KiOR's CEO Discusses Q2 2012 Results - Earnings Call Transcript

KiOR, Inc. (KIOR)

Q2 2012 Results Earnings Call

August 14, 2012 10:00 PM ET


Max Kricorian - Director, Finance

Fred Cannon - President and CEO

John Karnes - Chief Financial Officer


Patrick Jobin - Credit Suisse

Mahavir Sanghavi - UBS

Mike Ritzenthaler - Piper Jaffray

Vishal Shah - Deutsche Bank

Rob Stone - Cowen & Co.

Pavel Molchanov - Raymond James

Colin Rusch - ThinkEquity

Brian Lee - Goldman Sachs

Ben Kallo - Robert W. Baird



Welcome to KiOR’s Second Quarter 2012 Conference Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session, after the speakers complete their remarks. As a reminder, this conference call is being recorded for replay purposes.

The telephonic replay will be available approximately two hours after this call is complete and remain available until Tuesday, August 21, 2012. The number to call for the replay was included in the earnings release issued earlier this morning. This call is being webcast and will also be available on the company's website for approximately 90 days in the Investor Relations Section of the site.

I would now like to turn the call over to Max Kricorian, Director of Finance at KiOR.

Max Kricorian

Good morning. Thank you for joining us to discuss KiOR's financial and operating results for the second quarter of 2012. With me today are Fred Cannon, President and Chief Executive Officer; and John Karnes, Chief Financial Officer.

I would like to remind everyone that statements will be made during this call that are not historical facts and are forward-looking statements. These statements about the company future expectations, plans and prospects include statements regarding the timing for commissioning the company’s Columbus facility, statements regarding the timing for production from the company’s Columbus facility, the company’s plan to build it next commercial facility in Natchez, Mississippi and other the other statements containing the words believes, anticipates, plans, expects, intends, and similar expressions. These forward looking statements are based on current expectations and assumptions that are subject to risks and uncertainties.

The company cautions that a number of important factors could cause our actual future results and other future circumstances to differ materially from those expressed in any such forward-looking statements.

These important factors and other factors that could potentially effect the company’s financial results are described in the section called Risk Factors in the company's most recent annual report on Form 10-K for the year ended December 31, 2011, and in the company’s other filing with the SEC, which are available through the Investor Relations section of the KiOR website at or on the SEC website at

The company may change its intention, believe or expectations at any time and without noticed based any changes in such factors in assumptions or otherwise. The company undertakes no obligation to release publicly and relation to any forward-looking statements to affect events or circumstances after today to or to reflect the occurrence of anticipated events. Therefore you should not rely on these forward-looking statements as representing the company’s views as of any date subsequent to today.

Now, I would turn the call over to Fred Cannon.

Fred Cannon

Thanks Max. Good day. I would like to talk to you about another strong quarter of execution and progress for the KiOR team. First, our research and development team has created a new generation catalyst platform that is going to have a substantial positive impact on the economics of future plans.

Next, commissioning of our Columbus facility remains on track and we are getting ready to startup the facility in September. Given the typical startup issues that we expect to face, we remain confident that our cellulosic gasoline and diesel will be an American cars and trucks during the fourth quarter of this year.

We are closing the Columbus construction books and can report that the final actual costs for construction of the facility will come in about 4% less than our previously estimated costs of $222 million.

Let me start by talking about our progress in research and development. I’m excited to announce the development of our new next-generation catalyst platform. For some background, KiOR's two step biomass to fuels technology starts with non-fuel biomass that is fed into a biomass fluid catalytic cracking or BFCC.

Our BFCC is based on fluid catalytic cracking technology from the refining industry, which implies a continuous flow of catalyst in a loop. The catalyst is heated at the beginning of each cycle and is then fed into our reactor at the same time we feed our biomass. The reaction occurs literally in seconds, the catalyst and produced hydrocarbons are separated, and the catalyst is regenerated and reheated to start the next cycle.

The composition of these hydrocarbons is very important in maximizing the efficiency of our process. Without getting into too much detail there are three kinds of hydrocarbons that come out of our reactor, coke or carbon, gasses and a liquid fraction.

Since the liquid fraction is what we upgrade to our cellulosic gasoline and diesel, we want to maximize the volume of our liquid fraction. At the same time though, our facilities do require a minimum level of coke to be able to maintain in overall heat balance.

Our research and development team knows there is an ideal balance between coke, gasses and liquid fraction. They have been working tirelessly on both catalyst design and reactor design to achieve that balance.

As they do, we believe we will see improvements in overall yield increasing the number of gallons of our cellulosic fuels for a ton of biomass, as well as enhancements to our capital efficiency, thereby reducing the capital costs per gallon of cellulosic fuel. That’s what makes the development of our new next-generation catalyst platform so important. This catalyst is a culmination of the tremendous amount of effort by our R&D team and represents a major step toward achieving that balance of hydrocarbons that we discussed.

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