The Newport Beach-based company (Nasdaq: CLNE), North America’s largest provider of renewable natural gas (RNG) for use as a transportation fuel, last month announced an investment and related energy contract from Amazon that one analyst says could be worth $850 million.
“I think that significant players like Amazon send positive market signals,” Littlefair told the Business Journal on May 11. “Their commitment to this is really important for us and frankly for the broader industry.”
He adds: “I believe it’s the most important commercial deal that we’ve made at the company.”
Clean Energy was formed 20 years ago, co-founded by the famed late oilman T. Boone Pickens.
Buses, Trucks, Shuttles
RNG is produced by capturing methane emitted from the breakdown of organic wastes in landfills, wastewater and farms that would otherwise have escaped into the air. As a result, Clean Energy says its RNG reduces the amount of climate-harming greenhouse gases by up to 300% or even more.
The fuel is powering thousands of vehicles in fleets ranging from airport shuttles to city buses, as well as waste and heavy-duty trucks.
Clean Energy employs 431 people in North America, including 120 at its headquarters (see story, page 65). It runs a network of 565 fueling stations across the U.S. and Canada.
“We’ve gone from six or seven years ago 20 or 30 million gallons, now 153 million gallons (of RNG delivered),” Littlefair said. “So, it’s growing north of 20% a year.”
Electric, Hydrogen Competition
Littlefair says renewable natural gas is preferable to electric and hydrogen, adding that the latter two are “pretty far out in terms of their economic viability.”
He says RNG will be a “very important bridge” in the development of sustainable energy heading further away from traditional diesel for commercial transport.
“The bridge could be a decade or longer” while he emphasizes the huge size of the transportation energy market should provide plenty of room for everyone.
“This is a very large market. There’s probably great opportunity for these different fuels. And I think the market can be big for all of them.”
The field of competition from other fuel sources doesn’t bother him.
“We have a really good environmental fuel, so we should be fine.”
$1B Revenue Projection
Analyst Eric Stine of trading and investment banking firm Craig-Hallum on May 7 was bullish about Clean Energy’s long-term prospects, saying it can ultimately become a $1-billion-plus revenue company.
The company reported about $292 million in revenue last year.
Stine emphasized that natural gas faces stiff competition in the face of other alternative energy sources.
“Advances in technologies using competing alternative fuels such as hydrogen, ethanol, bio-diesel, electricity, or other technologies that improve their comparative advantages could slow the adoption of natural gas fueled vehicles,” Stine wrote in a May 7 note to investors.
Clean Energy said the COVID-19 health crisis that weighed on airports and public transport systems led to a drop in fuel deliveries in the fourth quarter, compared with the same period the previous year.
The company’s revenue for the first quarter of 2021 was $77.1 million, a decrease of 10.3% compared to $86 million for the first quarter of 2020. That reflected an unrealized loss of $2 million on commodity swap and customer fueling contracts, as well as lower volumes sold due to the pandemic, among other factors.
“I’m very pleased with our first-quarter results given the lingering impacts of COVID-19, and expect our performance to improve as the economy and commerce continues to gradually open up,” Littlefair said in presenting the results on May 6.
While the company’s outlook is complicated due to various factors, it did say that adjusted EBITDA—earnings before interest, taxes, depreciation, and amortization—for 2021 is expected to range from $60 million to $62 million, well above last year’s $45 million.
Biden Bump
Clean Energy has been making strides in adding big-name customers. The company is supplying fuel to UPS, FedEx, Waste Management and Frito Lay, among others.
The company’s shares were trading around $8 early last week, about four times their value a year ago, giving the company a market cap of $1.6 billion, amid a series of sharp ups and downs that pushed the market cap over $3 billion in March.
It ranked among OC’s 15 most valuable public companies when its stock was at its recent peak.
The share price increase has coincided with Joe Biden’s election in November on a platform that included the use of less-polluting fuels.
“Generally, I think the Biden administration’s push for more sustainable transportation fuels is a good thing for us,” according to Littlefair, who is also Clean Energy’s president.
Littlefair says he keeps a close eye on the company’s stock fluctuations but emphasizes that market gyrations “may not always have a lot to do with our particular business.”
“We’re building for the long term,” the Clean Energy CEO says. “We just stick to our knitting.”
20% Amazon Ownership
The company said on April 19 it would provide low and negative carbon renewable natural gas to Amazon, via 46 existing and new fueling stations in its network. The OC firm said it will spend upward of $60 million this year to build out the 19 new or upgraded stations that are part of the deal.
The April contract with the e-commerce giant also comes with an option for Amazon to take a stake in the local company.
“If they spend up to $500 million, it allows them to purchase up to 20% of our shares,” Littlefair said.
That would make Amazon the company’s second-largest owner of its stock, according to regulatory filings.
Credit Suisse said in a research bulletin the Amazon deal might ultimately be worth $850 million to Clean Energy, well above the stated $500 million value of the warrants issued to Amazon.
Amazon isn’t Clean Energy’s only notable partner.
On May 11, Chevron said it was investing $20 million more in the Adopt-a-Port initiative with Clean Energy.
Chevron has now invested a total of $28 million in the initiative, which provides truck operators—large fleets and owner-operators—serving the ports of Los Angeles and Long Beach with cleaner, carbon-negative RNG to reduce emissions.
“The demand by customers for RNG continues to accelerate,” Littlefair says.
