Home > Economic development, Haley Barbour, KiOR, News, State revenue > Has KiOR reached a purchase agreement for its product? (Update)

Has KiOR reached a purchase agreement for its product? (Update)

Bluefire Renewables Inc., the California-based biofuel company that is building a facility in Fulton, has reached three major milestones recently.

The company has reached a feedstock agreement that will ensure it has the biomass it needs to produce ethanol, it has found a buyer for the ethanol, and it has let the contract to actually construct its facility.

Another biofuel company that plans to build in Mississippi, KiOR, will not receive any of the $75 million in benefits the Legislature approved for it in late summer until KiOR has reached a purchase agreement with an oil company (or companies) to buy the renewable crude oil and refine it.

KiOR CEO Fred Cannon said in late August that he and his team were “in final negotiations” with a buyer. With that in mind, Magnolia Marketplace has been trying since Monday morning to find out if an agreement has been finalized; and if not, how close one is to becoming finalized. Calls and emails to a KiOR spokesperson have not yet been returned. Gov. Haley Barbour’s spokesman Dan Turner was not exactly sure one way or the other. We’re currently awaiting a response from the Mississippi Development Authority.

It would seem nothing can move on this project until KiOR has found somebody to buy and refine the re-crude it plans to produce from timber. The bulk of the state money approved for the project will go toward construction costs and the equipment that will stock it.

So has a purchase agreement been reached? It’s not a hard question. When we get an answer, we’ll let you know.

UPDATE: A KiOR spokesperson just emailed Magnolia Marketplace and said there had been no off-take agreement reached, and that discussions between the company and potential buyers remain ongoing.

No firm timetable exists for executing a deal, but it’s our guess that they’d like to get one done as soon as possible.

  1. October 27th, 2010 at 11:08 | #1

    KiOR spinning its perpetual wheels with this one … maybe waiting on more firm incentives from the state should their ‘buyer’ limit its contracted purchases … Hmmmmmmmm

  2. October 28th, 2010 at 14:35 | #2

    What puzzles me is the focus on purchase agreement. If KiOR really really does produce refinery ready bio-oil, then a purchase contract is relatively minor. It is not difficult to sell refinery ready crude. The bigger risks are whether their plant (i) is built on time and on budget and (ii) it operates economically and at the expected throughput. Remember they are scaling up this technology from demonstrator to commercial scale for the first time. If the plant doesn’t get built and operate as expected there is no bio-oil to sell and the purchase contract is irrelevant. The new technology scale up seems to be the largest risk the investors and taxpayers of Mississippi are taking. As a former project finance banker (Goldman Sachs, CreditSuisse and UBS), this is what we called an “equity risk” that we would expect to be financed or guaranteed by the venture capitalists or project owners. Now if the bio crude is not like existing crude oil, then it is useful to get a refinery operator to agree to purchase the bio crude if it meets certain specifications, but that is a risk in addition to construction and operation risks.

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