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Aircraft engine maker Pratt & Whitney Canada Corp. is clearing its debts with taxpayers, striking new terms with Canada and Quebec to repay early more than $1-billion in loans owing to the two levels of government in a move that has potential repercussions for Bombardier Inc.

Hartford, Conn.-based United Technologies Corp. (UTC), Pratt's parent, disclosed in a regulatory filing Wednesday that Pratt & Whitney Canada (PWC) signed amendments to existing loans agreements with the governments on Dec. 30. Records show the engine manufacturer has historically been the largest beneficiary by far of federal support for research and development.

The Montreal-area company will make four annual payments totalling $965-million (U.S.) – $1.4-billion (Canadian) at current exchange rates – starting this month to "fully settle and terminate" its previous contractual obligations related to royalties to the two governments, according to the filing. That means PWC will now no longer have to pay royalties to the lenders based on its engine sales.

Under previous agreements, the zero-interest loans were not due until 2030 at the earliest, Pratt spokesman Marc Duchesne said. Now they'll be off the books by 2020.

UTC, an industrial conglomerate that also includes Otis Elevators and Carrier brand climate systems, announced a $1.5-billion (U.S.) restructuring plan last month centred on what it called "structural cost reductions in high-cost locations." Chief executive officer Gregory Hayes said he expected to consolidate manufacturing plants as part of the effort. How that cost-cutting effort will affect UTC's Canadian operations remains to be seen.

Mr. Duchesne said the revised loan agreements do not absolve PWC from maintaining a Canadian presence, adding that the company will continue to develop and make investments in its facilities. PWC has operations at seven separate sites in Canada and employs about 6,200 people here.

"We have a strong supply chain based in Canada," Mr. Duchesne said. "We have dedicated employees. We have strong links with local universities, not just in Quebec but also in Ontario and elsewhere. So the whole ecosystem is positive for us."

Under the revised loan agreements, PWC will also spend about $8-million a year over 14 years to support innovation and research and development through existing partnerships with postsecondary schools and key industry associations.

The rationale for the early repayment by UTC is not entirely clear beyond the fact it has the money in hand.

UTC sold its Sikorsky helicopter business, the maker of the Black Hawk chopper, to Lockheed Martin for $9-billion cash in a deal announced this past July. It subsequently rolled out another share-repurchase program. UTC said its Pratt & Whitney unit recorded a pretax charge of about $870-million in the fourth quarter of 2015 related to the repayments.

Ottawa lent PWC money under three separate programs, notably the Defence Industry Productivity Program, Strategic Aerospace and Defence Initiative (SADI) and its previous incarnation, Technology Partnerships Canada. Quebec's support, representing roughly a 10th of the total, was made under the umbrella of Investissement Québec.

What exactly PWC used the money for has been described only in the most general of terms, with government press releases talking about the development of "next generation" engines that will "power lighter, greener airplanes around the world."

Among the engines PWC has developed recently is the PW800, slated for use in Gulfstream's luxury business jets. PWC will also assemble and test its new geared turbofan engine for Bombardier Inc.'s C Series plane at its Mirabel, Que., facility, according to PWC's website. The contract with Bombardier is a key one for the company.

UTC's move to repay its loans early would free up cash at both the federal and Quebec levels for other aerospace and defence suppliers, at least in theory. That means Bombardier, which has approached the Trudeau government to invest in its C Series airliner program to match $1-billion in funding committed by Quebec, could benefit.

"If you didn't know, at the Canadian government, where you were going to find the money, you just found it," said Nicholas Heymann, an analyst with William Blair & Co. in New York. UTC's loan reworking allows PWC to pay back the governments for their assistance in funding the geared turbofan engine's development costs over a four-year span rather than over the engine's lifetime, thereby improving the program's potential profitability starting in 2020, he said.

"And let's think about this: Was the motivation for UTC to do this related to the long-term enhanced success prospects of its biggest customer for the geared turbofan [engine]? That's one of those geopolitical 'who-knows?'."

In practice, each Canadian corporate assistance program has its own specific qualification criteria. SADI, for example, is meant to provide repayable contributions for "innovative research and development" projects and not help a specific marketing effort by one company to sell its planes.

Industry Canada officials said the agreement with Pratt & Whitney will "solidify its footprint in Canada." Spokeswoman Stéfanie Power said the company's decision to pay back the loans eliminates the uncertainty of recouping future royalty payments and provides "incremental commitments to innovation and R&D in the aerospace industry in Canada."