Big bet gone bad: hopes sink for Blind River

Anyone in Blind River still hoping to see significant cash from the town's failed trash-to-syngas investment is likely to be disappointed.

Back in March, Blind River Mayor Sue Jensen told SooToday she hoped money from Plasco Energy Group's insolvency proceedings could be used to reduce the $23.5 million one-time balloon payment the town must somehow pay in 2037.

This month, however, it's become apparent that Plasco's assets are fetching pennies on the dollar, that any Plasco proceeds will barely scratch the surface of Blind River's massive debt.

Plasco's large-scale demonstration facility at the City of Ottawa's Nepean landfill is now disassembled.

The plant and its equipment are being liquidated piecemeal through an online auction set to close September 11.

Court records reveal that Vancouver-based auctioneer Maynards Industries Ltd. paid just $487,000 earlier this month to acquire what it describes as a "400-million-dollar waste-to-energy plant built new in 2005."

There are other secured creditors, but the Town of Blind River is laying claim to the proceeds from substantially all assets of Plasco's demonstration plant, through North Shore Power Group (NSPG), a green-energy developer created and wholly owned by the town.

NSPG invested $25 million in Plasco four years ago.

This was done through a sale-leaseback scheme in which NSPG bought $25 million in equipment from Plasco and immediately leased the equipment back to the company over a term of 10 years and 98 days.

In February of this year, when Plasco sought protection under the Companies’ Creditors Arrangement Act, the town realized it was in trouble because of the failed investment.

So Blind River restructured its loan with Canada Mortgage and Housing Corp.

$16 million of the $39.5 million still owed by the town would be paid off in annual instalments of $1.1 million, over the next 23 years.

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

But those annual instalments covered only the loan's interest.

Principal was an entirely different issue.

Under the restructuring arrangement struck in February, the community was now expected to pay an interest-free balloon payment of $23.5 million on April 1, 2037, to cover outstanding principal.

The little town hadn't solved its financial woes.

It had simply passed them on to a future generation of voters.

NSPG says it holds some additional security, including Plasco’s North American patents and trademarks and an "unlimited guarantee" from Plasco Energy Group.

But no one is expecting major cash to come from Plasco's dissolution.

If anybody running the Town of Blind River or NSPG has a business plan for paying off the gigantic balloon payment, they weren't returning SooToday's phone calls yesterday,

At least one pundit doubts it can be done.

"The people of Blind River are in a hole deeper than anybody can reasonably expect them to climb out of, thanks to the people they elected, a blithe federal government, and apparently ineffectual regulators at the province," wrote the Ottawa Citizen's David Reevely earlier this summer.

"They've extended their repayment period but in the end, most likely, all of us will help, either through a provincial bailout or when the CMHC gives up on collecting," Reevely speculated.

"Rather than pay off its CMHC debt, Blind River would probably be better off to quietly disband."

Blind River is a community of 3,549 holding bad debt amounting to more than $5,000 for every man, woman and child.

NSPG recently announced that it will host a public information session sometime in September.

The time and place will be posted on northshorepowergroup.com and in a local newspaper, the company said.

Meanwhile, the online auction for Placso's equipment has attracted almost no interest since it opened on Tuesday.

So far, only two bids have been received on 91 lots.

One was a US$350 bid on 15 variable frequency drive switches.

The other was a one-dollar bid on a selection of tools.

The auction includes a Skyjack scissor lift, three front-end loaders, a Toyota gas forklift and five GE Jenbacher 730-kilowatt generators.

The online auction ends at 1 p.m. on September 10.

Plasco remains under protection from its creditors until September 25.

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