Legislation, Subsidies Adding Fuel to Still Overlooked Natural Gas Vehicle Sector

A plethora of media attention has descended on the emerging natural gas cleantech sector since the New Alternative Transportation to Give Americans Solutions (NAS GAS) Act of 2009 (http://themccormickstandard.com/new-alternative-transportation-to-give-americans-solutions-act-of-2009/). Still, natural gas vehicle-related companies (NGVs) are a sometimes overlooked segment of cleantech. There’s even a stock website solely devoted to NGV stocks (http://ngvstocks.com/). NGVs are common in Europe and emerging markets but still relatively unknown in the U.S.

CNBC and stock market pundit Jim Cramer have had their say about the sector ( http://www.cnbc.com/id/36497893/Natural_Gas_Plan_Gaining_Support_in_Congress_Pickens) (http://www.cnbc.com/id/37472995/CNBC_EXCLUSIVE_CNBC_TRANSCRIPT_CNBC_S_JIM_CRAMER_SPEAKS_WITH_T_BOONE_PICKENS_CHAIRMAN_CEO_OF_BP_CAPITAL_TODAY_ON_CNBC_S_MAD_MONEY_W_JIM_CRAMER).

Well-known advocate for NGVs T. Boone Pickens, the Chairman of BP Capital Management, has spent more than $60 million in what is known as the Pickens Plan (http://www.greentechmedia.com/articles/read/t.-boone/). 

Pickens wants to transition 18-wheelers to natural gas and has suggested that AT&T’s fleet is already moving entirely in that direction.  There are about 250 million heavy-duty vehicles in the U.S. Once there are a million or more adopters investors could see light-duty trucks make the same transition. Natural gas is about $1 less a gallon than diesel or gas and is trading as of late October at multi-year low’s near $3.539 per MMBtu (One million British thermal units) (http://www.eia.doe.gov/oog/info/ngw/ngupdate.asp).

There are already excellent natural gas subsidies from the government and upcoming (and very likely to get passed) legislation could increase these incentives for buying a natural gas engine. The order rate could increase dramatically with a corresponding major rise in demand for fleet vehicles and larger trucks. 

Natural gas is clean, inexpensive and abundant. While electric vehicles for small vehicles are here to stay NGVs could be a near term solution for energy efficiency and a cleaner environment for larger vehicles. 

Here is a brief look at some small cap NGV or hybrid-related stocks that could benefit from legislation and/or a move to NGVs:

Seal Beach CA-based Clean Energy Fuels (Nasdaq: CLNE, http://www.cleanenergyfuels.com/) has an $850 million market cap and provides natural gas as an alternative fuel for vehicle fleets in the United States and Canada  through 400 fleet customers and 200 NGAS fueling stations. CLNE is in the fueling station business as well as supplying compressed and liquefied natural gas. The company also produces renewable biomethane, which could be used as vehicle fuel. CLNE also provides natural gas conversions, service, warranty support, and research and development for natural gas vehicles. The stock trades well over 1m shares a day with a 52-week range of $10.95 – $23.70. It currently trades at about $14.

Vancouver-based Westport Innovations (Nasdaq: WPRT, http://www.westport.com/) has nearly a $700 million market cap and makes engines and fuel injection systems that use gaseous fuels, including natural gas for the on-road commercial vehicle sector primarily in North America and Asia. Their targets are heavy- and light-duty vehicles of all types and they also make a direct injection LNG system for heavy-duty trucks and engines fueled with LPG. WPRT also provides alternative fuel engines and relevant parts and kits for use in automobiles and heavy duty trucks.  WPRT stock currently trades around $17, with a 52 week range of $9.23 – $21.34 and volume around 500,000 shares a day.

New York City-based Fuel Systems Solutions (Nasdaq: FSYS, http://www.fuelsystemssolutions.com/), with nearly a $700 million market cap,  is in the business of alternative fuel components and systems which control the pressure and flow of gaseous alternative fuels, such as propane and natural gas used in internal combustion engines. FSYS also provides systems integration support for light- and heavy-duty refueling applications. FSYS supplies its products and systems primarily to automobile manufacturers, taxi companies, transit and shuttle bus companies, and delivery fleets.  The stock has a 52-week range of $24.50 – $52.53 and currently trading near $40 with daily volume of about 350,000 shares.

Chatsworth, CA-based Capstone Turbine (Nasdaq: CPST, http://www.capstoneturbine.com/), with a market cap just under $200 million) is in the hybrid electric vehicle market already and makes turbine generator sets with applications helpful to NGVs.  CPST microturbines are fueled by various sources, including natural gas. It primarily sells its products directly to end users, as well as through distributors in North America, Asia, Europe, and the Russian Federation. CPST stock trades near 2 million shares a day with a 52-week range of $0.62 – $1.45. It is currently trading at about 74 cents.

Last but certainly not least is Irvine, CA-based Quantum Fuel Systems (Nasdaq: QTWW, http://www.qtww.com/). QTWW makes propulsion systems, energy storage technologies, and alternative fuel vehicles engaging in hybrids, alternative fuels, and hydrogen refueling stations and systems providing fast-to-market solutions to support the production of hybrid and plug-in hybrid, hydrogen-powered hybrid, fuel cell, and alternative fuel vehicles (so are well positioned as natural gas becomes more popular to possibly add producst to their business line) as well manufacturing modular and transportable refueling stations. QTTW has strategic alliances with Fisker Automotive, General Motors, Asola, Advanced Lithium Power, Inc.; Power Control and Design, Inc.; and Shigan Quantum Technologies PVT LTD. The stock trades about 700,000 shares daily at a current price of about $.45. Its 52-week range is $0.38 – $1.49. As an aside, QTTW also owns a big chunk of privately-held Fisker Automotive,  which has an impressive plug in hybrid car (http://auto.ocregister.com/2010/10/04/irvines-fisker-automotive-eyes-possible-ipo/43352/). Buying  QTWW is the only way a public-market investor can own part of Fisker until it goes public (which has been rumored).


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