Today, Clean Energy Fuels (CLNE 3.07%) is perhaps best known for its America's Natural Gas Highway initiative, but CEO Andrew Littlefair says that while the America's Natural Gas Highway project is exciting, Clean Energy's core CNG refueling business is going strong. Counting Waste Management (WM 1.45%), Republic Services (RSG 1.75%), and Progressive Waste Solutions (NYSE: BIN) as customers, Clean Energy Fuels commands some 75% of this market. Add in the growth in public transit including buses and taxis, and the future looks bright -- before the ANGH comes into play.
Jason Hall: A lot of the past few years, the focus has been on the America's Natural Gas Highway and heavy trucking beginning to make that shift away. Even as that's taken time to really start kicking in, I think one of the things that doesn't get enough attention is what's happening with the core business. Could you talk about what's happening there?
Andrew Littlefair: Sure. We always focused on fleets. Sometimes people look at us and they think of their experience as a passenger vehicle. That's not really it. We fuel a few thousand Honda Civics at our network in California and some other places, but really we're fleet-focused.
When we started the business, we really got serious about refuse trucks, transit buses, and airports -- all those vehicles that go to airports. We refer to those as our core markets, and that's what you're talking about.
That's our bread and butter, and that's grown over time 20-some-odd percent a year. There's ups and downs in it, but let me give you an example.
Today, about 35% of all the transit buses in the United States are natural gas. We went through this period a few years ago where people were talking about fuel cell buses and diesel hybrids. That's kind of gone away and you're seeing a resurgence in natural gas transit buses.
The reason is, like LA MTA today is 100% natural gas here in Los Angeles; 2,200 buses. They save about $60 million a year on fuel.
Hall: That's significant.
Littlefair: That's really significant. The life of that bus fleet, that's getting up to almost $800 million so it's real money, and a lot of transit operators have figured that out.
The other core business that's been exciting to us is the refuse business, and we started that.
It started out almost 10 or 12 years ago with seven converted Waste Management trucks. No economics -- the incremental cost was $150,000 -- it was brutal. We took a diesel truck off the road and we had to take out the engine and change the transmission ... I think the incremental was $135,000-150,000.
But -- in fact, he's with our company now; he had the Western region for Waste Management -- Ray Burke. He understood that he was getting points for his franchises to operate these cheap (fuel) trucks. But it wasn't easy, and the economics were suspect -- If you didn't have grant money, it was very difficult.
Over time, over the last decade, we went through about four different engines. It wasn't until 2008 that that Cummins and Westport really came out with a great 9-liter engine that had the torque and horsepower very similar to what a diesel engine was capable of, and you didn't have the big efficiency penalty that you had in previous engines.
In that year -- which I think is interesting, Jason -- in 2008 there were 5,000 new trash trucks sold in America, and the 9-liter came out. In that year, these guys tested it. They were game, but they were suspect because they had been through some engines that didn't work so good, and 150 trucks were sold that year.
This last year, 60% of every new trash truck sold in America -- 8,000 new trucks -- about 60% of them were natural gas. That's our core market. We have 75% of market share in that market.
We've had competition from time to time, but we've proved out because I think we have the experience. Back in 2008, I think we had six or seven companies that we worked with. Today we have closer to 200.
Hall: A little growth there!
Littlefair: A little growth, and we're operating refuse stations. We built 30-some-odd last year and we'll build another 35, I think, this year. People are operating natural gas trash trucks all over the country -- in New Hampshire and in Florida -- all over. I think maybe we're operating refuse stations in 30-some-odd states right now. That's exciting.
Waste Management, of course, has been a great leader there. Last year 95% of all their purchases were natural gas. Republic Services was a little behind that, but they've shown great leadership at about 65%.
We have four national agreements with the largest refuse guys, so Waste, Progressive Waste, Republic -- and the fourth one always escapes me -- but we do a lot of business in that sector, so the core market is alive and well.
