Clean Energy Fuels Corp. 2020 Form 10-K Summary
Business context and reporting period
Clean Energy Fuels supplies renewable natural gas (RNG), compressed natural gas (CNG), and liquefied natural gas (LNG) for commercial transportation in the United States and Canada. It also provides fueling-station construction, operations and maintenance, equipment, virtual pipeline, and environmental-credit services. The filing covers the fiscal year ended December 31, 2020, with quarterly information for the three months ended December 31, 2020.
- The company operated or supplied 565 fueling stations, served more than 1,000 fleet customers and more than 48,000 vehicles, and employed 465 people at year-end.
- Total fuel and service volume delivered was 382.5 million gasoline gallon equivalents, down 5% from 2019. RNG vehicle-fuel volume increased 7% to 153.3 million GGEs and represented 74% of vehicle-fuel sales.
Financial performance and key metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $291.7 million | $344.1 million | Down $52.3 million |
| Gross margin | $106.3 million | $132.0 million | Down $25.7 million |
| Gross margin percentage | Approximately 36.4% | Approximately 38.4% | Down approximately 2.0 points |
| Operating income (loss) | $(9.8) million | $9.9 million | Declined $19.8 million |
| Net income (loss) attributable to Clean Energy | $(9.9) million | $20.4 million | Declined $30.3 million |
| Operating cash flow | $61.0 million | $12.3 million | Increased $48.8 million |
| Capital expenditures | $13.3 million | $27.1 million | Decreased $13.8 million |
- Volume-related revenue was $245.3 million, including $15.3 million of RIN revenue, $18.7 million of LCFS-credit revenue, and a $2.1 million favorable change in derivative fair value.
- Station construction revenue increased to $26.6 million from $23.1 million.
- Federal alternative fuel tax credit revenue was $19.8 million, compared with $47.1 million in 2019. The credit was extended through December 31, 2021.
- Cost of sales declined to $185.4 million from $212.1 million, while selling, general and administrative expense declined to $68.5 million from $73.4 million.
- Cash provided by investing activities was $24.2 million, while financing activities used $18.7 million, primarily because of debt repayments and $14.6 million of share repurchases.
Liquidity, debt and balance-sheet position
- Cash, cash equivalents and short-term investments totaled $138.5 million at December 31, 2020, compared with $106.1 million at December 31, 2019. Total cash, cash equivalents and restricted cash was $120.0 million, including $11.0 million of restricted cash.
- Debt principal was $85.8 million, excluding finance leases; total indebtedness including finance leases was approximately $89.2 million. The company reported $3.6 million of current debt at year-end and was in compliance with its debt covenants.
- The $50.0 million bp loan bears interest at LIBOR plus 4.33%. It is expected to be contributed to the planned bp joint venture; if that joint venture is not formed by April 30, 2022, repayment of principal and accrued interest is required.
- The company expects approximately $27.5 million of 2021 capital expenditures and anticipates deploying up to approximately $100 million for dairy RNG projects and up to approximately $75 million for fueling stations supporting contracted RNG volumes. Management stated that additional capital may be required if these plans proceed.
Material changes versus the prior comparable period
- COVID-19 reduced fleet activity, particularly at airports and in public transit, and caused total delivered volume and revenue to decline. Refuse volumes remained strong, and volumes in the fourth quarter improved 7% from the second quarter.
- Lower volumes, lower natural-gas prices, and a less favorable fuel mix reduced the effective revenue per GGE to $0.64 from $0.70. Effective cost per GGE declined to $0.42 from $0.47.
- The company repaid the remaining $50.0 million of 7.5% notes in May 2020 and refinanced certain NG Advantage obligations. NG Advantage became approximately 93.3%-owned at year-end.
- The company entered a memorandum of understanding with bp for a dairy RNG joint venture and received $50.0 million of bp preformation funding. It also partnered with Chevron on the Adopt-a-Port program; customers had ordered 141 trucks by year-end, with management expecting at least 310 additional orders in 2021.
- On March 3, 2021, after year-end, the company entered a 50/50 Total joint venture targeting up to $400 million of equity investment in U.S. dairy RNG production projects. Each party initially committed $50 million.
Guidance, outlook, commentary and risks
- Management projected 2021 volumes above 2020 levels and approximately $20 million of 2021 AFTC revenue, while cautioning that the pandemic could interrupt the recovery.
- The company’s stated strategy is to deliver 100% RNG across its fueling infrastructure by 2025.
- Key risks include continued COVID-19 effects; slower fleet adoption; competition from diesel, renewable diesel, electric and hydrogen vehicles; volatile RIN and LCFS-credit prices; expiration or modification of government incentives; RNG supply, permitting and project-development risks; and California zero-emission vehicle policies.
- Environmental-credit markets are volatile: 2020 RIN prices ranged from approximately $0.80 to $2.13. Regulatory reviews or noncompliance could restrict credit generation, require credit purchases or result in penalties.
- The company has significant contractual commitments, including approximately $155.9 million of scheduled debt, lease, take-or-pay, supply and construction obligations. It also had $29.4 million of surety bonds and a guaranty of up to $15.0 million plus fees relating to NG Advantage’s bp supply arrangement.
- The company reported no material pending legal proceedings, effective disclosure controls and effective internal control over financial reporting. KPMG issued an unqualified audit opinion; the fair value of commodity swaps was identified as a critical audit matter.
Important facts for investors to verify
- Reconcile recurring operating performance with the material and timing-sensitive AFTC revenue, environmental-credit revenue, derivative fair-value gains and asset-sale gains.
- Confirm the status and economics of the bp and Total RNG joint ventures, including the potential April 30, 2022 bp loan repayment obligation.
- Assess whether RNG volume growth can offset lower conventional-fuel volumes, reduced per-GGE pricing and higher planned capital deployment.
- Monitor RIN and LCFS-credit prices, program eligibility, regulatory audits and changes to federal and state incentives.
- Evaluate liquidity after planned RNG and fueling-station investments, debt maturities, share repurchases and potential additional financing.
- Track customer adoption of RNG trucks against competition from electric and hydrogen vehicles and California zero-emission mandates.