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KiOR filing raises doubts about Columbus biofuel plant

By   /   March 18, 2014  /   News  /   No Comments

By Steve Wilson | Mississippi Watchdog

Green energy might be turning into red ink for Mississippi.

The state might be on the hook for most of a $75 million no-interest loan after green fuel company KiOR idled its biofuel production plant in Columbus, according to a a 10-K filing with the U.S. Securities and Exchange Commission released Monday.

IDLE: The Kior plant in Columbus, Mississippi is designed to turn wood chips into gasoline. The state loaned the company $75 million with a no-interest loan to build the Columbus facility and a larger plant in Natchez in 2010.

IDLE: The Kior plant in Columbus, Mississippi is designed to turn wood chips into gasoline. The state loaned the company $75 million with a no-interest loan to build the Columbus facility and a larger plant in Natchez in 2010.

The company owns a $213 million plant in Columbus, built in 2011, and designed to convert yellow pine chips into gasoline and diesel fuel. It also planned to build an even larger facility near Natchez. The troubled plant is bedeviled by issues with its fluidic catalytic cracking process, which converts biomass into fuel stocks.

KiOR said the production issues are related to the first-of-its-kind nature of the plant and that the company is committed to improving the output, yield and operations of its facility.

Those improvements might never come to fruition. KiOR said without additional capital — besides $25 million promised from the company’s primary investor, Sun Microsystems co-founder Vinod Khosla —  it has “substantial doubts about our ability to continue as a going concern.” The company said in the filing it needs definitive documentation from Khosla for his contribution before April 1 or it won’t have the funding to continue operations or meet debt obligations.

Jeff Rent, the communications and media manager at the Mississippi Development Authority, said his organization has legal remedies in case of a default by KiOR. In a memorandum of understanding between the MDA and a company receiving a loan or a grant, there are clawbacks, or contractual administrative means by which the agency can recoup its investment. The one with KiOR is no different.

“The MDA would be the first lienholder for real property and equipment if the worst case scenario happens,” Rent said. “Each project is different and there are metrics they have to meet. We have regular contact with each company to make sure they are in compliance at all times.”

According to MDA, the company has already made three debt payments to the state at slightly less than $1.9 million, and is in compliance with all of the benchmarks specified in the memorandum of understanding. MDA will know in two weeks whether KiOR can make its first payment of the year, scheduled for June 30.

The Mississippi Legislature approved a $75 million loan to KiOR in the 2010 special session. According to the 10-K filing and the MDA, the company still owes the state slightly less than $69.4 million and cites debts of $279.5 million as of Feb. 28.

The company also must make more than a half-billion dollars in property and equipment investments and employee wages by Dec. 31, 2015.

The company revealed in its SEC filing it was served with a subpoena by the SEC and lost $347.5 million in 2013. The subpoena was “seeking documents about, among other subject matters, the progress at our Columbus facility and the timing of projected biofuel production levels.”

The company admits it hasn’t found a way to commercialize its production of cellulosic gasoline and diesel.

According to KiOR, the plant produced 894,000 gallons of fuel products in 2013, with 385,000 coming in the fourth quarter.

According to the filing,  the company has put the brakes on optimization projects and upgrades at the Columbus facility and is putting it into “an idle state.” The company also said it couldn’t estimate 2014 production from the plant.

Contact Steve Wilson at swilson@watchdog.org

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Steve Wilson is a writer and a journalist whose work has appeared on Fox News, the Huffington Post and the Daily Signal. He serves as the Mississippi Bureau Chief for Watchdog.org. Beginning his career as a sports writer, he has worked for the Mobile Press-Register (Ala.), the LaGrange Daily News (Ga.), Highlands Today (Fla.), McComb Enterprise-Journal (Miss.), the Biloxi Sun Herald (Miss.) and the Vicksburg Post (Miss.) His bachelors degree is in journalism with a minor in political science from the University of Alabama. He served four-plus years in the United States Coast Guard after his high school graduation and is a native of Mobile, Ala.