Clean Energy Fuels Corp (CLNE) 2011 Q1 法說會逐字稿

Greetings, and welcome to the Clean Energy Fuels first quarter 2011 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, Ina McGuinness. Ma'am, you may begin.

Thank you, operator.

Earlier this afternoon, Clean Energy released financial results for the first quarter ended March 31, 2011. If you did not receive the 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 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 expression 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. Thus, 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 Clean Energy's Form 10-Q filed earlier today. These forward-looking statements speak only as of the date of the release, and the Company undertakes no obligation to publicly update any portion of statements or supply new information regarding the circumstances after the date of this release. The Company's non-GAAP EPS on adjusted EBITDA will be reviewed on this call, and excludes 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 direct comparison GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS on adjusted EBITDA, and a reconciliation between these non-GAAP and GAAP figures, is provided in the Company's press release, which is been furnished to the SEC on Form 8-K today.

Participating on today's call from the Company is President and Chief Executive Officer, Andrew Littlefair; and Chief Financial Officer, Rick Wheeler. And with that, I would like to turn the call over to Andrew.

Thank you, Ina, and good afternoon, everyone.

Today we reported a very strong first quarter with year-over-year revenue growth of 67%, to $65.3 million. We delivered 35.5 million gallons during the first quarter of 2011, which is up from 28.6 million gallons a year ago. There's been a flurry of activity and positive momentum in the direction of expanding natural gas fueling in the trucking industry. The high price of diesel has put tremendous pressure on trucking companies. When diesel recently rose to close to $4.50 per gallon, and we were selling LNG for $2.27 on a comparable gallon basis, you can bet that shipping companies took notice and started making inquiries as to how to get in on this model. The price spread between diesel and natural gas has not narrowed, and the ongoing turmoil in the Middle East has only served to heighten awareness of the benefits of natural gas. We believe the trucking market is preparing for some really big changes in the near term.

As I've discussed before, we now have a national fleet sales team that is working with dozens of large shipping companies that have taken an interest in pursuing the conversion to natural gas. New engines under development from Cummins, Navistar, and Volvo; as well as product offerings from Peterbilt, Freightliner, Kenworth and Volvo Mack; are also going to drive acceleration of this market. There are now a number of these well-known vehicle and engine manufacturers that have in development 13-liter and 12-liter engines that will hit the sweet spot of the truckers' needs. We look forward to this shift, because we know that's what the industry needs. Case in point -- the trash truck industry has a perfect engine, with their 9-liter Cummins Westport for their specifications, and this market is expanding at a very rapid pace.

Turning to our subsidiaries, BAF had positive movement, and certifications and programs went forward during the quarter. We're already seeing the benefits of our ServoTech relationship, where ServoTech is reducing our development time for new Ford gaseous fuel systems. For example, ServoTech is nearly finished with the development of proprietary fuel systems for all current BAF vehicles, with completion expected this summer. A ServoTech-designed fuel system is expected to be released for the Ford F450, 550 and 650 in June 2011. BAF has also continued to build relationships with key strategic industry partners. BAF has added Dejana to our nationwide network of authorized installers for the sale and service of BAF's gaseous fuel systems. Dejana, who was the primary Ford ship-through to dealerships for the transit connect, will also offer other BAF products. It has six manufacturing facilities in the northeastern United States.

At IMW, for the first quarter of 2011, business was up 45% from a year ago. In the last few weeks, production has increased after they made improvements to their inventory management, their IT systems, and factory floor workflow processes. We expect these enhancements will improve our productivity and allow us to get ready for additional increases in orders that we anticipate in the second half of 2011. Our Northstar acquisition is proving to be very beneficial as we pursue expansion opportunities in LNG. Today, our construction carpet includes six LNG stations under development, that will fall under the Northstar operating unit. Northstar's backlog has doubled from a year ago.

With respect to biomethane, we formed a new operating subsidiary, Clean Energy Renewable Fuels, which is dedicated to developing, managing our biomethane projects. At McCommas, we announced that we have secured $40 million in new long-term debt at 6.6% interest rate. This debt was used to repay an $11 million bridge loan that had been made by Clean Energy, and approximately $25 million is available for capital expenditures to expand the plant. We anticipate volume is picking up in May. Today we're on a run rate for about 9.5 million gasoline gallon equivalents of pipeline quality natural gas on an annual basis. We expect well field and plan improvements to take us to a run rate of over 12 million gallons of annual production by the end of this year, and over 15 million gallons by the end of next year.

Our second biomethane project is a 30-year agreement with major solid waste operator, Republic Services. We will be producing landfill gas that will be recovered from Republic's 160-acre site in Canton, Michigan. We are completing the design, engineering and permitting of the plant, and we expect to commence commercial operations during the first half of 2012. We anticipate producing approximately 4 million gallons during the first year of operations, rising to about 6 million gallons a year at peak production.

As you know, development of landfill biomethane production assets gives us the ability to offer our customers a renewable vehicle fuel that reduces greenhouse gas emissions by up to 88% compared to gasoline or diesel. We are the only company in North America that is heavily invested in both producing biomethane and marketing selling natural gas vehicle fuel, and we believe that our ability to sell biomethane vehicle fuel will add substantial value to our natural gas vehicle fuel infrastructure. We anticipate developing other such projects under the Clean Energy Renewable Fuels umbrella.

Now, let's focus on some recent wins. Some of the recent contracts that are driving our growth include our award of a $40 million contract with Dallas Area Rapid Transit to design and build four new CNG stations to support their plan to deploy 452 new CNG buses and 200 natural gas paratransit vehicles over the next two years. This represents one of the largest single orders for compressors in IMW's history. We also signed an agreement with major contract freight carrier, Dillon Transport, to build, operate and supply a public use LNG/CNG fueling station in Dallas that will support their expanding fleet of LNG powered tanker trucks. Dillon is contracted to transport raw materials for Owens Corning. At the ports, there are 132 more trucks being deployed through grants from South Coast Air Quality Management District. In the taxi market, we have two new stations open for fueling taxi fleets in downtown Chicago. This is significant because it represents the opening up of Chicago market for natural gas vehicles, and our entrance into the Chicago market. We are now working with the largest taxi company in Chicago, and expect to see growth in the market.

Looking at the progress we've made at airports across the country, we signed 4 new contracts and are negotiating contracts for 3 more. This will bring the number of airports at which we have either built or upgraded fueling stations for growing natural gas fleets to 27. There are another 7 airports considering natural gas fueling options, and we are working diligently to capture these opportunities. Though Dallas-Fort Worth Airport is a great case study, as we built a station for them late last year for the rental car center; they started by putting just a few buses into service, and burned just 2,200 gallons in January; but by March of this year, 46 buses were operating, and the volume was 67,000 gallons for the month.

Republic Waste is another great success story. They are committed to ordering 500 more trucks next year. To date, we've brought 8 stations on line of the 15 that we were awarded by them; and we were recently awarded Las Vegas, which is a very large fleet. The refuse sector has really taken off. We now work with 63 refuse companies; and as we speak, our sales team is attending the huge refuse show in Dallas called Waste Expo, where natural gas trucks are prominently displayed by equipment manufacturers who all have natural gas offerings.

Lastly, Ohio's Stark Area Regional Transit Authority, or SARTA, in Canton, awarded a contract to us when they made the switch to natural gas. Public officials told the media that SARTA had been considering a move to natural gas when the recent spike in diesel fuel prices was projected to cost them $200,000 more on fuel in 2011 than in 2010. They estimate that they will save $350,000 a year on fuel when they move to CNG. A portion of the station construction project will be funded from the cost savings, and a grant from the state will cover the remainder of the cost.

Looking at our station construction activity, we completed 9 station construction upgrade projects during the first quarter, compared to 2 in the first quarter of last year. In our pipeline, we have 343 projects. Within the pipeline, there are several categories of projects. They are either in negotiation, validation, or are qualified prospects. Of the 343 projects, 173 are in the validation and negotiation stages. We now have 82 projects on the carpet -- and you'll remember, those are projects that are under contract -- up from 61 when I spoke to you on our fourth quarter call in March.

In an effort to demonstrate the power of the natural gas vehicle movement on a national scale, on April 13, the industry came together in Washington to display more than a dozen natural gas vehicles, ranging from passenger cars to 18-wheelers. Numerous companies, organizations and manufacturers were represented there. Natural gas products included equipment, stations, and compressors. The scope of vehicles and products demonstrated the application of NGVs across a broad range of industry sectors. There were more than 25 Members of Congress in attendance, and interviews from Congressmen together with Boone were conducted and sent back to their home districts via satellite. The goal of the event was to highlight the industry as the New Alternative Transportation to Give Americans Solutions, or the Nat Gas Act of 2011, moves its way through Congress. Also known as HR 1380, this bill would accelerate the use of natural gas fuel in the nation's transportation sector. Speaking of the Nat Gas Act, we see positive momentum, with high gasoline and diesel prices helping to keep our legislators focused on the need. We remain optimistic that with 180 co-sponsors, we will see some progress on this bill sooner rather than later.

We've also seen increased legislative support in key states that include Texas, Pennsylvania, California and Oregon. In Texas, the Senate passed a plan to carve out a portion of the Texas Emission Reduction Plan, and dedicate those funds toward regional natural gas trucking. In Pennsylvania, the Marcellus Works package is working its way through the House towards the Senate. The package proposes $25 million annual tax credits for heavy and medium duty private fleet vehicles, the establishment of $12.5 million in mass transit vehicle grants, while mandating that large mass transit agencies make the transition to natural gas; and a 5-year program to create several clean natural gas corridors throughout the state. California is considering the codification of state goals to reduce the state's oil consumption by 2020, and increase alternative fuel use. Oregon appears determined to implement its own low carbon fuel vehicle standard in 2012.

Now finally, let's talk about Boone's warrants. Also, we are seeking shareholder approval at our upcoming annual meeting to amend Boone's warrant agreement to incentivise him to exercise a portion of his warrant prior to the December 28, 2011 expiration date. We see this as a significant opportunity for the Company to receive an infusion of cash that would allow us to accelerate our planned capital expenditures and potential corporate strategic initiatives. To refresh your memory, before our IPO, Boone was issued warrants for 15 million shares at $10, totaling $150 million, the proceeds of which would come to the Company should he exercise his option.

And now, let me turn the call over to Rick.

Thanks, Andrew.

All my references to our results will be comparing the first quarter of 2011 to the first quarter of 2010, unless otherwise noted. For the quarter, our revenues were $65.3 million, up from $39 million. IMW contributed $16.7 million of our first quarter increase, and Northstar contributed another $3.6 million to the increase. BAF's revenues were off between periods by $5.4 million. Adjusted EBITDA in the first quarter of 2011 was $3.9 million, which compares to $1 million in the first quarter of 2010.

The first quarter of 2010 adjusted EBITDA amount excludes $3.6 million of VETC revenue that was recorded in the fourth quarter of 2010, when VETC was reinstated and made retroactive to January 1, 2010. Adjusted EBITDA is the financial measure we developed to highlight our operating results, excluding certain large non-cash or non-recurring charges that are not core to our business, including amounts we are incurring for our Series I warrant valuation, our stock-based compensation charges for our options, certain tax refunds, and foreign currency gains related to the notes we issued to purchase IMW. Adjusted EBITDA is described in more detail in the press release we issued earlier today. We had a loss of $0.05 per share on a non-GAAP basis in the first quarter of 2011, which compared with a non-GAAP loss of $0.07 per share in the first quarter of last year. Our gross margin this quarter was $18.3 million, and was $11.49 million in the prior period. IMW Northstar contributed $1.7 million and $1 million respectively towards this increase.

BAF's gross margin decreased between periods by $1.4 million. Our margin per gallon on our fuel sales was $0.24 in the first quarter of 2011, which compares with $0.26 in the fourth quarter of 2010. Our net loss on a GAAP basis for the first quarter was $9.8 million, or $0.14 per share. This compares to a net loss of $24.4 million, or $0.41 per share. The charge between periods was impacted by the amounts we recorded for valuing our Series I warrants between periods. We recorded a non-cash charge of $3.3 million in the first quarter of 2011, and a non-cash charge of $18.6 million in the first quarter of 2010.

The first quarter 2011 amount also included non-cash stock-based compensation charges of $3.4 million, and $300,000 of foreign currency gains on the notes we issued to purchase IMW. The first quarter 2010 amount includes an AMT refund of $1.3 million, and $3 million of non-cash stock-based compensation charges. Volumes during the quarter rose to 35.5 million gallons, up from 28.6 million gallons. On March 31, 2011, our biomethane subsidiary closed on a $40.2 million bond offering to fund its plant expansion at the McCommas Bluff landfill in Dallas. Approximately $11 million of the proceeds were remitted to Clean Energy to pay off the loan we had previously made to the entity to fund certain capital improvements. We then turned around and paid approximate $8 million to Plains Capital Bank to pay off our outstanding loan balance with them.

And with that, operator, please open the call to questions. Ina?

Operator?

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Our first question is coming from the line of Rob Brown. Please state your question.

Good afternoon.

Hi, Rob.

Could you give us an update on IMW and where the China sort of situation is there? Are they still seeing a big backlog growth there, and maybe just sort of the -- some color on the IMW backlog growth and customer base.

Sure. They are continuing to make progress in China, and you remember the way that business there is working. It's been a pretty comprehensive plan. You may have seen it by the government, on how they plan to expand natural gas into different cities. And you may remember in our past conversations, they kind of divvied that up, let's call it the development of distribution systems into about four different companies. We're currently working with one of those companies, and we're -- we now are in I would say deep negotiations with a couple of the others. There's four. Each of those companies, as they develop the distributions for the towns, they're also required to put in natural gas fueling. So, we've made very good progress on our first order of 120 stations with the one company, China Natural Gas and Rob, we're pretty close on one of the other companies to do some stations with them.

We've expanded our Shanghai facility, kind of doubled the space. Were doing more work there. We're getting more up -- more orders in smaller clumps right now in China, who are feeling very good about the long-term prospects because it really does look like over the next few years they are going to build 4,000 fueling stations in China. We are still are really the only Company there in China that has their own service field organization, and so we feel like we are pretty well -- very well positioned. We're also seeing some expansion in Southeast Asia, we're sending more units into Vietnam and the others. So, that's potentially pretty big.

Okay, good. Thank you. And then on your margin, your gallon margin in the quarter, do you see that as your run rate going forward, or maybe just give some color on how you see that trending.

Rob, there's one more LAMTA site that's coming on in the second quarter. The magnitude of that volume is about the same as the other one. By the time you weight that in there, this quarter we may see another $0.01 or so down from what we were this quarter. And then hopefully, that's kind of the bottom because all the LAMTA projects and divisions will be on at that point. Hopefully going forward, we'll be able to start getting that number back up as more and more and more commercial retail vehicles come on as we roll out the regional trucking and our other markets where we are back in the commercial retail world.

Okay. Thank you.

Thank you. Our next question is coming from Graham Mattison of Lazard Capital Markets.

Good afternoon, guys.

Good afternoon.

Just looking quickly through the Q, it looks like there was a pretty good jump in LNG volumes quarter over quarter. I'm just wondering what was behind that or what drove that.

What that is, when we got Northstar, they had a lot of O&M volumes that they maintain a lot of the stations out there that they built. So, those were primarily the volumes related to that.

And so do those volumes keep going -- so how does that work? Are they operating the fuel like you do on a regular O&M contract, or?

Yes. Exactly. They go out and make sure the station's operating properly and make sure the equipment is functioning properly and make the necessarily repairs as necessary and the type of thing. It's basically the same O&M type of service that we provide on the CNG side.

Got you, and the margins are comparable?

Yes. It's pretty much a similar type deal.

And then just turning more onto Northstar, with the recent wins you've had. Can you give us a sense of how much you have in backlog in terms of construction work that's out ahead of them over the next 12 months or what you consider in backlog for them?

Sure. Northstar, their backlog, as I think I indicated, has doubled. And right now, I don't know that we've been that specific about it, but it looks to me like they've got about 23 or 24 projects in their pipeline that are deals that are signed right now. So, that number is growing. And it's strong because of up until recently, for an entire year, Northstar would have been more like in the 10 or 12 station range. So, we like what we're seeing in that growth.

Would it be possible to put a dollar value on that?

Well, you know we don't project, so you could maybe take a standard station costs and try and do something yourself if you wanted to. But obviously, that subject, the size of station and what the individual project details.

All right. I can definitely do that. All right, great. I'll jump back in queue. Thank you.

Thanks, Graham.

Thank you, sir. Our next question is coming from the line of Eric Stine of Northland Capital Markets. Please state your question.

Hi, everyone. Thanks for taking my questions.

Eric, I bet I know what your first one is.

Well, if it's in the queue, I don't need to ask it, but I might as well. I'll start with that. If you could give the volumes, that would be great.

Bio methane 1.5 million, CNG 22.7 and LNG 11.3 to get you to your 35.5.

Okay. Thank you. I haven't had a chance to look at the Q. I'm just wondering if you can talk about BAF. You gave the year-over-year comparisons, but revenue, gross profit, maybe an approximate number of outfits. But then just what you saw in the quarter and how you see that playing out for the rest of the year.

From a revenue perspective, this quarter they were $3.6 million and the margin was $1.2 million. And I'll have to look up the outfit number, but I'll get that for you in a second. As far as prospects go, there's a lot of good activity that's going on at BAF. It's certainly down from where it was. AT&T is obviously off from where it was. We have some POs in from those guys through the third-quarter, so we've been working with them to kind of work through some of their facility and fueling issues. We, in all our discussions with them, continue to believe that they are committed to the similar type volumes and magnitudes of trucks and vehicles that they had talked about before. I guess we describe it as right now they are just in a little bit of a lull as they try to retrench and figure out where to put vehicles and where it makes sense for them to build stations or not build stations and use our infrastructure when and as it becomes available.

We also are working on some other solutions. A mobile fueling unit, as well as some smaller type applications that these guys can put in as kind of a short-term fix to provide fueling until the volume grows or the need is there at a particular site for a full blown station. We are working with them to try and solve the problem, but obviously, that's hurt us a little bit. These things are just kind of lumpy a little bit, and we're working with all these guys and through ServoTech we're working on other products. We have got a bio fuel product that's going to be coming along in the last half of the year that we think will be helpful. And we're starting to work on some bigger engine type projects. The F550 and those types of engines that are starting to gain some traction with some of the municipalities down there. We're not chasing a lot of business, we just need to get a little bit of it to drop and see how that goes rest of the year.

Okay. Is Verizon, is that largely done with their plan, or is that still ongoing?

Well, I would say that Verizon is not to dissimilar to the AT&T. I think Verizon is trying -- they're trying to bring these 500 vehicles into their system and kind of figure out the right fueling strategy. And I'd say for right this second, it looks to me they've kind of taken a breather as they've been able to sort of assimilate all these vehicles and figure out how they want to move forward. But this is kind of what the history has been in the conversion business. Sometimes it can be a bit lumpy. But I also like -- we have some of those big customers there, but we also have some bread and butter customers like SuperShuttle has just put in an order for 50 more vans for Los Angeles and San Francisco, and so all those add up as well.

Eric, we did 314 outfits during the quarter.

Okay. Thanks for that. And I think last quarter you talked about beyond AT&T and Verizon's three or four very large fleets that had started testing. And I know you probably can't disclose who those customers are, but maybe how those tests have gone. If you see any movement.

Sure, so these companies, they're big and they're slow-moving, they're methodical. They have fleet operations divisions, and so they kind of do things in a very methodical way. It's the way they do business. We have delivered a couple batches of vehicles to those two or three companies that I mentioned, and they are testing them right now. It's kind of what we did with AT&T, going back two years ago. I think the first was 25 vehicles or 12, I can't remember exactly, and then we started receiving more substantial orders. So, let's hope that they're liking what they've got and hopefully, next quarter or soon we will be able to talk more about it.

Okay. Last topic for me. Just Pilot Flying J Just wondering if you can quantify how many stations are in the pipeline. I think you had three last time and maybe 12 in consideration, whether that's changed or not. Thanks.

Right. There are six now underway that -- where we've signed deals with Pilot and they are in various -- a few of them are actually -- shovels are in the dirt. But there are six on our carpet right now, and I think the number is nine others that we've pulled the trigger on to move forward with. We are continuing to kind of ramp that up, and we're kind of getting our feet wet with them on how we're going to roll this thing out.

Thank you, sir. Our next question is coming from the line of Brian Gamble with Simmons & Company.

A couple of things. On the station side of things, I know that you mentioned nine stations completed. If you look at our run rate from last year, that's slightly down on a quarter on quarter basis. Any reason that was slower? If I figured our station number would be taken up from the 45 we did from last year.

Well, remember, last quarter was kind of a record quarter where we did the 20 or so in the fourth quarter. When you look at it a year ago, we did two, and this quarter we did nine. Just kind of -- Brian, they kind of depend on when we get started and the difficulty of them. Like for instance right now, under construction and soon to be completed, but they're very significant projects, one, two, three, four, five are LAMTA. Very large, very comforted. They take a little bit longer. Those will be dropping here shortly.

But when I look at our construction group right now, there's about 20 that are really literally under construction or stuff has been delivered where we're waiting for in many cases for the utilities to be completed, but the equipment's on site. We're working hard. We're adding personnel, we're adding permitting help, we're adding estimating help and construction help to be able to increase the station count from last year. And I feel pretty good that we will. Last year, it took us all year to get to 85 stations on the carpet, and we finished 45, and now we've added back this year almost 40, almost 50 stations. So, I feel pretty good about the pipeline, and I hope this next quarter we'll see a bunch of these drop-in. We have almost 30 stations in permitting right now, and so I feel like the number will be up.

Great. That's great color, I do appreciate that. Movement on the Nat Gas bill, last time I checked it was in subcommittee. Actually, it looked like it was in several subcommittees. Any sort of timing on when you guys expect something coming out of any of those committees?

Well, you know I've gotten a little gun shy on all the predictions on that, but--.

I know that's your favorite topic. I apologize for keeping--.

That's all right, but here's what I think, and I believe I'm current -- I'm actually going to Washington later this week to have some meetings. But we believe that that bill will be referred and that the hearings will be in the House Ways and Means Committee. And there may be a portion that goes over to the Energy and Commerce, but I think the real focus is going to be in the Ways and Means Committee. We know that members are talking on that committee now about when that might happen. Part of the problem that you have in terms of it moving along quickly is Congress just hasn't been in session that much. They are back here last week. There aren't that many weeks left before their next recess. I think they only have three weeks, so there's just not many days the calendar are hearing. And remember, they don't do hearings usually on Mondays or Fridays. So, you got three day weeks, so--.

We should all be so lucky.

Yes, I think the sense is that we feel like we have very good momentum, we have very good support. We're -- we've -- as you know, we've added co-sponsors. By the way, another little thing that some people don't realize, you can't add co-sponsors when they're out of session. Even though someone may have decided to do it, but they have to be back in session to add that. So, we've picked up some more. I don't know that you are going to get a hearing in Ways and Means in the next couple three weeks that are left in May, so we'll just -- it may be that it's after they come back from recess. I feel like the focus you saw earlier or late last week that the Nat Gas Act got put in on the jobs bill on the other side of the aisle. So, there seems to be pretty good support for it, we'll see.

Great. And then last thing for me, could you clarify what exactly the shareholders are going to be voting on to modify with regard to Boone's warrants?

All right, so the shareholders have to approve any change of those warrants. And I think you're familiar with how those warrants are styled, right? They're -- cash would come to the Company that Boone has 15 million warrants at $10. Those expire at the end of this year. The shareholders are considering whether or not they would induce him to do it earlier and therefore get a proportional exemption -- or not exemption, extension on those warrants. Let's just say, for instance, he decided to exercise 5 million shares June 1. And there's some math associated with this, and Rick maybe can help me, but essentially 5 million shares would get extended for a like almost identical period of time, say, six months after December. So, we felt like this was a way to kind of get the money in sooner rather than later and give him a little extension on the back end.

Okay, that's great. Thanks, guys.

Thank you.

Thank you. Our next question is coming from Peter Christiansen of Merrill Lynch. Please state your question.

Good afternoon, gentlemen. This Peter in for Steve. Firstly, has Mr. Pickens indicated how he is going to vote on the suggested measures?

Well, I think Boone supports those measures, so I'm sure he'll support them.

Okay.

(Laughter) I hope he does. Boone has not lost any enthusiasm for the business. And he really believes that we're onto something here and really is very enthusiastic. He's meeting with a whole bunch of salesmen in Dallas right now as we speak that are selling natural gas to trash trucks.

Great, great. And then I was wondering if you could talk about some of the economics of this new bio methane capacity that's coming on and even the landfill gas that you have planned for in 2012. My understanding is your bio methane gross profit per gallon has been pretty high previously and I was just wondering if you can characterize some of this new capacity that's coming on. And relatively to the previous.

Yes. We're obviously kind of thinking it's going to be similar. The whole concept is to initially use a healthy chunk of the gas that's coming out of there for renewable purposes with utilities and others who need them for that purpose. And then the great thing about it is those economics allow us to work with the trash haulers to take the other piece of the gas that's coming out of the landfill and then structure deals so that we can take that gas and turn it around and put an economic deal together with the Republic or whomever so that they can use that gas on a very cost-effective basis to run their trash fleet. Because that's very appealing to them, and we think as well for us in the country and the environment. If you can essentially have a closed loop system, right, where the trash company owns the landfill, they take the trash and they turn that trash back into vehicle fuel, that's a nice little package to be able to go out and sell to the municipality or others in the community about how they're cleaning up the air. And at the same time, if they can do that economically, that's even better. Those are the types of projects we're looking to do as we go forward and hopefully, they'll be similar to our McCommas deal.

I think, Peter, the only thing that will be different, the McCommas turns out to be one of the larger landfills. And so these high BTU landfill projects, there could be a lot of them, but most of them won't be as large as McCommas, so they'll be a tad smaller, I think, in most cases. But the economics should be, I don't know, pretty similar to what we've had at McCommas.

Great. And then one more, and I'll jump back into queue. In terms of Northstar, are they involved at all with the transportation of the LNG, the cryogenic storage? Is that an opportunity for Clean to get into that in terms of their existing contracts?

Well, now, we're in that business, right? When you mean the cryogenic -- you mean the transportation of like trailers, cryogenic--?

Correct.

Now, we do that, so as you probably remember, we have 61 cryogenic trailers and as that business goes up, we'll have more. Northstar is really more focused on the stationary portion of it -- on the station side of it, and they do do some fabrication on the storage and the dispensing side. But we're the guys in the transportation of cryogenic fuels business.

Well, just to be clear, we outsource and contract the actual hauling with the tractors. We just provide the trailers.

Yes, we don't have a trucking company, but we have the trailers.

But we have the trailers, so we are in the mix.

Great. Thank you.

Thank you. (Operator Instructions). Our next questions is coming from the line of Rupert Merer of National Bank Financial. Please state your question.

Hello, everyone.

Hi, Rupert.

You talked a little about where you expect your fuel delivery margins to trend in the near term, but can you remind us how a higher spread between natural gas and diesel can support your margins? I guess the question is, how much of your fuel volumes are sensitive to that price spread?

Right now, with all the LAMTA volumes we've brought on, it's probably in the 10% or 15% range. And then obviously, we hope as we go forward as we start to get into the regional trucking and the open road trucking, that that being a 30 billion gallon market hopefully it's going to dwarf kind of where were at now with the transit volumes. How that shakes out and plays out will be the huge impact on our margin when that happens. The math can get pretty much turned around and in our favor pretty quickly, just because that is such a large market that we're going after, and it's just going to be a matter of how fast we can get out there and penetrate that market which will, I guess the math impact how and what our margin looks like going forward.

Okay, so the higher spread is definitely helping things, it's just being a little washed out in the next quarter with the higher transit volumes?

That's right. You know that the transit volumes are substantially -- are less than the regional trucking margins. As we bring more of that on, that should help.

Okay. And on the legislative front, there was a bill, looks like it was introduced last week, HR 1795, promoting increased use of alternative fuels and public transport. Have you had a look at that? Do you have a sense of how important that could be?

Now, Rupert, that one's not ringing a bell. That is transport of what?

Alternative fuels in public transportation, I think. It doesn't look like the full text is being released yet.

I've not -- I should, I guess, know that one. I know there's three or four different bills kind of flopping around. Some of them are aimed toward conversions. I guess I'm not familiar with this particular one, Rupert, on public transportation.

Fair enough. Just one last one, so obviously, the higher spread is driving great interest in the sector on the customer side. Are you seeing any developments in competitive pressures?

Well, we have seen more competition. You remember, I mentioned this before where we're seeing is certain properties and agencies and cities have gone out to bid for stations. We see a lot more, I would say construction competition, right? So, that's fine. Those are people who think they can build stations, and so we've seen an increase there. But I wouldn't say that that's as important.

We have seen, for instance in Canada, which we are familiar with, they are interested in doing some LNG. They have built some stations. We've seen some friends in the producer industry really help promote natural gas. Some of them have built stations. We've partnered with a couple of them. We're seeing increased -- I saw were a CEO at the shareholders meeting, the CEO of Valero indicated that as the market warranted, they could envision someday putting natural gas into some of their stations. I've always believed that we will see increased competition as this market grows.

Okay, great. Thanks very much.

Thank you.

Thank you for your questions. At this time, I would like to turn the floor back over to the speakers for closing remarks.

Right. Thank you, operator. Let me just close by reiterating that we have tremendous opportunities for growth in the coming months as well as the longer term. We believe we're well positioned to expand our leadership position in the marketplace, and we will continue to benefit from our first mover advantage, our expertise and our technology. We look forward to seeing some of you at our upcoming annual meeting and reporting to you on our progress again next quarter. Thank you, and have a good day.

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