Clean Energy Fuels Corp (CLNE) 2008 Q3 法說會逐字稿

Greetings, and welcome to the Clean Energy Fuels third quarter earnings conference call. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Ina McGuinness of Integrated Corporate Relations. Thank you, Ms. McGuinness. You may now begin.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the third quarter and nine-months ended September 30, 2008. If you did not receive the press release, it is available on the Investor Relations section of the Company's website at www.cleanenergyfuels.com. This call is being webcast, and a replay will be available on the Company's website for 30 days.

Before we begin, we would like to remind you that some of the information contained in the news release and on this conference call will contain forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Words and expressions reflecting optimism, satisfaction, with current prospects, as well as words such as believe, intend, expect, plan, anticipate, and similar variations identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the risk factors section of the clean energy Form 10-K filed with the SEC on March 19, 2008 and subsequent filings. These forward-looking statements speak only as of the date of this release, and the Company undertakes no obligation to publicly update any forward-looking statements, supply new information, events or circumstances after the date of this release. Participating on today's call today from the Company are are President and CEO Andrew Littlefair and Chief Financial Officer, Richard Wheeler. And with that, I would like to turn the call over to Andrew.

Thank you, Ina, and good afternoon, everyone. This quarter, we have good progress to report to you. We saw our revenue increase by 21% with volume up over last quarter and our adjusted margins per gallon expanded by 17%. Rick will cover our financial performance in much more detail. But in general, we think awareness in this country of what natural gas can do for transportation is growing. More and more fleet operators are looking at how natural gas can benefit their operations. And this increasing interest is positive for our future.

In the third quarter, in order to benefit from that increased interest, we raised approximately $32.5 million to help fund capital projects and carry out our station build-out strategy. We were pleased to raise this capital in light of the difficult state our economy is in. We had planned to raise the money late last summer, but the pending purchase of FuelMaker complicated our ability to access the capital markets. And when the fuel deal was terminated in October and those constraints were lifted, the financial markets and the economy had deteriorated. So overall, we were pleased to get this financing completed in such a tough environment. We will put that money to good use for station construction and business expansion.

Since our last conference call, oil has dropped in price about 50%, and natural gas is off about equally. We will continue to see the prices fluctuate, but what is most important, is that we still offer a compelling solution for fleet operators even at lower prices with good margins for our business. The exorbitant prices for diesel that we saw over the past several months created an impetus for fleet operators to take a hard look at their fuel diversity. Most of the fleets that we are working with realize that they will inevitably see higher diesel prices again. Moreover, the new diesel emissions standards that are just around the corner in 2010 will likely mean higher engine and maintenance costs and increased efficiency penalties for diesel energy. This is yet another strong incentive for them to be thinking longer term about which fuel is best to power their fleets.

Let me give you a real-life example of the significant savings that an operator can generate by running on natural gas. Today in the port of Los Angeles in Long Beach, there is a trucking fleet that was running new L & G trucks. Each truck uses about 6,000 gallons to 8,000 gallons of fuel per year. Now, this is a lower fuel use example. But, there are many millions of short-haul trucks that operate in our nation. So this example is representative of a lot of trucking fleets. This trucker saved $0.78 per diesel gallon equivalent which equates to about $4,500 per year. And on a monthly basis, the savings is equivalent to about $400 monthly payment on his new LNG truck. No other alternative fuel can do that. And imagine the savings for trucks that use 15,000 gallons to 20,000 gallons per year.

On the legislative front, as part of the economic stabilization bill that was signed in October, [VTAC] was extended through December 2009. We view this as important, as [VTAC] will now be aligned with other alternative fuels when extensions are considered. And they will be. Turning to Proposition 10, California voters last week turned down the California Renewable Energy and Clean Alternative Fuels initiative. The passage of Prop 10 would have provided a funding mechanism for a wide variety of clean energy projects in California, including consumer rebates for the purchase of alternative fuel vehicles, and the construction of renewable energy generating facilities such as solar and wind power plants. As you know, we supported the initiative. And while Prop 10 may have served as a catalyst to accelerate our growth, its failure does not reduce our business opportunities. Our core business remains strong, and we still see a significant pipeline of new customers for our fueling stations. We have completed 12 station projects to date this year, and we have 27 more in various stages of completion. We are targeted to complete up to 20 of these projects by year end.

We are pleased to see Toyota announce that it will unveil a CNG Camry Hybrid at the Los Angeles Auto Show next week. We believe Toyota's decision to show this project reflects the growing public focus on natural gas as a cheaper, cleaner in domestic alternative fuel.

I would now like to discuss a key acquisition we made in the quarter, the 70% interest in the Dallas Clean Energy which owns the McCommas Bluff landfill gas processing plant in Dallas, Texas. McCommas is the third largest landfill gas operation in the United States. This is a major strategic action for us as it enables us to introduce renewable biogas into the pipeline system. By developing biogas resources, we intend to create programs that will enable our customers to reduce their carbon emissions, lower their costs, and increase the green value of their operations by fueling natural gas vehicles with renewable biogas. Refuse companies, which are among our biggest customers, are seeking our help in making the connection between methane gas from their landfills and its use for transportation to fuel their trucks. Since our acquisition of McCommas, we have increased production by 60% to about 800,000 gallon equivalents per month. Going forward, we intend to invest additional capital into this joint venture to increase production further. This program primarily will be funded through our $12 million line of credit with Plains Capital Bank that we established as part of the debt facility we obtained to acquire McCommas. Our planned acquisition of FuelMaker from Honda was recently terminated due to FuelMaker and Honda's inability to supply audited financial statements which of course was a term of the acquisition. We still like the idea of FuelMaker which manufactures a vehicle home refueling appliances.

Let me bring you up to speed on the construction of our Clean Energy California LNG plant. I am pleased to report that we commenced the commissioning process two weeks ago, and delivered our first load to our Carson LNG fueling station last night. So the plant is operating, and we have a few feet of liquid in the tank. This is a landmark step for us as we prepare to supply the LNG needs of trucking and transit in the southwestern region of the United States.

Turning to the ports of Los Angeles and Long Beach, progress is steady. Albeit, slower than we would like. Of the original 100 LNG trucks that we financed to launch the program, 90 are on the road and being fueled at our station. The remaining 10 will be in service shortly, and another 132 have been delivered and are being placed into service. Requests for another 89 LNG trucks were submitted. So we believe there will be about 300 in service by the end of the year. The port opened the next solicitation for new trucks about three weeks ago. And what that means is the port has gone out and asked people for, to put in orders for new trucks. Kenworth is in the final stages of expanding production capabilities that will allow for full-scale factory production starting in April, 2009. And Peterbilt made a similar announcement that they expect to be in production at their Texas facility in late spring, 2009. Also, Swift Transportation Company which operates 37 major terminals in the United States, and is the largest concessionaire to have signed up with the San Pedro Bay ports to date, has committed to use LNG trucks in its fleet serving the ports. Details of that arrangement are still being negotiated.

To review the truck plan, 4,000 older diesel trucks are targeted to be replaced in 2009. We have been assured by the ports and the port commisioners that their intent remains to replace 50% of these with alternative fuel vehicles. Of course, we believe that predominantly means LNG. We continue to work closely with the ports to keep this program moving.

Here are some of our recent business highlights. We were awarded a contract for up to 10 years from the Sanitation Bureau of the City of Los Angeles, the largest municipal LNG-powered refuse fleet in the United States with 340 LNG trucks. The LNG fleet currently uses approximately 3.5 million gallons of clean burning LNG fuel each year. We will be using LNG produced at our new Boron facility to fuel this fleet.

Also on the refuse front, we are building and will operate a station for CleanScapes, a Seattle solid waste contractor. That is a fleet of 40 CNG-powered refuse trucks. We are very proud to be working with CleanScapes to support one of the first CNG-powered trash truck fleets in Washington State. In Atlanta, at the extremely busy Hartsfield-Jackson Airport, we opened a public access CNG station. The station will serve a range of light, medium, and heavy duty vehicles including regional public transit buses, municipal vehicles, refuse-hauling trucks, and airport parking, hotel, and employee shuttle buses.

Next in Oklahoma City, Will Rogers Airport officials contracted with Clean Energy to build and manage a large-scale public access CNG fueling station on the airport property. In addition to CNG-powered airport transit and shuttle vehicles, the new facility will serve a growing number of CNG fleets in the area. These two contracts underscore a growing presence at airports across the United States. Just last Friday we announced that we have taken ownership of five existing Las Vegas CNG public access fueling stations. These stations are serving an ever-growing number of CNG-powered municipal fleet vehicles, airport and hotel shuttle vans, limousines, taxis, and passenger cars. Las Vegas is a very good market for us because it is relatively small geographically, and the traffic concentration makes our fuel station access very convenient. We think Las Vegas presents a great opportunity for natural gas vehicles.

We have dozens of project proposals before customers, and a sizable backlog of stations in the pipe line. I remain extremely confident in our growth opportunities and our ability to capitalize on the opportunities ahead of us. We continue to have an economic advantage with our fuel, and with all the natural gas that has been found in the U.S. We see the opportunities continuing for a very long time. And with that, I would like to now turn the call over to Rick to discuss our financial results.

Thanks, Andrew. Before I review our financial results, I would like to point out that all my references to our results will be comparing the third quarter of 2008 to the third quarter of 2007. We are comparing the nine month period ended September 30, 2008 to the nine month period ended September 30, 2007 unless otherwise specified. With that clarification, for the quarter, our revenues increased to $35.3 million which is up 21% from $29.2 million. For the first nine months, our revenues totaled $99.8 million,which is up from $88 million. Adjusted margin for the quarter was $10.3 million, which compares with $9.3 million, an adjusted margin for the nine months of $27.6 million which is up from $26.2 million. Our net loss for the third quarter was $10.6 million or $0.24 per share, which compares to a net loss of $1.5 million or $0.03 per share. Our net loss for the nine months was $8.9 million or $0.42 per share versus a loss of $6 million or $0.15 per share in the prior period.

During the third quarter as you recall, we recorded the loss of $6 million on certain futures contracts we liquidated in connection with the portion of a fixed price bid for the City of Phoenix's LNG supply contract that we were not awarded. This offsets the gain we recorded in the second quarter of $5.7 million related to these futures contract. The net impact of these contracts ended up being $300,000. Including this loss, the loss per share would have been $0.10 for the third quarter 2008, and $0.41 for the nine month period ended September 30, 2008. As a reminder, under our modified hedging policy, we don't speculate on futures contract, but rather we put contracts into place to lock in the economics on our fixed price contract.

The two largest contributors to our year-to-date increased loss were the gross margins on our fixed price contracts and the increase in our SG&A expenditures. First, looking at SG&A, the first nine months of 2008, stock-based compensation expense increased by $2.4 million. We saw marketing expenses increase by $4.2 million, primarily related to supporting Proposition 10. And salaries and benefits increased by $700,000, primarily related to the hiring of additional marketing personnel. We also spent $15 million in the fourth quarter supporting Proposition 10, so you will see that hit our SG&A expense next quarter.

Now, looking at our margins. Our actual margins in the first three quarters of 2008 have been negatively impacted by the net increase in the price of natural gas during the period. As you recall, the increased price of natural gas eats into our margins on our older, fixed price contracts where we are unhedged. In fact, our old Phoenix contract was underwater from an actual margin perspective by approximately $0.60 per LNG gallon through June 30th of this year, when it expired. So obviously this weighed on our actual margins during the period. With the expiration of the old contract and re-pricing of of the new Phoenix LNG supply contract on July 1, 2008, we are starting to see our actual margins increase as alluded to last quarter. For example, our actual margin in the third quarter of 2008 was $0.49 per gallon which was up from $0.32 per gallon in the second quarter of 2008 which was the last quarter of the old Phoenix (inaudible).

Non-GAAP loss per share in the third quarter of 2008 was $0.18. It was break even in the third quarter of 2007. Non-GAAP loss per share for the first nine months of 2008 was $0.24. It was a loss of $0.02 per share last year, Including the hedge loss mentioned above, non-GAAP loss per share would have been $0.04 for the third quarter of 2008, and $0.23 for the nine month period ended September 30th, 2008. Adjusted margin to non-GAAP EPS are discussed in more detail in our press release we issued earlier today.

Turning to our volumes, we delivered 18.7 million gallons in the third quarter of 2008, versus 20 million gallons last year. Year-to-date, we delivered 54.8 million gallons of fuel to our customers, compared with 57.1 million gallons delivered during the same period in 2007. To reference our last call, we have three legacy non-core customers who accounted for 3.5 million gallons in the first nine months of 2007 that are not in our 2008 numbers. Including these legacy gallons, our volumes with new and existing customers actually increased by approximately 1.2 million gallons between periods. Also of note, our volumes in the third quarter 2008 increased by approximately 200,000 gallons from our volumes in the second quarter of 2008, which includes making up for approximately 1 million gallons related to the lost portion of the Phoenix LNG supply contract during the quarter.

The $32.5 million of net proceeds we raised that Andrew mentioned earlier. We have enough cash to fund our CapEx plan through the rest of the year and into next year. How far into next year, and how much more cash we may need next year will depend on how quickly our station projects and the LNG supply needs continue to unfold. I think it is important to remember that we do not burn cash when looking at our business from a normal operating perspective. The cash we need is for our growth projects. For example, if you take our operating loss of $10.6 million in the third quarter, and you add back the derivative loss, our depreciation expense, and our stock option expense during the quarter, to that number -- the resulting amount is a positive $400,000. With that, operator, please open the call to questions.

Thank you we will now be conducting a question-and-answer session. (OPERATOR INSTRUCTIONS) Our first question is coming from Rob Brown of Craig Hallum Capital.

Good afternoon, could you maybe just throw a little more color on your pipeline of new stations. I know you said that a number of them would be completed in Q4. How much additional volume does that get you for the Q4 stations? And then how many stations will fall into '09, and how does that pipeline look?

Rob, let me speak to the backlog, the pipeline. I think I said this in last quarter as well. I have never seen as many projects in the pipeline, and, gosh, I was just reviewing that the other day. It changes, and they come and go, but the number continues to increase. They don't make our station carpet until we're in negotiation with the customers, or well down the road in negotiating with the customers with contracts. Literally, there are 120 stations to 125 stations in the pipeline. And I can't tell you exactly when those will all come on, and how many actually will get built in 2009. But as I think I have said before, we will have constructed this year about 50% more than we did last year, and that wouldn't surprise me that it would be that or more next year.

Now the volumes, I don't know that we're going to project that for you, but you know, you remember in our discussions, we don't spec these stations. And they have to come with contracts and with volume, of course. Some of them are large, and some of them are smaller. But remember, we like to think, and this is really a broad brush. We like to think these stations have to do a minimum of a 1,000 gallons per day. That is typically what we target for, and some of them will be much larger than that. There are several large transit opportunities in the offing, and some of those will be brought on in the quarter. So I can't give you a number. I don't know that I should because we don't really give that kind of guidance. But I'm beginning to start seeing the volume go in the direction that I would like to see.

Okay, great, thank you. And then on your landfill gas project or acquisition, has that yet started to bring additional refuse business for you, and then could you comment on how much additional volume your additional capital can bring in there?

I'm not sure I understood the last part of the question. But, let me say this. Yes, the landfill -- making vehicle grade fuel or even pipeline quality fuel from landfills as I said before, it's not without a lot of tricks to it. There is a lot of constituents in landfill gas so the clean-up technology, while it's available, it's significant. To get to where -- it's one thing to take landfill gas and make electricity, burn it to make electricity. It is another to get it clean enough to be accepted into a utility's pipeline system, which they protect very carefully. Or, to make it clean enough to meet the methane standards that you need for a vehicle. So our customers, we had a meeting last week where our Vice President who handles our refuse, he was a former Regional Vice President of Waste Management. And I'm very excited about what is happening in the refuse industry. A lot of these companies are wanting us to look at working with them on their landfills. Because as I've said before -- they see it. They understand it. They really love the concept of taking the methane out of their landfills and putting it in their trucks. They really see that as a nice close-loop system. They feel like it makes economic sense, and they get good green benefits from it.

But, we have to be very mindful of the fact that all of these landfills are a little different. All of the life spans of the gas coming from them are different. And you have natural gas going down in value. So, we have to look at them closely. We are working with -- we made a decision to go work with several of our refuse customers to move to the next phase on different projects. And we'll kind of see how it goes. Now, the second part of your question, I don't know that I understood.

I will clarify it. I think you said you put some additional capital in, and you got the volume coming out of that facility up to 800,000 gallons a day.

But --

Excuse me, and you also alluded to additional capital to increase that. I'm just curious, how much?

We have about another $12 million credit line that we'll continue to spend some of that to increase the volume some more. I don't know that I know exactly --

I am not sure that we can answer that question right now, we are working with our partner right now to figure out the best course to proceed. Whether it be drilling additional wells and maximize that, so unfortunately, we are going through that process right now.

Okay, I understand, thank you.

Thank you, our next question is coming from Graham Madison of Lazar Capital Markets.

Good afternoon.

Hi, Graham.

Quick question on the SG&A. I know you mentioned it is going to be impacted in Q4 with Prop 10 funding, and also the share options. But what is a run rate? How do you look at that? How should we think about that going forward in terms of what level that that would run at in a normalize basis?

Well, it certainly won't be a $15 million hit going forward after the fourth quarter. Because Proposition 10 is obviously done, and there is obviously not an election for a while. So SG&A, as we talked about before, looking at the current quarter excluding the incremental $4 million or so that we have in there, the year-to-date. The incremental, the several hundred thousand we have in there. For the Prop 10 deal, this quarter, you factor out the stock-based comp and you get to a cash base number. That number is going to go up a little bit as we continue to grow and expand. We have got a higher vision to go out sell into our existing markets and expand into other markets and capitalize on the growth that we think is out there. And what we believe is it is not going to grow anywhere near as fast. And we are going to have good leverage, relative to how fast our volume starts to grow, and how fast the revenues start to grow and all that good stuff. So with that caveat, and with always the caveat that does come up like we have talked about before -- that if something does come up like a (inaudible) tax situation or another Prop 10 if it does make sense. (inaudible)

Alright, great, and then just looking at the remaining fixed price contracts. How much -- when will those start to roll over? When will we get to a point where we're not going to see any real material impact on the --

2009, the last big one, the fixed one expires in September of 2008. And this phenomenon will essentially go away at that point.

So by the end of it, it should be gone. And then just finally looking at the ports, I know that you mentioned it is not moving as quickly as you want. Compared to where we were three months ago at the last call, what is your level of comfort with the ports rolling out on the time schedule that you had thought we would see? Is it still the potential where you could be adding a hundred trucks a month?

You know Graham, I'm sticking with that. Obviously, I was off a little off in 2008. And I go back and replay history. We were getting serious about seeing truck deployments about mid-year. So we obviously didn't do 100 a month in 2008. But I think if you look at what should happen. It should be about 2,000 trucks, 2,000 LNG trucks added in 2009. Now, some of that will come at the end of 2009. And it may not be quite that many. I don't know. It could be more. So I'm going to stick with our 100 a month. Certainly Kenworth and Peterbilt will be able to produce that easily, so I like the capability. And we might be pleasantly surprised later in 2009 that it is more than 100 a month. But, I think that is still a safe way to look at it. Now, if Swift goes ahead and does something that is several hundred trucks, which is what we think it could be. Then you know that adds in on top of that.

Okay, great, thank you very much. I'll jump back into the queue.

Thank you, our next question is coming from Ron Oster of American Technology Research.

Good afternoon, a few questions for you. I was wondering with regard to the ports. Have you seen -- have you been able to capture nearly all or most nearly all that business thus far? I know it is early, but has competition popped up yet? Or how is that --

So far, we have got that volume. Now I haven't seen any competition, but it is lurking out there I'm sure. But nobody so far has built an LNG station. Of course remember that LNG is in tight supply. And we have a leg up on that with our new plant. You know I continue to say that competition is a good thing. And that some day when we have several thousand trucks down there, don't be surprised if you see competition. But so far we don't see any.

Okay, and your minority interest line was negative this quarter. I believe that is your Peru operations. Is that losing money? Or can you give us an update on the status of the Peruvian operations.

The minority interest is actually our joint venture, McCommas. And the reason it is negative is that if it's a positive result, and we have to back out the minority interest from our results until we consolidate. So, it is making money. The Peru deal is, we have lost a little bit of money so far, primarily related to just start-up costs, related to opening the station and getting it up and going.

Okay. And Rick, can you give us an update on where CapEx is going to end this year? And directionally, next year I would anticipate it is going to be down since your LNG plant is going to be completed. Any guidance for '09 CapEx?

Well, we don't provide guidance, but I would add that your point is very good. An one thing to keep in mind is that we have spent or will have spent $50 million on the LNG plant this year that obviously own't pop in again next year. As far as when and how much next year, that's the million dollar question, and (inaudible)] how fast they show up, and how fast we can build a station. And how much we spend next year, but, in theory, the rate should slow down because we won't be building another LNG plant.

Okay, and then Andrew, I know Prop 10, big risk, big reward. I'm just wondering if you would walk us through your thought process and a significant amount of money. $20 million, especially for a development stage company with huge growth opportunities elsewhere. How did you come to the conclusion that $20 million was worthwhile for this opportunity?

Yes, sure, I would be happy to answer that. We started looking at Prop 10 a year ago. And of course, you may not be aware, but a couple of years ago there was another Prop called Prop 87. It lost. It was similar to Prop 10. But the way it was going the raise the money, it was going to tax the major oil companies. And by doing that they spent $80 million to try to pass Prop 87, and $120 million got spent against them. We learned from that experience. We worked with the people that were creating Prop 10 to design what we thought was a very fair alternative fuel and renewable Prop. We felt like at the time that to go with the general obligation bond was the best way to go.

Now the polling that we had all along, our Board reviewed. This wasn't just something that I decided to do here. But, we raised this all the way to the Board, and they approved the expenditures. Even in the loss which I didn't like of Prop 10. Even in the week before we lost, 60% to 40%, 67% or 70% of the people like the idea of having alternative fuels and wanting to reduce foreign oil. Throughout -- the Prop was qualified in March, throughout the spring and even into the summer, it was pulling very well. And then of course, now we understand what happened. And in the summer you had oil going up to $140. And then all of a sudden, weeks before election it is at $60. So the fuel price just totally collapsed. The economy collapsed. People -- the housing prices out here went down 30%, 40%. People's IRAs did. And unfortunately in July, August, September, finally the State of California adopted a budget after not having one for 80 days. Looked like the budget problem was behind us. And lo and behold two weeks before the election, the governor announced,that whoops! we are out of balance another $20 billion.

So I think it was just the headwinds, people's pocketbook, and the state's pocketbook just was too much to overcome. Well, let me say this. In Los Angeles county, Prop 10 was 55% to 45%. Actually, it was 54% and 46%, I think. It was closer. And 4.5 million people voted for Prop 10. So I am heartened by that. We looked at it, and we have always been on the lead of pushing policy.

And that is something that we've done for almost twenty years. I mean Boone was the advocate early on in the energy policy act. That is going back 15 years ago on pushing for transit buses. We have always believed that we had a role in pushing for clean air policy, and we'll continue to do that. You know we spent a couple of million a few years ago on promoting the concept that natural gas ought to have a [VTAC] like the Ethanol guys did. And people didn't think we would do that and we did do it. And that has been meaningful to the industry.

In this case, while it would have given a jump start to all of the alternative fuels. We know, and I was watching Boone on TV last night. We know that heavy-duty vehicles, it is not easy to move a truck on a battery. And so we knew that while hybrids and electric vehicles and others would be funded with Prop 10. We knew that in medium- and heavy-duty applications, a lot of that was going to be natural gas. And so when you step back and look at it with me, literally 0.5 billion gallons or 600 million gallons a year would have come to the natural gas vehicle industry in our home state where we are headquartered, where we have an LNG plant. Almost a $1.5 billion worth of fuel per year, many times larger than where we are today. So it was a big risk. It was a lot of money. I understand that. You know, $20 million, $18 million would get you 9 to 10 fueling stations that you might be very proud to do 20 million gallons. And this was 600 million gallons for the same price. So when we weighed it. We thought it was a risk to take. Sorry it didn't pass. I wish it would have. But that is kind of where we came out.

Okay, thanks.

Thank you, our next question is coming from Eric Stein of Northland Securities.

Hey guys, how is it going?

Hey, Eric.

Before a few questions, just a bookkeeping one. Can you give us the breakdown on CNG and LNG GGEs?

For the quarter?

Yes.

CNG, 12.9. LNG, 5.8.

And do those volumes include any, I know albeit small, from McCommas?

Yes, there is the McCommas volumes after the acquisition date on August 15th.

Okay. I guess just moving to the ports. On past calls, I know you have talked about plans for five stations. Can you just update us where you are right now. I know you have opened your first, and you made some progress on the next two.

Yes, good question. As you know, we have the one. We broke the ground on the second one which will be the largest LNG station, kind of looks like what would be a truckstop. Eric, it will look like -- it will be the largest in the country, I guess. And we are close to breaking ground on the third station which will also be in the port down there. Then we turn our focus. We are lining up two or three LNG station sites that will be in what we call out here, deal in empire. Where kind of the distribution centers for these trucks, a lot of them leave the port and head into Riverside, and we need some stations out there. So we're kind of on track for that 5, 6, 7 that we have talked about, that we'll need some time next year when we get these trucks on the road.

Okay, can you talk about, this progress made at other ports? I have read and heard that Oakland is considering some of the same initiatives that are going on in Los Angeles and Long Beach?

They are. They are adopting -- I don't know if they have adopted. They are wrestling around with this clean port initiative. I would say they are a little ahead of almost every other port in the United States. They are behind L.A. There are some LNG trucks operating up there, but they're -- I don't exactly know the date for that -- but they are a little bit behind. Other ports are all looking at this, of course. And the Port of Houston, and also out in New Jersey. So we are working in both of those places. We have specialists on the ground to try to do what we have done here. And I think it is safe to say though, they're just further behind than where we are out here in Los Angeles.

Okay, and then one last question, then I'll jump back into line. It is regarding the fixed price contract that has left the transit customer in Texas. Can you just give us an update on where you are in the process? Thoughts about, your chances as far as getting that back and whether it will be fixed or index plus?

Eric, I would love to answer that question, because we solicited the bid. We won the bid. We feel really good about it.

Okay, can you remind us just what the GGEs are on that contract?

It is roughly $2.5 million, $3 million a year.

Okay, I appreciate it. Thanks.

You bet.

Thank you, our next question is coming from Pearce Hammond of Simmons and Company.

Yes, good afternoon.

Good afternoon, Pearce.

I was just curious with the credit crisis if you have noticed any change in customer behaviors, and how it might be impacting you?

Well, I'm sure everybody is doing the same thing, and wrestling with how they're going to pay for capital and plant and all. We haven't seen much of it yet. Many of our customers have to replace vehicles. I'm sure some of that will slow down. I'm sure that will happen. But many of those vehicles are at the end of their useful life. So far, we haven't seen much of that. I'm sure if this economy continues to go in the tank, I'm sure certain fleets will begin to slow down. Now, the one thing that is good is, as they go to replace those vehicles, -- trucking guys really don't like the way that the 2007 engines are working. And they're really nervous about the way the new 2010s are going to work. And I think that helps. That is in our favor. They know those vehicles are going to be more expensive, and they know that our fuel is cheaper. So while, people laying out new money for a truck, that is obviously a very serious consideration for this market. But we have a pretty good advantage, I think.

Great, and then under President-Elect Obama, how do you see some of his policies benefiting clean energy?

Well, I would like to think that his statements about green jobs -- he has been pretty strong on two separate occasions. The President-Elect has said that he wanted to reduce over the next 10 years all the oil coming from the Middle East countries. Now, that is a tall order. And when you then look at how you do that, you obviously have to go after transportation. There is only one fuel that really can do it. Remember with me, that Senator Obama what, 60 days ago, introduced a natural gas vehicle bill. Now, it didn't go anywhere, but I liked that. And he talked about increasing incentives, and he talked about doubling incentives for fleets that did over 100 vehicles. Rahm Emanuel did the same thing. So I kind of like the way they teamed up in the White House. With Congressman Emanuel as his Chief of Staff and the President-Elect. So I'm hopeful Boone continues on the Pickens Plan to push for the President-Elect to consider his wind plan and his natural gas for transportation plan . So that is good for us.

Great, and then just one final question. I know in the past you have worked with Aubrey McClendon at Chesapeake. So just curious, to try to push natural gas vehicles. I was just curious if there had been any other discussions with any other E & P companies. It certainly seems like there is a lot of synergies there between clean energy fuels and some E & P companies.

I think there is. We did meet with [ENCANA] which is the other very large E & P company. I think through Chesapeake and Aubrey's good work, many of the E & P companies -- we have heard from a lot of them. Of course, you know that natural gas has gone from $3 to $6, so it has been a little tougher for some of them, too. But many of them have indicated their interest to do vehicles themselves and asked us what they can do to help promote natural gas as a transportation fuel. I think, many of the E & P guys know that because of the shale plays they are creating, and a potential to create an awful lot of natural gas production. And they want to be able to do what they can to make sure that natural gas will be a transportation fuel because I think they are going to have a lot of it. So, we will continue to work with them. I have a standing call with Chesapeake and Aubrey and his team, and our team every Friday at 5:30 in the morning out here in California with them. And so we're working closely with them.

Great, thank you so much, Andrew.

Thank you.

Thank you, our next question is coming from Patrick McGlinchey of Sidoti and Company.

Good afternoon, guys. Just real quick, just about everything here has been answered. I think you said you're going to have 20 new stations that will be completed by year end. Just give an idea on the type of size you're going the see there. You did say that volume varies from station to station.

Yes. It is kind of hard to do. Some of those are specifically designed for taxis. Some of them are airport stations, a couple of those will be transit .

A couple of trash projects.

A few trash projects. A few LNG. Well, the new LNG, that won't make it in this year it will be shortly after the first of the year. So it is hard to do that. It's hard to give you that. But what we do, is we do stay focused on our core markets. So as I said early until the call, we're not out speculating on stations. We're really sticking to our knitting on our target, our markets.

Okay, and then just looking for the end of the year here as far as the volume goes compared to '07, can you just give us an idea that in these last three months, do you think you will finish up above or below 2007's volume?

Well, that is another guidance question and we really can't --

I like the way the volume is trending. And I don't know that we're going to give you a number. But we're making up for lost ground. So I guess that is really what we can say there. And with the station backlog and the stations coming on, and the trucks coming, we have actually a lot of proposals out right now with customers. So some of those could come on immediately. We're trying to win customers back. So let's just keep our fingers crossed. You will like where the volume is beginning to hit.

Okay, thanks guys.

Thank you, there are no more questions at this time. I would like to turn the call back over to Andrew for any closing comments.

Thank you, operator. Thank you, everybody. You know how to get hold of us. We are busy here working hard, and we will let you know as it unfolds. Thank you for your support.

This concludes today's teleconference, you may disconnect your lines at this time. Thank you for your participation.