Trillium CNG Put Up for Sale; Experts See Nat Gas Slowing
WEC Energy Group plans to sell Trillium CNG, the nationwide operator of compressed natural-gas fueling stations.
A Trillium executive said the announcement was expected, while an analyst and carrier executives suggested the demand for natural gas is cooling as diesel fuel prices hover near six-year lows.
Trillium became part of WEC, based in Milwaukee, on June 29 as part of the $9.1 billion purchase of Integrys Energy Group Inc., the parent firm of Trillium.
WEC does not feel it is the “ideal company to continue to own Trillium and assist its growth, which will require additional investment for it to flourish and to develop,” said Lisa Prunty, a spokeswoman for the companies.
Michael Baudendistel, a transportation analyst with Stifel Equity Research Group, told Transport Topics that he wasn’t surprised by WEC’s rationale for selling Trillium because there is less interest in natural gas-fueled equipment in an environment of lower diesel prices.
“It seems to us that CNG is still being used heavily for garbage trucks and transit buses and maybe some shorthaul/regional, but interest generally has come down, especially for those on the fence between the fuel types,” Baudendistel said.
William Zobel, Chicago-based Trillium’s vice president of business development, said the sale was not unexpected.
“We just see this as an evolution of the business and the marketplace,” he said.
WEC estimates Trillium has $140 million in assets.
“The right thing to do is to get into the marketplace with somebody who has an interest in moving the business forward . . . and [can] help the company grow,” Zobel said.
Zobel said Trillium owns or operates 66 fueling stations in partnership with others. It also individually operates 43.
Don Orr, president of Central Freight Lines, said, “I think they have a good foothold, [but] there is going to be a lot of shakeout in this business.”
He said some people “got into [natural gas] because they thought they could get a quick return when diesel was $4 . . . and get a return on their [fueling station] property in a year and a half. It looked like a hell of an investment.”
Attracting new fleet customers for natural gas could be difficult in the short term.
“To make total economic sense right now, we need about a $1 spread between diesel and gas. And we are not there, but over the long pull we are pretty comfortable [CNG] is the right thing to do,” Orr said.
The U.S. diesel average was $2.47 on Sept. 28, down $1.27 from a year earlier, the Energy Information Administration reported. That is only 40 cents more than an equivalent amount of CNG, based on a separate national survey.
Stephen Silverman, chief operating officer at Raven Transport Inc.,said Raven uses LNG in 186 trucks and will get to 200 in the beginning of 2016, then add an additional 46 in the fourth quarter.
“We are committed to having a greener America, to getting off of Middle East oil,” he said.
Curt Reitz, president of Contract Transport Services, said, “Obviously, [CNG] doesn’t look quite as attractive to a lot of people right now, but we are still in it for the long haul. I think oil will end up going back up, whether it is the spring of next year or whenever,” Reitz said.