Nanalyze

LNG Trucking with Clean Energy Fuels (CLNE)

In a August 2013 report by Goldman Sachs titled “The Search for Creative Destruction“, Goldman lists 8 disruptive technologies to pay attention to in the coming years. One of these eight is natural gas engines. While Goldman states that only 3% of all vehicles currently run on natural gas, their report estimates that only 7 years from, now 20-30% of all truck hauling fleets will run on natural gas. By 2018, the report estimates that 25% of all diesel truck stops will offer liquefied natural gas (LNG) re-fueling. One company that stands to benefit from this trend is Clean Energy Fuels.

CLNE_Logo

 

 

 

About
Incorporated by Boone Pickens in 2001, Clean Energy Fuels (NASDAQ:CLNE) is the largest provider of natural gas fuels for transportation in North America, fueling over 30,000 vehicles each day at approximately 400 fueling stations throughout the US and Canada. The driver for companies to switch from gasoline to natural gas is an estimated 40% savings in fuel costs. CLNE has a current market cap of $1.14 billion and has demonstrated reasonable revenue growth over the past years though continuing to incur losses for each of the past 5 years that add to their overall deficit of $300 million as of 2012.

Source: Google Finance

Source: Google Finance

CLNE shares have remained within a relatively narrow trading range of between $11 and $14.50 per share over the past year while investors have awaited the sign of a catalyst to show the company may see profitability in the near future. Trucking is a major opportunity for CLNE as they estimate that the potential usage for heavy duty trucks is 25 billion gallons of natural gas per year compared to the next two closest opportunities, refuse trucks and airport vehicles, which represent a combined opportunity of only 4 billion gallons.

America’s Natural Gas Highway
The key to taking advantage of providing natural gas fuels for trucking is a nationwide network of refueling points. CLNE has already positioned themselves well to take advantage of this opportunity with 76 nationwide stations operational currently and another 24 stations being constructed. In order to provide a fully functional fueling network for natural gas trucking, the company may need to double or triple the number of stations in the coming years. The below diagram shows CLNE’s 2012 stations in yellow and their planned 2013 stations in orange.

Source: Clean Energy Fuels

Source: Clean Energy Fuels

According to Stone Fox Capital, Clean Fuels considers opening a station if 20+ trucks will use it. If 100+ trucks use the station, payback for the station is within only one year. Up until now, the lack of widely adopted natural gas engines has been a limiting factor for the growth of CLNE. In August 2013, Cummins, a leader in natural gas engines since 1991, entered into production the  Cummins ISX12 G engine for heavy duty vehicles perhaps signaling the catalyst for natural gas trucking to realize a faster rate of adoption leaving CLNE to benefit from this disruptive technology.

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  • JH

    Pretty sure you got the colors on the map backwards. At least according to CLNE website station map.

    • Nanalyze

      Thank you for the heads up JH. We added the map directly from the website with a legend that shows 2012 stations are represented in yellow with 2013 represented in orange.

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