Did Clean Energy Fuels and GE Just Grab the Natural Gas Trucking Wheel?

Last week, I pointed to the cost of building out the refueling infrastructure -- then having to count on other companies to get natural-gas-powered trucks out on the road -- as the single biggest risk facing Clean Energy Fuels  (NASDAQ: CLNE  ) and its investors right now. The company has little control over what happens between the truckers and the truck sellers, meaning that Clean Energy is left sitting on its hands to a large extent. 

Well, apparently management agrees with me. More importantly, they've decided to do something about it, partnering with GE's (NYSE: GE  ) GE Capital Transportation Finance business, to provide access to financing for shippers. ExxonMobil's (NYSE: XOM  ) fast growth in natural gas production indicates how this is part of a larger trend. What's it mean for investors? Let's take a closer look.

More involvement in all phases of the sales cycle
Clean Energy Fuels has been working closely with Westport Innovations  (NASDAQ: WPRT  ) for the past several years, including a formal agreement announced earlier this year when Westport acquired BAF Technologies from Clean Energy Fuels. Yet even Westport isn't directly selling its products to end-customers, as its technology is used in engines it manufactures directly and in joint-ventures, which are sold to heavy-duty truck manufacturers. At any rate, the company is, like Clean Energy Fuels, still a little bit removed from the end user.

Which brings us where we are today, with the agreement between GE Capital and Clean Energy. From the press release:

"Together with GE Capital, we're breaking down the barriers to entry that may have prevented some fleet owners from making the transition to natural gas," said Andrew J. Littlefair, president and CEO of Clean Energy. "Our goal is to work with fleet operators to achieve a one-year payback on the incremental cost of natural gas heavy-duty trucks -- and our alliance with GE Capital is another tool in achieving this important goal."

Since the company is already working closely with the shippers to establish pricing and agreements on natural gas prices and fuel purchase commitments, being able to help shippers get cheap financing for the tractors, while at the same time providing them with guaranteed access to natural gas along the routes they support, could be a big catalyst for adoption moving forward. 

For GE, this is a sign that its GE Capital arm is continuing to perform well. This is important for the industrial conglomerate for two reasons: First, let's not forget that it was GE Capital which seriously harmed the company during the financial crisis, costing GE billions in losses. GE Capital expanding its portfolio into growing segments of the finance business is a healthy sign. Second, its a reminder that GE's focus with GE Capital is about business finance, as it plans to spin off the consumer finance portion of the business. The Fool's Isaac Pino has more insight here

Natural gas is booming; majors are getting in deeper
ExxonMobil was the largest domestic producer of natural gas in the second quarter. As the domestic energy boom continues to expand, even with oil prices remaining relatively consistently above $100 per barrel since 2011, the adoption of natural gas as a transportation fuel is something that ExxonMobil and the rest of big oil are surely watching closely. At a price of $3.89/gallon, the North American diesel market is a nearly $98 billion business, and you can be sure that ExxonMobil and its counterparts will quickly jump in the natural gas for truckers game at the first sign of major adoption. ExxonMobil's growing production could be a sign that it's making steps to be ready for this change. 

Final thoughts
ExxonMobil is considered by many to be the best-run of the integrated majors, so seeing it step up production is a sign that the market is changing. Clean Energy's partnership with GE Capital to more directly control its future, added to its already strong working relationship with Westport, all point to demand for natural gas continuing to be strong in the coming years. Invest accordingly.

 

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  • Report this Comment On October 24, 2013, at 7:15 PM, energeticfool2 wrote:

    If WPRT can get profitable in 3 years, and continue with a reasonable growth of just 18% the folowing several years, then its fair value price today would already be 50% above current market price. (This is based on my analysis using Fair Value with Market Impact app for iPad.). So if analyst projections are basically decent, which i think are, then it is a reasonable buy here at ca. $24.60. Take 5% of your cash and give it a 'go'.

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