In Texas, Raymond James energy analyst Pavel Molchanov writes, “Contrary to a flawed news article, Columbus is on track. The stock has been on a wild ride, jumping from $6.50 in June to $9 in September only to fall back down to the $5 level over the past week. As we noted in our KiOR brief last Friday, the latest volatility came after an article in the Commercial Dispatch, the local newspaper of Columbus, Mississippi. Management is clear that the guidance from the 2Q12 call – first fuel sales in October/November – remains valid. Sales this current quarter will be slim: we assume only 650,000 gallons (sub-25% utilization). Our model shows production rising to full utilization of ~3 million gallons per quarter by 3Q13 – a ramp-up pace that is normal in the context of new energy infrastructure broadly defined, not just biofuels. The company will provide more details on the plant’s commissioning and production trends on its 3Q12 call on November 8.
“America’s first bio-MLP? From a long-term standpoint, our most intriguing takeaway is that KiOR seems to have found a way to create America’s first-ever renewable energy MLP. The “angle” is that only forestry byproducts (such as wood chips) could be used as the feedstock to produce the biofuel within the MLP. To be clear, the company’s production capacity wouldn’t scale up to MLP-able levels until at least the second half of 2014, by which point a letter ruling from the IRS to enable the MLP spinoff should be in hand.”
Category: Producer News