Date: July 11, 2011
Source: Chesapeake Energy Company
Natural gas developer Chesapeake Energy (Oklahoma City, OK) announced plans to invest $305 million in two clean energy companies -- one that builds liquefied natural gas fueling stations at truck stops -- and another that is developing a refinery to produce fuel from farm crops. Chesapeake said the two deals are part of a $1 billion venture capital fund it is creating to invest in alternatives to gasoline and diesel fuel. Chesapeake said it will invest $150 million in Clean Energy Fuels Corp. (Seal Beach, CA) to help pay for about 150 fueling stations, including many at Pilot-Flying J Travel Centers. Clean Energy was co-founded by Texas oilman and billionaire T. Boone Pickens as Pickens Fuel Corp in 1997 and reincorporated as Clean Energy four years later. It owns, operates or supplies about 224 natural gas fueling stations. In a separate deal, Chesapeake said it paid $155 million for a 50 percent stake in Sundrop Fuels Inc. (Louisville, CO), which plans to begin building a pilot plant to maketransportation fuel from plant fiber and agricultural waste. Sundrop says it has developed technology to speed production of fuel from fiber and that could lead to large-scale production of biofuels in five years.
PRESS RELEASE
July 11, 2011
Chesapeake Energy to Invest $150 Million in Clean Energy
—Investment Is Focused on Building a Network of LNG Truck Fueling Stations
To Form the Backbone of America's Natural Gas Highway—
Conference Call to be held today, July 11 at 4:45 pm
Eastern/1:45 pm Pacific
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).
"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.
Aubrey K. McClendon, Chief Executive Officer of Chesapeake commented, "There is clearly ample demand for the benefits of abundant, affordable and American natural gas among consumers who face the high costs of OPEC oil at the fuel pump every day, especially America's truckers and goods and product shippers. We are investing our capital in Clean Energy to accelerate the delivery of the natural gas fueling infrastructure needed to assure truck operators that they can transition away from high-priced diesel, the cost of which is set by foreign oil, and choose a better road powered by American natural gas."
Many of the LNG fueling stations will be co-located at Pilot-Flying J Travel Centers already serving goods movement trucking across the country. Clean Energy has an agreement with privately held Pilot Travel Centers LLC of Knoxville, Tennessee to build, own and operate public access, compressed and liquefied natural gas fueling facilities at agreed-upon Pilot-Flying J travel centers. Pilot-Flying J is the nation's largest operator of travel centers with over 440 retail properties in more than 40 states.
Littlefair concluded, "Deployment of new and innovative heavy-duty natural gas engines by world-class engine manufacturers and original equipment truck manufacturers such as Cummins-Westport, Kenworth, Peterbilt, Navistar, Freightliner and Caterpillar, combined with Clean Energy's LNG fueling station construction expertise through our NorthStar subsidiary, the strategic locations afforded by Pilot-Flying J and the investment by Chesapeake, should serve to quicken the transition to natural gas fuel as a game-changer for heavy-duty trucking."
Currently priced $1.50—$2.00 per gallon lower than diesel or gasoline (depending upon local markets), the use of natural gas fuels reduces greenhouse gas emissions up to 30% in light-duty vehicles and lowers emissions by approximately 23% in medium to heavy-duty vehicle applications. The U.S. Department of Energy reports that 98% of the natural gas consumed in the U.S. is sourced in the U.S. and Canada, making natural gas a secure North American energy choice.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities. The securities offered and sold in the private placement have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws, and may not be offered or sold in the United States absent registration, or an applicable exemption from registration under the Securities Act and applicable state securities laws.
Conference Call — A conference call will be held today, July 11 at 4:45 pm Eastern/1:45 pm Pacific to discuss these developments. For callers within the U.S., please dial 1-877-407-4018, and for international callers, please dial 1-201-689-8471. A telephone replay will be available approximately two hours after the call concludes through August 7, 2011 by dialing 1.877.870.5176 from the U.S. and 1.858.384.5517 from outside the U.S. The replay pin number is 375465. This call also will be available on the investor relations section of the Company's web site at www.cleanenergyfuels.com
About Chesapeake — Chesapeake Energy Corporation is the second-largest producer of natural gas, a Top 15 producer of oil and natural gas liquids and the most active driller of new wells in the U.S. Headquartered in Oklahoma City, the company's operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the U.S. Chesapeake owns leading positions in the Barnett, Haynesville, Bossier, Marcellus and Pearsall natural gas shale plays and in the Granite Wash, Cleveland, Tonkawa, Mississippian, Bone Spring, Avalon, Wolfcamp, Wolfberry, Eagle Ford, Niobrara, Three Forks/Bakken and Utica unconventional liquids plays. The company has also vertically integrated its operations and owns substantial midstream, compression, drilling and oilfield service assets. Chesapeake's stock is listed on the New York Stock Exchange under the symbol CHK. Further information is available at www.chk.com where Chesapeake routinely posts announcements, updates, events, investor information, presentations and press releases.
About Clean Energy Fuels — Clean Energy (Nasdaq: CLNE) is the largest provider of natural gas fuel for transportation in North America and a global leader in the expanding natural gas vehicle market. It has operations in CNG and LNG vehicle fueling, construction and operation of CNG and LNG fueling stations, biomethane production, vehicle conversion and compressor technology.
Clean Energy fuels over 22,700 vehicles at 238 strategic locations across the United States and Canada with a broad customer base in the refuse, transit, trucking, shuttle, taxi, airport and municipal fleet markets. Clean Energy del Peru, a joint venture, fuels vehicles and provides CNG to commercial customers in Peru. We own (70%) and operate a landfill gas facility in Dallas, Texas, that produces renewable natural gas, or biomethane, for delivery in the nation's gas pipeline network, and we plan to build a second facility in Michigan. We own and operate LNG production plants in Willis, Texas and Boron, Calif. with combined capacity of 260,000 LNG gallons per day and that are designed to expand to 340,000 LNG gallons per day as demand increases. NorthStar, a wholly owned subsidiary, is the recognized leader in LNG/LCNG (liquefied to compressed natural gas) fueling system technologies and station construction and operations. BAF Technologies, Inc., a wholly owned subsidiary, is a leading provider of natural gas vehicle systems and conversions for taxis, vans, pick-up trucks and shuttle buses. IMW Industries, Ltd., a wholly owned subsidiary based in Canada, is a leading supplier of compressed natural gas equipment for vehicle fueling and industrial applications with more than 1,200 installations in 24 countries. www.cleanenergyfuels.com
Forward-Looking Statements — This news release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumptions, including statements about the closing of future tranches of the Chesapeake investment, the number of stations to be included in the natural gas highway system, the timing for the completion of construction of these stations and the demand for and deployment of heavy-duty natural gas vehicles. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including Clean Energy's performance of its obligations under its agreements with Chesapeake, permitting or other delays encountered during the construction of the stations for the natural gas highway system, the performance, availability and price of heavy-duty natural gas vehicles relative to gasoline and diesel vehicles and the price per gallon of natural gas relative to diesel and gasoline. The forward-looking statements made herein speak only as of the date of this press release and, unless otherwise required by law, the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Additionally, Clean Energy's Form 10-Q filed on May 9, 2011 with the SEC (www.sec.gov) contains risk factors which may cause actual results to differ materially from the forward-looking statements contained in this press release.
For more information, contact:
News Media
Bruce Russell, 310/559-4955 x101
brussell@cleanenergyfuels.com.
Investors
Ina McGuinness, 805/427-1372
ina@mcguinnessir.com.
---
PRESS RELEASE
July 11, 2011
Chesapeake Energy Company purchases fifty percent stake in Sundrop Fuels, Inc.
Sundrop Fuels, Inc., a gasification-based drop-in biofuels company, and Chesapeake NG Ventures Corp. (CNGV), a wholly owned subsidiary of Chesapeake Energy Corporation (NYSE:CHK), today announced that they have closed a transaction in which CNGV will invest $155 million, enabling Sundrop Fuels to expand operations and begin construction of a commercial demonstration facility to produce biobased "green gasoline" made from cellulosic material. Additionally, Sundrop Fuels announced that Oak Investment Partners, a current investor, has committed to invest $20 million pro rata with CNGV. The deal closed on July 11, 2011.
Sundrop Fuels uses an ultrahigh-temperature heat transfer process to gasify virtually any cellulosic feedstock into synthesis gas, which is then converted into clean, affordable biobased "green gasoline" and other drop-in transportation biofuels for use in today's automobiles, diesel engines and aircraft via the nation's existing fuels distribution infrastructure. At the core of Sundrop Fuels' intellectual property is its RP Reactor™, a high-efficiency radiant particle technology that is more than 20 times faster than conventional convection gasification methods.
In addition, Sundrop Fuels is able to maximize its synthesis gas production by integrating clean, abundant natural gas with biomass feedstock, facilitating the most efficient utilization of hydrogen from both the biomass and natural gas to produce higher yields than any other biomass process. The combination of Sundrop Fuels technology with the efficient reactor-heating and hydrogen-enrichment properties of natural gas will provide the foundation for massive-scale biorefineries that will dramatically reduce both the nation's dependence on foreign oil and the amount of greenhouse gases released into the atmosphere.
Sundrop Fuels plans to break ground in 2012 on its first commercial-scale integrated biorefinery, which will produce more than 40 million gallons of transportation fuel annually demonstrating its RP Reactor™ technology with ExxonMobil's Methanol-to-Gasoline (MTG) process. The company expects to launch production at its first large-scale, 200-million gallon per year biorefinery in 2016.
The commercial readiness of Sundrop Fuels technology is indicative of Chesapeake's approach to enabling core technologies that address fundamental process and economic issues without taking on massive R&D expenditures. This investment is a key element of Chesapeake's strategy to reduce U.S. dependence on OPEC oil imports by facilitating the production of tank-ready fuels from American natural gas.
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are excited to be a part of bringing this ground-breaking technology to market. The combination of Sundrop Fuels' advanced technology and Chesapeake's proven execution capabilities is a tremendous partnership and represents
an important step in further utilizing America's clean, abundant, affordable natural gas resources to provide realistic and timely solutions to our country's energy needs."
Wayne W. Simmons, Sundrop Fuels Chief Executive Officer, stated, "Sundrop Fuels technology exemplifies the role of clean-burning, hydrogen-rich natural gas coupled with non-food biomass to realize the nation's goals for affordable renewable transportation fuels that are fully compatible with today's engines and distribution infrastructure. Teaming with industry leader Chesapeake will position Sundrop Fuels to make a significant contribution to America's Renewable Fuels Standards by bringing mass quantities of domestically produced, badly-needed advanced biofuels to the competitive market."
Bandel Carano, Managing Partner of Oak Investment Partners, added, "Sundrop Fuels disruptive 'green gasoline' technology based on non-food cellulosic biomass and natural gas feedstocks promises to ensure America's liquid fuels energy security while dramatically reducing the industry's carbon footprint at lowest possible cost per gallon. The Sundrop Fuels and Chesapeake partnership is a compelling model for how an innovative venture-backed clean energy company can scale to meet America's domestic liquid fuels demand with the visionary leadership and strategic commitment of a leading U.S. energy company."
Chesapeake's equity position in Sundrop Fuels will be held by Chesapeake NG Ventures Fund, L.L.C. (CNGV-Fund), a subsidiary of Chesapeake Natural Gas Ventures Corporation (CNGV). CNGV is in-turn a wholly-owned subsidiary of Chesapeake Energy Corporation. CNGV-Fund provides an investment vehicle for Chesapeake's investments in energy-related companies.
Chesapeake Energy Corporation is the second-largest producer of natural gas, a Top 15 producer of oil and natural gas liquids and the most active driller of new wells in the U.S. Headquartered in Oklahoma City, the company's operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the U.S. Chesapeake owns leading positions in the Barnett, Haynesville, Bossier, Marcellus and Pearsall natural gas shale plays and in the Granite Wash, Cleveland, Tonkawa, Mississippian, Bone Spring, Avalon, Wolfcamp, Wolfberry, Eagle Ford, Niobrara, Three Forks/Bakken and Utica unconventional liquids plays. The company has also vertically integrated its operations and owns substantial midstream, compression, drilling and oilfield service assets. Chesapeake's stock is listed on the New York Stock Exchange under the symbol CHK. Further information is available at www.chk.com where Chesapeake routinely postsannouncements, updates, events, investor information, presentations and press releases.
Sundrop Fuels, Inc. is a gasification-based drop-in advanced biofuels company based in Louisville, Colorado. The company uses a proprietary ultrahigh-temperature heat transfer process to gasify virtually any cellulosic feedstock into synthesis gas, which is then converted into clean, affordable drop-in biobased "green gasoline" and other liquid transportation biofuels for use in today's automobiles, diesel engines and aircraft via the nation's existing pipeline infrastructure. Backing for Sundrop Fuels comes from its strategic partner, Chesapeake Energy Company, and by two of the world's premier venture firms, Oak Investment Partners and Kleiner Perkins Caulfield & Byers.
Sundrop Fuels plans to build and operate large-scale biorefineries each generating more than 200 millions of drop-in transportation biofuels annually. For more information visit www.sundropfuels.com.
Oak Investment Partners is a multi-stage venture capital firm with over $9 billion in committed capital. Its primary investment focus is on high-growth opportunities in communications, information technology, clean energy, consumer internet/new media, financial services technology, healthcare services, and retail. Over the past 32 years, Oak has achieved a strong track record as a stage-independent investor funding more than 481 companies at key points in their lifecycle. Oak has been involved in company formation, funded spinouts of operating divisions and technology assets, and provided growth equity to mid- and late-stage private businesses and to public companies through PIPE investments. By building long-term relationships that endure through changing economic cycles, Oak has helped innovators anticipate trends and successfully exploit new business opportunities. Oak's Clean Energy portfolio investments include Aurora Algae, Boston Power, eSolar, GreenVolts, Nexant, NanoH2O, Phononic Devices, Protean Electric and Sundrop Fuels. For more information, visit www.oakvc.com.
For more information, contact:
Sundrop Fuels media and corporate communications
Steven Silvers
Mobile: (303) 596-9960
Email: media@sundropfuels.com.
Sign up to receive our free Weekly News Bulletin