America's Natural Gas Highway -- Rendering Of New Clean Energy LNG Truck Fueling Station At Major Travel Center For Trucking On Interstate Highway System. (Photo: Business Wire)

In a major alliance supporting the growing transition by major shippers and trucking operators from diesel to natural gas fuel, Chesapeake Energy Corporation (NYSE:CHK), the nation’s second largest natural gas producer, is investing $150 million in Clean Energy Fuels Corp. (Nasdaq:CLNE), North America’s largest provider of natural gas fuel for transportation. The investment is dedicated to help fund the development of approximately 150 LNG truck fueling stations at strategic truck-stop locations along major trucking corridors to form the backbone of “America’s Natural Gas Highway.” Chesapeake is the sole investor in the transaction, and will make the investment in Clean Energy through its newly formed, wholly owned subsidiary, Chesapeake NG Ventures Corporation (CNGV).

America's Natural Gas Highway -- Rendering of new Clean Energy LNG truck fueling station at major Travel Center for trucking on interstate highway system. (Photo: Business Wire)

“With the advent of new natural gas truck engines well-suited for heavy-duty, over-the-road trucking, it is time to build America’s Natural Gas Highway,” said Andrew J. Littlefair, President and CEO of Clean Energy. “The investment by Chesapeake will help us accelerate the development of this important fueling network.”

“This new initiative is in addition to our growing development program of stations serving local fleets in the refuse, transit, airport, municipal and regional trucking markets around the country,” added Littlefair.

The investment is in the form of convertible debt issued in three tranches of $50 million each that will provide the funding for a newly formed subsidiary of Clean Energy that will be dedicated to the LNG station build out. The first $50 million investment closed today, July 11, 2011, and the second and third tranches are expected to close in June 2012 and June 2013, respectively. The debt carries an interest rate of 7.5% and is convertible at CNGV’s option into Clean Energy’s common stock at a 22.5% premium to the volume-weighted average closing price of the 20-day period prior to the initial closing. In addition, Clean Energy can, under certain circumstances, force conversion of the debt if its common stock is trading at a 40% premium to the conversion price. The entire principal balance of each note is due and payable seven years following its issuance, and Clean Energy may repay each note in cash or shares of its common stock.