The truth about the failed Community Energy plan and the $26,637,244 cover-up

By Gerry Barker

June 23, 2016

Reading the Thursday edition of the Mercury/Tribune the lead story, written by Doug Hallett, consists of a rewrite of the annual report of the Guelph Municipal Holdings Inc (GMHI) chaired by Mayor Cam Guthrie.

It is the sloppiest, most inaccurate report I’ve read since the story broke about GMHI losing $26,637,244 as reported by former CAO Ann Pappert and GMHI Chief Executive officer and Chief Financial Officer, Pankaj Sardana.

If they didn’t know the facts, who did?

That’s what they signed off on May 16 at a meeting of Council representing the shareholders of GMHI. First, let’s try to follow the manipulations of how the former Farbridge administration covered up its excessive spending of citizen’s money.

The Farbridge administration formed the GMHI in late 2010. The public was told that this off-books corporation was to manage city holdings including Guelph Hydro, the Guelph Junction Railroad and the Eastview methane-recovery generating plant.

Now the picture gets murkier. Guelph Hydro through a subsidiary, Guelph Hydro Electric Services Inc, created a third corporation called Envida Community Energy Corporation.

At this point you have to start following the money.

GMHI was the conduit to fund the ambitious Farbridge sponsored Community Energy Initiative (CEI). It included two planned district energy plants in the Hanlon Business Park and downtown in the Sleeman Centre.

Mr. Sardana told that meeting that GMHI had no equity to support a projected loss of $18 million in so called tax losses. To explain, in a corporation, tax losses are carried as an asset because they may be used to offset future capital gains. But it’s still remains a loss. In addition GMHI owed some $5.3 million for a loan held by the Royal Bank.

So, the Far bridge-controlled GMHI amalgamated Guelph Hydro with GMHI because Hydro was owned by the city. Shortly after, some $23 million was transferred to GMHI from Guelph Hydro.

Now let’s turn to the Tribune’s page one account of the GMHI 2015 annual report.

When asked by Coun. Christine Billings if Envida was a going concern she was told by Mr. Sarsana that inter-company loans are keeping Envida afloat. “Absent that,” he added,” I would say that Envida is not a going concern. He added, “It becomes a going concern because of that parental support.”

So, who is the banker of Envida? GMHI has little or no equity; the City of Guelph that owns the whole CEI Field of Dreams project does not have anything in its budget to support Envida.

The best guess is that Guelph Hydro, (Sardana said it had a good year in 2015), is bankrolling this CEI scheme including propping up Envida. Even if it did work, less that 1,800 households and businesses would benefit out of more than 55,000 in the Guelph and Rockwood service areas.

Wait a minute! Guelph Hydro services are among the highest in the province. Ask yourself, is this what a vital public utility should be doing, gambling on a scheme that may cost millions before Envida turns a profit?

It already has cost $26,637,244 by the admission of Ms. Pappert and Mr. Sardana on May 16.

It is apparent that some $14 million has been spent just to set up the two district natural gas-fired energy plants that have yet to deliver power to the grid. Only a limited number of clients are receiving the benefit of geo-thermal hot and cold water.

In fact, Mr. Sardana has pointed out that the equipment was installed without regard to the minimum thermal customer requirement of 4 million square feet, just to break even. Today, each plant is nowhere near attaining the required thermal customers to become profitable.

The GMHI audited report says on the one hand that Envida lost $750,000 in 2015 due to lower expected revenue from the two district energy plants. But then the GMHI report goes on to state that factoring in the write-downs and write offs, Envida reported a net loss of $9.4 million in 2015.

Try to overcome these losses; Envida has promoted solar energy facilities starting with the Guelph Hydro and Guelph fire department headquarters plus other municipal buildings and fire halls. So here’s how that allegedly works. Envida installs the solar panels on the municipal buildings and then pays a leasing fee for use of the roof.

The GMHI annual report says that 204,000 Kilowatt Hours (KWH) were generated by these solar panels in 2015. I believe that’s a total of 20.4 Megawatts for the entire year. The report switches from KWH to Megawatt Hours.

One part of the report is interesting. Guelph Hydro that 350 private solar installations generated 11,784 megawatts in 2015. The report claims it was enough solar energy to power 1,250 homes for one year. Let’s see, only 350 private solar installations provide enough power for 1,250 homes for a year. Where does all that excess power go? You can’t store the stuff. How does the owner of a solar system get paid to produce excess power into the grid?

Further, what does this enterprise have to do with the district energy operations that have already cost $5.5 million for the Sleeman plant and $8.7 million for the Hanlon plant, just to build? The report fails to explain that but it’s assumed its either a write down or write off on the Envida books.

Then there is the shut down costs of the entire district energy and thermal energy system. Mr. Sardana quoted a figure of some $15.7 million.

The along comes Mayor Cam Guthrie who says: “GMHI and its subsidiaries have much to be proud of.” Tut tut Mr. Mayor, you ended your sentence with a preposition.

The reality is how can the Mayor who is also chairman of the GMHI board, make such an irresponsible assertion? Does he not understand the financials of this abortive social engineering plan?

The negative numbers are there but he merrily skips over the details making such a fatuous statement.

Mr. Guthrie there is nothing of which to be proud in this CEI experiment that has failed in its four-year grip on other people’s money. The former mayor knew the city was unable to finance it, so she used the capital and cash flow of Guelph Hydro to finance it. The complicity of the Guelph Hydro board in this multi-million dollar exercise is incomprehensibe.

The result is the diminished value of Guelph Hydro and its subsidiaries. That’s because of the debt load the utility has assumed that is totally of the city books.

The question remains: How many dollars does it cost to screw in a light bulb? Answer: Apparently, about $40 million and counting.

 

 

 

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6 Comments

Filed under Between the Lines

6 responses to “The truth about the failed Community Energy plan and the $26,637,244 cover-up

  1. geo

    This is fraud. This demands a police investigation! I can not believe the people of Guelph would just accept this. Exposing this is only half the exercise. There are Councillors, a former Mayor and some highly paid staff that have to be held responsible.

    • Brent

      You hit the nail on the head Geo….the fact is the majority of Guelph citizens live like ostriches when it comes to local government..a fact that the Farbridge administration had craftily exploited to push her expensive and risky master plan of her version of environmental Nirvana on a passive population….and now we must pay the bills!!!!….we’ve been thoroughly screwed over by her entourage.

  2. DAVID BIRTWISTLE

    Do I smell a sell-off of Guelph Hydro to the distribution company that ex-Mayor Farbridge was pushing and failed lo those many years ago?

  3. Albert Einstein

    Hallett writes: “Envida runs district energy systems in the new Hanlon Creek Business Park and downtown out of the Sleeman Centre, but they aren’t growing as had been anticipated.”
    This is the “journalism” we get from publications who reap tons of taxpayer dollars in ad revenue funnelled from City Hall.

  4. fred

    Gerry, give us the totals for the money thrown away on the city hall court case, community energy plan, recycling plant and any other projects. Are we at $80 million yet?
    How can we afford to live here?

  5. Glen

    To paraphrase Mark Twain “In the first place, God made idiots. That was for practice. Then he made the Guelph members of council involved in the District Energy boondoggle & their supporters.”

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