Clean Energy Fuels Corp. (NASDAQ:CLNE) previously signed a partnership agreement with Chesapeake Energy Corporation (NYSE:CHK) in 2011, to develop 150 LNG truck fueling stations along strategic & major truck-stop locations, to form the backbone of America’s Natural Gas Highway.
Chesapeake Energy agreed to invest $150 million in the project, as the number of shippers and trucking operators shifting from diesel to natural gas is increasing. Chesapeake’s wholly-owned subsidiary, Chesapeake Energy Corporation NG Ventures Corporation (CNGV) provided funding for the LNG truck fueling stations to Clean Energy Fuels.
Clean Energy Fuels Corp. (NASDAQ:CLNE) recently signed a similar agreement with General Electric Company (NYSE:GE) to add additional LNG plants. General Electric Company (NYSE:GE) agreed to invest $200 million to build two plants between the existing plants of Clean Energy across California and Texas.
The construction of the new plants is expected to begin next year, as soon as the company determines the final locations. The LNG stations will use GE’s modular MicroLNG technology. Each plant will have a capacity of 250,000 gallons per day, expandable to one million gallons per day. The plants are expected to operate by 2015.
Last year, Clean Energy delivered a total of 47 million gallons. Pavel Molchanov and Stacey Hudson, analysts at Raymond James projected that the company will be able to deliver approximately 55 million gallons in 2012.
Molchanov and Hudson believe that Clean Energy’s partnership with GE is similar with its agreement with Chesapeake Energy. According to them, the objective is the same, which is to boost Clean Energy’s capabilities to supply LNG for the domestic long-haul trucking market.
The analysts also noted that the financial structure of Clean Energy’s agreement with Chesapeake Energy Corporation (NYSE:CHK) and General Electric Company (NYSE:GE) is also the same. Both companies provided debt financing. Chesapeake Energy’s $150 million investment came in the form of convertible debt, with a 7.5 percent coupon and $15.80 per share conversion price.
On the other hand, GE’s $200 million investment came in a variable-rate project debt-LIBOR plus 700bp, and it is subject to mandatory 25 percent capital contribution by Clean Energy. In addition, Clean Energy issued General Electric Company (NYSE:GE) warrants to purchase 5 million shares at $0.01 per share. GE will own approximately 6 percent equity stake in Clean Energy once the warrant becomes exercisable.
Molchanov and Hudson believed that Clean Energy is still highly dependent on external capital resources, citing the company’s $133 million capital expenditures during the past 9 months in 2012. In addition, the company incurred $19 million in negative cash flow on operations. The analysts believe that Clean Energy’s partnership with Chesapeake Energy Corporation (NYSE:CHK) and General Electric Company (NYSE:GE), as well its partnership from a group of investors in Singapore, is solid, and it could be expanded over time.
Molchanov and Hudson believe that Clean Energy Fuels Corp. (NASDAQ:CLNE) will benefit from the positive impact from its partnership with its investors in the project in 2015, once the LNG stations start to operate. The analysts wrote. “Overall, we look at the news positively, and we think the stock (currently down 11% year-to-date) should react well today.” The analysts maintained their “market perform” rating for Clean Energy Fuels.
The shares of Clean Energy Fuels Corp. (NASDAQ:CLNE) were up by almost 10 percent to $12.13 percent per share on Tuesday (11:26 AM, ET) at NASDAQ.