Clean Energy Fuels Corp. annual report, FY2023

Clean Energy Fuels Corp. — FY2023 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report, not a standalone fourth-quarter filing; quarterly Q4 results are not separately presented in the provided text. Clean Energy supplies renewable natural gas (RNG), compressed natural gas (CNG), liquefied natural gas (LNG), environmental credits, fueling-station construction and operation and maintenance services primarily to U.S. and Canadian commercial fleets.

Key Financial Metrics

Metric	2023	2022	Change
Total revenue	$425.2 million	$420.2 million	+1.2%
Product revenue	$369.8 million	$373.0 million	-0.9%
Service revenue	$55.3 million	$47.2 million	+17.3%
Operating loss	$(76.4) million	$(51.7) million	Worsened
Net loss attributable to Clean Energy	$(99.5) million	$(58.7) million	Worsened
Basic and diluted loss per share	$(0.45)	$(0.26)	Worsened
Cash flow from operations	$43.8 million	$66.7 million	-34.4%
Cash used in investing	$(202.0) million	$(148.5) million	Higher use
Cash provided by financing	$139.1 million	$101.6 million	Higher inflow

Margins: Total cost of sales was approximately $343.6 million, implying gross profit of approximately $81.5 million and a gross margin of approximately 19.2%. Operating margin was approximately -18.0%; net loss attributable to Clean Energy represented approximately -23.4% of revenue.

RNG fuel volume increased 13.9% to 225.7 million GGEs; total fuel volume increased 7.6% to 288.2 million GGEs.
RNG represented 89% of vehicle fuel sales, compared with 74% in 2013. Management targets 100% RNG across the fueling infrastructure by 2025.
O&M service volume increased to 256.9 million GGEs from 240.4 million.
Environmental-credit revenue declined: RIN revenue fell to $25.9 million from $34.7 million, and LCFS revenue fell to $9.9 million from $12.6 million.
Alternative fuel excise tax credit revenue was $20.9 million. The credit was reinstated through December 31, 2024 at $0.50 per applicable GGE or diesel gallon of LNG.
Cash, cash equivalents and short-term investments totaled $263.1 million at year-end, excluding current restricted cash.
Consolidated debt was approximately $300.3 million of principal, or approximately $261.2 million net of debt discount and financing costs. The company reported compliance with applicable debt covenants.

Material Changes Versus 2022

Revenue was broadly flat, but profitability deteriorated substantially. Higher fuel volumes and station construction revenue were offset by lower environmental-credit prices and a $60.6 million non-cash Amazon warrant-related contra-revenue charge, compared with $24.3 million in 2022.
Product cost of sales increased to $309.9 million from $279.7 million, driven partly by higher natural-gas costs and increased volumes. Product cost of sales rose to 72.9% of revenue from 66.6%.
Interest expense increased to $22.9 million from $6.3 million, including debt refinancing and a $5.4 million loss on extinguishment of the Riverstone term loan.
Losses from equity-method investments increased to $12.5 million from $4.8 million, reflecting losses from the TotalEnergies and bp joint ventures and other investees.
California natural-gas prices spiked in January and February 2023. Management estimated the spike reduced first-quarter gross profit by approximately $10.0 million.
Cash from operations declined by $22.9 million, while investing outlays increased by approximately $53.5 million, primarily due to higher property, equipment and RNG-project spending.
On December 12, 2023, the company replaced the $150.0 million Riverstone loan with a $300.0 million Stonepeak senior secured first-lien term loan and obtained a $100.0 million delayed-draw commitment.

Outlook, Commentary and Unusual Items

Management expects approximately $60.0 million of 2024 capital expenditures and up to approximately $100.0 million of 2024 spending to develop ADG RNG production facilities.
The company expects to fund 2024 capital expenditures primarily with cash on hand and operating cash flow and states that it expects sufficient liquidity to meet principal and interest obligations for the next 12 months.
Expected 2024 interest payments on outstanding indebtedness were approximately $29.2 million. The Stonepeak loan bears interest at 9.50%, with interest-only payments and a balloon principal payment due December 12, 2029; up to 75% of interest may be paid in kind during the first two years.
The bp joint venture had six ADG RNG projects, including one operating project, with estimated aggregate production capacity of up to 11.1 million GGEs annually. Five projects were under construction and expected to be substantially complete between the first quarter of 2024 and first quarter of 2025.
Three wholly owned ADG RNG projects under development were expected to be substantially complete between the second and third quarters of 2025, with estimated combined production of 3.6 million GGEs annually.
The company and Tourmaline announced a CAD $70 million, 50/50 plan to develop up to 20 CNG stations in Western Canada over five years.
The Pickens LNG plant was offline for maintenance and repairs during 2023; the company recognized $3.9 million of business-interruption insurance recoveries. The Boron plant operated at 78% utilization, versus 79% in 2022.
An April 2023 fire at South Fork Dairy killed approximately 18,000 cows and delayed development of the company’s RNG project at the site. Construction could begin as early as the first quarter of 2024, but the initial completion date is expected to be delayed.
Key risks include slower fleet adoption of RNG, CNG and LNG; competition from diesel, renewable diesel, electric and hydrogen vehicles; volatility or adverse changes in RIN and LCFS programs and prices; RNG project construction and permitting delays; commodity-price exposure; dependence on vehicle and engine manufacturers; debt-service and covenant requirements; and potential dilution from warrants.
Government contracts represented 30% of 2023 revenue. Such contracts may be subject to appropriations, competitive bidding, modification or termination.
Amazon warrant charges reduced revenue by $60.6 million in 2023. Stonepeak warrants for 20 million shares were issued in connection with the new debt facility, and the company recorded $42.4 million in additional paid-in capital related to those warrants.

Important Facts for Investors to Verify

Reconcile fuel-volume growth with declining environmental-credit revenue and determine the sustainable margin contribution from RINs, LCFS credits and AFTC.
Review the Stonepeak loan’s 9.50% interest rate, balloon maturity, collateral package, call premiums, covenants and delayed-draw conditions.
Assess whether operating cash flow can support the planned $60.0 million of capital expenditures, up to $100.0 million of RNG-project spending and potential joint-venture capital calls.
Track the completion, ramp-up, permitting and credit qualification of bp, TotalEnergies and wholly owned RNG projects.
Evaluate the effect of California and other zero-emission-vehicle mandates on long-term demand for combustion-based RNG and natural-gas vehicles.
Model dilution from the Amazon warrant and the 20 million Stonepeak warrant shares, in addition to outstanding options and restricted stock units.
Review the $60.6 million Amazon warrant contra-revenue charge and distinguish recurring operating economics from non-cash accounting effects.
Monitor the expiration of AFTC after 2024, environmental-credit pricing and regulatory changes affecting RIN and LCFS eligibility.
Consider the company’s continuing losses, accumulated deficit of $929.5 million and reliance on liquidity, financing and partner funding.
The independent auditor issued an unqualified opinion, and management and the auditor concluded that internal control over financial reporting was effective as of December 31, 2023.