HALIFAX – Court documents filed in Ireland allege OpenHydro executives and its board of directors knew the company was insolvent even as it hired contractors in this country to install its tidal turbine in the Minas Passage.
The Chronicle Herald has obtained the petition made to the Irish High Court by OpenHydro’s major funder — French firm Naval Energies — asking it to wind up the company.
The petition repeatedly cites a letter written by five senior executives from OpenHydro to its board of directors on July 24, warning them that they may be breaking Irish law by running an insolvent company as if it were a going concern.
“(The senior managers have) a reasonable belief that OpenHydro Group has failed to comply with or is failing to comply with its legal obligations and/or that an offense has been, is likely to be committed, in breach of the Companies Acts 2014,” reads the letter.
“. . . For some months, our clients have been extremely concerned that OHG cannot pay its current or future liabilities and is within the zone of insolvency, thereby requiring the directors to consider its trading status.”
Emera distancing itself
The OpenHydro website lists Emera Inc. vice-president of special projects Christian Richard as occupying one of the seven seats on its board.
Spokeswoman Stacey Pineau said Tuesday that Richard vacated his seat from OpenHydro’s board in March of this year and that information on the company’s website is incorrect.
She also denied Emera having had any foreknowledge of OpenHydro’s insolvency when contacted by The Chronicle Herald.
“Given our relatively small 2.2 per cent investment stake in OpenHydro, we made the strategic decision to focus on our 20 per cent investment in Cape Sharp Tidal,” said Pineau of Emera’s reasons for vacating the seat.
A press release issued by Emera in 2008 stated that it paid $15 million for its ownership stake in OpenHydro and a seat on its board.
Though the turbine installed by Cape Sharp Tidal, which is jointly owned by OpenHydro and Emera, is not currently producing electricity – when it does it will be purchased by Nova Scotia Power at a subsidized rate.
The petition does not include a copy of the entire letter but quotes it extensively and summarizes the view taken of it by Naval Energies.
“The letter shows that five senior managers (who report directly to the CEO of OpenHydro Group) consider that OHG is insolvent,” reads the petition.
“The unavoidable implication is that OHG should be wound up. The letter is, in effect, critical of OHG’s directors for not having taken action to wind up OHG sooner.”
According to the documents the group of companies that come under the umbrella of OpenHydro had total losses in fiscal year 2017 of about $246 million Canadian against just $2.8 million in revenue.
The document cites lengthy delays and technical difficulties with its Minas Passage tidal turbine along with the cessation of a French project for a “very challenging” 2017.
Locals snubbed on bills
As of July 25, the company had $12 million left in the bank, which according to Naval Energies would be enough to keep it operating until the week of Aug. 20.
Meanwhile Atlantic Canadian marine services contractors, motels, caterers and heavy equipment operators hired by the Irish company to install the turbine at the Fundy Ocean Research Centre for Energy now face the potential of not getting paid for their work after OpenHydro’s bankruptcy last week.
“Probably tens of millions of dollars,” estimated one contractor, who didn’t want his name used, of the money owed to companies in Atlantic Canada in relation to the prep work and installation of the turbine.
The news that OpenHydro was potentially aware of its insolvency even as it hired contractors to install its two megawatt tidal turbine does not sit well with the latter.
Jay Grant, owner of Riverview Cottages in Parrsboro, said in the spring he was contacted by OpenHydro and told they would need as many cottages as he could provide.
He was only able to provide nine, while other motels and hotels in the area were booked up by the Irish company and its contractors.
As the booking was for two and a half weeks in July — the busiest part of a short season — Grant asked for and got 50 per cent of the cost of the booking up front.
The OpenHydro staff arrived and along with contractors completed the turbine installation on July 22.
Two days later, according to the court documents, senior managers at OpenHydro sent the aforementioned letter to the board of directors.
That same day Grant said he looked out the window from the old house that serves as his office and saw “a mass exodus” of OpenHydro staff well ahead of the date they were supposed to leave.
An OpenHydro employee contacted by The Chronicle Herald said the news came swiftly.
“(There was) no warning, just told us the business was bankrupt and that we were to collect our belongings and leave,” said the employee who was based in Ireland. “No explanation or anything. . . . They even left my Irish workmates stranded in Canada and they had to find their own way home.”
Watching them leave unannounced, Grant got worried. He called his contact with OpenHydro in Ireland and got no reply.
He went on Facebook and saw a livestream by a fisherman saying that the company had declared bankruptcy in Ireland.
So Grant took the Visa number the company had paid the advance for the booking and attempted to put a charge through for the remaining bill — $5,311.20.
It was denied.
“I know a lot of people out a lot more than I am,” said Grant. “This community just can’t afford to take hits like that.”
According to the court documents, a day after the letter arrived before OpenHydro’s board, it presented the company’s financial situation to Naval Energies.
The subsidiary of French company Naval Group has bankrolled OpenHydro since buying into the company in 2010 — providing $396 million in debt financing and equity investment. Naval Energies and Naval Group combined are owed $183 million by the OpenHydro group of companies.
On July 25, the board of directors of Naval Energies took a vote in France to stop funding OpenHydro and sent the latter’s board a letter warning they would be seeking a foreclosure on its assets.
According to the court documents, OpenHydro Technologies’ “main assets” are pledged to Naval Group as security for its many loans. OpenHydro Technologies is the engineering arm of the OpenHydro Group of companies that was responsible for the tidal turbine in the Minas Passage.
