US CNG Powered Transit Bus Fleet Now At 15%, 25% Of 2007 Sales: Government Subsidies Will Drive Further Adoption According To Industry Expert

• On 5:32 pm EDT, Monday September 21, 2009

67 WALL STREET, New York - September 21, 2009 - The Wall Street Transcript has just published its Alternative Energy/Clean Energy/Power Generation/Utilities Report report offering a timely review of the sector to serious investors and industry executives. This 83 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Long Term Perspective on Alternative Energy Industry -- Leading Indicators for Alternative Energy Components Companies -- Mergers and Acquisitions in the Alternative Energy Industry -- Break Even Business Fundamentals for Carbon Free Energy Providers -- Development of Carbon Free Energy Production Infrastructure -- NAT GAS Act -- New Players in the Alternative Energy Industry -- Solar Power Cell Manufacturers Market Strategy -- Demand Response for Raw Materials for Solar Cell Production -- Alternative Energy Investment Opportunities -- Multiple Stock Winners in Carbon Free Production Industry -- Government Funding of Alternative Energy Power Providers -- Chinese Solar Energy Companies -- Alternative Energy Hedge Fund Investors -- Commodity Cycles -- Determinants of Market Valuations in the Alternative Energy Production Industry -- Carbon Emissions Statistics -- Energy Efficiency Statistics -- Innovations in Solar and Wind Power Generation -- Business Economics for Methane Based Power Generation -- Electric Vehicles Projections and Statistics-- Cap and Trade Projections and Statistics -- Development of Battery Technology -- Regulatory Environment Developments for Solar, Wind, and Alternative Energy -- Hybrid Vehicles Development and Sales Projections

Companies include: Tanfield (TAN.L); Smith Electric Vehicles U.S.; Valence (VLNC); Spire (SPIR); Newport (NEWP); MYR Group (MYRG); Primoris (PRIM); Tetra Tech (TTEK); EnerNOC (ENOC); Comverge (COMV); EnergyConnect (ECNG.OB); Calgon Carbon (CCC); and Ener1 (HEV); Westport Innovations (WPRT); Clean Energy Fuels (CLNE); Fuel Systems Solutions (FSYS); FuelCell Energy (FCEL); FEI Company (FEIC); Veeco (VECO); ATT (ATT); Landi Renzo (LR.MI); Teleflex (TFX); Royal Dutch Shell (RDS.A); Wal-Mart (WMT); Pepsico (PEP); FuelMaker; Chevrolet; GM; Honda (HMC); Itron (ITRI); Siemens (SI); American Superconductor (AMSC); GE (GE); and ABB (ABB);

In the following brief excerpt from just one of the 23 interviews the 83 page report, an equity analyst discusses the outlook for the CNG, LNG and other alternative fuels sector and pick stock winners for investors.

John Roy joined Janney Montgomery Scott LLC in 2008 as a Senior Research Analyst covering alternative energy and advanced materials. Prior to joining Janney, Mr. Roy covered alternative energy and nanotechnology at WR Hambrecht & Co., and IT hardware and technology strategy at Merrill Lynch. Previously, he worked in aerospace and software development for 12 years. Mr. Roy received his master's and Ph.D. in computer science from the University of California, Irvine. He also holds a master's degree in electrical engineering from the University of Southern California and a bachelor's degree in electrical engineering from the University of California, San Diego.

TWST: Why do you think natural gas vehicles are superior to some of the other alternatives, like E85, hybrids or electric vehicles?

Mr. Roy: I used to cover ethanol about two and a half years ago. Our industry report was entitled titled "E10, Yes, E85, Maybe." The problem is, from a scale point of view E10 works - that is an additive to fuel through a replacement of something called MTBE. So that works. The main issue there with ethanol was of course corn. The corn input and the ethanol output were not commodities that were tied together. So one quarter you can make a ton of money and the next quarter you could be bankrupt. Actually both the companies that I covered at that point are now both bankrupt. So for corn ethanol these are difficult times, I think, for good reason. I think there were some recent articles also on biodiesel having some issues, mainly because, again, the price of oil being low, which dictates the price of diesel. So if you are looking at biofuels, biofuels at this point with oil so low is not economically attractive for a number of situations. In the future, though, you could have the reverse happen, but for now it's difficult. If you look at the next type, which is the natural gas vehicle, natural gas vehicles have been around for quite a while. There are approximately 10 million across the globe that are already running. I put natural gas and propane kind of in the same bucket, they're very similar. There are some differences, but there are a lot of similarities in terms of they're both gas, they both run fairly clean, etcetera. But the economies, in terms of how much it costs to build the vehicle, are coming down. I should say coming closer to the regular unleaded vehicle. So that's certainly a major factor. And that's why I think that's definitely the winner for today. As we go far out - and let's just jump to the other end of the spectrum, which is hydrogen. I'm not sure we're ever going to see a whole lot of hydrogen in the United States, vehicle wise. Certainly, fuel cells are an interesting technology, but over the years people have found it difficult to make them in scale and make them at a price lower. Even the U.S. government is trying to pull back some of its hydrogen fuel cell research. The general thinking is that the one that's in between on the maturity scale - plug-in hybrids and full-electric vehicles - could do well long term. I believe those definitely are going to work, but its going to be maybe in 15 years. Near term the plug-in hybrid approach, like the Chevy Volt, has a problem is with its battery. The cost, size and energy density are still not where they need to be. Depending on who you talk to, there is a general belief that Chevy is not going to make a whole lot of money with those vehicles. You look at some of the stuff like the Coda that's out there, that is going to be on the market here pretty soon, you are looking at ranges of between 100 and 125 miles for an electric vehicle that cost $45,000. I'm just not so sure that's enough to get a whole lot of people interested. It's a good - don't get me wrong - it's good, it's certainly better than it was. But when you are comparing to what you can do on the regular vehicle or a natural gas vehicle, it's not there yet. In the United States, you've got 150,000 gas stations. We have 2,000 propane and probably around 1,200-1,300 natural gas. As an example, in Italy they have 2,400 pumping stations. So in Italy alone, it has the infrastructure that supports propane. You can sell it to a consumer and they can be somewhat reasonably assured that they are going to get the fuel they need. So when I look at actually what's happening, it is the only one that seems to work now; it's cleaner, it's non-oil and it is reasonably mature enough that natural gas in the U.S. - and propane in other countries, again, they are similar. So I like the idea of a hybrid electric vehicle because one of the things you constantly hear about from both consumers and from fleets is the lack of infrastructure. You have a plug-in hybrid, the Chevy Volt is a perfect example of this, where you've got a vehicle that is basically an electric car with, think of it as a gasoline generator attached on to it - it's not exactly that, but it's close. So you run on electric as far as you can, and when you run out then you run the gasoline engine and it charges the electric batteries, and then you keep on going. Then of course you can do it while you're actually moving it, certainly that's reasonable. The issue is that the cost of this kind of dual system is higher than one system or the other, and also the amount of savings you are going to get and the cost of the actual batteries to get a reasonable distance is going to be tricky. Then you add on the issues of, okay, if I take an electric car and charge it with electricity that comes from a coal plant, it's not as clean as you want it to be. So the whole infrastructure - the electrical infrastructure needs to be looked at, and certainly we're looking at in the United States. So when we look at natural gas, natural gas certainly is cheaper, it's not like they will continue to be a lot cheaper. The price of natural gas is not going to vary necessarily with how much vehicle adoption you have because the vehicle adoption is such a small percentage of what's used in the United States. But the price of natural gas, unlike the ethanol situation, is going to go up and down with oil pretty much. Yes, there is some volatility, but the thinking is that those two will track together somewhat. You won't get this kind of upside-down situation. When you look at that, it really does make a lot of sense. So why aren't more people doing natural gas? You don't have enough stations. That is one of the big problems. If you look at these companies, Clean Energy Fuels is building stations, Westport is building engines, Fuel System Solutions is building what you might call a conversion kit that allows you to run two fuels or one or the other actually - it's not two fuels at once, but it's one or the other. So you ride these vehicles, they are like regular cars, right? You have to push a button, like Fuel System Solutions makes, and all of a sudden now you are running on natural gas. You can't tell you switched. The nice thing about that is, of course, you can run this idea that if I run out of natural gas, I can now run unleaded. That kind of an idea of a stepping-stone towards a full, dedicated alternative vehicle makes a lot of sense for consumers in the United States, but that is longer term. All these guys are focusing on fleets. The reason you focus on a fleet is because it has a return-to-base-type function. You have got taxicabs, which are returning to the depot, a refuse truck is always going back to the landfill to dump, a shuttle bus is making a certain circuit. All these types of fleet activities are always coming back. So you don't have to have this massive infrastructure built out to go wherever you want to go. So that's why they are all focusing on fleet, because that's where the adoption makes sense. The one thing that you do have is you still have a situation where the technology, particularly on the truck side, is more expensive. We were talking about how electric cars are more expensive. That is an issue going forward, certainly for consumers and for the makers of the cars themselves as well. If you look at a diesel truck today of a fairly large size, it will cost you $110,000. A similarly configured liquefied natural gas truck, LNG truck, is about $180,000. Obviously that is an issue. What happens is that over time, that differential will come in as the volumes go up and as people figure out more and more about how to build them, and they become less of a specialty item. As an example, this is what happened with CNG transit buses. Approximately 15% of the entire fleet of transit buses in the United States is now compressed natural gas; 25% of all sales in 2007 were compressed natural gas. One of the things that has happened since this whole effort started with the transit business, which is probably about 15 years ago, the premium 15 years ago was 50%. Now it is like 5%. So over time the volumes go up, people figure out how to do it, price comes in. Initially though, it's a big hurdle to get over and that's where you need the government subsidy. Right now the government subsidizes, for that example I gave you, between $110,000 and $180,000, at about $32,000. So now you're looking at $110,000 versus $150,000. Still it's a big hurdle for a lot of people. There is an effort actually in both the House and the Senate right now to do something called the Natural Gas Act - NAT GAS Act. And that would actually double the subsidy to $64,000, which would bring it basically to $120,000 versus $110,000. Add to that new diesel trucks next year are going to be more expensive because of some of the regulations on emissions, and so basically it would be $120,000 versus $120,000. And at that point you now say, "Okay, you are buying the truck, what would you like, diesel or liquefied natural gas?" It's the same price. All of a sudden, you could start to see companies adopting it. Obviously, if I'm a person who is buying a truck, the economy has to be good enough, in general, for me to buy a truck at all. And that's one of the things we talked about as well - how economically sensitive are the various companies in this sector? I think Westport is probably the one that's most economically sensitive and, to a certain extent as the economy gets better, it's going to have a little more juice because the stock has held back. Westport has certainly moved the last few days since the Clean Cities Program was announced, and we'll get into that later. But as far as Clean Energy, it's less economically sensitive and Fuel Systems is probably in the middle.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 83 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

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