Summary:

Biocrude startup KiOR filed for a $100 million IPO on Monday, laying out just how it hopes its process for turning wood chips into a crude oil substitute could compete against the oil industry on price per gallon.

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Biocrude startup KiOR filed to raise up to $100 million in an IPO on Monday, becoming the latest Khosla Ventures-backed biofuel company to seek the support of the public markets. It also laid out how its biomass-to-crude oil substitute process — unusual in an industry that has concentrated on producing ethanol or biodiesel — can compete on costs and logistics with the oil industry at large.

Indeed, KiOR says in its S-1 that it’s shooting for an unsubsidized production cost below $1.80 per gallon of gasoline or diesel for its wood chips-to-biocrude technology. That’s cheaper than competing technologies seeking to turn non-food feedstocks like straw, grass and wood chips into ethanol or biodiesel.

The catch is, that price is expected to come from a facility that could take 1,500 tons of feedstock per day. But the Lyle, Texas-based startup is only running a 10 tons-per-day demonstration plant right now, so it will need to scale up to prove those figures.

To get there, the startup will use any raised funds to build up to five plants, the first to be built in Columbus, Miss., and has lined up Hunt Refining Co. as a buyer of the bio-crude it hopes to produce from that plant.

KiOR is also seeking a $1 billion Department of Energy loan guarantee, and received a term sheet for the guarantee in early February. That’s a huge amount for a single company to request, compared to the $571 million in loan guarantees the DOE gave to biofuel companies Coskata, Enerkem and Diamond Green Diesel in February, and the $75 million to INEOS Bio and its partner New Planet Energy in January. Companies need to match the funding with private equity, and KiOR is going to need a lot more financial backing to land that loan guarantee.

The state of Mississippi said in August it would loan KiOR $75 million to help it build five biofuel plants in the state, and KiOR was reported to expect to invest some $500 million into those projects at the time. KiOR’s S-1 puts the expected cost of its first plant in Columbus at $190 million.

KiOR was spun out of a company called BIOeCON as a joint venture with Khosla Ventures in 2007, and Khosla provided the company’s $1.4 million Series A round. KiOR later on raised $40 million as part of a planned $95 million Series B round of funding. KiOR’s S-1 listed Credit Suisse, UBS  and Goldman Sachs as underwriters.

The IPO market for biofuel companies should give KiOR’s investors some confidence. Next-generation biofuel and biotechnology company Amyris has seen its share price perform well since its August debut, even as it admits it won’t be making its own biofuel for at least a year. And fellow Khosla-backed biofuel company Gevo raised $95.7 million in its February IPO, and has seen its shares climb from $15 to close at $24.45 on Monday.

KiOR won’t be the only biofuel company investors will be keeping an eye on; algae biofuel startup Solazyme announced its IPO plans in March, seeking to raise $100 million.

Image courtesy of Rick Hurdle via Creative Commons license.

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