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Analyst: KiOR Columbus plant may end up sold as scrap

By Jack weatherly

jack.weatherly@msbusiness.com

 

The Columbus biofuels facility (left) of  KiOR Inc. was left out of a bankruptcy filing, giving rise to hopes that a buyer may be found for it. KiOR said in its Chapter 11 filing that it does intend to find a buyer for the plant.

The Columbus biofuels facility (left) of KiOR Inc. was left out of a bankruptcy filing, giving rise to hopes that a buyer may be found for it. KiOR said in its Chapter 11 filing that it does intend to find a buyer for the plant.

Finding a buyer for the idled KiOR biofuels plant at Columbus would be a tough sell, according to Pavel Molchanov, an equity analyst who had covered Pasadena, Texas-based KiOR Inc. until it filed for bankruptcy protection on Nov. 9.

The state will be fortunate to recoup 10 percent to 15 percent of the $69.4 million balance left in a $75 million no-interest loan it made for the plant at Columbus, said Molchanov, who is employed by Raymond James and Associates, which is headquartered in St. Petersburg, Florida.

The Chapter 11 petition filed in U.S. Bankruptcy Court in Delaware left out the plant, which never produced gasoline or diesel fuel in the quantity and quality needed to make a success of the venture.

Molchanov said the loan is secured by the $218 million plant, “which even on the best of days never functioned particularly well.” It stopped producing fuel in January 2014. At the time, it employed 100, compared with the promise to create 1,000 jobs at several facilities in the state.

The plant may well be sold for scrap, Molchanov said.

“Unfortunately, the state of Mississippi is going to be left high and dry,” he said.

Investors affiliated with Vinod Khosla, a co-founder of Sun Microsystems and lead investor in KiOR Inc., have made an offer of $15 million for the parent, according to the petition by KiOR Inc., which nevertheless said it was open to higher bids.

But none of that money would go to the state, Molchanov said in a telephone interview. Those investors are just interested in the “intellectual property — the patents, the know-how,”  Molchanov said, adding to that they could get that for “pennies on the dollar.”

Molchanov likened the KiOR failure to the collapse of Solyndra LLC, a California-based maker of solar panels, which received a federal guarantee on a loan of more than $500 million but filed for bankruptcy.

The government issued a report last week that says that public-sector investment in “green energy” will take in between $5 billion and $6 billion over 20 years. However, critics have said that revenue is not the same as profit and that the Department of Energy figures are misleading.

Mississippi has had its own solar-power failure. In 2010, it invested $27.7 million during the Haley Barbour administration in the Twin Creeks Technologies startup at Senatobia. Encountering manufacturing problems and what has been called unfair competition with China, Twin Creeks shut down the plant in December 2012, without reaching its goal of creating 500 jobs.

Tim Climer, executive director of the Tate County Economic Development Foundation, said Tuesday that the 85,000-square-foot building has drawn a number of prospects, but no takers yet.

The foundation, the MDA and Entergy are marketing the facility on the website, MemphisMetro.Ms.org.

Regarding alternative fuels, Laurent Pilon, a researcher at UCLA specializing in producing biofuels from microalgae, said there are “a lot of companies … or even researchers who are overselling” their processes to create fuels, whether it’s ethanol, gasoline or diesel.

“To produce larger volume is challenging. What you can get in the small labs in small volumes is different from what you get on large scale. … You lose efficiency.”

The Mississippi Development Authority says it is working to recoup its investment in the KiOR plant.

“MDA, along with its counsel and financial advisors are diligently working toward solutions that protect the state’s investment to the maximum extent possible in the KiOR project,” agency Chief Marketing Officer Marlo Dorsey said in an email on Tuesday.

Dorsey declined to comment further, citing a confidentiality agreement the state has signed. She would not say whom the pact is with. The KiOR loan was made during the second and last term for Gov. Haley Barbour.

KiOR Inc. announced in July that it had hired Guggenheim Partners, which is based in New York  and Chicago, to help it find a buyer.

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About Jack Weatherly

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