Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Clean Energy Fuels Corp. (NASDAQ:CLNE)

Q1 2011 Earnings Call

May 9, 2011 4:30 pm ET

Executives

Ina McGuinness - SVP, ICR Inc.

Andrew Littlefair - President and CEO

Richard Wheeler – CFO

Analysts

Rob Brown - Craig-Hallum Capital Group

Graham Madison - Lazard Capital Markets

Eric Stine - Northland Securities, Inc.

Brian Gamble - Simmons & Company

Peter Christiansen - Bank of America-Merrill Lynch

Rupert Merer - National Bank Financial

Operator

Greetings and welcome to the Clean Energy Fuels First Quarter 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ina McGuinness. Ma’am, you may begin.

Ina McGuinness

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the first quarter ended March 31, 2011. If you did not receive the release, it’s available on the Investor Relations section of the company’s website at www.cleanenergyfuels.com. This call is being webcast and a replay will be available on the website for 30 days.

Before we begin, we would like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects, as well as words such as “believe”, “intend”, “expect”, “plan”, “anticipate”, and similar variations identify forward-looking statements, but their absence does not mean that the statement is not forward-looking.

Such forward-looking statements are not a guarantee of performance and the company’s actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of Clean Energy’s Form 10-Q filed earlier today.

These forward-looking statements speak only as of the date of its release, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release.

The company’s non-GAAP EPS and adjusted EBITDA will be reviewed on this call and excludes certain expenses that the company’s management does not believe are indicative of the company’s core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results.

For directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA, and a reconciliation between these non-GAAP and GAAP figures is provided in the company’s press release, which has been furnished to the SEC on Form 8-K today.

Participating on today’s call from the company 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.

Andrew Littlefair

Thank you, Ina and good afternoon everyone. Today, we reported a very strong first quarter with year-over-year revenue growth of 67% or $65.3 million. We delivered 35.5 million gallons during he first quarter of 2011, which is up from 28.6 million gallons a year ago.

There’s been a flurry of activity and positive momentum in the direction of the expanding natural gas fuelling in the trucking industry. The high price of diesel has put tremendous pressure on trucking companies, with diesel recently rose to close to $4.50 per gallon and we were selling LNG for $2.27 on a comparable gallon basis, you can bet that shipping

You can bet that shipping companies took notice and started making enquiries as to how to get it on this model. The price spread between diesel and natural gas has not narrowed and the ongoing turmoil in the Middle East has only served to heighten the awareness of the benefits of natural gas.

We believe the trucking market is preparing for some early day changes in the near-term. As I've discussed before we now have a national fleet sales team that is working with dozens of large shipping companies that have taken an interest in pursuing the conversion to natural gas.

New engines under development from Cummins, Navistar and Volvo as well as product offerings from Peterbilt, Freightliner, Kenworth, Volvo Mack, are also going to drive acceleration of this market.

There are now a number of these well-known vehicle and engine manufacturers that have been developing 13-liter and 12-liter engines that will hit the sweet spot of the truckers' needs. We look forward to this shift because we know that’s what the industry needs.

Case in point the trash truck industry has the perfect engine with their nine-liter Cummins Westport for their specifications and this market is expanding at a very rapid pace.

Turning to our subsidiaries, BAF had positive movement in certifications and programs with Ford during the quarter. We are already seeing the benefits of our ServoTech relationship or ServoTech is reducing our development time for new Ford gaseous fuel systems.

For example, ServoTech has nearly finished with the development of proprietary fuel systems for all current BAF vehicles with completion expected this summer. Our ServoTech designed fuel systems is expected to be released for the Ford F-450, 550 and 650 in June 2011.

BAF has also continued to build relationships with key strategic industry partners. BAF has added the Dejana to our nation-wide network of authorized installers for the sale and service of BAF's gaseous fuel systems. The Dejana who is the primary Ford ship-thru to dealerships for the Transit Connect and Dejana will also operate other BAF products, at six manufacturing facilities in Northeastern United States.

And I am happy that the first quarter of 2011, business was up 45% from a year ago. And the last few weeks, production has increased after they made improvements to their inventory manager, their IT systems and factory workflow processes. We expect these enhancements will improve our productivity and allow us to get ready for additional increases in orders that we anticipate in the second half of 2011.

Our Northstar acquisition is proving to be very beneficial as we pursue expansion opportunities in LNG. Today, our construction carpet includes six LNG stations under development that will fall under the Northstar operating unit. Northstar's backlog has doubled from a year ago.

With respect to biomethane, we formed a new operating subsidiary Clean Energy Renewable Fuels, which is dedicated to developing and managing our biomethane projects.

At the commence we announced that we have secured a $40 million a new long debt at 6.6% interest rate. This debt was used to repay an $11 million bridge loan that had been made by Clean Energy and approximately 25 million is available for capital expenditures to expand the plan.

We anticipate volumes picking up in May. Today we are on a run rate for about $9.5 million gasoline gallon equivalents of pipeline quality natural gas on an annual basis. We expect well filled and planned approvals to take us to a run rate of over $12 million gallons of annual production by the end of this year and over 15 million gallons by the end of next year.

Our second biomethane project is a 30-year agreement with major solid waste operator Republic Services. We’ll be producing landfill gas that we recovered from Republic’s 160 acres in Canon, Michigan. We are completing the design, engineering and permitting of the plan and we expect to commence commercial operations during the first half of 2012. We anticipate bruising approximately 4 million gallons during the first year of operations rising above 6 million gallons a year at peak production.

As you know, development of landfill biomethane production assets gives us the ability to offer our customers a renewable vehicle fuel that reduces greenhouse gas emissions right up to 88% compared to gasoline or diesel.

We are the only company in North America that is heavily invested in both producing biomethane and marketing and selling natural gas vehicle fuel and we believe that our ability to sell biomethane vehicle fuel add substantial value to our natural gas vehicle fuel infrastructure. We anticipate developing other such projects under the Clean Energy Renewable Fuels umbrella.

Now let’s focus on some recent wins. Some of the recent contracts that are driving our growth include are award of a $40 million contract with Dallas Area Rapid Transit to design and build four new CNG stations to support their plan to deploy 452 new CNG buses and 200 natural gas paratransit vehicles over the next two years. This represents one of the largest single orders for compressors in IMW’s history.

We also signed an agreement with major contract freight carrier Dillon Transport to build, operate and supply a public use LNG, CNG fueling station in Dallas that will support their expanding fleet of LNG powered tanker trucks. Dillon is contracted to transport raw materials for Owens-Corning. At the ports, there are 132 more trucks being deployed through grants from South Coast Air Quality Management District.

And in the taxi market, we have two new stations opened for fueling taxi fleets in downtown Chicago. This is significant because it represents the opening up of Chicago market for natural gas vehicles and our entrance into Chicago market. We are now working with the largest taxi company in Chicago and expect to see growth in the market.

Looking at the progress we made at airports across the country, we’ve signed four new contracts and are negotiating contracts for three more. This will bring the number of airports in which we build our upgrade the fuelling stations for growing natural gas fleets to 27. There are another seven airports considering natural gas fuelling options and we are working diligently to capture these opportunities.

Dallas/Fort Worth airport has a great case study, as we build a station for them late last year for the rental car center. They started by putting just a few buses into service and burned just 2,200 gallons in January. But by March of this year, 46 buses were operating and the volume was 67,000 gallons for the month.

Republic Waste is another great success story. They are committed to ordering 500 more trucks next year. To-date we've brought eight stations online of the 15 that we were awarded by them and we were recently awarded Las Vegas which is a very large fleet.

The Refuse Sector has really taken off. We now work with 63 refuse companies and as we speak, our sales team is attending the huge Refuse Show in Dallas called Waste Expo where natural gas trucks are primarily displayed by equipment manufacturers who all have natural gas offerings.

Lastly Ohio's Stark Area Regional Transit Authority or SARTA; again awarded a contract to us when they made the switch to natural gas. Public officials told the media that SARTA had been considering a move to natural gas when the recent spike in diesel fuel prices was projected to cost them $200,000 more on fuel in 2011 than in 2010. They estimate that they will save $350,000 a year on fuel when they move to CNG. A portion of the station and construction project will be funded from the cost savings and a grant from the state will cover the remainder of the cost.

Looking at our station construction activity, we completed nine station construction or upgrade projects during the first quarter compared to two in the first quarter of last year. In our pipeline we have 343 projects; within the pipeline, there are several categories of projects. They are either in negotiation, validation or qualified prospects. Of the 343 projects, a 173 are in the validation and negotiation stages. We now have 82 projects on the carpet. And you remember that those are projects that are under contract, up from 61 when I spoke to you on our fourth quarter call in March.

In an effort to demonstrate the power of NGV - the Natural Gas Vehicle movement on a national scale, on April 13th, the industry came together in Washington to display more than a dozen natural gas vehicles ranging from passenger cars to 18 wheelers. Numerous companies, organizations and manufacturers were represented there.

Natural gas products included equipments, stations and compressors. The scope of vehicles and products demonstrated the application of NGV’s across a broad range of industry’s sectors. There were more than a 25 members of Congressmen and interviews from Congressmen together with Boone were conducted and sent back to their home districts via satellite.

The goal of the event was to highlight the industry as the new alternative transportation to give American solutions for the NAT GAS Act of 2011 moves its way through Congress. Also known as HR 1380; this Bill would accelerate the use of natural gas fuel in the nations transportation sector.

Speaking of the NAT GAS Act, we see positive momentum with high gasoline and diesel prices helping to keep our legislators focus on the need. We remain optimistic that with a 180 cosponsors we will see some progress on this Bill sooner rather than later.

We’ve also seen increased legislative support in key states that include Texas, Pennsylvania, California and Oregon. In Texas, the Senate passed a plan to carve out a portion of the Texas Emission Reduction Plan and dedicate those funds for the regional natural gas trucking.

In Pennsylvania, the Marcellus Works package is working its way through the House towards the Senate. The package proposes $25 million annual tax credits for heavy and medium duty private fleet vehicles. The establishment of $12.5 million in mass transit vehicle grants, while mandating that large mass transit agencies make the transition to natural gas and a five year program to create several clean natural gas corridors throughout the state.

California is considering the clarification of state goals to reduce the state’s overall consumption by 2010 and increase alternative fuel use. Oregon appears determined to implement its own low-carbon fuel vehicle standard in 2012.

Now finally, we’ll start with our Boone’s warrants; honestly, we’re seeking a shareholder approval at our upcoming annual meeting to amend Boone’s warrant agreement to incentivise him to exercise a portion of his warrant prior to the December 28, 2011 expiration date. We see this as a significant opportunity for the company to receive an infusion of cash that would allow us to accelerate our planned capital expenditures and potential corporate strategic initiatives.

To refresh your memory, before the IPO, Bonne was issued warrants for 15 million shares at $10, totaling a $150 million. The proceeds of which would come to the company should he exercise his option.

And now, let me turn the call over to Rick.

Richard Wheeler

Thanks Andrew. All my references to our results will be comparing the first quarter of 2011 to the first quarter of 2010 unless otherwise noted.

For the quarter, our revenues were $65.3 million, up from $39 million. IMW contributed $16.7 million of our first quarter increase and Northstar contributed another $3.6 million to the increase. BAF’s revenues were up between periods by $5.4 million.

Adjusted EBITDA in the first quarter of 2011 was $3.9 million which compares to $1 million in the first quarter of 2010. The first quarter of 2010 adjusted EBITDA amount excludes $3.6 million of B-Tech revenue that was recorded in the fourth quarter of 2010 when B-Tech was reinstated and made retroactive to January 1, 2010.

Adjusted EBITDA as a financial measure we developed to highlight our operating results excluding certain large non-cash or non-recurring charges that are not core to our business including the amounts we are incurring for our Series-I warrant valuation, our stock-based compensation charges for our options, certain tax refunds and foreign currency gains related to the notes we issued to purchase IMW. Adjusted EBITDA is described in more detail in the press release we issued earlier today.

We had a loss of $0.05 per share on a non-GAAP basis in the first quarter of 2011, which compares with a non-GAAP loss of $0.07 per share in the first quarter of last year.

Our gross margin this quarter was 18.3 million and was 11.4 million in the prior period. IMW and Northstar contributed 1.7 million and 1 million respectively towards this increase. BAF's gross margin decreased between periods by 1.4 million. Our margin per gallon on our fuel sales was $0.24 in the first quarter of 2011, which compares with $0.26 in the fourth quarter of 2010.

Our net loss on a GAAP basis for the first quarter was 9.8 million or $0.14 per share. This compares to a net loss of 24.4 million or $0.41 per share. The charge between periods was impacted by the amounts we recorded for valuating our Series-I warrants between periods.

We recorded a non-cash charge of 3.3 million in the first quarter of 2011 and a non-cash charge of 18.6 million in the first quarter of 2010. The first quarter 2011 amount also included non-cash stock-based compensation charges of 3.4 million and 300,000 of foreign currency gains on the notes we issued to purchase IMW.

The first quarter 2010 amount includes an AMT refund of 1.3 million and 3 million of non-cash stock-based compensation charges. Volumes during the quarter rose to 35.5 million gallons up on 28.6 million gallons.

On March 31st, 2011, our biomethane subsidiary closed on a $40.2 million bond offering to fund its plants extension at the McCommas Bluff landfill in Dallas. Approximately $11 million of the proceeds were remitted to Clean Energy to pay off the loan we had previously made to the entity to fund certain capital improvement. We then turned around and paid approximately $8 million PlainsCapital Bank to pay off our outstanding loan balance with them.

And with that operator please open the call to questions. Ina?

Ina McGuinness

Operator, could you now open the call to questions please.

Question-and-Answer Session

Operator

Thank you. (Operator's Instructions) Our first question is coming from the line from Rob Brown from Craig-Hallum. Please state your question.

Rob Brown - Craig-Hallum Capital Group

Good afternoon.

Andrew Littlefair

Good afternoon, Rob.

Rob Brown - Craig-Hallum Capital Group

Could give us an update on IMW and where the Chinese situation is there, are they sourcing a big factor growth there and may be just sort of the, some color on the IMW backlog growth in customer base?

Andrew Littlefair

Sure. They are continuing to make progress in China and you remember the way that business there is working, its been a still pretty comprehensive plan, you may have seen by the government and how they plan to expand natural gas in the different cities and you may remember at our past conversation, they kind of divvy that up, which is called the development of distribution systems into about four different companies. We are currently working with one of those companies and we now, I would say deep negotiations with the couple of others; there’s four.

Each of those companies as they develop the distributions for the towns, they are also required to put a natural gas [fillings]. So we made very good progress on our first order of 120 stations with one company, China Natural Gas and a rather pretty close on one of the other companies to do some stations with them.

We’ve expanded our Shanghai facility, kind of doubled the space, we’re doing more work there. We are getting more orders in smaller clumps right now in China. We’re feeling very good about the long-term prospects because it really does look like over the next years, we can build 4,000 fueling stations in China.

So we are still really the only company there in China that has their own service field organization. So we feel like we’re pretty very well-positioned. We’re also seeing some expansion in Southeast Asia. We’re sending more units into Vietnam and the others. So it has potential to be pretty big.

Rob Brown - Craig-Hallum Capital Group

Okay, good thank you. And then on your margin, your gallon margin in the quarter, do you see that as your run rate going forward, maybe if you can give some color on how you see that trending?

Richard Wheeler

Rob, there’s one more LA MTA site that is coming on in the second quarter. The magnitude of do that volume is about the same as the other one. So by the time you wait that in this quarter, we may see in another penny so down from all what we were this quarter and then hopefully that’s kind of the bottom because all the LA MTA projects and divisions will be on at that point.

So, hopefully going forward we’ll be able to start getting that number back up as more and more commercial retail vehicles come on, as we roll out the regional trucking and other markets where we are back in the commercial retail world.

Rob Brown - Craig-Hallum Capital Group

Okay

Operator

Our next question is coming from Graham Madison of Lazard Capital Markets.

Graham Madison - Lazard Capital Markets

Good evening guys.

Andrew Littlefair

Good afternoon.

Graham Madison - Lazard Capital Markets

Just looking quickly through the [key-hole], it looks like there was a pretty good jump in LNG volumes quarter-over-quarter. Just wondering what was beyond that or what drove that?

Richard Wheeler

Yes, what that is, we've got Northstar. They had a lot of O&M volumes. They maintain a lot of the stations out there that they built. So those are primarily the volumes related to that.

Graham Madison - Lazard Capital Markets

So did those volumes keep going? So how does that work, I mean are they just doing or operating the fuel like you do on a regular O&M contract or…?

Richard Wheeler

Yes, exactly I mean the go out and make sure the stations are operating properly and make sure the equipment is functioning properly and make the necessary repairs, necessary and that type of thing. It’s basically the same O&M type service that we provide on the CNG side.

Graham Madison - Lazard Capital Markets

Got you and the margins are comparable.

Richard Wheeler

Yes, it’s pretty much a similar type of deal.

Graham Madison - Lazard Capital Markets

And then just turning more on Northstar, the reason when you had, can you give us a sense of how much you have in backlog in terms of construction work ahead of them over the next maybe 12 months or what you consider in backlog for them?

Andrew Littlefair

Sure. Northstar, their backlog as I think I indicated has doubled and right now, I don't know that we've been that specific about it but it looks to me they've got about 23 or 24 projects in their pipeline that are, deals that are signed right now. So that number is growing and it’s strong because up until recently for the entire year Northstar would have been more like in the 10 or 12 station range. So we like what we are seeing in that growth.

Graham Mattison - Lazard Capital Markets

Would it be possible that dollar value on that?

Richard Wheeler

Well, you know, we don’t project. So, I mean, you could maybe take a standard station cost and try and do something yourself if you want to do; but obviously that subject, size of station and then, you know what the individual project entails.

Graham Mattison - Lazard Capital Markets

Alright, I can definitely do that. Alright, great I’ll jump back in queue. Thank you.

Andrew Littlefair

Thanks, Graham.

Operator

Thank you, sir. Our next question is coming from the line of Eric Stine of Northland Capital Markets. Please state your question.

Eric Stine - Northland Securities, Inc.

Hi, everyone. Thanks for taking the questions.

Richard Wheeler

Eric, I bet I know what your first one is.

Eric Stine - Northland Securities, Inc.

Well, if it’s in the Q, I don’t need to ask; I might as well. I’ll start with that if you can give the volumes. That’d be great.

Richard Wheeler

Biomethane 1.5 million; CNG 22.7, and LNG 11.3 to get to your 35.5.

Eric Stine - Northland Securities, Inc.

Okay, thank you. I haven’t had a chance to look at the Q. I am just wondering if you can talk about BAF. You gave the year-over-year comparisons, but revenue, gross profit, maybe an approximate number of updates? But then just what you saw in the quarter and how you see that playing out for the rest of the year?

Richard Wheeler

From the revenue perspective, this quarter, they were 3.6 million and the margin was 1.2. And I’ll have to look at the update number, but I’ll get that for you in a second. As far as prospects go, I mean, there is a lot of good activity that’s going on at BAF. It's certainly down from where it was. I mean AT&T is obviously off from where it was. You know we have some POs in from those guys through the third quarter.

So we've been working with them to kind of work through some of their facility and fueling issues. We in all our discussions with them continue to believe that they are committed to the similar type volumes and magnitudes, trucks of vehicle that they had talked about before.

So I guess we kind of describe which is right now, there is just kind of little bit of well worthy in trying to re-trend and figure out where to put vehicles and where it make sense for them build stations or not build stations and use our infrastructure when and as it becomes available.

We also are working on some other solutions, a mobile fueling unit as well as some smaller type applications that these guys can put in. There is a kind of a short term fix to provide fueling until the volume grows and the need is there at a particular site for full blown station. So we are working with them to kind of try and solve the problem.

But obviously that’s hurt us a little bit. And you know these things are just kind of lumpy a little bit. We are working with all these guys and through Silver Tech we are working on other products. We had got a bio fuel product that’s going to be coming along in the last half of the year that we think it will be helpful.

And we are starting to work on some bigger engine type products, the F550 and those types of engines that are starting to gain some traction with some of the municipalities down there. So we are out chasing a lot of business. We just need to get a little bit of a drop to kind of see how that goes rest of the year.

Eric Stine - Northland Securities, Inc.

Okay. On the - is the Verizon, I mean is that largely done with their plan or is that still ongoing?

Andrew Littlefair

Well, I would say Verizon is not too similar to the AT&T. I think Verizon is trying to bring these 500 vehicles into their system and kind of figure out the right fueling strategy. And I would say right at the second it looks like to me they’re kind of taking a breather as they have been unable to sort of assimilate all these vehicles and figure out how they want to move forward. This is kind of what you know the history has been in the conversion business, sometimes could be a bit lumpy.

But I also like - we have some of those big customers there, but we also have some bread-and butter customers like SuperShuttle just put an order over 50 more vans for Los Angeles and San Francisco, you know all those add up as well.

Richard Wheeler

Eric we give that - 314 up during the quarter.

Eric Stine - Northland Securities, Inc.

Okay, thanks for that. And I think last quarter you had talked about beyond AT&T and Verizon, three or four very large fleets that it’s started testing and I know you probably can’t disclose who those customers are; but may be how those tests has gone; if you see any movement there?

Andrew Littlefair

Sure. So, these companies are, they’re big and they’re slow moving and they’re methodical and have fleet operation divisions and so they kind of do things in a very methodical way - it fits their the way they do business. We have delivered a couple of batches of vehicles to those two or three companies that I mentioned and are testing them right now.

So it’s kind of what we did with the AT&T, going back two years ago, I think the first was 25 vehicles or 12, I can’t remember exactly and then we started receiving more substantial orders. So let’s hope that they are liking what they got and hopefully next quarter or soon we’ll be able to talk more about.

Eric Stine - Northland Securities, Inc.

Okay. Last topic for me just, Pilot Flying J, just wondering if you can quantify how many stations are in the pipeline; I think you had three last time and may be 12 in consideration whether that changed or not? Thanks.

Andrew Littlefair

Right. So there are six now underway that where we’ve signed deals with Pilot and in various fields where actually, shovels are in the dirt; but there are six on our cargo right now and I think the number is nine others that we’ve pulled the trigger on to move forward with. So we’re continuing to kind of ramp that up and we’re kind of getting our feet well with them on how we’re going to roll this thing out.

Operator

Thank you, sir. Our next question is coming from the line of Brian Gamble of Simmons & Company.

Brian Gamble - Simmons & Company

A couple of things on the station side of things. I know that you mentioned nine stations completed. If you look at the run rate from last year, it’s slightly down on a quarter-on-quarter basis. Any reason that was lower; I figure that your station number would be taken up from the 45 we did last year?

Andrew Littlefair

Well, remember only last quarter was kind of a record quarter where we did the 20 or so in the fourth quarter. When you look at a year ago, we did two and this quarter we did nine. So its just kind of, Brian it kind of depend on when we get started and the difficulty of like, for instance right now, under construction and soon to be completed, but they are very significant projects one, two, three, four, five or LA MTA very large, very complicated, they take a little bit longer. Those will be dropping shortly.

But when I look at our construction group, right now there’s about 20 that are really literally under construction, where the stuff has been delivered, where we are waiting in many cases for the utilities to be completed; but the equipment is on site.

So we are working hard, we are adding personnel, we are adding permitting help, we’re adding estimating help and construction help to be able to increase the station count from last year and I feel pretty good that we will.

Last year it took us all a year to get 85 stations on the carpet and we finished 45 and now we've added back this year almost 50 stations. So, I feel pretty good about the pipeline and I hope this next quarter we will see a bunch of these drop in. We have almost 30 stations in permitting right now and so, I feel like they will be up.

Brian Gamble - Simmons & Company

Well, great. That’s great color and I appreciate that. Moving on that NAT GAS bill, it looks like a lots of much activities in sub-committee, actually it looked like it was in several sub-committees. Any sort of timing or when do you guys expect something coming out of any of those committees?

Andrew Littlefair

Well, I've got a little gun shot on all those predictions on that but…

Brian Gamble - Simmons & Company

I know it's your favorite topic. I apologize for that.

Andrew Littlefair

No, that’s alright. But here is what I think and I believe I am actually going to watch that later this week to have some meetings. But we believe that bill will be referred and that the hearings will be in House Ways and Means Committee and there maybe a portion that goes over in to Energy and Commerce. But I think the real focus is going to be in the Ways and Means Committee. We know that members are talking on the committee now about when that might happen.

Part of the problem that you have in terms of it moving along quickly is Congress just hasn’t been in a session that much. They were back here last week. There aren’t that many weeks left before their next recess. I think they only have three weeks. So, it's just not many days of calendar are hearing and remember they don’t do hearings usually on Mondays or Fridays. So, you've got three-day week.

Brian Gamble - Simmons & Company

We should all be so lucky?

Andrew Littlefair

Yes. I think the sense is that we feel like we have a very good momentum. We have a very good support. As you know, we've added co-sponsors. By the way, another little thing that some people don’t realize, you can’t add co-sponsors when they are out of session. Even though someone may have decided to do it but they have to be back in the session to add that.

So, we've picked up some more. I don’t know that you are going to get hearing in Ways and Means in the next couple of three weeks that are left in May. So we will just, may be that is after they comeback from recess.

I feel like the focus you saw earlier late last week that the NAT GAS act got put in on the jobs bill on the other side of the aisle. And so, there seems to be pretty good support for it, we will see.

Brian Gamble - Simmons & Company

Great. Then last thing for me, could you clarify what exactly the shareholder is going to be building on to modify with regard to those warrants?

Andrew Littlefair

Alright. So the shareholder have to approve any change to those warrants and I think you are familiar with how those warrants are styled right there. The cash that comes to the company, that Boone has $15 million warrants at $10.00.

Brian Gamble - Simmons & Company

Right.

Andrew Littlefair

Those expired end of this year. The shareholders are considering whether or not they would induce him to do it earlier. And therefore we got a proportional exemption -- not exemption, extension on those warrants.

So let's just say for instance, he decided to exercise $5 million shares on June 1st and there is some map associated with this and Rick may be can help me, but essentially then 5 million shares would get extended for a like almost identical period of time, say six months after this December. So we felt like this was way to kind of get the money in sooner rather than later and give him a little extension on the back end.

Brian Gamble - Simmons & Company

Okay. That's great. Thanks guys.

Andrew Littlefair

Thank you.

Operator

Thank you. Our next question is coming from Peter Christiansen of Merrill Lynch. Please state your question.

Peter Christiansen - Bank of America-Merrill Lynch

Good afternoon gentlemen, this is Peter in for Steve. Firstly as Mr. Pickens indicated how he is going to vote on the suggested measures?

Andrew Littlefair

Well, I think Boone, he supports those measures and so I’m sure he will vote for them.

Peter Christiansen - Bank of America-Merrill Lynch

Okay, okay.

Andrew Littlefair

I hope he does. I’d say Boone has not lost any enthusiasm for the business and he really believes that we’re onto something here and he really is very enthusiastic. He’s meeting with the whole bunch of salesmen in Dallas right now as we speak. They’re selling natural gas for transport.

Peter Christiansen - Bank of America-Merrill Lynch

Right, right. And then I was wondering if you can talk about some of the economics of this new biomethane capacity that’s come on and even the landfill gas that you have planned for in 2012.

My understanding is your biomethane gross profit per gallon has been pretty high previously and I was just wondering if you can characterize some of this new capacity that’s coming on and relatively to the previous?

Richard Wheeler

Yes, I mean, we obviously kind of thinking it could be similar. The whole concept is to initially use the healthy chunk because the gas that is coming out there for renewable purposes, with utilities and you needed for that purposes.

And great thing about it is though the economics allow us to work with the trash haulers to take the other piece of the gas that’s coming out of the landfill and then structure deals so that we can take that gas and turn it around to put an economic deal together with the Republic or whomever so that they can use that gas very on a very cost effective basis to run trash fleet because that’s appealing to them.

And we think as well for us and the country and the environment if you can essentially have of course a new system right, where the trash company, who owns landfill that takes the trash and they turn that trash back into vehicle fuel.

That's a nice little package to be able to go out and sell to the municipality or others in the community, but how to clean up the air and at the same time I think you do that economically, that's even better. So those are the types of projects we’re looking to do as we go forward and hopefully it will be similar to McCommas deal.

Andrew Littlefair

I think Peter that we don't think it will be different. The McCommas turns out one of the larger landfills and so these high BTU landfill projects, you know there could be a lot of them, but most of them won't be as large as McCommas. So they will be a tad smaller I think in most cases; but the economics should be I think pretty similar to what we’ve had at McCommas.

Peter Christiansen - Bank of America-Merrill Lynch

Great. And then one more and I’ll jump into queue; in terms of Northstar, are they involved in all with the transportation of the LNG, your cryogenic storage, is that an opportunity for Clean to get into that in terms of their existing contracts?

Andrew Littlefair

Well, we are in that business right, when you mean the cryogenic, you mean the transportation of our trailers for cryogenic?

Peter Christiansen - Bank of America-Merrill Lynch

Right.

Andrew Littlefair

Now we do that, so as you probably remember we have 61 cryogenic trailers and as that business goes up we’ll have more. Northstar is really more focused on the stationary portion of it, on the station side of it and they do, do some fabrication on the storage and the dispensing side; but we’re the guys in the transportation of cryogenic fuel business.

Richard Wheeler

Well, just to be clear, we outsource and contract the actual hauling with the tractors, we just provide the trailers.

Andrew Littlefair

Yes, we don't have a trucking company, but we have….

Richard Wheeler

But we have the trailers, so we are in the mix.

Peter Christiansen - Bank of America-Merrill Lynch

Alright, thank you.

Operator

Thank you. (Operator Instructions) Our next question is coming from the line of Rupert Merer of National Bank Financial. Please state your question.

Rupert Merer - National Bank Financial

Hello everyone.

Andrew Littlefair

Hi, Rupert.

Richard Wheeler

Hey, Rupert.

Rupert Merer - National Bank Financial

So, you talked a little about where you expect your fuel delivery margins to trend in the near-term. But can you remind us how a higher spread between natural gas and diesel can support your margins? And I guess the question is how much of your fuel volumes are sensitive to that price spread?

Richard Wheeler

Right now, with all the LA MTA volumes we brought on, it's probably in the 10% or 15% range. And then obviously, we haul as we go forward as we start to get in the regional trucking and the overload trucking that you know that be a 30 billion gallon market. You know, hopefully it's going to door kind of where we’re right now with the transit volumes.

So kind of how all that shapes out and plays out or be the huge impact on our margin and when that happens, you know, the math can get pretty much turned around in our favor pretty quickly, just because that is such a large market that we’re going after. It's just going could be a matter of how fast we can get out there and penetrate that market which will, I guess, the math impact kind of how or what our margin looks like going forward.

Rupert Merer - National Bank Financial

Okay. So, higher spread is definitely helping things or just being a little washed out in the next quarter with the higher transit volumes?

Andrew Littlefair

That’s right. You know that the transit volumes are substantially our last than the regional trucking margins. So as we bring more of that on, that should help.

Rupert Merer - National Bank Financial

Okay. And on the legislative a front, there was a Bill, looks like it was introduced last week, HR 1795 promoting increase use of alternative fuels in public transport. Have you had a look at that and you have a sense of how important that could be?

Andrew Littlefair

Rupert that is not ringing a bell, that is transport of what…?

Rupert Merer - National Bank Financial

Alternative fuels in public transportation I think. It doesn't look like the full text as being released yet?

Andrew Littlefair

Yes. I think, I should I guess that one; I know there is three or four different Bill’s kind of flopping around, some of them are into conversions. I guess I am not familiar with this particular the one Rupert on transportation.

Rupert Merer - National Bank Financial

Fair enough. Just one, last one, so obviously the higher spread is driving great interest in the sector on the customer side, are you seeing any developments in competitive pressures?

Andrew Littlefair

Well, we actually in more competition. You remember I missed this before where we have seen is, certain properties and agencies and cities have gone after the bid for stations. We see a lot more I would say construction competition, right. So that’s fine. There is people that they think they can build stations and so we have seen an increase there.

But I would say that, that’s as important; we have seen for instance in Canada which you are familiar with, they are interested and doing some LNG. They have built some stations. We have seen our friends in the producer industry, really helped to promote natural gas, so they’ve build stations. We partnered with a couple of them.

So we are seeing increase. I saw where the CEO, at the shareholder meeting the CEO of Valero indicated that as the market warranted they could vision some day putting natural gas in some of their stations. So I’ve always believed that we will see increased competition as this market grows.

Rupert Merer - National Bank Financial

Okay, great. Thank you very much.

Andrew Littlefair

Thank you.

Operator

Thank you for your questions. At this time, I would like to turn the floor over back over to the speakers for closing remarks.

Andrew Littlefair

Right. Thank you, operator. Let me just close by reiterating that we have tremendous opportunities for growth in the coming months as well as longer-term. We believe we’re well-positioned to expand our leadership position in the marketplace and we will continue to benefit from our first mover advantage, our expertise and our technology.

We look forward to seeing some of you in our upcoming annual meeting, and looking and reporting to you on our progress again next quarter. Thank you and have a good day.

Operator

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time. And thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Clean Energy Fuels' CEO Discusses Q1 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts