City wins Plasco cash clash

The city secured $300,000 from Plasco Energy Group on Wednesday to pay for dismantling its Trail Road plant, the same day the struggling waste-to-energy firm was granted an additional two months’ protection from its creditors.

Plasco has been under court protection from its creditors since Feb. 10. For weeks now, the city and Plasco’s lawyers have been sparring over the company ’s $300,000 letter of credit to the city, earmarked for decommissioning the plant. The letter of credit, issued by the Bank of Nova Scotia, expires on June 20, so it was imperative that the city take possession of the funds before then.

But according to city solicitor Rick O’Connor, all parties agreed that the bank would cash the letter of credit, and that the money would be held by the city’s external law firm for six months. At the end of that time, the city could begin to dismantle what’s left of the Plasco operations, which are on city lands.

“It’s good news for Ottawa taxpayers because we are counting on that $300,000 to make sure that the decommissioning of the site is done properly,” Mayor Jim Watson told reporters. “I’m still somewhat pessimistic that it’s going to be enough. If we get in there and we find it’s more expensive ... at least we have the surety of the $300,000.”

Of more concern to Ottawa taxpayers might be the $950,000 that Plasco had set aside in a contingency reserve specifically for decommissioning the site. It’s not clear how protected those funds are against the claims of other creditors. Plasco’s court-appointed monitor, Ernst and Young, has said in one report that Plasco advised it that the “estimated costs” associated with the decommission “are significantly higher ... than the Contingency Reserve proposed.”

The entire affair is something of a messy end in the decade-long relationship between the city and Plasco.

At the end of 2011, council agreed to a 20-year contract that would have paid Plasco more than $9 million per year to take up to 300 tonnes of garbage a day. But after a string of attempts to raise money, Plasco Energy was unable to meet its financial obligations to build a commercial waste-to-energy plant to handle Ottawa’s residential waste, despite two deadline extensions.

In February, council voted unanimously to terminate the contract.

On Wednesday, the court approved a second extension of protection for Plasco under the Companies’ Creditors Arrangement Act, this time until July 17.