Alex Gates of Clayton Partners presented his in-depth investment thesis on Clean Energy Fuels Corp. (US: CLNE) at Wide-Moat Investing Summit 2020.

Thesis summary:

Clean Energy Fuels owns and operates the largest footprint of natural gas fueling stations in the US. The growth of renewable fuels has transformed the company into a profitable, cash-rich business focused on reducing carbon emissions in the trucking industry.

Clean Energy distributes 50+% of all renewable natural gas (RNG) in the US through 550 stations, which Alex estimates would take more than ten years and $2+ billion to replicate. Clean Energy’s stations are the only scalable pathway to monetize highly valuable federal and California state environmental credits from RNG usage.

The company will end the year with ~15% of the recent market cap in cash and no debt. Alex expects 2020 EBITDA of $45 million to triple in three years as the growth of RNG continues at the current pace. By 2025 the company will distribute 100% renewable fuel, potentially garnering attention from ESG investors.

The equity would be valued at $3.50 per share assuming 8.5x 2022 EBITDA. However, if we value the company at a comparable gas station operator multiple of 12x, the equity could be worth $6 per share.

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About the instructor:

Alex Gates is the Director of Research and Chief Compliance Officer at Clayton Partners LLC. Founded in 2003, Clayton Partners is an opportunistic value investment firm. Clayton manages a private investment partnership and individual separate accounts. We take a private equity approach to investing in the public markets and look to align ourselves with shareholder friendly management teams that focus on long-term value creation. Alex leads our effort to find compelling public and private investment opportunities in sustainable businesses which have a positive impact on climate change. The current focus is on investments in renewable energy, bio-fuels, recycling and water infrastructure. He holds a Masters Degree in Business Economics from the University of California at Santa Barbara. Prior to his graduate education, he completed a dual major BS in Economics and Statistics from Cal Poly State University. At both institutions, Alex concentrated in finance and economic modeling. He earned the Chartered Financial Analyst designation in 2015.

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