Clean Energy’s Amazon Deal

Posted on April 26, 2021 by Brad Steveson

Last week Clean Energy (CLNE) announced a deal with Amazon to provide low and negative carbon renewable natural gas (RNG). They went on to say that the fuel will be provided at 27 existing Clean Energy fueling stations and another 19 non-exclusive new or upgraded Clean Energy-owned stations that Clean Energy expects to be constructed by the end of the year. And finally, the new and existing stations will provide RNG in 15 different states.

Well that sounds pretty cool. Anytime you stick Amazon in a press release it’s bound to attract eyeballs. In terms of the impact of this deal on CLNE, it’s not really that large, but one never knows what this agreement could lead to in the future. Business is business.

Now when you scroll to the bottom of the press release it says “In addition, the company has issued a warrant to Amazon”. That’s it. No other detail in the PR. However, there is plenty of information in the 8k filing, so I looked and found the following:

On April 16, 2021, in connection with execution of a Project Addendum to Fuel Pricing Agreement with Amazon Logistics, Inc., a subsidiary of Amazon (“Fuel Agreement”), the Company entered into a Transaction Agreement with Amazon (the “Transaction Agreement”), pursuant to which, among other things, the Company issued to Amazon Holdings a warrant (the “Warrant”) to purchase up to an aggregate of 53,141,755 shares (the “Warrant Shares”) of common stock of the Company (the “Common Stock”) subject to adjustment and vesting in accordance with the terms and conditions set forth in the Warrant.

Pursuant to the terms of the Warrant, the Warrant Shares vest in multiple tranches. The first tranche of 13,283,445 Warrant Shares vested in connection with the execution of the Fuel Agreement. Subsequent tranches will vest over time based on discretionary fuel purchases by Amazon and its affiliates, up to a total of $500 million, pursuant to the Fuel Agreement. In addition, in the event of certain acquisition transactions involving the Company under conditions as
set forth in the Warrant, all unvested Warrant Shares will automatically vest and become exercisable. Subject to vesting and certain conditions set forth therein, the Warrant may be exercised, in whole or in part, at any time before April 16, 2031 at an exercise price of $13.49.

Looking back to the Q4 earnings report released in March, CLNE said about their 2021 outlook with some qualifiers that GAAP net income (loss) for 2021 is expected to be approximately breakeven. Adjusted EBITDA for 2021 is expected to range from $60 million to $62 million.

Now back to the 8k where I found that they plan to revise the guidance when they release their Q1 2021 report.

Expected Impact on Financial Results.

The issuance of the Warrant described in this Current Report on Form 8-K is expected to result in non-cash contra revenue charges of approximately $76 million, which will impact the Company’s operating income for the year ended December 31, 2021. As a result, the Company plans to revise its previously published guidance regarding GAAP net income (loss) attributable to the Company for 2021 and expects to publish updated guidance for 2021, together with its announcement of financial results for the first quarter of 2021, in May 2021.

Capital Expenditures.

We expect to deploy $45 million to $60 million in capital expenditures to build fueling stations that will support RNG fueling volume contracted to Amazon during the year ended December 31, 2021.

So bottom line, I think CLNE continues to have a massive opportunity ahead of them, but I am still waiting to see some evidence that they will be able to take advantage of it. As for 2021, it looks like they traded the promise of a nice positive cash flow forecast for the Amazon deal. I hope it turns out to be worth it.

Disclosure: I have no position, but I may buy or sell shares at any time.

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