3 Natural Gas Davids Challenging the Transportation Goliath

Clean Energy Fuels continues to expand, as does competitor Trillium CNG, a subsidiary of utility Integrys Energy Group, with both announcing station openings this week. Despite a slow 4th quarter, Chart Industries is also expecting to participate in LNG station expansion in 2014.

Mar 9, 2014 at 2:06PM

When Clean Energy Fuels (NASDAQ:CLNE) CEO Andrew Littlefair bought $1.4 million worth of stock in his company on the open market in September, you can rest assured that he didn't anticipate the stock taking anything like the drubbing that it has over the past several months. Between 2 analyst downgrades, a series of short attacks via anonymous articles posted online, and general market concerns about the slow uptake of natural gas vehicles by the trucking segment, the stock fell as much as 34% before a recent rebound. 

Littlefair's response? Buy more shares; another $100,000 worth, roughly. Another Clean Energy insider, Director Stephen Scully, just picked up $45,000 in shares this week as well. Despite concerns that adoption isn't happening quickly, Integrys Energy Group (NYSE:TEG) subsidiary Trillium CNG is planning to open 100 public and private natural gas stations in 2014, and Chart Industries (NASDAQ:GTLS) reiterated that it has a contract to build 20 LNG stations for a major oil company this year. 

Between the three, more than 150 stations will be either built or opened this year. What should investors do?

Chart moving ahead in U.S., China
Chart's latest earnings report and conference call  was a solid reminder that a lot of progress has been made in natural gas refueling, and that a lot of momentum is building up for 2014l; especially the second half of the year. CEO Samuel Thomas, from the earnings call :

In the infrastructure area, 2013 included multiple awards for LNG fueling equipment in Asia, as well as the previously mentioned award from a major oil company for 20 LNG stations here in North America. In LNG end-user applications, we continue to see strong order and revenue growth, despite the recent market debate concerning LNG versus CNG for heavy-duty trucking. Our perspective is the 12 liter, 400 horsepower Cummins Westport engine will now give the industry a capable pilot fleet vehicle on a broader scale.

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Chart is the primary LNG tank supplier to the truck market in the U.S. Source: Chart Industries

Thomas further reiterated that, as the primary supplier of LNG tanks to the North American truck market, 2014 would see continued adoption of LNG, and he was anticipating mid-teen to mid-20% growth in sales related to the U.S. truck market for Chart's LNG products. In addition to its deal with what could be Royal Dutch Shell and TravelAmerica to build 20 LNG stations in the U.S., Chart landed a $50 million deal with PetroChina in the third quarter, and also announced an $80 million expansion to its manufacturing capacity in the country that will double its manufacturing capacity in the region. 

Integrys' Trillium ramping up, but slowly

Trillium Orlando Opening

Tullium LNG's latest station just opened in Orlando, FL. Source: Trillium LNG

Much has been made of the "CNG versus LNG" debate around trucking, but what's been ignored is that both liquid and compressed natural gas demand for trucks is growing. Integrys Group's most recent corporate presentation shows the combined CapEx for Trillium will be $121 million over the next three years, as the company expands its base of both private and public CNG stations. Clean Energy Fuels will spend almost as much in 2014 alone, building out both LNG and CNG infrastructure. Even with Integrys Groups financial backing (Integrys will spend more than $3 billion in total CapEx in the same period) Trillium's expansion appears to be happening at a slower rate, though part of the spend could be the nature of the stations that are being built. The company says it will build 101 public access CNG stations that class 8 trucks can access by 2016. 

Lots happening at Clean Energy
The string of new station openings and supplier agreements make it easy to understand why insiders at Clean Energy are buying. The company opened two more LNG stations recently, one in Texas, and one in Georgia, in addition to at least four more contract awards to supply and service CNG fleets in California, Pennsylvania, and Nevada. Combined, these deals represent almost 6.5 million gallons of natural gas every year. 

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Clean Energy's position as the largest CNG and LNG supplier could be a big advantage. Source: Clean Energy Fuels

Clean Energy's gallons-delivered has grown enormously over the past several years; climbing from 101 million in 2009, to 214 million in 2013. CNG remains the lion's share of fuel volume, at 144 million gallon equivalents in 2013. However, Chart Industries and Westport Innovations both reiterated on their earnings calls that sales of LNG tanks for heavy trucks would be strong in 2014, especially in the second half of the year. We know that Chart sold 1,500 of its tanks in 2013, and Westport had a single order of 900 tanks, in addition to likely a number of smaller orders. The point? Clean Energy Fuels is rather uniquely positioned as the only supplier which offers both LNG and CNG, which could be a strong competitive advantage for mixed fleets. 

2014 a turning point
Insiders buying shares on the open market is no guarantee of a winning investment. But combined in with the serious growth in refueling capacity to support the increasing adoption of natural gas trucks, there are a lot of things that point to 2014 being an excellent year for the industry. Is it time for you to buy? That's for you to decide. 

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Jason Hall owns shares of Clean Energy Fuels. The Motley Fool recommends Chart Industries and Clean Energy Fuels. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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