Greetings, and welcome to Clean Energy Fuels First Quarter 2021 Earnings Conference Call. . As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Vreeland, Chief Financial Officer. Thank you. You may begin.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the first quarter ending March 31, 2021. 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. I will quickly touch on our financial and operational highlights and then spend some time speaking about our very important and exciting Amazon announcement. Our new strategic partnership with Amazon is multi-pronged and we believe positions Clean Energy very well for the future and confirms the direction we set for ourselves years ago. As anticipated, the COVID pandemic continued to impact our volumes, but with stronger environmental credit pricing, our adjusted EBITDA of $11.7 million was up 4% over last year. As with the rest of the country, we are optimistic that the overall economy, including transportation sector specifically, will continue to rebound.

Thank you, Andrew. For the first quarter of 2021, our results were in line with our expectations. And as we look forward, we're maintaining our adjusted EBITDA guidance of $60 million to $62 million for 2021. We are updating our guidance on GAAP earnings for 2021 to reflect the noncash accounting treatments of the vesting of the warrant we issued to Amazon. I will speak to that accounting treatment in more detail in a moment. Continuing with the first quarter, total volumes were 92.4 million gallons compared to 99.3 million gallons a year ago. The year-over-year decline is directly attributed to the impact of COVID to 2021 compared to the 2020 first quarter, which was minimally impacted by COVID. And although our overall volumes declined, our RNG volume grew 3% in the first quarter compared to a year ago. RNG volumes for the first quarter of 2021 were 37 million gallons compared to 36 million gallons a year ago. Because we flow RNG to many of our fueling stations, the lower fueling volumes due to COVID also impacted our RNG and lowered the year-over-year growth. However, on the financial side, our RINs and LCFS revenues from RNG deliveries increased 63% to $9.5 million from $5.8 million, despite there being only a 3% increase in RNG volumes. This increase in RIN and LCFS revenue was primarily from gains in RIN pricing compared to a year ago with modest gains in LCFS. Overall, revenue was $77.1 million for the first quarter of 2021, which was reduced by $2 million due to the noncash change in fair value of our Zero Now related hedge and customer contracts. Exclusive of the $2 million reduction, our revenue amounted to $79 million. Prior year first quarter revenue was $86 million, which included $5.6 million in noncash…

. Our first question comes from the line of Eric Stine with Craig-Hallum.

So just maybe on the Amazon deal, and I know that you're limited as to what you can say, but in light of the fact that these are going to be clean, owned stations, curious your thoughts if there's anything you can talk about on whether Amazon pushes this to their suppliers. I mean, it sounds like you're confident in getting volumes from other fleets, wondering if those other fleets would be those suppliers. And just -- I don't know if you have a thought on what those volumes could be, they would seem to be significant.

Well, I don't have anything specific from Amazon to give you at this point on that, Eric. But I do know that we have had some Amazon vendors and suppliers purchasing natural gas trucks and arriving at our stations. And so I don't know how Amazon is looking at this, and I haven't -- I can't discuss exactly any program that they might have. They'll have to do that. But I know that as companies like Amazon look at their carbon emissions, their supply chain and their suppliers and those coming to and from supplying them goods, they get -- they have to account for those emissions and those carbon emissions. And so I think it's probably instructive that these stations that are being built at the request of and located with Amazon in mind, are being open to the public. So we'll have to kind of see how that develops. But I think that's probably the significant point there.

Yes. Okay. And then I know it's still early, so maybe this is a question for a few quarters down the road, but I know when UPS started on their route, I mean that was a driver of additional fleet interest. Wondering if it's too early for that, if you are seeing it, incoming calls on that. And then, do you feel like people are sharing to get the value proposition here? I mean, given that truckers care about seems down to half a penny, so--

I do, Eric. We have had inbound calls by large logistics and large for-hire fleets. A lot of these fleets haul for Amazon, right? And so they're very familiar with what's going on and are obviously keenly interested in it. And so that's a good thing. And we have demo truck going out to some very significant fleets right now that have tried it in the past and are looking again. I also say, and I've said this kind of before, is the -- as these fleets are facing their ESG goals and their sustainability goals, the screws are tightening everywhere. And people are taking, having to take this more seriously. And as they begin to look at their other options, electric heavy-duty trucks, the potential someday of fuel cell trucks, they begin to become familiar with the costs associated with these other options, and the RNG looks very favorable in that case. And it's something that can happen today and can begin. It can be dropped in today using a power, a power source that's very familiar, that they're very familiar with, right? Cummins engine. And so we are seeing some momentum from this. And I hope as this becomes more widely known and people begin to see more tractors on the road, that it will just increase the interest.

Got it. And then -- well, last one for me, and I know maybe not specific to Amazon, but just more from a Clean Energy owned station standpoint, that's part of this agreement. I know there's been some confusion over what the margin impact would be. So just maybe just channel a little bit about the margins at company-owned stations, which obviously these are at Amazon.

I'll let Bob maybe fill in here after if I bungle this and he wants to embellish it. But you know the number that we quote, the $0.22 last quarter and this quarter it was a nice spike in that up to $0.26, that's across all of the gallons that we sell. And that would take into account different categories of gallons, right? Operation and maintenance gallons where we may not be selling the fuel, but we're getting paid per gallon to maintain a particular station. So when you blend it all together, that's how we arrived at this $0.26. That is one of the numbers that is the number that we cite. But when you look at stations that we own, where we are providing the fuel and in control of, for instance, our RNG, there would be many, many stations in California and all across the country, the margin is substantially higher, right? So I mean, I've taken, I think on this call over the years, I've taken you through the buildup when you look at the price of natural gas, and you understand that there's 7 gallons of diesel per Mcf. And so that means your commodity per gallon is $0.35 or so, and then you put on $1 or $1.20 of costs, so you're at the nozzle tip at $1.50 and you're competing with diesel at $4, you can see there's a lot of room in there. There's a lot of room to give our customers a discount, and there's room for us to have a very nice margin. So we have stations where we have considerably higher-margin than that. So these are going to be our stations, as you point out, Eric. And of course, we're giving a good price, but we're also recognizing the fact that we're building a station for a customer with a commitment on fuel volume, but it's a much -- has a much different margin profile than maybe some kind of jump to the conclusion that it was just to multiply some of these gallons towards -- by that $0.26.

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

My first question on the ramp and the rollout plan here, I think you said you were going to build the stations in 2021. Maybe give us a sense of the size of the station you're building and then how you see the ramp of the project going in terms of gallon sales?

Right. We are going to build those by 2021. There's a little bit of wiggle room here. I know Amazon wants them all done tomorrow, and it takes a while to build these stations. Really, the station construction, as we've discussed before, Rob, isn't -- this isn't -- we've done 718 station projects over time. So we know how to build stations. It's the permitting, right? It's the local permitting. We went through a planning commission last night in a California city and got approved 5 to nothing. So that's good. So there's that. But yes, the expectation is almost all of these stations will be substantially completed, if not many online, by 2021. That's our hope. I'd like to have them all done, if we could. These stations are going to be large. You should -- they'll be sized depending on the needs at particular locations, so some are larger than others. But I would say, in general, you should be thinking that these stations would be sort of truck stop like in terms of being able to fuel 2 tractors at a time, sometimes 3, at 10 gallons a minute type speeds, which is good. Average tractors should take onboard about 85 gallons at a fill. So that's a good time in terms of dwell time for the fueling. And these stations will be sized. But I would say if you kind of wanted to use an average, they would be able to fuel 100 tractors a day or more. And some will be significantly larger that have that capability. So they're going to be -- have room to grow, and they're not stations of yesteryear for light-duty taxi cabs, they're large commercial truck stops.

Okay. Great. And so once they're in place, then it's a matter of trucks ramping to get the fuel volume up. Do you have a sense on sort of the timeline of how that rolls out and how you see that ramping over sort of what period?

Well, those trucks have been -- the trucks in question that we can't would love to get to the number at some point, the trucks, they've been ordered. And the first tranche of trucks have been built. And then there's another huge big slug coming that are being built and will be delivered in the remainder part of the year. And I think the expectation is those trucks are going to arrive all in 2021. And as they do, they'll fuel on our network and they'll fuel at the stations as they open, and they'll move trucks around to make sure they can begin to put those into service. But they have the truck slots and those have been ordered.

Okay, great. Thank you. And then on the capacity side, I think you talked about adding some facilities or starting that process through the JVs that you have. But how quickly do you need to add RNG capacity to meet Amazon? Or will those things work in tandem? And then I guess what's your sort of view of supply capacity that you'll add over the next couple of years?

Well, this is -- it's a little complicated because we want as much low CI, negative carbon fuel, as we can get, right? Because think about this, is because we have the low carbon fuel standard in California, we can stand, and we're selling 115 million, 120 million gallons in California, let's just kind of use that number. I'm in the ballpark there, right, this last year. And as I've said before, we expect to be ramping up our low CI dairy gas in California at somewhere between 6x to 10x what we did last year this year. So we're starting from a lower number. But my point is, as we bring on dairy gas from around the country, it will come to California first that's where it's most valuable. And it releases other gas to other parts of the country where it's not as low carbon. And so our focus, that's why I talked about the 5 billion to 7 billion gallons, is to bring on the lowest carbon fuel -- I mean in this way, the low carbon fuel standard, it works, right? It encourages you to bring on the cleanest fuel possible, capture the most methane. It's been interesting, Rob, that we've been all reading about some of the major oil companies trying to get their arms around sequestration, right? Carbon -- that's what we're doing, right, in a way. We're taking that methane before it escapes, capturing it and putting it into a vehicle and burning it. So it's -- and so we're going to want to do more low CI in California. And over time, our plan right now on the supply side, that's why we're working so hard, we have an origination team that's busy right now. We have in the pipeline 25 different dairy projects where we're working through the negotiations with the farms. We have 7 underway right now in the contracting process. We'll need all of it plus. And as you begin to -- we all begin to understand the scale of the Amazon deal, we need to add significantly to the supply. I don't think there's a problem of outpacing in the near term, though we've been kind of on the ragged edge of it here lately. But outpacing the demand of RNG because the industry is responding on RNG, right? Our friends at Chevron and others are busy on these projects. But the Amazon potential is going to keep us all very busy. But with the landfills and wastewater and other things, you'll be able to meet the demand and other demand that will come on, but you really want to meet it with as low CI as possible. That's our goal because that's the most valuable, and it's best for all. We've got to be creating over the next few years, several hundred million gallons of RNG in addition to where we are today.

Our next question comes from the line of Manav Gupta with Credit Suisse.

I actually wanted to quickly focus on the upstream versus downstream profitability here. So let's say you have a company-owned station and let's say you believe it's giving you $0.30 to $0.35 a gallon. What I'm trying to understand is, is this Amazon deal giving you the volumes to develop the low CI RNG through your upstream partners and the profitability over there is $5 to $7 a gallon. So if you split that half way, that's like $3 a gallon. So it doesn't really matter if on a downstream basis you make $0.30 a gallon or $0.40 a gallon, the real benefit of this deal is that now you can go back to your partners, Total, BP and others, develop the upstream RNG, which is like $3 a gallon. So the real benefit will come from the upstream side on the margin, not really the downstream side. Can talk about that?

Well, Manav, yes, and no. I mean, there's value on both, but you're absolutely correct that the demand that's created from a deal like this just completely supports our position on the upstream supply side. Because, look, I mean, after all, the upstream is being developed with the intent of putting it into -- to get the highest value to put it into vehicles, heavy duty vehicles. And so when you come to the table where you have that and you have that demand, then it's a pretty powerful upstream proposition. Not to mention the economics that then flow into the upstream, which is separate from that $0.30, $0.35 you mentioned. That would be, in our case, would be in the joint venture. Now we will have those economics to the extent that we are the producer and we're using the gas from ourselves. But we'll have to get it from other sources as well.

Manav, we also -- just on the source side, I don't want those on the call to think, well how are these guys going to develop all this RNG? We -- because we are the sort of the choke point with the infrastructure and have the largest network, we already take RNG for 40 different sources. And that grows all the time. And it will -- that will continue to grow. But Manav, you're right, the upstream is very profitable. But don't underestimate the value of the downstream per gallon. And don't -- and what I say, go back and look at my buildup, and you might be surprised that at a station that we own, our margin is better than what you're thinking.

I am not doubting that. I'm just saying sometimes --

I know, I'm just trying to help. I'm just trying to remind you that it gets confused on the way we kind of talk about it sometimes.

Fair enough. I'm just saying, when you put in the RINS, $35 MMBTU, you put in negative daily CI RNG, the LCFS credit, the magnitude of that can be significant. So again, the downstream profitability is very important, I understand it. But if -- when dealing with dairy farm RNG because the LCFS credit itself is so big that the profitability could be significantly higher. That's the only point I was trying to make.

No, look, it's -- we agree. But Manav, I'm not giving it away or just flushing it out, okay? I'm going to sell it.

One question away from Amazon. You also have programs with people like Chevron, adopt a port. Can you give us an update how that program is going? So we want to understand, besides Amazon, people like Chevron, who are running this adopt a port programs, how are those programs also going?

Yes. We're very pleased with Chevron, and I have said on the call that we were working to upsize that program, and we are. We're in the process of that. So standby for that. We have a pipeline of trucks at the port that are in the development, proposed and contracting phase, that totals about, oh gosh, I think it's 518 trucks as of last Friday. So that's potentially really good volume. All RNG, all in through our network, all in partnership, receiving incentive dollars from Chevron with us to use that RNG provided by Chevron and their upstream operation into our network. And so we continue to think that's really a kind of an elegant program, and it's kind of, as I've said before, it's a win-win-win. It's a win for Chevron, win for the farmers, went for the port operators that are being forced into cleaner technologies. And this is a way for them to do it with incentive dollars and still do it at a dramatic discount to diesel, and it's a win for us.

Thanks. One last question is, I think yesterday or a couple of days ago, you announced a number of new contracts. If you could highlight which ones you think are the most significant, which are your new customers? So if you could just run us through very quickly that announcement of multiple contracts that you signed?

Yes. And the reason we did that yesterday was just because it's gotten to be -- it's a nice thing, there's so many different deals on this call, it's kind of a laundry list, gets a little confused. Let me just highlight a couple that I think are important in sort of maybe as a fleet segment. CalPortland, CalPortland cement mixers, very large company, just -- I think they have a fleet now of approaching 220 or 250 mixers in this area. They just signed up for an RNG supply agreement for 150 more ready-mix trucks that will use a million gallons a year. And we're seeing that industry kind of take off a little bit, a little slower, it's a little smaller, but it's very similar to the refuse industry. And now we're working with really all of the largest ready-mix companies, so I wanted to point that one out. The PAC anchor one in the port is a real good RNG. That's -- those are heavy-duty trucks down in the port, and so we're proud of that one. I think the Biagi Brothers, this is a large liquor distributor, 900,000 gallons, that's using our Zero Now program. But Biagi has customers like Anheuser-Busch and Pepsi, so I wanted to highlight that. And then, of course, we continue with like the city of Pasadena, California, a new multiyear RNG supply agreement for 1.5 million gallons to fuel their fleet of 50 new refuse trucks and transit buses. Those tend to be long term. We have those cities for years and years. And there are several different sanitation districts. You're beginning to see all of the refuse companies in the country, and we're now working with 138 different refuse companies, they're all moving to RNG. And so those would be just some that I would mention. And this one is a good customer, it's part of our postal service. The mail is moved by a lot of large trucks, right? I think the postal service has -- oh, gosh, hundreds of contractors and it may total 30,000 over-the-road trucks. They have a requirement, it's loosely enforced I would say at the USPS, but that they are encouraging their postal haulers to use lower carbon fuel. And one of the early movers on this has been a trucking company called Matheson. I think the Matheson Family now is up to maybe 35 or 40 tractors. These are really high mileage trucks, 30,000 gallons a year running up and down. And this lane is I think, Idaho, California and all up and down California. And so they just took another 16 tractors that use over 200,000 gallons a year. So I think that's enough, but it gives you a flavor that we're seeing it kind of in all of our spaces in transit, refuse and airports and municipalities.

That was a very good response. Thank you for taking all my questions.

Our next question comes from the line of Craig Sheer with Chilly Brothers.

Good afternoon. Details, it's about details, of course. Could you provide a little color on how you might expect the Amazon related volumes to ramp this year and next? No specifics, but would you expect a relatively smooth or lumpier quarterly growth? And how long might it be until you see the full expected contracted volumes kind of reach their expected limit? And as to the new stations built, I think you had mentioned 100-truck fueling capacity on average a day. When the Amazon agreement is kind of at the full initial expected run rate, would you expect them to consume less than half of the new 100 a day stations or the majority of it?

Not sure I got the last very part of your question, so you might have to help me on that one again, at the very end. But well, look, I have to be careful here. So we're fueling some Amazon trucks now, right? And then that was from an earlier order. And those -- actually, those trucks are being phased in now. And we're actually fueling those in our network at a bigger number than I have cited today. It's on occasion. We've had a month where we've actually fueled trucks at 37 stations. But the way this will work, Craig, is it's when they get the trucks and when those stations are built. And so these trucks have been ordered, they're being built. They'll be built. The slots are later this summer and early fall. And so you'll see those arrive. And so really, it's commensurate with some of our current stations that are being adjusted to accommodate Amazon and the new stations, it's going to be in the latter part of the year, right? And then going forward, I just -- I'm going to stay away from that because that gets me into the whole scale. But this is going to play out over time, and I'm thinking over time as we all watch the volumes, you're going to be able to get a sense of just what's going on.

Fair enough. I appreciate that.

I'd like to -- and then your last question was about the stations.

If we're doing 100, if it's 100 trucks, will Amazon do half of it? Will they be 50 of the 100 million or 70--

Well, that's -- I kind of got myself into all of that. I mean some of the stations are being built for 180 trucks. So I just kind of said be thinking of 100 because that gives you an idea of a station that's doing 8,500 a day or 10,000 gallons a day, but some of them are twice that size, okay? So when I was using that 100, I mean, that sort of gives you the idea of a lot of that would be Amazon type demand. And then on top of that, these stations have more capacity, right? We're not mapping. When I use that kind of 100 truck, I mean that station could operate theoretically at 24 hours a day. Now they don't operate that way. So there's plenty more capacity than that 100. Let's just say a station was 100, and it's 100 Amazon trucks. Well, it has capacity to do 100 other trucks or 150 other trucks. So these stations have a great deal of capacity.

On an 11-hour day, it sounds like the new stations will be mostly utilized by Amazon. Is that fair?

Well, I don't know. It's not an 11-hour fueling day, so I don't -- look, we're building these stations with a fuel coop, a commitment from Amazon that justifies building these stations, all right? So they're not spec, but they do have the ability to be added to, right, by other customers.

Fair enough. I understand it's a touchy subject, and we'll see more in coming quarters.

Yes. I'd like to say more, but I just -- I think I've said enough.

One other area I'd like to get into and try to understand, kind of hearing from more and more utilities about trying to get into RNG like SoCalGas, for example. And wondering if major utilities start getting into the dairy market, if that kind of throws a bit of a monkey wrench into the supply and demand of projects and also maybe even such a deluge of RNG that isn't hitting your fueling stations, unfortunately, would be going the pipeline network if it's authorized. But that might just swamp the LCFS market. And I wanted to get your thoughts on that.

Well, the LCFS market is in California, right? And so I don't worry about the utilities that much. I mean, look, utilities are being faced with trying to decarbonize. And so you've heard these things about them, RNG and they're going to flow it into their pipeline system. And boy, it's really been a pilot in nature so far. I mean it's been few and far between and all. And when these utilities do it, often it's in the regulated house and so they're pretty cautious. Sometimes they'll do it in unregulated subsidiaries. But now remember, when you're -- so when you got a utility doing it, they're going to put it into power gen, right? And it's not going to compete in my space, and it brings a -- in California, right? It's substantially cheaper. I mean, what they're being paid for that to make electricity versus the vehicle market, it's dramatically -- getting dramatically less for it. So I just happen to believe in capitalism and I really think that what will happen is it's going to -- if the demand is there, you're going to see a lot of this want to flow to where it's getting the best price, and that will be in the vehicle transportation. Now you'll have some that could be stranded or some utilities that just need to do this for their particular public utilities commission and their particular needs. But I think there's going to be plenty for everything, everyone. But vehicle fuel is the highest and best use and so that's where it's going to go. And when you see a lack of demand, and all the demand dries up, then you'll see it want to go to the stationary. But that's not as good a place to put it.

Understood. Thank you.

Our next question comes from the line of Pavel Malchanov with Raymond James. I guess I'm not sure where he is. Our next question comes from the line of Jason Gabelman with Cowen.

I have two questions. First, on the Amazon deal, you mentioned that the deal justifies building the stations and implies you have enough volume committed to fuel trucks to build the stations. But can you talk about if you have commitments to source RNG across the country and what that process is like? And if it's a competitive process? Or do you think there's enough RNG out there and how those contracts, I guess, are arranged to supply RNG into the station. And then my second question is on the upstream build-out. I think you mentioned you're in talks with 25 different dairy projects, 7 are in contracting right now. Can you just kind of talk us through what that means from a volume perspective? Anything you could share on indicative economics on those dairy projects? And then more generally, just discuss what the I guess landscape is right now in terms of building these dairy projects out on the West Coast. It seems like there are a lot of players trying to get involved in the upstream business. So do you see it getting more competitive and getting more difficult to source these upstream projects? Thanks.

No, you've got a lot of things there. First off, it's not just West Coast, right? So this is nationwide. Upstate New York, Wisconsin. We have a bunch of stuff in Wisconsin. So remember, we've got the pipeline system and that's the beauty of RNG. Unlike some of our friends in the alternative fuel space that talk about building out a hydrogen infrastructure, well, we have the infrastructure. It's already in place. It's all across the country. So it's a matter of charting the pipelines and the pathway from Wisconsin and Texas and to California. We want that dairy stuff to come to California, but there will be a day not too distant when you have other states -- look, New York state and the Northeastern states are looking at a low-carbon fuel standard. So the market is getting ready to open up dramatically. And I might just mention to you, you probably know this, but I learned it a while back so I get to repeat it, but there are 40,000 dairies in the United States. Now some of them are small, and so they're not the first ones you're going to do, right? And we're targeting those that are larger and they have more sophisticated manure handling operations and because that makes them more efficient. In some ways, it may mean that they -- their carbon profile is maybe not as bad as some guys that don't handle their manure correctly, but you'll be kind of focused on those dairies that are sort of 7,500 and above. There's lots of those. There's lots of competition right now. There's going to be a lot more competition. And for the 5 billion to 7 billion gallons of dairy I've talked about, you need the $50 billion to $70 billion. The…

Great. That's really helpful. I appreciate the color.

There are no more questions in the queue. I'd like to hand the call back over to Mr. Littlefair for closing remarks.

Good. Well, thank you, everyone. I hope the commentary on the Amazon deal maybe brought some more clarity to that exciting opportunity for us. And thank you for listening to the call this afternoon, and we look forward to updating you all on our progress next quarter. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.