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KiOR stares down default on MDA loan

 

The Columbus KiOR plant is pictured in this 2012 Dispatch file photo.

The Columbus KiOR plant is pictured in this 2012 Dispatch file photo. Photo by: Dispatch file photo

 

William Browning

 

If KiOR does not finalize the details of a $25 million commitment from a California investor within the next nine days the company expects to default on a $75 million loan it received from the state of Mississippi. 

 

The Texas-based alternative fuel company, which operates a biomass conversation facility in Columbus, has made three payments on its loan to the Mississippi Development Authority, according to MDA public relations manager Jeff Rent. Each payment was for $1.8 million. 

 

KiOR's outstanding balance on the 2010 loan is $69.3 million, Rent said. 

 

The company shut down production at its plant in Columbus in December to install upgrades, according to KiOR officials. 

 

In KiOR's end-of-the-year financials filed with the Securities and Exchange Commission last week, company officials stated that if more capital is not raised soon, it will be unable to make its next loan payment to MDA. It is due June 30.  

 

The SEC filing also stated that KiOR's Columbus facility will remain in "idle state" until further capital is secured. The company, which has $279.5 million worth of debt, fears it will be forced to file for bankruptcy if no financing materializes, according to the filing. 

 

Rent noted that KiOR has made all of its scheduled loan payments thusfar. But if the June 30 payment is missed, the company would "no longer be compliant which would then put the clawbacks in place," he said. 

 

The state is the lienholder on KiOR's real property and equipment. 

 

"MDA is aware of the challenges faced by KiOR and we are concerned with the report filed with the SEC," Rent said. "We are in regular contact with KiOR and will closely monitor the company's future financial situation." 

 

Joe Max Higgins, the CEO of the Golden Triangle Development LINK, said if KiOR never produces fuel again it will certainly hurt Columbus and Lowndes County -- but not financially. 

 

Higgins helped put together the incentive package that brought the company to the area in 2011. At that time, KiOR, in addition to two other planned Mississippi plants, wanted to build a first-of-its-kind $225 million plant in Columbus that would convert wood chips to fuel. 

 

"We looked at the project and said it might work, it might not work," Higgins said. "We weren't willing to take a big risk at the local level." 

 

What local officials did was offer the company a vacant, 30-acre spot at the Columbus-Lowndes County Port. In exchange for the deed to that property, KiOR agreed to pay the port $25,000 a year for port maintenance. Local officials also entered into a fee-in-lieu of taxes agreement with the company. That agreement calls for the company to pay a little more than $1 million annually to the city of Columbus, Lowndes County and the Lowndes County School District for a decade. 

 

The company made the first of its payments to local entities on Feb. 1 -- the school district received $391,460 and the city and county both pocketed $294,767, according to Higgins. 

 

If the worst case scenario happens and KiOR shutters its operation, Higgins said "it's a bad deal for us." 

 

"We'll lose $1 million a year and 110 jobs," he said. 

 

The company currently has 70 employees and 40 contract employees at the Columbus plant, according to Higgins. KiOR has not given its employees notice of any potential layoffs, which by federal law they are required to do at least 60 days prior to any plant closure or mass layoffs. 

 

KiOR's SEC filing last week stated that Vinod Khosla, an investor from California, has committed up to $25 million to the company. But the deal is not finalized and if it does not become so by April 1, the company cannot fund operations.  

 

"If that doesn't happen," Higgins said, "they'll probably be in bad shape." 

 

If Khosla's $25 million becomes available, KiOR expects that money will help it meet its obligations through August. No other financing is in place at this time, according to the company's filing. 

 

At least one industry expert believes Khosla will release the money to KiOR in time for it to meet its financial obligations in the short term. 

 

"I think...Khosla is going to give them enough money to limp along for a few more months in the hopes that he can convince a much bigger investor to come onboard," Robert Rapier, a chemical engineer with two decades worth of engineering experience in the energy business, told The Dispatch on Friday. 

 

Rapier expects Khosla to give the company enough money to keep its doors open but not enough to get the plant up and running. 

 

"I don't think Khosla is going to let them go under just yet," he said. 

 

The company, meanwhile, remains optimistic and said it is using this time to install improvements at the Columbus plant. 

 

"We have completed a number of enhancement projects already, which we expect will enhance the throughput, yield and operability of the facility," KiOR officials said in an emailed statement to The Dispatch on Friday. "While we have more to do, we look forward to seeing these benefits when we start the plant back up." 

 

The company said its plant operates on "first-of-its-kind technology" and that "is a difficult thing to do." 

 

"They are working on, as we understand it, the technology and the operation," Higgins said. "Some people said, 'Are you just kicking the can between now and August or September?' We possibly could be. But they possibly could get a solution."

 

 

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