For more than 20 years old, Clean energy fuels (NASDAQ: CLNE) targeted commercial businesses to convert their diesel or gasoline fleets to renewable natural gas.
In this segment of “The High Energy Show” on Motley Fool live, recorded on February 1Fool contributors Jason Hall, Travis Hoium and John Bromels discuss the company’s current state and its plans for the future.
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Jason Hall: Here are clean energy fuels. For RNG supply, their long-term existence as a company, it’s a company that’s been around since the late 1990s, T. Boone Pickens and Andrew Littlefair were the co-founders, Andrew Littlefair is still the Company CEO.
Historically, their business was just taking natural gas and using it to replace diesel or gasoline for transportation customers, and they’re not people with a natural gas car in their driveway, they’re commercial users, so a taxi fleet operator, transit bus operator, highway trucking companies, solid waste removal companies. Companies make the financial decision to switch from diesel to natural gas. It’s cheaper for fuel. Go ahead, Travis.
Travis Houm: It was especially interesting when natural gas was extremely cheap and seemed to be when we were talking about the shale boom. The byproduct of the shale boom, one of them was that natural gas was plentiful and very cheap, which made it a financial decision for Clean Energy Fuels customers.
John Bromel: It’s worth saying that you can’t just fill your regular truck that was getting diesel with natural gas, you should specifically convert the engine to something that can accept liquid or natural gas based fuel.
Room: Lots of changes that need to happen. Again, the addressable market has never been personal transportation, as sacrifice and performance have reduced mileage. There are plenty of reasons why this was never on target. It’s always been a financial decision and it’s been targeted at business customers.
The company has grown its fuel volumes steadily between 5 and 15% each year for a long time and now supplies over 400 million gallons of fuel per year, has over 550 stations that it owns or operates, private stations and public stations like Pilot Flying J, for example, the largest truck stop operator in the United States. There are about 100 clean energy fuel stations at Pilot Flying J. So very well located for on-road trucking.
Anyway, what’s the plan here? Is to take their vertically integrated business and continue to move away from hydrocarbon natural gas. They’ve done a really good job here in California where they’re based because so many carbon initiatives have focused on that. You think of the ports of Los Angeles, the ports of Long Beach, where a massive amount of cargo is shipped to and from the United States.
It’s in the middle of one of the biggest urban areas in the United States and you have these diesel trucks going in and out dumping all the nitrogen sulfide and all those particulates into the air and the environment. There have been many initiatives to reduce the environmental impact of ports in the communities where they operate. The company has done a good job of transitioning a lot of businesses from diesel to natural gas in general.
Let’s take a closer look at the picture here. Again you see a large concentration of resorts on the west coast. A lot of that expansion here happened over the previous six or seven years under what they initially called America’s natural gas highway, which was a big speculative bet that management made, contracted a bunch of debt to build a bunch of stations which was really painful for the shareholders.
I’m not going to beat around the bush, because it didn’t lead to the kind of growth the company was expecting. We have already talked about it a lot. What is it, John?
Bromines: If we build it, they’ll come the philosophy, the idea that if we have a cross-Canada network of natural gas filling stations so that eventually a truck can drive across the country just filling up with natural gas, that will encourage more of people converting their fleets.
Room: No one was going to adopt natural gas trucks if there were no stations, no one was building stations because there were no natural gas trucks. It did lead to growth but it was brutal and the moment happened around the same time remember oil went from $114 a barrel to $30 a barrel the worst moment in the world because that they launched it just as all of this was happening. Needless to say, you’re moving fast so far and it’s paying off for the business. It was painful for the shareholders.
Jason Hall owns Clean Energy Fuels. John Bromels owns Clean Energy Fuels. Travis Hoium has no position in the stocks mentioned. The Motley Fool recommends clean energy fuels. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.