The Mississippi Business Journal published a story written by star reporter Amy McCullough on one of Mississippi's bio-fuels experiments. Apparently there are some questions about the financial health of a company that received a $75 million interest free loan from the Mississippi Development Authority:
"The eyes of the international renewable-fuels community are fixed on KiOR (NASDAQ:KIOR), a Texas-based company in which Mississippi has a large stake — specifically a $75 million interest-free loan administered by the Mississippi Development Authority. KiOR plans to build five plants in Mississippi that should convert wood chips to renewable crude through a process called pyrolysis, a feat only accomplished in test facilities.
Biofuels experts, like Sumesh Arora, director of the Strategic Biomass Solutions division of the Mississippi Technology Alliance, laud KiOR as a great fit for Mississippi, which has abundant biomass resources.
“KiOR’s first location at the port in Columbus, Miss., lends itself well to utilize the tremendous pine wood biomass resources in the state for converting into next generation biofuels. KiOR features prominently in the ‘Biofuels Digest’ index of publicly traded biofuels companies, and I believe that market forces will govern the success of this sector as we move forward,” Arora said, noting that KiOR’s CEO Fred Cannon even ranked No. 20 on this year’s list of the top 100 people in bioenergy worldwide.
But some of those looking at the company strictly from a financial standpoint are more skeptical.
On Jan. 13, CNBC’s Stock Blog said KiOR was “bleeding cash” and investors were looking at shorting it, or making money by betting the company’s stock price will continue to fall. ”It needs upwards of $100 million more just to get its two plants going and to reach profitability, and that assumes no glitches,” the report said.
The Columbus plant appears to have already experienced at least $15 million in “glitches,” with more cost overruns expected, based on regulatory filings with the Securities and Exchange Commission. KiOR is in the site selection process for its next Mississippi plant, which is set for Newton County with an estimated cost of $460 million. The plant currently under construction on a 22-acre site at the Columbus-Lowndes County Port was originally estimated to cost $110 million, according to “Pointe Innovation,” an MTA publication. Based on KiOR’s Sept. 30, 2011, financial statements filed with the SEC, the company has already spent over $125 million on the construction of Columbus plant. The MDA says the facility is expected to be in production by third quarter of this year.
In its SEC filing, KiOR explains that it is a “development stage enterprise” and “expects to continue to incur operating losses through at least 2013 as it continues into the commercialization stage of its business. The Company’s ultimate success is dependent upon the successful transition of the Company from primarily a research and development company to an operating company...
For the nine months ending Sept. 30, 2011, KiOR reported no revenues and realized a net loss to stockholders of $68.8 million. Although KiOR has yet to record any revenue and management expects to continue to incur losses through 2013, the company does maintain that it has the balance sheet to support its continued investments. Management noted: “We (KiOR) believe that our $152.2 million of cash and cash equivalents as of Sept., 30, 2011 and $35.6 million of remaining available borrowings as of Sept., 30, 2011, under our $75 million interest-free loan from the Mississippi Development Authority will enable us to meet our liquidity needs for the next 12 months.”
Under the MDA agreement, KiOR made a commitment to make certain investments in Mississippi by Dec. 31, 2015, including $500 million in property, plant and equipment as well as wages and direct local purchases of $85 million.
KiOR recently received a cash infusion on Jan. 27 when it announced it closed a new $75 million loan with a lender group comprised of an affiliate of Vinod Khosla and two Canadian corporations owned by certain pension fund clients of Alberta Investment Management Corporation (AIMCo)....." SEC filings, Rest of article
Friday, February 10, 2012
MBJ eyeballs KiOR
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27 comments:
This can't be anything but a disaster in the making.
Looking like a Beef plant
Why is it necessary to have an agency lime MDA that has basically zero accountability? Who came up with this atrocious idea? Not the idea of having an agency to spur development, but the idea that it had to be protected from full public scrutiny. Please make it stop.
Smell like beef and wood chips. Hold the mesquite please!
This is advanced technology with significant growth implications and is run by industry leaders from "black energy". They are spending significant amounts of their money. Hardly comparable to beef plant.
The last paragraph should be everyone's hint that this isn't like the beef plant or worse, Magnolia Venture.
Besides, processing beef wasn't an innovation.
Bad comparison,folks.
I note , also, that there is actual construction underway.
The question becomes whether or not the technology will work and can be marketed.
I don't know the answer, but I do know that if we looked at electrifying the nation or building the railroads or establishing airlines or Panama Canal only in terms of start up costs, time involved and quarter profits to investors, we'd still be reading by kerosene lamps, riding in stagecoaches and going around the tip of South America.
Also, one should look at the costs of the new nuclear plant in Georgia. It will be quite some time before it's turning a profit but with a nuclear plant,the technology, the delivery system and market is established. So,no one is looking at the start up costs and timeline from start to production.
I agree with those who write there is inadequate oversight, but you can't have it both ways. You can't decry government regulation, gut the SEC, and then complain about a lack of oversight.
And, we can't be innovative without failures. Edison wasn't the first to develop the light bulb nor Bell the telephone. What they were the first to do was succeed in turning those innovations into profitable business enterprises.
But, I'm beginning to wonder if it would have been possible for them to succeed today.
The higher the risk, the greater the return. But, unlike those who invested in a railroad by buying railroad stock , most individual investors these days have no part in the decision. They have bought into " plans" or " funds" managed by others.
Unlike Edison with the light bulb or Bell with the phone (who used private money) they are using public money.. Socializing the risk but privatizing the profits. If it were such a great idea pitch it to venture capitalist. But like the Illinois Pacific who got paid by the mile by the government they don't worry about having failures because it ain't their money. Burlington Norhern, private investments, took the best route nearer the farmers etc, and remains profitable today. To recoup the 75 million they will have to pay 1.5 trillion in salaries. That will take longer than digging the Panama canel eith a spoon. Good luck.
Is this the same biofuels company that Phil was extolling the virtues of during his campaign? I seem to remember a quote about how many trees we had.
8:35 & 11:38 - Nice back and forth. These types of comments are why I read this blog.
I also suspect that both comments were made by people who are closer to this deal than the average public, and probably would not bother to comment if they did not have the option to do so anonymously.
Props to KF for the only original reporting in this city (and some of the only in this State) and for putting up with anonymous commenting.
Yes, this the biofuels facility that Phil opens his mouth about every time he reaches a podium.
And Haley Barbour is the one who brought this to the Legislature and shoved it through.
The state of Mississippi has nothing for collateral except a hunk-of-junk, science experiment of a plant when the company goes bust.
But all the RINO's at the Legislature want to make sure we keep issuing bonds for "economic development."
A biofuels/bio-crude company that has never generated a dollar or made a product is hardly a Nissan or Toyota.
Ridiculous "investment." Flushing money down the toilet would have been a lot easier. Then we could have saved money on salaries at MDA.
Biofuels IPOs not doing well:
http://www.thestreet.com/story/11412490/1/the-worst-ipo-peddling-isnt-social-media.html?cm_ven=GOOGLEN
I juggle cats, can I get an interest-free loan from the MDA?
Khosla, no conflict of interest there eh? I'm sick of borrowing money to give to some politically connected crony. Our children deserve better.
This is illegal in the EU. They can't use taxpayer monies to bribe manufacturers.
Khosla...that's no conflict on interest eh? I'm sick of Haley's cronies getting enriched at the taxpayer's trough. And getting him out of office isn't going to end it. We better wake up soon!
In the EU economic incentives are not allowed. Sure they miss some manufacturing jobs, but they don't have to bribe Solyndras, Kiors, and beef plants either.
A blogger who happens to be a CFA wrote about this deal last week: Blog post. I know nothing about this blog or its author.
where is the beef? i say, where is the beef?
It must be nice to have a place where ignorant 'anonymous' comments can be made without any degree of knowledge of the subject matter. Just a hatred for something/somebody that is possibly remotely connected. Or not - maybe just want to make it connected.
"Disaster"; "beef plant"; "MDA no accountability";"trillions in salaries";"politically connected crony"
8:35 evidently has some knowledge of the actual deal and makes valid points about this particular deal. But all the posters that threw out the above unfounded comments probably know nothing of the details.
Beef Plant - and yes, Magnolia Venture (from a decade earleir) were disasters. Because they were done against all rules and all common sense. Beef plant had studies that said it absolutely would not work. Beef plant was 100%, plus and additional 125% public money and NO private investment. Beef plant was done with shysters that had no background in the production processes of the plant. And the beef plant failed.
KiOR is - at 8:32 pointed out with additional support from 8:35 - is advanced technology and new innovation. The beef plant was exactly the opposite. Advanced technology is not going to be profitable in its infancy, (as the business models presented by the investors to the state, other private lenders and other investors indicted). KiOR was required to have a substantial custormer for its product before the state would close its loan.
Look at the percentage of private capital invested in these facilities and operation. The state's investment is clearly secondary, not primary. Or, as it was in the oft mentioned Beef Plant, the only money.
And I would love for one of the anonymous individuals that seem to know all but never back up their comments to show where the "Crony" is in this deal. And I don't care if you can't prove the "politically connected" part of your comment, just back up either one of your accusations. Politically connected, or crony, of the Governor. Or for that matter, of any of the legislators that supported this project.
And the payback to the state is not measured strictly in "salaries". In this case, unlike Magnolia or the beef plant, the investment is a loan. The purpose is to create jobs. And this project also brings the benefit to other sectors - the supplier of the scrap wood, thereby helping a second industry. (Yes, just like the beef plant was supposed to do, help the cattle farmer. But there, the studies showed, there weren't enough cull cows produced in the seven southern states to supply the beef plant. Here, there is plenty of wood resulting from timber operations to supply KiOR operations.)
I understand its a blog. And everyone has their opinions, just like they have other bodily parts. Its just when your opinion comes out smelling like emissions from those other body parts, you lose credibility. At least have some idea of what you are bloviating about before you make the accusations.
The truth on KiOR will be available to all in a couple of years. If the plants are built, wood is being processed, and product is being sold, KiOR should be repaying its loan to the state. There is great hope for this innovative technology, and IF it works, it will be a great thing for our state, especially considering our renewable timber supply. If it doesn't AND if the state loses on its investment, then you can come complain with SOME of your accusations. But just because MBJ writes an article about it being unprofitable while it is still in construction is a little premature.
And - for disclosure - I have absolutely no connection to KiOR. I don't know the developers, I don't know the owners, and I'm not an employee of any state agency. I was and am an interested bystander that watched this project through its initial proposal and when I read the final deal made by the state, became convinced that it was not the bogus deal I first believed it would be.
yo! 4:00...what about ignorant 'anonymous' that BLATHER way to much? hmmmmm?
While Phil is out telling everyone how tight the budget is going to be he purchased two decked out black suburbans so he could look more important. Maybe after spending $80,000 of the peoples money on new rides he might use this biofuel to help save on their fuel cost.
Charlie Ali - I wish there were more people, and not kust young, not just Republicans, and not just in the nation's capitol who recognized the difference and ised the correct word. "Investments" are great for private money, not tax dollars.
@ 4:00 Nice to see an anonymous poster critical of another for being anonymous also. You admit to not knowing the owners of Kior. In that case, do some research before you post. Kior is a venture capital project of Vinod Khosla, one of the wealthiest men on earth. And he's getting an interest free loan from the poorest state in the union. He and Haley have been pushing this green energy/jobs for a while. It's not completely accurate to call this an "interest free loan" though. We don't have the cash on hand for this, so we sold bonds. So there is interest involved in the transaction, but the taxpayers will pay it.
To the anonymous commenter critical of others commenting anonymously:
You said, "KiOR was required to have a substantial custormer for its product before the state would close its loan."
You are correct. But if this company -- which has never made a $1 or a product before -- fails to actually produce a product, what good is the off-take agreement?
Republican (more aptly named RINOs) can see socialism when Obama doles out money to Solyndra, but not when RINOs at home do the same thing.
Some explain how billionaire Vinod Khosla of Khosla ventures is connected to Haley Barbour?
Just a billionaire who Haley loaned millions of OUR dollars, 3 times... Soladigm, Kior, and Stion. All 3 are "green jobs". Let's just pray they don't share Solyndra's fate.
Chip Pickering claims that bringing MPC's gasification plant to Mississippi was the "crowning achievement" of his thirteen-year run in Congress.
I predict that Pickering and Joe Higgins will end up with egg on their collective faces when the "shoes drops" on these "experimental" boondoggles.
Those idled Duke Energy natural gas fired electric generating plants will be back on line with the "frac" gas coming out of Pennsylvania and the Gulf.
And thanks to Bentz and Posey, MPC can just walk away and leave the MPC customer base with the $4.5 Billion debt.
I'd like to know more how that secret "catalyst" in KIOR's energy balance equation(converting cellulose to liquid petroleum) trumps the First law of Thermodynamics? The Germans did it with coal.
God forbid that the chemical "tailings" from the process end up in the Tombigbee or anywhere near that precious Tuscaloosa aquifer.
http://www.greencarcongress.com/2010/08/dumesic-20100815.html
Latest news from the Prairie on the KIOR facility.
http://packet-media.com/2011/07/08/kior-installs-5-million-700000-lb-converter/
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