Programs Supporting Cleantech and Clean Energy Development in Canada, San Francisco Cleantech Forum

Programs Supporting Cleantech and Clean Energy Development in Canada Cleantech Forum ‐ San Francisco Presented by: John Goetz, Partner Guy Paul Allard, Partner 1

Introduction• Climate Change agenda and legislation seem to be losing momentum• Cleantech sector is still growing and has benefited from government stimulus programs• Cleantech development may no longer be dependent on the success of cap and trade and GHG emission reduction programs, although they would still help 2

Outline• Stimulating Cleantech in Canada• Opportunities for Cleantech Development in Canada• Financing Cleantech in Canada 3

Stimulating Cleantech in Canada• Status of Climate Change initiatives and what they could still mean• Special Programs and Funds 4

Status of Climate Change Developments• Past 18 months has seen a dramatic shift away from comprehensive federal climate change programs in the U.S. and Canada• Canada abandoned its initial plan in favour of following U.S. Cap‐and‐Trade Plan• U.S. and Canada committed to Copenhagen Accord targeting 17% reductions by 2020 5

Status of Climate Change Developments• American Power Act Bill, unable to pass in the Senate• Obama announced he would be “looking for solutions other than Cap‐and‐Trade” to address U.S. emissions• Now that the U.S. is not proceeding federally, what is Canada doing? 6

Addressing Climate Change • EPA now regulating emission reductions • EPA has not ruled out introducing its own cap and trade scheme• Harsh EPA measures could force Congress to step back in to replace EPA regulation• Canadian Government not likely to act federally until there is a clear signal from the U.S. 7

What is left for Cap and Trade? Local and Regional Emission Reduction Programs• Western Climate Initiative (WCI) on track to start in 2012 • Initial target is to cut emissions to 15% below 2005 levels by 2020• WCI includes a cap‐and‐trade program to facilitate emission reductions and trade the reductions for cash 8

What is left for Cap and Trade? Local and Regional Emission Reduction Programs• Of 11 WCI Partner jurisdictions, a number of large jurisdictions such as California, B.C., Ontario and Quebec are on course to start cap‐and‐trade program in 2012 ‐ Manitoba intends to follow• The Canadian partner provinces represent about 46% of Canadian GHG emissions 9

Local/Regional Emission Reduction Programs• California recently unveiled new draft regulations for a GHG Cap‐and‐Trade Program pursuant to AB ‐32 Global Warming Solutions Act of 2006 • California voted down Proposition 23 which would have suspended AB 32 ‐ until unemployment levels reached almost unachievable levels (< 5.5% for 4 consecutive quarters)• Recent court ruling against CARB not expected to survive appeal 10

Local/Regional Emission Reduction Programs• There are several other states, territories and provinces that are Observers to the WCI, including Nova Scotia, Saskatchewan and the Yukon• Canadian Partner jurisdictions comprise 79% of Canada’s Population and 76% of Canadian GDP**WCI Design Summary 11

Local/Regional Emission Reduction Programs• British Columbia has enacted several pieces of climate change legislation including: – GHG Reduction (Cap‐and‐Trade) Act and have released draft regulations for offsets and emission trading – Renewable and Low Carbon Fuel Requirement Act – Vehicle Emissions Standards Act • Ontario has enacted: – Green Energy Act which includes sweeping provisions for accelerating the development of renewable energy projects – Feed‐in‐Tariff (FIT) program has stimulated massive renewable project investment (See Government of Ontario figures) – Environmental Protection Amendment Act with emission reduction provisions and Greenhouse Gas Reporting Regulation 12

Local/Regional Emission Reduction Programs• Quebec has: – Environment Quality Act, R.S.Q. c.Q‐2 – Bill 42 ‐ An Act to amend the Environment Quality Act and other legislative provisions in relation to climate change – Regulations expected to come Spring, 2011 to implement WCI in 2012 – Renewable Energy RFP Program • Has stimulated massive investment in wind energy projects • Further RFP’s are expected once government determines actual amount of expected construction under most recent RFP 13

Local/Regional Emission Reduction ProgramsNon‐WCI JurisdictionsAlberta• Requires 12% reduction in emissions intensity by large emitters from 2003 baseline • Large final emitters (LFE’s) have spent approx. $350 million on emission compliance instruments since 2007 • Expected to rise by another $100 million this year to $450 million 14

Local/Regional Emission Reduction ProgramsNon‐WCI JurisdictionsAlberta• Program has accumulated almost $200 million in the Climate Change and Emissions Management Fund• Approx $88 M spent on offsets by LFE’s to end of 2010• Expected to increase to $140 M in 2011• $2 Billion to Carbon Capture and Sequestration (CCS) • 5 million tonnes/yr by 2015 •170 million tonnes/yr. by 2050 15

Local/Regional Emission Reduction ProgramsNon‐WCI JurisdictionsSaskatchewan• Management and Reduction of Greenhouse Gases Act ‐ draft regulations expected in early 2011• Similar to Alberta’s program, with lower initial reduction targets • Green Options Partners Program (100 kW – 10 MW) • Power Call for up to 50 MW of Wind, solar, flair gas, low impact hydro, biomass • 20 year standard offer purchase agreements – up to 30 – 40 year contracts for low impact hydro 16

Local/Regional Emission Reduction ProgramsRenewable Fuels Regulations • Provides for the cooperation of the renewable and non‐renewable fuel sectors in Canada• The Regulations introduce a five percent renewable fuel content requirement for gasoline produced or imported in Canada• Market mechanism allows renewable fuel producers to sell compliance units to non‐renewable fuel producers/importers 17

Opportunities in Canadian CleantechSignificant Enabling Factors• Oil Sands and Resource Development demands clean technologies• Canada’s Economy is strong and growing• Transmission to U.S. improving over next 5 years• Good solar, wind and hydro resources• Corporate partnering/investment is growing • Coal plants being phased out in Ontario and other provinces 18

Hotspots for Canadian CleantechRenewable Energy Development• Quebec – RFP Program, if continued• Ontario – FIT and Microfit Program• Saskatchewant – Green Options Partner Program• Alberta – CCEM Fund – Offsets – Need for Cleantech• British Columbia – Pacific Carbon Trust – WCI Leadership 19

Financing CleanTech in Canada• Overview of Canadian Landscape• Special Programs/Funds• Venture Capital/Private Equity• Project Financing• Capital Markets – TSX – TSX‐V 20

Overview of Canadian Landscape• Strong Federal and Provincial Support for CleanTech – Regulatory initiatives, investments and financial incentives – Concurrent jurisdiction• Provincial Diversity – Feed‐in‐tariffs – RFPs – Legal/Cultural• Foreign Investment in Canada 21

Special Programs/Funds• Programs and Incentives – Scientific Research & Experimental Development (SR&ED) program – Provincial investment tax credits for R&D expenses • Examples of Specialized Funds – SDTC • Bridges the funding gap in innovation chain – Investment Accelerator Fund (IAF) • MaRS – Clean Energy Fund – Green Infrastructure Fund – Emerging Technologies Fund (Ontario) – Bringing Technology to Market Program (Alberta) – Innovative Clean Energy Fund (British Columbia) 22

Venture Capital• Limited “angel” resources• Continuing limited capacity of Canadian VC’s to fund new rounds• Many U.S. VC’s have invested in and continue to invest in Canadian companies• 2010 tax changes (changes to S. 116) removed many impediments to U.S. VC’s investing in Canadian companies• Cross‐border deals can be done using “U.S. paper” with limited modifications 23

Venture Capital (cont’d)Issues Related to U.S. VC’s Investing in Canadian Companies – Canadian company owning real estate – Employment laws 24

Project Financing• Canadian Banks• Life Insurance Companies/Pension Funds• Foreign Banks• Debt financing – Terms – Leverage and Security – Asset‐Based Lending 25

Capital Markets• TSX is 1st in the world by number of listed CleanTech companies (131)• Many non‐Canadian companies list on TSX also (8% of 2010 new International Listings were in the CleanTech sector)• IPO costs and ongoing compliance costs tend to be less than in U.S.• Various methods for going public on the TSX available – attractive for both large and small cap issuers• TSX Venture Exchange – Capital Pools Companies/Special Purpose Acquisition Companies 26

Contact Us John Goetz 403 268 7167 John.goetz@fmc‐law.com Guy Paul Allard 514 878 8876 guypaul.allard@fmc‐law.com 27

The preceding presentation contains examples of the kinds of issues companies looking at cleantech programs in Canada could face. If you are faced with one of these issues, please retain professional assistance as each situation is unique.

Programs Supporting Cleantech and Clean Energy Development in Canada, San Francisco Cleantech Forum

by FMC Law on Mar 15, 2011

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Programs Supporting Cleantech and Clean Energy Development in Canada, San Francisco Cleantech Forum — Presentation Transcript