US Gevo joins KiOR in going-concern worries among renewables

16 April 2014 17:58 Source:ICIS News

US Gevo joins KiOR in going-concern worries among renewables(adds details throughout)

HOUSTON (ICIS)--US-based isobutanol producer Gevo has joined fellow renewable producer KiOR in issuing warnings about continuing as a going concern.

Gevo's stock continued falling on Wednesday following the announcement, which it made in its annual report on Tuesday.

On that day, Gevo warned that as of the end of 2013, the company did not have enough working capital to fund its planned operations through the end of 2014. It will have to find more sources of cash.

"These conditions raise substantial doubt about our ability to continue as a going concern," Gevo said.

For 2013, the company had a net loss of $66.8m. Its accumulated deficit reached $262.2m

Cash totalled $24.6m at the end of 2013, Gevo said. The company is spending the money on corporate operations, including research and development (R&D) and on the startup of its Agri-Energy plant in Luverne, Minnesota.

Gevo is also spending the cash on servicing debt, on improving its isobutanol technology, litigation and on improving its isobutanol plant, the company said.

Gevo warned that it will likely continue to report losses because of product development and commercialisation costs.

"We may never achieve profitability or generate positive cash flows, and unless and until we do, we will continue to need to raise additional cash," Gevo said.

The company intends to do this by issuing more debt or shares, it said.

The company could also raise more money through strategic partners or from other sources, it said. Gevo may also restructure its secured debt with TriplePoint.  

Gevo and others promoted isobutanol as a renewable octane booster for gasoline that lower mileage like ethanol

Like Gevo, KiOR is another start-up that is producing renewable fuel.

However, unlike Gevo, KiOR is not relying on fermentation to produce a gasoline blendstock.

Instead, it is using a modified refinery unit, a fluid catalytic cracker (FCC) to produce drop-in fuel made from biomass.

KiOR is running such a unit in Columbus, Mississippi. When the plant reaches full capability, it could produce over 13m gal/year (49m litres/year) of gasoline, diesel and fuel oil blendstocks.

Production, though, has never matched expectations.

Currently, the Columbus plant is in what KiOR calls a “phased idle state” while work on research and technical improvements are taking place. No timeline has been set on a restart, but the producer plans to begin operations after further research and development and the receipt of additional funding.

In mid-March, KiOR reported that it had “substantial doubts” about its ability to continue operations, saying that it “must secure additional capital to provide us with additional liquidity”.

KiOR said that if it does not secure the funding, it likely would default on its existing debt and “could be forced to seek relief under the US Bankruptcy Code”.

In an interview with ICIS, KiOR said it was confident that it could avoid bankruptcy.

“Production issues at our Columbus facility are similar to those that any first-of-its-kind plant may have,” KiOR told ICIS in an earlier interview. “Currently we are working on enhancing the throughput, yield and operability of the Columbus facility. We have already completed a number of projects and look forward to seeing the benefits when we start the plant back up.”

A new batch of renewable fuels plants are expected to start-up this year. They could mark a turnaround for the industry or they could add to the growing list of faltering start-ups.

Abengoa, POET-DSM and DuPont are all expected to start-up cellulosic ethanol plants this year.

These plants will rely on enzymes to extract sugars from biomass to produce ethanol.

The capacity of these plants range from 25m-30m gal/year.

Earlier in 2013, INEOS Bio started cellulosic ethanol production at an 8m gal/year plant in Florida. However, this plant relies on a gasification process to produce ethanol from biomass. It does not use enzymes.

The following lists various renewable fuels plants either being developed or in production.

Company Product Capacity Technology Site
Gevo * ethanol 22m gal/year fermentation Minnesota
Gevo * isobutanol 18m gal/year fermentation Minnesota
KiOR gasoline, diesel, fuel oil 13m gal/year FCC Mississippi
Abengoa ethanol 25m gal/year fermentation Kansas
POET-DSM ethanol 25m gal/year fermentaiton Iowa
DuPont ethanol 30m gal/year fermentation Iowa
INEOS Bio ethnanol 8m gal/year gasification/fermentation Florida
* Gevo is making isobutanol and ethanol at same site

Additional reporting by Jeremy Pafford

By Al Greenwood