Issue: Jul 2011


KiOR - NEW DIESEL FUEL IS HALF THE COST OF CURRENT BIODIESEL



by Bob Brooks

The highly successful venture capitalist, Vinod Khosla, is under way with KiOR, Inc., which is building a first commercial plant in Columbus, Mississippi with a unique system to produce gasoline, diesel and eventually aviation fuel initially from southern yellow pine and later from lower cost cellulosic materials.

KiOR raised $150 million in June, 2011 via an IPO; the largest for a bio fuel business in well over a year during which a number of ventures have sought funding for
bio fuel production systems.

The KiOR system, based on biomass fluid catalytic cracking, has been proven in a complete pilot plant demonstration and is now the basis for an initial production plant in Columbus, Mississippi, (being built by the Houston based KBR, Inc. engineering and construction company) that will intake 500 BDT(bone dry ton) per day of wood chips. Start up in the 2nd half of 2012 is targeted. The plan is to add four plants in Mississippi at full scale each with wood chip intake of 1500 BDT which translates into 100,000 gallons of fuel per day per full scale plant at the outset.

Important virtues of the KiOR technology are its ability to produce green diesel and gasoline at cost said to be half of current biodiesel and corn ethanol (vs. market price on an equal energy basis). Life cycle greenhouse gas reduction of 82% for KiOR gasoline and 83% for diesel fuel compares with 25% reduction for corn ethanol, according to analysis quoted in the KiOR IPO prospectus.

Important to Mississippi is KiOR’s replacement of jobs lost with the demise of many paper mills in recent years which have similar needs for raw material and job skills. A benefit to KiOR is $75 million in funding from the state with the understanding 1000 new jobs will be created.

KiOR has contracts to supply diesel fuel to Federal Express and to Catchlight Energy, LLC when regular production begins. Catchlight is a 50/50 joint venture of Chevron and Weyerhaeuser which will supply KiOR with wood chips and forest waste initially at a cost of $72.30 BDT for clean yellow pine but at lower cost for other woody raw material that KiOR has indicated it is researching.
.
. The KiOR IPO prospectus quotes a DOE study which estimates almost a billion tons of U.S. cellulosic material is available. USDA Forest Service estimates that there is an 18% surplus of softwood in the Southern U.S including 60,000 BDT/day of southern yellow pine. KiOR’s planned five plants may intake a little over 10% of this surplus.

KiOR potential customers include virtually all types and levels of firms in the business of fuel distribution as well as volume end users. KiOR’s expectation is to expand both nationally and internationally with owned or licensed operations.


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