Thursday, January 9, 2014

KIOR Gives An Update

A couple weeks after Condi Rice resigned from the board of directors of Kior and the CFO left abruptly, Kior held a conference call this morning.  I called in and listened.

In essence KIOR operated 70% of the time in the 4th quarter and could only process between 250 to 300 tons a day of wood versus nameplate capacity of 500 tons a day.   The CEO stated they yielded liquid fuels at the rate of the low thirties of gallons per ton.  The CEO mistakenly stated they only had $25,000 of cash at the end of the year and this was corrected to $25 million later in the call.

Kior is planning to do limited production in Q1 as well as most of the year and plans to spend $10 million to fix the plant.   A reporter from WCBI (CBS) in Columbus Mississippi asked if there would be layoffs and the CEO replied there would not be layoffs.     Kior talked a bunch how the government was creating uncertainty in the payment stream for their cellulosic based transport fuel.  Kior also said they had not raised new funding yet but were still working on it.   They said they will slow production in Q1 to save cash on things like natural gas. 

This got me thinking about why they would use natural gas in a plant that has so much wood.   Perhaps Kior has been faking a renewable story when as much as half of their BTUs may actually come from natural gas.   I will investigate this over the next couple of weeks.   This would not be a new trick for Vinod Cost Us as his first company Cello faked renewable fuel when the fuel was found to be fossil derived.

Kior also talked some mumbo jumbo about a new catalyst arriving in the second quarter and continuing R&D efforts of $22 million in 2014.   They will not provide guidance on expected production but did give historical production and it looks like they make a lot of heavy fuel oil besides gasoline and diesel and lose yield in gas and water streams.

My guess is they are prepping for Chapter 11, 7 or 13 in the event new funds are not received.   KIOR is trading down 11 cents at $1.64 based on the call.  The use of natural gas in some large measure in their process is very interesting.   It could be they make a bunch of heavy tarry type stuff that needs massive hydrotreating or they simply are a partial gas to liquids play and the wood was a cover story to pretend to be green.   No matter what the workers in Columbus Miss better brace for the worst.


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