Plug Power – In the profit zone with H2 production

Project manager Robert Zalinski presented Plugs products at the new Duisburg site

The plans are huge: three sites are to start production already this year. The first target for the current fiscal year is 70 tonnes of hydrogen per day. This should enable a profit margin of 30 percent. Of this, 40 to 50 tonnes per day are needed for existing activities and 20 to 30 t/day will be brought to market as a tradable commodity, is my expectation. 

Here too the subsidies of the American government for green hydrogen (3 USD tax credit per kgH2) might play a role. The production target is 500 tonnes per day for fiscal year 2025 and 1,000 t/day for 2028. Also Plug’s cooperation (50/50 JV) with the Australian company Fortescue, founded by Australian billionaire Dr. Andrew Forrest, to achieve an electrolysis output of 1 GW sounds huge and may have a very positive effect on Plug’s development, especially since the conditions in Australia, plenty of sun and wind, are perfect. With Forrest, a partner has been gained who gives the topic of hydrogen the highest priority, shows very strong commitment here and meets many superlatives. He wants to become the world’s largest producer of hydrogen. 

HOC

Plug Power is positioning itself to cover the entire hydrogen and fuel cell value chain through strategic acquisitions. For this, the company is developing a number of applications and markets. In addition, Plug plans to make various calls for tender for use of the company’s own electrolysis capacity (from subsidiary Giner EXL) worldwide and thus generate revenue from this as well. Furthermore, the North Americans are working on optimizing and scaling the technology and the entire business model. 

In the material handling area, for example forklifts, Plug is probably getting several more major US and European customers. In 2030, this segment alone is expected to generate a turnover of 4 billion USD. Smaller customers that need less than 50 kgH2/day are also desirable, for which a trailer/containerized solution might make more sense as the H2 fueling station. Initially, Plug sees the international portion of the business as 25 percent, but 30 to 40 percent in the long run, which can be seen in various projects not only in Australia, but also in Spain, Egypt, South Korea (JV with SK Group), France, Holland and Germany. 

HYVIA – Joint venture with Renault 

In 2022, 250 vans are to be delivered to around 20 customers. The number is to be 250,000 in 2030. Among the buyers was named Amazon, but also taxi fleets. Plug’s acquiring of the companies Frames Group, Applied Cryo Technologies (liquefaction of hydrogen) and Joule Processing is certainly expedient, but the time of their integration will tell their true contribution to the business development and corporation. 

Summary: With nearly 2.5 billion USD in the bank (plus 1.2 billion USD of available-for-sale securities), Plug can still bear the weight of its ambitious plans itself. However, the extensive investments in production facilities and acquisitions will cause the capital base to melt away before profits are made, so the transition to the profit zone is likely to take a few more years. One billion USD is considered the investment (liquid asset outflow per year), so it cannot be ruled out that more capital will have to be raised by issuing shares, which, in view of the massive increase in the number of outstanding shares to over 570 million in the last two years, might even be seen as critical.[…]

… Read this article to the end in the latest H2-International

Warning 

Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here. 

Author: Sven Jösting, written March 15th, 2022 

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