Greetings, and welcome to Clean Energy Fuels First Quarter 2021 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Vreeland, Chief Financial Officer. Thank you. You may begin.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the first quarter ending March 31, 2021. If you did not receive the release, it is available on the Investor Relations section of the company's website at www.cleanenergyfuels.com, where the call is also being webcast. There will be a replay available on the website for 30 days.

Thank you, Bob. Good afternoon, everyone, and thank you for joining us. I will quickly touch on our financial and operational highlights and then spend some time speaking about our very important and exciting Amazon announcement. Our new strategic partnership with Amazon is multi-pronged and we believe positions Clean Energy very well for the future and confirms the direction we set for ourselves years ago. As anticipated, the COVID pandemic continued to impact our volumes, but with stronger environmental credit pricing, our adjusted EBITDA of $11.7 million was up 4% over last year. As with the rest of the country, we are optimistic that the overall economy, including the transportation sector specifically, will continue to rebound.

Thank you, Andrew. For the first quarter of 2021, our results were in line with our expectations. And as we look forward, we're maintaining our adjusted EBITDA guidance of $60 million to $62 million for 2021. We are updating our guidance on GAAP earnings for 2021 to reflect the noncash accounting treatments of the vesting of the warrant we issued to Amazon. I will speak to that accounting treatment in more detail in a moment. Continuing with the first quarter, total volumes were 92.4 million gallons compared to 99.3 million gallons a year ago. The year-over-year decline is directly attributed to the impact of COVID to 2021 compared to the 2020 first quarter, which was minimally impacted by COVID. And although our overall volumes declined, our RNG volume grew 3% in the first quarter compared to a year ago. RNG volumes for the first quarter of 2021 were 37 million gallons compared to 36 million gallons a year ago. Because we flow RNG to many of our fueling stations, the lower fueling volumes due to COVID also impacted our RNG and lowered the year-over-year growth. However, on the financial side, our RINs and LCFS revenues from RNG deliveries increased 63% to $9.5 million from $5.8 million, despite there being only a 3% increase in RNG volumes. This increase in RIN and LCFS revenue was primarily from gains in RIN pricing compared to a year ago with modest gains in LCFS. Overall, revenue was $77.1 million for the first quarter of 2021, which was reduced by $2 million due to the noncash change in fair value of our Zero Now related hedge and customer contracts. Exclusive of the $2 million reduction, our revenue amounted to $79 million. Prior year first quarter revenue was $86 million, which included $5.6 million in noncash gains related to the changes in fair value of the Zero Now related hedge in customer contracts. Otherwise, the prior year first quarter revenue was $80.4 million compared to $79 million on less volume. We benefited in the quarter from a higher effective price on our volume-related revenue. Our effective price per gallon in the first quarter of 2021 was $0.76 per gallon compared to $0.70 a gallon a year ago. This reflects generally higher natural gas prices and related prices at the pump. Both station sales and AFTC revenues remained steady and within expectations, but also both are still being impacted by COVID, particularly when comparing to last year. Our gross margins improved in the first quarter of 2021 compared to 2020, when excluding the noncash fair value loss of $2 million from 2021 and the noncash fair value gain of $5.6 million in 2020. Exclusive of these fair value items, our gross margin was $28.8 million in the first quarter of 2021 compared to $27.4 million in the first quarter of 2020. A big part of this improvement in gross margin was the gains in RIN and LCFS revenues previously mentioned. Our effective margin per gallon for the first quarter of 2021 spiked a bit to $0.26 per gallon compared to $0.22 a gallon a year ago, also reflecting favorable RIN pricing and favorable commodity sales during the quarter. We still believe our margin per gallon will be within our expected range of $0.22 to $0.26 for the year.

Our first question comes from the line of Eric Stine with Craig-Hallum.

So just maybe on the Amazon deal, and I know that you're limited as to what you can say, but in light of the fact that these are going to be clean, owned stations, curious your thoughts if there's anything you can talk about on whether Amazon pushes this to their suppliers. It sounds like you're confident in getting volumes from other fleets, wondering if those other fleets would be those suppliers. And do you have a thought on what those volumes could be? They would seem to be significant.

Well, I don't have anything specific from Amazon to give you at this point, Eric. But I do know that we have had some Amazon vendors and suppliers purchasing natural gas trucks and arriving at our stations. I don't know how Amazon is approaching this, and I can't discuss any program that they might have. They'll have to do that. But as companies like Amazon look at their carbon emissions, their supply chain and their suppliers and those coming to and from supplying them goods, they must account for those emissions. I think it's instructive that these stations that are being built at the request of and located with Amazon in mind are being open to the public. We'll have to see how that develops. But I think that's probably the significant point there.

Okay. And then I know it's still early, so maybe this is a question for a few quarters down the road, but when UPS started on their route, that was a driver of additional fleet interest. Wondering if it's too early for that, if you are seeing inbound calls on that. And then, do you feel like people are starting to share and understand the value proposition here? Given that truckers seem to care down to half a penny, so—

We have had inbound calls by large logistics and large for-hire fleets. A lot of these fleets haul for Amazon, and they are familiar with what's going on and are obviously keenly interested. We have demo trucks going out to some very significant fleets right now that have tried it in the past and are looking again. As these fleets face their ESG goals and sustainability goals, the pressure is tightening everywhere and companies are taking this more seriously. As they evaluate other options — electric heavy-duty trucks or future fuel cell trucks — they begin to understand the costs associated with those options, and RNG looks very favorable in that case. It's something that can happen today and can be dropped in today using a power source that is familiar, such as a Cummins engine. We are seeing some momentum from this. I hope as this becomes more widely known and people begin to see more tractors on the road, interest will increase.

Got it. And then—well, last one for me, and I know maybe not specific to Amazon, but just more from a Clean Energy owned station standpoint, that's part of this agreement. I know there's been some confusion over what the margin impact would be. Can you talk a little bit about the margins at company-owned stations, which obviously these are at Amazon?

I'll let Bob maybe fill in here after if I bungle this and he wants to embellish it. The number that we quote, $0.22 last quarter and this quarter it spiked to $0.26, that's across all of the gallons that we sell, and that accounts for different categories of gallons — operation and maintenance gallons where we may not be selling the fuel but we're getting paid per gallon to maintain a particular station. When you blend it all together, that's how we arrive at the $0.26. That is one of the numbers we cite. But when you look at stations that we own, where we are providing the fuel and are in control of, for instance, our RNG, there are many stations in California and across the country where the margin is substantially higher. If you look at the price of natural gas and understand that there's roughly 7 gallons of diesel equivalent per Mcf, that means your commodity per gallon is around $0.35 or so, and then add $1 or $1.20 of costs, so you're at about $1.50 at the nozzle and competing with diesel at $4, you can see there's a lot of room. There's room to give our customers a discount, and there's room for us to have a very nice margin. We have stations where we have considerably higher margin than that. These will be our stations, as you point out, Eric. Of course, we're giving a good price, but we're also recognizing that we're building a station for a customer with a commitment on fuel volume, but it has a much different margin profile than simply multiplying some of these gallons by that $0.26 number.

Our next question comes from the line of Rob Brown with Lake Street Capital Markets.

My first question on the ramp and the rollout plan here: I think you said you were going to build the stations in 2021. Maybe give us a sense of the size of the station you're building and then how you see the ramp of the project going in terms of gallon sales?

Right. We are going to build those by 2021. There's a little bit of wiggle room here. I know Amazon wants them all done immediately, and it takes a while to build these stations. Station construction isn't new to us — we've done over 700 station projects over time. We know how to build stations. The challenging part is permitting, the local permitting. We went through a planning commission last night in a California city and got approved 5 to nothing, so that's good. The expectation is almost all of these stations will be substantially completed, if not many online, by 2021. That's our hope; I'd like to have them all done if we could. These stations are going to be large and will be sized depending on the needs at particular locations, so some are larger than others. In general, you should think of these stations as truck-stop–like, able to fuel two tractors at a time, sometimes three, at 10 gallons a minute type speeds, which is good. Average tractors should take onboard about 85 gallons at a fill. These stations will be sized accordingly. If you wanted an average, they would be able to fuel 100 tractors a day or more, and some will be significantly larger. They have room to grow and they're not stations of the past for light-duty vehicles; they're large commercial truck stops.

Okay, great. And so once they're in place, then it's a matter of trucks ramping to get the fuel volume up. Do you have a sense on the timeline of how that rolls out and how you see that ramping over what period?

Those trucks have been ordered. The first tranche of trucks have been built, and another large batch is being built and will be delivered in the remainder of the year. The expectation is those trucks will arrive in 2021 and, as they do, they'll fuel on our network and at the stations as they open. They'll move trucks around to make sure they can begin to put those into service. They have the truck slots and those have been ordered.

Okay, great. Thank you. And then on the capacity side, I think you talked about adding some facilities or starting that process through the JVs that you have. How quickly do you need to add RNG capacity to meet Amazon? Or will those things work in tandem? And what's your view of supply capacity that you'll add over the next couple of years?

It's a little complicated because we want as much low CI, negative carbon fuel as we can get. Think about this: because we have the low carbon fuel standard in California, we tend to bring dairy gas to California first since it's most valuable there. As we ramp up our low CI dairy gas in California, we expect to be increasing between six- to ten-fold what we did last year. As we bring dairy gas from around the country, it will come to California first and release other gas to other parts of the country where it's not as low carbon. Our focus is the 5 billion to 7 billion gallons target to bring on the lowest carbon fuel — low CI — because LCFS encourages bringing on the cleanest fuel possible and capturing the most methane. It's been interesting to see major oil companies trying to get their arms around sequestration; that's essentially what we're doing in a way — capturing methane before it escapes, putting it into a vehicle, and burning it. We'll want to do more low CI in California. On the supply side, we have an origination team that's busy; we have in the pipeline 25 different dairy projects where we're negotiating with the farms, and we have seven underway now in the contracting process. We'll need all of it plus. As we all begin to understand the scale of the Amazon deal, we need to add significantly to the supply. I don't think we'll outpace RNG supply in the near term because the industry is responding — there are many projects underway by others as well. The Amazon potential will keep us all very busy, but with landfills, wastewater and other sources, the industry can meet demand. We want to meet it with as low CI as possible. Our plan is to create several hundred million gallons of RNG in addition to where we are today over the next few years.

Our next question comes from the line of Manav Gupta with Credit Suisse.

I actually wanted to quickly focus on the upstream versus downstream profitability here. Let's say you have a company-owned station and you believe it's giving you $0.30 to $0.35 a gallon. What I'm trying to understand is, is this Amazon deal giving you the volumes to develop the low CI RNG through your upstream partners and the profitability over there is $5 to $7 a gallon. If you split that halfway, that's like $3 a gallon. So it doesn't really matter if on a downstream basis you make $0.30 a gallon or $0.40 a gallon; the real benefit of this deal is that now you can go back to your partners, Total, BP and others, develop the upstream RNG, which is like $3 a gallon. So the real benefit will come from the upstream side on the margin, not really the downstream side. Can you talk about that?

Well, Manav, yes and no. There's value on both sides, but you're correct that the demand created from a deal like this supports our position on the upstream supply side. The upstream is being developed with the intent of putting it into vehicles to get the highest value. When you have that demand, it's a powerful upstream proposition. The economics flow into the upstream, which is separate from the $0.30–$0.35 you mentioned. In our case, that would be part of a joint venture. We will have those economics to the extent that we are the producer and we're using the gas from our projects, but we'll also source it from others.

Manav, on the source side, we are the chokepoint with the infrastructure and have the largest network, and we already take RNG from 40 different sources. That grows all the time and will continue to grow. The upstream is very profitable, but don't underestimate the value of the downstream per gallon. If you review the pricing buildup, you might be surprised that at stations we own, our margin is better than you might be thinking.

I'm not doubting that. I'm just saying sometimes, when you include the RINs, $35 MMBtu, negative daily CI RNG, the LCFS credit, the magnitude of that can be significant. So again, the downstream profitability is very important, I understand it. But when dealing with dairy farm RNG, because the LCFS credit itself is so large, the profitability could be significantly higher. That's the only point I was trying to make.

We agree. But I'm not giving it away — I'm going to sell it.

One question away from Amazon. You also have programs with people like Chevron, adopt-a-port. Can you give us an update on how that program is going? We want to understand besides Amazon, people like Chevron who are running these adopt-a-port programs — how are those programs going?

We're very pleased with Chevron, and we were working to upsize that program and are in the process of doing that. We have a pipeline of trucks at the port in development, proposed and contracting phases that totals about 518 trucks as of last Friday. That's potentially really good volume — all RNG, all through our network, with incentive dollars from Chevron to use RNG provided by Chevron and their upstream operations into our network. We think it's an elegant program — a win for Chevron, a win for the farmers, a win for the port operators being forced into cleaner technologies. It's a way for them to do it with incentive dollars and still do it at a dramatic discount to diesel, and it's a win for us.

Thanks. One last question: I think yesterday or a couple of days ago, you announced a number of new contracts. If you could highlight which ones you think are the most significant, which are your new customers? Could you run us through that announcement of multiple contracts that you signed?

The reason we did that announcement yesterday was because there are so many different deals it becomes a laundry list. A couple I'd highlight by fleet segment: CalPortland, ready-mix cement mixers, a very large company with around 220–250 mixers; they signed an RNG supply agreement for 150 more ready-mix trucks that will use about 1 million gallons a year. That industry is taking off slowly but steadily and is similar to the refuse industry. The PAC anchor one in the port is a good RNG project for heavy-duty trucks down in the port. Biagi Brothers, a large liquor distributor, signed for 900,000 gallons using our Zero Now program. Biagi has customers like Anheuser-Busch and Pepsi. The city of Pasadena, California, signed a new multiyear RNG supply agreement for 1.5 million gallons to fuel their fleet of 50 new refuse trucks and transit buses. Those tend to be long-term agreements for years. We continue to work with sanitation districts and refuse companies; we're now working with 138 different refuse companies moving to RNG. Another customer is a contractor for the postal service — the mail is moved by many large trucks and the postal service encourages postal haulers to use lower carbon fuel. An early mover, Matheson, now has 35–40 tractors, very high-mileage trucks using about 30,000 gallons a year per truck, and they just took another 16 tractors that use over 200,000 gallons a year. This gives a flavor: we are seeing activity across transit, refuse, airports and municipalities.

That was a very good response. Thank you for taking all my questions.

Our next question comes from the line of Craig Sheer with Chilly Brothers.

Good afternoon. Details, it's about details, of course. Could you provide a little color on how you might expect the Amazon-related volumes to ramp this year and next? No specifics, but would you expect a relatively smooth or lumpier quarterly growth? How long might it be until you see the full expected contracted volumes reach their expected level? And as to the new stations built — I think you had mentioned 100-truck fueling capacity on average a day — when the Amazon agreement is at the full initial expected run rate, would you expect them to consume less than half of the new 100-truck-a-day stations or the majority of it?

I have to be careful here. We're fueling some Amazon trucks now that came from an earlier order, and those trucks are being phased in now. We're actually fueling trucks in our network at a larger number than I cited today on occasion; we've had a month where we've fueled trucks at 37 stations. The way this will work is based on when they get the trucks and when those stations are built. These trucks have been ordered, are being built, and slots are later this summer and early fall. You'll see arrivals and stations being adjusted to accommodate Amazon and the new stations in the latter part of the year and then going forward. This will play out over time and as volumes are reported you'll get a sense of what's going on.

Fair enough. I appreciate that.

Your last question was about the stations.

If we're doing 100, if it's 100 trucks, will Amazon do half of it? Will they be 50 of the 100 or 70—

Some of the stations are being built for 180 trucks, so when I said 100 that gives you an idea of a station doing 8,500 to 10,000 gallons a day, but some are twice that size. When I used 100, that gives an idea of Amazon-type demand. These stations have more capacity; they are not fully mapped. A station that can service 100 Amazon trucks also has capacity to serve additional trucks. These stations have a great deal of capacity.

On an 11-hour day, it sounds like the new stations will be mostly utilized by Amazon. Is that fair?

We're building these stations with a fuel commitment from Amazon that justifies building them, so they're not speculative. They do have the ability to add other customers.

Fair enough. I understand it's a touchy subject, and we'll see more in coming quarters.

Yes. I'd like to say more, but I think I've said enough.

One other area I'd like to get into: I'm hearing more from utilities about getting into RNG, like SoCalGas, for example. If major utilities start getting into the dairy market, does that throw a wrench into supply and demand for projects? Could a deluge of RNG flow into the pipeline network (if authorized) and potentially swamp the LCFS market? What are your thoughts?

LCFS is a California market and utilities are cautious when they venture into RNG — pilots have been few and far between. When utilities put RNG into power generation, it's substantially cheaper than the vehicle market. I believe market forces will move supply to the highest value use — vehicle transportation — and that is the highest and best use for RNG. Some utilities may need to do projects for regulatory reasons, but I believe there will be plenty for everyone; vehicle fuel is the highest and best use and that is where it will flow. When demand dries up, some supply may shift to stationary uses, but that's not as attractive.

Understood. Thank you.

Our next question comes from the line of Pavel Malchanov with Raymond James. I guess I'm not sure where he is. Our next question comes from the line of Jason Gabelman with Cowen.

I have two questions. First, on the Amazon deal, you mentioned that the deal justifies building the stations and implies you have enough volume committed to fuel trucks to build the stations. Can you talk about whether you have commitments to source RNG across the country and what that process is like? Is it competitive? Do you think there's enough RNG out there and how are those contracts arranged to supply RNG into the station? Second, on the upstream build-out: you mentioned you're in talks with 25 different dairy projects with seven in contracting right now. Can you talk through what that means from a volume perspective? Anything you can share on indicative economics on those dairy projects? More generally, discuss the landscape in terms of building dairy projects on the West Coast. There seem to be many players trying to enter the upstream business; do you see it getting more competitive and more difficult to source these upstream projects? Thanks.

It's not just the West Coast; this is nationwide. We have projects in upstate New York, Wisconsin and other locations. RNG leverages the existing pipeline infrastructure. It's a matter of charting pipelines and pathways from places like Wisconsin and Texas to California. We want dairy gas to come to California because it's most valuable there, and other states may adopt LCFS-like programs, opening markets further. There are roughly 40,000 dairies in the U.S.; we're focusing on larger dairies with more sophisticated manure handling, typically those with about 7,500 head and above. There's a lot of competition; many players are active. To achieve the 5 billion to 7 billion gallons target requires significant capital and effort. The economics are attractive — roughly a 3- to 3.5-year payback in many cases — and they are long-life projects that are profitable for the farmer and for us. For the Amazon deal, all fuel must be RNG, so that creates demand. We need to develop large numbers of projects; there will be hundreds underway in the next few years. There have been about 400 dairy projects historically, though not all have targeted the vehicle market. Some projects are smaller or for stationary uses. The projects involve gathering systems at dairies and interconnects to pipelines; it's not inexpensive but it's straightforward. Our most recent deals went from introduction to signing in about 75 days; construction is 6 to 9 months and certification processes mean it can be about 18 months before full credit generation. That's why it's important to have many projects in the pipeline.

Great. That's really helpful. I appreciate the color.

There are no more questions in the queue. I'd like to hand the call back over to Mr. Littlefair for closing remarks.

Good. Well, thank you, everyone. I hope the commentary on the Amazon deal brought some more clarity to that exciting opportunity for us. Thank you for listening to the call this afternoon, and we look forward to updating you all on our progress next quarter. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.