Clean Energy Fuels Corp. (CLNE) Q2 2020 Earnings Report, Transcript and Summary

Greetings, and welcome to Clean Energy Fuels' Second Quarter 2020 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, Mr. Robert Vreeland, Chief Financial Officer. Thank you. You may begin.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the second quarter ending June 30, 2020. 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-Q filed today. These forward-looking statements speak only as 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 has been furnished to the SEC on Form 8-K today. With that, I will turn the call over to our President and Chief Executive Officer, Andrew Littlefair.

Thank you, Bob. Good afternoon and thank you for joining us. As the world continues to adjust to a pandemic that has stubbornly held on longer than we had hoped, Clean Energy's business of fueling thousands of buses, trucks and other fleet vehicles every day has remained healthy. Also, we have not slowed down our pursuit of new customers, adding additional gallons and expanding the use of our Redeem renewable natural gas during these uncertain times, which I'll expand on in a moment. But not unexpectedly, our volumes of approximately 90 million gallons in the second quarter of this year were 10% lower compared to the same quarter last year due to the overall economic slowdown caused by the pandemic. We are seeing lower volumes in primarily 2 sectors, public transit and especially airports, which have been significantly impacted by the lack of air traffic. The slowdown impacted our revenues in the quarter, which were approximately $60 million, down 17% from 2019. But we continue to retain a healthy balance sheet, with an adjusted EBITDA of $9.2 million for the quarter, an improvement over last year's second quarter, leaving us with $96 million in cash and investments and only $37 million of debt. For those of you who have been following us for a while, you know that we substantially lowered our overhead the last few years and we now have a disciplined, low-cost expense structure. Because of that, we are able to maintain healthy, positive adjusted EBITDA even with the drop in the transit and airport fleet businesses. And at some point, people will start flying again and public transit will resume to more normal levels, whether it be in a specific region of the country or nationwide. Until they do and while our nation recovers, we have a strong underlying recurring business and a healthy balance sheet. We have not taken, nor do we need to, any government assistance due to the coronavirus. Frankly, I'm optimistic about our business. ESG investing has continued to be a priority. If not increased, then perhaps the pandemic is forcing companies to question why they continue certain business practices, such as always running diesel trucks when other better alternatives are available. And during this time we all recognize and enjoy the clean air and absence of soot and smog, not to mention we know there has been a reduction in greenhouse gases. Regardless of the reason, we are seeing a renewed interest in natural gas fueling and adding new customers and growing with existing ones, despite our sales force operating via Zoom and phone calls rather than in-person meetings. In fact, we have signed contracts representing 6 million gallons over the last quarter, and we are currently in the process of responding to a record number of RFPs for new or expanded natural gas fleets from municipalities, transit authorities and companies. We believe this is a sign of a pent-up demand and a stronger natural gas fuel market in the months to come. In addition, customers have ordered new station builds, adding to our overall construction pipeline. In the solid waste sector, cities from the East Coast to West, including Lexington, Denver, Scottsdale, Sacramento, Muncie, Redlands, California, and Philadelphia have signed contracts over the last several months to begin or extend fueling for refuse trucks, representing approximately 2.2 million gallons a year. Waste Connections signed a contract to add fueling outside Fort Worth for additional trucks, and Noble Environmental are adding 20 new trucks in Pennsylvania to fuel an existing station. Overall, our refuse business has actually grown during the pandemic. We continue to see new interest by companies and municipalities to switch their diesel fuel refuse trucks to ones equipped with natural gas engines that have proven reliable and dependable over many years, while operating on a fuel that burns over 90% cleaner and can reduce carbon by over 250%. And speaking of reducing harmful greenhouse gases, I am excited to let you know that we will be formally announcing in a few days that the New York City Metropolitan Transit Authority has signed a multiyear contract to operate their 800 buses with Clean Energy's Redeem renewable natural gas. This is a significant move by the country's largest transit system, which will mean the conversion of over 8.3 million gallons from regular CNG to renewable CNG, which will eliminate over 25,000 metric tons of harmful carbon emissions from going into the atmosphere every year. New York MTA should be highly commended for this decision, which comes even before the state of New York adopts a low-carbon fuel standard program. As part of the ambitious package on the climate, an LCFS is currently working its way through the legislature and, if made into law, could accelerate the adoption of RNG in New York. While other companies have begun to offer RNG as a transportation fuel, almost all of it has been delivered in California. Clean Energy stands out with an extended geographical footprint of supplying 45 million annual gallons of RNG to customers in almost 30 states outside of California. We picked up another new transit agency, with SolTrans in Solano County, California, which is purchasing 16 new transit buses to run on Redeem. In addition, we renewed significant contracts during the second quarter with Tucson, Arizona; Santa Monica, Norwalk, Southland and Omnitrans, all in California; and ABM, the large shuttle service supporting LAX. We continue to see movement on the heavy-duty trucking front, as well, despite a significant drop in overall truck sales due to the pandemic. Thanks to our Zero Now Financing program, we have recently added the trucking firms Conestoga Logistics, Vernon Transportation, Linden Bulk Transportation and others to our heavy-duty truck roster of customers. Also during last quarter, UPS increased its RNG purchase from us for its heavy-duty truck fleet, by 3 million gallons per year, bringing the current total to 23 million annual gallons. Clean Energy has facilitated over 300 of 580 applications for grants for new natural gas heavy-duty trucks in California over the last 6 months, representing approximately $35 million of grants for trucks that should be hitting the road throughout the remainder of the year. To put that into perspective, we submitted a total of 110 for the entire year of 2019. Most of these will be fueling at our stations in and around the Ports of L.A. and Long Beach. Recently, trucks equipped with the new Cummins Near Zero 6.7-liter natural gas engine will be made available for these grants. We have seen a lot of interest in this engine, and it has been certified to be as clean as the Cummins 12-liter and will be hitting the market later this year. These midsize trucks, such as box trucks, will be able to easily fuel at our existing station network. In Canada, Clean Energy was recently awarded a $6.5 million grant from the Alberta government to underwrite the cost of 100 heavy-duty trucks and several fueling stations to support some of Canada's largest trucking companies, including WestCan and Mullen. It's part of a $30 million investment in natural gas vehicle technology in the region. The Alberta government is targeting to reduce NOx emissions by 20% in the province and sees the conversion of heavy-duty truck market to natural gas as a good start to that goal. As I mentioned, our Zero Now program, which allows firms to get into natural gas trucks at the cost of diesel trucks while saving on Redeem renewable fuel, continues to show results. We were excited to add a dimension to the program with a new partner, Chevron. As you might have read in their announcement, Chevron has begun to make investments into the production of RNG derived from methane from dairies, which has some of the highest levels of atmosphere-harming emissions. But when captured and burned as a transportation fuel, it erases those emissions, turning something that could have been very damaging to the planet into a transportation fuel for heavy-duty trucks that normally run on dirty diesel. The fuel is calculated as carbon-negative and produces 200% to 250% less greenhouse gas than diesel. In this new partnership, called Adopt-a-Port, Chevron is providing funding for truck operators to subsidize the cost of buying new RNG-powered trucks, while at the same time providing a commercial market for their RNG. Clean Energy is already making this carbon-negative fuel and truck purchase incentive available to hundreds of trucking firms that operate in the Ports of L.A. and Long Beach. This is now the third major global energy company that Clean Energy has partnered with to expand the use of RNG. Our joint marketing agreement with BP to source and supply more RNG continues to be strong, and the company's largest shareholder, Total, was instrumental in the creation of Zero Now program by providing $100 million in a line of credit for Truck Financing. It is now hard to ignore that more and more of the world's leading energy experts see RNG as a realistic ultra-clean transportation fuel, especially when it comes to moving large vehicles. And it is Clean Energy that they are looking to, to lead the way in the U.S. As I mentioned, despite all the obstacles presented by the pandemic, Clean Energy has remained steadfast at maintaining great customer service and expanding our business. I want to thank the hundreds of Clean Energy employees who have kept our stations operational, our books in order and all the other functions they continued to perform without a hiccup. And with that, I will hand the call over to Bob.

Thank you, Andrew. We ended the second quarter in solid financial shape, having generated $54 million in operating cash flow during the quarter, with only $2.7 million in capital expenditures. Our operating cash flow was helped by the receipt of the Alternative Fuel Tax Credit of approximately $47 million related to 2018 and 2019 as well as cash flow from ongoing operations. And we ended the quarter with $96 million in cash and debt of $37 million, excluding leases. As we addressed on our last call, we anticipated lower volumes and lower earnings as a result of the COVID-19 pandemic. We also anticipated some economic recovery exiting the second quarter, with a gradual ramp-up in the third and fourth quarters. Given the current prolonged nature of COVID-19 and slower economic recovery, we believe our volume growth going into the third and fourth quarter will be at a slower pace than we anticipated back in May. However, on the positive side, we have seen higher RIN pricing as well as lower operating expenses. We expect this trend of lower operating expenses to continue until there is a return to a normal business climate which, along with sustained RIN pricing, will help mitigate any reduction in gross profit margins associated with slower volume growth. As such, we are maintaining our 2020 annual guidance of a GAAP net loss of approximately $11 million and adjusted EBITDA of approximately $45 million, assuming no unrealized gains or losses on our Zero Now fuel hedge and related customer contracts. Our cash position is also expected to remain unchanged from our prior guidance, with operating cash flows exceeding capital expenditures by at least $40 million for 2020. Andrew gave some highlights around our volume for the second quarter. The overall decline in volume of 10% was principally in CNG in our transit and airport fleet services sectors, which experienced year-over-year declines between 25% and 45%, while our refuse and trucking sectors experienced gains of 2% to 7% on a year-over-year basis. Our Redeem volumes for the second quarter were 36 million gallons, compared to 38.9 million gallons in the second quarter of 2019, with the decline primarily due to lower volumes in California, where 100% of the fuel at our stations is renewable Redeem. Our revenue for the second quarter of 2020 was $59.9 million, or a decline of $12.4 million, compared to $72.3 million a year ago. Approximately half of the decline, or $6 million, can be attributed to the lower volumes, and another $8 million attributed to lower prices due to lower natural gas costs and the mix of gallons delivered. We had a noncash negative effect of $2 million from the year-over-year change in the fair value of the Zero Now fuel hedge and related customer contracts and a $600,000 decline in construction revenue. Partially offsetting these declines was our Alternative Fuel Tax Credit revenue of $4.4 million. Our effective price per gallon on volumes delivered was $0.58 per gallon in the second quarter of 2020, compared to $0.66 per gallon in the second quarter of 2019. The $0.08-per-gallon decrease was principally driven by lower natural gas costs impacting our prices by about $0.05 a gallon, with the remaining $0.03 decline coming from the mix of gallons delivered. Our overall gross profit margin in the second quarter of 2020 was $21.3 million, compared to $24.7 million in 2019. The decline is attributed to the lower volumes and a lower effective margin per gallon. Our effective margin per gallon was $0.20 per gallon for the second quarter of 2020, compared to $0.25 per gallon in 2019, with the difference primarily driven by the decline in the gallons in our airport fleet services sector. The Alternative Fuel Tax Credit benefited the second quarter gross margin, along with a better station construction margin, while the change in the fair value of the Zero Now fuel hedge and related contracts was a drag on the gross margin. Our SG&A in the second quarter of 2020 was $16.9 million, which was down $1 million, or 6%, from a year ago and down $1.4 million, or 7%, from the first quarter of 2020. We expected to see declines in SG&A and remain diligent in controlling our discretionary spending, albeit with certain increases in costs related to keeping our employees healthy and our work environments safe. We expect to see similar levels of SG&A, going forward, until more normal business operations return. Regarding our net results, we have fared well when compared to a year ago, given the circumstances of 2020. Our GAAP net loss for the second quarter of 2020 was $6.7 million, compared to a GAAP net loss of $5.4 million a year ago, or a loss of $0.03 a share in both periods. On an adjusted basis for the second quarter, our net loss was $4.5 million, compared to a net loss of $5 million a year ago, or a loss of $0.02 a share in both periods. And our adjusted EBITDA for the second quarter of 2020 was $9.2 million, compared to $8.9 million a year ago. So all in all, we performed well during the quarter with sufficient liquidity, going forward. And with that, Operator, we will now open the call to questions.

[Operator Instructions]. Our first question comes from the line of Eric Stine, with Craig-Hallum.

Encouraged to see the growth in refuse and trucking year-over-year. And maybe just specific to trucking, I'd love your thoughts on kind of how it breaks down there between current fleets driving more miles related to the goods movement versus just more adoption from fleets. And then I would also love to hear your thoughts on just what you're seeing from the small to medium-sized fleets, because obviously the big guys are, they're continuing to do what they've done for many years.

Well, Eric, on kind of trying to break it down for you, obviously, UPS continues to be a very good customer, right? And so they've ramped up their usage. So we saw that in the quarter. We received an extra contract for 3 million more gallons for the year. So some of the trucking growth is obviously at UPS. Then in another segment we're seeing a pickup with Zero Now, not super large numbers yet, but an increasing breadth of those that are beginning to take trucks and order trucks and participating in the Zero Now program. That's mainly in the western United States and in California. And then the third segment would be we've seen kind of a nice pickup on new truck orders and trucks hitting the road and volume pickup in the, let's call it, the ports, right, southern Los Angeles and the Ports of L.A. So our target focuses continues. The pipeline and the trucking is -- frankly, I was a bit surprised. As I tried to mention in my remarks, we've seen kind of an increase. We've seen an increase in our backlog of stations. We've seen an increase in RFPs, which is the most we've seen. I think a quarter, or so, ago I talked about kind of a record RFP number. This is 50% larger than that. So that's people investing in new stations or in new gallons. And so that's a good sign. And we've seen more interest in the Chevron program in the port and also in Zero Now. So I don't know if it's because people are coming back or if it was this prolonged period of people reflecting on their business and trying to do things a little bit differently or whether or not looking at clean air began to get people thinking, but we're seeing the sustainability theme seems to be pretty powerful right now.

Got it. Whatever reason it is, you'll take it. Okay. Well, so just on Chevron, and I know it's still early days, and good to hear there's, obviously, there's interest at the ports. And maybe it's a little bit of time before that starts to have an impact. But just curious on the potential to expand that. Is this something that we should think about, say, if you've got a fleet, for instance, that says we're going to run the West Coast from the ports to Seattle, is this something where you think Chevron, given their interest and focus on this area, that this is something that could be expanded beyond the ports?

I don't want to say too much and get outside my kind of approved area here with Chevron, but Chevron has been very clear that they see this as an important new area for them. They're making a big investment in the biomethane space, especially low-carbon fuel, and it's serious. They're investing serious capital there, and they see it as an important part of their business in California. This makes economic sense for them, as well. And so they have -- this initial program that we announced was a little while in the making. It piggybacks upon the rules that we've seen in the port that's pushing for cleaner trucks. It is additive to grant programs. So when I talk about these hundreds of trucks in the port, this Chevron help could actually add and kind of juice these trucks that are awaiting to sign these. These applications that I talked about in my remarks are not theoretical, right? So you've got a trucking company that has asked for natural gas trucks, and they're waiting for the contract to come from the granting authority to get it signed, and they have to deploy these trucks this year. So those numbers are beginning. I've talked about them for a long time in various programs. Those numbers that I quoted earlier, this 550 applications, that's 550 natural gas trucks that will be required to use RNG in the port and take those vehicles this year. Those Chevron dollars can be additive to that. So it makes it very compelling for the fleet owner, and it makes it compelling for Chevron, and of course to us, because we share with Chevron in the benefits, the environmental attributes of benefits coming from the RNG dispensing from our stations. So it's kind of a win-win-win for everybody. It's a win for the ports, it's a win for the trucking fleets, it's a win for Chevron and us. And so we've already seen some fleets opt into the program. They don't have -- those trucks are not on the road yet, but we've already rolled this out because we know who those customers are. We already have one fleet that's already signed up for 39 trucks opting in. So this has been in literally a couple of weeks. So we like the aspect of that. Now growing it, we've been told by Chevron, let's start here, several hundred trucks. And we can -- they said there's a lot more room to grow this program because they have a lot more appetite to generate credits, which we're required to offset in California. So yes, I think the program can be substantially larger than as we originally envision it.

Okay. Good. And maybe last one for me, and this is very high level, but lately hydrogen is getting a lot of attention as a possible transportation fuel, despite that it's likely many, many years away. But if there does come a time where hydrogen has a place in the market, I'd just love your thoughts on whether it's natural gas or renewable natural gas, how that plays into it, and then also how you might play into it with your station network?

Sure. Well, Eric, look, I want everybody in the alternative fuel space to be successful. Because let's remember for a second, I don't know, 98.5% of the universe is being supplied by diesel today. So there's a lot of room. Our CFO, Bob, here reminds me and tries to remind people it's not all going to go to one fuel, right? So there's plenty of room here for all of us. All right? And let's also remember just for a second that this is at least, at a minimum, a 35 billion-gallon market. Okay? So there's room for a lot of us that have different technologies to be successful. We happen to have the natural gas and renewable natural gas, happens to be the one that's really on deck today, right? That's in the marketplace, that's available at a nationwide network today. Hydrogen, we know something about hydrogen. We've operated a hydrogen fueling station for probably the better part of 10 or 12 years. We built that station years ago in conjunction with General Motors. It operates today. It was about a $2.3 million station, and it produces 68 gallons of hydrogen a day. So hydrogen fueling is very expensive. It's under 10,000 psi. The reformation of hydrogen at the station is through electrolysis. Get a load of this, it requires about 20 gallons of water for every gallon of hydrogen you produce. So march that out on a nationwide scale. And the idea that we're going to do it with renewable sources at a station is going to be very daunting, okay? I think that as you look at commercial truck stops with hydrogen, you're probably looking at something on the order of $15 million to $20 million, or more, per station. So this is a very expensive proposition because you're basically creating a whole new network. And really, the most successful stations around the world, and there's only a handful of hydrogen, is you're reforming natural gas. So to answer your question, what I think is where we're positioning ourselves is RNG is really key here. And we see a day, and we're working with certain technology providers, of reformation of natural gas onboard, either to produce hybrid electricity, so using a natural gas engine through a generator to produce electric powertrain, or eventually, and I think this is pretty far out and it would be a while, is the same thing to reform natural gas, renewable natural gas, onboard from a station through an existing station network and produce hydrogen onboard. This will be the most elegant solution, but it's a long ways out, as all of this technology is. Does that make sense, Eric? It was a lot. Our renewable feedstock, as the advantage, is that it has some scale and it has a delivery system that's already in place around the country that you don't have to create. So you can deliver RNG today anywhere in the United States. The real trick is going to be is the reformation of it. And I think eventually, it will be onboard, not at a new nationwide hydrogen network, which comes with just an exorbitant cost. The Department of Energy, Eric, years ago said, listen, when you get to large-scale hydrogen, this was back during the day, we've been on this a long time, and one of my chief operating officers actually sat on Governor Schwarzenegger hydrogen highway, that was back in those days, I guess. So we've been talking about this a long time. But the real way to get hydrogen in large scale is through nuclear. Okay? Well, I don't think we're going to be build a whole lot of new nuclear power plants. That's what Secretary Chu's reports told us. So there's a lot to this, and I wish everybody well on it. It's going to be -- it's challenging.

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

I just wanted to follow-up on the New York MTA deal. You talked about it, about converting it to RNG. Is this existing CNG business you have that's going to be converted to RNG? I think that's right. And then is there an opportunity for some of the remaining diesel volume to go RNG in that market?

Rob, it's new gallons to us, right? So that's an 8.3 million to 10 million gallon pickup for us. So it's a good new announcement that I'm making this afternoon. So it's a good one for us. And by the way, it already started 4 or 5 years ago. Okay? So it's in process. But those CNG gallons that those buses were using were not our gallons, all right? But now they are with the RNG.

Okay. Okay. Good. Thanks for clarifying that. That's great news. And then kind of back to the Chevron deal, I know it's early yet, but how has the response been? How do you sort of see that growing and playing out? And do you -- are you in the middle of that financing flow? Or is that directly from Chevron to the truck owner?

And I'm glad you mentioned that. So the financing is different than the Total-sponsored program that we have with Zero Now. This finance is coming from Chevron, right? So it's not coming from us. Now we're in the middle of it, right? We're marketing it. We're delivering it to the customers. So we're the customer facing. But it's Chevron's money. It's Chevron's RNG through our infrastructure. And we've just wheeled it out in the last couple of weeks, but we've already brought it out. And I don't know if you heard me, but we've already signed one customer, to 39 trucks. So we're seeing some pickup because it makes a lot of sense to everybody, right? It's essentially, it's very advantageous capital to the customer, and it's kind of a no-brainer for them. So I think we should see very good pickup on it. And literally, it's 7 days of sales, and it's harder to sell right now because we can't go knock on somebody's door. We had -- we've already shown this now to 15 or 20 fleets, and we've had one pick up on it already for 39 trucks, which is pretty good. So it's showing real promise.

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

I remember when we did our webinar right after Memorial Day we talked about the kind of disconnect between recovery in municipal transit fleets versus private sector trucking and the impact of social distancing on the consumer. I'm curious if you're seeing any further recovery in transit in terms of customer kind of receptiveness to getting on a bus in the last 100 days or so?

Pavel, it's hard -- every area is a little different. And so we've seen some unique things happen. Just as we -- I think maybe it was after we had our call with you we did see about a 5% or 6% uptick in transit volume. And then we kind of locked down again, especially in Texas, where we have big transit property, and certainly in California. They're still running the routes. We're still -- I measure it, Pavel, by fuel, right? So we're still at about 75%. And they're still running the routes. It's just that there isn't -- and I don't know that I'm the expert to say that it's because people don't want to get on a bus; it's just you have less people going to work, right? So you just have less overall demand. But we've seen a little bit of a -- we saw an uptick, right, from the depths from when I was just a few weeks before we talked to you, and we saw about a 5% recovery in those markets. And then we kind of locked down again, but we haven't seen it tick back down. We've seen it kind of come off 5%. So we've seen some repair in that, but I'd say it's leveled off, probably still down about 20%.

And then in terms of aviation, I'm guessing that's the weakest part of the revenue right now.

It's the weakest for us. And if any of you have been traveling around, you know that it's just still brutally calm at these airports. And so picture, we have -- our base customers are the airport shuttles, the rental car shuttles, the employee airport shuttles. So those are down. Now they're running, but they're running off, right? So that's been down, as we said, almost 45%. We haven't seen much uptick there, just a little bit. And it will come back, but I think that one is slower. And that's difficult for us. Now it's interesting, Pavel, without getting into too much detail, so when we -- we operate at about 40, 35, we have about 40 airport stations at maybe 35 of the nation's kind of largest airports. Sort of think about it that the business, the base business is the airport. Now we still have about 50% of the business at those airports that's private sector, and that hasn't gone off by the same level as the base business. And yet, those locations are really important to us because they tend to be those with the higher fuel margin, right? And they tend to be ones that get Alternative Fuel Tax Credits. And so they're kind of our richest gowns. And so that's why we think that given that particular segment being down and yet that we came through to where we did for the quarter, we actually feel pretty good about it because that's been somewhat impactful to us.

Last thing I wanted to ask about is the Advanced Truck rule in California. Obviously, a big market for you. That doesn't take effect for, I guess, 4 years, or so. But your thoughts on that in terms of kind of electrification of truck fleets?

Right. Well, I've been a little outspoken on this. You know there's been an industry lawsuit now on that, Pavel. So the natural gas industry, the natural gas vehicle industry has sued the Air Resources Board on this very rule. They don't believe that the Air Resources Board has taken into account sort of the rules and the mission and the legislation that they live under to actually provide for mitigating the air quality benefits in the short and near term. If you really look out, what they're doing is they're turning a blind eye to air quality and to health and to the responsibilities that they have under the SIP for about a decade while they fool around with this. And then even when you get out a few years you still are allowing 85% of the trucking world to use diesel. So we think that they've overstepped here, and we think they also have not provided -- they basically provided an electric mandate, rather than setting an emission standard that would allow other, cleaner fuels to play ball. So I think it's somewhat misguided, but it sort of fits their, I think, somewhat myopic kind of political view that it's got to be electric and it's got to be solar and it's got to be wind, and if it's not that it doesn't fit. And so they're really kind of pushing this. I'm not sure that it will end up being –- it's going to go into effect quite the way they figure. Now what does it say? It says that an awful lot of other fuel is going to be used other than electric for a long time. And so we happen to think that as the rules shake out, that renewable natural gas, which is cleaner than electric here in California, should have a place at the table, and we think that's the way it will probably come down eventually. But this doesn't surprise us. This kind of fits the mantra here that we live out here in California. And those electric vehicles aren't even available. And it starts out with mandates requiring certain things. And it's very difficult. Pavel, I think, and you and I talked about this before, look, Mr. Musk and others are going to perhaps produce probably elegant electric vehicles, and they'll have their certain operating characteristics and costs associated with them. We don't have to go into that here. I think the thing that's going to be very difficult, and you've seen this a little bit in transit, is the refueling or recharging infrastructure for heavy-duty is altogether a different game than a light-duty Tesla in your garage, totally different. One recharging facility in Los Angeles was going to be built for $5.5 million to recharge 24 heavy-duty trucks in a day's time, in, like, a 20-hour time, and that was the equivalent of the electricity needed for 44,000 homes. And Southern California Edison couldn't provide it, even if they wanted to. Didn't have it. So I just think that that's something that we haven't spoken about. It's kind of the unsung or the unspoken problem. And I think that's the one that comes home to roost and makes the heavy-duty electric vision very difficult, very expensive. Look, if you were going to power America's goods movement I don't think you're going to design a system in the final analysis that's going to be done by the municipal and government utilities in the country. That's not who's going to provide the electricity to move America's goods. That's not the way it's going to go down. So there's going to be a lot that's going to have to change before that's the way it happens.

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

Thank you, Operator. Well, we want to thank everyone for listening to the call this afternoon, and I look forward to updating you all on our progress next quarter. Stay safe.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.