Summary:

Khosla-backed startup KiOR has a new customer for the biocrude it hopes to start producing in 2012 — Hunt Refining Co. It’s an important step for a startup seeking $1 billion in federal loan guarantees. Hunt has agreed to buy an unspecified amount of product.

Oil Refinery

KiOR has a new customer for its biocrude: Hunt Refining Co. The refining arm of the Ray L. Hunt family’s Texas oil empire has agreed to buy an unspecified amount of product from the Khosla-backed startup’s first plant, set to open in 2012. For KiOR, a startup seeking a $1 billion federal loan guarantee — and we’re thinking might plan to file for an IPO this year — it’s an important step.

Hunt said Thursday it will buy renewable gasoline and diesel blendstocks and fuel oil from KiOR’s yet-to-be built plant in Colombus, Miss. The two will also “collaborate on information and resources aimed at optimizing the performance of their products and services,” according to a press release.

KiOR says its “Biomass Catalytic Cracking Process,” aided by a catalyst developed from a precursor company called BIOeCON, can aid the process of pyrolysis: super-heating organic matter in the absence of oxygen to break it down into a substitute for crude oil. The company was created in 2007 as a joint venture with Khosla Ventures, which provided the company’s $1.4 million Series A round.

KiOR has since raised $40 million as part of a planned $95 million Series B round of funding, and is seeking $75 million in Mississippi state grants for its Columbus plant. The Mississippi cash was dependent on KiOR landing a contract with a refinery; KiOR’s process doesn’t yield a final fuel product like ethanol or biodiesel, but rather a “biocrude” very similar to crude oil, which then can be refined into various products like gasoline, diesel and fuel oil. The deal with Hunt Refining would appear to help move KiOR’s negotiations for the Mississippi grant package closer to fruition, though the company didn’t mention that in its Wednesday press release.

Eventually, KiOR wants to build four plants capable of a combined 250 million gallons per year of production. To get there, it announced its intent in February to seek a $1 billion loan guarantee from the Department of Energy, an amount that would dwarf the loan guarantees DOE has so far given to biofuel projects. The company has a term sheet from the DOE.

Then there’s the potential for an IPO. Vinod Khosla told a conference earlier this month that one of the biofuel companies he’s backing will be “filing another IPO within the next four weeks or so.” While he didn’t name the company in question, KiOR is one of the more promising of the Khosla-backed biofuel startups — Coskata or LS9 are other contenders — that hasn’t yet gone public, and would follow fellow biofuel startups Amyris and Gevo that have in the past several months.

KiOR’s deal with Hunt is the third big biofuel partnership to be announced this week. On Tuesday, Monsanto announced an equity investment in and partnership with algae biofuel company Sapphire Energy. Earlier today, algae biofuel startup Solazyme announced a deal with Dow to sell the chemicals giant products to be used as insulation for transformers and other industrial equipment.

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Image courtesy of Iguanasan via Creative Commons license.

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