October 17, 2012 11:30:29 AM
Sarah Fowler - email@example.com
According to company officials, KiOR has entered its start-up phase and expects to ship product by the end of the year. However, waining investor confidence has resulted in a falling stock price.
The company's stock, which hit a 52-week high of $19.87 per share last October, was worth $5.89 at the end of the trading day Tuesday, a drop in valuation of roughly $1.4 billion over the span of a year.
After initially stating that the company would have no response to concerns over production delays -- KiOR spokesperson Kate Perez cited an SEC-mandated "quiet period" -- KiOR Chief Financial Officer John Karnes said Wednesday morning that while he cannot confirm whether production has been delayed, he reaffirmed a point the company made during an August shareholders' meeting that "we would begin shipping in the October, November time frame."
In that conference call, KiOR CEO Fred Cannon confirmed the plant would begin their start-up phase in September and that delivery of product would follow in the fourth quarter of 2012.
The low stock price has some shareholders worried about their investment and green energy bloggers buzzing about the company's viability.
Tristan Brown is a professor at Iowa State University Bioeconomy Institute and is also a shareholder in the company. Brown has tracked the company's progress and added he was not aware of any production delays.
However, he said that is not uncommon in a facility of KiOR's expansive size.
"When you try to start your commercial scale facilities, you're going to try to iron out the kinks," Brown said. "They have already cleared major hurdles and once they have a product to sell I think there will be plenty of buyers. They just need to get those wrinkles ironed out."
In the case of KiOR, a delay in production could become an issue depending on the company's remaining capital.
Commonly called the "Valley of Death," companies can struggle to continue to fund themselves between the time they complete construction and the time they begin generating revenue.
Brown said that appears to be the case for KiOR.
"The issue here is getting up production before you run out of cash," Brown said.
While Brown added the company should be in the clear if they start production relatively soon, based on their quarterly report, the company has a limited amount of time to produce based on their depleting capital.
"From the numbers they gave, they are running a little low on cash," Brown said.
However, if KiOR can start production by the end of this quarter, both Brown and Columbus-Lowndes Link CEO Joe Higgins insist the company will grow by leaps and bounds.
Higgins said he understands that production should begin sometime before the end of the year.
"We went out there and toured (the facility) and I asked about production," said Higgins, who toured the facility on Oct. 8. "They said they hoped to be running this quarter," Higgins told the Columbus Rotary Club on Tuesday.
At the company's quarterly meeting in August, officials announced start-up was set to begin in September.
KiOR became a publicly-traded company in June 2011 when it offered 15 million shares for sale on the NASDAQ at $15 per share.
With 104,800,000 shares of stock, the company's worth fluctuates with the market. When it was selling for $19.87 per share, KiOR was worth just over $2 billion. At $5.89 a share, the company fell to a $617 million valuation.
KiOR secured a $75-million loan to build five plants throughout Mississippi. The Columbus facility cost $222 million to build.
The company broke ground at the Columbus location in May of 2011 and construction was completed a year later.
KiOR has developed a proprietary technology platform to convert sustainable, low-cost, non-food bio-mass into a hydrocarbon-based renewable crude oil. Using standard refining equipment, the company processes its renewable crude into gasoline and diesel blend stocks that can utilize the existing transportation fuel infrastructure for use in vehicles on the road today.
To produce oil, which can be made into fuel, KiOR uses a process called Fluid Catalytic Cracking (FCC) technology combined with its proprietary catalyst systems to reduce the time it takes to produce oil "from millions of years to a matter of seconds," according to the company's website. Their Bio-mass Fluid Catalytic Cracking (BFCC) technology has been used to reduce the cost of producing biofuel. The gasoline and diesel blend stocks that are produced can be combined with existing fossil-based fuels and used in modern vehicles.
"They'll produce 11 million gallons a year," Brown said. "The Columbus facility will be the largest biofuel facility in the world once they start up production. There is still a lot of potential here before they run out of cash."
The first year's production has already been sold to Catchlight Energy, a joint venture between Chevron and Weyerhaeuser.
"It's a pretty significant impact on Columbus," Cannon said in May. "It's enough fuel, when Columbus is up and running at full production, to fuel 60,000 cars each and every year in the United States."
Higgins said the energy industry will be paying close attention.
"It's a safe bet, there are a lot of people watching this thing," Higgins said.
Editor's note: This story originally reported production delays at the Columbus KiOR plant, which is incorrect, said the company's CEO Fred Cannon. Presently, the Columbus plant is in "start-up phase," a period during which the plant's systems are brought on line, as Cannon said would be the case during an Aug. 14 phone call to shareholders. Cannon told The Dispatch this week he expects the Columbus facility to "ship product" in October or November of this year, as projected. As is the case for facilities of this type, it could be nine months to a year for the plant to be fully operational, he said.
Sarah Fowler covered crime, education and community related events for The Dispatch.