Executive Summary / Key Takeaways

• Integrated RNG Leadership: Clean Energy Fuels (CLNE) stands as North America's leading integrated provider of renewable natural gas (RNG) for transportation, leveraging an extensive fueling network and growing upstream production to offer a compelling, low-carbon alternative to diesel.
• X15N Engine as a Catalyst: The introduction and increasing adoption of the Cummins X15N engine for heavy-duty trucks, coupled with CLNE's strategic pricing and infrastructure, presents a significant growth opportunity, enabling attractive economic paybacks for fleets.
• Strong Financial Rebound & Upgraded Outlook: Despite initial Q1 challenges and non-cash charges, CLNE delivered a solid Q2 2025 performance, leading to an upward revision of its full-year 2025 Adjusted EBITDA guidance to $60 million - $65 million, reflecting underlying business strength.
• Policy Tailwinds & Headwinds: While the expiration of the Alternative Fuel Tax Credit (AFTC) and volatility in RIN prices pose near-term headwinds, the "One Big Beautiful Bill Act" (OBBBA) and anticipated clarity in California's Low Carbon Fuel Standard (LCFS) are expected to provide long-term support for RNG.
• Strategic Moat & Undervaluation: CLNE's vast fueling infrastructure, diverse RNG supply, and integrated service model create a substantial competitive moat, which management believes is currently undervalued by the market, driving recent share repurchase activity.

The Unseen Power of RNG: Setting the Scene for a Decarbonized Future

Clean Energy Fuels Corp. (CLNE), incorporated in 2001, has evolved into North America's preeminent integrated provider of natural gas as an alternative fuel for vehicle fleets. The company's core mission centers on supplying Renewable Natural Gas (RNG), Compressed Natural Gas (CNG), and Liquefied Natural Gas (LNG) to medium and heavy-duty vehicles, complemented by comprehensive operation and maintenance (O&M) services for its extensive network of fueling stations. This strategic focus positions CLNE at the forefront of decarbonizing the transportation sector, particularly the U.S. heavy-duty Class 8 trucking market, which consumes over 40 billion gallons of fuel annually.

CLNE's journey began with early natural gas deals nearly three decades ago, culminating in the pivotal introduction of RNG as a transportation fuel in 2014. This foundational step has been bolstered by strategic partnerships and investments, including a significant fuel pricing agreement with Amazon Logistics, Inc. (AMZN) in 2021, which led to the development of state-of-the-art fueling stations. Concurrently, CLNE forged 50-50 joint ventures with TotalEnergies S.E. (TTE) and BP Products North America, Inc. (BP) to develop anaerobic digester gas (ADG) RNG production facilities, signaling a robust commitment to upstream supply. Further expansion into Canada through a partnership with Tourmaline Oil Corp. (TOU) and a joint development agreement with Maas Energy Works, LLC for additional dairy RNG projects underscore CLNE's integrated approach to securing and distributing clean fuel.

The broader industry is undergoing a profound transformation driven by global decarbonization efforts and evolving regulatory landscapes. While the push for electrification and hydrogen has gained traction, CLNE's narrative highlights a growing recognition of RNG as a practical, economically viable, and immediately deployable solution for hard-to-decarbonize sectors like heavy-duty trucking. This shift in perspective, particularly in response to the operational and infrastructural challenges of other alternative fuels, positions CLNE's proven technology and established infrastructure as a critical enabler for fleets seeking to reduce their carbon footprint.

Technological Differentiators: The Core of CLNE's Value Proposition

At the heart of Clean Energy Fuels' offering is Renewable Natural Gas (RNG), a potent technological differentiator. RNG is derived from biogenic methane, captured from organic waste sources such as dairy farms and landfills. This process not only provides a clean fuel but also prevents harmful methane emissions from entering the atmosphere. The tangible benefits of RNG are significant and quantifiable: it reduces greenhouse gas (GHG) emissions from 60% to over 400% compared to fossil fuels, depending on the source, as determined by the California Air Resources Board (CARB). This makes RNG a "negative emissions highway transportation fuel" in certain contexts, offering substantial environmental advantages.

The widespread adoption of RNG in heavy-duty trucking is further catalyzed by advancements in engine technology, notably the Cummins (CMI) X15N engine. This 15-liter natural gas engine is critical because it addresses the largest segment of the over-the-road engine market, historically dominated by diesel. Early testing by major fleets like J.B. Hunt (JBHT) has shown the X15N delivers "significantly better fuel mileage than the 12-liter, while their drivers noticed the additional power and torque." Critically for fleet economics, the incremental cost of trucks equipped with the X15N has decreased from over $100,000 to approximately $75,000. This reduction, combined with CLNE's advantageous fuel pricing (offering up to $2 per gallon savings over diesel), enables a compelling two-year payback period for fleets, making the transition economically attractive. The entry of major OEMs like PACCAR (PCAR) (Kenworth and Peterbilt) and Freightliner (a 35% market share leader) in offering the X15N option further validates its market potential and broadens its reach.

Beyond natural gas, CLNE is also exploring hydrogen fueling as an emerging technology. The company has secured contracts to build hydrogen fueling stations for transit agencies, demonstrating its capability to deliver highly pressurized gas into vehicles. While this segment is nascent, CLNE's strategic intent is to leverage its existing infrastructure to reform RNG into clean hydrogen, or to add electric vehicle charging capabilities. These initiatives, though requiring significant capital investment and dependent on broader vehicle deployment, underscore CLNE's commitment to offering diverse clean energy solutions as the market evolves.

Competitive Positioning: A Network Moat in a Shifting Landscape

Clean Energy Fuels operates in a highly competitive landscape, primarily contending with diesel as the dominant fuel, but also with other alternative fuels like renewable diesel, biodiesel, ethanol, and emerging electric and hydrogen-powered vehicles. Despite this intense competition, CLNE has carved out a formidable competitive moat, largely built on its extensive, integrated fueling network and strategic RNG supply.

CLNE's fueling infrastructure is unparalleled in North America, comprising 580 stations in the U.S. and 26 in Canada as of June 30, 2025. This network provides access to more fueling stations and vehicle fleets than all its competitors combined, a strategic asset that would cost an estimated $2 billion to $2.5 billion and a decade to replicate. This vast footprint enables CLNE to serve over 1,000 fleet customers operating more than 50,000 vehicles, commanding a 50-60% market share in most of its operating markets. The company's "almost 100 different RNG supply contracts" further ensure a steady and reliable flow of clean fuel, a critical advantage in winning new contracts, as evidenced by its success with transit agencies and waste companies.

When compared to Westport Fuel Systems (WPRT), which specializes in alternative fuel engine systems, CLNE offers a more integrated, end-to-end solution encompassing fuel supply, infrastructure, and services. This comprehensive approach fosters stronger customer loyalty and recurring revenue streams, differentiating CLNE from WPRT's component-focused model. However, WPRT may exhibit greater agility in engine-specific technological innovation. Against Cummins Inc. (CMI), a major engine manufacturer, CLNE's focus on fuel and infrastructure complements CMI's engine offerings, creating a symbiotic relationship rather than direct competition in all aspects. While CMI boasts superior scale, diversification, and historically stronger profitability (CMI's TTM Operating Profit Margin of 0.11 is significantly higher than CLNE's -0.37), CLNE's deep expertise in RNG production and environmental credits provides a unique value proposition.

In comparison to Shell plc (SHEL), a global energy giant with its own LNG and CNG infrastructure, CLNE's emphasis on RNG and localized North American operations allows for more tailored, environmentally focused solutions. While Shell benefits from an extensive global supply chain and greater financial resilience, CLNE's specialized focus on RNG and its integrated model for environmental credit generation give it an edge in specific regulatory-driven markets. Indirect competitors like Tesla (TSLA) (EVs) and Plug Power (PLUG) (hydrogen) represent longer-term shifts towards electrification and alternative energy. While these technologies could eventually impact demand for natural gas fuels, CLNE's management believes that RNG remains the most viable and economic solution for heavy-duty trucking in the near to medium term, given the current limitations of electric and hydrogen infrastructure and vehicle performance.

CLNE's strategic positioning is further reinforced by strong customer relationships, including major accounts like Amazon, which continues to drive significant fueling demand. The long-term contract with UPS (UPS) for 170 million GGEs of RNG through March 2026 highlights the stickiness of its customer base. Management's decision to resume share repurchases in Q1 2025, while maintaining ample cash, signals a strong belief that the market currently undervalues CLNE's strategic assets and long-term growth potential.

Financial Performance & Liquidity: Building a Resilient Foundation

Clean Energy Fuels' recent financial performance reflects a business in transition, balancing the foundational strength of its fueling operations with investments in upstream RNG production and the impact of a dynamic regulatory environment. For the second quarter of 2025, CLNE reported revenue of $102.6 million, contributing to a year-to-date (YTD) Q2 2025 total of $206.4 million. This YTD revenue represents a modest 2.92% increase over the comparable 2024 period, primarily driven by a 14.79% rise in fuel sales to $144.2 million and a significant 56.51% increase in LCFS credits to $6.5 million.

Operational highlights include RNG volumes of 61.4 million GGEs in Q2 2025, a 21% rebound from Q1 2025, demonstrating recovery from earlier production challenges. However, YTD Q2 2025 RNG volumes were slightly down at 112.0 million GGEs compared to 115.1 million GGEs in the prior year. The company's Adjusted EBITDA for Q2 2025 was $17.5 million, reflecting strong underlying business performance. Despite these operational strengths, CLNE reported a net loss of -$20.2 million in Q2 2025, bringing the YTD Q2 2025 net loss to -$155.4 million. This substantial loss was significantly impacted by non-cash charges, including a $64.3 million goodwill impairment loss recognized in Q1 2025 due to a sustained decline in share price, and $50.7 million in accelerated depreciation and ARO charges related to the planned exit from 55 Pilot Travel Centers LNG fueling stations.

Liquidity remains robust, with $241 million in cash and investments as of Q2 2025, an increase from $217 million at the start of the year. Cash provided by operating activities surged to $59.3 million for YTD Q2 2025, up from $21.4 million in the comparable 2024 period, reflecting improved working capital management and contributions from natural gas procurement. The company's total indebtedness, including debt and finance leases, stood at approximately $313 million in principal amount as of June 30, 2025. The Stonepeak Term Loan, bearing a 9.5% interest rate, saw its principal balance increase from $300 million to $310 million due to the election to pay a portion of interest in kind.

Outlook & Guidance: Fueling Future Growth

Clean Energy Fuels has demonstrated confidence in its operational trajectory by raising its full-year 2025 guidance for Adjusted EBITDA to a range of $60 million to $65 million, up from the initial $50 million to $55 million. The GAAP Net Loss guidance was also updated to -$217 million to -$212 million, primarily reflecting the non-cash goodwill impairment and Pilot station write-offs already recognized. This revised outlook underscores management's belief in the "underlying strength of our fundamental business."

Key assumptions underpinning this guidance include projected total RNG volumes of approximately 246 million GGEs for 2025, excluding wholesale gallons. A significant driver of future growth is the anticipated adoption of the Cummins X15N engine, expected to contribute 3 million to 5 million fuel gallons from over 25 fleets in 2025. While this represents "a lot of singles versus home runs" in early adoption, it is crucial for building a broad market base.

The outlook also incorporates specific assumptions for environmental credit pricing: RIN prices are estimated in the $2.40 range for 2025, a notable decline from the $3.10 average in 2024, contributing to an approximate $10 million reduction in RIN revenue. Conversely, LCFS prices are estimated in the low $70s, an increase from the $61 average in 2024, potentially adding $2 million in revenue. Importantly, the guidance does not include any revenue from the expired AFTC or the pending 45Z production tax credit, reflecting a conservative stance amidst regulatory uncertainty.

Capital expenditures for 2025 are projected at approximately $30 million for fueling stations, IT, and LNG plant costs, alongside up to $35 million for 100%-owned ADG RNG production projects and up to $65 million in equity capital for the Maas JDA. Upstream RNG production from joint ventures is expected to yield 4 million to 6 million gallons in 2025. While the Del Rio, Texas dairy project is already producing positive EBITDA, other operating dairy projects are in a ramp-up phase, which can take around six months. Two large projects in Texas and Idaho are on schedule to begin production by year-end 2025, with full monetization expected in 2026. The Idaho project, in particular, is noted to be a drag on 2025 upstream EBITDA due to operating costs incurred during its construction phase.

Risks & Challenges: Navigating Headwinds

Despite a positive outlook, Clean Energy Fuels faces several pertinent risks. Regulatory and policy uncertainty remains a significant concern. The expiration of the AFTC and the pending finalization of the 45Z production tax credit create revenue uncertainty. Volatility in environmental credit prices, particularly RINs and LCFS, can materially impact profitability. The evolving regulatory landscape in California, which has historically favored battery-electric vehicles, has caused confusion and depressed truck sales, though recent adjustments may offer more clarity for RNG.

The pace of X15N engine adoption is critical; slower-than-expected sales could delay anticipated fuel volume growth. Operational challenges in ramping up new RNG projects, as experienced with some dairy facilities, can lead to lower-than-anticipated production and profitability in the near term. The company's dependence on a few key customers, such as Amazon, introduces concentration risk. Furthermore, the competitive landscape from other alternative fuels and vehicle technologies, coupled with the scale and diversification of larger energy companies, could pressure CLNE's market share and margins. Finally, cybersecurity threats and reliance on information technology systems pose ongoing operational and financial risks.

Conclusion

Clean Energy Fuels stands at a pivotal juncture, poised to capitalize on the growing demand for sustainable transportation solutions. The company's integrated strategy, combining an unparalleled fueling network with expanding upstream RNG production, forms a robust foundation for long-term growth. The advent of the Cummins X15N engine is a game-changer, offering a technologically superior and economically compelling alternative for heavy-duty trucking, a market ripe for decarbonization.

While the path forward is not without its challenges, including regulatory uncertainties and the inherent complexities of scaling new RNG projects, CLNE's updated 2025 guidance reflects a resilient business model and effective operational execution. The company's strategic investments in RNG production, coupled with its established infrastructure and strong customer relationships, underscore its leadership in the clean fuels sector. As the broader market increasingly recognizes the practical and environmental benefits of RNG, CLNE's technological differentiation and strategic positioning make it a compelling investment for those seeking exposure to the evolving landscape of sustainable transportation. The company's commitment to share repurchases further signals management's conviction in the intrinsic value of its assets and future prospects.