# KiOR hits milestone of making biocrude in Mississippi

Updated: Next-gen biofuel maker KiOR (s KIOR) announced last week that it hit a major milestone: the company has started producing its biocrude at its factory in Columbus, Mississippi, and plans to start shipping this biofuel later this month. The company released the good news in its earnings call and KiOR CEO Fred Cannon called the planned shipment “the world’s first cellulosic gasoline and diesel fuel products.”

KiOR has developed technology that allows it to convert biomass (plants and bio waste) into a bio substitute for crude oil. The Houston, Texas-based company emerged in late 2007 as a joint venture between Khosla Ventures and Netherlands-based biofuel startup BIOeCON. Khosla Ventures provided the early rounds of funding and BIOeCON provided the intellectual property for its “biomass catalytic cracking process,” a thermochemical process that’s been used in the oil industry for decades and which turns out can also produce biocrude from grass, wood and plant waste.

I attended an event where Cannon described KiOR’s technology as being able to do in seconds what has taken millions of years in nature (the natural process of how biomass has been crunched into oil). Cannon said the company’s catalyst — a fine white powder that he showed to me in a tiny see-through vial after his talk — can turn any bio feedstock into a liquid biocrude that has a 92 percent lower carbon emissions footprint than fossil-fuel based crudes and which is supposed to be able to be dropped into the current oil infrastructure. Update: KiOR now says the full lifecycle greenhouse gas profile of their gasoline and diesel fuels reduces emissions by over 80 percent compared to fossil fuel equivalents, instead of the 92 percent mentioned above and told to me by Cannon in 2010.

But, as anyone that’s followed the next-gen biofuel industry knows, many of these types of technologies have suffered delays and setbacks. A company called Range Fuels, also backed by Khosla Ventures, went bankrupt in late 2011. And BP recently cancelled a planned cellulosic ethanol plant, which would have been one of the world’s first commercial scale cellulosic ethanol plants.

So the news that KiOR is on track is a rare spot of good news from these types of firms. KiOR’s Columbus plant, at 11 13 million gallons per year, is smaller than the standard corn-based ethanol plants in the U.S., points out MIT Tech Review. But KiOR also plans a larger commercial production facility in Natchez, Mississippi, which is supposed to produce three times what the Columbus plant can produce.

Scaling up these two plans is really capital intensive, particularly because the company has no revenue. In January KiOR announced that it raised a $75 million loan from existing investors Alberta Investment Management, a fund that manages billions on behalf of the province of Alberta, Canada, and Khosla Ventures. KiOR is still in an early stage of its life. It’s not bringing in any revenue (yet), and had a net loss of$27 million for the third quarter of 2012. KiOR’s stock dropped 6.5 percent this morning to \$6.91, seemingly on uncertainties about biofuel incentives in the U.S.