Clean Energy Fuels Corp. 2018 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018. The filing is an annual report, not a standalone Q4 filing; quarterly information is included for the three months ended December 31, 2018. Clean Energy supplies RNG, CNG and LNG and provides fueling-station construction, operations and maintenance, natural-gas transportation, credit monetization and vehicle-financing services. At year-end, it served more than 1,000 fleet customers operating more than 47,000 natural-gas vehicles and owned, operated or supplied approximately 530 stations.
Financial and Operating Highlights
| Metric | 2018 | 2017 | Change |
|---|---|---|---|
| Total revenue | $346.4 million | $341.6 million | +$4.8 million |
| Operating income (loss) | $3.9 million | $(134.4) million | Improved by $138.3 million |
| Net loss | $(9.2) million | $(81.4) million | Loss reduced by $72.2 million |
| Net loss attributable to Clean Energy | $(3.8) million | $(79.2) million | Loss reduced by $75.4 million |
| Basic and diluted loss per share | $(0.02) | $(0.53) | Improved |
| Gross margin | $133.5 million | $85.8 million | +$47.7 million |
| Cash provided by operating activities | $38.0 million | $(4.3) million | +$42.3 million |
| Cash and short-term investments | $95.5 million | $177.5 million | Down $82.1 million |
| Total debt, net of issuance costs | $84.2 million | $260.1 million | Down $175.9 million |
Revenue included $286.7 million of volume-related revenue, $25.5 million of station construction revenue, $26.7 million of AFTC revenue and $7.5 million of other revenue. Compressor revenue was zero following the December 2017 CEC Combination. Gross margin included a $10.3 million unrealized gain from commodity swaps, which was not an operating cash inflow.
Total natural-gas gallons delivered increased to 365.5 million GGEs from 351.4 million. CNG volume increased to 299.5 million GGEs, LNG volume was approximately flat at 66.0 million GGEs, and Redeem RNG vehicle-fuel volume increased to 110.1 million GGEs from 78.5 million.
Fourth-quarter 2018 revenue was $96.2 million, operating income was $3.6 million and net income attributable to Clean Energy was $6.9 million. The quarter included a $4.8 million gain related to additional proceeds from the BP transaction.
Material Changes Versus 2017
- Operating results improved substantially because 2017 included $67.9 million of asset impairments and other charges and a $13.2 million inventory valuation provision; no comparable charges were recorded in 2018.
- Revenue benefited from $26.7 million of AFTC revenue recognized and collected in 2018 for qualifying 2017 fuel sales. The AFTC was not available for fuel sales after December 31, 2017 and may not be reinstated.
- Volume-related revenue increased by $21.8 million, supported by higher delivered volumes and increased LCFS credit revenue after 2017 account restrictions were resolved, plus the $10.3 million commodity-swap fair-value gain.
- Station construction revenue declined $26.4 million to $25.5 million, and compressor revenue declined $23.5 million to zero after the CEC Combination.
- SG&A declined $18.5 million to $77.2 million, while depreciation and amortization declined $4.7 million to $51.9 million.
- Cash flow from operations turned positive, primarily due to AFTC collections and working-capital timing. Financing activities used $95.2 million, principally for debt repayments.
- The company issued 50.9 million shares to Total for gross proceeds of $83.4 million. Total held approximately 25% of outstanding common stock and received director-designation and other governance rights.
Debt, Liquidity and Commitments
- At December 31, 2018, principal debt was approximately $84.4 million; approximately $5.5 million was due in 2019 and $55.3 million in 2020. Estimated 2019 interest payments were $6.1 million.
- The company repaid the $110.5 million principal balance of its 5.25% convertible notes plus $2.9 million of accrued interest in October 2018 and repurchased $50.0 million of 7.5% notes for $50.5 million in December 2018.
- The company had $50.0 million of unused availability under its PlainsCapital revolving facility as of year-end and stated that available liquidity was sufficient for requirements over the following 12 months.
- 2019 planned capital expenditures were approximately $18.5 million. NG Advantage could spend up to $28.0 million on additional CNG trailers and equipment, subject to third-party financing.
- Contractual obligations totaled $210.7 million, including debt and lease obligations, natural-gas supply commitments and construction contracts. Off-balance-sheet items included $29.9 million of surety bonds and a guarantee of up to $30.0 million plus fees for certain NG Advantage obligations.
Outlook, Commentary and Key Risks
- Management expects long-term opportunities in heavy-duty trucking, refuse, transit, airports, government fleets and industrial customers, but stated that adoption of natural-gas vehicles remains slow, volatile and difficult to predict.
- The Zero Now truck-financing program is intended to accelerate adoption of ultra-low-NOx natural-gas trucks. A January 2019 facility permits up to $100.0 million of additional borrowing through January 2022, with loans maturing in 2024 unless extended.
- Total Holdings USA guarantees the Zero Now facility in exchange for a fee equal to 10% annually of average outstanding borrowings. The company has pledged or assigned related fueling agreements and cash flows as security.
- Zero Now creates execution, debt, LIBOR, fuel-volume, commodity-swap and customer-credit risks. If participating fleets do not use contracted fuel volumes, the company could incur debt, guarantee fees or swap-related costs without corresponding revenue.
- Natural-gas demand is exposed to gasoline, diesel and natural-gas price spreads; competition from electric, hydrogen, renewable diesel and other fuels; vehicle availability and performance; and changes to tax credits, grants and environmental programs.
- RIN and LCFS credit markets are volatile. Prior LCFS account restrictions resulted in $7.0 million of cash payments in 2017, and future regulatory reviews or noncompliance could reduce credit revenue or create additional costs.
- The AFTC contributed $26.7 million of 2018 revenue but is unavailable for post-2017 fuel sales under the law described in the filing.
- California greenhouse-gas regulation may increase costs and reduce margins if the company cannot pass compliance costs through to customers.
- Management reported no material pending legal proceedings and stated that disclosure controls and internal control over financial reporting were effective. KPMG issued unqualified audit opinions.
Important Facts for Investors to Verify
- Separate recurring operating performance from the $26.7 million AFTC benefit and the $10.3 million unrealized commodity-swap gain.
- Assess whether fuel-volume growth and Redeem RNG growth can offset the loss of AFTC revenue and lower station-construction activity.
- Review Zero Now participation, drawdowns, minimum-fuel commitments, swap exposure and the potential effect of up to $100.0 million of incremental debt.
- Monitor the $50.0 million 7.5% note maturity in 2020, NG Advantage obligations and the company’s ability to maintain liquidity after debt service and capital expenditures.
- Evaluate the sustainability of volume-related gross margins, RIN and LCFS credit pricing, and the proportion of earnings attributable to noncash or unusual items.
- Consider Total’s approximately 25% ownership, director-designation rights and potential influence over corporate decisions.