According to a recent announcement from Pasadena-based KiOR Inc, the Columbus II Project (designed to expand production capacity at their plant in Columbus, Mississippi) will be funded by $100 million of committed equity. This amount will be financed as two individual placement transactions that will fund the expansion. After the successful completion of technological development and upgrade of both the Columbus facilities as planned, a fair amount of positive cash flow is expected from the KiOR operations by the Columbus II Project.
First Placement by Khosla Ventures:
Khosla Ventures III, along with several other Khosla entities, financed $85 million as the initial placement of committed equity, which contains immediate delivery of Senior Secured Mandatorily Convertible Notes worth $42.5 million. In addition, it also includes conversion of current senior debt of $53,197,308, which was held by Khosla entities. The conversion rate of Notes to Common Stock Class A per share is $2.897 based on the average 20-day daily volume of Common stock, Class A as of October 17, 2013; representing a premium of 25%. This rate is dependent on several factors, such as decrements due to changes in the equity issuance of Notes or other announcements made by the company that may reflect conversion rate until October 21st of the following year.
By utilizing the conversion rates or issuance of Notes, the company can also purchase Class A Common Stock of up to $42.5 million as a part of this transaction. While the company is fully funding the Columbus II Project, it is expected to be completed with minor time constraints and debt offerings.
Vinod Khosla commented:
“Khosla Ventures and I have reviewed independent reports on the assessment of the technology and conducted our own significant due diligence as part of this commitment. We are pleased to invest in KiOR with Gates Ventures in this equity financing for the Columbus II Project. I believe that KiOR’s technology for production of cellulosic biofuels can not only serve as the foundation for a successful and sustainably profitable long-term business but can also scale because of the hundreds of saw, pulp and paper mills that have been shut down and have local feedstock available, providing a much more stable and less price volatile feedstock than oil, while fueling the world’s transportation requirements with significantly less geopolitical risk and greenhouse gas emissions on a life cycle basis. I expect, as the technology matures over the construction and operation of multiple facilities, it will achieve cost parity with many traditional oil sources such as new deep offshore projects and oil sands, without subsidies.”
Second Placement by Gates Ventures:
The second placement was funded by an affiliate of Bill Gates — Gates Ventures, LLC — which funded $15 million in committed equity financing at KiOR. As part of this placement, KiOR will receive:
– Class A Common Stock of about $7.5 million on immediate basis. In addition the company was also committed $7.5 million of additional Class A Common Stocks
Bill Gates commented on the new funding:
“I was impressed when I visited KiOR’sColumbus facility and learned more about the company’s technology. I am happy to be joining the other investors in support of KiOR’s efforts to move its technology forward.”
Further details of these transactions are discussed in the Form 8-K of the company that was filed on 21st October, 2013
The CEO of KiOR, Fred Cannon commented:
“This equity financing completes what we currently believe will be the last equity portion of the Columbus II Project, which we believe, will facilitate the ability, with the remainder of our currently anticipated project financing requirements, to achieve positive cash flow from operations sometime in 2015. We expect that expanding capacity at Columbus will derisk project execution and allow us to showcase our R&D advancements at scale much quicker. In addition, we expect to quickly order long lead time equipment for the project. We also anticipate that the combination of continuous improvement efforts and R&D advancements that we have already seen in our research scale facilities in Pasadena may allow our existing Columbus facility to increase its targeted nameplate processing capacity to over 600 bone dry tons of feedstock per day before the end of 2014 while achieving significant progress towards our long-term target yield of 92 gallons per bone dry ton of biomass.”
He further added:
“KiOR still plans to continue to develop our standard scale commercial facility in Natchez. We currently intend to preferentially pursue either project-level financing or strategic partnerships for development of our standard scale commercial facilities, including Natchez, unless market conditions would make corporate-level financing more accretive and less dilutive to our shareholders.”