Re Varennes Cellulosic Ethanol LP
What is the test for a contested RVO with contested releases?

Summary: The Québec Superior Court has approved a reverse vesting order allowing StormFisher Hydrogen to acquire the assets of Varennes Cellulosic Ethanol LP and its general partner, preserving a $1.5-billion clean-energy project. The sale follows a seven-month CCAA process after the venture ran out of liquidity amid cost overruns and technical risks. StormFisher will repurpose the partially built Varennes biorefinery into an e-methanol facility using renewable hydrogen and captured CO₂, reusing some of the existing infrastructure. Justice Sheehan found the RVO essential to maintain non-transferable permits, tax credits, and Hydro-Québec power allocations, largely rejecting objections raised by certain opponents over intellectual property and release provisions. With little prospect of creditor recovery under liquidation, the Court concluded the transaction was the best outcome available and granted the RVO.

The Québec Superior Court has approved a reverse vesting order (RVO) allowing StormFisher Hydrogen Ltd. to acquire the assets of Varennes Cellulosic Ethanol LP (VCE) and its general partner 7037163 Canada Inc., securing the future of a $1.5 billion renewable-methanol project.

The decision caps seven months of Companies’ Creditors Arrangement Act proceedings launched in March 2025 after VCE—an ambitious joint venture backed by Suncor, Shell, and Proman—ran out of liquidity amid cost overruns, technology risks, and uncommitted offtake contracts. Ernst & Young Inc., the monitor, and Barclays Capital Canada, the financial advisor, ran an extensive sale and investment solicitation process that contacted 71 parties worldwide. StormFisher’s bid emerged as the only binding offer by August 2025 and was declared the successful bid.

StormFisher plans to repurpose the partly built Varennes biorefinery—75% complete on the biofuel plant and 45% on the electrolyser—into an e-methanol facility using captured CO₂ and renewable hydrogen instead of Enerkem Inc.’s biomass-gasification technology. The shift, the Court heard, removes first-of-kind technical risk while maintaining the environmental objective of low-carbon methanol production. Of the $950 million already spent, the purchaser will reuse major infrastructure and retain certain employees.

The purchase price, which has been sealed, will first fund a $750,000 administrative reserve and the CCAA charges, while interim lenders Investissement Québec and Canada Infrastructure Bank will only be partially repaid. The Court accepted the monitor’s evidence that liquidation would yield less than the charges and leave nothing for secured or unsecured creditors.

Justice Martin Sheehan found the RVO structure essential to preserve critical regulatory approvals, clean-energy tax credits, and Hydro-Québec electricity allocations that could not be reassigned under a conventional asset sale. He accepted that without the structure, the project’s permits and megawatt entitlements could be lost entirely, jeopardizing any going-concern outcome.

Enerkem Inc., Black & McDonald Ltd., and Groupe Promec Inc. opposed aspects of the order. Enerkem sought protection of its intellectual-property rights embedded in project equipment. The Court required the purchaser to give an undertaking preserving Enerkem’s IP while allowing the transaction to close. Promec and B&M contested broad releases for directors, officers, and secondees from Suncor and Shell, arguing misconduct pre-dating the CCAA filing. Justice Sheehan upheld the releases, citing the “extraordinary commitment” of management during the restructuring, but carved out the statutory exclusions in s. 5.1(2) CCAA for contractual and misrepresentation-based claims.

In approving the RVO, the Court reiterated that such structures remain exceptional but permissible when necessary to preserve non-transferable regulatory attributes. It emphasized the monitor’s view that no alternative process could yield a better outcome and that an orderly liquidation would erase jobs, destroy value, and forfeit federal clean-fuel incentives.

Justice Sheehan acknowledged that some stakeholders may find this outcome “surprising and disappointing”, with no recoveries for most creditors, but concluded the sale “preserves a potential future Canadian supply source of low-carbon methanol” and represents “the best option available in the circumstances”.

Judge: The Honourable Martin F. Sheehan, J.S.C.

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