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The plasma-gasification system at Plasco. (Blair Gable/Photo by Blair Gable)
The plasma-gasification system at Plasco. (Blair Gable/Photo by Blair Gable)

Waste

Garbage in, energy out Add to ...

Indeed, managerial weakness is a leading cause of mortality among startup technology companies whose founders - usually engineers, as at Plasco - insist on trying to build the business themselves.

And despite a reputation for sometimes overpromising, Mr. Bryden clearly knows what it takes to build a successful technology company, although his own career has also seen some high-profile failures.

"Plasco required somebody that could roll up their sleeves and work the company through the permitting process, introduce it to investors, get initial capital into the company, and then grow the company to the point where it could raise significant capital," says Dan Phaure, an investment banker with Toronto-based Jacob Securities Inc., which has participated in Plasco financings.

"There wouldn't be very many people in Canada aside from Rod who would be able to do that."





Quest for capital The global waste-to-energy market is booming, though many municipalities are opting for older incinerator technology that raises pollution concerns.

Governments are looking to generate power from renewable sources in order to reduce greenhouse gas emissions and to divert garbage from landfills, where tipping fees are expected to climb dramatically as available land becomes scarce.

Despite recycling efforts, North Americans currently throw out the equivalent of 99 million green garbage bags a day. The energy content from virtually all of that material can be recovered in the form of electricity, steam or even ethanol.

Plasco's quest to capitalize on all this dormant energy initially focused on tapping the federal government's Sustainable Development Technology Canada (SDTC) fund, which provides early round, pre-commercial funding for promising technologies that are potentially profitable.

A key moment came when the SDTC staff concluded their review of Plasco's application for funding in 2006 and decided to recommend it to the board. Even before the board approved a $9.5-million grant, investors took their cue from SDTC's due diligence process and agreed to finance the Ottawa demonstration plant, Mr. Bryden says.

The demonstration plant started operations in July, 2007 - and almost immediately ran into problems. The sorting and conveyor system simply couldn't handle the volumes of garbage required for a commercial operation.

In December, 2007, Plasco announced it had a new largest shareholder - First Reserve Corp., a Greenwich, Conn., private equity fund that specializes in energy. First Reserve invested $35-million (U.S.), leading a syndicate that contributed a total of $54-million (U.S.).

On top of that, First Reserve committed an additional $110-million to be invested over the course of 2008, as Plasco met performance targets. But the targets weren't met and that money never came.

Mr. Bryden says the lack of follow-up capital from First Reserve was not as critical as it might have been - the money would have been needed to build a commercial-scale plant, but Plasco couldn't proceed on that front until it ironed the wrinkles out of the demonstration plant.

The lack of capital and sales, however, forced him to lay off 53 workers in May, nearly a third of its employees. Critical work at Trail Road in Ottawa continued.

Mr. Bryden takes responsibility for the delay, saying he was focused on ensuring the plasma technology worked, and paid too little attention to materials handling.

"We underestimated the time it took to deal with the so-called simple stuff - the stuff that isn't rocket science," he says. "Some of it is rocket science, and that worked. But it was a much more time-consuming process than we expected to integrate that into a real functioning system."

Now the CEO insists Plasco is ready for prime time.

Since March, the materials feeding system has functioned smoothly, allowing the company to increase its waste handling by 43 per cent in the second quarter. The energy conversion unit has also performed well, and Plasco last week was rated top performer among nine waste-to-energy competitors by the California municipality of Salinas, which is prepared to enter contract discussions with the company.

To proceed with commercial plants, the company is deeply reliant on the health of capital markets, and the re-emerging appetite among international investors to plow money into unproven technologies.

Indeed, Plasco's business plan is predicated on taking the risk off the shoulders of its municipal partners, who will not contribute to the capital costs.

Instead, the company would tap the capital markets for project financing. To persuade investors, Plasco needs agreements with municipalities to obtain feedstock at a set price, and indications it will be able to sell the power to local electricity companies at the premium prices available to renewable-energy developers.

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