Clean Energy Fuels Corp. 10-Q Summary
Business Context and Reporting Period
Company: Clean Energy Fuels Corp.
Filing Type: Form 10-Q (Unaudited)
Period Ended: June 30, 2009
Business Overview: The Company sells natural gas fueling solutions (CNG and LNG) to fleet customers in the U.S. and Canada, including public transit, refuse, airports, and regional trucking. It also operates fueling stations, provides vehicle financing, and owns a 70% interest in Dallas Clean Energy, LLC (DCE), which produces renewable biomethane from a landfill in Dallas, Texas.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2009 | Six Months Ended June 30, 2008 |
|---|---|---|
| Total Revenues | $58.1 million | $63.8 million |
| Net Loss (Attributable to Clean Energy Fuels) | $(12.9) million | $(8.6) million |
| Operating Loss | $(13.0) million | $(9.5) million |
| Cash and Cash Equivalents | $19.8 million | $36.3 million (Dec 31, 2008) |
| Net Cash Provided by Operating Activities | $5.6 million | $(12.9) million (Used) |
| Net Cash Used in Investing Activities | $(24.5) million | $(32.6) million |
| Net Cash Provided by Financing Activities | $2.4 million | $0.1 million |
| Long-Term Debt (Total) | $27.4 million | $25.1 million |
| Gasoline Gallon Equivalents Delivered | 42.0 million | 36.1 million |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased by $5.7 million (9%) compared to the prior year period. This was primarily driven by a decrease in the average price per gallon ($1.06 in 2009 vs. $1.50 in 2008) due to lower natural gas market prices. This decline was partially offset by a 16% increase in volume delivered (42.0 million GGEs vs. 36.1 million GGEs), driven by growth in CNG and biomethane sales.
- Cost of Sales: Decreased by $13.2 million to $37.8 million, largely due to lower natural gas costs ($0.79/gallon vs. $1.41/gallon). Increases in station construction costs and delivery volumes partially offset this reduction.
- Derivative Losses: The Company recorded a derivative loss of $2.4 million for the six months ended June 30, 2009, compared to a gain of $5.7 million in the prior year. The 2009 loss includes mark-to-market adjustments on Series I warrants required by new accounting guidance (EITF No. 07-5). All futures contracts in 2009 qualified for hedge accounting, whereas 2008 included non-qualifying contracts.
- Depreciation and Amortization: Increased by $3.5 million to $7.7 million due to expanded station networks, the California LNG plant, and amortization of intangible assets from the DCE acquisition and recent O&M contract acquisitions.
Guidance, Outlook, Risks, and Unusual Items
- Capital Raise: On July 1, 2009 (subsequent to the period end), the Company closed a follow-on public offering of 9.43 million shares at $8.30 per share, raising net proceeds of approximately $73.2 million.
- Capital Expenditures: The Company plans approximately $14.9 million in additional capital expenditures for the remainder of 2009, primarily for new fueling stations. It also anticipates providing up to $2.5 million in funding to the Vehicle Production Group, LLC.
- Debt Covenants: The Company is subject to strict covenants with PlainsCapital Bank (PCB), including maintaining minimum liquidity ($6.0 million), accounts receivable ($8.0 million), and a debt service ratio of 1.5 to 1. Management noted that falling natural gas prices or volume declines could lead to covenant violations, though the Company was in compliance as of June 30, 2009.
- Key Risks:
- Price Volatility: Significant declines in oil, gasoline, and diesel prices reduce the economic incentive for fleets to switch to natural gas, potentially slowing growth.
- Tax Credit Expiration: The federal Volumetric Excise Tax Credit (VETC) of $0.50 per gallon, which contributed $8.1 million to revenue in the first half of 2009, is scheduled to expire on December 31, 2009.
- Government Dependence: Approximately two-thirds of revenues historically come from government entities, which face budget deficits and may curtail spending.
- Supply Chain: Reliance on third-party LNG suppliers and the operational reliability of the DCE landfill gas facility.
Investor Verification Checklist
- Covenant Compliance: Verify the Company's ability to maintain the $8.0 million accounts receivable and 1.5:1 debt service ratio covenants given the decline in natural gas prices.
- Tax Credit Renewal: Monitor legislative developments regarding the extension of the federal VETC beyond December 31, 2009, as its expiration would materially impact revenue.
- Series I Warrants: Review the impact of the "down-round" protection on the Series I warrants, which caused a $2.4 million charge in Q2 2009 and may cause future volatility.
- Government Contract Stability: Assess the risk of budget cuts affecting major municipal and transit customers who comprise a significant portion of the revenue base.
- Liquidity Post-Offering: Confirm the utilization of the $73.2 million raised in the July 2009 offering to fund planned capital expenditures and debt obligations.