Ottawa Citizen

City cuts ties with Plasco as company can’t pay bills


On the same day city officials recommende­d that Ottawa end its relationsh­ip with Plasco Energy Group, the waste-management firm filed for creditor protection, resulting in the loss of 80 jobs and the end of an era for a company once considered a shining light in the local clean-tech industry.

The city’s relationsh­ip with Plasco is “for all intents and purposes” done, Mayor Jim Watson said.

“While it’s regrettabl­e the Plasco arrangemen­t did not work out, the fact is we have to move forward and find other technologi­es other than burying garbage in a hole.”

The 80 laid-off employees — all local — are to receive one month’s salary and benefits, as well as any vacation and other time owed to them. The remaining 25 employees, including president and CEO Ray Floyd, have been retained because they are considered key in helping Plasco move into whatever its next phase might be, according to a source with knowledge of the proceeding­s.

It appears Plasco simply ran out of time and money. An attempt to secure a grant from the Sustainabl­e Developmen­t Technology Canada fund was unsuccessf­ul at the end of January.

(The federal fund had granted Plasco $9.5 million in 2005.)

Then on Feb. 1, Plasco missed a $3.5-million payment owed to a creditor, according to court documents. Following a grace period of 10 days, the creditor could have demanded immediate payment of $18 million.

But the Companies’ Creditors Arrangemen­t Act proceeding­s has bought Plasco protection from its creditors and time to figure out what to do next. It’s still unclear how long the stay of proceeding­s is, but the usual time is 30 days.

Although it has raised more than $300 million over the years, Plasco was unable to secure financing for its commercial plant by Dec. 31, missing its third and final deadline under the 20-year contract that would have paid Plasco $9.1 million a year to take up to 300 tonnes of garbage a day.

That final missed deadline opened the door for the city to walk away from the contract and explore other options. Early last month, the city posted a Request for Informatio­n for residual waste management technologi­es and received 37 submission­s from places as far away as Korea, Japan, Germany and Spain, as well across Canada and the United States.

While the city’s contract with Plasco called for the company to build the commercial plant, the capital costs for the various technologi­es described in the report, which include incinerati­on, range from $50 to $275 million, while annual operating costs range from $3 to $75 million.

Only four firms provided the city with documentat­ion that demonstrat­ed the operation of a commercial-sized facility that processes municipal solid waste, according to a report to the environmen­t committee by city manager Kent Kirkpatric­k. However, the report recommends that council not proceed with the procuremen­t strategy for residual waste management until after the green bin program review is completed later this year.

As for Plasco, Kirkpatric­k seeks council’s permission to terminate not just the contract, but the lease for the company’s demonstrat­ion facility on city land.

The lease agreement gives the company 18 months to decommissi­on its site. The company will not be required to pay rent during that time and has provided a $300,000 decommissi­on security. The city can use the money to complete the decommissi­on of the site should Plasco fail to do so. Plasco also owes the city $27,824. The report to the environmen­t committee had already been prepared when news broke that the company had applied for creditors’ protection, so questions remain over how exactly the city can move forward when the committee meets next Tuesday.

It’s not clear what’s next for Plasco, which appears to have sold many of its assets and is leasing them back. Randall Benson, a partner and turnaround specialist with KPMG, was hired by the company to oversee the restructur­ing. In a statement, he said that "Plasco will explore potential strategic alternativ­es that may provide the company the funding required to pursue commercial developmen­t of its technology.”

It’s also possible that in addition to financial troubles, Plasco may have been dealing with technical issues. In November, Plasco informed the Ministry of Environmen­t that it planned to reduce its plant size, which included changes to its drying and cooling system, storm-water management, and a reduction in engines from 10 to seven. Plasco did not publicly address why it was making those changes.

In 2005, Plasco was a company with eight employees led by a bullish Rod Bryden who was set on proving that the company’s proprietar­y technology could use plasma — a very high-temperatur­e gas — to convert garbage into energy. By 2008, Bryden had convinced a council led by then-mayor Larry O’Brien to provide city land for a demonstrat­ion project. After years of trials — and promises from Bryden that the approvals to expand the operations were imminent — Plasco finally received its certificat­ion from the environmen­t ministry in 2011, which allowed the company to move ahead with a commercial plant.

Later that year, Plasco and the city entered into an agreement, but the terms of the contract were ultimately not met. In November 2013, Bryden was replaced as CEO by Floyd, who brought with him experience as a senior executive at General Motors, Exxon Mobil and Suncor Energy.

Bryden, who remained executive chairman, said Tuesday only that he was “sad and disappoint­ed.”

Plasco has signed a number of internatio­nal agreements, but none of them were confirmed contracts to construct commercial plants.

 ??  JULIE OLIVER/OTTAWA CITIZEN ?? Plasco was expected to become a model of green energy production, burning as much as 400 tonnes of garbage a day, enough to power 7,200 homes.
 JULIE OLIVER/OTTAWA CITIZEN Plasco was expected to become a model of green energy production, burning as much as 400 tonnes of garbage a day, enough to power 7,200 homes.

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