There is a pent-up demand for cement trucks as the construction industry recovers; Clean Energy Fuels (NASDAQ:CLNE) sees a natural niche for General Electric's (NYSE:GE) CNG in a Box for this industry, and a few others as well.
Andrew Littlefair is the CEO and co-founder of Clean Energy Fuels, the leading provider of natural gas for transportation in North America. Clean Energy provides CNG and LNG fuels to solid waste, trucking, and transit fleets, among others, and currently operates some 500 fueling stations in the United States and Canada, as well as manufacturing related equipment and technologies.
In the video below, Littlefair tells us how Clean Energy acquired 65 CNG in a Box units from Chesapeake Energy, and how they plan to use them to grow into new markets.
Jason Hall: One thing that happened recently that was surprising and kind of exciting was the acquisition of the CNG in a Box units from Chesapeake Energy. Can you talk a little bit about that, and your plans?
Andrew Littlefair: Sure. We had a long, healthy, deep relationship with Chesapeake. Chesapeake loaned us money. They were great supporters of natural gas in transportation. They had a big operation, themselves. Aubrey McClendon was a visionary, I think in this, and a friend of ours.
They, shifted gears after Aubrey left. To really get GE in the business, they had put in a big order of these CNG in a Box from General Electric.
I've been telling people, Jason -- because it sounds kind of quaint -- "CNG in a Box," like it's in a two-drawer filing cabinet...
Hall: Stick it in your garage...
Littlefair: These things are big. They are self-contained. They're a good unit, they have the storage, they have the dryer, and they have a 400 horsepower motor. It looked more like a container, so these aren't little things. They're big things that are really well-suited for truck application.
We got 65 of them. We bought 65 plus the dispensers. They're ready to go, and we're beginning to deploy them now.
A new, exciting vertical for us is the ready-mix vertical. I'm becoming a quasi-expert on that -- hardly -- but because of the downturn in construction a few years ago, really the ready-mix cement truck industry hadn't added any cement trucks, so they've got a pretty old fleet out there, and a lot of pent-up demand.
We have the product for them now.
Hall: With the Cummins Westport engine.
Littlefair: Yes. You're seeing them very seriously look at ... if you think about it, they're not totally dissimilar to a refuse application. A little bit different profile, they don't always work the same in the winter.
Hall: But you still have that same return-to-base model.
Littlefair: Big truck, yes, they go out and they fill up and they go back. They stay in one place a little longer. An average refuse truck in the United States uses 10,000 gallons a year. I'd say ready mix a little less. But they're in clumps, and there's more ready mix trucks around than you would think.
The CNG in a Box that we have is really good for that. It's really nicely suited for 15 or 20 trucks. What happens is, in some cases, ready mix trucks might be at a location where there are a couple hundred of them, but then they have satellites in other parts of the city where there's maybe 20 of them.
You'll see our CNG in a Box -- this is CNG -- go into that market. It will be used in the refuse market for smaller fleets.
It's interesting, Jason; what you're seeing right now is in the big guys, Waste Management and Republic Services -- and this is an overstatement -- but a lot of trash trucks in the U.S. are in clumps of 100 or 150. Here in L.A. Basin there's a bunch of those where there's 150, and maybe they service a couple different cities.
But then there's probably half -- and my number is there's like 180,000 refuse trucks in the U.S. -- and about half of them are in small places.
Hall: Where you may have 1 or 2 or 5 or 10 trucks.
Littlefair: You may have 10 trucks. You may have 12 trucks, and it's pretty tough to make a $1 million or $500,000 station (pay off) from that. The GE CNG in a Box may be a solution for that as well. Then the CNG in a Box is going to be good at starter fleets, for CNG heavy-duty truck fleets, behind the gate.
It'll take us a while to work them off. We purchased them right. We have a deep relationship with General Electric. This is kind of the fourth thing that we're doing with them. We're excited about those, and they're beginning to go in. We won't wipe out 65 of them this year, but I see it as an advantage too, because they're built and they're sitting there.
Hall: They're ready to go.
Littlefair: They're ready to go. Otherwise, if you go out and order a compressor right now, it takes a while, so I think it will be an advantage for us.
Hall: As compared to what IMW does, this is a niche that IMW doesn't specifically ...
Littlefair: Well, we've retooled IMW, so we're pleased with that. We have some new products. We have a complete fleet fueler that is a self-contained package. My friends at IMW probably said, "What did you do that for?" because obviously they want to sell us a bunch of this stuff!
The GE in a Boxes, if you put two of them together, three of them together, because we bought them right, it's hard for others to compete with us on that.
If you were just going to go to a bare-bones self-contained smaller unit, IMW has a unit that would work for that as well. I didn't really mention that by putting a couple of these CNG in a Boxes together -- you have a 400 horsepower engine, it's kind of large -- that is a unique offering that maybe IMW didn't have.
Hall: Right, and it was an ideal opportunity to acquire these units the way you were able to get them from Chesapeake.
Littlefair: That's right, and I'd rather have them than somebody that wants to run around in the truck market with those.
Hall: Right, it's either you or somebody you're competing against.
Littlefair: That's right. I think it was a good thing. It's good equipment. We're working closely with GE to even optimize them now.
Jason Hall owns shares of Clean Energy Fuels. The Motley Fool recommends Clean Energy Fuels. The Motley Fool owns shares of General Electric Company. 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.