Greetings and welcome to Clean Energy Fuels' Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Robert Vreeland, Chief Financial Officer. Thank you. You may begin.

Thank you operator. Earlier this afternoon Clean Energy released financial results for the quarter and year ending December 31st, 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.

Thank you, Bob. Good afternoon everyone and thank you for joining us. On last quarter's call, I spoke in some detail about Clean Energy's future and the expansion of our renewables business. I'm pleased to say that since that time, the pace has continued to accelerate on both the upstream production side as well as the downstream demand side for renewable natural gas. This should keep us in a great position for maintaining our lead in providing RNG to the transportation industry. And I will speak more about that in a moment. In the fourth quarter of last year, we delivered 96 million gallons of fuel which was slightly down from 103 million gallons delivered in the same quarter a year ago. Due to COVID, we experienced softness in airport fleets in transit, but we were pleased that other sectors performed very well like refuse and heavy-duty trucking.

Thank you, Andrew. Today, I'm going to focus my comments mainly on our outlook for 2021 with some highlights of 2020. I'm pleased to say we finished 2020 as expected. We achieved $45.1 million in adjusted EBITDA versus our guidance of $45 million. As Andrew noted, our cash and investments at the end of 2020 amounted to $138.5 million, which included $49.5 million in net proceeds remaining from our $50 million loan related to our RNG joint venture activity with BP. And while overall volumes declined in 2020, our renewable natural gas volumes grew 7% and to 153.3 million gallons delivered in 2020 versus 143.3 million gallons delivered in 2019. All in all, we fared very well under the circumstances of 2020. Looking at 2021, the good news is, we are expecting more recovery from the impacts of COVID-19 as the economy continues to pick up particularly in the second half of 2021. It's also an exciting year as we will expand our renewable natural gas deliveries and particularly increase the mix of carbon-negative RNG coming off of dairies as well we are moving into 2021 with two exciting joint ventures with two of the top energy companies in the world. We are building on this exciting momentum and look forward to executing on our 2021 plan. Having said that, our GAAP net results will be around breakeven for 2021, which I will point out includes an incremental $7 million in noncash stock compensation compared to 2020. This $7 million year-over-year increase in stock compensation reflects our higher stock price. Also I am not including any estimate of unrealized gains or losses from the change in fair value of our Zero Now fuel hedge in our expected GAAP net results for 2021. Neither of these two non-cash items, the stock compensation and the fair value adjustments to our fuel hedge impact our adjusted EBITDA. Our outlook for adjusted EBITDA for 2021 is in the range of $60 million to $62 million, which is an increase of approximately 35% above 2020. This improvement reflects our assumption of continued economic recovery from COVID-19 and positive contributions from our RNG volume growth as well as the greater mix of carbon-negative RNG.

Thank you. Our first question is from Eric Stine with Craig-Hallum. Please proceed with your question.

Hi Andrew, hi Bob. And so I don't know if you're -- it seems like you're breaking some news here today. In that I don't believe you announced that you had finalized the JV with BP to this point. So I guess maybe confirm that. Hopefully that's not something that I've missed here. But just curious what that looks like versus the JV that you announced earlier this week with Total because that one was upsized a little bit and had some language about what that could be long term that was increased versus when it was originally announced as an MoU in December?

Sure. Eric you did pick up on that. We signed that finalized that agreement with BP this afternoon. So you're hearing here first. And we're excited about both of these joint ventures. I mean as we -- as I said in my remarks I mean it really puts to work about potentially $500 million of equity. As you're right the Total JV has actually been kind of upsized there where we can each contribute up to $200 million of equity. So when you put the leverage on top of these I mean you could have north of $1 billion $1.2 billion for these projects. So it's exciting for us. The BP joint venture already has two projects that are in process up and running, not running but being underway. And we've signed sort of the initial agreements for the first project in the Total joint venture. So we're going to try to be as expeditious as we possibly can bringing these projects online. These are all dairy projects and super low negative carbon dairy projects. And they're coming in. We don't have the exact pathways on this but some of the most recent dairies we've seen are negative carbon in the 350 range. So these are dramatically lower carbon than the other fuels out there. And so they're powerful.

Got it. And just to confirm on timing obviously you're going to -- as you said expeditious. I mean is this something that we still should think about as more of a where you'd start to get the initial benefit below the line very late in 2022. And just curious if you're able to or willing yet or something we need to wait for to just talk about kind of income contribution per project?

Yes. These -- you're right Eric these projects take a year to 18 months to really -- so you're right that's when you could expect those to be able to contribute. The projects themselves don't take long. But by the time you get the pathway charted and certified I think it's safe to say that it's between a year and 18 months before you could really have those contributing. Now the projects that we signed in December and it's several of them as I mentioned 30 million gallons there's low CI dairy projects and that those are further along, right? And that -- those are coming on now. So you'll begin to see that contribution in 2021. And there will be more. I mean we're working on it. I mean look this is fun right now and exciting time. I mean as I mentioned in my remarks there's one billion gallons -- there's billions of gallons of potential of low dairy. And when you look at all the sources there are studies that show that it's approaching 25 million to 30 billion gallons. So lots of money will go into developing this. We like our position because we have those nozzle tips which you know I always talk about that but that is a key differentiator between us and others because we get a chance to then bring a lot of that to our fueling network and to our customers. But this is -- this -- when you look at the economics and the low carbon nature of RNG versus the other alternatives that people are talking about this is here today. It operates in vehicles that are on the road today. It can be dropped into the fleets and it's unique. And so I think as fleets look at their other alternatives they're going to turn to RNG, until those other alternatives are ready for the market.

Right. Got it. And maybe a good segue. I know you've got a goal to have 100% of your owned station volumes to be RNG by 2025. Now, that you've got BP, Total, Chevron, all committed to the low CI RNG. Any thoughts on what type of percentage you might think about out in 2025? When you reach your goal, what percentage could be low CI?

Oh boy, I haven't -- no I'd be making it up. I mean it's -- we're started out. You heard Bob, you heard -- we'll work on it. You heard Bob say that this year. We're going to increase our low CI about tenfold, okay? But we're starting out at a very low base on low CI. And we're well positioned because we are taking the lion share of low CI that was already developed. And so, we're growing it substantially. We will begin I think over time to be showing the carbon of our portfolio of fuel. And soon that will go negative which is kind of interesting, isn't it that we could be selling hundreds of millions of gallons and it actually is negative carbon all of it. When you blend it all in. But I don't know we'd have to get back to you Rob. I don't -- I mean, Eric. I don't know the contribution on low CI versus other.

No. That's fair. Thought I would give it a shot, but to be continued.

It will increase. Kind of -- each year that's going to go up. So -- but it may be a stretch to say we'd get all the way to 100% of all low CI, but...

Obviously, we're going to want to use low CI if we can, right? It will be meaningful particularly because of the value of that as well.

Yes. No fair enough. Maybe just last one for me and I do appreciate all the details because you certainly gave more on the outlook than you ever have in the past. But when you think about the volume dynamic just maybe some thoughts by segment knowing that it's all likely back-half loaded, but maybe volume improvement year-over-year expected by segment would be great.

Okay. Yes. Well, I mean from the I'll call it kind of the core markets, refuse transit fleet trucking, those are all -- they'll see good volume increases that mean the fleets and trucking are going to be in the teens percentage-wise over -- because they were fairly significantly impacted this year. So we see them...

Fleets and transit fleets.

Fleets and yes fleets and transits trucking as well we see that improving and -- in the same kind of bucket and that's just because that market is really evolving. So you have transit and fleet that are kind of coming off of tough years, you have trucking that is really gaining momentum. And then refuse is kind of Steady Eddie.

Last year refuse grew at eight, right?

Yes. And so exactly. So it was even a little uptick on its growth rate, but then it would be kind of close to that. So we -- and then kind of the rest of it you get into kind of some bulk, you get into NG advantage and others. So you end up kind of in that overall 6% to 9%. But frankly at looking more at the fourth quarter is really what we where -- where we see kind of a 12% to 15% year-over-year, which should start to equate to more of an annual rate on that. So 2021 still got a little bit -- as we know we're seeing good signs, but we're not quite out of the woods on the COVID-19.

Got it. Okay, thanks.

Our next question is from Manav Gupta with Credit Suisse. Please proceed.

Hey guys. So you talked about BP and Total. You mentioned Chevron, but I want to highlight something. Chevron today morning at its Analyst Day event, indicated that they are looking to grow their RNG by 10 time by 2025. Now, one of the questions I did ask Mark Nelson, their Head of Downstream was how do you plan to distribute it? And they said, look we can look to distribute it but there are partners. And you are a key partner. So, I'm just trying to understand like BP and Total sign, but one of your partners Chevron is going to grow its volume tenfold and how do you fit into that? How does Adopt-A-Port program fit into that? If you could talk a little bit more about Chevron's and its ambitions to grow RNG? And how you could fit into that?

Right. Well, Chevron is a very valued partner of ours, right? And we take a significant portion of all the dairy gas that they're producing today. So, it comes to us under contract. We've increased that over the last year and then of course, we have I think what's a really innovative program with them and I mentioned Manav that we're expanding it. We proved it out in the last six months. That's at the port of Los Angeles, we call it Adopt-A-Port where Chevron is providing incentive funding to our customers truck owners in the port of Los Angeles as they look at. They're being forced or faced with over the next couple years moving toward either electric or natural gas RNG trucks at the port that's kind of their choice. And/or pay a fee to operate a diesel truck and it's going to be a newer truck on top of that newer diesel truck if they're able to operate it. And so we're actually able to use -- Chevron has worked out a program with us where we're able to provide incentive funding to help defray the cost of that new natural gas truck which will use RNG from Chevron through our stations. So, it's kind of a win-win-win. It's a win for the air quality down in the port. The carbon and the tail pipe emissions in the port of Los Angeles are among the dirtiest in the United States. So, it's good for the people to live there. It's good for the truck owner because it gives them an economic way to operate for the future as compared to their other alternatives. Good for -- we're moving a significant portion of all the fuel that Chevron is beginning to produce out of their dairy projects. And of course, we're a partner because we're participating at the nozzle tip and participating that way. So far, we are not in the upstream relationship with Chevron. We're really on the downstream and in the marketing side. So, we'll continue to work with them. I was on with the President of Chevron today talking about that as they look at different ways in their infrastructure, we're here to help in any way we can. Because after all we've built 1,718 station -- 718 station projects over the years more than anybody else really in the world. And so we understand this. And so we're excited about that relationship with them. And I saw as you did that was a bold statement that there this is going to be a significant way for them to work on their decarbonization effort.

Perfect. A quick question here was we saw Amazon order 100 CNG RNG trucks given they're trying to hit their carbon neutrality, most likely they will try and go for negative RNG? I mean CNG will not really get them to negative carbon neutrality by 2040. So, again, you haven't signed a contract, but you have contracts with UPS and FedEx. So, help us understand what's the unique proposition of Clean Fuels? Why would somebody like an Amazon or anybody else who's ordering 1,000 RNG CNG trucks and trying to move them from long haul would actually like to sign up with CL any versus anybody else?

Well, we have the largest network right in the United States. And so I think that as fleets like that. We've seen this over the years that national players want to be able to have the optionality to move their vehicles where they operate. And so that's why often that we're able to participate with these large fleets. That's why we have that I think still remaining six years 150 million gallon RNG contract with UPS. And so you know that we have the advantage that we have the most RNG. We have the most flexible RNG portfolio. That's another reason why a large fleet would want to work with us. We don't have the dilemma for them where we have one source that if something happened that --- look these are like anything else occasionally these projects will go down. And then all of a sudden that fleet is not able to get the RNG. We have the ability to move our RNG around. And so we give flexibility to the fleet. So it's our network. It's our know-how in terms of developing stations for these kinds of large players and it's the RNG supply that we have. And so I haven't -- I didn't specifically say that we have a deal with that fleet that you're talking about. But that's why fleets like them would look to Clean Energy I think because we have those capabilities.

And the last question for me was, how much of -- like with your existing infrastructure without spending any more capital forget the maintenance capital, but with your existing infrastructure how much more volumes can this existing infrastructure handle across United States without spending capital into it?

Yes. No, it's a good question Manav is, we'd like to think that our available capacity at the stations that we've already built and paid for is in and around 500 million to 600 million gallons. So without spending any significant capital, we can accommodate that much volume. So that's another advantage is that we have stations that have unutilized capacity that's available today. That are up there -- that are there installed and ready to go.

So if I get it right you're doing 100 to 120 per quarter, but you're telling us you can literally double the volumes through the same infrastructure without spending a $0.10?

That's right. A little -- maybe a little more than double.

Okay. Thank you for taking my question.

Thank you.

Our next question is from Rob Brown with Lake Street Capital Markets. Please proceed.

Good afternoon.

Hi, Rob.

And just following back up on Chevron and the port program. You said that first phase was completed, how many trucks went through that phase? And what's the potential size of kind of a phase 2?

That -- I don't know that we've said that Rob we're making news here today. It's about 185 to 200 trucks in that first phase. And they're not all -- they're all contracted, they're not all on the road yet, but the incentive dollars have been obligated and contracts for the most part of those 200 are all done. And now we're working on kind of the next phases, which should be significantly more than that. So I can envision that -- and by the way there was just another round of grant funding, which goes kind of hand in glove with this Chevron incentive money for another 350 to 400 trucks which will round out that will happen in the next three months. So you'll have about 700 trucks funded. There's about 250 trucks already operating the port and there's about let's call it 200 in the Chevron program and then about another 700 trucks. They haven't all signed on to our program yet. But I'd like to think that they probably will because it's very attractive. So you get to over 1,000 trucks – 1,200 trucks out of kind of a daily operating there's 16,000 trucks in the port but there's really 10,000 that operate daily. So you're beginning to make significant penetration at the port. It's really a very interesting testbed for something that's actually operating today and has really great emissions. Kind of goes under the radar a little bit. I mean, I think at the same time there's a handful of test electric trucks down there a couple and I don't know if there's any fuel cell trucks. There may be a couple of Toyota trucks down there that are testing as well. So there's a lot of experience being gained doing the duty cycle that needs to be done that's very difficult at the port of L.A. and Long Beach.

Okay. Great. That's excellent color. Thank you. And then, I think, you mentioned a potential CapEx addition of about $75 million. What is that dependent on? And how many stations would that fund?

Well that was -- that's dependent on growth in the fleet sector right in the trucking sector for kind of this RNG growth that we see coming. And that would get you about another 25 large fleet heavy-duty truck stations. Those will be under customer contract though. They're not spec. We're out of the spec business.

Okay. Okay, good. And then in less detailed question Bob what was the margin per gallon in the quarter?

It was about 23.

23?

Yeah.

Any other questions, operator, I think that might do it. Oh, we have Pavel. Pavel?

Yes. We do. Pavel Molchanov with Raymond James. Please proceed.

Hey, thanks for taking the questions. In the 2021 guidance for $60 million to $62 million of adjusted EBITDA, what's the implied value of the federal tax credit AFTC revenue?

$20 million?

Two-zero?

Two-zero.

Two-zero? Okay. So that's pretty similar to this past year's level, correct?

It is. It is Eric , yeah. And yeah, we're -- because we still do have some kind of AFTC gallons if you will being impacted by COVID for the first half of the year. So if that goes up maybe that number could go up.

Okay, got it. And also when we think about the cost of crude, which is now pushing $70 Brent and safe to say higher on the front end of the curve than just about anybody would have guessed 100, 120 days ago. Is there any relevance of that for your economics in 2021? In other words, are you making any call on where diesel goes?

Well, I don't know that the numbers that Bob just gave you would -- Pavel, I'll let him speak to he may look at me funny here. I mean, I don't know that we've as we've given that guidance here we've tried to adjust our -- adjust for -- let's say if the year finishes out on an average of $65 a barrel or something like that. But clearly the $65 oil year has made a marked improved increase in diesel prices, right? I mean, at the depths of forget the negative print Pavel right, but at the depths of COVID back in April, May of last year, we saw diesel prices $1.60 in certain of our markets in the southeast and those -- in that pad. Today the average diesel price in the United States is $3. Out here this morning at the port of Los Angeles I got the reports $3.89. So our prices have moved up. Our feedstock, the natural gas is stable in comparison. And so no it's significant for us.

That's exactly what I was looking at. And lastly this one is a little just broader point. Historically LNG volumes have declined every year since 2014. And, obviously, this past year there was COVID impact but of course not before that. Is there something structural going on in that heavy-duty long-haul market that's caused volumes to go from 80 million gallons in 2014 to 60 million currently?

Well, Bob's got some numbers here to review. But, look, I think the majority of the heavy-duty truck space is moving towards CNG, not LNG. And, I mean, that's it in a nutshell. I mean, you're seeing more as this market has developed so far, still think there may be some LNG, as it gets a little bit more mature, out of route-type deliveries, sleeper cabs could avail themselves to LNG. But the industry has made tremendous strides on the fuel package, on board the vehicle, the range of CNG, the delivery of CNG in the urban areas, as more trucks overtime kind of the truck getting truck drivers at home at night has led to slip seating and has meant kind of more super regional trucks than out of route type, what we used to think of a truck driver or truck driving. So, I think CNG is a very super competitive fuel. And so more of it is, going to CNG than LNG. And look, we've had to make adjustments. I mean, there's no secret here. I mean we built some LNG stations years ago, that10 years ago now, right? Probably, too many. And so we made adjustments to that. We've -- and good news is we can make LCNG, right? We can put in some vaporization equipment to have CNG at our stations. And in some cases, we've had large fleets. We have great locations, right? And so, we've made the additions where we needed to, based on customer demand to put CNG in.

Right, is the margin profile meaningfully different, between the two fuel categories, from the...

CNG has better margins.

Okay.

So, it's not a bad thing. Probably -- it's probably a good thing.

Yeah, yeah.

As I mean, there are a couple of things where LNG has more range. LNG tank package is cheaper. So the truck can be cheaper, but the fuel tends to be a little bit more expensive. And the handling of it is a little bit more complicated. So CNG is tough -- it's awfully tough to be.

Understood. As long as guys are making money, either way, right?

Exactly. I mean, look, if there's a mistake is we probably built more LNG stations that we should have back then. And because we really felt like, at the time, CNG you have to go back with me. Remember Pavel, we bought the first 100 trucks to prove out that this would work. And it was in a port application. So it was really a drayage application. We didn't know if over-the-road trucking would really work. And we didn't really have the range, for it to work. We were limited on range. But look, the industry responded beautifully in the tank packages today. And the back of the cabs are sweet. And you have 650 miles a range, which we didn't have in the beginning. And so, CNG is a really tough competitor to LNG today.

I appreciate.

You bet.

This does conclude our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Well, thank you operator. We want to thank everyone for listening on the call this afternoon and look forward to updating you on our progress on the next quarter. Good afternoon.

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