February 8, 2016 3:30 AM, EST

Love's Agrees to Buy Trillium; Deal Seen as Boon to Nat Gas

This story appears in the Feb. 8 print edition of Transport Topics.

Love's Travel Stops has entered into an agreement to purchase Trillium CNG, a nationwide operator and developer of compressed natural gas fueling stations, a move observers say validates the future of alternative fuels.

The purchase of Trillium from parent company WEC Energy Group will add 37 fueling station's to Love's 28 CNG locations, according to Love's. Terms of the deal were not disclosed.

Trillium delivers more than 55 million gallon equivalents of CNG annually, while Love's Travel Stops has 360 locations in 40 states, but it declined to provide CNG or refined product volumes.

"Trillium's established network of CNG locations and its deep expertise within the industry will also allow Love's to serve new types of customers in new markets while expanding reach to existing customers,” Frank Love, co-CEO of Love's, said in a statement.

"This shows Love's is convinced CNG is going to be a big player in trucking and transportation. There's no doubt in their minds or they wouldn't spend this kind of money,” Gordon Larsen, a technical trainer with the Natural Gas Vehicle Institute and a 42-year veteran of the fuel-market industry, told Transport Topics.

Matthew Godlewski, president of the advocacy group NGVAmerica, summed up Love's purchase as "a great transaction for the industry.”

Godlewski said Love's has close ties to its customers, and the acquisition signals to the marketplace that consumers, fleets and schools "continue to want to use clean-burning natural gas as a transportation option.”

The U.S. truck-stop industry has three large chains and many smaller participants. Love's ranks No. 2 among the industry's Big Three, when measuring by number of locations. Pilot Flying J has about 650 travel plazas and offers propane at some, according to its website.

TravelCenters of America had 253 stations in 43 states as of Sept. 30, according to the company's filing with the Securities and Exchange Commission.

TravelCenters and Shell Oil Co. plan to develop a nationwide network of full-service liquefied natural gas fueling centers for "heavy-duty road transport customers,” according to the TA website. A graphic on the site shows one fueling station under development and more than 50 other locations identified for future development.

Love's two main competitors grew significantly because of large recent mergers. Pilot Travel Centers and Flying J joined in 2010, and TA bought Petro Stopping Centers in 2007.

Erik Neandross, CEO of the alternative fuel and transportation advisory firm Gladstein, Neandross and Associates, said Trillium is likely to be energized by the eventual new arrangement with Love's.

"My guess is that moving Trillium out into a more private-sector environment could really unlock some untapped value that perhaps was a bit constrained when it was part of a utility,” he said.

Trillium became part of Milwaukee-based WEC on June 29 as part of the $9.1 billion purchase of Integrys Energy Group Inc. WEC essentially put Trillium immediately up for sale, saying at the time the unregulated nature of Trillium's business was not a good fit with the utility.

Bill Cashmareck, general manager of Love's CNG business, told TT the pending deal also would include Love's acquisition of Trillium's construction, equipment sales, operational and maintenance services business, which operates nationwide.

"That's about another 75 locations,” he said, adding: "We are not in all places. There's not a company out there that is.”

At the same time, he said, "We have a long-term vision for compressed natural gas and other alternative fuels. It may only be a couple of years before oil is at higher prices.”

The agreement was announced as U.S. and Canadian natural-gas Class 8 truck retail sales, which started 2015 with slow growth, ended the year in the same fashion, according to a recent report from ACT Research.

Despite sequential momentum slowing, with natural-gas Class 8 retail sales for November down 28% month-over-month and year-over-year, the year-to-date volumes stand just 1% below 2014 levels, according to the ACT report.

"However, this doesn't mean the adoption of natural-gas fuel has stopped or that there are no new developments supporting a future uptick in natural-gas truck orders,” ACT General Manager Kenny Vieth said in a statement.

"Natural-gas engines may be the future, particularly if oil prices rebound,” analyst John Larkin said in a recent investor note for Stifel, Nicolaus & Co. "Larger carriers [are] positioned to reap benefits once economic justification becomes more clear-cut, all else being equal.”

Love's spokesman Ryan Welton told TT it has not been decided if Trillium's stations would keep that name or be rebranded as Love's outlets. He added the deal should close before the end of the first quarter.

Associate News Editor Jonathan S. Reiskin contributed to this report.