Robert Brown is a Senior Research Analyst in the equity research
department at Craig-Hallum Capital Group LLC, where he covers
alternative energy and cleantech companies. Mr. Brown holds a B.S. in
aerospace engineering from the University of Minnesota and an MBA from
the University of Minnesota Carlson School of Management. He is a CFA
charterholder.
TWST: Eric, what are some of the specific stimulus projects you
believe will benefit alternative energy companies in the near future?
Mr. Stine: All of the companies under my coverage definitely are
impacted by the stimulus, certainly the size of the stimulus and the
timing of the stimulus. Funding is very noteworthy, specifically for
alternative fuels and vehicles. Funding for the DOE Clean Cities
program probably is the most significant. It's $300 million, which is
allocated to the Clean Cities program with the goal to advance the
number of alternative vehicles on the road. And that includes all
technologies, electric, hybrid, biodiesel, ethanol, but also propane
and natural gas. On Aug. 26 the DOE did make those grants, $300
million for cost-sharing programs that funded 25 projects. A very
significant amount of those projects involved propane and natural gas.
In the past, the Clean Cities program is one that has received
funding, but nowhere near this $300 million level. To me it's a pretty
clear political signal that natural gas and propane are looked at as
part of the answer going forward.
TWST: Eric, what are some of the most interesting infrastructure
buildout projects that will have the biggest impact on the alternative
transportation sector?
Mr. Stine: Certainly, what makes it noteworthy is the amount of
funding and the number of vehicles. But I think maybe overlooked to an
extent are some of the infrastructure aspects and also the involvement
of national fleets. If I had to point out one of the projects, it's
probably the UPS (UPS) Ontario Las Vegas LNG Corridor Expansion
Project. What this will do is connect existing LNG fueling stations in
Southern California to some that are being built in Utah. Specific to
UPS will be a station in Las Vegas in support of their deployment of
48 LNG trucks with additional trucks to follow. Clearly,
infrastructure is something that's been a limiting factor for the
industry and the increased use of CNG, but more so LNG. And so
certainly infrastructure buildout is important. I also think it's
noteworthy that you've got a high profile fleet like UPS. There's
another project, the J.B. Hunt (JBHT) LNG Truck Project, where they're
going to deploy 262 heavy-duty LNG trucks. I think fleet involvement
is very important. It's been an overriding theme in my discussions
with fleets and particularly the smaller-owner operators that in the
short term, they are trying to get through and survive this economic
environment, which has been very difficult in the trucking industry.
But in the long term, they're looking to the large fleets to gauge
where the industry is going. So UPS, J.B. Hunt and you've got Wal-Mart
(WMT), who's testing small numbers of natural gas vehicles. That would
go a long way in the development of the industry.
TWST: Rob, do you expect to see some greater scrutiny of the companies
as they're getting the more public policy support in the form of
stimulus dollars?
Mr. Brown: I don't think you will see greater regulatory limits. But I
do think you will see adjustments to regulations to make them work for
the way the industry is developing. For example, there needs to be
some standardization of the regulatory structures around vehicle
emissions regulation. In some cases there are multiple regulator
authorities that have different requirements, which serves to limit
the ability to roll out alternative fuel vehicles in a cost effective
way.
TWST: Eric, do you share that view?
Mr. Stine: I do share that view, and I would say it's more scrutiny on
Corporate America. As companies have to deal with their carbon
footprint and their emissions, often the easiest way to do that is
through your transportation fleet. So it would be just more regulation
on the end user than on the companies that I cover.
TWST: Eric, with the companies getting increased public policy support
to help speed the adoption of alternative fuels, what else do you
think the companies themselves could do to speed that adoption?
Mr. Stine: Well, one of the things is continually trying to be part of
the legislative process and just further their position. As Rob said,
I agree with streamlining the process on the certification side.
Especially on the light-duty side of the market, getting engine and
alternative fuel systems certified has been very, very difficult.
Until that changes, I think that development of this market is
hindered. Along those lines, I also think trying to continue to
penetrate national fleets is important. Clean Energy (CLNE) and
Westport (WPRT) specifically are working together on a national fleet
sales initiative, where they're targeting 20-plus fleets. These are
some of the largest fleets, ones that we would all know, trying to get
those companies to go past just testing a handful of vehicles, to
increase testing of more vehicles, to get more comfortable with it
from a usage standpoint and maintenance standpoint to further the
industry in that way. Also OEM involvement on the heavy-duty trucking
side is crucial, getting a lot of the OEMs to have natural gas heavy-
duty trucks. I think that goes a long way, and Westport has made quite
a bit of progress on the OEM side.
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