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Clean Energy Fuels Corp. (NASDAQ:CLNE)

Update of Natural Gas for the Trucking Industry Conference

February 10, 2014 09:00 AM ET

Executives

Tony Kritzer - Director, Investor Relations

Andrew Littlefair - President and Chief Executive Officer

Rick Wheeler - Chief Financial Officer

Analysts

Rob Brown - Lake Street Markets

Jeff Schnell - Jefferies

Eric Stine - Craig-Hallum

Carter Driscoll - Ascendiant Capital

Andrea James - Dougherty & Company

Operator

Good morning and welcome to the Clean Energy Fuels’

Natural Gas and Trucking Industry Update. Today’s event is being recorded. I’ll turn the conference over to Mr. Tony Tony Kritzer.

Tony Kritzer

Thank you operator. Good morning everyone and thank you for joining us for this trucking update call. On the call this morning with me is President and Chief Executive Officer, Andrew Littlefair, and Chief Financial Officer, Rick Wheeler. And with that I’ll turn the call over to Andrew. Go ahead.

Andrew Littlefair

Tony, thank you and good morning. Thank you for joining us this morning as we thought it was important to address and clarify our LNG and CNG business in light of some recent reports. Let me make sure – let me make some general comments. This sound familiar I think to many of you and may not sound new, but I think they are still valid, but I think some of them bear repeating.

Clean Energy does both, CNG and LNG, and yes we do renewable natural gas. We’re really the only company in the business that does both compressed natural gas and liquefied natural gas. And you know as we look at some competitors large and small, some that have built a few stations, some that have really done not much yet, you can almost total up in the United States today almost 100 different companies that claim to be in the business. And when you look at that number we’re almost 99 or 98 of those are just in the CNG business. So it’s no surprise that a lot of people talk a lot about compressed natural gas. But we do both compressed natural gas and LNG. And we do it because our customers demand it.

We have more CNG stations in almost all of our competitors combined and we operate more compression than all others. We built 55 compressed natural gas stations in 2013. We own and operate 317 CNG stations and we own and operate 154 LNG stations. We built 19 LNG stations in 2013. In 2013 of the 1,444 12 liter engines, heavy duty trucks that were delivered, 58% were CNG and 42% were LNG. We are now working with over 137 fleets and it’s hard to get an exact number, those fleets represent tens of thousands of trucks. But as we look at what’s in our clear line of visibility for 2014, we’ve identified over about 3,500 trucks as we sit here in the beginning of February. And we believe so far as we review that split with our customers and dealers and the OEMs, the split right now as we sit here in the 3,500 trucks that we know about that we are working with is 57% LNG and 31% CNG.

Let me though mention some realities in this new market. I mean there is no doubt that we’re in a test phase and we’ve been very clear about that over the last year, year and a half. You’ll recall these engines didn’t really arrive to market, the 400 liter, 12 liter which we’re very proud of didn’t really come to market till August. It takes those engines about four months to end up in the customer’s hands. But there is no doubt that when a fleet wants to test some new heavy duty trucks and they ought to, we understand that. That when they’re going to test four to six or 10 trucks in a controlled test, it’s probably easier and quicker to use compressed natural gas today just because of some of the stations that are available than it is LNG.

Much of the early adopters are testing and they should as I mentioned. You can count on one hand though the number of fleets that have really deployed 30 or 40 or trucks or more. And I think this is obviously understandable but I think it’s important that these trucks, these truckers, these fleets need to gain the experience. But it’s one thing testing six trucks and working that into your fleet of 1,000 trucks and it’s another when you begin to take them in, in groups of 100 or more.

Some of the differences between the fuels will become more clear when larger deployments occur. 100 trucks take very large CNG stations and we know because we fill 7,000 transit buses, about 5,000 trash trucks every night. Those CNG stations when you’re filling 100 trucks many at a time cost between 2 to 2.5x more than an LNG station, so this is something that will need to be taken into consideration.

Many of the early adopters were in more urban locations today and lesser over the road. And those urban trucks right now are typically driving less miles and that will change. Our ANGA stations are more retail and less behind the gate. Those stations will serve truckers that cover more miles on our more rural locations. But I think it’s very important to understand that each market is huge, urban, regional, last mile, distribution center trucking, distribution center trucking that’s sometimes last several miles in urban setting, it’s billions of gallons. And in many cases that will be very well suited for CNG. But on the other hand long-haul, regional, interstate sleeper cabs, those kinds of trucking is billions of gallons and so the markets are both very large.

Now a little bit on our LNG program currently. Some of our customers are UPS, Modern Transport, Raven, Lowe’s, Cal Cartage. We’re fueling dozens of carriers today. And right now as I said we’re dealing with over, it’s very close to 150 various fleets. Many of them are wanting LNG. On our American Natural Gas Highway, we have 115 stations built and about currently 22 are open. Since December we’ve opened six more stations and we now have 64 ready to be open. Those stations don’t require any more capital, very minimal bit of kind of commissioning and they are ready to open so that capital has been spent.

There has been a lot of incorrect information about pricing. It is true that LNG tends to be a bit more expensive but it is very competitive if one considers the cheaper incremental cost of the truck and the weight. And let me mention weight and I know this sounds sort of esoteric I guess, but it really is important. Consider this that today a CNG truck that will be operating a range similar to what to be put on board with a one LNG tank can weigh up to 2,000 easily up to 2,000 pounds more.

Now let me just give you how this really compares. So I’m thinking of a truck that now has –an average truck that might use 20,000 gallons a year and the trips associated with that would mean that in about every 21st trip because of that extra 2,000 pounds that shipper, that trucker may need to take an extra trip. What does that really mean? Well when you then look at the amount of fuel they’ve used on those previous 20 trips and lay in an extra trip with the extra cost associated with that that’s $0.40 per gallon. So it’s very significant. So when you take into some of the consideration of time of fueling, cost of the stations and the weight and look at the overall lifecycle cost of the truck we think that you begin to understand the pricing in the fuels are very competitive.

We believe the split between LNG and CNG will continue at about 50:50 and it might even skew a bit more towards LNG as more is known. In the meantime we are building CNG and LNG stations. And as I mentioned we’re opening seven, about seven more in the next three weeks. Currently we have $375 million cash on hand and have a CapEx budget for 2014 that’s in the $100 million to $150 million range. We expect to be well funded well into 2016. We’ve done I think a very good job securing upwards of 400 million gallons of LNG that we think will be necessary as this market grows. And let me be clear that we are being very careful on our planning on our LNG plants as you know we have a relationship with GE, but we’re going to watch how this market develops very carefully before we begin to build new greenfield plants.

However those plants are under planning as we speak because we believe we’ll need them by early 2017. We have great partnerships with Pilot-Flying J, Mansfield Oil, GE and Westport. Our IMW subsidiary is one of the largest CNG compression station manufacturers in the world. So we’re well equipped with the best product. And let me say we’re very optimistic. We do think as we work with our partners and work with those in the industry that there will be upwards of 10,000 heavy duty trucks ordered in 2014. And just to put that in perspective of the couple of 100,000 Class 8 trucks sold that is close to 5% and five or six times more than 2013.

It’s very meaningful to us. If you extrapolate those trucks and apply somewhere around 20,000 gallons annually you could see that’s a 200 million gallon run rate, we still expect to have a meaningful, a very meaningful market share and so it’s very important. But regardless of which way the industry goes and it will ebb and flow as we saw in the refuse and in the transit over time CNG or LNG we’re ready to serve our customers. We’re opening just in the next three weeks as I said stations in London, Ohio, Amarillo, Texas, Walton, Kentucky, Oklahoma City, Oklahoma, Valdosta, Georgia, Sulphur Springs, Texas, and Charlotte, North Carolina.

Our GE financing relationship, we’re very excited about that. We currently have 1,144 trucks that are in the application phase. And right now those are breaking down at about 50:50 LNG versus CNG. I think I had gone on long enough and so at this point why don’t we turn the call over to – for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We’ll go first to Rob Brown of Lake Street Capital Markets.

Rob Brown - Lake Street Capital Markets

Good morning. Thank you for the good info on the marketplace.

Andrew Littlefair

Thanks, Bob.

Rob Brown - Lake Street Capital Markets

Did you say that the mix of the 12 liter shipped in 2013 was I think you said it was 40% LNG and maybe guess the color was that sort of after that 400 horsepower engine hit the market?

Andrew Littlefair

Yes, Rob, that’s what I said. I said basically these numbers are a little hard to be completely exact, but we believe that’s the right number. And now I use the term there delivered because I think more engines than that were actually ordered. But because I think the number Rob is closer to 2,500 and that would probably have a much larger number in there associated with the UPS because if you roll in 985 UPS orders, they’ve got ordered last year, you’d skew that number. But on delivered which I still think this is important, what I – what we believe is 58% for CNG and 42% were LNG.

Rob Brown - Lake Street Capital Markets

Okay, great. That’s good clarity. And then maybe you talked about sort of in this transition phase, but if you sort of step back what sort of the pace of adoption as people try these trucks and make the- when sort of the decision on what fuel do you use and sort of the next chunkier order size or bigger order size to get to that 10,000 truck run rate, how does that sort of play out this year and when does sort of clarity on this transition maybe get a little better?

Andrew Littlefair

Yes. And that’s what we look at all the time, Rob. And it’s building, I mean when you look at the sheer number you think back with me three or four years I mean you could count your fleets on one hand, that we’re really seriously looking about deploying these trucks. So now I mean we know of as I use that number 137 that we’re working with, there is others in our pipeline that I didn’t use in that number, there is literally 100s of fleets that are getting with the program.

Now some are further ahead than others, right. You have UPS out ahead with ordering 1,000 LNG tractors and others, our friend Jerry Moyes at Swift, he placed an order for 200. So you have some that are just a little bit longer in grade, but I think while we’re going to go from 2013 with 2,500 or so engines ordered that you’re going to this year be closer to 10,000 or perhaps a bit more. So it’s growing, the breadth is growing, you’re still I think not quite at the point where you’re going to see fleets taking batches of 50 or 100 or 200 at a time.

I think that will come kind of what we saw in the refuse industry few years back. Remember 2008 there was only 150 trucks sold, 3%, the next year was 8%. It wasn’t - of course we went through a difficult period 2009 and 2010. It really wasn’t until the next year that you saw – it appeared to us more of a normal order cycle where people were taking what it would be that they would otherwise buy for diesel. So we’re not quite there yet. I think this year is going to be backend loaded so we fully expect that you’ll see larger purchases later in this year. I think next year is going to be twice as big as this year.

But I think it’s still – you’re still in the phase Rob I think where your 10s and 20s building to something larger than that.

Rob Brown - Lake Street Markets

Okay, great. Thank you. I’ll turn it over.

Operator

We’ll go next to Laurence Alexander of Jefferies.

Jeff Schnell - Jefferies

Hi, this is Jeff Schnell in for Laurence actually. I guess one question on the weight restriction, I know you mentioned that it’s about 2,000 pounds for a CNG truck that is hauling the same amount of fuel as an LNG. But some state governments have come out and sort of relaxed the rules of weight restrictions in certain regions. Do you expect that there will be a regional disparity in CNG truck orders versus LNG go over the next two, three years until infrastructure is more broadly built out?

Andrew Littlefair

It’s a good point. I think there has been one maybe right the state. I think Jeff you’re eventually -- this is a federal issue so on your interstates I’m not sure the states can make that rule but I’m on shaky territory here. So what I was getting at is that I was looking for a waiver on the weight. We – our company in the past has been with others to suggest that maybe the federal government should look at a weight waiver. Typically, I’d tell you what though as we work with DOT and others over the years because of bridges and infrastructure in this country as you know in the United States is old, they’re reticent to begin to waive this.

And so I’m not sure you can count on that making up the difference, I think where you are is today to have long range you just need more cylinders and look I’m not a huge proponent of CNG so don’t get me wrong. And I’m very impressed with some of these CNG applications that I’ve seen being installed but it requires a lot of CNG tanks and these are heavy. And today it’s a couple of thousand pounds extra that have to be made up somewhere, it’s coming out of payload. That ends up – when you think about it that ends up meaning you got to run another trip and over the course of the year if you got a truck is doing a lot of duty that’s 20, 30 trips.

Jeff Schnell - Jefferies

Yep. That’s very helpful. Thank you. And if I can ask just one more, are you seeing a large portion of your early adopting CNG fleets testing at water now with LNG, are you seeing most of the new orders coming from clients that you haven’t had fuel contracts with before?

Andrew Littlefair

Well we had a group of customers that we’ve sold millions of gallons of LNG to that now have been in with us for years. We’re coming up on some of our customers from the Port of LA and others that started there. They’ve run now 500,000 to 600,000 miles for four years. We’ve seen some of them test CNG, we’ve seen some of our early CNG adopters now switching to LNG. I don’t know that I can give you a breakdown Jeff on exactly how this has gone. I think what I know is these truckers are good operators and they’re trying to figure out the price, they’re trying to figure out the duty cycle, they’re trying to begin to understand the time of fill and these other things that really do come into play when you get serious about this, just one thing to test one truck, three trucks, you’re willing to let your driver hang around for 37 minutes to go up.

But when you’re really trying to operate it as efficiently as these companies do, all of those kinds of factors come into play. So we’re seeing many of our customers look at both fuels but it’s kind of breaking down what we’ve always said. Those companies are really have to haul and haul longer ranges and drive more miles tend to favor the LNG. And those that tend to be in more urban environments maybe cube out before they weigh out, drive maybe less, perhaps run their trucks back to their own facility. CNG maybe the perfect fuel for them.

Jeff Schnell - Jefferies

That’s very helpful. Thank you so much.

Andrew Littlefair

Okay.

Operator

We’ll go next to Eric Stine of Craig-Hallum.

Eric Stine - Craig-Hallum

Good morning guys.

Andrew Littlefair

Hey Eric.

Eric Stine - Craig-Hallum

I just wondered if we can look at this a little bit different way just on your highway I know when this started years ago you had over a 100 NDAs signed with fleets. I was just curious if you can touch on how many of those are starting to adopt or you’re starting to see more meaningful volumes, just to get a sense of how early it is in this process or how many fleets potentially from that group we could start to see move towards this either CNG, LNG in 2014?

Andrew Littlefair

Right. So let me for just for the group Eric refers to the fact that we have a national truck team sales force that really call on shippers, those people who hire truckers and they could be Pepsi-Cola or Owens Corning or Procter & Gamble. We signed NDAs with them not because I wish that we had a deal with every single one of them, but we obtained their fleet data, their lane data, we know where their trucks go everyday, we’ve entered that into a GIS system. That’s how we chose some of the Pilot-Flying J locations and that’s how we chose in 2013 the other 19 distribution center key areas that feed into lot of these customers.

Eric, they’re beginning to [face] them in. And just like what happened with Procter & Gamble in the middle of last year where they went out to RFP to their haulers and asked them to begin to consider natural gas for certain lanes. That’s what we’re seeing happen now and I don’t have the number, I know that a huge percentage of that 137 fleets we’re working with come out of that group of people that we’ve obtained their lane data. But I don’t have the exact numbers, but we’re beginning to see that movement now. It takes a while for everybody in the call we have to remember the first trucks that were really well-suited for CNG frankly or LNG certainly for LNG the 400 horsepower didn’t get produced till August.

And they really didn’t end up in the hands of the customer still September, October. So it’s difficult to that point to have some shipper tell their trusted carrier that they got to begin to go out and buy these trucks when the guy hasn’t even put any miles on. So I think the good news Eric is that we’re beginning to see those fleets that we’ve worked with now for a couple of years, begin to talk to their haulers, I don’t have the exact number for you, but it’s beginning to happen now and I think that’s why you’re going to see orders go from something around 2,500 to 10,000.

Eric Stine - Craig-Hallum

Right, okay. What’s safe to say within those 137 or so still quite early in the process than you wouldn’t anticipate fueling a sizable portion of those fleets as they roll-out?

Andrew Littlefair

We do I mean we’re lucky and we got into this business first I mean we have more CNG as I said early and LNG than anyone else. So, we have more sales than anybody else, we have more stations, we have more – we operate in more states. And so not to be braggadocios, but we’ll – we typically end up getting a nice percentage of what you see coming, we don’t win every deal and that’s what [rattle] I think some people. You’ve seen announcements of this station here and that station there. This is a big country. Remember there are – because I’ve read something over the weekend about numbers of stations, there is about 5,000 or 6,000 diesel depots, we’re on the early beginning of this. But we have the most coverage and working with the most fleets and we serve more fleets, we have 800 and some odd fleets already under contract. So nobody else has that. So, yes I think we will and I hope but it looks like right now as we look at our – what we’re doing for 2014 we’ll still get a fairly nice market share of those trucks be at CNG or LNG.

Eric Stine - Craig-Hallum

Right, right, okay. That’s helpful. Maybe last one from me, just…

Andrew Littlefair

Eric, Eric, let me just interrupt to mention one thing. We do have a little bit of a strategic advantage and that is we have a compressor company that is selling compressors all around the world, we end up buying about 35% of all other products, we have the things the best. We know all the compressors out there and some of these guys are good making a nice compressor, ours is lube-free and we fuel 1000s of heavy duty vehicles on them every day right now. We can get that product, we don’t have to wait in line with those 99 other CNG companies in this -- that are in this business.

We have our own company and so it gives us a huge edge to be able to put stations in when we need them quickly for our customers. By the way something that we haven’t mentioned that we acquired some CNG in a box from Chesapeake and have 54 units that are ready to go, that are – we have stored now, that are perfect for heavy duty applications like ready mix, transit and some of these introductory stations where we’ll put two CNG in a box together and that will be perfect for a fleet of 15 to 20 heavy duty trucks. And we just acquired those from Chesapeake here in the last few weeks.

Eric Stine - Craig-Hallum

Okay. That’s great. Well so I guess what I was wondering just talking about what you’re doing with these fleets. Can you just talk about kind of playing it out a little further in terms of you’re going to – you’ve got the locations along these key routes, but then citing dedicated fueling behind the fence with some of these fleets where that stands?

Andrew Littlefair

Right. So we think that our partnership with Mansfield Oil which we’re expanding right now to go into the bulk hauling. Mansfield has I think 900 trucks that actually move fuel for them everyday to a few thousand locations. We’re entering into a new deal with them with bulk hauling so we’ll be their partner to do that vertical as well. But the Mansfield partnership is very important because they fuel about 3.5 billion gallons behind the fence. So, you’ll have a lot of fleets you have to remember this market breaks down forget LNG versus CNG, this market breaks down by those people, those haulers that have business that take them through the truck stops of America through our friends at pilot, flying J and travel centers and love’s. And others that are regional. We have some – we have three other regional deals with them. So, a big piece of this business is the retail business is the truck stop business and we feel like we’re well positioned with our America’s Highway which right now most of those are LNG, nothing precludes us by the way putting in CNG stations if and when we think that makes sense.

In fact as many of you know we’ve added some LCNG to some of our LNG. But the Mansfield relationship is particularly good because a lot of them, if you’re not fueling your truck stops you’re maybe bringing your vehicles home to a terminal or to a distribution facilities because the way you do your business like Frito-Lay, they want to fuel up in their backyard. And I think that will typically in many cases that could be CNG and we’re doing some of that right now with Mansfield. So, you’re going to see this business but both of those businesses when you look at how these trucks fuel in America I mean we’re talking 30 billion gallons. And it breaks down, it would be hard for me to give you the exact number and you might want to check with somebody else. But, I’m thinking it breaks down 60-40 or so between the retail and behind the gate.

So, we’ve done behind the gate for years I mean every [refuse] we now work with 220 [refuse] companies around the United States, all of those are behind the gate. So, we know how that business works and those are all CNG. So, Eric I don’t know if I answer your question but it’s going to roll out behind the gate I think it’s going to be important. Those trucks often will run less miles, could be in distribution centers their urban environments and I think a lot of those working with our friends at Mansfield, lot of those could be CNG.

Eric Stine - Craig-Hallum Capital

Okay, that’s great. Thanks guys.

Operator

We’ll go next to Carter Driscoll of Ascendiant Capital.

Carter Driscoll - Ascendiant Capital

Hey guys. I want to ask a question just about – I think there might have been some misinformation about if you were to take some of the ANGH stations you have out there but not yet opened and maybe add CNG to it, what the economics might be in terms of doing so at least some maybe extending some of those shorter haul fleet ranges maybe not building up completely on the Highway but the economics of what it might cost to do so on a station basics?

Andrew Littlefair

Right. Carter, thanks. Now you kind of implicit in that question is if you’re going to – all of America’s Natural Gas Highway stations were about $600,000, you could add natural – you can add compressed natural gas.

Carter Driscoll - Ascendiant Capital

Okay.

Andrew Littlefair

But what you’re doing is you’re taking LNG and you’re making it CNG. So, there is a little extra step in there. However, volume is a beautiful thing, I mean if you have 20 trucks, they want to use CNG. That is very economic and has a very good payback and we can be very competitive with CNG. So, all of those stations can be augmented but we’re not going to do that until we -- obviously we don’t have enough customers as it is in some of those stations. So the last one we want to do is just go add CNG because you don’t need it.

But, it can be done and it can be done with our CNG now. A lot as I mentioned just very quickly in 2013 we added distribution centers. So, we see a need to put in sort of the last mile natural gas fueling at distribution centers and we’ve targeted those that’s in our GIS system, we know where the best one are, we did 19 last year. We have another 37 some odd sort of in the queue, I don’t want to say they’re all under construction. Many of those will be compressed natural gas not we provide natural gas. And we’re weighing that now, some will be LNG because the customers feed into the network and we know who they are some will be CNG.

A lot of the – and this is something that’s it’s kind of not understood, you get out into the rural areas of America done certain different interstate, don’t always assume, you have the power or the gas service for a big CNG’s fueling station. You need that the - when we’re talking about a real honestly goodness, truck stop that could maybe do eventually that’s open in a year or two do a 100 trucks a day or more. You’re now talking about a $5 million CNG station requires a lot of size and the power requirements are enough for a small hospital. So you don’t always have that out in those areas. And so, you won’t be able to do CNG in some of these places. So, this is just something that as the industry matures people are going to be able to -- begin to understand how this is going to roll out and the cost associated with it.

Carter Driscoll - Ascendiant Capital

Okay, that’s helpful. Thank you. And then just getting back to the – talk about the testing question. Obviously, some of the bigger companies that have really taken the forefront with UPS have the big balance sheets to be able to make that decision certainly more easily than some of the mom and pop shops, say 100 trucks or fewer. Can you talk about the difference in the testing phases, and then any of the feedbacks you have gotten from some of the smaller fleets as to maybe some of the issues you maybe hadn’t thought about which are causing them either too to elongate their testing phase and/or just some of feedback you might have anticipated in terms of why they would choose one fuel over the other?

Andrew Littlefair

Right. Yes, that’s good question. We have a little experience, maybe different than some of our competitors in this, because we really cut our teeth on this in the Port of LA, which was unusual, right. We needed in those days in 2008, 2009, a lot of government support, because we were dealing with incremental cost of $114,000. And yet, our owner-operators down in the port were really at the bottom of the food chain. These guys were good, small one, two truck owners that bought trucks that had a million miles on them. That was their business model, and we were asking them with the City of LA and others of course to buy a truck that was a $250,000.

And so, we got a taste of working with these owner-operators, and we understand how they think versus UPS, and they’re totally different. I think what you’re seeing today is the bigger players. The bigger players are well suited. They have people to test things and they have the wherewithal to do it. However, we’re seeing another group of entrepreneurs that are a bit smaller than the large players like JB Hunt and others, Swift. All of them are in the – are beginning to test as well. And of course Jerry Moyes of Swift is – I think has a 200 truck order. We’re seeing the next group down 500 trucks. A good-size business scrappier, smaller, more nimble, they’re going after some of the entrenched larger companies because they can move a little bit quicker, they can turn the fleet over a little differently , and so we’re seeing some of them wanting to use in some cases LNG and CNG, basically both to unseat the incumbents.

And so, as you begin to see some of these announcements of companies, you don’t recognize, maybe Raven or Modern or Dillon, they tend to be a little bit smaller. You know what’s different about this trucking business rather than our refuse business, refuse business, I think the top four companies are about 50% of the industry when you have Waste and Progressive and Republic. Swift is the largest, I believe and they have – remember there is 3000 – there is 3 million trucks and Swift has 17,000, they’re large. So, this business is much more decentralized. I think it’s going to start first with a little bit larger players and some of them are mid-sized, and it won’t be until later when you start seeing that competitive pressure have the smaller players move in, and they maybe the guys who buy the two- or three-year old truck once the infrastructure is more fully developed.

Carter Driscoll - Ascendiant Capital

Okay. And then just…

Andrew Littlefair

But there are thousands of fleets, I mean literally thousands of fleets that we haven’t even talked to yet.

Carter Driscoll - Ascendiant Capital

Yes, that’s kind of what I was getting to, just the pace of the size of the fleets and trying to order in when you think that ramp is going to happen, obviously I think it is back half loaded obviously?

Andrew Littlefair

Yes, you’ve got to go with the big boy, the big players first. Remember, too, a lot of our – the truckers are responding to the shippers. Those shippers respond -- they’re paying for the fuel. So, they’re sensitive to the fuel price. They know there is a savings here, they know they are going to have to share that with their trucker, but they know there is something in there for both, and they also like the sustainability. So, they tend to have the wherewithal to go there first, later I think it will just be price and it will go down the food chain to the smaller guys.

Carter Driscoll - Ascendiant Capital

Okay. Just lastly a clarification, just to make sure I understand, when you talked about the number of trucks, they’re over 1100 that were delivered in 2013 and the split, versus the number that were potentially ordered but not actually delivered in calendar 2013. So, obviously UPS maybe had a little bit of a skew on the deliveries, but still it’s no where near the 90% CNG/LNG split you have seen thrown around and bandied about recently, correct?

Andrew Littlefair

While I’m doing this call this morning, there’s been a lot of stuff bandied about that just isn’t – just doesn’t match reality. So, I don’t know where they get those numbers.

Carter Driscoll - Ascendiant Capital

Okay. Thanks guys..

Andrew Littlefair

Thank you.

Operator

We’ll go next to Andrea James of Dougherty & Company.

Andrea James - Dougherty & Company

Hi, thanks for taking my questions.

Andrew Littlefair

Good morning.

Andrea James - Dougherty & Company

Good morning. What do you make of the fact that, I guess, even Andrew for Blue is saying that they’re going to slow their LNG rollout, and I was wondering if that surprised you?

Andrew Littlefair

No, itt doesn’t surprise me because as you know we slowed down the building of our stations as well, because these – when you really go back and look at the delay of the 12 liter engine, I’m not picking anybody here, it’s just the way these things go. I met with Cummins and met with them in March 2011, and that engine was going to be released in June 2012, and we had an understanding that we would begin to develop the infrastructure, and those engines will be there in 2012 and they’re nobody’s fault, that engine showed up in August, and so Blue got busy building things in 2012 as – in 2013 like we did.

They had a little bit different, and I don’t really want to speak about their business strategy, but they were – if you look at their map, you’ll see an awful lot of it in the Northwest, Salt Lake City, and then up into the Northwest. We picked a little bit different approach, and we really – we did that work with those fleets and those shippers to make sure we put in really corridors, so if you look at our map, you’ll notice the Texas triangle and also these other corridors. And I think theirs is just – they just took a breather here for a second, because they and we got a little ahead of the truck deployment. So, I don’t think there is much more to it than that, I mean when you read what their CEO has said, he said we slowed down, we’ve reduced our speed, but we still are very – they still are very optimistic about what they’re up to.

Andrea James - Dougherty & Company

Okay, thank you. And then your 2014 CapEx, I think you said $100 million to $115 million, where will the balance of that go?

Andrew Littlefair

So, I actually said $100 million $150 million.

Andrea James - Dougherty & Company

Okay.

Andrew Littlefair

And we’ll try to nail that down a little bit better. The reason, there is some bigger numbers in there, one is we recently acquired which we think is very opportunistic is from GE and Chesapeake, the CNG In a Box. It gives us turn-key stations that are built already that we think is a huge leg-up for us. So, there is a chunk of money in there for that. The other more significant than that is there are some big pieces as we sit here today for our piece of the LNG plants that we would begin to probably get into play with our GE, our two new GE plants.

As I said in my opening remarks, we’re going to watch that carefully, make sure we like the way this market is going . And – but we still feel like that’s on track and we [will] (ph) need to do it, and if we come to that conclusion here in the later part of this year, you will some $40 million or so or $50 million of that $100 million to $150 million, that would actually go to the LNG plants. The rest of it is for station development, it’s all CapEx, and it’s – we’re building out these next CNG and LNG stations to fill in – in fill these distribution centers and our network.

Andrea James - Dougherty & Company

Okay. Thank you. And then I have a question about, has Procter & Gamble committed to CNG or LNG either way, or are they still testing? I’m just curious about how their processes is maybe different than say like UPS or Lowe’s who are – who have definitely said we’re going to go LNG?

Andrew Littlefair

So, if I had Jim Harger who is my Chief Marketing Officer on this line, he might be able to give you even better clarity, but they’re different right, because they’re a shipper. So, they went out I believe to – they did it twice. This year I believe when it’s fully implemented, 20% of all their hauling -- all of their fuel spend which to me is pretty impressive to go from zero to 7% in 2013 to 20% this year. I believe they went out with an RFP, and it covered as many as 48 of their haulers. And, Andrea I think that’s right and their haulers responded saying they would use natural gas, I don’t know what that breakdown is. And I don’t – I’m not sure that we know exactly, I know we’re talking to a bunch of those haulers, I don’t know how that’s broken down. I don’t think Procter & Gamble called the shot on that, I think it’s up to their hauler.

Andrea James - Dougherty & Company

I understand.

Andrew Littlefair

And I know that some of these numbers I’m giving you, that 3,500 has that all baked into it, but I can’t give you a breakdown.

Andrea James - Dougherty & Company

Thanks. And then one final one, talking about the CNG going out -- the LNG and making them have CNG at those stations too -- you had talked before about the payoff on a station, and obviously the margins are better on LNG, and I was wondering if sort of this every station ends up being retrofitted or half of them? I guess I’m just wondering somebody had asked about the economics, my question is not that well formed --.

Andrew Littlefair

Yes.

Andrea James - Dougherty & Company

But do you see where I’m getting with this? I mean does this extend the time to payoff the station entirely? Thanks.

Andrew Littlefair

So, let me because you and I talked about this before, and I probably have confused you. So, actually the margins on LNG is not as good as CNG. All right. Now, when we get to very serious – when we get to very serious stations and that’s just something you have to take my word on it, and that means there haven’t been enough built. I think there’s been four or five, I know that Lowe’s has announced 10, and by the way those are smart guys so they’ve announced that they’re building more. These are not million dollar stations or a million and a half dollar stations. They’re $5 million stations. So you’ve seen some pricing that’s been fairly aggressive in some of these early deals because we have new players coming into the market that see this huge market, they want to get into the business, and they’ve shown pretty skinny frankly, margins on CNG.

And we bid on a bunch of those Andrea, and we haven’t participated in some of them because we look at it, we know what we’re looking at, and some of those deals were 10- to 12-year paybacks. And we’re not in the business to build the station and base load it, and if you never got in another customer, you have 12-year payback, we just – that we just can’t do that. Now, when I talk about making an LNG station, go to LCNG, I mentioned the $600,000, I’m starting with a cheaper station. So, I’m using a $1.8 million LNG station that can fuel 100 trucks compared to that $4 million, $4.5 million, $5 million CNG station. I’m spending another $600,000 or so to put compressed natural gas in there.

The only thing that we have to be careful with is that we – and I think over time this won’t be a problem is as the LNG infrastructure in terms of plants and hauling of longer distances is not perfect today, if you build an LCNG station and you spend your $600,000, you get an adequate, very nice pay back with 20 trucks on that, $600,000 extension. But you want to make sure you’re not pricing yourself too high because you’re hauling that LNG from too far away. So, certain of our stations are very competitive today with CNG, even bargain basement CNG at an LCNG station. But certain of them today, it doesn’t look as good because until the LNG infrastructure in terms of supply is more rounded out, you might have to be hauling it too far. Does that make sense?

Andrea James - Dougherty & Company

I think so. I’m surprised that the CNG margins are even better or if not the same as LNG for yourself?

Andrew Littlefair

Well if you’re pricing it correctly, they can be, if you’re not charging up or not. But it’s just because there is a couple less steps in it. Now, this is to the fuel provider, right.

Andrea James - Dougherty & Company

Okay. Thank you. I appreciate that. Yes.

Andrew Littlefair

Yes. Now, I would argue that when you really look at the life cycle cost and you take into consideration weight and timing and all those other factors, by the way, the incremental cost today, this I didn’t even mention this, the incremental cost for that truck with the same CNG on it versus LNG is $10,000 more. You put all that into the equation, this seemingly expensive LNG is not very expensive.

Andrea James - Dougherty & Company

So, if CNG is getting the same margins, then you’ll be raising the prices compared to say like a depot or something, doesn’t that negate some of the reason why they would go CNG anyway?

Andrew Littlefair

I happen to think that when you fully bake in that, you’re trying to amortize a $4 million or $5 million station which is the experience that, that customer wants, yes it does.

Andrea James - Dougherty & Company

Thank you. I appreciate it.

Andrew Littlefair

Yes.

Operator

At this time, I’ll turn the conference back to management for any additional remarks.

Andrew Littlefair - President and Chief Executive Officer

Operator, I think that covers it. I appreciate everybody coming on the line. I hope this was – that we had a chance to maybe set the record straight and highlight our plan, it hasn’t changed, but it is responding to the customer. And to the extent that the customers would like CNG, we’re ready to provide it. We happen to think though our business plan is intact, we’re well funded and we’re very optimistic about the role of those compressed natural gas and liquefied natural gas. Thank you very much.

Operator

And that does conclude today’s conference call. Thank you for your participation.

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