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Kior Opens Wood-to-Gas Plant as Biofuel Makers Seek Scale

Kior Inc. (KIOR), a producer of transportation fuels from biomass such as wood waste and non-food crops, began production at its first commercial facility as other U.S. biofuel companies including Gevo Inc. (GEVO) and Amyris Inc. (AMRS) struggle to shift their technologies from the laboratory to the factory.

Kior’s facility in Columbus, Mississippi, will be able to produce more than 13 million gallons (49 million liters) of gasoline and diesel a year once it reaches full capacity in nine to 12 months, Kate Perez, a company spokeswoman, said in an interview yesterday. The Pasadena, Texas-based company is planning another plant in Natchez, Mississippi, which will be three times bigger.

Kior is one of several companies that have gone public in the past two years to raise capital for high-volume plants that process organic material into biofuels and chemicals. Some of these efforts have been marked by delays and shutdowns as yields failed to meet expectations, demonstrating the challenges of commercializing a new technology, said Alejandro Zamorano Cadavid, an analyst at Bloomberg New Energy Finance.

The biofuel companies “are not on schedule with their original plans, and it’s not surprising,” Cadavid said in an interview yesterday. “The common denominator is that they’ve all underdelivered on promises from when they IPO’d.”

Kior has lost 49 percent of its market value since raising $150 million in its June initial public offering. The plant began production last month, on schedule, and encountered “only normal start up issues,” Chief Executive Officer Fred Cannon said on a conference call with analysts yesterday.

First Facility

By opening what he called “the world’s first commercial-scale cellulosic gasoline and diesel facility,” Kior is making as “shift from an R&D company to an operating company,” Cannon said.

Other advanced biofuel companies have encountered setbacks. Gevo, which has lost 87 percent of its value since its February 2011 IPO, began production in May at its flagship plant in Luverne, Minnesota, and then stopped in September. The Englewood, Colorado-based company said its proprietary isobutanol production system wasn’t delivering anticipated yields. The plant is currently making standard ethanol while Gevo adjusts its process.

Amyris, which is down 82 percent from its September 2010 IPO price, temporarily stopped production at two of three plants that are located at partners’ facilities in the second quarter to address issues with fermentation yields.

Solazyme Inc. (SZYM) has fallen 59 percent since its May 2011 IPO. The South San Francisco, California-based company expects to open a $145 million plant at a Bunge Ltd. (BG) sugar-cane mill in Brazil in the fourth quarter of next year. The company said in May that it won’t be be cash-flow positive until the end of 2013.

Complex Systems

Amyris, Gevo and Solazyme all use sugar-fermentation processes to make fuel and chemicals.

“This is not about putting a bunch of servers in a room and flipping on a switch -- we are dealing with complex biological systems,” Joel Velasco, an Amyris spokesman, said by e-mail.

Other companies are closer to commercial production. Ineos Bio, a unit of Ineos Group Ltd., expects to begin production this year at its first commercial plant in Vero Beach, Florida. The facility at full capacity will produce 8 million gallons of ethanol a year from yard, vegetative and agricultural waste.

Poet LLC, the largest U.S. corn-ethanol producer, and Abengoa SA (ABG/P) plan to begin operating facilities next year in Iowa and Kansas that each will be capable of producing about 25 million gallons of ethanol a year from corn waste.

Kior’s top priority is ensuring that operations at the Columbus plant go smoothly, Cannon said. “As far as the yields, we’re not focused on those right now,” he said during the call. “ Our focus right now is to get the plant up and stable.”

To contact the reporters on this story: Justin Doom in New York at jdoom1@bloomberg.net; Andrew Herndon in San Francisco at aherndon2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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