Small town out $17.9M from collapse
Among the names of the creditors who are owed millions of dollars due to the fall of Plasco Energy Group is one that sticks out.
The North Shore Power Group is a renewable energy initiative that is wholly owned by the municipality of Blind River, a tiny Ontario town about an hour east of Sault Ste. Marie.
According to court documents Plasco filed under the Companies Creditors Arrangement Act, the town of 3,500 people is owed $17.92 million.
Sue Jensen, the mayor of Blind River who is also a director with North Shore, refused to comment on the matter when reached by the Citizen this week.
Similarly, North Shore director and chief executive officer Graeme Lowry would not speak about the issue and hung up the phone when asked to comment about it. It wasn’t supposed to be this way. In 2009, the Ontario government, under then-premier Dalton McGuinty, introduced the Feed-in Tariff Program, offering lucrative rates for electricity generated through sustainable methods and fed back into the province’s electrical grid. The initiative was meant to create new clean energy industries and jobs, plus boost economic activity as well as the development of renewable energy technology in the province. For a town such as Blind River, the promise of jobs and a possible economic boost was appealing. Outside of service jobs, employment in the town is primarily centred around resource extraction, logging and tourism.
In 2010, the municipality approached Canada Mortgage and Housing Corp., which was working with the federal government to hand out low-interest infrastructure loans as part of Canada’s Economic Action Plan.
The town secured a loan of $49.5 million from CMHC’s Municipal Infrastructure Lending Program to construct a solar-energy generating facility. The project was to include the installation of about 45,000 solar panels on 285 towers over an area of 120 acres and was to provide the residents of Blind River with a low-cost renewable energy supply. The 15-year loan carried with it a 4.03 per cent interest rate. Terms of the loan said it cannot be repaid before 2025.
However, the town’s massive solar installation was turned down when it applied for the approvals necessary to hook into the province’s electrical grid. Apparently, the large-scale solar farm required infrastructure improvements to transmit power back to Ontario homes — improvements the town was not prepared to take on.
With its pockets flush with cash and promises that the money would lead to jobs, the town created North Shore Power Group and moved forward with a number of smaller solar initiatives, 71 in all, totalling about $25 million worth of investments and creating 17 new jobs.
At some point, North Shore became aware of Plasco. Without the ability to pay back its loan early, city council asked for an expert opinion on the company, reaching out to two finance firms in the process, and ultimately approving a large loan to the Ottawa firm. It secured that loan by taking ownership of a majority of the company’s Trail Road test facility in Ottawa.
“A loan agreement had been signed with the federal government and we were not permitted to repay it early,” reads a Frequently Asked Questions section on North Shore Power Group’s website. “Our only option was to look for somewhere to invest this money in order that we would be in a favourable position to make our first CMHC payment. Perley-Robertson and Hill & McDougall were given the task of completing due diligence on Plasco for (North Shore). The due diligence report came back favourable and (North Shore) invested with Plasco.”
The agreement with Plasco, for an undisclosed sum, saw the Ottawa company return seven per cent interest to the municipally owned organization. Neither Plasco nor the town would confirm the amount initially invested.
However, with the entrance of Plasco into CCAA protection, the company has listed North Shore amongst its creditors. The municipality is owed $17.92 million. The Plasco news comes as the town is due to make a $4-million payment on its loan to the CMHC by March 1.
Further compounding the issue for the municipality is the deal it made with Plasco, which saw it assume ownership of the company’s Trail Road trial facility in exchange for cash. Plasco has been leasing the facility back from North Shore.
The bizarre scenario leaves Plasco with very few actual assets from which the municipality can claw back its money. Further muddying the situation is the land on which the test facility is built, which belongs to the City of Ottawa. The city had a lease arrangement with Plasco that saw the company pay $10,000 a year to operate on the site.
The entire scenario is one that the courts will have to sort out.