Source: Clean Energy Fuels Corp. investor presentation , Dec. 22, 2015.
We've all have grasped the power of repeat business, having being first exposed to it by glancing in our medicine cabinets and seeing disposable razor blades lying there on the shelf. Just taking a look at Clean Energy's biggest customers inevitably leads to one conclusion: These organizations did the research and were willing to invest the money in natural gas-powered engines for at least a portion of their fleets. They're in it for the long haul, as is Clean Energy Fuels.
The tricky part
Projections of profits and big-name customers are all well and good, but this story has been playing out for a decade now. At what point do investors have the right to begin questioning Clean Energy Fuels' viability? Based on the weight of the evidence, and with the full knowledge that we're talking about a decade of red ink, it seems that it's still too early to close the books on Clean Energy as an enterprise. The benefits of natural gas and its bi-products as a fuel for trucks and buses are well documented, and this fact alone lends itself to seeing Clean Energy as a worthy endeavor. Waste Management knew what it was doing when it went down this path for a decent portion of its fleets.
The simple fact is that what Clean Energy Fuels is trying to accomplish is both difficult and capital intensive. Customers have no incentive to use natural gas if the station to fuel up at is inconveniently located and uncommon. Would you buy a gasoline-fueled car if there were almost no gas stations along your regular driving route?
Clean Energy has made huge amounts of capital expenditures, and it's finally beginning to see the benefits of years of investment in distribution and the creation of over 550 natural gas fueling stations across the country. As Andrew J. Littlefair, the company's co-founder and CEO recently put it, in the Q3 2015 earnings call:
Regarding our balance sheet and financials, we continue to make sure that we are operating the business efficiently as we continue to grow our volumes and getting operating leverage out of the business. As an example, over the last five quarters, we reduced our SG&A by 20%, while we grew our volumes by 24%. All this is in the face of a challenged oil environment.
Clearly, Clean Energy Fuels has reached an inflection point, and the worst thing believers in a natural gas-fueled future can do is throw in the towel now.
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The article Clean Energy Fuels: A Flawed Business Model, or on the Road to Greatness? originally appeared on Fool.com.
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