May 10, 2018

Clean Energy, Total in accord to fund difference between diesel, natural gas trucks

French giant to become Clean Energy's largest shareholder with $83.4 million investment.

By DC Velocity Staff

Clean Energy Fuels Corp., which operates one of North America's largest networks for natural gas for transportation fueling, and French energy giant Total S.A. said today they entered into an agreement whereby Total becomes Clean Energy's largest shareholder and guarantees up to $100 million in payments by Clean Energy to eliminate the price gap between diesel-powered heavy-duty trucks and their more expensive natural gas-powered counterparts.

Paris-based Total will purchase up to 50.8 million shares of Clean Energy's common stock for $83.4 million, thus controlling 25 percent of Clean Energy's common shares. The Total payment guarantee will allow fleets to begin driving natural gas-powered trucks at no increased cost compared to diesel vehicles, the companies said. The program is expected to begin in the third quarter and will be available across North America, the companies said.

The program also guarantees that fleets will pay 50 cents a gallon less to fill up with natural gas than with diesel, regardless of diesel's market price, which has been steadily rising since it troughed in February 2016 at a nationwide average price of $1.98 per gallon. As of last Monday, the average nationwide price of on-highway diesel stood at $3.17 per gallon, up 60 cents a gallon from the same period in 2017, according to the Department of Energy's Energy Information Administration (EIA). Prices were as high as $3.86 per gallon in California, typically the most expensive place to buy diesel, and as low as $2.95 per gallon in the Gulf Coast, generally the cheapest part of the country in which to fill up.

Total and Newport Beach, Calif.-based Clean Energy will work with one or more truck leasing or finance companies that would lease natural gas trucks to large vehicle fleets for payments that are equal to those for diesel trucks. Fleets will lease the vehicles, and Clean Energy will service the lease portion that is attributable to the so-called incremental cost of the natural gas truck over the diesel truck. Since 2012, the cost differential between diesel and natural gas vehicles has remained at about $40,000 per truck, according to Clean Energy's estimates. The higher cost is due largely to the expense of building a heavy-duty vehicle that is powered by natural gas.

At the same time, the fleet operator would enter into an agreement with Clean Energy to purchase a minimum amount of fuel at a discounted price over the lease's term. Clean Energy will generate the funds to finance the incremental cost payments through the cash flow from the fuel leases. Total's finance commitment would apply just to the differential costs.

Andrew J. Littlefair, Clean Energy's president and CEO, said today in comments at an event held by the two companies that the incremental costs of natural gas vehicles are the main reason fleets don't invest in them. The initiative with Total "could be the catalyst for a much quicker adoption rate to natural gas," Littlefair said. "It is a no-risk way to get into a natural gas truck, the cleanest vehicle on the road, and pay for fuel at a strong discount to diesel."

Clean Energy Fuels Corp. owns and operates more than 550 natural gas and renewable natural gas stations across North America.

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