KiOR: The inside true story of a company gone wrong

Not long ago, KiOR quietly re-named itself Inaeris Technologies and launched a modest website which discussed the technology and management in little detail, but focused to an extraordinary extent on a declaration of values.

Empowerment, honesty, fairness, “lessons learned from our collective experience” and so on. Warm, kindly Hallmark Card sentiments, universally popular, admired and vague.

Not the bold, We-Are-Black-Swans, detailed descriptions of yields, costs, downstream partners, brand-name board members and timelines to commercial scale that had been the style of the Old KiOR.

Old KiOR was exciting, dramatic, and fast, and the headlines it produced between 2008 and 2011 were candy for a renewables-hungry world.

A Breakthrough in Catalytic Pyrolysis to make cost-competitive, drop-in renewable fuels. A “Magic Catalyst”. The backing of a celebrity investor in Vinod Khosla.  A star-studded board featuring former Secretary of State Condoleezza Rice. An impending venture with Chevron and Weyerhaeuser. A massive loan from Mississippi voted by the state legislature, called into special session by a high-profile governor, Haley Barbour. A huge IPO. Reports of high yields. Construction at full-scale. 13 million gallons to start, multiple projects on the way.

A slide presented by KiOR in 2013, prior to the bankruptcy filing.

And then the shortfalls started. KiOR fell further and further behind on its production goals throughout 2013, and ran out of cash and tumbled into bankruptcy in 2014. Ultimately, the state of Mississippi filed a lawsuit alleging that the KiOR technology hadn’t been ready for scale, its management knew that fact, that the company had faked technical data, and overstated commercial progress to lenders to secure financial support.

Scandal erupts

Paul O’Connor

That there was a turbulent KiOR story to be uncovered was of little doubt. In late 2014, The Digest published a string of correspondence from major shareholder Paul O’Connor to the KiOR board, alleging a wide range of scientific mis-steps and warnings unheeded on the technology’s viability.

In part, O’Connor wrote:

“It is obvious for all of us today that KiOR is going through some difficult times, and may even not survive as a company. The reason for this, in my opinion, is not because of the failure of the technology itself, but because of several wrong choices made during the development and commercialization of the technology. Over the years there have been several warning signals (internal & external), one of which as I mentioned in the foregoing has been my own technology audit report in March/April of 2011. Notwithstanding these warnings KiOR’s MT continued on their set course. In mean time everyone else hoped for the best.

“The real proof-of-the-pudding however would be a successful start-up and operation of Columbus in 2013…[but] it became clear however that the product yields were in fact much lower than projected [**], while the on-stream times were also way too low [**]….My observation was that the low yields and on-stream times at Columbus were reasonably in line with the results and experience in the DEMO plant in Houston. This means that the main problems at Columbus are already discernible in the DEMO operations and are therefore structural and not “just” operational issues.

“I am of the opinion that KiOR’s [management team] professionally has not performed in evolving the KiOR technology to a commercial success; furthermore the MT in my opinion has not provided the board of directors of KiOR with the adequate, right and relevant information to do their job. I therefore am of the opinion that the MT needs to resign and to be replaced in order to improve the chances of success of KiOR and/or any other potential new ventures based on KiOR technology in the future.”

The complete O’Connor resignation letter is here.

By then, O’Connor was traveling with Alex Major, best known for his “Can We Still Fly Jets & Save the Planet?” presentation given at a number of industry conferences. Major had a plan to acquire the on-site assets at Columbus and produce jet fuel and green power. In mid-February, Major wrote:

The KiOR legal case is a complete bag of worms that if John Grisham got a hold of it would make a fabulous legal thriller and an interesting movie!! Regardless of whether Paul is going to speak or not, I would like to attend the ABLC. Hopefully we will have a chance to chat over a tea or a glass of wine at some point so that we can discuss the KiOR lawsuit.