Clean Energy Fuels’ top management mounted a spirited defense of its strategy for building out U.S. natural gas fueling Monday in the face of recent news stories and investor analysis that knocked some 17% off its share price over the last week.
In a morning conference call, CEO and President Andrew Little fair sought to downplay what appears to be greater trucking company interest in compressed natural gas (CNG) versus liquefied natural gas (LNG), as well as a pullback by another builder of LNG stations (Blu LNG).
Much of the trucking industry is still in a testing phase when it comes to natural gas fueling, Littlefair said. Trucks with Cummins’ 400-horsepower engine (well suited for LNG) hit the market in August 2013, but it took a few months more to actually reach customers. It’s understandable that adopters looking at Class 8, heavy duty trucks may keep testing natural gas fueling with CNG because “fleets need to gain experience,” he said.
Its one thing to test six CNG trucks at a time and quite another to get that experience by taking 100 trucks that run on LNG, he added. With the exception of a few early and large adopters (such as UPS), the current pace of adoption for fleets is in “the tens and twenties” of trucks, Littlefair said. Larger orders should follow later in 2014, he added.
Some investor reports critical of Clean Energy’s LNG strategy note that 84 public access CNG stations capable of accommodating Class 8 trucks were opened in 2013, for a total of 414. Meanwhile, LNG stations number just 87, with 47 open to the public. Of that total, 19 public access stations were opened in 2013.
In addition, Blu LNG (also known as Trans Fuels LLC) said in late January that they were slowing down their development of LNG stations while they waited for more trucks to shift from diesel to LNG.
Clean Energy’s work with some 137 trucking fleets has so far seen a skew toward CNG as they replace diesel trucks with natural gas fueled vehicles, Littlefair admitted. During 2013, the split in vehicle deliveries was 58% for CNG and 42% for LNG.
However, Littlefair expects the number of natural gas trucks ordered in 2014 to jump to about 10,000, five to six times the order level of 2013. Given Clean Energy’s position in the business of both LNG and CNG fueling, “we expect to have meaningful market share … regardless of how the market flows,” he said Monday.
“We have more salesmen, more stations, we operate in more states and we have more CNG and LNG” than anyone, Littlefair said. “We don’t get every (fleet) deal but we have the most coverage,” with some 800 fleets under contract.
Littlefair challenged the notion that Clean Energy was overly focused on LNG, asserting that all of its America’s Natural Gas Highway stations could add CNG capability for about $600,000 each. However, there aren’t enough CNG customers to make that practical, he said, and in some rural locations there isn’t sufficient electricity (the amount needed would power a small hospital) to power CNG fueling capability.
Clean Energy, which will report fourth quarter and full year 2013 earnings on Feb. 27, has some $375 million cash on hand and is planning capital expenditure of $100 million to $150 million in 2014. “We expect to be well funded into 2016,” Littlefair said, adding that the company has secured LNG supply but “will watch carefully to see how the market develops.”
Clean Energy’s share price fell from $11.69 on Feb. 3 to $9.69 on Feb. 7, down $2.00 or 17%. After dipping to $9.41 earlier Monday, the price was close to $9.60 toward the end of the trading day. The 52-week range has been $9.20- $14.82/share.