Khosla, Gates commit financing to KiOR's Columbus II project

By Erin Voegele | October 23, 2013

KiOR Inc. has announced the execution of $100 million in committed equity-related financing in two separate private placement transactions to support the company’s recently announced expansion of production capacity at its Columbus, Miss., location.

The first private placement includes $85 million of committed equity-related financing from Khosla Ventues III and various other Khosla entities. The financing consists of the immediate issuance of $42.5 million of senior secured mandatorily convertible notes plus the conversion of nearly $52.2 million of KiOR’s existing senior debt held by the Khosla entities.

The second private placement includes $15 million of committed equity financing from new investor Gates Ventures LLC, an affiliate of Bill Gates. The equity financing consists of the immediate purchase of $7.5 million of Class I common stock and the commitment to purchase an additional $7.5 million of Class A common stock. The future equity commitment is contingent upon, among other things, KiOR fully funding the Columbus II project.

KiOR announced the Columbus II project in late September. The company is pursuing plans to double production at its existing Columbus location through the construction of a second facility incorporating its technology. The $225 project is scheduled to break ground within 90 days of KiOR raising sufficient equity and debt capital to commence the project. The facility is expected to take 18 months to construct and start-up.

According to Fred Cannon, CEO of KiOR, the Colmbus II facility will produce cellulosic gasoline and diesel from southern yellow pine wood chips. He also noted there are several benefits associated with developing a second production facility at the Columbus site. “As we build Columbus II, we'll be able to achieve significant operational and technological synergies between the two facilities, as we expect to incorporate our most recent technology developments into both the new Columbus II facility and retroactively into Columbus I,” Cannon said. “These synergies will result in decreased execution and start-up risk of Columbus II, reduction in construction timing and cost, and a shorter start-up period for Columbus II as a result of shared personnel, infrastructure, and operational knowledge with Columbus I.”

KiOR is also still working to develop its proposed production facility in Natchez, Miss. “As we build Columbus II, we'll also be refining the design, based on the newest technology improvements, of our next standard scale commercial production facility in Natchez, Miss.,” Cannon continued., noting that as a result of these additional efforts, his company expects to improve both the capital and operating costs associated with the Natchez plant.