65% of Republic´s new truck buys likely CNG

By Jim Johnson | WRN senior reporter

Feb. 24 -- Republic Services Inc. expects to continue increasing the number of compressed natural-gas-powered trash trucks it operates around the country, a move that ultimately will help lower transportation costs for the nation´s second largest trash company.

The Phoenix-based company, during a recent conference call with securities analysts to discuss 2011 financial results, indicated almost 6% of its fleet of nearly 15,000 vehicles is powered by natural gas.

Republic Services has 826 vehicles operating on either CNG or liquefied natural gas, and plans to purchase about 550 CNG trucks in 2012.

Natural gas trucks, which cost less to operate on a per-mile basis than traditional diesel vehicles, ultimately can have a noticeable impact on costs, Treasurer Edward A. Lang said during the call.

"Right now, it´s marginal," he said, due to the number in the company´s fleet. He indicated the fuel cost impact will be "a growing story over the next several years. But here in the early part of the process, it doesn´t have a measureable impact on the fuel expense."

While CNG trucks are more costly at the onset compared to diesel trucks, natural-gas-powered vehicles save money over time because of lower fuel costs.

CEO Donald W. Slager said the company is not spending any more money on capital expenses than usual while incorporating CNG trucks into its 2012 budget.

"This is just a steady move forward. We´re living within our normal capital spend if you will, very traditional with our Republic philosophy here. We want to keep that cash flow predictable and just live within our means, and we´ll just allocate that cap-ex around maybe more efficiently as we go forward," Slager said.

Lang characterized the CNG savings at around 30% on a per-mile basis once the vehicles are rolling.

Factoring in the infrastructure costs needed to fuel the vehicles, he said the payback period on CNG conversion is about 4.5 years.

Republic Services expects to buy a total of 850 trucks this year, including the 550 CNG units, according to company spokesman Will Flower. That CNG segment represents about 65% of this year´s total buy.

Republic Services´ growing interest in converting portions of its fleet to CNG power means the company expects to have about a third of its fleet running on natural gas within a five years or so, Lang said.

Along with CNG- and LNG-powered units, Republic Services also has about 350 biodiesel-powered trucks on the road, Flower said.

The company, meanwhile, saw profit increase for both the fourth quarter and the entire year in 2011.

Republic Services earned $589.2 million, or $1.56 per diluted share, on revenue of $8.19 billion, in 2011. That compares with net income of $506.5 million, or $1.32 per share, on revenue of $8.11 billion in 2010.

Net income for the fourth quarter was $191 million, or 51 cents per diluted share, on revenue of $2.025 billion. That compares with earnings of $147.6 million, or 38 cents per diluted share, on revenue of $2.021 billion for the last quarter of 2010.

Republic Services beat analysts´ earnings estimates of 45 cents per share before one-time items for the fourth quarter.

Contact Waste & Recycling News senior reporter Jim Johnson at jpjohnson@crain.com or 937-964-1289.

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