Mayor Jim Watson’s blog: Plasco a good deal for taxpayers, the environment and local economy

December 15, 2011

From Ottawa Mayor Jim Watson’s blog:

Yesterday Council faced an important decision – our business deal with Plasco Energy and I wanted to share the thoughts I expressed during our deliberations:

In 2005, a small company – Plasco Energy – with eight employees at the time approached the City with a unique approach. They had technology to take garbage right off the back of the truck, without pre-treatment or drying, and convert it into electricity. This company proposed to create energy from waste – with lower emissions to air, water and land than putting the same garbage in the landfill.

But the City made it very clear to Plasco – and Plasco understood right from the start, that the municipality could not be asked to take a risk on the cost of developing new technology. Of course, we are interested in having that new technology and better results for the environment. But these risks are for the private sector to take – these risks are NOT for the taxpayers or residents to take. We would never allow the people of Ottawa to assume the multi-million dollar risk for the development of a new technology.

Back in 2005 Plasco set out to prove its potential with a demonstration plant paid for by private sector investors. They also set out to prove to the ministry of the environment that very low emission levels could be achieved. Finally, they set out to prove that they could get investors to build a full commercial plant without a capital contribution from the City.

In 2008, the City of Ottawa agreed to provide waste for the demonstration project. Many Councillors present on the current Council supported that decision. In return, the City would get preferential terms for being an early adopter of the new technology.

Today, Plasco has grown from 8 people to more than 150 employees all here in Ottawa. It has spent more than $150 million in our community and in our Province over the past five years.

Furthermore, Plasco has created some of the most desirable kind of jobs for any city to attract – in engineering, process design, high-end fabrication and new technology innovation. They have attracted the kind of innovative jobs and innovation that have the potential to grow a new industry, to diversify our economy and potentially make a global impact.

This company has attracted more than $250 million in new investment in Ottawa since the City first sat down to consider a joint venture opportunity. Investment capital is coming here from across the country and around the world: $45 million from Canada; $52 million from California; $25 million from the Midwest US; $75 million from New York City; $25 million from London and $10 million from the balance of Europe. And these investments are not coming from venture firms who take long-shot bets, but from private equity funds that invest in solid companies with high growth potential – respected companies.

So what we have here is a potential world player, home grown in Ottawa, with whom our municipality is looking to partner with no up-front risk to us. Over the course of the last year, we have spent a lot of time discussing how we can diversify our local economy away from its traditional reliance of the Government of Canada. We have also lamented the loss of thousands of high technology jobs in our City.

So is all our talk about supporting the diversification of our economy just talk, or are we serious about it?

If we are serious about it, and I believe we are, then now is the time to say “YES” to this opportunity. We cannot be a bystander on this opportunity. Given the opportunity to be the first municipality in the world to conclude an agreement with PLASCO, a homegrown company that is poised to become very successful, I am in complete support.

This is a business deal from which the City will benefit as Plasco successfully moves to large scale commercialization. The City will benefit by sharing in Plasco revenue, it will benefit by increasing the life of our landfill, and it will benefit directly through increased economic diversification. And let me tell you I have seen my share of divisive and never-ending debates about where to locate “the next landfill” in our community.

No one wants the next landfill anywhere near their neighbourhood. Nor does anyone around this table want to think about where they will find the quarter of a billion dollars required to locate and build the next landfill facility in our City.

With this proposed agreement, the environment benefits on all counts from day one. And the City maintains its commitment to increased diversion and recycling as core elements of our City’s environmental policy.

Our City Manager has lead some very hard-nosed negotiations – exacting improvements across the board to the City’s position in relation to the original agreement signed back in 2008 with Council’s full endorsement.

For our residents’ sake and for our City’s sake, I hope Plasco is successful. And if Plasco is not successful – and let me repeat that I really do hope this local start-up succeeds – then not a cent of taxpayer dollars will go into the facility. The risk to the City is near zero. The benefits to our residents, our taxpayers, our City and the environment are numerous and long-lasting.

Jim Watson

For the original blog post, please click here.

Council Overwhelmingly Endorses Plasco Deal

December 14, 2011

OTTAWA — Pinning their hopes to a pledge that Ottawa taxpayers are supremely well protected from any financial risks, city council has signed off on a long-term contract to have Plasco Energy Group dispose of garbage with its “plasma gasification” process.

The attitude that carried the day was perhaps best expressed by College Councillor Rick Chiarelli, who declared that the “risk to taxpayers from this deal is virtually nonexistent … if it turns out it fails, we’re back to where we are now.” He rejected the notion that the fact Ottawa is Plasco’s first big customer is significant: “That’s the definition of being in on the ground floor of it.”

In all, said Chiarelli, “I think this is easy to vote for, because it provides an opportunity for significant upside and because there’s almost no downside risk associated with it.”

He was one of many councillors to lavish praise on city manager Kent Kirkpatrick, who negotiated the framework of a contract with Plasco, led by technology entrepreneur Rod Bryden, that’s to last 20 years, with the option for four extensions of five years each. Plasco would take 300 tonnes of city garbage a day (about half of the non-recycled, non-composted garbage Ottawa produces now) and process it into burnable gas and slag, at a cost of $83.25 a tonne in the first year, rising with inflation after that. To answer skepticism about Plasco’s technology, which has never been used on such a scale before, the contract contains numerous provisions to ensure the city only pays for garbage Plasco actually processes. And in recognition of the city’s contributions to Plasco’s development, the city is in for royalty payments if the company grows.

The exact legal language has yet to be finalized.

According to the city’s calculations, once all the major costs and revenues are accounted for, the deal will cost between $400,000 and $950,000 a year over a full 40-year contract, compared to the status quo of landfilling Ottawa’s leftover garbage. All the scenarios assume great success in getting Ottawans to divert more recyclable and compostable waste.

Councillor Maria McRae swore that no matter how successful Plasco is in getting rid of Ottawa’s garbage, neither she nor the “awesome” council environment committee she chairs will rest when it comes to promoting recycling, composting and other diversion efforts. The city’s recycling contracts are coming up for renewal and staff are scouring the market for companies that will take Styrofoam and “film plastics” like bags and food wrap that aren’t currently blue-binnable, she said.

“We are up to the challenge. This council is. Our staff is,” she said. “Our residents — they are up to the challenge.”

Mayor Jim Watson likewise argued (and voted) for signing the Plasco deal, saying it’s a crucial move in diversifying Ottawa’s economy, promoting a local green-technology business that’s already attracting interest from around the world.

“This is a business deal from which the city will benefit as Plasco moves to large-scale commercialization,” he said. And above all, the contract will protect the city if Plasco can’t deliver what it promises. It simply won’t be taxpayers’ problem, he said — all that will be lost is a few years of time examining other alternatives to a landfill that’s already projected to stay open till 2042 before the Plasco deal is taken into account.

Bryden says Plasco’s plan is essentially to build three carbon-copies of the demonstration plant it’s modified and upgraded and tweaked over the last several years, and for which it secured provincial environmental approvals in October. It’s emerged in the 10 or so days of debate over the contract that the longest the plant has run at a time is six days, including scheduled maintenance shutdowns, and has consistently processed about 56 tonnes of garbage a day in that time. But that was good enough for an independent engineer who reported on the run for Plasco’s investors, who in turn came through with more than $100 million for the company afterward.

Councillors took their vote despite earlier revelations that a senior member of Plasco’s executive team, Brian Guest, had also recently worked under Kirkpatrick on city files from light rail to the 2012 budget, and that a technical report on technologies that compete with Plasco’s contained information that was up to two years out of date. Indeed, McRae said in the meeting that memos updating and clarifying things councillors had previously been told were flying around as late as Wednesday morning.

The deal with Plasco is sole-sourced — no other company was invited to bid, on the grounds that no other company could meet certain standards that Plasco does: taking garbage as it comes off the back of a collection truck, processing it into energy using thermal technology, charging as little as $83.25 a tonne, and already holding a certificate of approval from Ontario’s environment ministry. A late memo from Dixon Weir, the city’s general manager of environmental services, did allow that a competitor called Alterna NRG has five operating facilities around the world and is working on one in Dufferin County, but said that at best its approvals in Ontario are “months away.”

At this point, said Alterna NRG spokeswoman Shannon Sharp in an email, with the council vote already taken, “Alter NRG’s only request to the decision makers within the City of Ottawa, is that they recognize that there are other successful technology companies in this space beyond Plasco.”

Watson said something better is always just around the corner, and it’s time to get on with a technology that’s ready to go now.

For the full Ottawa Citizen article, please click here.
For the Ottawa Sun article, please click here.

Council Approves Plasco Deal

December 14, 2011

The City of Ottawa and Plasco Energy Group are now partners for at least two decades.

With a 22-1 vote, council on Wednesday approved a contract with the local waste-to-energy company, which will process 300 tonnes of municipal garbage daily at an annual cost of $9.1 million to taxpayers.

Only Somerset Coun. Diane Holmes voted against the deal.

“It’s moot whether the process works or not,” Rideau-Rockcliffe Coun. Peter Clark said.

“You don’t try it, you never find out.”

“There is nothing to lose in terms of what happens with the garbage itself,” College Coun. Rick Chiarelli said, adding the financial risk to taxpayers is “virtually non-existent.”

Rideau-Vanier Coun. Mathieu Fleury pointed out the risk to the city’s reputation but he said the benefits are significant, as is the possible “exposure” to Ottawa.

“The world is watching. Make no mistake about it,” Barrhaven Coun. Jan Harder said.

Mayor Jim Watson said it’s time to progress beyond filling holes in the ground with trash.

“When you think of it, since the time of cavemen we’ve been burying garbage,” Watson said.

Sending trash to Plasco will defer the need for a new city dump until 2070.

Plasco’s plasma gasification technology super-heats garbage to produce a synthetic gas that powers electricity-generating engines. The electricity is sold to the power grid and the leftover solid, called “slag,” can be sold as construction aggregate.

The city can pull out of the deal in March 2013 if Plasco hasn’t finalized its financing for the commercial plant near the Trail Rd. dump.

The deal also has four five-year extensions available.

A revenue-sharing scheme has the city receiving a cut when Plasco revenues hit $34.1 million in any year.

The city will also receive some revenue from other plants Plasco builds in North America.

The Ottawa facility must be built by no later than June 2016 and a “ramp-up” period would last up to three years.

Council next year will be faced with options of how to pay Plasco’s bills in the years before operational costs go down at the dump and revenue, hopefully, starts rolling in when the plant is going at full steam.

For the full Ottawa Sun article, please click here.
For the Ottawa Citizen article, please click here.