Alternative Fuel IPO: Highlights from Clean Energy's S1 Filing

Alternative fuel provider Clean Energy filed to go public yesterday with an OpenIPO auction. Highlights from the filing, excerpted from the company's S-1:

Proposed Ticker: (CLNE)

Underwriters: WR Hambrecht; Simmons & Co

Maximum Offering: $287.5 million

Company Overview:

We are the leading provider of natural gas as an alternative fuel for vehicle fleets in the United States and Canada. In the late 1980s, one of our founders, Boone Pickens, became convinced that natural gas had a number of advantages over gasoline and diesel as a vehicle fuel. Over the next decade and a half, Mr. Pickens and Andrew Littlefair, our CEO, were pioneers in developing this market. They founded our company on the premise that natural gas is cheaper and cleaner than gasoline and diesel, and that almost all natural gas consumed in the United States is produced domestically. We have supplied natural gas fuels to our customers since 1996.

We offer a comprehensive solution to enable vehicle fleets to run on natural gas as an alternative to gasoline or diesel. We design, build, finance and operate fueling stations and supply our customers with compressed natural gas [CNG] and liquefied natural gas [LNG]. We also help our customers acquire and finance natural gas vehicles and obtain local, state and federal clean air incentives. We serve over 200 fleet customers operating over 13,000 natural gas vehicles in a variety of markets, including public transit, refuse hauling, airports, taxis and regional trucking. We own, operate or supply 168 natural gas fueling stations in 10 U.S. states and Canada. In 2005, we delivered over 56 million gasoline gallon equivalents of CNG and LNG and for the first six months of 2006 we delivered over 32 million gasoline gallon equivalents of CNG and LNG.

CNG and LNG are well suited for use by vehicle fleets that consume large amounts of fuel, refuel at centralized locations, and are subject to increasingly stringent requirements to reduce emissions. According to the U.S. Department of Energy, the amount of natural gas consumed in the United States for vehicle use nearly doubled between 2000 and 2005. We believe we are well positioned to capture a substantial share of the anticipated growth in the use of natural gas vehicle fuels in the United States and Canada given our leading market position and the comprehensive solution we offer.

Financial Highlights: Revenues are generated by the sale of CNG and LNG to fleet customers, by owning and operating fueling stations, and by designing and selling fueling stations to customers. From October 06 through December 09 the company will receive a tax incentive from the government for every gallon of CNG and LNG filled. Risk management comprises a significant portion of the company's financial activity, as "sales are covered by contracts to sell LNG or CNG to our customers at a fixed price or a variable index-based price subject to a cap."

Revenue grew from $57.6 million in 04 to $78 million in 05, primarily due to increased consumption but also due to increased prices to customers who pay on an index-plus basis. Cost of sales also increased to $72 million (92.4%) from $48 million (84.6%). There was an increase in derivative gains from $10.6 million in 04 to $44.1 million in 05. Net income grew from $2.1 million to $17.2 million.

In the first half of this year, revenue grew from $30.7 million in H1 05 to $42.6 million. Cost of sales increased from $27.3 (89.2%) million to $36.7 million (86.2%), and derivative gains decreased by $31.2 million to a loss of $0.3 million. At the end of June, the company had $32 million of cash and less than $1 million of long term debt.

Use of Proceeds: The company expects to use $50-55 million to build an LNG liquefaction plant in the western United States, $30 to 35 million to build CNG and LNG fueling stations,and $15 to 20 million to purchase natural gas vehicles and equipment. The rest is for general corporate and acquisition purposes.

Competition: Primary competition is from gasoline providers, and other types of alternative fuel (ex: ethanol). In the natural gas segment, competitors are Trillium (private; primarily California), Hanover Compressor (HC) and Applied LNG (private; western US).

Management:

Andrew J. Littlefair, one of our founders, has served as our President, Chief Executive Officer and a director since June 2001. From 1996 to 2001, Mr. Littlefair served as President of Pickens Fuel Corp. From 1987 to 1996, Mr. Littlefair served in various management positions at Mesa, Inc., an energy company of which Boone Pickens was Chief Executive Officer. From 1983 to 1987, Mr. Littlefair served in the Reagan Administration as a presidential aide. Mr. Littlefair is currently Chairman of NGV America, the leading U.S. advocacy group for natural gas vehicles.

Ownership: Boone Pickens, one of the company's founders and a director, has control over the lion's share (73.3%) of the company.