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Bitcoin producer has inside track on acquiring North Bay power plant

Validus Power generating stations in Iroquois Falls, Kapukasing, Kingston and North Bay on CCAA selling block
Validus' North Bay power plant (Company photo)

The power station assets of insolvent Validus Power in northeastern Ontario are up for sale.

A leading contender to acquire one of the sites is Hut 8 Mining, a Toronto bitcoin company, that was once a Validus business partner in North Bay.

An Ontario Superior Court judge approved a sales and solicitation process (SISP) that started on Nov. 2 as part of the CCAA (Companies’ Creditor Arrangement Act) proceedings involving a stable of four natural gas plants in Iroquois Falls, Kapuskasing, North Bay and Kingston.

Waiting in the wings with an offer in the form of a stalking horse bid is Macquarie Equipment Finance and Far North Power Corp., a newly created entity of 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. Validus entered CCAA on Aug. 29.

The sales process will test the market and invite other bidders.

KSV Restructuring, the court-appointed monitor handling the sales process, said in court documents that there are other interested parties out there that contacted them over the summer when Validus first entered receivership at the beginning of last August.

Hut 8 is a cryptocurrency business that once partnered with Validus to design, construct and install a generating station to power an adjacent data centre in North Bay. Hut 8 is embroiled in a separate lawsuit with Validus over a claim of a broken power supply agreement. 

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

Macquarie and Far North/Hut 8 decided a few months ago to team up as bid partners. If the stalking horse bid is successful, they would acquire the Validus plants.

Of the four power stations, only the Iroquois Falls and Kingston plants are operational. The other two are being maintained. 

KSV said it’s important to keep these power plants operating as going concerns and retain the workforce. The plants sell power to Ontario’s Independent Electricity System Operator (IESO) on an as-needed basis for the provincial power grid. 

If the stalking horse bid is declared successful,, a new subsidiary company of Hut 8 will become the owner of “certain" assets of Validus. Macquarie will receive a minority equity interest of 20 per cent and this Hut 8 subsidiary will be an 80 per cent majority owner.

In a Nov. 3 news release, Hut 8 CEO Jaime Leverton talked about creating a vertically integrated, diversified operation, involving its former North Bay site that would be “a first in our industry.”

The  deadline to submit bids is 11:59 pm, Dec. 7. If warranted, KSV could decide to hold an auction by Dec. 13.

If no qualified bids come forth, KSV, at its discretion, could approach the court to terminate the sales process by Nov. 22 and declare the stalking horse offer the winning bid.

Those considering a bid must be prepared to pony up $60.2 million or more to qualify.