Jackson Jambalaya

Kior halted production at its Columbus plant in December to "make improvements" and has not plans to resume production during the first quarter of 2014.  The company operates a plant in Columbus and plans to open a larger one in Natchez. The legislature approved $75 million in interest-free loans to Kior in a 2010 special session. The plants are supposed to convert woodchips into crude oil and gasoline. The project was supposed to create 1000 direct and indirect jobs in Mississippi as well as constructing up to five plants. Bloomberg reports:

Kior is the operator of the first U.S. commercial-scale cellulosic biofuel plant, fell after it was downgraded by Raymond James & Associates Inc. on concern over production.

Kior declined 4.9 percent to $1.57 at the close in New York.

The company shut down its plant in Columbus, Mississippi, in the fourth quarter to adjust the manufacturing process, and doesn’t plan to resume commercial operations this quarter, Chief Executive Officer Fred Cannon said during a conference call yesterday.

Kior has lost 90 percent of its market value since its June 2011 initial public offering at $15, and investors are becoming impatient for the company to begin selling its cellulosic biofuel in high volume, Pavel Molchanov, a Raymond James analyst in Houston, said in a report today.

“Inconsistent execution and lack of operational visibility have become a major source of frustration for investors,” he said in the report. Not only will the plant be out of operation this quarter, “management provided slim detail for the rest of the year: no production guidance of any kind, even in general terms.” Molchanov downgraded the Pasadena, Texas-based company to the equivalent of hold.

Kior in October received $100 million from Khosla Ventures LLC and Gates Ventures LLC to expand production at the Columbus plant. The company makes transportation fuels from wood waste and non-food crops. Article

However, Greencarcongress.com added some more details and analysis to the shutdown in a January 13 post:

In a conference call on Friday, KiOR President and CEO Fred Cannon said that the company will halt production of cellulosic gasoline, diesel and fuel oil at its plant in Columbus, Mississippi in order to implement a number of optimization projects it identified as necessary—based on its experience in 2013—to optimize production to enhance yield, throughput and operability and to minimize cost.

In December 2013, Cannon had said that KiOR would operate the Columbus plant “on a limited campaign basis only” to verify the impact of improvements. (Earlier post.) In the Friday call, he said that the company would only operate the Columbus facility during Q1 “only to the extent we want to test and prove optimization projects.” The current execution plan for 2014 is to focus exclusively on bringing the plant to its nameplate basis, and further to develop yield and process efficiency through R&D.

KiOR is a significant factor in the US Environmental Protection Agency’s (EPA’s) calculation of cellulosic fuel volumes for the Renewable Fuel Standard (RFS) program. With the final 2013 overall volumes and standards requiring 16.55 billion gallons of renewable fuels to be blended into the US fuel supply (a 9.74% blend), EPA projected 6 million gallons (0.004%) of cellulosic biofuels. Of that, EPA projected the bulk to come from the KiOR Columbus plant (5-6 million gallons of renewable gasoline and diesel).

For the 2014 percentage standards, EPA proposed reducing the overall target to 15.21 billion gallons, with 17 million gallons of cellulosic biofuel. (Earlier post.) Of that 17 million, EPA expected 0-9 million gallons from KiOR.

During the call, Cannon said that KiOR had produced 894,000 gallons of total fuel product in 2013, with 385,000 gallons of that in the fourth quarter. The ratio between gasoline, diesel and fuel oil is 41% gasoline, 37% diesel, and 22% fuel oil.

The final results, however, fell short of what the company had projected in December: approximately 410,000 gallons of renewable fuel during the fourth quarter of 2013, which would have brought the full year production total from the facility to approximately 920,000 gallons.....

Improvements will include some changes to the BFCC, hydrotreater and woodyard. Assuming the improvements are implemented on time, the company expects to be able to process about 500 bone dry tons of biomass per day by the end of 2014.

Further, assuming commercial supply of its next-generation catalyst in by the second quarter of 2014, as well as the installation of additional equipment to recover yield from process gases and water, KiOR expects a significant increase in yield by the first quarter of 2015....

The company anticipates that the improvement project will require an investment of about $10 million over the course of 2014, and it is actively pursuing a number of ways to secure financing. ... Rest of post,December post on Kior

Kior's stock price is $1.12 per share. The company has a market cap of $123 million. Cowen also downgraded the stock.  Here are some quotes from the January 9 conference call with CEO Fred Cannon:

Turning now to shipments during the fourth quarter of 2013. The Columbus facility shipped a total of 252,000 gallons of fuel. Total fuel shipments for the calendar year 2013 were 597,000 gallons. Shipments of cellulosic gasoline, cellulosic diesel, and fuel oil during the fourth quarter were 115,000 gallons, 111,000 gallons and 26,000 respectively....

In the aggregate, we expect that this project will require approximately $10 million of capital investment in the facility over the course of 2014 and we are actively pursuing a number of ways to finance this project as a condition to our board approval process. I believe that we have the right team in place both in Pasadena and Columbus to successfully execute this project on time, on budget and achieve the results we expect. We believe that this relatively small capital investment will bring the Columbus facility to a level of operational and financial performance that can serve as a basis for the design and financing of our next commercial facility.....


To that end, we have decided to operate the Columbus facility during the first quarter of 2014 only to the extent we want to test and prove our optimization projects. This decision makes sense for two reasons. First, with the facility out of operations, we will have the opportunity to begin to implement the Columbus optimization project consistent with the expected timetable that I described above.

We expect this focused execution of many of the Columbus optimization projects in the first quarter will position us to run Columbus in the second quarter with many of these enhancements already integrated into the facility and we would expect to see a significant step forward in terms of throughput yield and operability relative to what we experienced at Columbus in 2013.

Second, we do not believe that it is prudent to fund the production of our cellulosic fuels out of Columbus at a significant loss relative to the prices we would expect to receive from our customers. In large part, these losses are driven from Columbus’ current operating state as the low volumes presently produced by the facility cannot fully absorb the cost of production, a condition that we believe our optimization projects will help, although not entirely eliminate...

Given our operational plans for Columbus during 2014, we do not intend to provide guidance in terms of projected production, either on a quarterly or annual basis during 2014. We will evaluate whether or not to provide production volume guidance in the future once operations have reached a steady state with all of the optimization projects successfully implemented.

With $25,000 (sic) [$25 million] (22:00) in cash at year-end, we will need to secure additional financing during the next three months in order to continue to execute this strategy. We have engaged in initial discussions with potential source of financing. And while we have received positive feedback on our focused 2014 execution plan, we do not have currently committed sources of financing for our business plan. .... (KF note: That is $25 million). Rest of filing in Edger*

*If a general search page appears when clicking on link, go to EDGAR online, enter Kior in the search box. The transcript is exhibit 991. WCBI reported on the shutdown in January:



Earlier posts:
Lawsuit accuses Kior of fraud
Kior doubles down