Clean Energy Fuels Corp (CLNE) 2008 Q4 法說會逐字稿

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

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the fourth quarter and year ended December 31, 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 President and CEO Andrew Littlefair and CFO, Rick Wheeler. And with that, I would like to turn the call over to Andrew.

Thank you, Ina, and good afternoon, everyone. Looking back on 2008, much has changed in a very short time. In just the last six months we had record highs and lows in fuel prices, economic momentum, and consumer confidence. We now see our nation and the current administration beginning to focus more clearly on its energy policy which includes an emphasis on alternative fuels including natural gas. In 2008, we laid the groundwork and made the investments to fuel our growth in 2009 and beyond. Our customer count, station count, and addressable markets all grew in 2008 and we expect this to continue and even accelerate.

Looking at our business by key segments for 2008, in the refuse sector we added ten new customers in five states that represent approximately 2.4 million new gallons of CNG based on the anticipated initial level, vehicle levels of the projects. These ten new station -- these ten new customers, pardon me, operate fleets that number in excess of 19,000 trucks combined. So while they typically start out with modest initial vehicle levels, they have the potential to grow significantly as they retire and replace their fleet. In fact, when one looks at all of our refuse customers, we are working with companies that own and operate 40,000 trucks. As a reminder, there are 200,000 trucks in the United States.

We are confident that we can increase our presence in this key market in 2009 as this segment is keenly focused on the rapidly approaching 2010 diesel emission standards. Natural gas refuse trucks already meet the 2010 standards. Along these lines, we have realigned a portion of our sales force to specifically concentrate on refuse. During 2008, our transit division added key contracts in Akron, Las Vegas, and Santa Cruz, which represented more that 170 incremental buses and approximately 2.5 million annual gallons of CNG. We also added 160 buses with our existing customers which represents approximately 2.3 million annual gallons of CNG.

Another trend that is indicative of the growing understanding of the benefits of natural gas vehicles was the decision actually this week by Dallas Area Rapid Transit to let existing RFPs and staff recommendations for diesel trucks expire and focus on the benefits of natural gas for their upcoming procurement of 573 buses. This move is a strong signal I think to the rest of the nation's municipalities that natural gas is the way to go.

As for progress in major airports, in 2008 we added Atlanta's Hartsfield and Oklahoma City Airports to our customer list. Both will fuel high volume fleet applications including hotel and shared ride shuttles, parking and transit buses. We are now operating at 19 of the largest airports in the country. Also during the year, several of our taxi customers increased their natural gas vehicle counts. New clean taxi programs were recently announced by two Los Angeles adjacent cities that have a combined total of 700 taxi permits that will go into effect in 2009. We see such programs spreading which should help us grow our taxi volumes in the coming years.

Also we participate in an investment group that is funding a new natural gas vehicle designed for taxi and paratransit use which will be another growth driver for the company. The target is to have this new vehicle on the road in 2010.

And lastly, turning to our trucking sector which is initially focused on the Clean Truck Program reports of Los Angeles and Long Beach, we saw the rollout of 250 heavy duty LNG trucks in 2008. These trucks supported our increased fuel cells at our Carson Station which recently was showing volumes in excess of 8,000 gallons per day. On a related note, we completed the construction of our LNG plant in Boron, California in the fourth quarter of 2008. The plant is only 125 miles from LA ports, significantly closer than our previous LNG sources for the ports, some of which were over 800 miles away. This plant provides us a significant advantage in meeting the anticipated growth in LNG demand in California and the southwest. So far we produce approximately 5 million gallons of LNG at the plant which we anticipate will increase in the future as the ports and other regional truck programs unfold.

Speaking of the port project, let me elaborate on its status since it is such a significant growth opportunity for us in the near term. On February 18, the port commenced collecting container fees that are assessed on every container that enters or leaves the ports on old, dirty diesel trucks. This program is expected to generate roughly $700,000 a day. These funds are earmarked to fund subsidies for the purchase of new clean trucks including LNG trucks. The container fees initially were delayed due to lawsuits filed by the American Trucking Association and the Federal Maritime Commission which were efforts to block various portions of the joint ports' clean truck program. But we're pleased to see this program is back on track and moving ahead.

Of equal significance, the ports have embarked on a 2009 supply chain review to help them develop a plan in the coming weeks to accelerate their clean truck program. I do believe that you will see them get beck to a pace of 100 trucks per month or so later this year and we have heard several manufacturers state that they could make 100 trucks available a week later this year. To put it in perspective, every 1,000 LNG trucks equates to roughly 12 million to 15 million gallons.

In the upcoming plan, we expect to see grant support and other incentives to facilitate an efficient supply chain that encompasses the proper integration of fuel supply, engines and trucks. Our role is insuring adequate fuel supplies which includes building the largest public LNG truck station in the country. This station is in the ports and is slated to open in April. We are ready to add more stations in the near future and we have the fuel supply ready from our Boron LNG plant.

I would also add that our backlog of station opportunities continues to be strong and includes a long list of stations that we believe will get built regardless of the macroeconomic environment. We are looking very carefully at all our station projects as we manage our cash while still seeking to capitalize on our growth opportunities. In this effort, we are prioritizing the stations we build based on their strategic importance and overall economics. During these trying times, we recognize the need to stay close to our customers, to stay attuned to further shifts in the economy, and to stay adaptable and flexible as to how we operate our business.

To that end, last year we froze all salaries at the company and senior management did not receive bonuses. We also cut basic cash expenses that we anticipate will result in SG&A reductions of approximately $3 million in 2009. Our management team remains extremely focused on growing our business while controlling our costs and we now have another G&A cut under review.

As I look at it today, there's just as much interest if not more in green jobs, reducing greenhouse gases, instituting low carbon regulations in green legislation, and decreasing our dependence on foreign oil. On the national legislative front, we anticipate there could be several potential bills introduced this year including an energy bill, a climate change bill, as well as legislation to reauthorize the highway bill among others. This legislation will likely encourage the growth of our industry and fast. Currently there is a draft bill circulating Washington that would extend VTAC and expand the natural gas vehicle tax credits. These credits are important for us but are also important for our customers as they allow them to have some certainty in the economics of their natural gas vehicles beyond just a few years.

In anticipation of this bill making it to Congress at some point, just last week members of Clean Energy's board of directors and senior management fanned out across Capitol Hill to educate members of Congress and the Senate about the benefit of natural gas as a transportation fuel. Hopefully these efforts will bear fruit in the form of legislation to support tax provisions for natural gas for fleet vehicles in this Congress.

I also attended an energy summit in Washington in late February at which Boone, Nancy Pelosi, Senator Reid, Al Gore, and President Clinton addressed the critical need to change the way we produce and use energy. It was very interesting, just as an aside, Boone was seated next to Al Gore and at one point in closing, Vice President Gore slapped Boone on the back and said, "You know, Boone, I'm with you, I'm with your effort to try to use natural gas in heavy duty trucks. I personally think that light duty will go more to the battery and hybrid electrics, but I'm with you that I think we can make a great impact in this country to put natural gas in heavy duty transportation." So we're making very good progress.

On the California legislative front, the US EPA is considering allowing a waiver for the state's clean car act that would enable the state to implement the law. The clean car act is legislation that would essentially require car companies to reduce carbon emissions to equivalent levels of a free average of 42 miles per gallon which represents an opportunity for natural gas vehicles due to their carbon reductions when compared to gasoline and diesel. And in fact, in light duty vehicles, natural gas and biomethane can provide up to a 30% and 88% carbon reduction respectively compared to gasoline.

In addition, the California Air Resources Board is looking to adopt its low carbon fuel standard at its April board meeting. This rule is slated to go into effect in January 2010 and will require a 10% reduction in carbon intensity by 2020 for on and off road transportation fuel sold in California. It is worth noting that the rule identifies four fuels that are considered already compliant with the 2020 goal and of course natural gas and biomethane are two of the four. The other two are hydrogen and electricity, neither of which we compete with in our medium and heavy duty markets. These compliant fuels will be eligible to generate credits that can be sold to those who are not compliant.

I want to comment on the good progress we are making in the renewable sector of our fuel business. Our team is currently out marketing the renewable aspect of the biomethane produced by our Dallas Landfill Joint Venture. The goal is to enter into a long term sales agreement with an entity that is willing to pay a premium for the renewable aspect of the gas. We are also eyeing the carbon benefits of the production facility with a view towards monetizing these benefits as well. This is an example of how we are working to broaden our business and expand our customer base.

Before I turn the call over to Rick, there's no doubt that the business economy is difficult. But from our perspective, we haven't seen customers go back to diesel or cancel stations. What we have seen is increased interest from very large national fleets. In fact, I'm pleased to say that we are talking to some of the nation's largest fleets which is very promising. That's all I can really say about that right now, but I look forward to reporting to you on our progress on this front. And now let me turn the call over to Rick.

Thanks, Andrew. Before I get into our results, I wanted to point out that we had a lot of one-time, unique items in 2008 that impacted our numbers. One number we look at when managing our business is operating income without our non cash charges and one-time and unique items. For 2008, this metric was a positive $1.5 million which I will walk you through the calculation in a bit. So with that intro, let's look at our financial results.

Before I begin I would like to point out that all my references to our results will be comparing the fourth quarter of 2008 to the fourth quarter of 2007 or comparing the year end at December 31, 2008 to the year ended December 31, 2007 unless otherwise specified. With that clarification, for the quarter, our revenues totaled $29.6 million compared with $29.7 million. For the year, our revenues totaled $129.5 million, which is up 10% from $117.7 million in 2007.

Adjusted margin for the quarter was $8.2 million, which compares with $8.8 million, and adjusted margin for the year was $35.9 million compared with $35.1 million. Our net loss for the fourth quarter was $22.4 million or $0.47 per share, which compares with a net loss of $2.9 million or $0.07 per share. Our net loss for the year was $40.9 million or $0.90 per share versus a loss of $8.9 million or $0.22 per share in the prior period.

The largest contributor to our quarterly loss was the increase in our SG&A expenditures between periods. As you recall, we spent approximately $15 million during the fourth quarter of 2008 to support Proposition 10 on the California ballot. Also during the fourth quarter of 2008, the margins on our commercial retail business were squeezed as the significantly lower gasoline and diesel prices during the period caused us to lower our pump prices by significant amounts to maintain our savings per gallon relative to these other fuels, albeit while natural gas prices were not coming down as quickly. The good news here is that this pricing pressure seems to be reversing itself in the first quarter of 2009 as gasoline and diesel prices have trended higher which has allowed us to raise our pump prices while natural gas prices have remained steady.

There are three main contributors to our increased loss between years. Our SG&A expenditures increased, our depreciation expense increased, and our interest income decreased. First, looking at SG&A, the increase is primarily related to the $18.6 million we spent during the year supporting Proposition 10. In addition, our stock based compensation expense increased by $3.4 million between periods and we incurred approximately $800,000 of costs in 2008 related to our abandoned acquisition of the FuelMaker Corporation.

Second, our depreciation expense increased by $2.5 million between years due to our higher property equipment balances in 2008 including our California LNG plant that came online in December. And finally, our interest income decreased between periods primarily due to lower average cash balances on hand in 2008.

Non-GAAP loss per share in the fourth quarter of 2008 was $0.09 and was $0.02 in the fourth quarter of 2007. Non-GAAP loss per share for 2008 was $0.25 and it was a loss of $0.04 per share in 2007. The 2008 amounts include adding back our Prop 10 expenses in their respective periods in addition to our employee related stock based compensation charges when calculating non-GAAP EPS. Adjusted margin to non-GAAP EPS are discussed in more detail in the press release we issued earlier today.

Turning to our volumes, we delivered 18.7 million gallons in the fourth quarter of 2008, versus 18.2 million for 2007. For 2008 we delivered 73.5 million gallons of fuel to our customers, compared with 75.3 million gallons in 2007. Our 2008 volumes include our share of the biomethane produced and sold by our [Lanso] Gas Joint Venture. Let me remind you that in 2007 there were three legacy non-core customers that accounted for 3.7 million gallons that are not in our 2008 numbers. Excluding these legacy gallons, our volumes with new and exciting customers actually increased by approximately 1.9 million gallons year over year even in these trying economic times.

As I mentioned in my introduction concerning our operating results for 2008, if you take our operating loss and add back our non-cash charges of depreciation and amortization and stock based compensation, and add back the one-time Prop 10 charges of $18.6 million we incurred during the year and the $4.5 million of losses on our unhedged fixed price contracts we incurred during the year, which should not occur in 2009, this amount is a positive $1.5 million. With approximately $36.3 million of cash on the balance sheet at year end, we anticipate having sufficient cash to fund our current 2009 operating and capital plan. With that, operator, please open the call to questions.

(Operator Instructions) Rob Brown, Craig Hallum.

Good afternoon. I think you mentioned earlier a number of -- I think it was 40,000 truck fleets that you're working with on the refuse side. Can you give us a sense of what sort of share of that fleet you have now in natural gas at this point and what your thoughts are about adoption rates in that fleet?

Sure, Rob. As you know, we're just starting in all these markets and I guess now of the 200,000 -- it's probably just a little less than that because that number includes transferred trucks, but let's call it 179,000 collection trucks more or less. There's probably now today about 4,000 or 5,000, 4,500 on natural gas.

When you look at the -- so the way I look at it and some of the fleets we're dealing with, we're still only 1% or 2% or 3% of their fleet. It's probably a little higher than that if you figure we're fueling about 2,000 trash trucks and we're working with customers that own 40,000, so it's a couple, it's a little less. But we're just starting with all of these. And the way, Rob, as I think you may know, the way you start is a company may add 1,000 trucks and they start at one yard and they start there they have 150 trucks and year one they do 15 or 20. And the next year they replace 10% of their fleet, they do the next 15 or so. And this is the way it builds. It's very steady though once it starts. And so it's been important for our effort to get out there and we're literally now seeing deals all across the country. It's not just a California phenomenon. It's Florida and New Jersey, and Long Island, and Chicago and Vermont. So we're seeing it everywhere and that's why I think it's important to let you know that we're dealing with companies that own 40,000 trucks. We've got a lot more work to do, but we're starting.

Okay, great. Thank you. And then you mentioned the 2010 standards sort of coming on down the route. Are there -- I guess are customers in this economic environment paying attention to that or is that driving change now? Or is that something you see even holding off and sort of waiting until that comes to fruition?

I missed the first -- Rob, I missed the first part of your question, I'm sorry.

I just want to understand how the 2010 standards are driving increased volume or customer --

Yes. Sorry, it's a big issue. As we talk to trucking fleets, you'll recall that the first set of standards kind of came in 2004 and that really affected the price of diesel. And then in 2007 the standards got tighter, the trucks got less efficient and more expensive, on average about $14,000 or $15,000 per truck, created more heat, and didn't operate as well. The trucking fleets, especially trash and some of the others, they don't like the way the 2007, and they're really scared to death about the 2010 because they know they're going to have put another fuel onboard. They're talking about [Euria] now you now and the jury is out on how expensive that's going to be, the fuel and how it's going to work. And so in refuse, the refuse companies know that the current trucks that we're putting out there are 2010 compliant and they know they work well and there's a few thousand of them on the road. And so I think it's a big, it's a winner for us, certainly in refuse.

Now on the heavy duty side where there isn't quite as much experience, the 2010 standards are still daunting. And no one yet has really said that they are going to make a compliant vehicle in 2010. Most manufacturers are suggesting they're going to use credits. That's not to say they won't get there. But some companies won't quote the cost, and so I think it's a big question mark for fleets. And we're using it to our advantage right now. The thing that we are being told by trucking companies is they are not going to do a pre-buy because nobody is buying any trucks to speak of right now. So once before, the trucking companies, the engine companies, and truck manufacturers were able to convince their customers to do a pre-buy in 2006, you remember that bulge, because people weren't really ready for 2007. Well the word is out there isn't going to be a 2009 pre-buy, so it means that someone that's going to need a new truck is going to likely wait for the 2010 or they're not sure what they're going to get. So we're out there working it hard right now and we hope we have a better answer.

Okay, great. Thank you.

Graham Mattison, Lazard Capital Markets.

Good afternoon, guys. Quick question for Rick. Can you give us a sense of the timing of the capital spending for 2009? Is it going to be probably more back half weighted or -- can you give us a sense of how that will roll out across the year?

Basically looking at the timing now, it's pretty, it's kind of spread evenly. There's a lot of stuff that has been in the hopper in the middle of the year of '08 that's come to fruition now, kind of that six months build period we've kind of always talked about. A lot of those projects are starting to come on and then all our third and fourth quarter stuff we signed. A good example of that is the Clean Scapes deal up in Seattle was a trash deal we signed in the third or fourth quarter of last year is getting built and I think is on target to start in April. The Brookhaven deal is another one last year that got signed in the middle of the year I think and has been up and going since January. So a lot of that stuff is rolling off and a lot of the new stuff we're signing now obviously is starting to look at third or fourth quarter, so surprisingly it's kind of spread fairly evenly.

Okay. And then looking at the landfill in Dallas, where are you in terms of that? Is there still money to be spent on that or have you done the renovations that you guys were planning on doing on that?

We're kind of assessing that right now when but in essence there is money still available and we're kind of looking at plant capacity and what we want to do and when and how and what makes the most sense from a long term strategic perspective. So we're still kind of working through that a little bit, but we do still have some capacity on our line of credit with Plains Capital Bank to go ahead and fund some more expansion and production enhancements down there.

All right, perfect. And then just one last question. In terms of talking with your customers, how important is it and what are you seeing from them in terms of the recent support coming out of the latest government spending bill? How important is that in terms of their decision making, particularly the extension for the tax credits or the stations?

Well we've seen in the stimulus, and you know, Graham, we're trying to get some stuff in there and we didn't -- we got a little bit in, but not much. But for a couple of our customers it's pretty significant. For instance, there's a program that sponsors projects around the country called the Clean Cities Program and we were involved years ago starting that, almost 10, 15 years ago. And I think at one point the Clean Cities Program had grants available of $20 million, $25 million a year. As you could imagine, many of those projects ended up being natural gas station projects and we availed ourselves to that as did our customers. Well in the stimulus the Clean Cities Program went from in the Bush budget I think it was down to $3 million or $5 million a year, they just got $300 million.

So we think that's going to be very important for municipalities and for us to help partner with customers around the country. In addition, transit agencies, looks like there's another $300 million or so available for clean transit. So it's -- the stimulus bill is a little hard to get your arms around, but we've identified abut $600 million that likely could go to our customers to promote clean projects.

Okay, great. I'll jump back in queue. Thank you very much.

Julie Cotu, Simmons & Company.

Hi, guys, good afternoon. Just a housekeeping item. Can you give us a breakdown on the CNG and LNG volumes?

Sure, for the year?

For the quarter if you could.

Sure. Fourth quarter CNG is 11.9 million. Our [Metromis] biomethane sales were 1.4 million gasoline gallon equivalents, and LNG was 5.4 million and that gets you to the 18.7 million.

Okay. And another question, on the ports with the implementation of the clean truck fees that they saw in February and as things slowly move forward there, just wondering what kind of competition you're seeing for volumes?

Well we haven't seen too much yet but we are seeing some fleets talking about going to compressed natural gas trucks. I think that while we have a little bit of a leg up because of our plant on LNG and our early lead on that, we don't see much on the LNG side. You may see some competition down the line with certain fleets that may want to do it themselves. We haven't seen much of that yet. But there are a couple talking about it. So, so far, so good. But I've always said, you get to 2,000, 3,000, 4,000 trucks, you're going to have to expect competition.

Right. Thank you very much.

Eric Stein, Northland Securities.

Hi, guys. Thanks for taking the call. I was wondering, could you talk about the Carson -- you mentioned how many GGEs a day that were being pumped there. Could you just let me know that again?

Yes, a couple of days ago we hit 8,500 and we've seen it consistently over 7,000 gallons. It's a pretty interesting site down there. We have on days, of course not everybody is doing a full fill, but we have days when we're fueling 140 trucks in that location. We have two fuelers there. It's impressive.

And how about -- I know you said that the station on Anaheim and I Street, that that will be done in April. I know that's a much larger station. What kind of volumes should we think about on a daily basis at that station?

That station will be capable, it's a large station as we said, it's the largest. It will have, it will start out, it's being plumbed for ten lanes It will start out with six lanes. It will have actually 12 LNG hoses, be able to do cold fuel and what we call warmer fuel. I don't know that I have a number for you, but it's clear to me that when you get to -- when you get to 1,000 trucks, you're going to need, that would be approximately 600 or 700 trucks that would be fueling at that location. They can take upwards of 150 gallons or more a day apiece. So that station will end up looking pretty strong. It's going to start out with two 25,000 gallon tanks and we have it plumbed to be able to take two more when we need it. I don't know if I have a number for you exactly, but it will be able to fuel really a very large number of trucks.

Okay. And any change in your thinking on having -- I know you've talked about five stations at the ports within the next 12, 18 months. Any change to that?

No, no change to that. We're finalizing the next station in the port. That Anaheim Street station, if you're familiar with the area down there, I don't know, but that Anaheim Street station, that's right smack in the middle of the port. There's another one that we're just finalizing the lease with Long Beach. I think it's Long Beach, not LA. And that will be next to go. And then we need a station and we're now finalizing the agreements for land arrangements at the rail head and also out where the -- what we call the inland empire out in Ontario. There will probably be two stations out there.

We're trying to do this kind of hand in glove with the port, so as we see this plan come out here in the next few weeks about how many trucks they want to get into the port in 2009, that will determine how quickly we ramp up those other stations.

Okay, that's very helpful. Just one last question. This might be a little early in the process, but the phoenix contract from last summer, the portion that you did not retain, where are you in the process on that? Or is it a little early to start thinking about that since it was just a one year contract?

Well it's never early. I know our Phoenix team, we have guys in Phoenix, they're working on that all the time. They're in close contact with Phoenix the City, the transit down there. It comes up in July.

Okay, July. And that was $3 million to $4 million GPEs?

Yes, we haven't seen anything on it yet.

Okay, I appreciate it. Thanks, guys.

Marvin Loh, WR Hambrecht.

Good afternoon, guys. Of the 18.7 million gallons that you guys reported for the fourth quarter, can you break out the ports' contribution of that or how much was filled at the port and approximately how many trucks?

About 300,000 is the number and the trucks there was roughly 200 running around at the end of the year down there.

Okay. And you mentioned that you would expect that we would get to 100 trucks per -- 100 trucks per month add at the ports later this year. How do you see that ramping going into what -- maybe the beginning of the second half we would see that 100 per month run rate start to kick in?

This always puts me on the spot a little bit because I'm not in control of the timing down there of course. This is what I know, some of the facts that I think are really pretty important. The port has -- they started collecting that fee and so really now, and that just started on February 18th, and really now there's a very compelling reason for somebody to not want to drive a dirty truck anymore. For a while last quarter, those people that took those clean trucks, really the smart play was to sit it out and drive around with an old dirty truck because there wasn't a penalty. Well now there is. So you're beginning to see some stir down there.

We know that the LA Port has sent their staff out to develop this plan. We spent a day and a half with them, they called in the engine manufacturers, the truck manufacturers, to work on this plan. The ports in their current plan have said that fully almost 5,000 -- I think it's 4,500 trucks, diesel trucks, according to the current plan would get eliminated in 2009. Now I'm not saying that those are all going to be LNG and I don't know how this is going to ramp out, but what the community down there in the port is talking about is that they'd really like to see -- they still have their 50% number and they still, they would like to see a couple thousand trucks put into the ports in '09. We have to see the proof in the pudding in what comes out and how this all rolls out. I still think it's safe, and as I've been saying, I'd like for all of us to think at 100 a month. But I do know that West Port and Kenworth have said that later this year if they can get the right signals here soon, they were hoping for March 1st, they didn't get March 1st, they didn't get them yet, but they can actually get the supply chain set up to be able to produce 100 vehicles a week in the fourth quarter.

So I think it will be somewhat back half loaded. I'm guessing that you'll see something come out in April I'm hoping and then we'll see it really start up a couple months after that. There are a couple hundred LNG trucks that would be produced and are on lots now that could be bought, so I'm hoping that that happens soon. And then I think you'll see the most of this happen in the second half.

Okay, excellent. On the margin compression side of things, could you help me understand what the thought process was around actually letting the margin compress? I would think that you have a pretty competitive position with most of your clients and you could have kept it wider if you wanted to, particularly since you already maintained an advantage over some of the other fuels that were out there. So I would view it as being kind of a conscious decision on your part to shrink your margin so that you could remain competitive. Is that correct?

That's exactly right. It was a business decision on our part. Obviously the fourth quarter is when the economy was certainly in trouble and dire straits and gasoline and diesel prices were really trickling down and we wanted to maintain some savings for our customers so we could still provide them with a compelling economic option even in those difficult economic times. So we made a conscious decision to maintain our buffer below the price of gasoline and diesel. And because natural gas the commodity wasn't coming down as fast, we just got squeezed a little bit and we certainly thought that was going to be a temporary phenomenon which it seems like it is. But it was a business decisions just to maintain our economics even when things were difficult.

Okay, so as we see kind of oil prices stabilize a little bit and kind of move in the other direction, we could presume that there is a certain amount of flexibility that you have to kind of keep that spread however you want?

Exactly. Another thing, keep in mind this is only applicable in roughly 20% of our business, this is just that commercial retail piece where we're selling at our pump prices that we're setting on a daily basis. 80% of this stuff, be it fixed with our new hedge policy or index plus, we're protected on margin compression regardless of what goes on in the commodity markets and with the price of gasoline and diesel.

Okay, great. Thanks. And just one last question. When we look at your SG&A going into 2009, how should we be thinking about it? Is '08 a good number less the $18 million that you spent on the Prop 10 plan? Or can -- are you actually rationalizing expenses below that even?

Actually below it. I would start with that rationale of the total minus the Prop 10 expenditures and my comments exclusive of our stock based compensation which in theory with the additional options we issued at the end of December and beginning of January will go up. But obviously for non-GAAP purposes we'll pull that out. But stripping that out and just getting to a cash SG&A perspective, those are where we went in and tried to do the 10% cuts to generate that $3 million of savings which we've been targeting. So that's kind of what we're looking for and shooting for, again, with the caveat that that's all contingent on if there's a huge bill that gets introduced that we really need to go out and support or do some things with in order to benefit us or the industry, we're going to do that again. And if any of this stuff in Washington and the legislation gets out there and we need to go support it, we're going to. So there's always that caveat out there that I guess that theory we just talked about is subject to change.

Okay, great. Thank you very much.

(Operator Instructions). John Roy, Janney Montgomery Scott.

Hey, guys. On extending the VTAC, I know it's always kind of hard to guess what the government is going to do, but when do you think that that might be put up for discussion? Is that part of the energy bill or is that something separate?

Yes, it -- John, hi. It will be part of an energy bill and I think there's going to be an energy bill that will have a lot of what I talked about introduced very shortly. I mean maybe even this week. So watch for that. A few days ago, they talked about trying to get an energy bill up and going and actually get it into this -- they have about five weeks left before they take I guess it's Easter break for the Congress. I think that's aggressive and it depends on what character shape the energy bill takes. I mean if they roll a climate change bill into an energy bill, then you're going to really have a very large bill. It may slide that behind the healthcare debate, I'm not sure. But you'll see the VTAC in elements of an energy bill. You're going to start seeing that, those pieces introduced shortly. I'd like to say it's going to happen any time, but it kind of depends on how complicated it gets and where it lines up behind healthcare or not.

All right. And one other quick question on volumes. I noticed a flattish or slightly down quarter on quarter. Do you feel like the fourth quarter was a little bit of an aberration as people didn't do much? Or--

Yes, I think that's right, John. It -- I would say in a way I think we were somewhat surprised. I mean we were seeing our customers, our customer base expand but their. really in late part of the year, business really came off hard. And taxi trips were down and even bus trips. While ridership was up, they cut back on some buses. Trash actually slowed a teeny bit in terms of the weight and trips. So we saw some of our customers actually use less. So we had those year over year deals where we had to replace volumes, but then some of our existing customers actually used somewhat less.

And what's your kind of take on what's going on now? Is it getting a little bit better? Is it still depressed?

It's -- what I said is it -- we haven't had anybody say, you know, thanks for this grant and thanks for the contract and I want to go back to diesel, I'm not interested. We really have not had that happen yet, knock on wood. That's not to say that that couldn't happen. So we're seeing the refuse guys in particular actually expanding and we've got a lot of contracts out in the field that we're working. My guess is it will be similar. I don't know that I can tell you right now that the volume per customer is up. I think it's about flat from where it was in the last quarter.

Sounds good. Thanks a lot.

Rupert Merer, National Bank Financial.

Good afternoon. Just a quick question on the landfill gas business. What's pacing the volumes from the landfill gas business today? Would you say that the operation is production constrained or demand constrained? And do you see much potential for growth in volumes there?

Oh yes, we do. It's production constrained. And that was, Rick I think was trying to get at that. We do have a capital program to increase reliability this year and we're drilling more wells. So we are actually increasing production as we speak. And then we have another program that we're looking at for in the future where we can dramatically increase the production. So it's not on the demand side. It's really us doing the work that needs to be done to increase production.

Okay, great. So that -- the volumes there I imagine could probably what, triple perhaps over time with enhanced productivity?

I think it's double from today, but since August we doubled the production. And it will double again. We've got to spend a little money to do that.

Okay, very good. Thank you.

It takes awhile. It's a double again, but you'll see that over the next several years.

Okay, very good, thank you.

David Woodburn, ThinkEquity Partners.

Hi, guys, thanks for taking the question. Andrew, you spent a couple of minutes on the last quarterly call talking about the number of projects that you had in process and the number you hoped to get done by the end of the year. Can you tell us how many stations are actually up and running at the end of 2008?

We -- I think my number that I gave you was higher than what we actually got done. We finished 28 in 2008 and 13 didn't get finished. So we've got 13 that are being completed now. We've actually completed -- we're completing some right now. We completed a couple earlier last several weeks. So we did about 23 in 2007, 28 in 2008, we have 13 that are currently under construction and then we have about 35 or more in the CapEx plan right now. So these things tend to -- we can't always predict exactly when they'll get done, but we've got a lot in the pipeline.

Okay, and then related to the CapEx plan for 2009, with those 35 or maybe more stations, are you feeling capital constrained? Or if you had another $10 million or $20 million in cash sitting around, is there demand out there that you could pursue those projects and probably get them done this year?

We have a great thirst for capital. I mean we're trying to do it, we're trying to be prudent the way we're going about it. We have our CapEx plan funded for 2009, but I think you're exactly right. If you had another $20 million, $25 million, you could bring some things forward and spend it. And if and when, I hope when, you get a national customer that asks you to build 15, or 20 or 30 stations, then you're going to have to figure that out. But we have more projects, we have a lot of projects in the queue.

Okay, perfect. Thanks, guys.

This concludes our question and answer session. I'd like to hand it back over to Mr. Andrew Littlefair for closing comments.

Just very -- thank you, everybody, for participating. And just briefly in closing, we're focused on expanding our customer base and building out our network as we just discussed and expanding our LNG stations and expanding our markets at the ports and regional trucking. Watch the national fleet story and the port, what happens in the port, and the federal legislation and the legislation in the states including the low carbon fuel regulations. There's a lot on our plate for 2009, a lot of good things working. So thank you for your continued interest in supporting Clean Energy. Talk to you next time.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.