JACKSON, Miss. — KiOR, the struggling Pasadena-based biofuels company that has fallen short in its bid to produce commercial quantities of biofuel from wood chips, has bought four more months to resume paying $69.4 million debt to the state of Mississippi.
In granting the extension, the state passed up a chance to force the company into bankruptcy and seize its Columbus, Miss. refinery.
The state negotiated a short-term forbearance agreement with KiOR under which the company will pay Mississippi $250,000, and the state will agree not to press its claims for 120 days, Mississippi Development Authority spokesman Jeff Rent said in a statement he emailed to The Associated Press on Thursday.
Rent says the $250,000 is in addition to what KiOR already owes the state.
“MDA will continue to work closely with the company and monitor the company’s progress during the term of the forbearance agreement and take all actions necessary to protect the state’s interests,” Rent said. He did not say why it is in the state’s interest to delay the debt payment.
KiOR owed Mississippi a payment of nearly $1.9 million last Monday on what was originally a $75 million, no-interest loan. Kior said if it defaults, it could face demands from other lenders to repay immediately the entire $287 million that it owes.
A spokeswoman for KiOR couldn’t be reached for comment Thursday.
Mississippi relented after KiOR’s longtime financier, Vinod Khosla, apparently refused to lend the company any more money. KiOR signed an agreement March 31 to borrow up to $25 million from KFT Trust, an entity controlled by Khosla, the billionaire co-founder of computer firm Sun Microsystems. KiOR said the money would be drawn in installments and Khosla could stop lending if the company didn’t reach “certain performance milestones.”
Stock filings show that, so far, KiOR has drawn only two $5 million installments, the last on May 22. In its May 12 quarterly financial report, KiOR said it hadn’t met the milestones.
Khosla Ventures — the financier’s Menlo Park, California, investment firm — controls 88.5 percent of KiOR stock. The company declined to comment Thursday.
Even if had gotten the rest of Khosla’s money, KiOR has warned it needs a total of $55 million to operate into 2015.
KiOR has been a pioneer in efforts to develop cellulosic biofuels — renewables made from non-food sources in contrast to ethanol, usually made from corn or sugarcane, or biodiesel, made from vegetable oil.
It aimed to take wood chips and cook them at high temperature and pressure into synthetic crude oil, using chemical catalysts. But the Columbus refinery never worked as designed, and while KiOR has said it has designed improvements, it idled the plant after stopping production in December. It’s gradually laying off its 100 workers to save cash. KiOR also employed some contractors.
Mississippi’s loan is secured by the Columbus refinery. The company invested $225 million, but now values it at $51 million because of production problems. It’s unclear how much Mississippi could recoup if it seized the property.
Among KiOR’s other creditors is the Canadian province of Alberta. Its $50 million loan is secured by KiOR’s remaining assets including intellectual property —the know-how to run the plant.
Mississippi’s loan was one of a number of investments in alternative-energy companies made by former Gov. Haley Barbour. In exchange KiOR by the end of 2015 was supposed to invest $500 million in plants in Mississippi and spend $85 million on wages, wood and other local purchases. KiOR had planned a plant in Natchez, and later said it would build another plant in Columbus first.
KiOR isn’t Barbour’s first alternative energy deal to sour. Senatobia solar panel maker Twin Creeks failed in 2012 after receiving $27.7 million in state aid.
KiOR is under investigation by the Securities and Exchange Commission, and faces two federal lawsuits in Texas claiming the company made false or misleading statements about its progress.