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Edited Transcript of CLNE earnings conference call or presentation 13-Mar-18 8:30pm GMT

Q4 2017 Clean Energy Fuels Corp Earnings Call

SEAL BEACH Mar 14, 2018 (Thomson StreetEvents) -- Edited Transcript of Clean Energy Fuels Corp earnings conference call or presentation Tuesday, March 13, 2018 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew J. Littlefair

Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director

* Robert M. Vreeland

Clean Energy Fuels Corp. - CFO

* Tony Kritzer

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Conference Call Participants

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* Eric Andrew Stine

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Robert Duncan Brown

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst

* Shereen Undavia

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Presentation

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Operator [1]

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Greetings, and welcome to the Clean Energy Fuels' Fourth Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Tony Kritzer, Director of Investor Relations. Thank you, you may begin.

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Tony Kritzer, [2]

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Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the fourth quarter and full year ending December 31, 2017. If you did not receive the release, it is available on the Investor Relations section of the company's website at www.cleanenergyfuels.com, where the call is also being webcast. There will be a replay available on the website for 30 days.

Before we begin, we'd like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects as well as words such as believe, intend, expect, plan, should, 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 Clean Energy's Form 10-K filed March 13, 2018. These forward-looking statements speak only as of the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release.

The company's non-GAAP EPS and 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 directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which was 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, Bob Vreeland. And with that, I will turn the call over to Andrew.

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [3]

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Thank you, Tony. Good afternoon, everyone, and thank you for joining us. On our last call, I told you about several important strategic actions that we were undertaking, which we believe will enhance our competitive position and drive improve -- improved financial performance in 2018. I'm pleased to report that we completed those initiatives and we are already seeing positive results.

The first action we took was to rationalize some of our low-volume legacy stations. This has produced the intended result and contributed to our margin per gallon improving by 13% or $0.03 over last quarter. Additionally, even with shuttering these unprofitable stations, we increased our volumes by 7% annually.

The second action we took was to identify and initiate SG&A reductions, which will result in approximately $20 million of savings annually or close to 21% compared to 2017.

The last significant action we took was announcing and completing the combination of our compressor manufacturing business with Landi Renzo's European compressor subsidiary, SAFE, to establish a new global powerhouse in the natural gas compressor business.

Clean Energy compression is well established in North America and South America, and SAFE has a strong presence in Europe and Asia. The combined companies have complementary product lines with limited geographic overlap and will benefit from manufacturing economies of scale.

We will maintain a 49% ownership but it will no longer be consolidated on our balance sheet and is now properly capitalized for success in the future. This move also allows Clean Energy to better focus on our core strength, delivering more natural gas fuel to our customers.

Now on to results. In the fourth quarter, the company delivered 86.3 million gallons, a 3% increase over the fourth quarter of 2016. For the full year, we delivered 351 million gallons, a 7% increase over 2016. Our revenue for the fourth quarter was $89 million, and for the full year 2017, revenue was $342 million. The difference from 2016 was almost entirely due to the sale of our upstream biomethane assets to BP for $155 million and no alternative fuel tax in 2017.

Speaking of the alternative fuel tax credit, last month, Congress passed a 1-year extension retroactive for 2017. We look forward to receiving the tax credit payment next quarter, which will net to us -- net to us should be approximately $25 million. When added to our existing cash position of $178 million, we will have over $200 million of cash and investments on our balance sheet.

Our core markets continue to experience healthy growth. The refuse sector added new customers and expanded capacity with existing customers, with refuse volume increasing 18% in 2017. Overall, the refuse industry continues to adopt CNG as their fuel of choice. Leading the way are our longtime customers, Waste Management and Republic Services. In fact, Waste Management recently opened their 104th refuse station to fuel their growing fleet of over 6,000 CNG refuse trucks and have said they will continue to aggressively increase their CNG fleet. Today, we own or operate over 280 refuse stations and fuel over 13,000 refuse trucks daily all across the U.S. and in Canada.

In our transit market, we increased volume 7% in 2017 over 2016. And since our last report, we have signed new or extended customer contracts for close to 12 million gallons, with fleets such as Phoenix Public Transit and the city of Santa Fe.

On our construction carpet in 2017, we completed 39 station projects. For customer construction projects, revenue was $52 million.

Looking out to 2018, we believe we'll complete a similar amount of station projects for the year, both for our own network and for our customers.

Our Redeem-branded renewable natural gas, or RNG, offering continued to accelerate in 2017. We delivered 78.5 million gallons of Redeem, a 33% increase year-over-year, which represents 22% of our total fuel mix and 100% of our fuel delivery in California. As part of California's statewide greenhouse gas reduction initiative, Clean Energy is well positioned to benefit from the ultra-low carbon intensity RNG production in the state, some of which we have recently contracted from dairy digester projects.

Remember that in order to monetize the RNG fuel gallons, the fuel must be delivered through a downstream station network, and ours is unmatched. As an example, the fourth quarter is one of our strongest Redeem volume quarters. This is because our robust station infrastructure was the only downstream distribution network with the capacity to flow an excess amount of RNG inventory that has built up industry-wide. We currently flow close to half of all the RNG delivery vehicles in the United States.

We announced the deal with Dallas-Fort Worth International Airport to supply the DFW vehicles -- vehicle fleets with Redeem. This makes DFW the first airport outside of California to operate their fleet with Redeem RNG. DFW is the only airport in the United States to be certified as carbon neutral and is the largest airport in the world with that distinction. We applaud our longtime DFW partners for their commitment to lowering their fleet emissions.

I'd like to highlight our recent partnership announcement with the L.A. and Long Beach Harbor Trucking Association. We are now the exclusive clean transportation fuel provider to more than 100 member companies represented by HTA. These member companies operate more than 8,000 trucks across the West Coast ports in the United States. As part of this partnership, we will provide specialized clean fuel programs to HTA members in preparation for the implementation of the Clean Air Action Plan in the ports of Los Angeles and Long Beach.

As a reminder, the Clean Air Action Plan adopts far-reaching strategies to further reduce air emissions and support California's vision for more sustainable freight movement. The plan calls for the introduction of Near Zero engines in 2020 and also places a fee on diesel that same year. This should dramatically change the makeup of the 16,000 heavy-duty trucks that move in and out of the ports every day.

Commercial production of the new Cummins Westport heavy-duty Near Zero 12-liter engine began last month. Kenworth and Peterbilt expect to begin shipments in Q2 and Freightliner in Q3. Trucks with these new engines will be delivered to the port next month.

The realization by trucking companies that they need to do something to meet stricter emission requirements in California is beginning to settle in. For instance, PAC9 Transportation recently purchased 24 natural gas trucks for their port operation.

More broadly, the U.S. Postal Service continues to implement aggressive mandatory carbon reduction programs with the dozen -- with the dozens of its contract haulers. We recently signed contracts with Sheehy Mail Contractors based in Kansas City and Thunder Ridge Transport, which is now offering 20 heavy-duty CNG trucks on behalf of the USPS. This brings the total number of heavy-duty CNG trucks operating on behalf of the Postal Service to over 300.

Moving on to our capital structure. As I previously mentioned, we had $178 million of cash and investments on the balance sheet at the end of the fourth quarter and expect an additional $25 million revenue contribution from the alternative fuel tax credit in the upcoming quarter.

Looking out to our debt maturities of $135 million in the back half of the year, we will have more than enough cash to comfortably pay down our debt. CapEx for our core business was $18.4 million in 2017, with an additional $18 million for NG Advantage's virtual pipeline business. However, most of NG Advantage CapEx is financed.

For 2018, we anticipate our CapEx for the core business to be approximately $15 million. We remain on track to achieve positive operating cash flow in 2018, and we believe we'll be close to $55 million to $60 million of adjusted EBITDA for the year. We are expecting to increase our volumes in the high single digits and continue to reduce SG&A where we can.

Before I turn the call over to Bob, I would like to take a moment to review some of our accomplishments for 2017. While it has been a disappointing year for our stock price, we had a good year strategically and significantly improved the financial health of the company. Specifically, these accomplishments include: the sale of our upstream biomethane production and supply contracts to BP for $155 million, plus the assumption of $10 million of debt, plus a $25 million earn-out; we added $22 million new gallons; we strengthened our relationship with BP to secure long-term biomethane supplies for us and our customers; we increased our renewable Redeem biomethane sales by 33%; we strengthened our balance sheet by reducing our convertible debt from a high in 2016 of $545 million down to $235 million today; we also improved our cash position so that we will have ample resources to repay the $135 million of debt due in the second half of 2018; and by the end of the year, our convertible debt will be down to $100 million.

We secured the alternative fuel tax credit for 2017. We shuttered unprofitable stations. We reduced our SG&A by $20 million. And we combined our compressor subsidiary.

Finally, I'd like to take a moment to address our stock price. It's been a rough time for our stock price and our shareholders. Our friends on Wall Street tell us there are 3 principal reasons, which I want to address. The first is the fervor around the perceived potential of mass adoption of heavy-duty electric trucks. Electric may work for passenger and light-duty vehicles; however, as the dust begins to settle on the hype around electric heavy-duty trucks, we are starting to see industry experts that are highly skeptical of the feasibility of the battery range and the weight, the cost of charging stations and the ability to scale commercially to meet the demands of heavy-duty truck market.

Our natural gas offering meets the demanding duty cycle of heavy-duty trucking. It is green or greener than electric and is available today for significantly less.

The second concern about -- is about how we might handle our debt. As I stated several times, we have adequate resources to pay off our upcoming maturities. Our debt is manageable and will not be an issue for this company.

The third and last concern is Boone Pickens. There has been some misinformation stemming from Boone's recent retirement announcement. Some have questioned Boone's involvement and ownership position in the company. Boone remains our largest shareholder, a director on our board and is deeply committed to the continued growth of our company and the advancement of the natural gas fueling industry. In fact, we just got back from a 2-day board meeting with Boone in his Dallas office.

In summary, while our stock price has been under severe pressure, our underlying business is strong and improving, and I'm optimistic about the future. And with that, I will turn the call over to Bob.

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Robert M. Vreeland, Clean Energy Fuels Corp. - CFO [4]

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Thank you, Andrew, and good afternoon to everyone. I'll direct my comments first toward the actions we've previously announced and then our results for the fourth quarter. And lastly, I'll comment on our outlook for 2018.

As Andrew mentioned, we've completed the actions we discussed during our third quarter earnings call and I don't expect any significant costs in 2018 related to those actions. This includes the station closures, reductions in personnel and the Clean Energy compression combination, where we formed a new company by combining our compressor subsidiary with Landi Renzo's compressor subsidiary. Most of the cost of these actions were recorded in the third quarter, although we recorded $6.5 million in the fourth quarter in nonoperating losses associated with the Clean Energy compression combination. While we saw improvements in the fourth quarter, the full effect of these positive changes began in January 2018, which you'll see in the first quarter.

Before I get into the details of the fourth quarter, I want to emphasize the positive aspects of our fourth quarter results. We continue to see volume growth on an ever-growing base of volume. Our gross margin per gallon improved $0.03 in the fourth quarter to $0.26 on 86.4 million gallons, reflecting our station optimization efforts as well as the rise in retail pump prices.

Our station revenue of $17.8 million was the strongest quarter in 2017, and we saw reductions in SG&A expense from a year ago and from the third quarter, with further significant SG&A reductions coming in 2018. So all in all, our core business performed well in the fourth quarter, with further improvements slated for 2018.

Regarding the fourth quarter results, our volume increased 3% over last year due to growth in CNG and LNG, while nonvehicle RNG gallons declined as a result of us no longer operating the biomethane plants we sold to BP.

For CNG, we saw most of our growth in refuse, while the LNG growth related to bulk deliveries. Fourth quarter Redeem volume delivered was 25 million gallons compared to 14.9 million gallons a year ago or a 68% increase. For the year, we delivered 78.5 million gallons of Redeem versus 59 million gallons last year or a 33% increase.

As I mentioned on our last 2 calls, our quarterly results after the first quarter were expected to be impacted as a result of our sale of our upstream biomethane assets to BP for $155 million. As a result of the BP transaction, we expected a reduction in revenue of $8 million to $10 million per quarter and a reduction in SG&A expenses of $500,000 per quarter when compared to our first quarter results.

Our revenue for the fourth quarter of 2017 was $89.3 million versus $101.8 million in 2016. Revenue in 2017 was lower due to lower environmental credit revenue of $9.8 million as a result of our BP transaction, and 2017 doesn't include alternative fuel tax credit revenue, while 2016 had $7 million of alternative fuel tax credit revenue.

Our construction revenues of $17.8 million were ahead of last year by $900,000, and our compression revenues of $6 million were ahead of last year by $1 million, 2 good indicators of continued investment by our customers in natural gas fueling infrastructure.

Our gross profit margin was also impacted by the lower environmental credits due to the BP sale transaction and 2017 not having any alternative fuel tax credit. Our margin per gallon increase of $0.03 represented approximately $2.3 million in additional gross margin in the quarter.

Our SG&A for the fourth quarter of 2017 was $23.8 million compared to $28.7 million in 2016. And even after considering 2016 included $3 million of incremental charges, this is still a 7% year-over-year decline in SG&A.

Overall, for the year 2017, SG&A declined 9.3% or $9.8 million compared to 2016.

As we pointed out in our last quarter, we have an administrative matter in process with the California Air Resources Board, or CARB, and this matter has not been resolved, which caused us to record a $7 million charge during the fourth quarter for environmental credits invalidated by CARB. We are contesting the invalidation. We have resumed generating and trading LCFS credits in the first quarter of 2018.

Our GAAP net loss for the fourth quarter of 2017 was $28.3 million versus a net loss of $3.9 million in 2016. Our net loss for 2017 was negatively impacted by the LCFS charge of $7 million and the $6.5 million in nonoperating losses from the Clean Energy compression combination, while 2016 was favorably impacted by $25.8 million from the combination of alternative fuel tax credits, gains from debt repurchases and incremental environmental credits.

Our adjusted EBITDA of negative $9.8 million for the fourth quarter of 2017 was also negatively impacted by the LCFS charge and a nonoperating loss related to the Clean Energy compression combination, while our 2016 adjusted EBITDA of $17.9 million was favorably impacted by the alternative fuel tax credits, the gains from debt repurchases and the higher environmental credits.

Now regarding 2018. As a result of the Clean Energy compression combination, we will no longer consolidate our compressor company and instead will account for our 49% ownership of the new combined company as an equity method investment and record our 49% share of the results of operations in a single line item in the nonoperating section of our income statement. There will be a reduction in revenue averaging approximately $6 million per quarter. There will be a minimal impact to our overall gross margin; however, we will see a favorable impact to SG&A, as I will point out in a moment.

In addition to the improvements from our third and fourth quarter actions, 2018 will benefit from the alternative fuel tax credit related to 2017 volume, which is estimated to be $25 million. The full $25 million will be recognized as revenue and earnings in the first quarter of 2018. We would expect to receive the cash by the end of the second quarter, although the timing of collection is subject to IRS processing.

Our margin per gallon is expected to be within a range of $0.24 to $0.28 for 2018, keeping in mind our range in 2017 was $0.23 to $0.26 and that a $0.01 increase in our effective margin per gallon represents over $3.5 million in additional operating profit.

Our 2018 SG&A, including the removal -- removing the SG&A from our former compressor subsidiary, is expected to range from $73 million to $79 million, which is down from $96 million in 2017 and $105 million in 2016. GAAP net loss for 2018 is expected to range from $20 million to $25 million, which is an improvement of $54 million to $59 million over 2017. Adjusted EBITDA will be in the $55 million to $60 million range, which will result in positive cash flow from operations.

And with that, operator, we'll open the call to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Eric Stine from Craig-Hallum.

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Eric Andrew Stine, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [2]

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I was wondering if we could just start at the ports, with the cap in place, the fees on diesel trucks starting in 2020. Just curious what you're seeing on the funding side, whether that did, in fact, start to flow in December, what you see now and when do you think you will start to see these trucks on the road that you can start to fuel.

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [3]

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Eric, there are some of the new, as I had mentioned, some of the new 12-liter trucks. Low NOx 12-liters are being sold into the port now. There's been some orders taken. Next month, we'll have about 25 new trucks going into a couple of fleets down there. All of the OEMs will have trucks that will be moving into the ports in the second and third quarter. On the grant funding, there is, as you know, as you followed it over time, there's lots of different pots of money in the state, Prop 1B money and others. There are actually, right now, 140 trucks that are in a -- in the queue to receive Prop 1B money. Many of these trucks will go into the port. There's been some recent efforts underway by the Port of Long Beach and Port of Los Angeles and the Air Quality Management District to come up with another very highly focused pot of grant money to assist in trucks that perhaps might not have a truck to retire, some of the new asset base trucking fleets that are in the -- there in the port. And so we like that. So I guess I'm pretty -- it's just now starting. We just now have the Near Zero product, some of the grants, and I think for the larger deployment of grant money, more time is going to be needed to craft that money correctly. There seems to be a good attitude at the port. There seems to be a better general awareness of what is coming down the road. They're busy down there, and they've got some time. But we can tell, by talking to our customers, that there is recognition that something's changing down there. And there are 2 other important things happening in the port, Eric, that is the ports jointly are commissioning some studies on just what the right fee will be and the economic impact of how that will be designed. There's been a couple of companion city council measures to encourage the port to deploy money faster. So I think there's a lot of the right things in motion, but there is -- I think, really, it will be the remainder of 2018, trucks will arrive in the port, but there's kind of more work to be done to get, I would say, more aggressive full-scale deployment.

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Eric Andrew Stine, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [4]

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But in -- so 2019, 2020 is when you'd expect to start to see...

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [5]

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Yes. I mean, I'm guessing here, I'm guessing we're going to have a few hundred trucks to 2018 probably. But the bigger number is going to be in 2019 and 2020. And certainly, history would tell us that last time around, when there's several thousands of trucks went into the port, the fee worked. Just for those that aren't as familiar, the fee is something on the order of $70 per container, so that's $35 and then most have 2 containers. So $70 is one that gets the attention. And the last time around, the switch could be to brand-new diesel or natural gas. This time, it's got to be Near Zero natural gas or electric. And we like our odds on that play. And $70, Eric, doesn't work well down at the port.

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Eric Andrew Stine, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [6]

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Right. And that switch last time happened pretty quickly when it started to happen.

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [7]

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Very quickly.

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Eric Andrew Stine, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [8]

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Okay. Maybe just turning to Redeem. Good to hear that 25 million gallons in the quarter. I mean, is it fair to kind of take that as a potential run rate as we look at 2018? Or maybe, just what are your expectations for 2018 and how's that pipeline shaping up?

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [9]

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Yes, well, we still obviously like the Redeem fuel, and it's gaining a lot of traction. Redeem, the renewable natural gas, it's really the cleanest fuel out there. And when you look at how it's made versus the manufacturing of electricity, it really is renewable and it's cleaner, which is something that people -- it takes a while for people to completely understand that, but it isn't lost on a lot of our fleets that are concerned about sustainability. Don't get carried away as you model us, Eric, on $25 million as the run rate. We did see that in the quarter. It is because we have the downstream capability to take a lot of this. We are seeing new renewable natural gas coming to the market, so I'm not saying that this kind of bulge or bump-up won't happen from time to time. I'm not sure I'm prepared to tell you to just assume that that's where the business is right this second in the first quarter or so.

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Eric Andrew Stine, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [10]

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Got it. Okay. Maybe last one for me. Just a little color on the LCFS charge. I mean, is that something that covers past volumes and going forward, we should kind of expect the same situation as you've had? Or is that something that potentially impacts going forward as well?

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Robert M. Vreeland, Clean Energy Fuels Corp. - CFO [11]

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No. Eric, it's Bob. So that will not impact us going forward. That really is kind of a unique situation, but it really relates to credits that we otherwise would have been transferring to other obligated parties that we had available to us. So they weren't passed revenue, those credits, but they were available in our account and they were invalidated. And so in order to meet our obligations, we, in effect, had to spend $7 million to take care of that. It's over, and we're back in trading and we're contesting that. But going forward, well, we're back into a normal LCFS, given the transaction we do with BP and the sharing and that sort of thing, so yes.

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [12]

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And we have to be a little careful because we're talking to our friends there, and we can't say too much on it. But we're hoping that we're going to get some sort of resolution to that issue.

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Operator [13]

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Our next question comes from the line of Rob Brown from Lake Street Capital Markets.

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Robert Duncan Brown, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [14]

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I just wanted to follow up on the organic growth rate in the quarter. I think you closed some stations. Do you have an organic growth rate, or was the 3% growth sort of an organic number?

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Robert M. Vreeland, Clean Energy Fuels Corp. - CFO [15]

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That was mostly organic, yes.

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [16]

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Yes, yes. And the stations we closed, obviously, were lower volume, right? That's why we closed them, they were legacy stations. But yes, I'd say that the 3% growth rate was mostly organic, yes.

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Robert Duncan Brown, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [17]

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Good. And then you talked about a high single-digit growth rate kind of going into '18, and I think you have laid out some of the drivers. But I just wanted to clarify, are -- is it refuse growth mostly driving that, or is it some of this port stuff coming on or just...

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [18]

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Well, I think some -- there should be some trucking, which are -- it's good margin for us. Trucking, the port stuff would obviously fit in that category. We have continued good growth rate in refuse and transit, but we see a little bit of an uptick and our internal budget calls for an uptick in the trucking volume. We're seeing -- it's kind of across the board, even our airport stations, we're seeing -- we've got some new product at the airports and we've got -- we've done some good here recently on transit. So all of our markets now are -- our NG Advantage business is -- look, $60 oil is -- means, today, you've got diesel in California at $3.75. And so we've seen the pump price move up and we've seen our interest move up for the fuel, frankly, and so we see growth on -- in all of those, in all of our sectors.

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Robert Duncan Brown, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [19]

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Okay. Good. And then -- and the final question, I just wanted to touch a little bit more on the Near Zero engine versus electric. Where are the customers then in terms of kind of working through that question? And do you think that you could term that in '18, or is this something that maybe causes a pause in the market or maybe just your color on the comparison in there?

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [20]

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Rob, it's a good -- a very good question, and electric has captured people's attention around the world, right? We all want to be green, we all want to be clean, and so, as we've all seen, electric passenger cars have, frankly, limited success, but good success, and a lot of interest, certainly a lot of interest by the political crowd and also the environmental crowd. I think it's been easy for people to kind of just assume that, oh, well, electric light-duty passenger vehicles are gaining broad acceptance, and so that's easily transferred over to heavy-duty. And of course, we've seen a couple of announcements by different engine manufacturers that they all have different skunkworks going on as it relates to electric, and there's even a hydrogen application. I think somebody has that. And Tesla, and with some fanfare, had their trucks. You really can't buy one of those trucks today, and I think that those deliveries are really slated for something in the later part of 2019. I think people are intrigued, but yet, I think that, really our customers, we have lots of -- 1,000 or more fleets that have a lot of experience running our natural gas. And our product's gotten better and our product now has gotten dramatically cleaner. And now with the advent in the last years of the renewable, it's even cleaner, it's lower on NOx, price has come down. Our friends in the transit or in the refuse industry, there is no incremental cost on their engine for natural gas. And our friends in the refuse sector with a $300,000 trash truck, all in, a natural gas truck costs about 7% or 8% more. While that's down a long way from where and when I started here many years ago, so it's come into where it's very short payback for them. The experience, I think, it's -- UPS is running, I don't know if it's 1 billion miles, but I mean, hundreds of million of miles on natural gas. And so a lot of our customers have a lot of experience, and so there is no experience running electric duty. So I think people are -- have an open mind. So far, I think, people have been willing to accept a lot of things that, frankly, we know in application they're not willing to accept. And electric trucks that have -- are reported to be 500 to 7,500 pounds heavier, well, that doesn't work when you're hauling goods, when you can only haul 40,000 pounds of goods. People used to be very critical of natural gas. We had an 800-pound weight penalty. So I think that time's going to tell how these vehicles, how expensive these vehicles are, how this weight actually pans out, how they operate. The range is a huge issue. So let's see. I don't know that it's going to put a pall over ordering because fleets are under pressure to replace vehicles and under a pressure to be green and sustainable. And I'd like to think that as people look at the electric, when they get a chance to, we're going to compare very favorably.

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Operator [21]

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Our next question comes from the line of Pavel Molchanov from Raymond James.

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Shereen Undavia, [22]

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This is actually Shereen. I'm on the behalf for Pavel. So my question is about the tax credit. I'm curious how you're thinking about the odds of getting a longer-term extension in the current legislative session. And is this something that will ultimately be tied to what happens with biodiesel?

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [23]

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So, it's -- as you know, Shereen, there's a lot going on in Washington, so it's sort of hard, kind of hard from morning to morning to figure out exactly what's going on there. It appears that there is a budget reconciliation or another budget that might need to be passed to continue funding the government, and that could be looked at again as early as March, I think, 23rd. I think there's a good bipartisan support for looking at the tax extenders. Everybody that's been on this call over the years knows that that's a broader group than just the alternative fuel tax. None of those tax extenders got extended into 2018 or beyond. I'm told that there's -- and our folks believe that there's good support for making that extension and that it could happen as soon as this next budget is addressed. So we may know something here soon. So we'll kind of see how that all plays out and how the -- what goes on in Washington. It's a little hard to tell from time to time. I don't have any intelligence right now that it's going to be paired up or put with the diesel or biodiesel, or what you're thinking of maybe is the issue on the ethanol right now. I don't believe -- it's not the way it's currently crafted, and I'm not so sure that's the way they will do it.

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Operator [24]

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Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would now like to turn the call back over to Andrew Littlefair for closing remarks.

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Andrew J. Littlefair, Clean Energy Fuels Corp. - Co-Founder, CEO, President & Director [25]

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Yes, thank you, operator, and thank you all for joining us this afternoon. We look forward to updating you on our progress next quarter. Thank you, operator.

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Operator [26]

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