Clean Energy Fuels Corp (CLNE) 2010 Q1 法說會逐字稿

Greetings and welcome to the Clean Energy Fuels first quarter fiscal 2010 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 now begin.

Thank you, Operator. Earlier this afternoon Clean Energy released financial results for the first quarter ended March 31st, 2010. 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 website for 30 days.

Before we begin we would like to remind you 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 in the risk-factors section of the Clean Energy's Form 10-K, filed on March 10, 2100 and its 10-Q that will be filed later today. 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 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 with 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 press release, which has been furnished to the SEC on Form 8-K today.

Participating on the call from the Company are President and CEO Andrew Littlefair and CFO Rick Wheeler. And with that I will turn the call over to Andrew.

Thank you, Ina, and welcome everyone joining us this afternoon. It's a hell of a day for an earnings call so we appreciate you being on. Today we reported another good growth quarter year after year. Our volumes and revenues are up and we added contracts during the period. And our construction activity continues to be robust.

As you recall, in 2009 we completed the construction projects for 29 new or upgraded stations. Today we have 59 construction projects currently underway. These are projects either in the design, permitting, or construction phase. In addition we have about 160 projects that are in our pipeline. These are projects that have been initially screened by our sales, engineering, and financial groups. So I'm pleased with the station construction expansion that has shown an increase of 100% so far this year over all of 2009.

This expansion of our market opportunity is due in part to the investment we've made in expanding our sales force, engineering, and construction groups in order to increase our presence in key markets, particularly refuse, airports, and regional trucking. We see a tremendous number of opportunities coming and we have the right team in place to insure we capitalize on them.

Now let me review some of our new deals by segment. First, in the refuse market, Republic recently announced that 20% of their new purchases in 2010 will be natural gas which will bring the total number of Republic's natural gas trucks to more than 450. We are now working on seven stations for Republic for this year. As the second largest refuse company, Republic represents huge opportunity for us. Obviously we like the fact that another major national fleet has made a significant commitment to natural gas.

We are seeing an ever expanding list of opportunities in the refuse sector. Let me give you some color on our progress in this segment by highlighting a few other deals that we haven't talked about before. This quarter we signed a 20-year deal with Los Angeles County Sanitation to operate two stations at the Puente Hills landfill. Puente Hills is probably the largest municipally owned landfill in the country. We also recently signed a three-year LNG supply extension with Harrison Industries of Ventura. Harrison currently operates 30 LNG trucks and we hope to penetrate their 120 -- 150 truck fleet with more.

We have a new deal with Alpine Waste which is the largest independent hauler in the Denver metro area. The station will start with 26 trucks. In Maryland, Unity Disposal just began fueling 20 trucks at the Clean Energy station in Montgomery County. And in Texas, Royal Disposal, the first private hauler in Texas to go CNG has taken delivery of eight trucks and is fueling at existing Clean Energy stations. Also, for the city of Dallas, we are now fueling 26 of their trash trucks.

Finally, IESI, the third largest hauler in the United States headquartered in Ft. Worth, is in the testing phase for natural gas trucks. In New York, our New Huntington CNG station already is fueling 35 trucks a day and there are five additional trucks on the way. In California we recently signed a 10-year station deal with Livermore Sanitation for 32 CNG trucks, and Mission Trails Waste Systems of Santa Clara which is for 35 CNG trucks.

Just yesterday the huge National Solid Waste Association Convention wrapped up in Atlanta, Georgia. Every truck body maker and supplier is offering natural gas trucks and product. Six natural gas trucks were on display on the convention floor. Our team met with hundreds of fleet operators. This industry is really now a believer. They know it works, it's clean, and they save money. We now do business with 61 different refuse companies.

Turning to our progress in key -- turning to our progress at key transportation hubs, we just announced a deal with Super Shuttle which operates at 33 airports. And by the way, each of their vans use over 8,000 gallons of fuel a year. Included in the announcement was Super Shuttle's deployment of 40 CNG vans in San Francisco. We look forward to additional deployments in the future.

At the Dallas/Ft. Worth airport, we were awarded a 10-year contract to build and operate a new CNG fueling station to support the airport's rental car center which will have a new fleet of 46 CNG buses. In addition, our contract for DFW's onsite CNG station was extended through June of 2020. Once we complete our three station at DFW we will not -- when we complete our three station at DFW, we will not, we will -- that will allow us to expand our service to airport shuttles and buses. But it will also allow us to continue to expand our relationship with the cab operators at the airport such as Cowboy Cab and Executive Taxi who have deployed 35 units in recent months.

As an example of our expanding airport business, Parking Spot has been a good national customer and partner for us. We started with them with a handful of vans and one airport and now they are operating in seven of our airport locations. In addition, we have also leased property from them on their off airport parking facilities to build stations in strategic locations such as at Houston Intercontinental Airport and DFW.

We recently announced that we are constructing a CNG station at Newark's Liberty International Airport. It will also be available 24/7 for public access and is scheduled to open in July.

And under an agreement with the Utility National Grid, we have assumed operational responsibilities for 13 stations in the northeast part of the United States, four of which are in New York City proper. As for the New York stations, we are also building a CNG fueling station in Queens which is where most taxis that operate in Manhattan are based. This property is owned by New York City's largest taxi fleet owner. So in looking at the New York area, our station network is coming together for taxis as it now encompasses LaGuardia, JFK, Newark, and other locations around the city.

Finally, in conjunction with Wally Park, we were recently awarded a million dollar grant to install a fueling station employing 20 shuttle buses at the Philadelphia International Airport. This station will allow us to capitalize on the significant number of cab and off-airport parking operators in this market and expend our footprint in the northeast part of the country.

On the municipal transit front, Clean Energy secured a contract totaling $8.4 million to upgrade the four LAMTA CNG bus fueling stations that we currently operate. The LAMTA operates America's largest natural gas transit bus fleet with 2,506 CNG buses comprising 95% of its overall fleet.

Last week we signed Elk Grove Transit in the Sacramento area. The station will be built by yearend and at that time they should have 41 buses and eventually 68. Finally, two weeks ago we opened the City of Glendale station which we own. The station will serve 39 transit buses and 30 refuse trucks. We anticipate this station to dispense 600,000 gallons annually.

At the ports there were a couple of hundred more LNG trucks that have been put into service since the last time we talked. In fact, just last Friday, 50 new LNG trucks were delivered. We estimate that there are now more than 700 trucks fueling daily. Another 200 or so will be delivered in the near term and an additional 165 have been recently ordered and they will be deployed later in the summer. Our LNG volumes have picked up nicely from an average of 6,000 gallons per day to about 18,000 gallons per day and we expect this will continue to grow over the next few months.

We are also expanding our LNG infrastructure which will allow regional trucks to travel from Central California to San Diego all the way to Las Vegas. We are pleased about the announcement we made on April 22nd that BAF will be converting 501 new Ford vans for Verizon. These vans are scheduled for deployment later this year and we believe a significant number of the vans will be fueling at our network stations.

And let's not forget that AT&T continues to be a national leader in deploying natural gas vehicles in their fleet. Their progress is really notable. BAF has now secured purchase orders for 1,850 vehicles to be delivered this year for AT&T. Currently they are deploying these vehicles in areas where we have a good network of retail CNG fueling stations AT&T has also given us the right of first refusal on the construction of any stations they decide to build. We anticipate we'll be building some stations for them in the near future.

Now turning to a legislative update, major portions of the Nat Gas Act were contained in the Kerry-Graham-Lieberman Energy Bill which as you know was recently sidelined due to an unrelated issue about the prospects of an immigration bill. That notwithstanding, we are very pleased to be in the bill. I believe it was a good sign that earlier this week Senators Kerry and Lieberman sent the bill to the EPA for environmental scoring. The situation is fluid. We have information that suggests that Senator Kerry said the bill now may be introduced very soon. We're very involved, so we're keeping our eye on it and so stay tuned.

VETC as you know was part of the tax extender bills passed by the House and Senate. Currently the bills are in informal conference between the House Ways & Means Committee and the Senate Finance Committee. Chairman Levin and Chairman Backus are involved in the conference personally and say it is their top priority and expected to be on the President's desk by memorial Day.

We are told that VETC will be retroactive to January 1st, 2010. Assuming it is, and the president signs it, which we believe he will, it will add abut $3.8 million to our first quarter. Due to the timing, however, we will record it in the second quarter. We'll keep a close eye on it.

Lastly, let me touch on the price spread between oil and natural gas and some industry data that indicate a continuing long term favorable commodity tend for natural gas. Right now we are seeing historically wide spreads between oil and natural gas. As of now it's about what, 19 to 20 to 1 range. Further supporting the long term value proposition of natural gas for vehicles, a report put out a few weeks ago by PIRA, which is a leading energy consulting firm, predicts the gap between oil and gas prices will remain wide into the future. They have forecasted spreads out to 2017 of about 15 to 1 which is obviously very good for us.

Now let me turn 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 first quarter of 2010 to the first quarter of 2009, unless otherwise specified.

Volumes during the quarter rose 56% from a year ago to 28.6 million gallons. The increase in volume was in large part due to our increased volumes from the four transit properties we acquired from Exterran in May and June of 2009, our increased sales at our landfill gas project in Dallas, and our increased port volumes. We also saw increased volume in the quarter from the additional piece of the Phoenix LNG supply contract that commenced on July 1st of last year.

We lost $0.07 per share on a non-GAAP basis in the first quarter of 2010. This compares with a non-GAAP loss of $0.06 for the first quarter last year. One thing to keep in mind when assessing our results this quarter is that we do not have any VETC revenue in our numbers for the first quarter of 2010 as VETC expired on December 31, 2009. This impacts all of our financial numbers for the quarter. For purposes of comparison, VETC revenue for the first quarter of 2009 was $4.1 million and would have been $3.8 million in 2010 had the legislation been effective. Legislators are currently conferencing the bills that would extend VETC for 2010 and make it retroactive to January 1st, 2010, but they have not been passed as of today.

Our net loss on a GAAP basis for the first quarter was $24.4 million or $0.41 per share. This compares to a net loss of $6.5 million or $0.13 per share. The increase in the net loss on a GAAP basis is primarily related to the noncash charge of $18.6 million we recorded in the first quarter of 2010 related to valuing our Series I warrants which is required under certain accounting requirements. We recorded a noncash charge of $200,000 in the first quarter of 2009 for these warrants.

Before I move on, I would like to emphasize that the Series I warrants 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 certain anti-dilution provisions in the warrants. The noncash charge increases or decreases each period based primarily on the increase or decrease in our stock price during the period which is why the first quarter charge is so large as our stock price increased significantly during the period. We will need to continue to value the warrants each period and record a noncash gain or loss until they are exercised or they expire, which is about six years from now.

Adjusted EBITDA in the first quarter of 2010 was $1 million, which compares to $900,000 in the first quarter of 2009. Again, please keep in mind there is no VETC revenue in our 2010 number. 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 and our stock-based compensation charges for our options. Adjusted EBITDA is described in more detail in the press release we issued earlier today.

From a margin perspective, our gross margin this quarter, without VETC, increased $2.8 million from the prior quarter. The majority of this increase was generated by BAF, which we acquired on October 1st. Our margin per gallon on our fuel sales was $0.31 for the quarter, which compares with $0.46 in the fourth quarter of 2009. This decrease was primarily attributable to not recording any VETC revenue in the first quarter of 2010.

For the quarter our revenues were $39 million, which is up from $30.2 million. At March 31st, 2010, we had $66.3 million in cash and $20 million available under our line of credit with Plains Capital Bank. One interesting item as it relates to cash is we generated $9.2 million of cash from the exercise of options during the quarter. This is cash we did not plan for at the beginning of the year that will help our capital needs as we move forward.

And with that, Operator, please open the call to questions.

(Operator Instructions). Rob Brown, Craig-Hallum

Good afternoon. Could you provide a little more color on BAF? What kind of the revenue level was in the quarter and maybe some contribution that you got from that?

Absolutely. BAF generated $9 million of revenue during the quarter. They did about 100 vehicles on top of the 460 or so AT&T vehicles that they did during the quarter. And the gross margin contribution was about $2.6 million on those vehicles.

Okay, great. And then Andrew, you talked a lot about the pipeline and the refuse contracts building. Could you give us an update on sort of the regional trucking side of that pipeline? How is that coming along? And is that maybe more dependent on the legislation or is that not a hold up?

Well I think, Rob, as we've talked before, the regional trucking is a little different than refuse because the incremental cost is more. And so certainly those fleet operators keep a pretty keen eye on the legislation. If those incentives were sweetened, it would help them. Now as I've mentioned before, I like the fact that many fleet operators are at least in the testing phase and beginning to work on kind of initial deployments.

We are seeing UPS going forward with a project. TriMack is a regional hauler and they're starting a project in Texas to haul goods, they'll have 14 trucks up. US Food Service is beginning, they're scheduling the demo for their truck. Central Freight, which you know is a very huge trucking fleet, has put in for a 100 truck grant. Pepsi, Frito Lay, [Soveil], and the others just to name a few, are all working. So our gentlemen that are working in this area are really very busy. I think though it's safe to say, Rob, that they do have their eye on the legislation because it really brings the payout in very close and makes it a no brainer. Otherwise, it's a little bit more difficult right now, it stretches out the payout. But we're seeing literally dozens of different -- in fact, let me give you this metric which I thought was interesting. Kenworth has 1,300 requests -- 1,300 trucks, bids out on 1,300 trucks. That is, they've been asked for RFPs for 1,300 vehicles. And Peterbilt 260. So that doesn't mean all those are going to hit the roads anytime soon, but that gives you an indication there's interest out there.

Great. Thank you.

Graham Mattison, Lazard Capital Markets.

Great. Thanks, guys. I was wondering if you could update us on the Clean Cities Awards. I know there were a lot (inaudible) awards from last summer. Are there still station opportunities or stations you're looking to get under that sort of hunting license?

Yes, Graham, hi. That, as we mentioned I think in last call, the good news/bad news, I mean the process to the deal has been slow. But of the stations that we talked about receiving as part of, with our partners in that, almost all of those contracts have now been let and signed by our partners and some by us and by the Energy Offices and by the DOE. They're not all done, but most of them are.

We finished one station, about 75 vehicles have been delivered. There are several hundred more in the pipeline now. And so we're just beginning to see all those projects come to I wouldn't say fruition, but coming along. Many of the projects now are in permitting to build the stations and a lot of the vehicles now have been ordered since people have contracts. So it's been somewhat slow. It's kind of proceeding the way we thought it would.

In terms of a hunting license, there's about three or four, five that I'm aware of, projects that kind of went back to the DOE that now we are in the middle of that will be incremental to what we announced about a year ago. So that's going to be a net pick up of stations and eventually a pick up of 800 vehicles operating at those stations and we'll add some more to it.

All right, got it. And then on the ports, can you just go over the volumes again comparing the fourth quarter to this quarter and then in terms of your outlook for that with the additional trucks going on and then potentially as well with additional competition coming in that area? How should we think about that?

Well let me -- I was referring to last quarter. We've seen the volume at the ports on a daily basis about triple since the last time we talked. I guess it averaged 6,000 gallons a couple of months ago, now we're closer to 20,000 gallons. About 200 and some -- you recall the last time we visited, I think there were about 500 trucks, 480 or so trucks in the mix. That number is now a touch over 700. Some of them are just now beginning to work literally in the last few days, week.

There's about 200 more that have already been awarded and contracts done and trucks delivered and those trucks being brought to the dealership and sent out to the fleets. So those will come onboard as well will another 165 that are a couple of months behind. So we're coming up to that magic sort of 1,000 number, a little over 1,000 number, that should be operating here later this summer. And I'd look for our volumes to grow significantly from, again, from where they were right now. That make sense?

Yes, great. And then just in terms of -- so as those come on, will there be a need to expand your Anaheim station or -- and any comment to the additional stations coming on in the area, how that might affect?

Well we've done some additional things we haven't necessarily talked about. We've added another fueling node if you will, station dispenser, at out plant out in Boron which is now servicing a hauler that hauls from the Boron mine to the port. And that's routinely now doing 1,000 gallons a day. The Anaheim street station in the port of Long Beach you know is a really big station and it can handle significantly more volume than we're running through it now. But we are bringing on more stations. We have six more stations we've talked about on the corridor that will kind of -- it won't all be in the port and I don't think they're necessary there, but they're in the area. One of them is over at the rail head, one of them is up closer to the pass going into the valley, some of them are on their way to the Ilion Empire. And this will augment the fuel available for those fleets and help them as they begin to spread out throughout southern California.

Great. I'll jump back in queue. Thank you.

John Roy, Janney Montgomery Scott.

Hi, guys. Hey, Rick, I've got a real simple question. LNG, CNG, bio, can you give us gallons there?

For the quarter?

Yes.

You bet. CNG was 19.2. Bio was 1.9. And LNG was 7.5 to get you to the 28.6.

Okay. And Andrew, real quick, it's kind of been flat the last few quarters. Do you think people are really waiting for the Nat Gas Act, or what's your take on the volume there?

Well the volume this quarter in the first quarter was down a tick. But part of that is because a little bit of weather, some of it is due to LAMTA was down. And we don't really know exactly why, but it was down pretty significantly. I think it could have been financial reasons. And because of February. I mean it sounds funny, but that makes, that's a reason for 2% of it, of the 3% dip.

Typically, John, we see the volumes -- we added about 29 stations, most of them in the last part of the -- just at the end of last year. And we have a bunch more coming on now, as I mentioned. You'll see that growth move up just like it did the year before. It will come on up in the second half.

Great. Thanks, Andrew. Thanks, Rick.

Steve Milunovich, Merrill Lynch.

Great, thank you. What's your thinking on capital spending right now? And what it might be going forward, what you might have to do in terms of financing?

In the Q we're going to file later today, you'll see we think we're going to spend about $76 million for the rest of the year from April through December. In theory, well we have $66 million of cash in the bank right now and $20 million available under our Plains line of credit. So in theory we've got that covered for the rest of the year with just cash we have. And then obviously depending upon how this Nat Gas Act shakes out, or just the other opportunities even without it shake out from a timing perspective, obviously we're going to be looking at raising capital at some point to obviously fund our anticipated growth which we think is going to continue and we're going to need to do.

Obviously we're going to, as we've talked about before, pursue debt opportunities before trying to go back to the equity market and we'll just have to kind of see how that progresses as we go through the year here. But we're kind of in that same position we've always been that we think there's a lot of opportunity out there, we're going to need capital to grow this business, and we're going to do what we need to do to raise that money to fund that growth and we're certainly going to try and do debt before we get to the equity world again.

Okay. And how are your talks with some of the truck stop operators progressing?

We are doing that, I'm not going to talk about that too much. We do have about three, Steve, three truck stop LNG stations kind of in process, let's put it that way. And we're working with a couple of them to do larger projects and I would characterize those as ongoing and feel very optimistic about it.

Okay, and then finally, can you just review for us kind of current levels what your cost per gallon is? I mean you layer on your costs and kind of get to net add margin and then get to your current price per gallon versus diesel? Kind of update us on that?

I guess that's my -- so we're back to kind of the -- if you look at it on a diesel equivalent, so you have about seven diesel gallons, you've got natural gas sitting here today at $3.90, so your commodity per gallon is about $0.57, Steve. Then LNG is a little different. Typically when I run through this I talk about it in compressed natural gas, but I think it's safe to say you're around $0.80 or so a gallon of costs of getting, of making the product cold and delivering it to the station. And so you're in there at the station at about $1.50-ish and today, the port, the price has come up. Diesel at the Port of LA yesterday, I don't know how it is today, but it was $3.23. So we're able to offer a very nice discount for our customers and have a nice margin on that commercial retail type LNG business.

That's a big difference. Just back on the Nat Gas Act, obviously the tax incentives are very attractive, but we're all kind of assuming that regional truckers are going to switch over en masse. And is it that much of a no brainer for them? Or how confident are you that that's going to happen I guess if the Act gets passed?

Yes, you know, it's interesting. One of the reasons I remain very confident on it is you're seeing more engine announcement all the time about the breadth of availability. So the reason you're seeing engine manufacturers do that is because they're hearing from their customers. That's step number one. But when we look at the refuse market, with the current tax incentive in place, the trash truck, the payout on the incremental investment is about a year, a little less than a year. And they're keeping that truck about ten years. And so that really makes it attractive to them.

Now in the case of a Class A and the trucks that we believe will go for this first, it will be the trucks that use the most fuel, right? So a Class A truck, and many of them do, tens of thousands if not hundreds of thousands of the 3 million universe use 20,000 gallons a year. So let's say we can save them $1 a gallon, that's $20,000 a year. The Nat Gas Act increases the incentives to where now you're really looking at paying off the incremental in a year. They keep those trucks, some of these guys turn them over two years, three years, and so it's a nice payback. They save $20,000 in the next year, and it really brings it in to be a no brainer for them. It's a little bit tougher if you don't have any incentive. It still works out, but it's a little bit tougher.

The other -- Steve, the other thing I think is important to note, when we rolled out those first port trucks, those heavy duty port trucks, Class A, the incremental was $106,000 and today the incremental costs for those Class A heavy duty trucks, the biggest ones, the 15 liters, is closer to $70,000. The ISLGs which is the 9 liter trucks that are a little bit smaller that are being really -- people are really liking those, the incremental cost on those now is coming down under $40,000. Now you're really beginning to bring the cost down which we knew would happen. And it will happen some more. So with increased product and if we get a little bit of help in incentives to goose up the production, you'll see those costs come down. And then I really do believe it's something that these guys will do.

Great. That's helpful. Thank you.

Eric Stine, Northland Securities.

Hey, guys, thanks for taking the questions. That was good info that you gave on the number of refuse fleets that you're fueling, the 61. Can you just give us some context on how that compares to last year?

I don't know. And probably if we go back six or eight, or three or four calls ago, I think I said it. I think a year ago we were dealing with about 20 some odd companies. So it's really grown. You go back a year and a half ago, we had refuse projects, deals with refuse companies in three states and now we're in 11 states.

I talked to our head rainmaker for refuse, Ray Burke, who is one of our vice presidents in charge of the refuse sector who spent a career with Waste Management. He called me from Atlanta and Ray is a tough operator and ran an $800 million piece of business for Waste Management. He's one of the first guys in the country to take trash trucks and frankly he was a hard sell. He's been with us for three years. And he said, Andrew, we've broken over. This thing sells itself. He said, they understand it, they know it's clean, they know they're saving money, they know they don't have to fool with diesel going forward. He said now it's just making sure that we're out there educating the customer and getting the deals.

So the refuse market is, as I've said often, is going to follow the transit and be faster than transit penetration. Because it really does work.

Okay. And then is it fair to say that not only expanding number of fleets, but I mean penetration within those fleets right now is pretty small, so you've got room to grow there, too?

Oh, absolutely. I think if you go back and look at Republic for instance, they were fooling with this for a few years. They had, through a couple of their acquisitions, I think they had a couple of fleets that were LNG. But it was things they really -- it was through acquisition that they inherited. And their announcement that this year they'll be at 20%, I mean you're really going from a standing start and then this year 20% of their purchases, that's pretty good. Next year we've seen it will be quite a bit more than that. So that, to me that's a testament to somebody that's taking this very seriously. It's not just a one off test thing.

Right, that's good to hear. Then maybe just turn to BAF. Last call you talked about the 1,850 or so trucks for AT&T and then beyond that you were thinking kind of in the 1,000 number. Is that still your thinking and did that number include Verizon? Or should we think that's incremental?

No, it's still my thinking. We knew or we believed that AT&T was on track. The feedback has been very positive from AT&T. And that's going nicely. I thought we'd do another 1,000 vehicles. I always hope we do a little more than that, so it might make my guys nervous. So I said I thought we'd see another 1,000. So you should, of that 1,000 add AT&T, or add Verizon into that, and I think we'll do that 1,000 and maybe we'll do a little better than that.

Okay, so Verizon is in that number though? I mean that was in your thinking?

Yes.

Okay, and can you just remind me -- I mean AT&T, are they -- they're committed to BAF is it through 2011? Or is it -- I mean it's just something they up every quarter, but is there a long term commitment there?

No, I don't think there's technically any long term commitment. It's really quarter by quarter. We get out a few quarters ahead, like we've already secured the purchase orders throughout this year already. So we know we're done for 2010 and we're working on 2011. But we don't have anything that would necessarily commit them to us. We feel pretty good about where we are with them.

Right, given what you've done and the fact that you're the station, a preferred station provider.

Right. And the experience has been good. AT&T has been pleased.

Okay, that's great. And then just last question, any change to the competitive environment?

Well I think there are more competitors out there. They're new. The report was from Atlanta there were two or three small companies that provide environmental services and natural gas fueling that we've never heard of before. I'm not sure they've built any stations. But you know, with increased station activity, you'll see other contractors and other people that believe that they can do this. We've heard of a scattered station here or there being built. I'm not sure there's anybody in the business quite like us yet, but as I've long said, you'll have more competition as the volume comes up.

And we've seen little bits of it -- most of it is from contractors that were looking for new areas where they could do some business in the downturn and they figure they can build a station. So we've seen some of that, but we're still doing pretty well.

And your win rate is still pretty good?

Yes.

Okay, thanks a lot. Very helpful.

Pearce Hammond, Simmons & Company.

Good afternoon. It is, as you say, a hell of a day for a conference call. Can you provide an update on McCommas Bluff and other opportunities that you see similar to that one?

Sure. McCommas Bluff is operating pretty well. We've done work on it. We're in the middle of upgrading McCommas Bluff, really stage one, to do some fixes on that compressor station and then we'll do, later this year we'll do -- and that will increase production about 20%. And then the next stage of the upgrade will be taking the compressors and electrifying them and doing different things and changing the capacity and re-plumbing the well field a little bit. And next year you should have that, I would say the McCommas volume could be up as much as 50% or a little more.

Harrison Clay, who is our general counsel, also has responsibility for the biomethane projects, has really seen a lot of interest. There are -- we have to stay pretty focused here, but we've had some significant players in the landfill business turn to us and ask us to look at some of their landfills and begin to give them quotes for doing some different projects. These things take a little while. They're complicated and you have to analyze the landfill and the production curves that the landfill will generate over time. But we're in this business now and we hope to have a couple of announcements I hope soon on other projects

Great. And then on the Nat Gas Act, obviously gas producers have a lot of interest there. But have you noticed any other new interest from some of the gas production community? Some of the E&P companies and what Clean Energy is trying to do?

Well they are. You know they've -- and we've been really supportive of that and a lot of this comes back to Boone sort of sharing the vision with a lot of the gentlemen that run those companies about how this natural gas for transportation could be an important new market for them. And I think they do believe that now. So we've seen Aubrey and Hackett and Kanna, we've seen those companies beginning to do some of the right things, push for local policy, change some of their fleets, add a few occasional fueling stations out where they operate.

I think most of them want to be supportive and we are talking with most of them about how we might work with then on LNG in the future, how we might work with them on fueling stations. They want to be supportive, they see it not as their core business though. And because of the way they're structured, some of them have a hard time being --would have a hard time because of the way their tax situation is, being in the position to retail fuel. But they want to do things to prove out that this works and works for their fleets.

And so we're working with them, with all those companies that I mentioned and I think we'll have a good relationship with them in the future. My guess is it won't be -- that you won't see most of them in the station business, but rather looking for ways to create LNG as the market requires it for this heavy duty trucking business And we hope to work closely with them as we bring that online

Thank you, Andrew.

Thank you. I would now like to turn the call back over to the speakers for any closing comments.

Thank you, Operator. I know many of you have been on this journey with us for a few years now, so you'll know what I'm referring to when I say we've gone from being a small company with a big idea to I think a major force for delivering cleaner, domestic, cheaper fuel. It wasn't long ago that we used to have to explain what natural gas was. And just in the last two weeks, there have been articles in the Wall Street Journal, the New York Times, and dozens of other publications talking about how natural gas can be a big part of solving our energy problem. In fact, even the tragedy in the Gulf has focused more attention on natural gas. We have seen a tremendous increase in the awareness of natural gas and its availability for use in transportation. And today many executives and other decision makers are well versed on natural gas's benefits as a transportation fuel. And that makes our solutions much easier to discuss with them.

We're building national infrastructure for natural gas for transportation in the United States. As of today we have 214 stations in operation and we're building more. We expect to see further market moving shifts in our direction over the course of the coming months and years. So let me thank you for your interest in Clean Energy and we look forward to discussing our projects with you again next quarter. Thank you.

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