Clean Energy Fuels Corp. (NASDAQ: CLNE) is a leading provider of renewable natural gas (RNG) and conventional natural gas as alternative fuels for vehicle fleets in the United States and Canada. The company has established itself as a dominant player in the clean transportation market, delivering RNG and natural gas to thousands of vehicles across various sectors, including municipal, transit, and logistics fleets.

In the fiscal year 2023, Clean Energy Fuels reported annual revenue of $425.3 million and a net loss of $99.5 million. The company's operating cash flow for the year was $43.8 million, while its free cash flow was negative $77.5 million. These financial results reflect the company's continued investment in expanding its RNG production capabilities and fueling infrastructure to meet the growing demand for clean transportation solutions.

During the first quarter of 2024, Clean Energy Fuels reported revenue of $103.7 million and a GAAP loss of $0.08 per share. The company's non-GAAP loss was $0.01 per share, and it generated adjusted EBITDA of $12.8 million, a significant improvement from the negative $4 million in the same period last year. This strong start to the year has reinforced the company's confidence in maintaining its annual guidance for 2024.

Business Overview

Clean Energy Fuels is focused on providing the cleanest fuel for the transportation market, with a particular emphasis on renewable natural gas (RNG). The company's principal business is supplying RNG and conventional natural gas, in the form of compressed natural gas (CNG) and liquefied natural gas (LNG), to medium and heavy-duty vehicle fleets. Additionally, the company designs, builds, operates, and maintains public and private vehicle fueling stations, sells and services compressors and other equipment used in RNG production and at fueling stations, and generates revenue from the sale of environmental credits, such as Renewable Identification Numbers (RINs) and Low Carbon Fuel Standard (LCFS) credits.

One of the key strengths of Clean Energy Fuels is its ability to produce and distribute RNG, which is derived from biogenic methane produced by the breakdown of organic waste. The company has developed a robust portfolio of RNG production projects, including joint ventures with TotalEnergies and bp, which allow it to provide a reliable and consistent supply of this ultra-low carbon fuel to its customers. As of March 31, 2024, the company delivered RNG to 454 fueling stations across 43 states and the District of Columbia in the U.S., as well as 24 stations in Canada.

Renewable Natural Gas (RNG) Business

Clean Energy Fuels' RNG business is a critical component of its overall strategy, as the company believes RNG is the best use of renewable energy for the transportation sector. The company procures RNG from its own projects and from third-party producers, and then resells this RNG through its fueling infrastructure. The success of this business depends on the company's ability to secure a reliable supply of RNG, sell it in adequate volumes and at attractive prices, and generate revenue from the sale of environmental credits.

The company's RNG production projects, particularly those developed through its joint ventures with TotalEnergies and bp, have faced some challenges in recent periods. Factors such as unpredictable production levels, financial difficulties of dairy farm partners, and delays in construction and regulatory approvals have impacted the timing of these projects coming online. However, the company remains committed to expanding its RNG production capabilities and has recently announced a new development partnership with Maas Energy Works, a leading RNG project developer, to construct additional RNG digesters at dairy farms across the country.

Fueling Infrastructure and Services

In addition to its RNG production efforts, Clean Energy Fuels operates a extensive network of fueling stations that provide RNG and conventional natural gas to its customers. As of March 31, 2024, the company had 579 fueling stations in the U.S. and 24 stations in Canada. These stations serve a diverse customer base, including municipal fleets, transit agencies, and major logistics companies like UPS and Amazon.

The company's fueling infrastructure and services business generates revenue from several sources, including fuel sales, station construction, and operation and maintenance (O&M) services. In the first quarter of 2024, the company's volume-related product revenue, which includes fuel sales and the sale of environmental credits, was $83.8 million, while its service revenue, primarily from O&M services, was $14.3 million.

One of the key advantages of Clean Energy Fuels' fueling network is its ability to provide a reliable and consistent supply of RNG to its customers. The company's portfolio of RNG supply agreements, including its own production projects, allows it to offer customers greater assurance of fuel availability compared to competitors who may rely on a single or limited number of RNG sources.

Financials

Clean Energy Fuels' financial performance in the first quarter of 2024 was strong, with the company reporting a GAAP loss of $0.08 per share and a non-GAAP loss of $0.01 per share. The company's adjusted EBITDA for the quarter was $12.8 million, a significant improvement from the negative $4 million reported in the same period last year. This performance was driven by continued growth in RNG volumes, higher RIN revenues, and lower net losses from the company's RNG equity method investments.

Despite the challenges faced by the company's RNG production projects, Clean Energy Fuels maintains a strong balance sheet, with approximately $249 million in cash, cash equivalents, and short-term investments as of March 31, 2024. The company's capital expenditure guidance for 2024 is $60 million for its distribution business and $120 million for its RNG production investments, which includes the new partnership with Maas Energy Works.

Risks and Challenges

While Clean Energy Fuels has made significant progress in expanding its RNG production and fueling infrastructure, the company faces several risks and challenges that could impact its future performance. These include the volatility in the prices of RINs and LCFS credits, which are a significant source of revenue for the company, as well as the potential for delays and cost overruns in the development of its RNG projects.

Additionally, the company's success is heavily dependent on the adoption of natural gas and RNG as alternative fuels for vehicle fleets, which can be influenced by a variety of factors, including government policies, the availability and performance of natural gas and RNG-powered vehicles, and the cost competitiveness of these fuels compared to traditional diesel and gasoline.

Outlook

Despite these risks, Clean Energy Fuels remains optimistic about its future prospects. The company's strong balance sheet, growing customer base, and continued investment in RNG production and fueling infrastructure position it well to capitalize on the increasing demand for clean transportation solutions. The recent partnership with Maas Energy Works and the anticipated implementation of the Inflation Reduction Act's tax credits and incentives for RNG production further bolster the company's long-term growth potential.

Conclusion

Clean Energy Fuels is a leading provider of renewable and conventional natural gas as alternative fuels for vehicle fleets in North America. The company's focus on RNG production and distribution, coupled with its extensive fueling infrastructure and services, has positioned it as a key player in the clean transportation market. While the company has faced some challenges in its RNG production efforts, its strong financial position, growing customer base, and strategic partnerships suggest that it is well-positioned to navigate the evolving landscape and continue to drive the adoption of clean transportation solutions.