Governors' Biofuels Coalition

The operator of one of the nation’s first cellulosic biofuel plants yesterday cast a bleak outlook for its future, warning investors that it has only enough financing to make it through September.

In a filing with the Securities and Exchange Commission yesterday, KiOR Inc. reported a net deficit of $629.3 million and said it expects to continue incurring losses for the foreseeable future. As of July 31, the company had just $800,000 in cash on hand.

“Since inception, the company has generated significant losses,” KiOR said. “The lack of any additional committed near-term sources of financing … raises substantial doubt about the company’s ability to continue.”

KiOR was once hailed as a success story in the biofuels industry, last year producing the nation’s first commercial quantities of cellulosic gasoline and diesel out of Southern yellow pine. Industry supporters used KiOR as an example to counter critics who say the advanced biofuels industry has been too slow to emerge.

U.S. EPA also relied on KiOR’s production levels to set last year’s initial cellulosic biofuel targets.

But the company earlier this year revealed it was on the verge of bankruptcy after failing to get its $225 million cellulosic biofuels plant in Columbus, Miss., to run at full capacity. Faced with a lack of revenue, KiOR idled all of its operations, laid off more than half its workers and began exploring a potential sale.

KiOR’s sole funding over the last few months has been a last-minute cash boost of $15 million by venture capitalist Vinod Khosla, who has backed the company since it formed in 2007. The state of Mississippi in July also granted a four-month extension for KiOR to repay a nearly $70 million loan.

The filing with the SEC yesterday, though, spells more bad news. The company’s bills could be as high as $60 million over the next year for overhead, operating costs for its idled plant and loan repayments, KiOR said.

Without additional funding, it would be unable to fund its operations or pay back its loans past Sept. 30, KiOR reported. In the meantime, KiOR expects to have “little to no revenue” from the Columbus facility.

“The company does not believe it can restart the Columbus facility on an economically viable basis at this time,” KiOR said, “and therefore cannot be certain as to whether it will be able to successfully secure additional financing or the ultimate timing of such additional financing.”

The SEC, meanwhile, has served the company with two subpoenas dated Jan. 28 and July 17, KiOR revealed. The commission is seeking documents related to progress at the Columbus facility, projected biofuel levels and the status of the company’s technology.

KiOR said it has been cooperating with the requests from the commission but does not know the outcome of the SEC’s investigation and whether it will result in any penalties.

KIOR also is facing multiple lawsuits from shareholders over its failure to hit production targets.

Aside from KiOR, only two other companies are currently producing cellulosic biofuels in commercial quantities. A Florida plant operated by INEOS Bio began producing ethanol from waste last year, and a small Iowa ethanol plant last month began converting parts of a corn plant left over from conventional ethanol production into cellulosic ethanol.

Three big ethanol and agriculture companies are eyeing start dates this year for stand-alone cellulosic ethanol facilities in the Midwest. Abengoa Bioenergy, POET-DSM Advanced Biofuels and DuPont each have invested millions of dollars in facilities that would convert post-harvest corn debris into cellulosic ethanol.

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