Will natural gas autos fuel 1st profit?
Clean Energy Fuels Corp., the Seal Beach company that builds and operates natural-gas filling stations for some of the nation’s biggest bus and truck fleets, is banking on corporate customers to buy more clean-energy vehicles this year.
Executives hope that a growing fleet will boost sales of natural gas and propel Clean Energy to its first annual profit since its 1997 founding by Texas billionaire T. Boone Pickens, the onetime oil baron and corporate raider, and the company’s chief executive, Andrew Littlefair.
Clean Energy has become one of the biggest players in the industry with customers such as Frito-Lay North America Inc., Proctor & Gamble Co., United Parcel Service Inc., Ryder System Inc. and home improvement chain Lowe’s Cos.
Natural-gas engines and fuel systems have proved themselves in some of the most grueling urban conditions.
The nation’s second-largest street transit fleet, run by the Los Angeles County Metropolitan Transportation Authority, for example, retired its last diesel bus in January 2011.
Metro, with 2,200 buses running on natural gas, is one of Clean Energy’s biggest customers. Metro also has a few buses that are electric or hybrids.
Clean Energy raised $108.8 million in its 2007 initial public offering.
The company is the majority owner of a landfill gas facility in Dallas that produces renewable natural gas, or biomethane, and has built a second such facility in Michigan. It also owns and operates liquid natural gas production plants in Texas and California.
The latest
In November, the company reported a third-quarter loss of $14.7 million, an improvement over the loss of $16.7 million a year earlier.
But the growing number of vehicles Clean Energy could serve is giving the company hope of turning things around this year.
“The pronounced trend toward natural gas as a transportation fuel is clear,” Littlefair said in a recent statement to investors.
Customers, he said, ordered 70% more natural gas vehicles from January 2013 through September than they did during the same nine-month period in 2012.
Littlefair said that manufacturer Cummins Inc. produced engines and fuel systems for about 2,400 natural gas trucks last year and will make enough for about 10,000 this year.
Accomplishments
Clean Energy provides natural gas fueling stations for 30,000 vehicles in the U.S. and Canada.
Pickens and Littlefair said in an interview last month that the company aims to build “America’s natural gas highway.” It has nearly 500 natural gas fueling stations nationwide, twice as many as it had in 2011.
It also has broadened its reach to include the manufacturing of compressed natural gas and liquid natural gas equipment and technologies and the developing of renewable natural gas production facilities.
Pickens, who long has wanted to wean the U.S. from its reliance on foreign oil, conceded that he was a few decades early into natural gas. But he thinks its time has come.
“Natural gas is 75% cheaper than oil. It’s cheap, clean, abundant and domestic,” he said.
Challenges
Clean Energy’s ambitious building of fueling stations has taken a toll on the company’s bottom line.
And natural gas has a long way to go to dethrone oil-derived gasoline as the fuel king on the nation’s freight corridors.
The vast majority of the nation’s taxis, buses, shuttles and trucks still run on diesel fuel. Cleaner, low-sulfur diesel fuels and better engine technology have made diesel a strong competitor to alternative fuels for companies looking for better mileage and environmentally friendly fuels for their fleets.
And some analysts see Clean Energy as essentially a gas station chain that sells a commodity with low profit margins.
“As a fuel distributor, it’s going to be exceedingly difficult for this company to be profitable on a sustained basis,” said Pavel Molchanov, an energy analyst at Raymond James Financial Inc.
Analyst views
Analysts, though, are split over the company’s prospects and recommendations on whether to buy, hold or sell the stock, which closed Friday at $11.79.
Of 11 analysts, one rated the company’s stock a strong buy, and three others recommended buying it. Four analysts suggested holding the stock. Three rated it underperform or sell.
Ascendiant Capital Markets, which recommended buying shares, noted that “Clean Energy is the largest provider of natural gas fuel for transportation in North America and is leading the deployment of [natural gas] fueling infrastructure.”
Analysts at Piper Jaffray reiterated a “sell” rating on shares of Clean Energy in an Oct. 8 research note to investors.
Molchanov recommended shorting the stock this year, saying the entry of other companies into the natural gas infrastructure system will put pressure on the company’s chances for a profit.
A short position is essentially a bet that the share price will go down, which would result in gains for those shorting the stock.
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Twitter: @RonDWhite
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(BEGIN TEXT OF INFOBOX)
The company: Clean Energy Fuels Corp.
Headquarters: Seal Beach
Ticker: CLNE
Leadership: Andrew J. Littlefair, chief executive since the firm was founded in 1997
2012 revenue: $334 million
2012 net loss: $101.3 million
Stock price: $11.79 at Friday’s close
52-week range: $10.63 to $14.82
P/E ratio: N/A
Quarterly dividend: none
