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Public meeting sought to discuss Blind River's awful legacy to its kids

The man who tried to warn the Town of Blind River about its now-failed $18 million investment in an Ottawa energy-from-waste scheme is now asking for a public meeting to discuss the debacle.
 
The man who tried to warn the Town of Blind River about its now-failed $18 million investment in an Ottawa energy-from-waste scheme is now asking for a public meeting to discuss the debacle.
 
"I am disappointed and angered," says André Berthelot, a Blind River lawyer who raised red flags over the investment while running for mayor of the community in last October's municipal election.
 
In a letter sent Thursday to Mayor Sue Jensen and Blind River Town Council, Berthelot expresses concern that council has not explained the terms of its recent renegotiation of the $49.5 million Canada Mortgage and Housing Corp. loan that financed its investment in Plasco Group, which applied last month for protection under the Companies' Creditors Arrangement Act.
 
The town channeled its botched investment through North Shore Power Group (NSPG), a green-energy developer created and wholly owned by the Town of Blind River.
 
NSPG has committed to providing $1.1 million to cover the annual interest payments that Blind River must now make to CMHC over the next 22 years under the recently renegotiated loan.
 
The money will come from NSPG power projects around the province.

Last week, Mayor Jensen told SooToday that annual payments on the renegotiated loan would now be just $1.1 million, compared to $4.4 million previously.

"We're going to be just fine," Mayor Jensen told us. "This is going to settle things right down."

However, Blind River must now make those annual payments for 22 years on what was previously a 15-year loan.

And that just covers the interest, not the loan's principal.

The town may recover some money under Plasco's Companies' Creditors Arrangement Act proceedings.

NSPG may be able to pony up a little more than the $1,115,324 it's already agreed to pay each year.

But otherwise, no one has so far offered a credible plan for how the community of 3,549 will make the one-time principal payment of $23.5 million that's due on April Fool's Day, 2037.

In short, Blind River's fiscal jeopardy hasn't been resolved, just shifted 22 years ahead to a new generation of ratepayers, many of whom are now wearing diapers.
 
André Berthelot wants more information about terms of the renegotiated deal.
 
He also accuses the town of refusing to "accept any responsibility in the matter, or to seek an accounting from the management of the NSPG and [NSPG president Graeme] Lowry in particular."
 
"It was thought important enough in 2010 to have a public meeting to announce the development of the solar park, but apparently no public meeting is necessary to discuss the effect that the new loan terms will have on the NSPG and the Town of Blind River and on the next generation of Blind River taxpayers," Berthelot says in his letter to Mayor Jensen and Town Council.
 
Among other things, Berthelot is asking for a forensic audit, improved access to NSPG minutes and reports, and a public meeting at which NSPG officials will be required to face questions from the people of Blind River.
 
He is also calling on the town to set up a dedicated reserve fund of not less than $1,115,324 (one year's interest payment on the CMHC loan) in case of an unexpected default by NSPG to the CMHC.
 
The following is the full text of Berthelot's letter:
 
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Open letter to mayor and council of Blind River - concerning the CMHC debt, Plasco and the North Shore Power Group
 
I write to you following the bankruptcy protection sought by Plasco, its default on the loan to the North Shore Power Group, and the subsequent renegotiation of the CMHC loan by the Town of Blind River.
 
As a taxpayer I recognize the need to renegotiate the CMHC loan to avoid the town’s bankruptcy and that of the North Shore Power Group.
 
I am disappointed and angered, however, that council has not felt it necessary to explain the terms of the renegotiation, accept any responsibility in the matter, or to seek an accounting from the management of the NSPG and Mr. Lowry in particular.

It was thought important enough in 2010 to have a public meeting to announce the development of the “solar park," but apparently no public meeting is necessary to discuss the effect that the new loan terms will have on the NSPG and the Town of Blind River and on the next generation of Blind River taxpayers!

The reduction of the annual payments to CMHC from $4,461,429 to $1,115,324 means that the repayment of the loan which was to end on March 1, 2025 will now continue to March 1, 2037 at which time the next generation of taxpayer will have to figure out how to pay the remaining “deferred” $23,406,750 less whatever amount the NSPG is able to realize on its “security” from Plasco.

I urge council to pursue immediately further negotiations with CMHC to define the circumstances under which the balance of $23,406,750 can be forgiven by CMHC.
 
Otherwise this will remain a cloud on municipal projects that require borrowing by future municipal administrations.
 
I understand that NSPG has given its assurance that it earns enough to pay $1,115,324 each year.
 
What is the plan of NSPG for the next $23,406,750?
 
It would be dangerous to assume that the microFIT program will continue indefinitely let alone 2037 and that NSPG’s chief source of revenue, will also continue, given the criticism leveled at the Ontario Liberal Government as to the program’s cost and inefficiency.
 
We have other reasons to mistrust the assurances of the NSPG:
  • It was NSPG that trusted its “experts” as opposed to Hydro’s warnings in respect of the connectivity issue which forced NSPG to abandon the solar park and go for the microFIT program. January 22, 2013, after four years and $600,000 spent to remedy the problem of thermal constraint and connectivity to Hydro, NSPG boasted to councillors that the Striker Dam Station now has eight MW of available capacity.
  • In 2010, NSPG was obliged to terminate its relationship with a vendor under contract to install solar panels for gross non-performance to which it had paid $838,555 for parts and an advance on work of $1,745,228 that was never performed. The amounts have not been recovered.
  • Instead of a solar park or many small projects locally supervised and sold to Ontario Hydro as originally contemplated, the investment in Plasco was a major investment with a completely independent third party, and NSPG has had to go further afield outside of the region such as Smith Falls to pursue its solar energy leasing microFIT ventures rather than produce energy for the Town of Blind River which was the original purpose of the CMHC loan as set out in the town’s Bylaw 2130, Schedule A.
  • During the election of 2014 NSPG published a “facts sheet” touting the vetting of the Plasco loan by an Ottawa Law firm. The Ottawa Citizen reported recently that the Ottawa law firm insisted that NSPG remove that assertion from its web site and the “facts sheet” in question was removed.
  • I have repeatedly asked both before and after the election from both the town and NSPG a copy of the “due diligence” materials referred to at a special meeting of council June 20, 2011. At that time a resolution of councillors Solomon and Kennedy was passed to authorize NSPG to invest in Plasco Energy Group Inc., for up to $28,000,000 in accordance with investment term sheet included in transaction binder delivered to council including all due diligence materials gathered and reviewed by NSPG. I have had no reply from either the Town or NSPG.
  • I have asked for confirmation of the existence and the terms of an “abandonment covenant” which affects NSPG’s ability to collect on its security given by Plasco. In its agreement with Plasco Trail Road Inc., the City of Ottawa provided for a number of defaults which could terminate its agreement with Plasco. One of these was the failure of Plasco Trail Road Inc., to use commercially reasonable efforts to obtain an acknowledgment and agreement from NSPG that it would be bound by an abandonment covenant providing that in the event that NSPG fails to remove and/or dispose of the collateral within a time period provided, that it will be deemed to have abandoned its security without further action on the part of the City of Ottawa. The time period allowed for NSPG to remove its security in the event of Plasco’s default may have been disclosed to council in an investment term sheet and a transaction binder delivered to council and attached to Resolution 11-439 of a special closed meeting of Council held on June 14, 2011, but has not been discussed publicly. I have not been able to obtain the documentation for review, and ask that it be produced if it has been signed. If so, has an exit strategy been put in place to protect NSPG’s security over Plasco Trail Road Inc., assets?
  • Now we learn that Plasco has defaulted on more than $18,000,00 of indebtedenss!
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MATERIAL REMOVED HERE. RETRACTED BY AUTHOR
 
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Council cannot remain silent.
 
It must re-establish the public’s confidence in what goes on at NSPG.
 
I suggest the following measures be considered by council and NSPG:
  • That the municipality and the NSPG have the same accounting firm and that this firm be obliged to report both to council and the NSPG, and that a forensic audit be ordered by council for the period 2010-2014.
  • That the stipend of $100 a month being paid for director’s fees to members of council sitting on the NSPG be paid to the municipality and paid out in accordance with the Town’s policy on remuneration. This will avoid the appearance of conflict of interest.
  • That the town’s resolution appointing former mayor Robert Gallagher to the NSPG board as a representative of the community be reviewed and time limits imposed for his appointment.
  • That the chief executive officer, Mr. Lowry not be a voting member of the board of directors. Mr. Lowry’s company was paid $550,000 for its shares in the company and he or his management company was earning $130,000 a year to manage NSPG. Nothing is owed to him. He is not responsible to the electors and the CEO should not be voting but rather directing and advising the NSPG. I point out to you that the Ontario government has eliminated the CEO’s right to vote on public hospital boards for very good reason including the appearance of conflict of interest.
  • That the minutes of the NSPG board be published online retroactive to its beginnings and that in camera sessions be instituted but only for the period commencing 2015, so that transparency is enhanced.
  • That the members of council sitting on the board of NSPG give quarterly reports in open meetings of council.
  • That the NSPG produce the “due diligence” materials for the Plasco loan.
  • That the NSPG produce the abandonment covenant with the City of Ottawa in respect of the security on Plasco assets located on the lands owned by the City of Ottawa.
  • That the town council pursue with CMHC written clarifications of what must be done to forgive the balance owing to CMHC of $23,406,750.
  • That the town establish a dedicated reserve fund of at least one annual payment ($1,115,324) to protect against any sudden default by NSPG to the CMHC.
  • That the NSPG prepare a plan and disclose what is being done to realize on the Plasco security.
  • That the town hold a public meeting in conjunction with Mr. Lowry and Mr. Gallagher, chairman of the NSPG to answer questions of the town’s taxpayers and community partners.
All of which is respectfully submitted, March 12, 2015
 
André L.J. Berthelot
Taxpayer and resident of the Town of Blind River
 
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Previous SooToday.com coverage of this story
 

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David Helwig

About the Author: David Helwig

David Helwig's journalism career spans seven decades beginning in the 1960s. His work has been recognized with national and international awards.
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