While it is currently straining its balance sheet to accelerate infrastructure buildout, Clean Energy Fuels Corp. likes its strategic positioning to take advantage of what it considers now widespread acceptance of natural gas as the alternative fuel of choice for large trucks and a new national network of fueling stations it expects to be in place by next year, CEO Andrew Littlefair told financial analysts on an earnings call reporting more red ink for the Seal Beach, CA-based firm.
Littlefair said he was still bullish despite losses for 4Q2011 ($20.9 million) and the full calendar year ($47.6 million), compared with $13.7 million in net income in the 4Q2010 and a much smaller loss ($2.5 million) for all of that year. He cited as positives the growth in core markets, sales, engineering and construction staffs, starting the America’s Natural Gas Highway for medium- and heavy-duty trucks, and raising $350 million last year.
Despite pressure on its cash flow, Littlefair said the company made “absolutely the right business decision” to pour extra capital in at the highway network of liquefied natural gas (LNG) and compressed natural gas (CNG) fueling stations along major trucking corridors throughout the United States. “The more stations we build, the more entrenched and farther ahead we become, and the more valuable we are,” he said.
Littlefair called last year a time of “enormous change” during which he thinks the efforts of Clean Energy and its founder, Boone Pickens, have “fundamentally shifted the dialogue on alternative transportation fuels, establishing natural gas as the primary alternative fuel for heavy duty trucking.”
Noting that Clean Energy’s competition from diesel is seeing the engines get more expensive and the performance go down, Littlefair said natural gas fueling stations opened last year have increased their volumes overall by about 27%, and he expects more of the same this year, although he cautioned that the real growth from the full-court press on the national highway effort won’t really begin to kick in until late this year and early in 2013.
“It’s a very late 2012 and early 2013 story because some of the engines [for the trucks] won’t be ready to go until the latter part of this year,” Littlefair said. “I’m as stimulated and excited about what’s going on [in the trucking industry] as I have ever been.”
In response to analysts’ questions regarding Clean Energy’s LNG supplies, Littlefair said he was pleased last year that there was a “little bit more LNG available” in the United States than he had anticipated — some in the Northeast and mid-Atlantic where it is used for peak-shaving, and other cryogenic facilities in the Southeast and Northwest.
“We believe that when you shake all that out, there is probably a billion gallons annually available of LNG supply,” he said. “We don’t have it all tied up because we don’t need it all yet, but I think by 2016 [demand will be such] that you better line yourself up to have about 3.5 billion gallons available. [Clean Energy] is going to be OK between now and the next two years, but we’ll be working with our friends in the gas patch and midstream to begin to make the changes to some cryogenic facilities and storage to be able to have more LNG on hand in later years.
“I am fully confident that can be done, but that is going to be an important, strategic part of this business.” Littlefair said each station in the national network needs to have LNG supply within a 250-mile radius.
Between LNG and CNG, Clean Energy will be dishing out proportionally about 70% LNG in its overall operations, Littlefair estimated in response to another analyst’s question. (Last year, LNG volumes were up about 30% and CNG by 25% for Clean Energy Fuels.)
While CNG has gotten a big boost from transit sector moves to natural gas, Littlefair thinks that LNG will continue to outpace CNG in growth as it did last year. “When you look out at the big interstate trucking market and the fueling network, I think the split with be 70-30 [LNG to CNG] because of LNG properties and the ability to put in those stations for less. As our business model gets into effect, I think the LNG should be bigger than CNG.”
In response to a question on possible congressional action to boost natural gas as a transportation fuel, Littlefair, who conducted the conference call from Washington, DC, where he was doing some lobbying, said, “[The CNG/LNG transportation sector] should keep in mind how far we have come. I don’t think we should worry [on Tuesday] about a yes or no vote because I think we have made our points. No one here [on Capitol Hill] thinks we shouldn’t use natural gas for transportation.
“There is some disagreement on the form and the process, but I’m not sure tomorrow’s action [one way or the other] is the end.”
The swing toward natural gas vehicles (NGV) took on aspects of a bandwagon last week as GM and Chrysler paraded out new natural gas-powered pickup trucks (see Daily GPI, March 8a; March 6), and GE and Chesapeake Energy Corp. heralded a new “CNG In A Box” fueling station (see Daily GPI, March 8b).
Not to be left out, American Honda Motor Co., which bills itself as the only automaker selling natural gas-powered passenger cars in the U.S. (Honda Civic), said it would be helping to answer the “chicken and egg” conundrum by installing CNG pumps in some of its dealerships (see Daily GPI, March 12).
President Obama also addressed the “which comes first” question last week (see Daily GPI, March 8c), including natural gas-powered vehicles in his $1 billion National Community Deployment Challenge to spur deployment of alternative fuel vehicles in communities around the country.
“At the end of the day it doesn’t matter how much natural gas or flexfuel or electric vehicles you have, if there’s no place to charge them up or fill them up,” Obama said at the Daimler Trucks North America Mt. Holly Truck Manufacturing Plant in Mount Holly, NC. “So that’s why I’m announcing…a program that will put our communities on the cutting edge of what clean energy can do. To cities and towns all across the country, what we’re going to say is ‘if you make a commitment to buy more advanced vehicles for your community, whether they run on electricity or biofuels or natural gas, we’ll help you cut through the red tape and build fueling stations nearby.'”
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