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Clean Energy Fuels Surges on Deal to Supply L.A. County Metro

Clean Energy Fuels wins a five-year contract to supply renewable natural gas for the nation's largest transit bus fleet.

Clean Energy Fuels  (CLNE) - Get Clean Energy Fuels Corp. Report shares rose Monday after the natural gas company said it had signed a multi-year agreement with the Los Angeles County Metropolitan Transportation Authority to supply about 47.5 million gallons of renewable natural gas (RNG) for the nation’s largest transit bus fleet.

Shares of the Newport Beach, Calif. company were surging 34.8% to $17.50 at last check.

Metro awarded Clean Energy three fueling depots for a five-year term, with an option to extend that for up to three additional years. 

Clean Energy already delivers RNG, the first renewable and commercially available vehicle fuel made entirely from organic waste, to five additional L.A. Metro fueling depots under an earlier agreement, the company said.

Clean Energy said its RNG is derived from capturing the biogenic methane produced by the decomposition of organic waste from dairies, landfills and wastewater treatment plants. 

RNG reduces climate-harming greenhouse gas emissions by at least 70% and up to 300% depending on the source of the RNG, making it a potentially negative carbon fuel.

The agreement will mark the completion of L.A. Metro’s five-year goal to transition its diesel fleet to cleaner, low-carbon fuel, Clean Energy said, with 2,400 buses now running on RNG.

L.A. Metro has been retrofitting and replacing its buses with the Cummins-Westport Low NOx CNG engines that reduce smog-forming NOx emissions to 90% lower than the EPA NOx limit.

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NOx is produced from the reaction of nitrogen and oxygen gases in the air during combustion.

The announcement follows the news also on Monday that Westport Fuel Systems  (WPRT) - Get Westport Fuel Systems, Inc. Report agreed to supply natural-gas truck engines to Amazon.com’s  (AMZN) - Get Amazon.com, Inc. Report U.S. truck delivery fleet.

Amazon ordered more than 1,000 engines from a joint venture between Westport Fuel and Cummins  (CMI) - Get Cummins Inc. Report, a natural gas engine parts maker, Reuters reported.

Westport Fuel shares were rising 45.1% to $12.55 on Monday morning.

Craig-Hallum Capital Group LLC analyst Eric Stine raised his price target on Clean Energy to $25 from $12, while maintaining his buy rating. 

He said that Clean Energy Fuels will likely benefit from the Amazon deal, calling the engine order “a substantial positive” for the company.

The order “further magnifies Clean Energy's strategic importance in the market and the value of its station footprint," the analyst said.

Last week, Clean Energy Fuels received an initial rating of outperform with a price target of $17 from Credit Suisse.

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