'Entrepreneur of the year' goes under

Monday, August 29, 2011

by BETTER FARMING STAFF

In June 2010, Powerbase Energy Systems Inc. was singled out as the entrepreneur of the year by the Ontario Association of Community Futures Development Corporations.

One year later, the company that specialized in building biogas and hydroelectric systems, declared bankruptcy. 

At least three issues led to the failure of the eastern Ontario company with an apparently bright future, says trustee, Andre Bolduc, senior vice president BDO Canada Limited. There were technical issues with their biogas technology and delays in getting provincial feed-in tariff (FIT) contracts. “They were unable to secure additional investment in the company,” he adds.

The company voluntarily filed for bankruptcy on June 17 but had been in receivership since May. It owes creditors more than $2 million. Major secured creditors include Farm Credit Canada, HSBC Bank Canada and Valley Heartland Community Futures Development Corporation. There are about 160 unsecured claims.

Bolduc says the company’s hard assets such as inventory, equipment and vehicles were auctioned last week. He does not yet have information on how much money was recouped.

The future of the company’s intellectual property is still up in the air. “The file is still ongoing,” he notes.

For Doug Cleary, a dairy farmer near Spencerville, south of Ottawa, Powerbase’s failure may mean a return to square one to install a 500 kW biodigester on his farm. Other companies looked at the technology and Cleary says he has been warned there is still a lot left to do. “We may be almost starting over again.”

Getting a biodigester in place has been a long struggle so far. Cleary says he started talking to Powerbase about a digester in 2007 but changes in provincial green energy programs delayed the project.

“We had originally started under the Renewable Energy Standard Offer program; we had submitted paperwork that started the process and then it changed to the FIT program so we had to rescind the paperwork and resubmit it,” he says. “By the time we got approval it was June 1” of this year. The company went bankrupt a few weeks later.

With the approval in place, Cleary plans to carry on: “If we walk away now then we’ve just got a million dollar bill in front of us; if we carry on then we can hopefully build something that will give us a return.”

So far, the project has cost nearly $1.5 million. “I expect we’ll spend as much again,” he says. About $400,000 came from a provincial grant. Cleary financed the remainder.

The company had at least two other systems running but there were problems, Cleary says.

 “They could have used more experience,” Cleary says of Powerbase. He thinks the company should have looked to Europe where biodigesters have been developed “for a number of years now.”

Dan Jones, president of the 80-member Agrienergy Producers’ Association of Ontario does not feel comfortable about making a statement about the impact of the company’s demise on biodigestion power generation in the province. Jones is also co-owner of European Power Systems, Ltd. in Mississauga. He is not aware of the number of installations where Powerbase was involved.

Jones estimates that about a dozen biodigesters are operating in Ontario with more under construction. “Hopefully we’ll see about 28 of them within the next few months,” he adds. BF