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An aerial photo of the Pikangikum First Nation. The Wataynikeneyap line will connect communities north of Dryden, with the first leg to Pikangikum already under construction and due for completion later this year.John Woods/The Canadian Press

The federal government will provide $1.6-billion for an ambitious project to bring reliable power to 16 remote First Nations communities in Northwest Ontario, in what is being billed as the Ontario's largest-ever Indigenous-led infrastructure project.

Ottawa is underwriting a 1,800-kilometre transmission line that is 51-per-cent owned by Wataynikaneyap Power, a consortium of 22 First Nations, with a 49-per-cent stake held by Fortis Inc., the St. John's-based utility company.

As well, the Ontario government will be providing its existing northern ratepayer subsidy to support transmission connect and distribution within the communities.

"This [project] will be really transformative for communities to know they will have access to reliable, clean power," federal Minister of Indigenous Services Jane Philpott said in an interview on Thursday.

The minister announced the federal funding during a ceremony in Thunder Bay that included Ontario Premier Kathleen Wynne, Fortis chief executive Barry Perry and Wataynikaneyap Power chief executive Margaret Kenequanash, former chief of the North Caribou Lake First Nation.

In a telephone interview, the minister noted the importance of having a reliable energy source to support economic and social development in the remote communities, including new housing, education, Indigenous-led businesses and provision of clean water.

The Wataynikaneyap project is one of two major transmission upgrades being undertaken to provide more reliable power to Northwestern Ontario communities, with the other being an additional east-west line from Thunder Bay to Wawa, Ont.

The Wataynikeneyap line will connect communities north of Dryden, with the first leg to Pikangikum already under construction and due for completion later this year.

All told, some 14,000 people in the 16 remaining communities are due to be connected by the end of construction in 2022.

While the First Nations consortium and Fortis will raise initial financing for a $1.6-billion capital project, the federal money will be put into a trust account and be used to pay back construction costs over the long term. Ottawa will offset a significant part of its contribution by eliminating the federal support for diesel-powered generation that the communities currently rely on.

Ottawa's contribution will help ensure Ontario ratepayers are not shouldering any costs, Fortis's Mr. Perry said. And the Ontario Energy Board will set the partners' rate of return.

Ms. Kenequanash said she has been working for more than 10 years to bring the Wataynikeneyap project to this critical point.

"This will bring hope and opportunities to our communities," she said in an interview. "I think about my little grandson and his future, and the other little ones in our communities."

She said the transmission project will bring dual benefits: reliable power to communities that now rely on dirty diesel-generation, and showcasing a First Nations-led business that provides a model for how to do business with industry and government.

Mr. Perry said the partners will now submit an application for "leave to construct" to the Ontario Energy Board and continue vetting construction contractors. They hope to make a final investment decision once the provincial regulator gives the green light later this year, with construction starting in 2019.

For Fortis, Wataynikeneyap will add $600-million to its asset base, increasing it to $15.1-billion, and boost its long-term growth to 5.4 per cent annually from 5 per cent.

While the costs are high given the small population it will serve, Mr. Perry said it makes financial sense.

"When you think of what this will replace, and what this will enable in the communities, it becomes pretty logical: This is the right project," he said.

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