Think CNG Will Kill Clean Energy Fuels? Think Again

"The thing that I want to stress, is we are the leader of both. We have built more CNG stations than anyone else." 
--Clean Energy Fuels senior official, Feb. 5

Shares of Clean Energy Fuels (NASDAQ: CLNE  ) were hammered yesterday, largely as a result of a short attack launched in an article on the Seeking Alpha website claiming that the company's bet on LNG was a mistake and would lead to the company failing. Part of the author's claim is that new technology is allowing CNG-powered vehicles to attain the necessary fuel range and refueling speeds to make LNG a "niche-within a niche" for transportation, and the superior price of CNG would make LNG a non-starter

With privately held Love's Travel Stops and Integrys Energy Group  (NYSE: TEG  ) subsidiary Trillium CNG investing heavily to expand CNG stations, while privately held Blu LNG has reportedly put the brakes on its plans to expand LNG stations, what's the reality for investors in Clean Energy Fuels? Is it time to get out while the gettin's good, or double down? Let's take a closer look.

Clean Energy's core business is CNG, but the company stands behind its position that LNG will grow as a fuel for transportation over the next several years. Source: Clean Energy Fuels

Reality of the natural gas engine cycle
Much of the truck market has so far gravitated to CNG; this has been well publicized. However, it's worth noting that a big part of this is due to the lack of a viable engine to support over-the-road trucking demands before last Fall. Westport Innovations  (NASDAQ: WPRT  ) and partner Cummins launched the CWI ISX12 G engine for class 8 trucks early in 2013. The higher horsepower, 400hp variant that fits the needs of long-haul and heavier load trucking was not launched until the end of last summer. Simply put, the majority of engines shipped to-date being the CNG variant shouldn't surprise anyone. It's old news. 

Additionally, the engines -- whether LNG or CNG -- are really the same thing. The only difference is whether the fuel is stored as a liquid or a gas. As time passes, and the CWI engine proves to be dependable and performs as well as anticipated, all indications are that more shippers will begin augmenting their fleets with LNG for their longer deliveries, while still utilizing CNG for "out and back" or "return to base" deliveries that don't need the range advantage that LNG provides. 

Physics and economics
A senior Clean Energy official had the following to say when reached by phone:

"The [Seeking Alpha] author is vastly underestimating the complexity of these Fast Fill CNG stations. If you're out in the middle of the country, there's no guarantee you're near one of these interstate pipelines. And these things are akin to the amount of power needed to power a small hospital."

Simply put, refueling CNG in high speeds and high capacities probably isn't quite as simple as the companies that are only touting CNG make it sound. After all, even one of the companies the short-attack author cites, Agility Fuel Systems, carries LNG, not CNG, in its largest tanks in terms of fuel capacity.

It's worth noting that Clean Energy has strong upside in LNG for locomotives, as well as ships. Source: CN Railways

The Clean Energy official I spoke with also took issue with the author's claim that it would cost Clean Energy "additional capital of $1 million or more per station to add LNG-to-CNG" capacity at its stations, calling the authors' claims "just not true," and putting the actual cost at "about half that."

He continued, "And you do it where the demand justified it," versus the need to redevelop all its facilities. Additionally, he pointed out that IMW, the company's subsidiary that makes the refueling systems for LNG and CNG stations, is making Fast Fill systems, which is what the company installed at its two newest stations at LAX airport in Los Angeles. These stations are supporting buses and taxis, meaning that it's no problem to maintain fill rates for low-volume tanks.

"Scaled up to refueling class-8 trucks all day," he says, "isn't as easy as these guys make it sound." 

Where are the engines now? What does the math look like?
UPS
 has ordered almost 1,000 LNG tractors so far, and they will all feature the ISX12 G engine from Cummins Westport. All indications are that somewhere around 10,000 of these engines will be sold in 2014. If 20% of these engines are running LNG, and if Clean Energy can command 75% of those trucks as customers, it would net 1,500 LNG-based trucks over the next year. If we follow the logic that only the longest-distance trucks will run LNG, then we can extrapolate the following:

UPS is making large moves into LNG, but is not the only company jumping on board. Source: UPS

1,500 long-haul trucks would average around 15,000 DGEs (diesel gallon equivalents) per year), at a price of $2.20 per DGE, that's $33,000 per year per truck-- $49.5 million per year in new fuel sales. If Clean Energy can net a 20% margin on that fuel, that's $10 million to the bottom line, based on 20% of the market adopting LNG for this one engine.  And that's just the first year of this one engine. And with the company currently opening two or three stations for business every month already, that's an indication that, indeed, adoption of LNG is happening. 

Follow the money
There are no guarantees that Clean Energy Fuels will remain the dominant player in natural gas for transportation, but that has little to do with anything in this latest attack on the company. Essentially every claim so far that LNG is a bad bet has been made by those that were either poorly informed -- such as the Piper Jaffray analyst last year -- or had significant financial incentive for LNG to fail, or to be perceived as going to fail, like the anonymous author of this recent short attack, who holds short positions, and competitors like Trillium CNG and Love's, which are only investing in CNG so far. 

So far, the company's position as the largest seller of both LNG and CNG does give it a strong advantage, despite those who are being compensated to say otherwise. While that alone is no guarantee of future success, it is a reminder to, as Morgan Housel recently wrote, understand how the guy on the other side of the table is being compensated.  

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  • Report this Comment On February 06, 2014, at 10:00 AM, Upside wrote:

    I wrote the Seeking Alpha article.

    $10 million to the bottom line won't even cover stock-based compensation for CLNE's management team, let along begin to service debt overhang of $594 million. The LNG stations have got to be profitable or the company is done for.

  • Report this Comment On February 06, 2014, at 10:06 AM, DavidAMinnesota wrote:

    I am holding long CLNE, so I generally agree with the thesis of your article. However, I think there are a few issues the article does not adequately addressed.

    To begin with, the statement: "The only difference is whether the fuel is stored as a liquid or a solid." is not accurate. I think you mean a gas (CNG) or a liquid (LNG).

    One of the major points of the SeekingAlpha article concerned CLNE's debt level. The SA author suggests that a slower rate of LNG rollout may be fatal to CLNE shareholders in that additional shares will have to be issued to raise capital, and that even a rising CLNE share price will result in conversion of debt to equity, diluting existing shareholders. An effective refutation of the SA article should point out that CLNE has a strong balance sheet, is generating enough cash flow already to last a long time, and that a rising stock price resulting in conversion of debt is hardly a bad thing for current shareholders.

    Another SA article scoring point was attacking the credibility of CLNE management. This means, of course, that the CLNE sources quoted in this article will be dismissed as unreliable. It would be helpful to have hard information from a reliable source about the number of long haul LNG tractors being deployed by truckers other than UPS with its private fueling capabilities.

    I apologize for the critique of what I perceive to be deficiencies of this article, but I do appreciate the effort to bring a more balanced view to light.

  • Report this Comment On February 06, 2014, at 10:13 AM, LetsTalkMoney wrote:

    Thanks for the article. Although the Seeking Alpha piece was an absurd unfounded attack clearly with an agenda behind it, its relaxing to hear a response from Clean Energy Fuels Senior Officials given the breathtaking tumble the stock took yesterday.

  • Report this Comment On February 06, 2014, at 10:31 AM, Upside wrote:

    The figure of $1 million or more per station to add LNG-to-CNG actually came from Clean Energy themselves. The company estimates it would cost about $100 million to add this to the initial highway project (approx. 90 stations). It is posted on the CLNE website at 12:50 to 13:10 into this video:

    http://cleanenergyfuels.com/video/lng_v_cng_video.html

    It isn't complex to construct, nor is it expensive to power, high capacity fast-fill stations so long as high-pressure gas is available. What Love's, Kwik-Trip and others have figured out is that high-pressure pipelines almost universally are found near interstate freeways and nearby existing truck stops. Along the ANGH there are mothballed LNG stations situated within spitting distance of high pressure gas lines. So the business model is to pay a driver to burn diesel so as to truck in natural gas which was liquefied elsewhere? It's madness.

    Look, LNG will always have a place in trucking such as the rare example of gotta-have natural gas, not diesel, on a route which has no pipeline gas supply anywhere along it. But leveraging its balance sheet to well over a half billion in convertible debt to go after this little niche has put the common shareholder in a no-win situation.

    As for CLNE being the largest provider of CNG & LNG they may need to rethink this marketing message, at least as pertaining to LNG. According to the Reuters report cited in my article, BLU LNG not only has 25 permanent stations with real-deal customers filling each day, but it also has 15 to 18 "terminal stations" which are semi-portable. This in contrast with some 22 CLNE stations which have been commissioned.

  • Report this Comment On February 06, 2014, at 12:26 PM, TMFVelvetHammer wrote:

    >>$10 million to the bottom line won't even cover stock-based compensation for CLNE's management team, let along begin to service debt overhang of $594 million. The LNG stations have got to be profitable or the company is done for.<<

    You are largely overstating this. I hope you've closed your short position. Congratulations on anonymously manipulating the market; I'm sure you turned a tidy profit.

    Your claim that the cost of adapting the LNG stations to also produce CNG would be $1 million+ per station is overstated as well. You *say* the numbers are from Clean Energy. I *spoke with* Clean Energy Officials who said you are wrong. I'll trust them.

    Your $10 million won't cover the cost of stock-based compensation is a non-sequitur. The company is using stock as currency to compensate management, and If you bothered to read the latest Form 4's just released, you'll see that the latest grants only vest if --in 2 years' time -- the stock trades at a 60% premium of today's price for a sustained period.

    While shareholders do suffer a little bit of dilution (not great), the issuance of shares 1) doesn't actually cost the company any capital, and 2) does help management stay more aligned with shareholders, since their compensation is tied to growing the company over an extended period of time.

    Good luck.

    Jason Hall,

    Article Author

  • Report this Comment On February 06, 2014, at 12:27 PM, TMFVelvetHammer wrote:

    >>To begin with, the statement: "The only difference is whether the fuel is stored as a liquid or a solid." is not accurate. I think you mean a gas (CNG) or a liquid (LNG).<<

    DavidAMinnesota,

    Thanks for catching that. I must've been thinking about rocket fuel or something...

    Seriously, thanks. I hate it when I do stupid stuff like that. I've asked my editor to fix it.

    -jh

  • Report this Comment On February 06, 2014, at 3:14 PM, tomdotstar wrote:

    I'd like to add another perspective to the effect of competition in the CNG business.

    It is a mistake to consider CNG sales a zero sum game. CNG use is in its infancy and the so-called competitive pressure of other CNG providers will only increase CLNE's market.

    The current natural gas fleet is small because there are very few fueling stations. When multiple players get in the market and more stations are built, the "chicken or egg" problem will be solved.

    I've been fueling 2 CNG vehicles over the last 5 years. Sometimes I fuel at Clean Energy, sometimes at other providers. The issue is not who provides the cheaper, cleaner, American fuel. Rather, the issue is whether I can get the fuel on a dependable basis.

    More players means a bigger market.

  • Report this Comment On February 06, 2014, at 3:17 PM, chzmnia wrote:

    First, let me 'fess up' I am long CLNE and WPRT.

    However, after 30 years in the brokerage business (far in the past now, thank goodness), I have learned that a good portion of the market cap of a stock is faith based (no, not religion), that there is a long bias in investors' make up, and of course confirmation bias in the information we choose to evaluate and accept.

    The hostile reception to the SA article, published by Upside, does not surprise me. And the name calling, or allegations that he (assumed) will be somehow compensated are a distraction.

    As an investor, risking one's hard earned capital on the outcome of an investment recommendation, we should be asking ourselves the hard, nasty questions posed by the author every single day.

    The value of a security, over the long run, will track its fundamentals. A stock, in the meantime, may be all over the place, and the direction and value over any period is based upon expectations.

    No one will question that the anticipated roll-out of the "natural gas revolution" has not exactly kept to a schedule, or that the construction of the ANGH was a bit ahead of itself and of course, that the valuations of WPRT and CLNE two years ago were somewhat over-optimistic.

    The author has included links to quite a number of references, competitors to CLNE, which seem to support his position.

    The bottom line, however, is the contention that LNG is a niche product in an industry that will be dominated by CNG, and that Clean Energy has made a bad bet in an area with a low barrier to entry, (no moat, so to speak).

    The real crux of the problem then, is whether he is right, not if he is an evil, money grubbing, short seller.

    Much of my understanding of the CNG vs LNG debate comes from the presentation on the CLNE website "When to use LNG vs CNG for Trucking" by Brian Powers. I state that up front.

    http://cleanenergyfuels.com/video/lng_v_cng_video.html

    Much of the contention is that CNG fast fill technology has overcome the advantage of LNG for long haul trucking, and that the cost to build a remote CNG station is not as prohibitive as stated in Powers' video.

    First let's compare the opposing arguments on the build of a CNG station.

    Capital cost assumption for a 10 GPM fill rate on a 4 lane station which must be able to fill each truck simultaneously;

    (Remember, all figures are for a station to be able to perform at capacity)

    1)To fill at 40 GPM (4 lanes times 10 GPM each) requires a 5500 SCFM compressor requiring 2500 HP and a 2 megawatt power supply to run it. Which can cost $1 Million

    2) A 6 to 8 inch dedicated utility gas line running back to the utility at a cost of $500,000 per mile.

    3) Electrical demand charge of up to $30,000 per month, plus usage no matter how many trucks you fill.

    4) A total cost for a remote station may reach $5 Million.

    For an LNG station that can fill 4 lanes at 12 GPM each;

    1) 2 LNG pumps at 25 HP each.

    2) No electrical demand charge per month, only usage.

    3) A 15,000 gallon LNG tank.

    4) No dedicated gas line.

    5) Total cost for a remote LNG station, around $2 Million.

    An LNG station is also scalable, where CNG must be sized and completed up front.

    Next, the debate over fill rates of CNG vs LNG;

    The great majority of CNG trucks and buses in operation fit into the return to base category.

    In a return to base use system, excess heat can dissipate during the slower fill time, at a time of lower demand charges.

    Fast fill of CNG, or Boyle's Law in a closed system. Simply stated, if you add pressure to a fixed volume, you increase temperature. This leads to a couple of issues not experienced by diesel or LNG trucks.

    First, there is the problem for the user to get the full range expected by using the simple math of tank capacity times miles per DGE. Because of the heat of compression, a tank does not get a complete fill. It's only a few percent short, but it;s not full.

    Second, CNG vehicles do not operate well once tank pressure drops below about 400 PSI. This is about 10 percent of full tank pressure.

    These factors do not affect actual mileage achieved, but they do affect range expectations. Anyone who has limped into a gas station on fumes and a prayer knows what I'm talking about.

    Range can be reduced by 10 to 15%.

    Third, as temperature goes up in a fast fill station, there's not much time to dissipate heat. When you fill a heavy duty truck with a large tank, the temperature can increase by up to 120 degrees fahrenheit above ambient air temp. In Minnesota, in mid winter, this is not a problem. On a 100+ degree day in Arizona in summer, it's significant. Because of the maximum capacity and pressure of the tank during fast fill (remember Boyle's law), the tank can only be filled with 70-75% of the quantity of fuel expecte, in a hot climate, and the truck has 25-30% less range in Arizona, or 15%+ in Minnesota.

    Now technology is constantly changing and improving. If the heat of compression, and range problems have been solved, that could support Upside's position on CNG vs LNG for Clean Energy, and CLNE has a real problem.

    I anxiously await clarification.

  • Report this Comment On February 06, 2014, at 5:47 PM, Upside wrote:

    Thank you for the well presented commentary chzmnia.

    The video "When to use LNG vs. CNG for Trucking" posted on the CLNE website contains so many fatally flawed assumptions that I will probably just write up a new article to review all of them. Stay tuned.

    In the mean time understand that since the video was produced and CLNE bet big, there has been no shortage of innovation in the competitive CNG industry in rising to the occasion.

  • Report this Comment On February 06, 2014, at 6:20 PM, matric wrote:

    seeking alpha..... sounds like someone wants a buying opportunity.

  • Report this Comment On February 07, 2014, at 2:49 AM, movinman138 wrote:

    I have read both SA and this article and all the comments:

    Obviously there are not many fleet managers on here but investors.

    Sniff test time:

    why would you give up a dollar in fuel savings to use a more expensive fuel that is less safe to the operator and is an open system aka vents directly to the atmosphere? Why would a fleet manager settle to save $1.00 or 75 cents when they can save $2.00 with a fuel that is safer, more convenient and safer for the environment? 80% of the time fleet professionals don’t, they choose CNG not LNG. Pushing any alternative fuel past its appropriate applicability is not wise. And I believe it will be ultimately reflected in share price. Oh, and I don’t own CLNE either.

    I agree that LNG has its place, marine, rail, maybe even aviation and obviously for exporting. But IMO this article is more on the mark than off. Good investing often has its basis in good understanding of the target industry. So I am only addressing the industry, not CLNE's fiscal details.

    Consider these:

    Contrary to CLNE Jim Harger assertion in the Dec.28th 2013 article calling “LNG’s big advantage”, “Our pumps can fuel two dispensers at the same time at 20 diesel gallon equivalents per minute,” Harger says. “The (CNG) industry’s not happy at five gallons per minute,” “.http://www.fleetsandfuels.com/fuels/lng/2013/12/lng-its-more...

    Really? The Atlanta MTA dispenses 25DGE's/minute of CNG per hose. Here are some recent examples in the news well above the 5 GGE limit Harger claims:

    TruStar Energy's CNG fast fill rates up to 17DGE: http://trustarenergy.com/cng-info/fast-fill-cng-station.pdf

    Grady Gaubert of Gaubert Oil & CNG station owner states fill rate @ 13 GGEs/min http://www.tri-parishtimes.com/business/article_be43bac2-521...

    LovesTravelStop 's can fill a 60gal class 8 CNG tank in less than five minuets with a fill rate of 12 GGE/min http://www.loves.com/AboutUs/MediaCenter/News/PressReleaseOc...

    Sure doesn’t sound like CLNE is factual in their representation of the marketplace which is what many of you are accusing the author of doing. IMO, CLNE are master spinners not the author.

    One poster stated that an LNG station is $2 million to build and a CNG takes $5 million to build. You need to go back and read CLNE's annual statement again you have them backward and wrong. A fast fill CNG station costs between $700,000 and $1.5 million (that is approximately what Smith Dairy with an Ariel/ANGI fast fill compressor package cost). LNG stations cost between $5-$7 million PLUS needs a $3-$5 BILLION LNG liquefaction plant and trucking logistics to supply it. These numbers are verifiable at http://www.afdc.energy.gov

    CLNE says they designed, built, own and operate 450 NG stations. WRONG they bought more than half of them (SoCal as stated in the article and recently with the acquisition of Mansfield Gas Equipment Systems)- they did not design and build them. That’s a BIG difference when one is claiming industry dominance . There are all American companies like ANGI Energy (www.ANGIEnergy.com) that have designed and built three times that amount, they just don’t own and operate. And they don’t have to brag about or exaggerate that claim either.

    One poster quotes Littlefair’s recent regurgitation saying IMW (made in Chinese and Canada) is a world leading CNG manufacturer with 1,400 natural gas compressors. He didn’t say their world leading sub-standard compressors are limited to CNG solutions under 150 horse power. The reality is Ariel Corporation (www.ArielCorp.com) of Ohio celebrated shipping its 40,000th natural gas compressor last summer www.arielcorp.com/unit40k/ and offers horse power options up to 10,000. GE stated at its expo CNG rollout fall of 2012 that they have produced 15,000 natural gas compressors and offer horse power in the 1,000s as well. IMW is far from the world leader that they hold themselves out to be. Even the Argentinean company Aspro has more than 5,000 natural gas compressors in the marketplace according to their website. It’s been rumored for some time now that IMW is for sale by CLNE. IMO it’s because of the horse power and other mechanical limitations of the IMW product.

    Many posters keep saying how big CLNE is. The same thing was said about General Motors (GM) too.

    Does it really give you that much comfort that they have maybe 400 operating natural gas stations when there are at least half a dozen large CNG infrastructure building companies building faster than CLNE and ALL are priced less per GGE?

    Oh and for the posters that don’t understand the scrutiny the EPA is putting on trucking companies and the rest of the industry. Just because you don’t understand it or don’t like it doesn’t mean it’s not a factor http://www.truckinginfo.com/channel/fuel-smarts/news/story/2.... LNG if forced to go to a closed system WOULD CEASE TO EXIST because it would be cost prohibitive. The EPA is increasing fugitive emissions focus on Methane. LNG trucks are an open system meaning they vent to the atmosphere. CNG trucks are a closed system, they do not vent to the atmosphere.

    One can bury one’s head in the sand but that doesn’t mean the short comings of LNG doesn’t exist. True CLNE sells a lot of CNG, but the heavy weight of the fiscal LNG anchors are simply too much for the CNG life rafts to keep CLNE afloat under the status quo I believe.

  • Report this Comment On February 07, 2014, at 9:52 AM, fourlagers wrote:

    Who are you going to believe more? Jason or some anonymous poster? They both have something to gain financially by convincing you of their positions, but only one's credibility is on the line. Upside has already accomplished the damage that short sellers wanted. Among them who will care if he/she was mostly wrong in the long run? And, if Upside's credibility wanes, they'll just come back with some other anonymous name.

    BTW, I might give some weight to Littlefair's 1.6 million dollar purchase in Sept. Now that's someone with a real stake in this companies outcome!

  • Report this Comment On February 07, 2014, at 10:55 AM, movinman138 wrote:

    One important fact not addressed is the HUGE growth in the dual fuel and Bi-fuel market for CNG. That technology growth further widens the functionality gap pushing CNG ahead of LNG.

    If I am a fleet owner and I have LNG trucks I can only get fuel at less than 100 places from all competitors (probably closer to 50). If I am driving a class 8 dual fuel CNG from http://fydaenergy.com/ (which received its EPA cert late last year), I can take advantage of CNG's $2.00 DGE savings and improved safety over LNG and still burn 100% if I needed to do so aka found myself away from a natural gas station. And FYDA isn't the only one that has received certification. Smith Dairy in Ohio is running three different dual fuel technologies. Notice you don't hear CLNE talking about this despite the fact that it is clearly a game changer for CNG. And bi-fuel does the same for gasoline engines that dual fuel does for diesel. Lots and lots of class 4-6 bifuel equipment being sold today. LNG says what???

  • Report this Comment On February 07, 2014, at 10:59 AM, movinman138 wrote:

    Definition Clarification:

    Dual fuel allows a compression diesel engine to inject up to 90% natural gas into a diesel engine. So a fleet can realize up to 90% of the $2 savings though generally average a 60/40 or 70/30 savings depending on duty cycle. This saving is clearly more than the $.75-$1 offered by LNG.

    Bi-fuel allows a gasoline engine to run on either CNG or gasoline not simultaneously as in dual fuel.

  • Report this Comment On February 07, 2014, at 12:23 PM, TMFVelvetHammer wrote:

    movinman138-

    Let's clear the air on the vast majority of the links and companies you cite above:

    Almost 100% of the giant gas compressors you mention are being built for natural gas production sites, where producers are compressing gas in the field into tanks to transport the NG out of the field, and to a pipeline.

    This is heavy-duty industrial use, and not what would be found at a refueling station, as these things process massive amounts of fuel, are very loud, huge, and use tremendous amounts of electricity.

    Additionally, all of the fleets and Fast-fill stations you are talking about, are return-to-base vehicles, and most with smaller tanks, versus the 100+ gallon tanks that over-the-road trucks could easily have.

    Filling an 8-gallon taxi tank, or even a 30-gallon bus tank just isn't comparable to filling long-haul truck tanks.

    As to bi- and dual-fuel, again, not really applicable, especially bi-fuel which is a gasoline technology. Gasoline vehicles have never been targeted by CLNE for LNG.

    As to bi-fuel, this isn't something that the trucking industry even really likes, because it *requires* two fuels to run the engine. The diesel is necessary just to get the NG to ignite. So this further complicates fuel acquisition and budgeting for fleets.

    What it boils down to is this:

    Who's right about the size of LNGs role in transportation? I'm not convinced that Westport and Clean Energy both would have invested as much in LNG as they have, if it didn't offer substantial benefits versus CNG for a large enough part of the market.

  • Report this Comment On February 07, 2014, at 12:46 PM, Upside wrote:

    Excellent points, movinman138. The large compressor manufacturers (Ariel, GE) are well suited to provide solutions to the ever-growing demand for high-capacity, fast-fill CNG systems along trucking corridors.

    Dual-fuel is a great way for trucking fleets to get started with natural gas: the vehicle can always run 100% diesel if needed, and EPA approved retrofit systems are plentiful for many engines out there.

  • Report this Comment On February 07, 2014, at 12:48 PM, movinman138 wrote:

    elihpaudio -

    First, Aspro is 100% a CNG company. Second, An Ariel valve or cylinder is the same or very similar whether it is gas lift or CNG. The frames are identical. The only major difference is the PRESSURE not the technology. So while CLNE likes to try to differentiate themselves from the big boys by claiming this distinction, it is simply spin. You can find 1,000's of Ariel CNG compressors in service today way more than the IMW 1,400 claim. And you can find 1,000's more in the gas patch, processing etc. That technology is clearly the industry leader, despite what CLNE spin might say. And their electricity demands of a CNG station is another CLNE fallacy. But there is not enough space to address here.

    Second, your "return to base" understanding is simply out dated. Duel fuel is embraced by the class 7-8 trucking industry as both Fyda Energy Solutions and Eco Dual have full production schedules. Additionally, there is a new evolution to the return to base mentality. Just because a truck is not at "home" every night doesn't mean it is not at the same set of "homes". Now that public CNG stations are approaching 1,000, running dedicated CNG is becoming more and more viable. But make no mistake, dual fuel is a game changer. You say the industry doesn't like it because of two fuels. Dual fuel is cheaper and safer than LNG. Period. That is why it is growing as fast as production can keep up.

    And lastly, the whole point of this article was that CLNE did make a miscalculation of the LNG industry and the common share holders are going to be left holding the empty bag. I think LNG will be a HUGE part of our energy future, for exports, marine, rail and maybe even aviation. But not trucking. It is too expensive, vents directly to the atmosphere and can freeze your face off. Just ask Love's which operates its own fleets. Like so many other large fleets around the country, they launched an internal trial of both and CNG beat LNG outright. Plus they are self described as hydrocarbon agnostic. If their clients were asking for LNG, they would have CNG for themselves and LNG for customers. But as it is, their customers are asking for CNG too, as is evident by their aggressive CNG build out schedule. In my book, LNG is mostly hype supported by fiscal consequences if it fails, by both CLNE & their investors.

  • Report this Comment On February 07, 2014, at 12:57 PM, movinman138 wrote:

    Oh and elihpaudio -

    I forgot one thing. You said, "Almost 100% of the giant gas compressors you mention are being built for natural gas production sites, where producers are compressing gas in the field into tanks to transport the NG out of the field, and to a pipeline."

    .... ever hear of "CNG in a Box"? That's GE's dedicated line of CNG station compression equipment. You won't ever that in the gas patch as you assert.

  • Report this Comment On February 07, 2014, at 3:05 PM, TMFVelvetHammer wrote:

    >>Dual fuel is cheaper and safer than LNG. Period.<<

    If that's the case, then why is Cummins getting behind 100% NG burning engines, via its partnership with Westport?

    It's not as cut-and-dried as you claim.

    >>. ever hear of "CNG in a Box"? That's GE's dedicated line of CNG station compression equipment. You won't ever that in the gas patch as you assert.<<

    Yes, I know about it, I've written about it a few times. It's a great product, and an area where GE and CLNE will probably compete for some business.

    However, it's a 400hp system, and NOT designed to do fast fill or support large vehicles. Which is kind of the crux of this argument, no?

    Anyhow, this argument will only be answered with the passage of time.

    Despite the acrimony, I really have enjoyed the discussion. I learned a long time ago that engaging in debate with those that have views that oppose your own is the only way to find the truth.

    Thanks for your comments.

    Jason Hall

  • Report this Comment On February 07, 2014, at 6:18 PM, Upside wrote:

    Jason,

    Let me say that I also have enjoyed the exchange of thoughts with you and others here. I stand corrected as to the stock-based compensation remark.

    Your article was well researched and a credit to the CLNE cause. I look forward to reading more from you.

  • Report this Comment On February 09, 2014, at 1:53 PM, neptasur wrote:

    If the detractors of CLNE are correct, then not only has CLNE (ala T Boone Pickens, et alia) expended enormous resources on a fools parade, but so has Cummins, Westport, UPS, and others. History may well prove that to be the case (I don't know), but I don't think the probability is as high as the detractors wish to portray.

  • Report this Comment On February 10, 2014, at 12:32 AM, TMFVelvetHammer wrote:

    Martinbrasear,

    You ignore that when his trading program was ended in September, CLNE CEO Andrew Littlefair BOUGHT $1.6 million dollars worth of shares on the open market.

    That's a pretty big statement of belief, and from a founder of the business. Don't make the mistake of looking as his sales of options awards (which is part of his compensation, not investing) and mistaking that for selling shares he bought as an investment.

    Again, his last transaction was buying 127,000 shares for $1.6 million. Open market buy. Not am option from the company.

  • Report this Comment On February 10, 2014, at 1:45 PM, Phanntom wrote:

    Okay, I got to do some actual field research today as I'm an RV'er and use Flying J truckstops and this particular one outside Phoenix is also a CLNE filling station.

    Last Monday when I was here filling up, I looked over to the CLNE (I have my granddaughter in it) and there were 5 semi's in the line. The two at the pumps were UPS rigs, the other 3 were non-UPS.

    Because of all the fuss the last few days I was there for fuel again today. When I looked over there were 2 semi's there, both UPS, so I took the time to walk over to talk with the drivers.

    The bottom line is....this station carries both CNG and LNG. The pumps have no prices on them. The drivers use a unique card so they have no idea what the pricing is...it's a contract price with UPS and CLNE.

    He said the tractors were given to UPS for testing and are equipped with the Westport/Cummins engine. He said they were told the conversion is very expensive and pointed to the tank. He said the tanks cost $35k./each.

    They said from a driving standpoint they don't notice any difference from diesel. He said the fill time is about the same as diesel but said he doesn't pay much attention to that as they just shoot the breeze while it's filling.

    I'm a frequent visitor to the particular Flying J and see the CLNE tankers here quite often...sometimes multiple times a day, so someone is buying the stuff.

  • Report this Comment On February 10, 2014, at 11:15 PM, TMFVelvetHammer wrote:

    >>Oh, OK, so he quit selling, every month, every possible share he could sell, for 8 years -<<

    Contraire. He still held more than 350 thousand shares, worth some $4.2 million, before buying that 125,000 shares.

    I don't know about you, but $4.2 million worth of shares held is a long way from selling every possible share he could sell.

  • Report this Comment On February 11, 2014, at 11:57 AM, chzmnia wrote:

    What an incredibly enlightening 'battle royale' of contending views on Clean Energy we have witnessed.

    I was priviledged to hear evidence from well informed individuals on both sides of the case, as well as people with experience in the trucking industry.

    My conclusion is that the argument has changed.

    We are no longer in the chicken and egg scenario, where the product cannot be supported without the infrastructure, and the infrastructure cannot survive without the product.

    The product, the Westport Cummins natural gas engine, whether fueled by LNG, or CNG, is in production. It's out there. Orders are flowing in. The rate of production is yet to be determined by the market, but the innovators have been testing the product in real time for a few years, and are ordering more.

    If the product is to be successful, and given the macroeconomics of energy in the USA, it appears the opportunity is there, the adoption of the product, or its subsequent iterations, is likely to experience something similar to the Rogers Bell curve above. A particularly important question for investors, at this point, is whether we are still in the phase of adoption by Innovators, or on the cusp of the Early Adopters.

    And of course, timing and execution (and lucky guesses), are always utmost in the success and survival of an individual company. The continuing discussion of the merits of CNG vs LNG has brought to light the tremendous innovation going on in the infrastructure side. Improved fuel tanks and novel solutions to technological problems have and will contribute to the success of the natural gas engine.

    As far as Clean Energy goes, they made an early, and expensive bet on LNG with the ANGH. Is it a “niche”, to be obscured by advances in the range of CNG vehicles, and relegated to “small niche”, as some contend ? It seems to me that they have savvy management, with substantial experience with both CNG and LNG. They do a large amount of business in both areas. They have a substantial amount of capital at their disposal, and in my opinion, the stock is cheap enough that I would not sell in a panic at this point.

    If CNG wins the day, they will be a strong competitor.

    And finally on the “niche” argument, even a niche, in a large economic sector, can prove quite profitable.

    The most exciting, and reassuring point of all the give and take, for me however, is my own conclusion that Westport Innovations, WPRT, contrary to the gut wrenching price activity of the stock over the last two years, stands on the cusp of something very big. Certainly there are bumps in the road (pun intended) ahead. They seem to have a “moat” around their nascent business, with their 'IP', and their alliances with significant industry players. Without a doubt management must prove their worth over the next few years, and financing may prove critical, but if they get past 2014 without substantial dilution, or financial hemorrhage , investment at these levels may prove quite rewarding.

    I am long both WPRT and CLNE.

    Charlie

  • Report this Comment On February 11, 2014, at 12:10 PM, chzmnia wrote:

    https://www.google.com/search?q=images+rogers+bell+curve&amp...

    Sorry, my word processing skills deserted me in placing this chart in my response above.

  • Report this Comment On February 11, 2014, at 2:02 PM, mnatural wrote:

    America's Natural Gas Stations for Trucks = ANGST

    It really 'works' much better than ANGH, which is not only unpronounceable, but is easily confused with ANGA, who're already too confused on this debate to start.

    This thread has, so far, over-looked this aspect:

    http://ecosakh.ru/data/im_docs_62_vzryv_avtocisterny_origina...

    It requires the US reader do some unit conversions, but I advise you do them. Whistling past the graveyard is dumb re. both govt policy/regs and business plans.

    ...or America's NG Station 'Trail' = ANGST ha

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