunities.
1. Culture2. Environment3. Partnerships and
relationships4. Profile of
organization5. Employment6. Community support7. Increase asset base
Group Participation (Part 2)
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Community Fit Example
Increases Capacity / Profile
Within Current Capacity
Increases Asset Base
Builds Important Partnership / Relationship
Council / Comm
munity Support
Environmentaly Safe
Employm
ent
Cultural Fit
Sustainable
Score
Rank
Future Forestry Ltd. 3 3 1 2 3 2 3 3 3 23 2Engineering/Road Building 1 3 1 3 2 1 3 2 2 18 8Log Turning 2 1 2 2 2 1 2 2 1 15 12
Energy IPP Additional Equity 3 3 3 3 3 3 1 2 3 24 1EcoLodge and RV Park 2 1 3 1 2 2 2 1 1 15 12Renovation of lodge 2 3 3 2 2 2 2 3 2 21 4Aquaculture/Salmon Enhancement 2 2 2 2 2 2 2 2 2 18 8Added Value Fish Products 3 1 1 2 2 3 2 3 2 19 6Logistics Services 2 1 1 3 2 2 2 3 2 18 8Transmission Line Construction 3 1 1 3 2 2 3 2 2 19 6x Nations Construction 2 3 1 3 2 2 3 2 2 20 5Health Centre 2 1 3 2 3 2 1 2 1 17 11Natural Resource Management 3 2 1 3 3 3 3 3 2 23 2
Colour Score321
Legend
Qualitative Criteria
Opportunities
FutureOpportunities
Forestry
Tourism
Fisheries
Construction
Other
1 2
3
4
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Group Participation (Part 3)
• Similar to the previous slide, we will applycommunity fit criteria to 3 businessopportunity ideas.
Green = A Good FitYellow = NeutralRed = No Fit
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Project
Project
Project
Project
Corporate Investment Plan
• Consider community andeconomic elements –rank projects andconsider synergies:
1. ReviewOpportunities
2. Assess forCommunity Fit
3. Assess forProject Economics
4. Rank Projects &Consider Synergies
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Other
Energy
SasquatchBC Revenue
Big time
Small tim
eSakw
iSts'ailes
TourismSasquatchSalm
onIce Production
StockJoint
NationsStore and GasFuture ForestryEngineering/Roa
Log TurningIPP Additional EcoLodge and RVRenovation ofAquaculture/SalAdded Value FishLogistics ServicesTransm
issionx Nations
Health CentreNatural Resource
Forestry Limited 0 1 0 0 0 0 0 0 0 0 0 0 1 0 1 1 1 0 0 0 0 0 0 0 1 0 1 10 NA
BC Revenue Sharing 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA
big time 1 0 1 1 1 0 0 0 0 0 0 1 1 0 1 0 0 0 0 0 0 0 0 1 1 0 1 15 2
small time 1 0 1 1 1 0 0 0 0 0 0 1 1 0 1 0 0 0 0 0 0 0 0 1 1 0 1 15 2
Campground Management Services 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA
Lhawathet Lalem 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 NA
Lodge 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 NA
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 1 3 NA
Ice Production 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 NA
Stock Assessment 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA
Joint Venture 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1 1 0 0 7 NA
x Nations Construction 0 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 11 NA
Other Store and Gas Bar 0 0 0 0 0 1 1 1 0 0 0 0 0 0 0 0 0 0 1 1 0 1 0 0 0 0 0 6 NA
Future Forestry Ltd. 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 1 0 1 8 3
Engineering/Road Building 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 2 9Log Turning 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 3 6
Energy IPP Additional Equity 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13
EcoLodge and RV Park 0 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 2 9
Renovation of lodge 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1 0 0 3 6
Aquaculture/Salmon Enhancement 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 2 9
Added Value Fish Products 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 0 1 0 1 0 0 0 0 4 5
Logistics Services 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 3 6
Transmission Line Construction 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 1 0 1 7 4
x Nations Construction 1 0 1 1 1 0 0 0 1 0 0 1 1 0 1 0 1 0 0 0 0 0 0 0 0 0 1 16 1
Health Centre 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 12
Natural Resource Management 1 0 1 1 1 0 0 0 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 1 0 0 14 2
Rank
Forestry
Total
Tourism
Fisheries
Construction
Other
FutureOpportunities
CurrentOpportunities
Forestry
Tourism
Fisheries
Construction
Energy
Forestry
Tourism
Fisheries
Construction
Other
Current Opportunities Future Opportunities
Tourism
Fisheries
Construction
Energy
Forestry
Assess Synergies Example
1 2
3
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Investment Plans
• From the previous analysis, investment plans can bedeveloped
• Then, the following would be understood:– Required capital– Financing options
– Financial position of Nation
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Corporate Investment PlanSummary• Helps organize, analyze, and prioritize opportunities• Considers community resources• Builds consensus and support for projects• Helps direct limited amounts of capital• Provides a framework for future analysis
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FIRST NATION’S ‘EQUITY’
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Increased Need for Financing
Older...• AANDC• First Citizens Fund• Revenue Sharing
Agreements• Taxation• Land Leases
Newer…• FN Finance Authority• Cape Fund• Aboriginal Owned
Trusts• First Nation Bonds - US• Impact Benefit
Agreements – Equity
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Cape Fund
• $50 million private sector investment fund• Created to address economic disparity
between Aboriginal communities andmainstream society
• Funds available to mid-market opportunitieswith strong Aboriginal involvement
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First Nation Finance Authority
• First bond was issued in June2014.
• The first bond issue was for $90million CAD.
• Capital raised was used by 14 FirstNations for infrastructure projectsas well as economic developmentopportunities.
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All Nations Trust Company
• ANTCO originated in 1984 to providefinancial services to Aboriginalentrepreneurs. They currently make loansto small businesses through their businessequity fund.
• ANTCO is Aboriginalowned. Shareholders are comprised ofBands, Tribal Councils, AboriginalOrganizations, Métis Associations, Status,Non-Status and Métis individuals.
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OTHER EXAMPLES
• Business deals happening between FirstNations, Government and Industry.
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Navajo Nation (example)
• First Bond issuing in 2012• $120 million offering• Given an A rating• Will use funds to finance 50 projects
– Convenience stores– Fast-food restaurants– Shopping centres– Offices and industrial complexes– Tourist centre
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Equity Spectrum
Personal Personal Assets/Cash Flow
Bankable Assets/Cash Flow
$100kto$1MM
$10MM
$20MM
Frie
nds
& F
amily
Vent
ure
Cap
ital
Priv
ate
Equ
ity
Ang
el In
vest
ors
Time
Money
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Venture Capital
Assets &Personal
Bankable
Scale $
$100k to$1MM
$10MM
$20MM
Frie
nds
& Fa
mily
Vent
ure
Cap
ital–
Ange
ls In
vest
ors
- Venture Capital Funds: E.g.Ventures West, Cape Fund- Fund Size $60MM to $100MM-$1MM - $5MM Range perInvestment
-Generally limit to 10% of fund perinvestment-Seeking High GrowthOpportunities-Anticipate failures to offset
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Venture Capital – First NationPerspective
Assets &Personal
Bankable
Scale $
$100k to$1MM
$10MM
$20MM
Frie
nds
& Fa
mily
Vent
ure
Cap
ital
Ange
l Inv
esto
rs
-Initial Barriers exist-VC expected returns and growthpotential = 10 times invested-Access to high growth sector vs.resource based opportunities
-VC’s need to understand risklevel ; many FN opportunitieshave uncertain risk
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Investor Expectations
• Management Team: leadership, track record• Market Opportunity: Operates in large markets
with room for growth• Growth Potential: Profit/Value Growth• Technology: preference for first-of-a-kind new
ideas rather than common products• Exit Strategy: within 7-10 years; 10X
investment
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Private Equity
Bankable Assets/Cash Flow
Scale$
$100kto$1MM
$10MM
$20MM
Priv
ate
Equ
ity
Funds in excess of $100 MM
E.g.. Tri-Corp Fund: $600MMWould invest $50MM-$60MM perinvestment
Looking for 33% returns rangeLower risk opportunitiesFocus on business capacity and cashflow
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Private Equity – First Nation Perspective
Bankable Assets/Cash Flow
Scale $
$100k to$1MM
$10MM
$20MM
Priv
ate
Equi
ty
Best fit for First Nations : returnexpectations
Requires Strong Corporate GovernanceStrong business model
Collective FN Opportunity?? Forestry orFisheries?
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Equity Summary
• Challenges at FN Level: barriers to entry• Ideas, not just trees• Good governance the key• Need to create a healthy ‘Risk’ Model• Trust• Focus on building on strengths• Community Assets, Traditional Territory
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General First Nation Situation
• Traditional Territories– There is Much More Value than Appears on
Balance Sheet.• Forestry• Land• Impact Benefit Agreement (IBA’s)
– For the banker/investor; there is a risk/rewardtradeoff.
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NEXT STEPS
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How to move forward
1. Take Inventory of Your Opportunities.2. Assess your Business Opportunities, using
a tool such as a corporate investment plan.3. Consider different options of financing the
business opportunity.4. Start planning to achieve financing success.
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Is there a Capacity Gap?
• Know your territories assets• Overlap issues• Institutions Established?
– Governance– Corporate setup
• Capacity: HR– People development– Eg. Burns Lake HR capacity project
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Plan for Financing?
• Detailed description of business opportunity.• Details about partnerships, agreements or
commitments.• Financial forecasts (sources and uses)• Organizational structure.• Economic Benefits• Compliance with laws and regulations.
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Plan for Financing?
• Financial Structure: First Nation equity,private equity, government funding.
• Demonstrated Management Capacity• Tax Considerations• Cash Flow Projections• Long Term Viability• Risk Management Considerations
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Questions and Comments?
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Please visit us at ourbooth.
Enjoy theConference!
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Thank you for your time!
Travis [email protected] [email protected] [email protected]
