Texas-based biofuels company plans expansion

By Jeff Amy
Associated Press

JACKSON, Miss. (AP) — A Texas-based company has announced that it plans to double the production capacity at its biofuels production facility in Columbus, Miss.

KiOR Inc., based in Pasadena, announced Wednesday in a news release that it will build a second plant in Columbus that converts wood products to diesel and gasoline.

The company has to raise $225 million to pay for it though, which would mean selling more stock or borrowing more money. KiOR said it has raised another $50 million from investor Vinod Khosla, who has been a major financier for the company.

The company missed its estimates of how much fuel it would make in the second quarter, although it said output rose in July and August. Because it was running out of cash, it had a compelling need to raise money.

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In moving ahead in Columbus, KiOR will put off the start of construction of a larger facility in Natchez, Miss., until late 2014. The company said in August it would cost $560 million to $600 million to build the Natchez plant.

When the state of Mississippi made a $75 million low-interest loan in 2010, KiOR pledged to develop three plants in the state by the end of 2015, including one in the southwest. The company also agreed to invest $500 million in land and buildings and spend $85 million on wages and contract by the deadline. The company is also supposed to create 1,000 direct and indirect jobs.

Spokeswoman Kate Perez said the company is still on track to meet the deadline. “Our plans will allow us to meet our contractual obligations with the state,” she said.

Perez declined to say whether the company would count the two Columbus phases as separate plants to meet the three-plant requirement.

“I think it’s a fair question to ask,” said Joe Max Higgins, CEO of the Golden Triangle Development Link industrial development agency.

KiOR and its contractors have about 100 employees in Columbus now, and the company invested $212 million in the first phase.

In addition to the state’s loan, local officials granted property tax breaks worth roughly $20 million over 10 years. Higgins said that officials are negotiating a second property tax break for the second phase. The state also granted other tax breaks and pledged up to $6 million more in grants and job training.

CEO Fred Cannon said in a release that KiOR would start construction within 90 days of raising the money, and that construction and startup would take about 18 months.

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That means the second Columbus phase is unlikely to begin full operations.

Cannon had said earlier this summer that KiOR was considering expanding in Columbus because it could get a return more quickly on research advances. He said building a second, identical plant would cut design and construction costs, and that using trained personnel from the first plant would make for a less-risky startup phase.

Finally, KiOR believes it can expand the range of ingredients it uses in its process to include not only pine trees but hardwoods, energy crops and waste wood such as railroad ties. That means expanding in Columbus won’t overload the amount of available wood and drive up the price, especially because KiOR competes for pine with a Weyerhaeuser Co. pulp mill there.

“We believe that the Columbus II project also enables KiOR to continue to execute on our long-term business plan consisting of larger, standard scale commercial production facilities,” Cannon said.

He also said that he believed better financial results and technological refinements at the Columbus expansion would help KiOR raise money for its Natchez plant more easily.

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