City could be on hook for additional Plasco costs
Joanne Chianello, Ottawa Citizen
Published on: February 25, 2015, Last Updated: February 25, 2015 4:25 PM EST
Ottawa taxpayers could be on the hook for costs related to the city-owned Plasco Energy property if city lawyers fail to convince a commercial court judge to give priority to company funds earmarked for decommissioning the site.
“I’m worried if there’s any cost that we’re going to be burdened with,” Mayor Jim Watson told reporters after Wednesday’s city council meeting. “We will vigorously defend our position before the courts.”
Earlier this month, Plasco filed successfully in the Ontario Superior Court of Justice for creditor protection under the Company Creditors Arrangement Act (CCAA), freezing any actions against the company for 30 days ending on March 11. On March 3, Plasco and its creditors will appear in a Toronto courtroom, where creditors — including the City of Ottawa — are expected to argue that debts owed them should be honoured ahead of those of other creditors.
In a memo to councillors on Tuesday, city solicitor Rick O’Connor explained that while the city has a $300,000 letter of credit for remediating the city-owned property where Plasco has its waste-to-energy demonstration plant, Plasco has not asked that the letter of credit be given priority over other secured creditors. Lawyers from Borden Ladner Gervais representing the city will argue that Plasco “pay into the court the $300,000.”
However, there’s no guarantee that the commercial court judge will give the city’s letter of credit priority over other secured creditors. The same goes for the additional $950,000 Plasco had set aside for decommissioning its site. Right now that, too, will be just one of the many claims creditors are making on Plasco’s assets.
Exactly what assets the company has is unclear. For example, Plasco does not own the equipment at the Trail Road facility. The company sold to and leased back the equipment from North Shore Power Group, which is wholly owned by the Municipality of Blind River and is owed more than $17 million by Plasco. Court documents state that, as of Dec. 31, 2014, Plasco had $116.6 million in consolidated liabilities.
According to the memo from O’Connor, city and Plasco representatives met on Feb. 18 when “Plasco discussed what it saw as the ‘road ahead’ under the CCAA process. This was mainly about Plasco exploring the potential for the sale of its intellectual property in the next four to six months.”
It is too early to say what Plasco’s proprietary technology might be worth.
Despite the complex situation — and the risk to city taxpayers — no one on council asked a single question on the Plasco file. Indeed, the environment committee’s decision to terminate the city’s contract with Plasco was simply carried unanimously without discussion.
At the March 3 court appearance, the city’s lawyers will also ask for the judge to allow the city to unilaterally end its contract with Plasco.
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