Plug Power starts up large-scale hydrogen plant while reassuring on cash flow

Plug Power starts up large-scale hydrogen plant while reassuring on cash flow.

Plug Power Inc. has started production at what the company is touting as the largest liquid “green” hydrogen facility in the US as it narrows in on a $1.6 billion government loan, executives said on Jan. 23.

Located in Woodbine, Ga., the plant is expected to ramp to its full capacity of 15 tons of liquid hydrogen per day within the next three to four weeks, President and CEO Andy Marsh said on a call with investors. The facility is also the largest proton-exchange membrane (PEM) electrolyzer deployment in the US, according to Plug Power.

Marsh also announced that the company has finalized a term sheet negotiation with the US Department of Energy for a $1.6 billion loan facility.

Andy Marsh, President and CEO, said:

The DOE Loan Programs Office funding would support construction of up to six hydrogen production facilities, “significantly advancing green hydrogen deployment in the United States,”

The business update came two months after Plug Power warned investors that the hydrogen and electrolyzer company could run out of cash, though at the time of the going concern warning, Marsh said the situation was “just a bump on the road.” The company’s shares fell about 40% on the news.

Plug Power’s stock price took another hit on Jan. 18 when the company announced plans to raise capital by selling up to $1 billion in stock “at the market.” If fully executed, the equity raise would provide Plug Power between an estimated six months’ to one year’s worth of operating cash, Morgan Stanley analysts said in a research note last week.

On Jan. 23, Plug Power shares recovered somewhat, increasing by about 18% by midday, following the announcement that the Georgia plant was operational.

The increase also came after CFO Paul Middleton outlined steps the company was taking to improve its cash flow, which in addition to the potential DOE loan and the capital raise announced on Jan. 18, included measures to reduce spending. If finalized, the DOE financing could kick in as early as the third quarter of 2024, Middleton said.

Paul Middleton, CFO, said:

The reason why this particular milestone’s a critical and important one is they’ve completed, by and large, all their technical diligence.

“They’ve done market diligence on the hydrogen market. They’ve done a lot of diligence on Plug.”

The US has sought to incentivize the production of hydrogen as an alternative to fossil fuels by offering tax credits worth up to $3 per kilogram produced. Authorized by the US Inflation Reduction Act of 2022, the program allows for multiple “clean” hydrogen production methods, such as by running zero-carbon power through an electrolyzer.

In December 2023, the US Treasury Department issued draft rules that would place limitations on the use of grid power to produce hydrogen, rendering certain business models ineligible for the subsidies. The proposal was criticized by electrolytic hydrogen producers, including Plug Power, who had lobbied for the option to use existing renewable resources on the grid to qualify for the credits.

Middleton listed the recent Treasury guidance among the “challenges” leading to the company’s current financial situation, noting on the call that the rules were “not as favorable as expected.”

The Biden administration has solicited feedback from industry on the draft rules before finalizing the eligibility requirements for the hydrogen tax credits.

S&P Global Commodity Insights reporter Siri Hedreen produces content for distribution on S&P Capital IQ Pro. S&P Global Commodity Insights is a division of S&P Global Inc.

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Plug Power starts up large-scale hydrogen plant while reassuring on cash flow. source