Next week, Canada will put investment squarely in the spotlight.

Prime Minister Mark Carney’s Canada Investment Summit will bring together investors, business leaders and decision-makers in Toronto for two days of discussions about investment, economic growth and major projects in Canada.

At the same time, The Energy Mix will be on location with The Better Ideas Show, a livestream featuring conversations with investors, entrepreneurs, policy- and decision-makers and others working to build Canada’s clean economy. Canada Cleantech Alliance Board Chair Peter McArthur will be among the participants.

All of that makes this a good moment to talk about something we are likely to hear a lot of next week: investment announcements.

Governments are looking to attract more international capital. Companies are looking for the financing they need to build and scale. Investors are looking for opportunities in energy, critical minerals, advanced manufacturing and clean technology.

And whenever investment is the subject, a familiar vocabulary tends to follow.

Transformational investment. Strategic partnership. Billions in potential investment. Thousands of jobs. Memorandum of understanding. Letter of intent.

Play enough rounds and you could almost fill out a bingo card. But behind those words are some important distinctions.

An MOU is not an investment. A letter of intent is not financial close. And the announcement of a $1-billion project does not necessarily mean that someone has committed $1 billion.

That doesn’t make these announcements meaningless. Quite the opposite. Many represent important steps on what can be a long road from an initial conversation to a project actually being built.

The trick is understanding where on that road a project actually sits.

So, ahead of next week’s Investment Summit, we thought it might be useful to offer a decoder ring for some of the language we’re likely to hear – what it means, what it doesn’t necessarily mean, and what questions we should be asking.

“Strategic partnership”

Translation: We see enough mutual interest to work together.

That can be significant. A technology company may have found a potential customer, project partner or investor that can help it move forward.

But “partnership” can cover a very wide range of relationships.

What to ask: What have the parties actually committed to do? Is there funding involved? A commercial relationship? A defined project? What happens next?

Memorandum of Understanding – MOU

Translation: We’re serious enough about exploring an opportunity to put our intentions on paper.

An MOU can establish the scope of a potential relationship and the work the parties intend to undertake together. But it is generally an early step.

What to ask: Is any part of the agreement binding? What milestones have been established? What has to happen before the parties move to a commercial agreement?

Letter of Intent – LOI

Translation: Things are getting more serious, but there may still be significant work ahead.

An LOI can signal that the parties intend to pursue a transaction or project, often subject to due diligence, financing, approvals and definitive agreements.

It can be an important milestone. It shouldn’t automatically be interpreted as a completed investment.

What to ask: What conditions remain? Is financing attached? Is there a timetable for reaching a definitive agreement?

“A $1-billion project”

Translation: That may be the estimated cost of developing and building the project – not the amount of financing already secured.

Large project values make great headlines, but the more useful question is how much of the capital required to build the project has actually been committed.

What to ask: What does the capital stack look like? How much equity and debt has been secured? What remains to be financed?

“Up to $200 million in government support”

Translation: $200 million may be the maximum potential support, not necessarily the amount that will ultimately be provided.

Government support can also take very different forms: grants, repayable contributions, loans, loan guarantees, tax credits or other incentives.

What to ask: What form does the support take? What conditions must be met? When does the funding become available?

Offtake agreement

Translation: Someone has agreed to buy what the project intends to produce.

For many cleantech projects, this is an especially important signal. A credible customer can substantially reduce market risk and make a project more attractive to investors and lenders.

But not all offtake agreements are created equal.

What to ask: Is it binding? How much of the project’s production is covered? For how long? Does the pricing structure support the economics of the project?

Final Investment Decision – FID

Translation: Now we’re getting somewhere.

FID generally means the project sponsor has made the decision to proceed with the investment after assessing the project’s economics, financing, technical requirements and other risks.

For capital-intensive projects, reaching FID can represent years of development work.

What to ask: What conditions remain? Is financing in place? Have major permits, customers, suppliers and construction arrangements been secured?

Financial close

Translation: This is one of the strongest signals that a project is moving from plans toward execution.

Financial close generally means the major financing agreements needed for the project have been executed and the financing structure is substantially in place.

At this point, the next question becomes a much more tangible one:

What to ask: When does construction start?

Announcements aren’t the problem. Expectations can be.

None of this is an argument against celebrating MOUs, LOIs, partnerships or early investment commitments.

For Canadian cleantech companies in particular, these milestones can matter enormously.

Complex investments rarely begin and end during a two-day conference. A meeting between a Canadian company and an international investor may lead to another meeting, then due diligence, then an LOI, then negotiations, then financing.

That process can take months or years.

A successful investment event therefore shouldn’t be judged solely by the dollar value of deals announced while everyone is still in the room.

It should also be judged by what it sets in motion.

Did companies meet investors they otherwise would not have reached? Did promising projects enter due diligence? Did potential customers and technology providers find one another? Did investors identify barriers that governments can help remove? Did a project find a missing piece of its financing?

Those outcomes don’t necessarily produce the biggest headline the next morning. But they may ultimately matter much more.

From announcement to investment

Perhaps the simplest way to think about investment announcements is as points along a continuum:

Conversation  →  Partnership  →  MOU  →  LOI  →  Commercial/Offtake Agreement  →  Financing Commitments  →  Final Investment Decision  →  Financial Close  →  Construction  →  Operation

Not every project follows precisely that path, and some steps happen simultaneously. But the continuum illustrates something important.

Progress and completion are not the same thing.

When we hear about the next major investment announcement, the most useful question may therefore not be:

“How big is the announcement?”

It may be:

“What just changed – and what still has to happen before this project gets built?”

That’s where the real investment story begins.

This is the first in a CCTA series looking at investment and Canadian cleantech. In our next piece, we’ll turn from the language of investment announcements to the projects themselves: What actually makes a cleantech project investable?