DC Velocity - June 2018

16 DC VELOCITY JUNE 2018 www.dcvelocity.com newsworthy

go figure …

500– 1,200 miles The range per refueling stop of the Nikola One hydrogen-electric heavy-duty trucks built by Nikola Corp. Anheuser-Busch, the U.S. unit of Belgian brewer InBev, will buy up to 800 trucks in the largest order yet placed for the model.

SOURCE: COMPANY DATA

Clean Energy Fuels Corp., which operates one of North America’s largest natural gas networks for transport fueling, and French energy giant Total S.A. have signed an agreement under which Total becomes Clean Energy’s largest shareholder and guarantees up to $100 million in payments by Clean Energy to eliminate the price gap between diesel-pow-ered heavy-duty trucks and their more expensive natural gas-powered counterparts.

Paris-based Total will purchase up to 50. 8 million shares of Clean Energy’s common stock for $83.4 million, thus controlling 25 percent of Clean Energy’s common shares. The Total payment guarantee will allow fleets to begin driving natural gas-powered trucks at no increased cost compared with diesel vehicles, the companies said. The program is expected to start in the third quarter and will be available across North America, the companies said.

The program guarantees that fleets will pay 50 cents a gallon less to fill up with natural gas than with diesel, regardless of diesel’s market price, which has been steadily rising since it troughed in February 2016 at a nationwide average price of $1.98 per gallon. As of May 29, the average nationwide price of on-highway diesel stood just below $3.29 per gallon, up 71 cents a gallon from the same period in 2017, according to the Department of Energy’s Energy Information Administration (EIA).

Total and Newport Beach, Calif.-based Clean Energy will work with one or more truck leasing or finance companies that would lease natural gas trucks to large fleets for payments that would be equal to those made for diesel trucks. Fleets will lease the vehicles, and Clean Energy will service the lease portion that is attributable to the so-called incremental cost of the natural gas truck over the diesel truck. Since 2012, the cost differential between diesel and natural gas vehicles has remained at about $40,000 per truck, according to Clean Energy’s estimates. The higher cost is due largely to the expense of building a heavy-duty vehicle powered by natural gas.

At the same time, the fleet operator would enter into an agreement with Clean Energy to purchase a minimum amount of fuel at a discounted price over the lease’s term. Clean Energy will generate the funds to finance the incremental cost payments through the cash flow from the fuel leases. Total’s finance commitment would apply just to the differential costs.

Clean Energy, Total reach accord to fund
difference between diesel, natural gas trucks
Runge estimated that about one-
third of her company’s clients will be
affected by the various changes, and
on average, the new policies will add
about a six-figure equivalent to their
current shipping costs.

The executive who sought anonym-
ity said the audit fee will add insult
to the injury already being meted
out through higher dimensional pric-
ing. The brunt of the pain may be
borne by unsophisticated shippers
who repeatedly use UPS’s website
to book pickups, the executive said.
“Most average shippers won’t think to
put the dimensions in,” the executive
said. “They get the sticker shock later
[from the dimensional pricing]; now,
they will get a $1 surcharge.”
Jerry Hempstead, a long-time par-
cel executive who runs his own firm,
said the changes will amount to lit-
tle if anything for UPS. Regarding
the volumes subject to the higher
handling surcharges, Hempstead
said it involves a “minuscule number
of transactions. And we are talking
about shipments that should never
find their way into the UPS parcel
network.”
Rob Martinez, CEO of consultancy
Shipware LLC, said that only a small
set of UPS customers will feel the pain
of double-digit cost increases. The
average increase for all UPS custom-
ers is just 0.7 percent, Martinez said.

It is believed that Memphis, Tenn.-based FedEx Corp., UPS’s chief rival, has yet to implement similar measures. The two companies often move in lockstep on rate and other pricing actions.