Clean Energy Fuels Corp (CLNE) 2009 Q4 法說會逐字稿

Greetings and welcome to the Clean Energy Fuels fourth quarter fiscal 2009 earnings conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (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 begin.

Thank you. Earlier this afternoon Clean Energy released financial results for the fourth quarter and 12 months ended December 31st, 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 that you some of the information contained in the news release and on this conference call 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 the 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 to the risk-factors section of the Clean Energy Form 10-K, which will be filed with the SEC later today. These forward looking statements speak only as of the date of this release, and the Company undertakes no obligation or (inaudible) to publicly update any forward-looking statements or supply new information regarding circumstances after the date of this release.

The Company's non-GAAP EPS and adjusted EBITDA, which will be reviewed on this call, exclude certain expenses that the Company's management does not believe are indicative of the Company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance to GAAP and should not be considered as a substitute for or superior to GAAP results. The most directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA, and a reconciliation between the non-GAAP and GAAP figures is provided in the company's fourth quarter 2009 press release, which has been furnished to the SEC on Form 8-K today.

Participating on today's call from the Company are President and CEO Andrew Littlefair and Chief Financial Officer Rick Wheeler. And with that I will turn the call over to Andrew.

Thank you, Ina, and good afternoon, everyone. We ended 2009 on a very positive note, and we continue to see great progress for the industry and our Company. In the fourth quarter we grew our volume by 58%, and we produced another strong cash flow quarter by generating $5.8 million of adjusted EBITDA. Importantly, we ended the year with $67 million in cash, leaving us well positioned to continue our growth in 2010.

Reflecting on the full year, we are particularly pleased that in a very tough economic climate we experienced growth in all of our key markets, including refuse, regional trucking, transit and airports. We added more projects than ever before, and the volume of our backlog has more than doubled. The fact that we saw acceleration in station construction at a time when all of our customers were focused on cutting their costs is really a testament to the appealing economics of natural gas. The spread between the price of oil and natural gas, which drives our economic advantage, continues to hover in the 13 to 15 to 1 range, and today in fact it was 18.5 to 1. Even when I look out to the futures in 2015, it remains at about 14.5 to 1. So this is good for us.

We are also very encouraged by some of the recent activity we have seen for our industry. As many of you are aware, in December Exxon agreed to acquire XTO Energy. Exxon's decision to expand into shale gas validates the huge potential of the natural gas market. And this underscores our belief that there will be an increasing presence of natural gas in the energy picture, as it is cleaner, economic and a domestic resource.

Also it seems the shale natural gas reserve estimates just continue to grow. At the end of the year, the Colorado School of Mines released a study with US gas reserves near 2,000 trillion cubic feet. A couple weeks ago I saw a report from JP Morgan that estimated the shale unconventional reserves in place in North America are closer to 8,000 trillion. Now, of course we won't recover all of that, but it has been suggested 4,000 trillion could be a realistic number. So gas supply is not a problem.

Now I would like to spend a moment discussing BAF. As we said last quarter, we closed on the acquisition of BAF on October 1st, so the fourth quarter was our first quarter during which BAF was included in our operating results. We are very pleased with the momentum we are seeing for BAF. As you recall, AT&T submitted its first purchase order for 600 vehicles to be converted a while back. And we finished these conversions in December. AT&T has since issued purchase orders for 1,390 vans to be converted in the first three quarters of 2010 and appears on track to issue a purchase order for 463 vehicles for the fourth quarter of this year. We have had nothing but positive feedback from AT&T and their experience with BAF and their vehicles, and we look forward to a long-standing relationship with AT&T as they continue to increase their use of clean vehicles.

BAF is working with other large national fleets, regional shuttle companies, taxi companies, the state of New York, the state of Texas and gas producers. So far it looks like these sources will add another thousand vehicles in 2010. Overall, we view the increased activity surrounding BAF's business as a testament to the promising developments in our industry.

BAF's business struggled for a while a few years back, but is evident they have turned a corner in the last six months or so. We are pleased that we are now in a position to capitalize on the synergies of Clean Energy and BAF, and based on working together we see significant, profitable growth for BAF in the future as they increase the number of natural gas vehicles on the road. And remember, we fuel a great percentage of these vehicles.

Now turning to an update on what's happening at the ports of LA and Long Beach. There are approximately 580 LNG trucks operating at the ports, and there are another 470 or so LNG trucks that have been awarded grant punts. Of the 470, a couple hundred are being produced right now by the OEMs and delivered to the dealers and the customers as we speak. Of the remaining so 250 trucks, we are helping these customers obtain financing through outside sources, which is going very well. And we hope to have these trucks financed and operating at the ports by the end of April. So all in all, we should see about a thousand trucks operating at the ports in the second quarter of this year.

And as these programs develop, we are starting to see some early adopters of LNG ordering additional trucks, which confirms what we suspected, that once a customer begins using LNG trucks and sees their performance and fuel savings, they will continue to order additional trucks in the coming years. One interesting trend that we are seeing at the ports is that LNG trucks are getting more work than their diesel counterparts. Often LNG trucks are running more routes. Not only because the fuel is cheaper, but also because the container fees are waived for them, making it less expensive for clean trucks to move in and out of the ports.

This Friday, another solicitation of $16 million will be answered. And we think it will be oversubscribed and should fund between -- another 200 to 250 LNG trucks. One nice thing about this program is the trucks don't have to operate exclusively at the ports, but can operate in certain parts of Southern California. And we view this as a positive development, as these funds will now be open to other fleet operators in our largest market and will help support the network on public LNG stations that we are developing in Southern California.

We are continuing to see a host of economic incentives and grants to encourage vehicle operators to make the switch to cleaner fuels. We are proud of the good work of our grants department. In 2009 they lined up more than $95 million in grants for us and our customers. And in the first quarter of 2010 we have already submitted another $23 million in grant requests. Even in these difficult economic times, we are seeing air districts, cities, states, among other entities, continuing to issue grants and incentives.

Concerning the stimulus funds we were awarded, we are beginning to see the funds flow and the projects finally begin. We have started or completed construction on four of the 12 project we were awarded. These four projects include our first project in Idaho and our first three projects in New Jersey. These funds are helping us expand our footprint across the United States.

On the legislative front, I have some late-breaking news. About an hour ago, maybe an hour and a half ago, the Senate passed the Extenders Bill which contain the extension of VTAC. They passed it in the Senate 62-36. And depending on if the House accepts all the amendments, and we believe they might, this could be signed into law very shortly. That's good news. Everyone on this call knows we believe that the NAT GAS Act will be an important catalyst for the move toward natural gas for heavy duty trucking. I continue to be optimistic, and in fact we believe we are seeing the critical mass that can move this legislation.

It is a bit complicated to describe the machinations of the legislative process here, but let me say there are several groups working, about three in the Senate and two in the House, that all incorporate the NAT GAS Act. Senator Reid continues to push hard, as does Senators Menendez, Senators Kerry, Lieberman and Graham have all indicated strong support, as well as the so-called Group of 7, which includes Senator Udall, Senator Pryor and others. We believe a more comprehensive energy bill is likely to materialize in the Senate in the next couple weeks. And it is this -- and it will be this vehicle that will contain the NAT GAS Act and likely move its way back to the House.

Another development on the legislative front that we stand to benefit from is the adoption of a low-carbon fuel standard by 13 states. Also, on the local front we continue to see current legislative activity. For instance, Oklahoma recently passed a bill that sets a goal of having a public CNG fueling station every 100 miles along their interstate highway system by 2015. These developments highlight the growing nationwide awareness and push toward cleaner technologies which should benefit us. Just today, in fact, the Dallas city council adopted a front-of-the-line privilege for CNG taxis at Dallas Love Field.

Our McCommas landfill project is going well. With the capital upgrades we did in the first quarter of 2009, the project now is capable of generating approximately 950,000 gallons a month. We are also investigating the possibility of obtaining some project financing to expand the plant's production capabilities further. Because, as you recall, with the premium we are receiving for renewable gas being produced, the economics of the project are very attractive. Because of our success at McCommas, we are often approached by other landfill owners who are looking for someone to partner with to collect and sell their gas. We are also working with some of the refuse customers to see if there is a way we can work with them to capture the benefits of landfills that they own.

Now I would like to discuss our business in regard to some of our different sectors. We experienced growth in all of our sectors, and we are confident we will do so again in 2010. In particular, our refuse business continues to grow at a fast rate. Three years ago we had natural gas refuse trucks in just three states, and now 11 states. We are doing business with the three largest refuse companies, and they are buying more natural gas trucks than ever before. So far in this year we already have 34 projects in the backlog for this segment.

Another -- airports is another sector where we have seen accelerated growth. During 2009 we added stations at four airports, and we are now at a total of 23 airports, and we have five more airports where we are negotiating with them. With this presence, we are now in business with seven national shuttle operators, including the three largest, Fast Park, Park 'N Fly and The Parking Spot. Avis and Hertz just added 40 buses at LAX, and in January we were awarded the DFW rental car bus facility and are building another station at DFW for Parking Spot. Also it is worth noting that often times when we build an airport station, BAF benefits from these efforts by producing the various shuttles and vans that service the airports.

Before I turn the call over to Rick, I would like to highlight a few other developments we are working on or we're involved with. Let me for a second mention our engineering carpet. These are stations or major upgrades that are either under contract or committed to. Some are in design, permitting or construction. Last year we completed 29 station projects, and at present we already have 52 underway and signed. Last week we signed a deal to take over and upgrade 13 stations in and around New York. These stations, along with our network of 12 stations in the area, will give us a strong network to go after the taxi and black-car markets in the area.

This network will also be beneficial for us in anticipation for the MV-1 vehicle launch scheduled for later this year. As you recall, the MV-1 vehicle is a new ground-up natural gas vehicle that can be used in paratransit, taxi, delivery van applications, among others. In support of its anticipated launch, we are also developing networks in Chicago, Philadelphia and Houston to go along with our existing networks in LA, San Francisco and Dallas. Okay, so now let me turn the Rick over -- the call over to Rick.

Thanks, Andrew. Before I review our financial results, I would like to point out that all of my references to our results will be comparing the fourth quarter of 2009 to the fourth quarter of 2008, or comparing the year ended December 31, 2009, to the year ended December 31, 2008, unless otherwise specified.

Volumes during the quarter rose 58% from a year ago to 29.5 million gallons. The increase in volume between periods was in large part due to our increased port volumes, increased volumes from the transit properties we acquired from Exterran and increased sales at our landfill gas project in Dallas. We also saw an increased volume in the third and fourth quarters of 2009 from the additional piece of the Phoenix LNG supply contract that we won last year and commenced on July 1st. For the 12 months of 2009 we delivered 101 million gallons of fuel to our customers, up from 73.5 million gallons.

We earned $0.02 per share on a non-GAAP basis in the fourth quarter of 2009. This compares with the non-GAAP loss of $0.12 for the fourth quarter last year. For 2009 on the non-GAAP basis, our loss per share was $0.03, compared with the non-GAAP loss of $0.33 last year. Our net loss on the GAAP basis for the fourth quarter was $1.9 million or $0.03 per share. This compares to a net loss of $23.7 million or $0.49 per share. Our net loss for 2009 was $33.2 million or $0.60 per share, versus a loss of $44.5 million or $0.98 per share in the prior period.

During 2008 we incurred $18.6 million of nonrecurring costs related to supporting a California bond initiative, $14.9 million of which was incurred in the fourth quarter of 2008. During 2009 we recorded a noncash charge of $17.4 million related to valuing our Series I warrants, which is required this year under certain accounting requirements. The primary driver of the amount recorded this year was the impact our higher stock price had on the valuation model we used to value the warrants.

Before I move on, I would like to emphasize that the Series I warrant adjustment is not a cash liability of the Company, but rather a required exercise we must do under the accounting rules to mark to market the warrants each period due to the exercise price reset feature of the warrants. After the exercise price reset feature goes away on November 3, 2010, due to other exercise price protection features of the warrants, we will still be required to value them each period and take corresponding losses or gains until they are exercised or expired.

Adjusted EBITDA in the fourth quarter of 2009 was $5.6 million, which compares to a loss of $3.2 million in the fourth quarter of 2008. For 2009 the adjusted EBITDA was $15.5 million, compared to a loss of $6.8 million in 2008. Adjusted EBITDA is a financial measure we developed to highlight our operating results, excluding certain large noncash or nonrecurring charges that are not core to our business, including the amounts we are incurring for the Series I warrant valuation, our stock-based compensation charges for our options, and in 2008 the cost we incurred to support the California bond initiative. Adjusted EBITDA is described in more detail in the press release we issued earlier today.

From a margin perspective, our gross margin increased about $3.2 million from the prior quarter. About two-thirds of this increase was generated by BAF, which we acquired on October 1st. Our margin per gallon on our fuel sales was $0.46 for the quarter, which compares with $0.42 in the prior quarter. This increase was primarily attributable to the Pickens Plant being up in the fourth quarter, which reduced our transportation costs to our Texas customers in the period, and a settlement we recorded in the quarter with one of the LNG suppliers to reimburse us for the extra costs we were incurring while the plant was not operating.

For the quarter our revenues were $42.2 million, up from $28.3 million last year. For the year our revenues totaled $131.5 million, up from $125.9 million. During the fourth quarter of 2009, our subsidiary, BAF, contributed $6.9 million of our revenue total for the period. At December 31, 2009, we had $67.1 million in the bank and $20 million available under our line of credit with Plains Capital Bank.

Our 2010 capital expenditure budget is $86.3 million and is based on the NAT GAS Act or similar legislation passing that would spur our growth. If this were to occur in order to capitalize on this opportunity and to preserve our market leading position we likely would need to raise money during 2010 to fund our anticipated growth in future years. If some form of legislation does not pass that promotes the natural gas vehicles and fuel, our capital expenditures may be significantly less than $86.3 million during 2010. In this case our capital raising needs during the year will be determined by the timing of the rollout of the current fuel supply and station construction projects that we are working on, as well as any unanticipated capital expenditures, investments or acquisitions we may pursue. As we mentioned before, we will try and pursue debt facilities to fund our capital needs before pursuing equity options. And 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 from the line of Steve Milunovich with Merrill Lynch. Please proceed with your question.

Thank you very much. Would you guys care to hazard any guidance views on 2010 in terms of what kind of gallon increase you think is likely? And I assume the NAT GAS Act, if it passes wouldn't necessarily have that much impact on this year, it would be more future years.

Steve, we haven't provided guidance on that. And I think you are right. The NAT GAS Act, while I think we will see a lot of activity and a lot of interest. Let's say if it passes in the next couple months, you will see a lot of action, but you won't see a lot of the volume drop in probably until 20 -- next year.

Okay. And what is your station backlog? I think you said you will build 50 plus this year, but I assume your backlog is larger?

That's right. The -- I use these terms, and I know they are a bit funny. The backlog is a term that I have used over time. You and I have talked about that. Is a larger number, but those aren't necessarily under contract or ones we already committed to build. That number has grown substantially, and I am very pleased with that. And that's what makes me believe we have seen an inflection point. In fact I was visiting with our Board last week at our Board meeting, and that number is almost tripled. Now remember, those are stations where we have been working with the customer. They have been passed through some engineering and financial screens, but they are not necessarily under contract. Some of them are under negotiation for contract. That number has gone from almost 80 stations six to eight months ago to closer to 175 now. So that we have seen almost 200 now. So we have seen great growth there.

The number that I just mentioned just now on the call is our engineering carpet. Now those are stations that we are committed to building and/or are under contract. Last year we did 29 stations. Right now, either in permitting, in construction, it is 52 stations. We know we will build 52 as we sit here today, and I hazard a guess it will be much bigger than that.

Okay. And then kind of on the same store sale basis, can you make any comments in terms of what volumes per station increase you saw in 2009, and what we might expect to see on the CNG side in 2010?

Let me come -- I don't know I can sit here and give you an exact same store sales growth number. Steve, we will try to give a little color on that maybe to you later, but we are seeing for instance -- let me just talk first on the LNG side. The LNG stations that were in the port started out the year where they were doing 8 to 10,000 gallons a day. And I checked the reports last night, and the station has almost seen a doubling of the volume there. And that will continue to grow as those other 5 -- 700 trucks come online.

So we are seeing nice -- we will in 2010 see some nice stations, same store sales growth at some of our large LNG stations. At certain of our network stations at -- for instance we fielded that I think it is about 6 to 800 AT&T vehicles that have all gone to our network stations so far. And so those are network stations where we are seeing additional growth, some of our airport stations have seen nice growth. LAX's was up in 2010 about 35% to 40%. So I can't give you a systemwide -- I'm hazarding a guess it is more like 6% to 8% -- but at some of our CNG stations. Rick, I don't know if you have a better way to answer it.

I think that's right. We don't necessarily look at same store sales growth like a retailer would. We look at stuff by projects. As long as we are managing that project and ensuring that the vehicles are coming on online, the same store sales growth takes care of itself. Like a lot of the trash deals we do for instance, they only initially buy 10% or 20% of their fleet day one and convert it to natural gas. Then each subsequent year they put another 10% or 20% on there. So that's kind of built in the same store sales growth.

And we certainly focus on it. Because anywhere we can add vehicles into our existing network, like our network in and around LA, if we can put more cabs on that particular infrastructure, other shuttle vehicles, that's just additional gallons and economics without any CapEx. So we certainly like that. We certainly try to do that. In fact, with some of the AT&T stuff we have done, we have been able to -- wherever they wanted to deploy vehicles where we have networks of stations, we just put them in where we have fueling for them.

And that's just a great example of how we can add gallons without increasing our CapEx, which obviously is good for us economically. We kind of watch it and monitor it more from an indirect perspective than looking at just traditional same store sales numbers like perhaps as a retailer would.

Okay, thank you.

Our next question is from the line of John Roy with Janney Montgomery Scott. Please proceed with your question.

Hey, guys. Hey, nice quarter. Real quick, in terms of the stations you announced in L.A, the LNG stations, can you give us any kind of idea when those are going to start and when those might finish? Because I know that will connect into the network of what the others are doing as well.

That's right. Those -- a couple of those -- those are the ones that we announced earlier last -- late last month. Those are in Los Angeles, City of Commerce, Industry, Fontana. And for those of you that are familiar with Southern California, they really -- for the most part those stations kind of spread out east into what we call the Inland Empire. Also the Otay Mesa stations down to the San Diego border, and then one up toward closer to Bakersfield, which gets you up toward the San Juaquin valley, which is important distribution center as well.

Three of those -- four of those are under construction right now. They will all be done by the end of the year. And that will be timely with these other 700 some odd trucks that will come on, 4 or 500 of which will come on in April. Most of those will be at the port. But these next 2 to 250 that I mentioned will be scattered out in the greater South Coast Air Quality Management District. So I think -- does that get it for you?

Yes, no, no. That definitely does, because I'm kind of figuring out. Because those are going to be probably reasonable volume, won't they be?

Yes, they will be. The LNG, as we talked before, the LNG stations have -- can have pretty significant volume on them. Because each vehicle uses a hundred gallons. While it takes a lot of light duty vehicles to get to a thousand gallons a day, it doesn't take many trucks. So, yes, they'll -- it will be a nice add. And remember, I casually mentioned the several hundred or so additional trucks, that number. Those are averaging between 15,000 or more gallons a year.

Right.

So those are nice volumes.

One other quick question, I know, Rick, you normally give us the LNG versus the CNG. Can you give us that real quick so we have it?

Sure, John. For the quarter CNG was 19.6. These are millions, obviously. Biomethane was 2.1 million, LNG was 7.8 million. That adds up to the 29.5.

Great. Thanks, guys. Talk to you soon.

Thanks, John.

Thank you. Our next question is from the line of Rob Brown with Craig-Hallum. Please proceed with your question.

Good afternoon. I think you mentioned on the BAF business that you had another thousand trucks in your pipeline. Could you just give us some color there on those. Are those contracted trucks or are those things you might get?

For the most part that's contract. They are not all trucks, Rob. Some of those are taxi cabs. About a hundred or so -- I think 85 of which we've already produced. There is about 50 airport shuttles that are in that thousand. There is another large national fleet that I'm counting in that number that I'm not gonna give you any more color on, but that will be in that number. And then there are easily -- I am feeling comfortable about that thousand number I've given you -- there is easily another 500 or so that I'm at getting up to that thousand. And this is where we see pickup trucks for the state of Texas and then New York. I don't know that we have all of the contracts in, but we are negotiating on all those right now. So I feel comfortable that we will get those all done. And then hopefully it will be more. I am trying to be conservative.

Okay, and then is it -- in terms of revenue is it similar to the AT&T business or maybe lower revenue per unit?

Some of them are the same. Some of them are a little lower. In some cases we are using outside dealers and small volume manufacturers to do that business, where margins are very nice, but the revenue per vehicle may be slightly lower. But a lot of that is in-house in Dallas.

Okay, great. Thank you.

Our next question is from the line of Graham Mattison with Lazard Capital Markets. Please proceed with your question.

Hi. Good evening, guys.

Hey, Graham.

Just a quick question on the acquisition you made during the quarter, and [on general thinking] terms, so what you are looking [as] potential for additional acquisitions and what type of price are you guys looking to pay? Is it the $0.25 per gallon, similar to the Exterran deal last year?

No, I mean, that was kind of unique just because it was in the transit business, why the math worked out the way it did. Obviously, if it is a retail operation, it is going to be higher than that per gallon, depending on capital, et cetera, and what we are buying. We need to be a little careful on what we are looking at or thinking about. But we always have our eyes open and are looking to see what's out there that may make sense. From adding onto the business, if we think it would be a nice piece to add on, we'll look at it. And if it makes economic sense, and we can get it at a reasonable price and it is something we would look at, but --.

You really have to look, Graham, at those gallons and what the margin is on the gallons. As you know, the transit gallons are thinner margin. If you are able to acquire some -- and there are not many left -- but if you are able to acquire some, quote, unquote, commercial retail public taxi-type stations, those carry a much higher margin. In which case you pay more than that number you are using for the transit.

So that would be more like a $0.50 or $0.75 number?

It just depends on what it is doing and how much they want for it and all that good stuff.

All right. But that's just a loose range on that. And then actually, Rick, you mentioned there is a one-time gain in the quarter that was with the margin. How much was that gain and what would the margin per quarter have been without that?

I would rather not say what it was out of confidentially -- or for confidentially reasons, but I would say it would be close to that. Because keep in mind that was offsetting the increased costs that we were incurring. It was kind of a wash.

Gotcha. And one question on the tax extenders bill, and [it] will probably go through by the end of the month. So that will be retroactive for you guys, but going forward, how are you -- has that changed anyway you are negotiating your contracts in terms of whether you keep it or how much you split or how much you share? And how should we think about long-term margins of that going forward?

We've made, I think -- and I think most lawmakers understand that one-year extensions on these kind of things is not really the right way to do business. I mean, they'll tell us that, but it is kind of what's been easy for them to do right now. As you know the NAT GAS Act had some much longer extensions that it considers. And so this extends the VTAC for a year. We have always in all of our existing negotiations and contracts with customers, we've always had outs for if the VTAC goes away and it disappears. And so -- and our customers now, especially after -- since the VTAC went away here a few months ago, they understand that now too. So we are very mindful of it. I do happen to think that it is important. I think it is an important piece of legislation that the House members and the Senators understand. I don't think it is going to sunset at the end of this year. I think it will get extended and it wouldn't surprise me that VTAC -- some extension could find its way in a broader energy piece. In energy -- in a more comprehensive energy bill or the NAT GAS Act, if that thing moves along.

Okay, got it. It I will jump back in que. Thank you.

Thanks.

Thank you. Our next question is from the line of Pearce Hammond with Simmons and Company. Please proceed with your question.

Good afternoon.

Hey, Pearce, how are you doing?

Good, good, thank you. Very good gross margin per gallon this quarter. I know you don't provide guidance for '10, but is that gross margin per gallon reasonable to think about for 2010?

Yes, I mean, gross margin is not an exact science, right? It depends on the mix, and where we are pulling product from, and who is coming in and who is going out, and all that good stuff. It is not an exact science, but it is kind of hovering in where it has historically. And the Exterran acquisition is kind of in there now, and is having its impact, and the additional port trucks that are showing up, that is certainly helping and that was part of the reason to bounce back a little bit in the fourth quarter. So, knock on wood, but it assumes our LNG production facilities stay up and running, our sales mix stays the same and all that stuff. But it is certainly something that shouldn't be unreasonable.

Thank you. And then on VTAC, I certainly believe it will get extended and obviously be retroactive. If for some reason it didn't get done by the end of March, how would that look from an accounting standpoint for Clean Energy Fuels? Would we see a decline in margin for Q1, but then a pick up in say Q2? Or how do you see that looking?

I guess in theory we wouldn't recognize the revenue for whatever piece that is not retroactive for in the first quarter. And then whenever it does become effective, which in theory, if it is day one of the second quarter, then we would be back on track with our normal quarterly filings for the second quarter. You have a hole I guess in there if it is not retroactive.

But it is contemplated to be retroactive right now.

And then, Andrew, one final question. If the NAT GAS Act passes and basically let's say the government said let's move forward with natural gas fuels in a big way. And so you have a complete green light to move forward, where would you see the biggest -- I don't know if the right word is choke point, but where would be the limiting factor? Certainly not the supply of gas. Would it be LNG facilities, or would it be engine manufacturers or -- where have you identified the kind of key constraint?

It is gonna take a while. It is gonna take a while for the customers to understand and purchase the trucks and understand how it works and get with the -- I think the OEMs and the engine manufacturers will come around relatively quickly. But they don't just start making natural gas engines overnight. So we do know that there is a period for those platforms to get -- engineered onto the line and come to market. The good news is, because of the increased momentum of natural gas, we have seen some important things with Volvo and Navistar's recent announcement about their 13 and the Cummins 13-liter product. So there is now, really dramatic, three or four more platforms kind of in the works right now that weren't even in the works three or four months ago. So I like that.

I would say your choke point though would be that the bredth of product, and it will take a while, but I have full confidence in the capacity -- in the industrial capacity of the country and certainly in these equipment manufacturers and the engine manufacturers. My take of nine months, 12 months to really get cranked up, but, boy, once they get cranked up they turn out a lot of trucks. That will be -- that will take a while to get tuned up.

And then I would say looking out in a year, year and a half, you need to see some LNG production capability come online. If not come on-line, be announced. I think we are okay for a year or so in the country, but I really think the latter part of -- or the summer of 2011 we are gonna see a lot of activity, a lot of stations being built, and we will be needing LNG capacity coming on later in 2011, early 2012.

So it is those two things. You got. It it is engines, selection of engines and platforms, and it is -- eventually it will be LNG. The LNG production capability, it can happen. There's a lot of gathering plants, gathering systems, compression. There are a lot of facilities out there that can be augmented and can come online, but those producers need to see that there is a need for it. I think the NAT GAS Act will give them that signal.

Well thanks and congratulations on a great quarter.

Thank you.

(Operator Instructions). Our next question is from the line of Eric Stine with Northland Securities. Please proceed with your question.

Hi, everyone. Thanks for taking the questions.

Hey, Eric.

I was wondering if we could just go back to the stations you recently announced that you will be building in Southern California. Just to get a sense of the size again -- I mean, should we think of those more like the Carson Street station, or more the Anaheim and I, the port station.

The Carson Street station.

Okay, so fair to say that --.

Right. These will be stations that will be smaller. They will have plenty of capability. You can produce a lot of volume through those, because unlike a CNG station that is really limited by the compressor capacity, all you need to do on LNGs is pouring more LNG in the tank. You can pour a lot in there. But they'll be -- they will have one -- some of them will have one, some will have two 15,000 gallon tanks. Because, you remember, we like to dump 10,000 gallons in at a time. And usually you will have two to four hoses.

Okay. I was more getting at -- we should think about those, just given the size, that those maybe come on sooner in the year rather than later?

Yes, as I said, some are under construction now. We haven't turned the shovel yet. We are in permitting. They will sprinkle in. I don't need them all right this second. But they will sprinkle in -- those stations will all be done by the end of the year.

Okay. And these -- there are no anchor tenancies-- are going to be public, so that certainly helps your margins. And I would assume that's based on conversations with fleet.

That's right. There aren't -- I don't want to say there aren't any anchor tenants, because that wouldn't be right. There are anchor tenants on these. That's our model. We like that. But they will be open to the public. So you will have a blend of commercial retail pricing and also some discounted volume pricing.

Okay. Maybe we can just switch to the station pipeline. Pretty impressive numbers you talked about. Can you give us a sense of maybe the percentage that is O&M that you see, versus supplying the fuel, and if that's changed with this growth.

Okay. Some of the -- some of our refuse stations are a combination -- some of them are construction and O&M. I would say that is probably of our refuse stations that are sort of in the pipeline, 60% of them are -- 40% are O&M and construction and the other 60% are full both. But of the numbers I gave you, I'm kind of shooting off the top of my head. I would say a vast majority of the 52 are not O&M, but are commercial retail.

Okay. That's helpful. And then lastly, just going back to BAF, you talked about the thousand additional beyond AT&T and the national fleet. Can you just update us on the Verizon RFP that was out there, and is that something we should think about as being potentially incremental?

I don't have any -- other than they went out to bid, and they haven't made an announcement yet. I don't have really anything other than to say about Verizon, though I feel very confident that that's likely to happen anytime.

Okay. Thank you very much.

Okay.

Mr. Littlefair, there are no further questions at this time. I would like to turn the floor back over to you for closing comments.

Okay. Well, thank you very much. In summary, 2009 was a good -- great year for Clean Energy. And we are optimistic that 2010 will be even better. There is tremendous awareness about the benefits of natural gas, and Americans really never before have been more committed to green initiatives. And so to ensure we capitalize on the growing number of opportunities, we beefed up our engineering team to enable us to build these stations and meet the anticipated increasing demand. And we have added sales staff, and now we are spread out in about 10 or 11 sales offices across the country. So we are -- we've never been talking and working with more fleets as we are now. As the leading provider of natural gas for transportation, we think we are in the right place at the right time, and we look forward to seeing where this opportunity takes us. We look forward to reporting to you on our next call. Thank you very much.

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