Shares of Clean Energy Fuels (CLNE 3.79%) were up 19.8% at 12:42 p.m. EST on Tuesday on exceptionally heavy trading volume. As of this writing, more than 3.2 million shares have traded hands, more than five times the average full-day volume in recent months.
Today's jump is almost certainly tied to Congress' steps toward passing a bill that may include the reinstatement of a tax credit that Clean Energy would benefit from enormously. The so-called "tax extenders" bundle includes an alternative-fuels tax credit that, in years past, has been worth almost $30 million to the company.
This tax credit expired at the end of 2017 and was not reinstated, but management has been optimistic that it would eventually come back and potentially be made retroactive. It's looking like management might be getting its wish.
Overnight, an amendment was added to a big spending bill that would extend the alternative-fuels credit to the end of 2020, while also making it retroactive to 2018 and 2019.
If the amendment sticks and the bill becomes law, Clean Energy Fuels could see a tax credit for 2018 and 2019 worth between $40 million and $60 million, depending on refueling agreements with certain customers that will take the credit themselves.
Either way, that would be a massive cash infusion for the company, and would further improve a balance sheet that's already in pretty solid shape. It would allow the company to easily repay its $80 million in debt, $55 million of which comes due in 2020, while maintaining a sizable cash position.
As the table above shows, Clean Energy already has more cash than debt, but adding another $50 million or so to its coffers wouldn't hurt. Considering the company already generates positive operating cash flows, and continues to deliver steady growth, I expect management would find ways to put that extra cash to work growing the business (particularly its renewable natural gas operations) or maybe even repurchasing shares. Only time will tell.
But here's the big thing investors should consider: Yes, this tax credit would be fantastic if it gets reinstated. But Clean Energy Fuels doesn't need it to be put back in place. The company continues to grow, carries more cash than debt, and is able to consistently generate positive cash from its operations without the alternative-fuels tax credit. But I'm sure management would be happy to get it nonetheless.