[PDF] - Economic Development Investment Strategies September 2014 CANDO PDF Document

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Economic Development Investment Strategies September 2014

CANDO National Conference Travis Seymour, Chris Hild, and Robert Campbell

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We acknowledge the traditional Coast 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 the 6th largest chartered accountancy and business advisory firm in Canada MNP has over 75

ffices and 3,000

team members across Canada In BC, MNP has more than 450 staff located in 16

ffices across the

province We serve more Aboriginal clients in Canada than any

ther CA and

advisory firm

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Expectations

As planners or economic development
fficers, learn about what is a ‘Corporate

Investment Plan’, and how it can be used to help formulate economic development strategies.

Learn about different methods of financing

economic development ventures.

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OPPORTUNITIES FOR INVESTMENT

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New Landscape of Opportunity

Investment Interest
Major resource

projects

Aboriginal tourism
First Nations Title

Victory: Tsilhqot’in ruling

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Increase in Economic Activity – Examples include:

Oil & Gas: Alberta and

BC

Mining Activity: Northern

Ontario

Forestry
Fishing
Tourism
Shipbuilding: East Coast

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Economic Self-Sufficiency

Balancing growing

community needs with transfer funding from Fed/Prov . sources

Increased need for

Own Source Revenues

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Community Needs

Unemployment

Levels

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 the

business opportunities that your community is considering (large or small).

Pass the paper on to the group facilitator.

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CORPORATE INVESTMENT PLAN

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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 projects to be prioritized – Therefore, review priority projects based on quantitative (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

pportunities

– Better prepared for funding applications

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Corporate Investment Plan

Approach to

create a Corporate Investment Plan:

1. Review

Opportunities

2. Assess for

Project Economics

3. Assess for

Community Fit

4. Rank Projects &

Consider Synergies

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Corporate Investment Plan

Sector of interest
Opportunity timeframe

– Current – Future – Long-term

Influenced by community

plans

– Economic development strategies – CCP’s – Community engagement – Secondary industry research

1. Review

Opportunities

2. Assess for

Project Economics

3. Assess for

Community Fit

4. Rank Projects &

Consider Synergies

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Review Opportunities Example

Sector Opportunities

Sector Opportunities Energy Fisheries Forestry Mining Tourism Construction Other

Current Operations 1) IPP Projects 2) Energy Related Contracting Opportunities 1) Company investment 2) Stock Assessment 3) Ice Production 1) Forestry Limited Co. 1) Campground Management Services 2) Current Lodge Operations 1) Transmission Line Project 2) x Construction & Consulting Ltd. 1) Community Store and Gas Bar 2) Natural Resource Management - Manage Forest Tenure Future Opportunities 1) x project investment 1) Aquaculture/Salmon Enhancement 2) Added Value Fish Products 3) Logistics Services with Project Partners 1) Future Forestry Limited Co. Operations 2) Log Turning 3) Further Engineering, Road Building, and Other Contracting Opportunities 1) Additional lodge investment 2) Renovate lodge 1) Transmission Line Construction (Proposed JV) 2) x Nations Construction & Consulting Ltd. 1) Health Centre 2) Natural Resources Management / Contracting Opportunities Long-Term Opportunities 1) Future IPP Projects in the Territory 1) Scientific Investigations 2) Habitat Stewardship 3) Elementary-Level Conservation School 1) Partnership with other companies 1) Aggregate mining

pportunity

1) Eco-Centre showcasing fish program 2) Partnership Opportunities 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 forecasted future net income

Provide analysis for:

– Total profits – 10-year Internal Rate of Return – Return on assets – Return on equity – Leverage (debt/total capital)

1. Review

Opportunities

2. Assess for

Project Economics

3. Assess for

Community Fit

4. Rank Projects &

Consider Synergies

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Project Economics Example

Profits (5 years) 10-Year Return Return on Assets (Year 5) Return on Equity Debt/Capital Ratio Risk (Highest to Lowest) Total Score Rank

Future Forestry Ltd.

$1,720,000 0% 0% 0% 0% 2 1.245084093 2

Engineering/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 1

EcoLodge and RV Park

$2,174,344 6% 17% 19% 11% 17

14.20754673

10

Renovation of lodge

$109,000 7% 15% 15% 0% 12

10.88011215

8

Aquaculture/Salmon Enhancement$120,000

0% 5% 0% 100% 13

34.50328156

13

Added Value Fish Products

$444,600 0% 44% 0% 100% 14

30.54054054

12

Logistics Services

$200,000 80% 40% 80% 50% 11

8.024375888

6

Transmission Line Construction $625,250

0% 0% 0% 0% 10

10.45676094

7

x Nations Construction

$0 0% 0% 0% 0% 4

4.705882353

4

Health 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

Evaluation Strength of Future Cash Flows

Criteria Opportunity Future Opportun ities Forestry Tourism Fisheries Construction Other

1 2 3 4

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Corporate Investment Plan

Does the opportunity

meet community fit?

1. Culture 2. Environment 3. Partnerships and relationships 4. Profile of

rganization

5. Employment 6. Community support 7. Increase asset base

1. Review

Opportunities

2. Assess for

Project Economics

3. Assess for

Community Fit

4. Rank Projects &

Consider Synergies

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As a group help us to

select 4 items from the list of community fit criteria.

We will use these

criteria to assess 3 business

pportunities.
1. Culture
2. Environment
3. Partnerships and

relationships

4. Profile of
rganization
5. Employment
6. Community support
7. 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 / Commmunity Support Environmentaly Safe Employment Cultural Fit Sustainable Score Rank

Future Forestry Ltd.

3 3 1 2 3 2 3 3 3 23 2

Engineering/Road Building

1 3 1 3 2 1 3 2 2 18 8

Log 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 1

EcoLodge and RV Park

2 1 3 1 2 2 2 1 1 15 12

Renovation of lodge

2 3 3 2 2 2 2 3 2 21 4

Aquaculture/Salmon Enhancement

2 2 2 2 2 2 2 2 2 18 8

Added Value Fish Products

3 1 1 2 2 3 2 3 2 19 6

Logistics Services

2 1 1 3 2 2 2 3 2 18 8

Transmission Line Construction

3 1 1 3 2 2 3 2 2 19 6

x Nations Construction

2 3 1 3 2 2 3 2 2 20 5

Health Centre

2 1 3 2 3 2 1 2 1 17 11

Natural Resource Management

3 2 1 3 3 3 3 3 2 23 2 Colour Score 3 2 1

Legend

Qualitative Criteria Opportunities

Future Opportunities Forestry Tourism Fisheries Construction Other

1 2 3 4

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Group Participation (Part 3)

Similar to the previous slide, we will apply

community fit criteria to 3 business

pportunity ideas.

Green = A Good Fit Yellow = Neutral Red = No Fit

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Project Project Project Project

Corporate Investment Plan

Consider community and

economic elements – rank projects and consider synergies:

1. Review

Opportunities

2. Assess for

Community Fit

3. Assess for

Project Economics

4. Rank Projects &

Consider Synergies

Page 26 Other Energy Sasquatch BC Revenue Big time Small time Sakwi Sts'ailes Tourism Sasquatch Salmon Ice Production Stock Joint Nations Store and Gas Future Forestry Engineering/Roa Log Turning IPP Additional EcoLodge and RV Renovation of Aquaculture/Sal Added Value Fish Logistics Services Transmission x Nations Health Centre Natural Resource Forestry Limited

1 1 1 1 1 1 1 10 NA

BC Revenue Sharing

NA

big time

1 1 1 1 1 1 1 1 1 1 15 2

small time

1 1 1 1 1 1 1 1 1 1 15 2

Campground Management Services

NA

Lhawathet Lalem

1 1 NA

Lodge

1 1 NA 1 1 1 3 NA

Ice Production

1 1 NA

Stock Assessment

NA

Joint Venture

1 1 1 1 7 NA

x Nations Construction

1 1 1 1 1 11 NA

Other Store and Gas Bar

1 1 1 1 1 1 6 NA

Future Forestry Ltd.

1 1 1 1 1 8 3

Engineering/Road Building

1 1 2 9

Log Turning

1 1 1 3 6

Energy IPP Additional Equity

13

EcoLodge and RV Park

1 1 2 9

Renovation of lodge

1 1 1 3 6

Aquaculture/Salmon Enhancement

1 1 2 9

Added Value Fish Products

1 1 1 1 4 5

Logistics Services

1 1 1 3 6

Transmission Line Construction

1 1 1 1 7 4

x Nations Construction

1 1 1 1 1 1 1 1 1 1 16 1

Health Centre

1 1 12

Natural Resource Management

1 1 1 1 1 1 1 1 14 2 Rank

Forestry

Total

Tourism Fisheries Construction Other Future Opportunities Current Opportunities 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 be

developed

Then, the following would be understood:

– Required capital – Financing options – Financial position of Nation

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Corporate Investment Plan Summary

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 and mainstream society

Funds available to mid-market opportunities

with strong Aboriginal involvement

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First Nation Finance Authority

First bond was issued in June

2014.

The first bond issue was for $90

million CAD.

Capital raised was used by 14 First

Nations for infrastructure projects as well as economic development

pportunities.

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All Nations Trust Company

ANTCO originated in 1984 to provide

financial services to Aboriginal

entrepreneurs. They currently make loans

to small businesses through their business equity fund.

ANTCO is Aboriginal
wned. Shareholders are comprised of

Bands, Tribal Councils, Aboriginal Organizations, Métis Associations, Status, Non-Status and Métis individuals.

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OTHER EXAMPLES

Business deals happening between First

Nations, 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

$100k to $1MM $10MM $20MM

Friends & Family Venture Capital Private Equity Angel Investors Time Money

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Venture Capital

Assets & Personal Bankable

Scale $

$100k to $1MM $10MM $20MM

Friends & Family Venture Capital – Angels Investors

Venture Capital Funds: E.g.

Ventures West, Cape Fund

Fund Size $60MM to $100MM
$1MM - $5MM Range per

Investment

Generally limit to 10% of fund per

investment

Seeking High Growth

Opportunities

Anticipate failures to offset

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Venture Capital – First Nation Perspective

Assets & Personal Bankable

Scale $

$100k to $1MM $10MM $20MM

Friends & Family Venture Capital Angel Investors

Initial Barriers exist
VC expected returns and growth

potential = 10 times invested

Access to high growth sector vs.

resource based opportunities

VC’s need to understand risk

level ; many FN opportunities have 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 $

$100k to $1MM $10MM $20MM

Private Equity

Funds in excess of $100 MM E.g.. Tri-Corp Fund: $600MM Would invest $50MM-$60MM per investment Looking for 33% returns range Lower risk opportunities Focus on business capacity and cash flow

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Private Equity – First Nation Perspective

Bankable Assets/ Cash Flow

Scale $

$100k to $1MM $10MM $20MM

Private Equity

Best fit for First Nations : return expectations Requires Strong Corporate Governance Strong business model Collective FN Opportunity?? Forestry or Fisheries?

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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/reward tradeoff.

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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 our booth. Enjoy the Conference!

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