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Clean Energy popped by Chesapeake Financing

Editor — Wed, 13 Jul 2011 15:06:28 +0000

Clean Energy Fuels (Nasdaq: CLNE) shares surged 12% this morning on news that Chesapeake Energy (NYSE: CHK), the U.S. second largest natural gas producer, will invest $150 million in the company to finance the development of nearly 150 liquefied natural gas truck fueling stations at strategic truck-stop locations across the U.S and Canada. By the end of the day the stock hit a new two-month of $15.08 on volume of 7.3 million. Moreover, the rally continued in the aftermarket session with Clean Energy’s shares gaining another 8% to $16.32.

The investment is in the form of convertible debt issued in three tranches of $50 million each. The first $50 million investment closed on July 11, and the second and third tranches are expected to close in June 2012 and June 2013, respectively. The debt carries an interest rate of 7.5% and is convertible at Chesapeake option Clean Energy’s common stock at a 22.5% premium to the volume-weighted average closing price of the 20-day period prior to the initial closing. The entire principal balance of each note is due and payable seven years following its issuance.

The companies’ intention is to capitalize on technologies that replace gasoline and diesel with fuels derived from natural gas. Drivers who filled up with natural gas at the station could save up to $2 per gallon when compared to diesel. Strong oil pricing environment have made alternative fuel sources attractive, with natural gas positioned well to play an increasing role in becoming a viable transportation fuel.

In addition, the use of natural gas fuels reduces greenhouse gas emissions up to 30% in light-duty vehicles and by approximately 23% in medium to heavy-duty vehicle applications. The U.S. Department of Energy reports that 98% of the natural gas consumed in the U.S. is sourced in the U.S. and Canada, making natural gas fuel a viable option to decrease dependence on OPEC oil and develop additional domestic jobs.

The lack of infrastructure have has been an obstacle in deployment of natural gas powered vehicles so far, however, the recent events indicates that along with Chesapeake, United Parcel Service (NYSE:UPS), Westport Innovations (NYSE:WRPT) and General Motors (NYSE: GM) have also developed programs to build infrastructure and put more natural gas compatible vehicles on road.

Clean Energy Fuels is in the forefront of so called “natural gas revolution” being the largest provider of natural gas fuel for transportation in North America. The company has operations in CNG (compressed natural gas) and LNG (liquefied natural gas) vehicle fueling, as well as biomethane production, vehicle conversion and compressor technology. It fuels more than 22,700 vehicles at 238 strategic locations across the U.S. and Canada with a broad customer base in the refuse, transit, trucking, shuttle, taxi, airport and municipal fleet markets. Clean Energy owns and operates two LNG production plants in Willis, Texas and Boron, Calif., with combined capacity of 260,000 LNG gallons per day and that are designed to expand to 340,000 LNG gallons per day as demand increases.

The rapid expansion of natural gas fueling stations network allowed Clean Energy to report impressive growth over the last year. Revenue for the first quarter ended March 31, 2011, rose 67% to $65.3 million, up from $39.0 million for the first quarter of 2010. Gasoline gallon equivalents (gallons) delivered for the first quarter of 2011, totaled 35.5 million gallons, up from 28.6 million gallons delivered in the same period a year ago. The diesel prices above $4 per gallon and comparable LNG from Clean Energy at $2.30 represent the biggest driver of diesel-to-natural gas transition and points that the company’s momentum does not look to be short-lived.

The company has also reported that its Q1 2011 loss shrank to $9.8 million or $0.14 per share, from $24.4 million, or $0.41 per share one year ago. Excluding one-time items, the company said it would have lost $0.05 per share in the most recent quarter, compared with $0.07 per share a year earlier. Analysts were expecting a loss of $0.07 per share on revenue of $64 million.

For 2011, analysts expect the company to lose $0.28 a share on revenue of $290 million, up 37% when compared to 2010. The recent news has made several analysts to upgrade the company’s rating and revise result estimates. The support from larger gas and transportation companies could certainly accelerate adoption rates for LNG-powered vehicles and enhance Clean Energy’s opportunity and growth prospects.

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Hot Stock Alert – General Motors to Return on the Back of Potentially Largest U.S. Offering

Editor — Wed, 17 Nov 2010 15:48:30 +0000

After a pause of 16 months, General Motors (GM) is returning to the stock market and planning to launch its Initial Public Offering on November 18. Originally, GM had set the opening share price for its IPO at approximately $26 to $29. However, interest in the IPO has escalated; investors were placing orders worth $70 billion by late Tuesday, and now the company expects to receive a slightly higher price per share, somewhere in the $32 to $33 range.

GM plans to sell 478 million common shares and raise about $15.5 billion at the mid-point. Moreover, the company boosted the size of its preferred stock by offering $1 billion to $4 billion in a move that could strengthen its balance sheet by paying down pension debt. Including an overallotment provision for both common and preferred shares, the GM deal is now set to raise about $22.7 billion if it prices at the high end of the new price range.

The new General Motors Company emerged from the ashes of old General Motors (which became Motors Liquidation Corporation) on July 10, 2009, after the government injected about $49 billion to stabilize the company and help it through bankruptcy. During 2009, new and old GM sold 7.5 million vehicles, representing 11.6% of total vehicle sales worldwide. Approximately 72% of GM’s total 2009 vehicle sales volume was generated outside the U.S., including 38.7% from emerging markets, such as Brazil, Russia, India and China, which have recently experienced the industry’s highest volume growth.

The global automotive industry sold 66 million new vehicles in 2009. This represented a 6.1% decrease compared to 2008, but the rate of decline slowed from the 9.5% plunge in 2008 versus 2007. Global growth in auto sales could be limited to 10% in 2010 and 7.1% in 2011, according to researcher J.D. Power & Associates. U.S. auto sales are expected to rise to 11.5 million units in 2010 from 10.4 million in 2009, and are expected to recover to the pre-recession level of more than 15 million units in the next few years.

The new GM is poised to capitalize on an expected rebound in car sales worldwide and despite the still weak recovery signs; GM reported strong results for the first nine months of 2010. The company, which lost nearly $90 billion from 2005 through its 2009 bankruptcy, earned $4.1 billion in net profits in the first nine months of 2010 and is on track for its first full-year profit since 2004. GM now expects to report positive EBIT for Q4 2010, although at a significantly lower run rate than each of the first three quarters.

The company’s revenue increased 36.6% to $98.7 billion in the first nine months of 2010, compared to the corresponding period in 2009, due to higher sales in North America as a result of improving economy and successful recent vehicle launches. Lower operating costs and reduced sales incentives in GM’s U.S. operations, as well as better labor agreement, allowed GM to turn to profitability and report $4.1 billion in net profits for the first nine months of 2010. Moreover, the company reported that it now can breakeven at the U.S. industry with auto sales as low as 10.5 million vehicles per year. That means the new GM would have made money in 2008 when the old GM burned more than $30 billion.

While the latest financial reports sound encouraging, the company’s biggest achievement was the change in business philosophy. GM is now executing a new strategy, which is based on delivery of quality vehicles that should make a profit for the company and its shareholders.

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