Clean Energy Fuels Corp (CLNE) 2009 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Clean Energy Fuels first quarter 2009 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 ICR. Thank you, Ms. McGuinness. You may begin.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the first quarter ended March 31, 2009. 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 projections, 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 16, 2009 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 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. We have much to be encouraged about on this call as we discuss our first quarter 2009 results. Our revenues are up, our volumes are up, and our gross margins are up from the first quarter of 2008. I'll let Rick give you some more detail on the numbers later, but we like how we are starting 2009 from a financial perspective.

In addition to the positive financial results, we are also seeing positive momentum for the Company and for the industry despite the challenging macroeconomic environment. We continue to win more contracts, the natural gas message is being embraced more and more by fleet operators, and we are seeing government officials on both the state and federal levels take action regarding green legislation and incentives and for natural gas in particular.

So let me jump right in with a port update. While the economy is impacting the ports, we are seeing more positive momentum toward the deployment of alternative fuel trucks for this year. To accelerate the deployment of alternative fuel trucks, the Port of Los Angeles recently announced a program to assist in deploying 900 natural gas trucks. The Port of LA announced an initial round of incentives using in excess of $45 million of their own funds to provide up to $80,000 of financial incentives for each of 450 natural gas trucks. The balance is expected to come from funds generated by the container fees being charged to shippers that were implemented in mid February. And tonight they will formally vote and adopt this program.

In addition to these trucks at the Port of LA, the Port of Long Beach has announced that they will be able to fund another 300 trucks. They have an attractive incentive program and have received applications from trucking operators for several hundred trucks which they are processing at this time. In fact, just yesterday, 25 LNG trucks made it through the process and were delivered to the customer.

They also modified their program so the natural gas trucks would be exempt from the container fees which is a significant development. Right now, more than 190 trucks are on dealers' lots, so the deployment of trucks as these new programs take effect, should happen quickly. Both ports also stand to benefit from California and federal legislation promoting the use of alternative fuels and low carbon fuels which I'll discuss later in my remarks.

Our next port station for fueling both LNG and CNG port trucks is expected to be operational later this month. With six fueling lanes and 50,000 gallons of LNG storage, this will be the world's largest LNG truck stop. Most importantly, this station serves as a visible testimony to our commitment to build the necessary infrastructure to support the ports' clean truck program. When the LNG demand at the port ramps up, and it's beginning to, we are ready to provide the LNG to fuel the vehicles. Our California LNG plant is fully operational and our production is averaging approximately 1.3 million gallons per month.

Now let me take a moment to talk about the McCommas Bluff landfill in Dallas. Last month we entered into a 15-year agreement for the sale of renewable, biomethane produced in McCommas. The agreement calls for the sale of up to 4,500 MMBTUs per day of biomethane from April of 2009 through September, 2010, and between 5,000 and 6,000 MMBTUs per day through 2024. Just to put this in a gallon perspective, 4,500 MMBTUs is about 32,000 gallons a day.

Shell Energy North America is the purchaser and will supply the biomethane to the end user. In addition to providing us with a sound, long term revenue stream, this agreement is extremely important for us as it validates the selling of renewable natural gas as a valuable, ultra low carbon fuel. Many of our customers are showing interest in biomethane for their fleet vehicles and it is the best available alternative fuel to meet the new, low carbon fuel standard. This standard is coming in California and we believe it will be embraced by other states and ultimately the nation.

The success and renewable aspects of our McCommas Bluff landfill has also generated interest from refuse companies seeking to develop other landfills which should help us continue our leadership position in the refuse sector. In addition, we have built a significant expertise internally at Clean Energy in the area of low and ultra low carbon fuels and the emerging market of carbon credits, particularly those associated with the capture and use of methane from landfills. With this expertise, we expect to be on the leading edge in the US of understanding the carbon credit landscape and capitalizing on these credits. And we expect to do more in this area.

Let me highlight a few of the key contracts that we won in the first quarter of 2009. We were awarded a contract to build and operate a CNG time fill station by Republic Services. Republic is the second largest solid waste management company in the United States and is the City of Boise's waste and recycling contractor. Republic provides solid waster and recycling services to more than 68,000 residential and commercial customers in the greater Boise area. This station will support the planned deployment of a new CNG refuse truck fleet that will be the first in Idaho. But as a result of this win, we are in discussions with Republic about additional opportunities going forward and this is exciting.

We have been recommended by the staff of the City of Phoenix for a new 3-year LNG supply contract that is to begin July 1st. This is nearly 8 million gasoline gallons equivalent per year. We were the low bidder in the process and should have an official word from the city in the next six to eight weeks. And we are hopeful we are in a good position to win the supply contract back for this large customer.

In the stimulus package, there was about $300 million allocated nationally to the Clean Cities Program. This program will be administered through DOE, but in concert with local granting agencies. Generally the grants require partnerships between cities, fleet owners, and the private sector to obtain these matching funds. Most of these grants are to be submitted by the end of May, so our grant department is preparing submissions in 12 states on upwards of 60 projects involving more than 4,500 natural gas vehicles. We of course won't win them all, but if history is any guide, we should do well. This is very exciting.

To give you an idea of what sort of new station activity you can expect to see going forward, as of today we have 15 projects in various stages of development and construction with many more in the pipeline. As you recall, last year we completed 28 station projects which was up from 2007 and we are on track for station growth in 2009 which we are very proud of given the economy.

Another growth driver will be increasing volumes at key existing contracts. I guess you'd say this is sort of a same store sales metric. The San Diego MTS grew its fleet by 60 buses during the last two quarters and will take delivery of another 75 buses by year end. Las Vegas RTC took delivery of 45 buses this past quarter and ordered 20 more that will be delivered by the first quarter of 2010. Foothill Transit will take delivery of 30 buses during the second quarter of this year and LA MTA began fueling 20 buses at our Santa Monica station this past quarter. MTA will take delivery of an additional 30 buses that will be in service by the end of the second quarter adding an incremental 2,500 gallons a day to our volume totals. A good way to think about this growth is that on average, every 60 buses equates to about a million gallons a year.

Looking at our operations outside the US, we saw improvement in our Peruvian operation. We have recently added industrial customers that are being serviced by our station in Lima, thereby increasing our volumes threefold. We are looking at adding other stations in other highly populated traffic and taxi areas in Lima.

Before I move on to provide a legislative update, I want to highlight a very exciting announcement about the industry that was made this quarter when AT&T Chairman and CEO Randall Stephenson announced AT&T's major commitment to natural gas vehicles in its nationwide fleet. And some of you may have seen, may be seeing their new TV ads touting natural gas. AT&T plans to invest up to $350 million to purchase about 8,000 CNG vehicles over the next five years. This represents the largest corporate commitment to CNG vehicles in our nation's history, and the Clean Energy team is working to insure that we are well positioned to capitalize on this opportunity.

Now turning to federal legislative activity, as you know, on April 2nd, a bipartisan group of representatives introduced H.R. 1835. It's got a doozey of a title, but New Alternative Transportation To Give Americans Solutions Act, or we say for short is the NAT GAS Act. The group was led by Dan Boren, John Larson and John Sullivan. And currently I think there's 35 co-sponsors on the bill. Their goal is to reduce imported oil by accelerating the production and use of natural gas vehicles.

Key elements include a doubling of the current per vehicle tax credit, an 18-year extension to the current $0.50 per gallon tax credit, a new credit of up to $4,000 for vehicle manufacturers of natural gas vehicles, a new requirement that at least 50% of the vehicles purchased by the federal government be natural gas fueled, and finally an increase in the tax credit for natural gas fueling stations to $100,000 from the current $50,000.

We will keep you posted on the developments related to this bill. But you know, a great deal of credit for this bill goes to Boone for his tireless efforts to educate our legislators on the benefits of cleaner, domestic, and abundant natural gas as a vehicle fuel. This includes the 4.6 million supporters of his Pickens Plan who are letting our legislative representatives know that they expect a decisive action related to the passing of an energy bill.

In California, Governor Schwarzenegger's low carbon fuel standard was formally adopted on April 24th, establishing a national model. When fully phased in, the regulations require a 10% reduction in the carbon content of transportation fuels by the year 2020. Domestic natural gas and biomethane are two of the four fuels that are compliant with these new requirements. The other two are electricity and hydrogen. Natural gas and biomethane will fair well under the new regulations as both fuels far exceed the standard.

Under the regulation, regulated parties can comply by producing low carbon fuels using bank credits or acquiring credits from other regulated parties. It's our expectation that we will be in a commanding position to earn a significant amount of credits throughout the entire rules implementation. The regulation will take effect in 2010 with credit generation ramping up in 2011 and the initial sale of credits starting in 2012. So watch this.

The new program is likely to have national significant since 22 other states have expressed a desire to adopt similar requirements under a regional cap and trade market. And the EPA is compelled to consider adopting a national standard.

I think that about wraps up my report and now I'd like to turn it over to Rick.

Thanks, Andrew. Our revenues for the quarter ended March 31, 2009 were $30.2 million which is up from $29.9 million in the first quarter last year. Gallons delivered in the first quarter of 2009 increased to 18.3 million gallons which is up from the 17.6 million gallons we delivered in the first quarter of 2008.

Gross margins improved to $8.6 million during the quarter up from $7.5 million a year ago. On a GAAP basis, our net loss for the first quarter was $6.5 million or $0.13 per share which compares with a net loss of $5.4 million or $0.12 per share for the first quarter of 2008. One number we look at when managing our business is our non-GAAP loss per share. For the first quarter of 2009, this metric was $2.8 million or a loss of $0.06 per share which compares to a non-GAAP loss of $2.9 million or $0.07 per share in the first quarter of 2008. This measure excludes employee related stock based compensation charges and in the first quarter of 2009 the mark-to-market loss on our Series I warrants which we are now required to do each period beginning January 1, 2009.

Looking at our margins, one thing I would like to discuss is the impact of our McCommas Landfill operations on the numbers. In the first quarter of 2009, natural gas prices were depressed which negatively impacted the McCommas revenues which were priced off the local gas index during the period. Consequently, the McCommas operations negatively impacted our margins by approximately $700,000 during the quarter. With the new Shell deal starting in early April Andrew mentioned earlier whereby the gas produced at the landfill will be sold at a price that is at a premium to the current market price of natural gas, we anticipate this trend will reverse itself over the remainder of the year and McCommas will make positive contributions to our margins beginning in April.

Another thing you will notice about our margins this quarter is there is not an adjusted margin figure as in the past. This is because we are now out from under our unhedged legacy fixed price contracts that created the need for the adjusted margin measure. As you can see, our margin per gallon was $0.47 per gallon in the first quarter of 2009 even after the negative margin impact of the McCommas operations I just mentioned.

Turning to our SG&A expenditures, you can see they were relatively flat between periods. However, if you look at our expenses excluding stock based compensation charges, our cash SG&A expenditures if you will, they actually decreased by approximately 10% or $1 million between periods. We believe this demonstrates that the cost savings initiatives we implemented for 2009 are taking effect.

At March 31, 2009, we had cash and cash equivalents totaling $30.9 million. Based on our current business plan for the remainder of the year, we believe we have sufficient cash to meet our needs over this period. However, we are constantly looking at ways to expand and grow our business and we also anticipate we will need growth capital to fund our 2010 capital plan to capitalize on future station opportunities. As such, we anticipate we will be looking to raise some money between now and the end of the year. We will first pursue debt opportunities to fund our cash needs and then we will pursue equity opportunities to fund any additional needs we have. We do not know the magnitude or timing of the capital needed at this time, but we do believe we will need more capital at some point to continue to grow our business.

Finally, in April we purchased futures contracts covering approximately $24.5 million GTEs of fuel to hedge our risk related to two LNG fixed price supply contracts that we bid on. One of these contracts is the Phoenix LNG supply contract that we lost a portion of last year. We believe we are the low bidder on the contract and the staff reviewing the bids has recommended us for the award. We hope to receive official word soon from the city and we are excited about hopefully having this large customer back in the fold for the next three years beginning July 1.

With that, operator, please open the call to questions.

(Operator Instructions) Rob Brown, Craig Hallum Capital Group.

Good afternoon. Just curious on the Republic contract you announced, how many trucks does Republic run in total? And what's sort of the I guess method where you win other cities within Republic?

Rob, good afternoon. Republic merged with Allied. They're the second largest now. They have 17,000 trucks system wide. That compares to about 22,000 collection trucks. When I say 17,000, that's collection trucks. They have other roll offs and other kinds of trucks, fleet vehicles. And of course as you probably know, they're scattered all over the United States. And so without saying too much here, we are talking to Republic about expanding our presence with them and we're excited about that.

Okay, great. Thank you. And then at the ports right now, how many port trucks do you have running, and when do you think these new trucks you talked about the port implementing, how does that roll out through the rest of the year?

Currently there's about 300 trucks at the port that are in operation. And that probably doesn't count those 25 that got delivered yesterday that are having the stickers put on them today or something. There are another 200 that are, as I said, at dealers' lots. In fact, my number was 190 on the sheet, I'm subsequently told it's about 210, on dealers' lots in Southern California. Tonight it's expected, it's already been announced, but expected that a vote will go ahead and put in motion 450 trucks, or funding mechanism for 450 trucks. Long Beach is already really underway with that kind of a similar program. And so you know my record on this, but we've always missed a little bit on projecting when these are going to come along. It's LA's intention that by the end of the year that they get at least another 900 on the road and I think Long Beach would like to see 300. So you're talking about between now and the end of the year potentially as many as 1,200.

I think -- if you think of 450 trucks and the 300 in Long Beach, those 750 probably could find their way onto the roads in the next, I don't know, five months, six months. And then you'll have a bigger piece at the end of the year to kind of round out up over 1,000. So it's kind of going the way I said it might, Rob, which is this kind of 100 a month pattern. And I'm pleased because remember, those trucks are using anywhere between 10 and 15, some more, thousand gallons per truck. So it's what we need and it's going to be very important for us for the remainder of 2009.

Okay, good. Thank you.

Graham Mattison, Lazard Capital Markets.

Hi, good afternoon, guys. Just a question -- judging by the recent awards that you guys have won, particularly in the later part of 2008 and also in the beginning of 2009, when do you see the gallons sort of kicking in there? Are you expecting it to be first half or will that be more sort of weighted towards the back half when those contracts ramp up?

Back half, when you say back half you mean 2009?

Yes.

You're going to see a lot of volume growth here in the latter half of 2009 I'm happy to say, without projecting it, I mean giving you specifics. But when you start adding in those buses I just talked about and you add in a half year of 8 million gallons for Phoenix and some other things that we talked about, you should see some pretty good growth in the back half of '09.

Okay. And then on the Phoenix contract, you expect to hear something, formal award on that, probably around July 1st, similar to last year?

Supposed to, if I've got my numbers right here, it's supposed to be in effect by July 1st. And it has to go through the city council and through the staff. The staff, as you know, has already recommended it to the city council, so knock on wood, I think we should hear something here in the next four to six weeks. We're ready to serve them today. I mean we don't -- we've got the capability and the fleet in place to do it. We could get a call tomorrow and we'd be ready to go.

Great. And then one just last question for Rick, on SG&A, that's a pretty meaningful reduction on that. Is this a good run rate to go forward with? What you guys did this quarter for the rest of the year? Will there be any sort of meaningful ramp up in that?

Good question. As you know, we don't provide guidance, so I need to be a little careful here. But we always throw the caveat out there that to the extent there are legislative initiatives or marketing efforts that we think will benefit the business long term, we certainly will invest in those. I would also add we are focused on our SG&A and the cost cuts that we did coming into the year look like they're starting to take effect and we're getting some good reductions. So we would look for those to continue. So kind of keep watching it with the caveat that we're always subject to doing what's right for the business going forward. That number, there's nothing I know about right now that would make it out of whack going forward.

All right, got it. Great. Thank you very much, guys.

Pearce Hammond, Simmons Company International.

Good afternoon. In the prepared remarks when you were talking about McCommas, Andrew, so the McCommas volumes would equate to roughly did you say 13 million gallons a year?

I think the number I used was 32,000 gallons a day, is that 13 million a year? It's less than that.

Okay. So if we're going --

That's at that current 4,500 MMBTUs.

FYI, that doesn't run all the time. I mean, it has maintenance and issues and stuff like that, so just don't multiple by 360.

Sure. So if it's going to be in the volumes, would that mean that the gross margin per gallon would be coming down a little bit just because of the gross margin of those gallons being less? Is that correct or not?

That's kind of hard to say. The good news is that the price we're going to be charging is in excess of what the current natural gas prices are today, so we're going to see a significant bump on the revenue line. The question is, just what is it going to look like from an operating perspective? There's just a lot of work out there that the guys do that's somewhat outside our control. I k now this is probably hard to believe, but apparently the guys who run the landfill aren't the most careful guys out there and have a tendency to run over a well or hit some of our equipment, that type of thing. So it's not a real steady state from an operating perspective, but all in all, I would certainly say or give you, indicate it's going to be less than typically what we do from a retail gasoline perspective, but it will still be pretty good.

But should we see those start to flow through in a meaningful way say in Q2?

Yes. We did some capital improvements actually during the month of March. McCommas was basically down all month while they were doing the capital upgrades. And it's been running real well during April and the expectation is that with those capital upgrades it will continue to run well. And if we start in early April with the new pricing and the new contract, it should start kicking in meaningfully to our results.

Great. And then, Andrew, on the AT&T, the 8,000 trucks, if those trucks were say 10,000 gallons a year, that's 80 million gallons, so it's really sizable. What can you share as far as AT&T's plans for who they want to buy the fuel from and your potential relationship with them?

That's a good question. And first off, AT&T -- these are typically vans, okay? So picture a GM van or a Ford van and they use more like 1,000 gallons a day, not 10,000. So these aren't heavy duty trucks. So you have to take your number down there a bit. Still significant, so if you've got 8,000, what's that, that's 8 million gallons. They are going to roll those out over about three years. We are in conversations with the first set of stations with them, in negotiations with them. I don't want to get too far ahead of myself. I think we have to get those first stations under our belt with them and with us and then we'll kind of move to the next phase.

They have put out an RFP for the first I don't know 600 or 800 of those vans, and so those vehicles are beginning to be put into play. You know what's exciting though to me is this leadership that they've shown has kind of caught on. And other large national fleets -- in fact, there's a consortium of about 10 to 13 very large businesses that are making a little pilgrimage to Detroit to talk to our original equipment manufacturers that have like size fleets as AT&T. And what's important about what AT&T did, it kind of got the ball rolling and captured the attention of Ford who really wasn't interested to do that right now. And they have now made a commitment they are going to help AT&T and I hope they do with these other national fleets. So it's a nice bellwether for I think what might happen with some of these other big national fleets.

And then in your prepared remarks, I may have missed this, but just curious your comments on US District Judge Christina Snyder's injunction?

Well I didn't mention that, but -- you're talking at the port?

Right.

We've sort kind of gotten through -- the way I understand it, we've kind of gotten through the legal challenges there and I think that's probably why tonight LA is moving forward on this. I imagine there will be other legal challenges as we go. But you know what's interesting to me there is even those that have brought those suits haven't -- the squabbling hasn't been over whether or not there should be clean trucks or there should be LNG trucks, or if they should try to modernize their fleet. It's been about some other parts of the concession agreements, about where they can park the trucks and this sort of thing. And employee driver is certainly an issue, but I'm under the impression that these issues are getting cleared away and as it relates to clean trucks, we're in the clear.

All right. Well thank you very much.

Eric Stein, Northland Securities, Incorporated.

Hey, guys, thanks for taking the call. I was wondering just a bookkeeping item. Did you break out --

Eric, before you even start, I'm on you.

You are? Good, you knew I was going to ask.

You betcha. Last quarter, or Q1'08 CNG 11.6. Biomethane hadn't started yet because we hadn't done the acquisition, and LNG was 6.0 to get you to 17.6. And current quarter is 12.1 for CNG, 0.9 for biomethane, and 5.3 for LNG gets you to your total of 18.3

Okay. Do you have a port volume number?

No, not exactly, but I think they've been running at what, 6,000, 7,000, 8,000 gallons a day down there recently

Sometimes more.

Sometimes more, so it's kind of in that magnitude right now.

Okay. And did I understand correctly that -- so McCommas was down for a month because I know that 0.9 million TGEs is down a bit from last quarter, is that correct?

It in essence was down all of March. I think it operated for a few days in March or a week maybe, but after that it was down and they were doing all the capital improvements.

Okay, so we should well obviously expect that to tick back up to where it was last quarter or a little bit more since you've seen some improvements there?

With the capital improvements we've expanded the capacity and it should in theory pick up.

Okay. And just sticking with McCommas, the utility customer who is taking the volumes, should we expect that basically all your volumes are going to that customer?

For now I think that's right. And then as we continue to expand the plant capacity, we'll have extra gas to sell to other customers or other vehicle applications. We do have the ability to pull 500 MMBTUs a day out of there per vehicle application like if we do something with the City of Dallas or some other refuse hauler in the area.

Okay, and you're obviously okay with that given that the economics are pretty favorable?

You bet.

Okay. Just kind of switching gears a little bit, just the construction revenues -- I know you don't talk about that a whole lot, but it looked like I mean that was a pretty significant number in the quarter. Is there anything I should read into that?

No, just obviously that's kind of lumpy and sporadic just depending on when things get done. In this particular case there was a big station we did for the Orange County Transit Authority out here in California that we got done during the quarter and that was the bulk of it. It was just a nice little project for us and we also have ongoing O&M with them.

Okay. Let's see -- I guess this is more of a long term question, but I know something I've been reading about at the ports, the potential rule that they may have ships coming in, use LNG as opposed to bunker fuel and now that's, right now it's voluntary. If that is made mandatory, is that something that you would potentially be involved in?

We've played with this some and it's called cold-ironing. I don't know if that's what you're reading about, Eric. It's where you don't use the APUs and the bunker fuel as the ship idles while it's offloading or loading. And we've actually worked with a company that has a way to use liquefied natural gas to run a compressor then to power the ship. That's been tested in Oakland. Electrification, that is putting big power lines up to the ships, pretty expensive and it's pretty awkward. And so we've looked at this cold-ironing, we think it's kind of neat. We certainly have the LNG available. We think it could make some sense and so we're monitoring that, we have a guy here that's gotten to be pretty seasoned on that and so we'll see how it goes. I think you're a little ways out on that, but it wouldn't surprise me that you'll start to see ports in other places look at cold-ironing. Because when you look at the port, and the problem with the port, you've got the trucks, you've got the rail, you've got the ships. And I don't know exactly the breakdown, but those ships certainly account for about a third of it. And it's really from them while they're idling there in the harbor.

Okay, but that's definitely, like you said, that's a ways out, but a potential opportunity.

It's a ways out, but it's one of these things where it's in -- the regulators are looking at it and I don't know when it all happens. We've looked at it, we've actually even been party to a test of it, and so we're keeping, we're monitoring.

It's actually pretty economic, so we're hopeful obviously it does take some roots and get going.

Okay, thanks a lot. I'll jump back in the line.

David Woodburn, ThinkEquity Partners.

Hi, thanks for taking the question. Rick, can you give us an update on the CapEx plan? For 2009, does that still include about 35 stations? Or is that not necessarily a calendar plan?

That might be a little high. We look at things more from a dollar perspective. Right now I think the remainder of the year we're on tap for about another $20 million or so of CapEx as part of our plan. That's kind of the magnitude of where we're at.

Okay. And then, Andrew, a more qualitative question. When -- obviously with the change in natural gas prices relative to diesel and things, are the conversations, the initial meetings that your sales teams are having, are they getting more meetings I guess as a share from municipalities that are looking at both the green and the economical aspect? Or is it with AT&T signing on, are private fleets just as strong a component of their potential pipeline?

You know, it's about -- it's both, it's evenly split. I actually think that we -- the climate has been very interesting. On one hand you've had the price, the pressure come off a bit as you've had the price of oil come down and diesel and gasoline have come down. But the policy impetus for green and green jobs and low carbon and all that, that's put more pressure on. So we're actually in many ways seeing more private fleets look to fuel diversity. They are, as I've said before in these calls, they do believe that eventually when the world economy kicks back into gear, that they're going to be faced with more expensive fuel. And they're also monitoring this move, this green movement. So we are working with lots of private fleets. Yet on the other hand, you're seeing a lot with municipalities. So I don't know if it's 50/50 or what, but there's plenty in both categories.

And can we use the Boise contract, the Republic contract as an example, what was the start to finish timeframe of that?

Those -- as you know, our business is a long lead time business. And by the time that we talk to them or by the time the city is thinking about going out to bid, in this case refuse, it can take six to eight or nine months, a year. And it takes us six months, it takes them six months to get trucks, it takes us six, seven months to build it. So I don't know off the top of my head, but it wouldn't surprise me if early negotiations and discussions with our friends at Republic started a year and a half ago on this very project. That's why we've, as you probably know, we beefed up our marketing department and opened up other offices because we really believe that we need as many projects in the pipeline because they take awhile to fruition. So we've got a lot of projects in the pipeline but they take awhile.

All right, well we'll take the big number then. Thank you.

Rupert Merer, National Bank Financial.

Thank you. Good afternoon, gentlemen. Just one high level question. The low carbon fuel center obviously looks like a great opportunity for natural gas fuel. The ARB's carbon dioxide calculation seemed very favorable for CNG, the fuel is available here and now. But then I look at the ARB's scenario analysis and they don't look that bullish on CNG. It looks like they're only looking for 2% penetration for natural gas by 2020 and only as a diesel replacement. Why is it that they're not more positive? How important is their analysis and how do you think we can change their viewpoint?

Well I don't know that their analysis -- we've had to bring them a long way. When you look at what CARB -- and I have to applaud their leadership for the low carbon fuel standard and what they've done as they've looked at the different fuels. So let's give them a lot of credit, I mean they did come up with four fuels and now -- if you go back nine or ten months ago, natural gas wasn't really on the list. So here as we come to the final rule, we've got natural gas and biomethane out of the four that are contributors. So they've come a long way.

Their staff analysis has always had a hard time getting their arms around how natural gas will compete with liquid fuels. And you know when you go back and look at some of the history of CARB, they focused always on liquid fuels. They didn't see a time -- sure they looked at electricity a little bit, but they really always focused on what is it they do to liquid fuels. So they used to focus, Rupert, on cleaning up diesel and diesel trash because they really -- their -- and maybe it's the right way to look at it, they figured we have all this liquid fuel that's going to be in the market, how do we clean it up?

So their staff has been I think slow to get their arms around the market size, the market potential. We will continue to work with them and bring them along like we did here recently. So I wouldn't put too much in their analysis of what the penetration is.

Okay. And it appears as though they're doing a review on the potential for LNG fuel right now. I imagine you're working with them on that. Do you expect that they might start looking at some scenarios with greater LNG penetration?

Well we are, we're working closely. We have two people, staff members here that work very closely with them and have a good relationship with CARB. They are working on a few other areas of the rule. You known the rule will get sort of finalized and put in place here over the next six months. So we are working with them. They will look at the analysis of how much LNG will go in. When we talk though, when you and I right now talk about LNG, it's not that it's imported LNG, it's just LNG as it relates to a vehicle fuel versus compressed natural gas.

Okay, and just finally, do you have any view on what the credits might look like that you'll generate from selling the CNG and LNG starting in 2011?

Well, we're getting our arms around that. What we know is that we will generate credits. And we also know that the way that the low carbon fuel standard goes into effect, that in the early years, the ramp if you will, for the oil, the refiners and this, it's gentle in the beginning and then it really picks up speed in the out years. But when you look to I think it's 2012, 2013, 2014, you're starting to talk about having to make reductions on billions of gallons and so it gets to be pretty big numbers. And so I'm not going to sit here and tell you that I know what it is per ton and how they're going to get traded and what they're going to be valued like. But we know that you're going to see a market and it looks to us like it's going to be pretty interesting starting in about 2012.

Great. Well, thanks very much.

It may start even earlier than that. 2011. We're going to be able to start banking them before that.

(Operator Instructions). [Roy Hoyn], Janney Montgomery Scott.

Hey, it's John Roy. I don't know why he got the name wrong. Hey guys, one quick question. On the V-TAC capture rate, I noticed that it dropped pretty good this quarter unless my math is wrong of $0.22. Was there something particular that was going on there or is that --

Yes, hi, John. The biggest thing there is one of our customers switched from a gas deal to and O&M deal that was pretty large. And we no longer qualified to get the credit anymore. And so that's why you're seeing a dip.

All right, should we kind of model that growing in the future as you continue? Because that's been the kind of thinking in the past. Should we still continue to model that?

Yes, I think we believe that's right. All the port trucks that are going to be doing the LNG for our station down there, we'll get V-TAC on that. Certainly additional retail opportunities, buses -- well not necessarily buses, but expanding vehicles and such at our infrastructure will qualify for V-TAC, so it's certainly our goal to move that number up.

So one last question on this. When that customer changed their situation, does that negatively impact your gross profit per TGE the way you calculate it, or is there some other way you get that back?

From a dollar perspective, it's the same. It's just instead of charging them for the commodity, we won't be doing that anymore. It was an index plus deal, if you will, whereby the index went away.

Got it, that's what I kind of figured. Okay, thanks.

Thank you. At this time there are no more questions in queue. I would like to turn the call back over to management for any closing comments.

Well, thank you, everybody, for participating. And just briefly in closing, as you can see, we're making good progress on our goals to expand our base. We're adding some new geographies and we're readying ourselves for the benefits of the progress at the ports. Low carbon fuel regulations that have passed and the federal legislation that is pending will play a significant role in our ability to expand our mission. As many of you know, next Tuesday, May 12th, is our annual meeting where we'll have on display the prototype of the CNG fueled paratransit and taxi panel van that we are probably funding and which will be available for sale in the first half of next year. So we look forward to seeing some of you at the annual meeting. In the meantime, we appreciate your continued interest in supporting Clean Energy. Thank you very much.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you very much for your participation and have a wonderful evening.