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Former Validus power plants to go on the sales block

CCAA process to extend to December, unsecured creditors out of pocket $18.7 million
Validus North Bay power plant (Company photo)

Finding new ownership for three power plants in northeastern Ontario, under creditor protection, will be a process that will extend into December.

Last week, an Ontario Superior Court judge granted a stay of proceedings until Dec. 1 to give KSV Restructuring, a court-appointed monitor, enough time to start a sales process to entice bidders interested in the assets of insolvent Validus Power.

Validus was placed under CCAA (Companies’ Creditor Arrangement Act) protection Aug. 29.

Validus is a Toronto holding company that operated power plants in Iroquois Falls, Kapuskasing, Kingston and North Bay. Only two of the four are operational.

Initially, the company and its assets were placed in receivership by the court. Aug.10. 

Macquarie Equipment Finance, a lender to Validus and a secured creditor, had accused the management of Validis of defaulting on a $55.6-million loan arrangement signed in 2022 to buy the Iroquois Falls plant, and also of misappropriating funds.

The court approved a transition to the CCAA process to enable the sale of the power plant assets.

Macquarie is the leading contender in a stalking horse bid to acquire the properties in an arrangement with a bitcoin company, Hut 8 Mining.

A stalking horse bid is a binding offer to purchase the assets of an insolvent company, conditional on the company not receiving a better offer during the CCAA sales process.

Separately, Hut 8 and Validus are locked in litigation over an alleged breach of a power contract.

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A motion to the court will come forward on Sept.19 to approve a sales and solicitation process, expected to start almost immediately.

In a report to the court, KSV said it’s been contacted by “several parties expressing an interest in the opportunity.”

Validus’ four power stations generate electricity for the Ontario grid as controlled by the Independent Electricity System Operator.

Only Iroquois Falls and Kingston are operational, supplying power to the grid on an as-needed basis. 

Cash-wise, KSV said the power plants should generate enough liquidity to continue to fund operations through the CCAA process into December.

In court filings from late July, Macquarie made a number of allegations that Validus failed to pay municipal and federal taxes, failed to maintain proper books and records, failed to maintain insurance, and failed to provide employee benefits and RRSP contributions to its unionized workforce. Taxes are owed to Canada Revenue Agency, which registered a lien against Validus in the amount of $6 million.

Among is also owed to other creditors including Toronto-Dominion Bank and Mercedes-Benz Financial, the latter in the amount of $179,206 for a Mercedes G-63 “G-Wagon” SUV.

Court documents show a lengthy list of unsecured creditors in the form of service and supply companies, consultants, technical firms, telecom providers that amounts to a total of $18.7 million.