KiOR announces Q2 financial results, discusses expansion plans
KiOR Inc. has released financial results for the second quarter, reporting operational progress at its Columbus, Miss., plant. The company shipped more than 75,000 gallons of cellulosic fuels during the three-month period, which ended June 30.
“I am happy to report that Columbus has made significant operational progress and is continuing to build its on-stream performance and reliability," said Fred Cannon, president and CEO of KiOR. "In addition to making our first shipment of cellulosic gasoline in the second quarter, we more than doubled the run time of our core technology, the Biomass Fluid Catalytic Cracking Unit, to 43 percent in the quarter, up from 20 percent in the first quarter."
During a call to discuss the financial results, Cannon spoke about three phases he said are necessary to bring a first-of-king facility to a steady state of operation. First, there is a reliability phase that concentrates on simply running the facility and building its on-stream percentage, he said. Second is a throughput phase, which focuses bringing the facility to nameplate capacity while maintaining the on-stream percentage. Finally, the third phase focuses on optimization, during which process efficiency is optimized, increasing yield. According to Cannon, the facility has achieved significant progress of the first phase and is beginning to work on the second stage.
Cannon also noted that the plant’s CFCC unit operated for just under 40 days during the second quarter, which doubled the quarterly on-stream percentage. “Our first run was April 22 to April 27,” he said. “We then started the BFCC back up on May 6 and rant it until May 12. We decided to terminate both of these runs due to feed synchronization issues. Nothing about the KiOR technology prevented the runs from going longer.” The BFCC was brought back online on May 30 and operated through June 29. The 30-day run more than doubled the facility’s previous longest individual run. According to Cannon, a small repair requirement in the wood yard necessitated the shutdown of that run.
He also stressed that nothing about the KiOR technology resulted in these operational terminations. “As has been the case since we first started the facility, these issues are not related to our core technology,” Cannon continued. “They are simply part of the break-in process, and again, let me reiterate that our goal last quarter was to keep the plant running as long as possible, not to push the plant from a throughput standpoint. Our focus was on reliability, and we typically ran Columbus at 40 percent to 50 percent of its nameplate capacity.”
Cannon said longer runs are KiOR’s main objective in the third quarter. He also stressed that the plant is currently operating, with high quality oil being produced and stored. “I anticipate that the hydrotreater will start up shortly, meaning we will have fuel ready to ship in the very near term,” he said, noting that the company’s focus will likely not shift to process optimization and increasing yield until the fourth quarter. “I look for us to achieve normal, steady-state optimal operations at Columbus in the first half of 2014,” Cannon continued.
During the call, Cannon also spoke about KiOR’s long-term business plan, highlighting two developments that have factored into the company’s strategic thinking. “First, we believe that we have made some important gains in our research and development efforts that…can have a significant impact on the operating efficiency and catalyst performance of our technology at a commercial scale.” Second, Cannon said KiOR is beginning to see traction on the commercial development of feedstocks other than Southern Yellow Pine, including hardwood, energy crops and waste products. Cannon said the company expects to be able to procure these alternative feedstocks at a lower price.
As a result of the two developments, combined with progress at the Columbus facility, Cannon said KiOR is considering an alternative growth strategy that would involve the construction of a second 500 bone-dry-ton-per-day facility adjacent to the existing Columbus plant. While Cannon stressed that the company is still in the early stages of evaluating the possible expansion, the move is exciting because it could reduce the cost and time required to design, engineer and construct the second facility. Cannon also said building a second plant adjacent to the Columbus plant would be expected to reduce start-up and commissioning risk as a result of shared experienced personnel, site infrastructure, equipment and operational knowledge. “On a preliminary basis, we expect that the total cost of this second 500 ton-per-day commercial facility in Columbus will range from $175 million to $225 million,” he said, noting that current estimates shows cellulosic gasoline and diesel could be produced at a cost of $2.60 to $2.80 per gallon at a yield of 72 gallons per bone dry ton. At a yield of 92 gallons per bone dry ton, the cost would drop to $2.20 to $2.30 per gallon.
KiOR has also continued to refine the design for its proposed facility in Natchez, Miss. According to Cannon, the current estimated cost to build that plant is $560 million to $600 million. “We also estimate that this facility will be able to produce cellulosic gasoline and diesel at a per-unit unsubsidized cost between $2.25 and $2.48 per gallon at our current yield of 72 gallons per bone dry ton, excluding cost of financing and facility depreciation,” he said. “This would decrease to between $1.81 and $1.96 per gallon at our short-term yield target of 92 gallons per ton.”
Regarding quarterly financial results, KiOR reported a net loss of $38.5 million, or 36 cents per share, compared to a net loss of $31.1 million, or 30 cents per share, during the previous quarter. During the second quarter of 2012. KiOR reported a net loss of $23 million, or 22 cents per share.
Revenues for the quarter equaled $239,000, up from $71,000 during the first quarter of the year. The company posted no revenues for the second quarter of 2012.