Clean Energy Fuels Corp. (NASDAQ:CLNE)
Industry: Oil & Gas Refining & Marketing
Market cap: 1.97B
Clean Energy is a leading renewable energy company focused on the procurement and distribution of renewable natural gas, and conventional natural gas, in the form of compressed natural gas, and liquefied natural gas for the United States and Canadian transportation markets. Renewable natural gas, which is delivered as either compressed or liquified natural gas, is created by the recovery and processing of naturally occurring, environmentally detrimental waste methane, or biogas, from non-fossil fuel sources — such as dairy and other livestock waste and landfills — for beneficial use as a replacement for fossil-based transportation fuels.
Clean Energy is focused on developing, owning, and operating dairy and other livestock waste projects and supplying renewable natural gas (procured from their own projects or from third parties) to their customers in the heavy and medium-duty commercial transportation sector. Clean Energy has participated in the alternative vehicle fuels industry for over 20 years and will argue they are the largest U.S. provider of renewable natural gas for commercial transportation. Clean Energy is in a unique position because valuable Environmental Credits are generated by the party that dispenses renewable natural gas into vehicle fuel tanks, and they have access to more dispensers than any other market participant.
As a comprehensive clean energy solutions provider, Clean Energy:
- designs and builds, as well as operates and maintains, public and private vehicle fleet customer stations in the United States and Canada
- sells and services compressors and other equipment used in renewable natural gas production and at fueling stations
- transports and sells their fuels via “virtual” natural gas pipelines and interconnects
- sells U.S. federal, state and local government credits, which they collectively refer to as Environmental Credits, they generate by selling renewable natural gas as a vehicle fuel
- obtains federal, state and local tax credits, grants and incentives
On April 19, 2021, Clean Energy announced an agreement with Amazon to provide low and negative carbon RNG. Fuel will be provided at 27 existing Clean Energy fueling stations and another 19 new or upgraded stations by the end of the year. This will provide renewable natural gas in 15 different states. Additionally, on May 11, 2021, Chevron announced they were investing an additional $20M in the Adopt-a-Port initiative with Clean Energy to provide cleaner, more carbon-negative renewable natural gas.
Clean Energy began to see the negative effects of COVID-19 on volumes delivered in mid-March 2020 and continued to see declines in volumes delivered through December 31, 2020, as compared to 2019. Their volumes bottomed in the second quarter of 2020 and improved through year-end albeit at a slower pace than expected, with volumes delivered for the fourth quarter of 2020 increasing 7% over the second quarter of 2020. While volumes delivered in December 2020 were 2% lower compared to December 2019, this decline was lower than the decline of 4% when comparing September 2020 to September 2019. The most significant negative effects of COVID-19 in relation to Clean Energy volumes were experienced in the airports (fleet services) and public transit customer markets, which were down by between 15% and 31% during 2020 compared to 2019 due to federal, state and local government mandates to restrict normal daily activities, as well as travel bans, quarantines and “shelter-in-place” orders.
Other risk factors Clean Energy may face include:
- The willingness of fleets and other consumers to adopt Clean Energy vehicle fuels, which may be influenced by certain of the factors, many of which are beyond their control.
- Competition in the market for vehicle fuels generally, and the nature and effect of competitive developments in the market
- Suppliers’ ability to successfully develop and operate projects and produce expected volumes of renewable natural gas, particularly in light of a long and variable development cycle that requires significant resource commitments
- The potential commercial viability of livestock waste and dairy farm projects to produce renewable natural gas
- The development and production of vehicles and engines in key customer and geographic markets by vehicle and engine manufacturers, over which Clean Energy has no control
I am bullish on Clean Energy and I agree they are currently undervalued. Clean Energy serves fleet vehicle operators in a variety of markets, including heavy-duty trucking, airports, refuse, public transit, industrial and institutional energy users, and government fleets. I believe these fleet markets will continue to present a growth opportunity for Clean Energy vehicle fuels for the foreseeable future.
I am not a financial advisor, just a smoothbrain with 1000 shares at $9.84
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