May 15, 2018 9:00 AM, EDT

Total S.A. Agrees to Buy Major Stake in Clean Energy

Leases to Be Underwritten to Speed Adoption of Natural Gas Heavy-Duty Trucks
Clean Energy fueling station Clean Energy Fuels Corp.

Clean Energy Fuels Corp. announced that French oil and gas company Total S.A. has become its largest stockholder and will underwrite a leasing program meant to accelerate the use of natural gas fuel in North American heavy-duty trucks.

Total, one of the world’s leading petroleum refining companies, has agreed to purchase up to 50.8 million shares of Clean Energy’s common stock for $83.4 million and acquire 25% of the company.

For its part, Paris-based Total gains operational insights into North America’s largest provider of natural gas to the heavy-duty market as Total prepares for increased opportunities in that sector in Europe, Clean Energy CEO Andrew Littlefair said during a conference call with analysts.

Total S.A.

“I think this is kind of a watershed moment where you are getting recognition from a major oil company,” Littlefair said, referring to the role of natural gas in heavy-duty transportation. “We both have a passion for transforming the transport industry, and we have the horsepower to do it.”

Clean Energy will work with leasing companies to offer natural gas heavy-duty trucks at payments equal to those for diesel trucks, according to the Newport Beach, Calif.-based company.

Total is providing a separate $100 million of credit support to offset the incremental differences in the lease payments for natural gas trucks costing more.

Clean Energy will recover the added cost of a lease through the required fuel purchases at its stations, and operators will pay 50 cents a gallon less than the cost of diesel, 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 deal,” he said. “We have never had that before.”

In some areas, renewable natural gas, or RNG, will be available.

They need each other. It’s a good deal for both of them.

Steve Tam, ACT Research Co.

Steve Tam

Speaking of RNG, which is derived from biogas, Littlefair said, “There’s good supply coming. I think that the RNG is really the icing on the cake for the fleets.”

The companies expect the leasing arrangement, anticipated to begin in the third quarter, to cover about 2,500 trucks.

Clean Energy’s stockholders must approve the agreement, and a meeting is set for June 8. Clean Energy’s board already has backed the plan.

The plan is moving forward as the price for diesel is climbing steadily, there is a new 12-liter near-zero natural gas engine for Class 8 trucks and emissions regulations are on the books.

The Cummins-Westport Inc. near-zero engine is an integral piece of the lease arrangement, according to Clean Energy.

ACT Research Co. Vice President Steve Tam called the agreement between Clean Energy and Total a natural fit.

“They need each other. It’s a good deal for both of them,” he said. “And if it puts an incremental number of natural gas trucks on the road, so much the better for the environment. And if it saves truckers money, so much the better, too.”

Total plans to send executives to work at Clean Energy and would be given two seats on its board “to understand how we have grown the business,” Littlefair said.

“Customers and regulators around the world are demanding cleaner transportation alternatives, particularly in the heavy-duty market,” Total Chairman and CEO Patrick Pouyanné said in a statement.

“Natural gas can become the fuel of choice,” he said. “Total believes there is a strong development opportunity in the natural-gas-for-transportation market, in particular in the United States, which benefits from unique giant low-cost gas resources.”

Clean Energy has 530 stations in North America that it either owns or operates, making it the largest provider of natural gas in the region.

Total operates 450 compressed natural gas stations, globally, and plans 350 more by 2022, Littlefair said.