http://www.biomassmagazine.com/articles/8745/kior-announces-cellulosic-diesel-shipment-2012-financial-results
On
March 18 KiOR Inc. announced the initial shipment of cellulosic diesel
from its commercial-scale plant in Columbus, Miss. On the same day, the
company reported financial results for the fourth quarter of 2012 as
well as the entire fiscal year. According to the financial release, KiOR
recorded its first revenues since inception during the fourth quarter
2012.
Fred Cannon, KiOR’s president and CEO, called the cellulosic diesel
shipment a major step forward for his company, the biofuels industry,
and the renewable fuels sector. “With first production at Columbus, KiOR
has technology with the potential to resurrect each and every shut down
paper mill in the country and to replace imported oil on a cost
effective basis while creating American jobs,” he said. “This facility
demonstrates the efficacy of KiOR's proprietary catalytic
biomass-to-fuel process with the potential to deliver cellulosic
gasoline and diesel to the U.S. We are proud to be making history in
Mississippi. The technology is simply scalable and we believe sufficient
excess feedstock exists in the Southeast alone to build almost fifty
KiOR commercial scale facilities."
Cannon added that the U.S. EPA’s recent actions to qualify cellulosic
gasoline for the renewable fuel standard (RFS) market and increase the
gasoline blend rate to 25 percent have de-risked KiOR’s business
strategy and created a market for the company’s hydrocarbon fuels that
is nearly twice the size of the current ethanol market.
During the fourth quarter of 2012, KiOR posted a net loss of $29.7
million, compared to a net loss of $27 million during the prior quarter.
Net loss for the full year was $96.4 million, compared to a net loss of
$64.1 million in 2011.
KiOR recorded its first revenues since inception during the final
three months of 2012. The $87,000 in revenue is attributed to the sale
of blended cellulosic diesel from the company’s research and development
facility. The fuel was blended with fossil diesel. The cost of revenue
for the quarter was $68,000, and related to the first sale, including
production, shipping and blending costs.
During a call to discuss the results, Cannon noted his company faces
three primary risks: technology scale-up risk, regulatory risk, and
financial risk. Since the last financial update was made in November,
Cannon said KiOR has made substantial progress in addressing all three
risks.
“A mitigation of scale-up risk due to commercial production of
cellulosic gasoline and diesel at Columbus is a remarkable achievement
by the KiOR team,” he said. “ In four years we have successfully
achieved a 20,000 ton scale up in our proprietary biomass to fuels
technology from proof of concept in our pilot plant to our demonstration
plant and now to our first commercial scale facility at Columbus.”
While KiOR had previously stated it expected commercial shipments of
biofuels to commence in late 2012, Cannon noted the company encountered
unexpected startup issues unrelated to its technology, but has since
overcome those normal startup issues and proven that KiOR’s
biomass-to-fuels technology works at commercial scale. “In fact, we know
now that our technology performs better in terms of quality as it is
scaled,” he continued. “From very good oil at the very small pilot plant
to even improved quality oil at the demo and now to our best ever
quality oil made at Columbus. So high in quality we’re converting over
90 percent of our oil from Columbus into transportation fuel.” The
conversion rate for conventional crude oil is only about 70 percent, he
added.
Regarding regulatory risk, Cannon said that the EPA’s recent pathway
rulemaking was the last hurdle to KiOR’s ability to fully participate in
the mandated RFS2 market. “What this means is that every gallon of
cellulosic gasoline and diesel that comes out of KiOR’s Columbus
facility and all our future facilities will generate 1.5 or 1.7
cellulosic grams per gallon, which unlocks significant additional value
for KiOR relative to nearly all other renewable fuel companies,” he
said.
Cannon also spoke about EPA’s approval of an increased Part 79
registration for blending KiOR’s cellulosic gasoline at levels up to 25
percent. “At a 25 percent blend, KiOR has a 33 billion gallon per year
domestic market for its cellulosic gasoline. This is more than the
entire RFS2 renewable volume obligation in 2022. By comparisons, this is
double the size of the ethanol market and without any blend wall
limitations,” Cannon continued.
During the call, Cannon also addressed two factors he said KiOR
believes will de-risk its funding risk. First, he said, is the
achievement of milestones. Second, he continued, is flexibility. “In our
experience, one of the best ways to drive value in any financing
process, whether debt or equity, is to have the flexibility to raise
financing when the market allows a company to maximize the value for its
existing shareholders,” he said, noting that Alberta Investment
Management Co. and Vinod Khosla have agreed to amend the loan agreement
KiOR signed last year in order to give the company flexibility it needs
from a liquidity perspective to drive financing for the Natchez
facility.
“Specifically, we have increased the potential launch under
the agreement from $75 million of current principal to $125 million,
with affiliates of Vinod Khosla committed to funding that additional $50
million upon request from the company,” Cannon continued. “If funded,
this additional funding would automatically convert into equity in
connection with future financing for the Natchez project, which further
enhances our flexibility going forward.”
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