Q2 2021 Plug Power Inc Earnings Call
Greetings and welcome to the plug power second quarter 2021 earnings call. At this time, all participants are in a listen only mode.
The question answer session will follow the formal presentation.
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Please note. This conference is being recorded I will now turn the conference over to your host Teal Hoyos director of marketing and communications. Thank you you may begin.
Thank you.
Welcome to the 2021 second quarter update call.
Call will include forward looking statements.
Forward looking statements contain projections of future results of operations or of our financial position and other forward looking information.
We intend these forward looking statements to be covered by the safe Harbor provision for forward looking statements.
And in section 27, 8 of the Securities Act of the 1933 and section 21 E of the Securities Exchange Act of 1934.
We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward looking statements and such statements should not be read of the guarantee of future performance or results.
Such statements are subject to risks and uncertainties that could cause actual results to perform our different differ materially from those the fact as a result of various factors, including but not limited at the risk factors and uncertainties of Bos under item 1.
1 a risk factors in our annual report on form 10-K for the fiscal year ending December 31, 2020, as well as the other reports we file from time to time with the FTC.
These forward looking statements speak only as of the day in which the statements are made and we do not undertake or intend to update any forward looking statements after the call or as a result of new information.
At this point I would like to turn the call over to plug Power's CEO Andy Marsh.
Thank you teal and thank you for everyone for attending our call today.
The quarter quarter had a mixture of successes and challenges.
Second the successes, it's easy to write a wall.
You increased dramatically by over 75% versus the prior year.
Shipment of Dread drive you into news sites the <unk>.
The increase versus the prior year.
We closed the idea of JV with her now targeting of the light commercial markets of vehicles in Europe. This market is expected to be 500000 vehicles in 2030 with over 30% of the market captured by the J D.
We did have some challenges in the quarter associated with hydrogen.
There are 2 major drivers the call.
Cost of Andy our relationship with air products, instead of short term impact from pricing and construction cluster of place Eric Tronic liquid tanks. This is about 2 thirds of the increase of the cost for the quarter.
There also was the crisis with the availability of hydrogen due to of course, Virginia.
The force Majeure was due to a major hydrogen plant going down for 2 months in the South East.
This nuclear disruption impacted the U S hydrogen network 1.
I think it's really important.
We have plug power made sure our customers had hydrogen throughout the sedan.
Let me talk briefly about our near and mid term corrective actions you're track changes here of 1 time event and now won't be duplicated.
Also now not strangle hold by having industrial gas companies.
And any of our customer sites, giving us greater flexibility and making sure we have cost effective hydrogen solutions for our customers.
Second the forest, Virginia for hydrogen was the unprecedented events in July of additional capacity was brought on line buyer of partnered Lindsay over 30 tons per day, which will alleviate future issues just to give people feel this is an increase of over 10% of the U S capacity.
We're also increasing our annual capacity of the October by $3.
5 times, and our Tennessee plant.
Plug power will add an additional 70 turns 1 line in the third quarter 2022, and additional sites online in early 2023.
And just to remind folks we use about 50 tons of hydrogen.
Day at the moment and we've already announced addition of green hydrogen sites.
Rest of the Board of New York, Pennsylvania, Georgia, and Texas.
This week, we broke ground at our George at site and the site, the New York and Texas will be the largest green hydrogen plants in the world.
Some may ask why did we absorb the cost of the force majeure.
We believe the near term protect their customers from the challenges in the market today will pay off in the near term we want our customers to know they can count on hydrogen being available.
More importantly can count on plug power of meeting their needs they will be critical in helping us build up our new plants.
And we have an exciting news coming up in the coming quarters.
<unk>, our gross billing guidance in 2020.1.
$500 million this means we'll be increasing our.
Gross billings by over 50 per cent from our 2020 numbers.
We will close our JV with S. K this quarter as planned.
We're working on the style of details of the relationship.
Both of us are really quite exciting.
And we will also be closing our JV with Oxy arena in the Iberian Peninsula, we plan to build 30 tons of liquid hydrogen capacity with the axion it make us 1 of the largest liquid hydrogen producer in Europe.
We're also targeting bookings of 250, the 500 megawatts of electric <unk> in 2020, 1 with 250 megawatt shipping out of our new Giga factory.
We'll be making announcements in the second and the additional take off agreements for hydrogen plants.
Finally, and this is really important with.
With the Giga factory.
We are utilizing state of the art automated equipment.
New manufacturing processes.
The plane to match, our president capabilities.
And sale and design of fuel cells and <unk>.
<unk>.
And become not only of leader in manufacturing newest devices.
But the global manufacturing leader.
That's why we hired Dave <unk>, who ran the test the Giga factory and the the bad.
We remain.
It's incredibly excited about the future.
We'll be holding our third annual plug power symposium, where the October 14th.
We're moving to a virtual event because of the recent uptick in Covid cases.
You'll not be you'll be able to sign up online next week and we expect to have the in person abandon the spring once the pandemic pandemic recede.
The show up or the.
Facility in Rochester, I would say Andrew yesterday, it's just great.
Finally, we are operating now with 4 general managers, who are of different businesses.
Schmidt of your new markets that includes stationary on road vehicles.
Keith has done a marvelous job closing out the I V of JV.
And as you know Keith has been plug C of O for 7 years.
Only half of them in running out of Electrolyze Your business only work that day or the key for 29 years and read the U S hydrogen business for many many years.
Jose Crespo is the lead has led our sales efforts for 6 years.
Now the head of our material handling business.
Sunday shifts that with the long career in renewable energy is running our energy business.
I'll ask 1 of them to join the call know.
We're focused on building the business and I'm sure the analysts would like to speak with them.
In this quarter I'd ask Sanjay to the.
Join me as well as our CFO Paul Middleton.
We're ready now to take questions.
Thank you at the.
This time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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Our first question comes from Colin Rusch with Oppenheimer. Please proceed with your question.
Thanks, So much that's it you know well done on the the revenue guide higher.
Here, but what I would love to understand and the more details of what's going on with your customers in terms of.
The growth trajectory into 'twenty, 2 and beyond you know what's the.
Sort of foundation of New line at this point and once you point to in terms of customer activity conversion rates.
Her size that would give us some comfort on the code change across the circa hard yeah, So calling us.
As you know we've committed to.
First let me take a step back.
I'm sitting here and it's beginning of August.
And we have the $500 million in house for shipping this year.
That's really unprecedented for.
For next year, we feel incredibly comfortable with the $750 million.
No I expect the Electrolyze your business would be $150 million of that.
I expect material handling.
This year will be.
$457 million.
And we expect that number to go up and continue to grow.
And the energy business, the new markets had.
Great potential.
Before this call Sanjay and I have talked about whether we should be up in guidance for 'twenty 'twenty..2 today. We have this symposium on October 14th and I think you'll see us lay out.
The new plan and.
Some new insight into how the business can be significantly.
Significantly bigger.
In 2020, 'twenty, 1 and 'twenty 'twenty 4 'twenty 'twenty, 2 and 2024.
Okay. Thanks, so much of that and then just the follow up is really around the class 6 truck.
And you know the progress you've made on that in terms of finishing.
Finishing up designs qualification of suppliers.
And your ability to start.
Built into some of those types of departments.
Yeah Colby.
We expect the.
Things are progressing well.
Fortunately, we're not having the in person event, where we're going to have.
Some vehicles there.
Both for the light commercial vehicles in the class 6 the show off.
I've seen the vehicle.
That we've done per our JV.
We're you know we're remaining in line that.
We will do 10 significant pilots next year for on road vehicles, and I think probably more important to them.
We are.
In discussions about the.
The model for heavy duty vehicle trucks and I think.
You know I Didnt mentioned, none of my opening remarks.
I think you'll be a certainly hearing a lot more about that.
In the coming 6 months and certainly at the plug power symposium.
Perfect. Thanks, so much guys.
Good good talking to you Collyn.
Thank you. Our next question comes from P. J do you have a car with Citi. Please proceed with your question.
Yes, hi, good morning, good to be on here of course, [laughter] grit and good day.
The narrow T J.
So we usually do this in the morning, it's wonderful to talk good to talk to you. Andy you know I understand the do you have to absorb some costs hydrogen cost for your customers this quarter, but as you build out of your hydrogen network would you have cost pass throughs built into your future.
Contracts.
I will let Ted Sanjay take that Sanjay I know you run they can do this every day.
Sure I'm happy to do that Andy. Thank you P. J how are you. So so P. J a couple of points right. Our goal is to really think about making green hydrogen as economical that's great heightened churn number 1 number 2 the way we're building the screen hydrogen generation. That's what we're really thinking about how can you tackled the force majeure like this.
So that of any another plant shut down because of the force majeure disruption in the industry is not as big of an event for the entire hydrogen industry as well as for plug power.
Right. So the way we're looking at it our goal is to be as transparent as we can but we're not looking to take the view frankly of being opportunistic if you would for a lack of of better word. If there was the disruption in the industry. This is the time to hike of the price you know deal with situations like that look our goal is to make sure that you know we.
Keep driving the cost and price of hydrogen down so more and more application of opens up right. So that's the approach. We're taking that's how we think about it and really we're not looking to sort of make sure that we're maximizing the profit opportunity of course, we want to make sure. We have the right return profile built into this rate and again 1 of the key things that we have.
Set it in the past we are really looking to make sure that all of end customers get green hydrogen at the same price that they're paying for green hydrogen today and more importantly, we're focusing about really build the ecosystem more apps come on line, where hydrogen becomes more and more of a big hitters and folks unconcerned about having apps like long road.
Of the mile vehicle and things along those lines. That's how we think about this feature.
Great Great Sanjay. Thank you and you know as you get closer to building out your new hydrogen network.
The cost of construction is going up everywhere.
So do you have a good handle on your building costs as well as your green power costs and given all of that used to are you still sticking to your.
The gross margin targets for hydrogen fuel that you highlighted before thank you.
Sanjay you want to take that 1 too.
Sure Andy Happy happy to do that so P. J, let me break that into 2 parts right of course part of the question is the power component of the absolutely yes, right. So that there's no change to that you know if anything we're continuously looking to see.
Where else can we lock in more of a location, where there was an attractive renewable sources as well as expansion potential and which is why we're working with a lot of different partners on that front now you bring up an excellent point, which is commodity prices are up right.
Is the are we concerned about potential the EPC costs being maybe marginally higher than what we thought look there and what are you doing big projects. Like this there is always going to be some pluses and minuses right, but at this point in time given that the biggest component of the cost is the variable cost and that's the luxury like Capex is still a relatively small.
Component when you think about the total cost of 4 kilogram of green hydrogen molecule right. So even if the aware to be some escalation given what's happening to the commodity prices labor prices, we really don't see any changes to what we've talked about from our cost target as well as of March and targets.
Great. Thank you I'll pass along.
Thank you P J.
Thank you. Our next question comes from James West with Evercore ISI. Please proceed with your question.
Hey, good afternoon guys.
Hey, James how are you did the.
Doing well Andy.
So Andy your increased.
Confidence in the get you know raising guidance and then it sounds like the increased confidence in next year as well is that drip.
Driven more by your base the materials handling business as gains more missile momentum or are you getting momentum in some of the other areas you've been targeting like data centers.
Yeah. So.
Let me sort of.
James Yes, yes, yes.
But the.
Yeah, you know, let me just give you a good deal of the.
My increased confidence for next year.
Has to do with the continuous the performance of our material handling business, which you know I think it's probably fair to say.
Will will you.
We will continue to grow with the rates we've seen before.
We know we have now 5 pedestal customers.
Started talking about pedestal customers 2 years ago, we had to.
And now it's Jose Christopher pointed out to me.
We've already hit the number of pedestal customers, we expect in 2020 for this year.
I mean, that's of usually fishman.
The Electrolyze your business.
No I I believe will be at least the $150 million next year.
And just the gave you a feel for that.
I spent the.
7 of 10 days in Europe with all the coal for men and David Bowe, who run out of Electrolyzed Your business and just the new 7 day 10, 7 to 10 days, we booked $30 million worth of business for next year.
So that just gives you a feel and we're working on some rather huge more Roger.
You know 1 of the advantage, we have versus the and James first of all the folks.
We actually have the factory that can make well.
[noise] stacks.
That pace, which is needed for that market. It provides us the unique advantage I think versus the competition.
And no I look at the funnels and no I didn't even touch on the stationary market.
And the stationary market.
We have activities in data centers of course.
The first units will be getting deployed now.
No. What we also found to other markets, which are the first 1 I never really thought about.
It's counterintuitive to me, but we're seeing them.
E vs that folks are having difficulty, bringing the electricity to the grid and.
And we actually probably the next year or just the $25 million to $30 million in business per body stationary products. The power of E V cards core EV the.
Vehicles, which as you know with some ways kind of counterintuitive.
Now our president at present customers in material handling and at the end of this year, we'll be at 165 sites.
Half of hydrogen on site and I can tell you.
Because of some of the issues with siding diesel some of them.
The issues with the when California, there's limits to how long you can run the diesel engines.
We actually see and been talking to our.
5 day customers about.
Deploying stationary power products of backup their building, so and those applications many of their low hanging fruit because we have the hydrogen there.
Right right it makes sense, but the congratulations on that.
Maybe the follow up for me on your Green hydrogen as you bring production.
On line, how should we think about the pace of take off the agreements should those be coming on kind of consistently.
As you start up of the production should we hear about them well before Andrew.
I guess do you think you'll you'll basically of sold most of your hydrogen before it actually comes on line.
Well, Jay I will let you take the Ocwen.
Yeah, So hey, James how are you so great question right.
This is something obviously, we're spending a lot of time on that because the.
Our initial priority was to lock in the sites right renewable sources cost of green hydrogen molecule. That's been our focus right. How do you make sure you get the things done on time on budget stay with the scheduled right now that part of it as Andy mentioned right. It's now becoming a lot more reality, we just broke ground in GA clients when she was.
The which which will actually be the gas plants by the end of this share of the forest Green hydrogen gas plant and then 15 tons of the quick client by the summer of next year. So you know, we obviously have a lot of those discussions going on right and we look forward of providing a lot more update obviously at our upcoming symposium. So the way we're thinking about this is as follows right. Our goal is to really make sure the.
Our customers are getting the benefit of the screen hydrogen number 1 number 2 our goal is to expand more applications. So that the pie becomes bigger we're not looking to go off of the existing pie of the hydrogen March of if you work right. Our goal is to really make sure that the pie gets bigger of for example of James sorry material handling consumes 1 kilograms of hydrogen the day.
If you have class a truck that's gonna consumed 40 kilograms of hydrogen a day. If you have 10000 class 8 trucks youre going to need for hundreds of 500 tons per day of hydrogen capacity. Today, you have 285 tons per day after the liquid hydrogen the merchant capacity in the U S. We're trying to tackle that topic right that issue and not to mention the fact.
The incremental demand of stationary data center opportunity. So you will see us start to get this plants loaded as we go forward as the plants are going to start to come on line by the summer of next year in Q4 of next year Q1 of 2023, and we'll have a lot more of a share over the next quarter of a chip.
Okay got it great. Thanks, Sanjay Thanks, Andy.
Yes James.
Thank you. Our next question comes from Craig Irwin with Roth Capital Partners. Please proceed with your question.
Good evening and thanks for taking my questions.
Good evening, Craig how are you I'm, great I'm, great. Congratulations on the on that really nice revenue guide, it's good to see the traction.
I remember many years ago and Albany, when you were working on the cost out of your systems. He really didn't impeccable job by engineering the product.
And then there was a little bit of the.
Let's just say technology substitution of technology evolution in there as well.
Just to gauge of factory, you're going to be building.
This is this is more of innovation on the manufacturing side not just on the on the technology suites of more holistic approach.
Can you maybe help us understand the potential cost improvement.
On an on stack production out of this facility you know Andy.
Electrolyze of production I should say too.
Are we looking at and very material cost.
Costs down and overall system economics is this something that.
E C is key to unlocking the the the longer term margins of the company.
Greg I think the hitting on the hey, they're going ahead.
And I'm going to say.
No I I brought they've been successful.
2 of them.
You know to automate that factory and helpless.
Significantly drive down costs.
You know when I look at it.
You know the cost of Ami as when I look at the fact that we're moving the metal stand.
Place for our power stacks when I look at it we're changing the whole manufacturing process for how you manufacture of Electrolyzed yours by going from a dry do true from a wet 2 of dry bill.
We see step changes in cost so I think.
4 we are.
We do other work I think you're probably thinking about the low cost sort of typical frac and dropped 20%.
But there's still so much more.
You know we've been here of late in the factory, Greg well 1 of the areas that is you know like kind of open the school and I talked about that are you know.
Improving.
Our manufacturing both of the Giga factory in the lithium.
You know, we're looking at all sorts of tracing system to make sure. We're on top of everything not only will drive down low material cost will make our quality better service better and predictability of better.
You know I I was there the Giga factory yesterday.
<unk>.
Watching the construction process and I think it's going to be a game changer for of course.
Excellent excellent. So my follow up question is around the <unk>.
The heavy duty market right trucks and buses I guess, meaning do you have as well.
There seems to be a misperception out there that this market is several years away.
You know I know you've been you've been talking about this now I guess for close.
Close to 2 years and it's unusual for you to talk about something unless there's a material action.
Can you can you maybe scope out for us I know, you're not ready to talk about individual customer share.
Maintenance on the part of customers kicking the can you can you maybe scope out for us.
Roughly you know how many stacks you supplied for potential customers to evaluate either as engineering bench systems or to build test vehicles or prototypes of.
That would be evaluated to put together business plans are we talking about single digits or is there potentially.
A much wider experience base, that's already been developed.
Yeah.
Craig and I would say the experience is wider.
And look.
We've already built.
We're building vehicles.
The JV.
I mean.
The you know either either.
Yeah.
You look at the Master van product when you look at it it's the real deal.
The.
We do have the.
We try and make sure he phrased it right in.
We do have the.
Well say EBITDA, we use which are based on trials, we have which could expand rather rapidly.
Nichols B on light commercial vehicles.
And as you can see with the AE we.
The activity going on in the bus bus with the you know, which quite honestly I put out of lower priority long term.
Hi.
I expect that.
I expect that.
It will be.
I know I'm, giving a presentation coming up in the next Lauren about everything we're doing with vehicles.
Think I'll be able to answer your questions probably.
Even better than that.
It is of significant activity.
Yeah.
What's really nice about it it's completely criteria of stationary product activity through the line.
Look at our 125 kilowatt module.
It's really a system, it's not just the module and that.
No.
From a density and performance point of view, we think it's the best.
Best in the industry when we look at Toyota the numbers when we look at her days vendors.
We take the well well positioned.
Greg after Oh, the dies down here with the <unk>.
Covid. After this late build of virus goes away and loved the have you come up and kind of show walk the little.
It sounds like fun, Hey, congratulations on the progress.
Thanks, Greg.
Thank you. Our next question comes from Eric Stine with Craig Hallum. Please proceed with your question.
Great. Thanks for taking the questions, it's Aaron spar hull on for Eric.
Hey, Aaron how are you doing good thanks, Andy maybe first on the pedestal customers. You know you kind of touched on it a little bit and congrats on being ahead of the timeline, but with that fifth customer or is that still you know of the thought process of $25 million in the back half and can you just maybe talk a little bit about potential for other auto customers.
And then maybe switching over to Europe, as well you've kind of talked about 3 pending customers. You know can you just give us an update there.
Sure Good question, there and stay well.
It'll be the these the fifth pedestal customers 25.
The second half and we expect to well over 50 for what the for 2022 already.
With sites that have been identified.
No they're targeting.
It really rolled off of around their factories around the world.
In Europe, we're making a big commitment there.
And.
And by the way Youre going to get a scoop here.
The.
We're putting a facility in India in the.
The Dusseldorf, Germany.
There will be.
We have over 50000 square feet to support.
The material handling customers, Inc. In Europe, where will the will do final assembly and do stocking level true Europe because of it.
That's really the target day.
I know that there is oh customers Oh, you know what I've spoken about them before car for which are the sites that have material handling equipment from plug power line carrier Covid.
Covid.
Performed better than others in their network and that's how we usually convince people because they could see they can you move more gauge with less people faster and.
That value proposition is really valuable the.
Activity, we're doing with the <unk>.
It would be somewhere in the 500, the 600 million dollar range, so there's huge huge opportunities and.
We've.
We've really been established.
A strong leadership team there with only half of them in familiar the key.
And David the 2 root for who work in now.
The 2 really.
No exploit the mark it as you know exploits not real big that's the good word really engaged the market we have sales folks across the world.
Mmm, Europe, and the U S as well as working with that's K in South Korea is and you know for use in Asia, we have activity going on in Oceana.
It's really of global sales effort and I think the fact that we can actually put stacks out there.
The remarkable thing about what we've done with the Gigafactory that's.
Drawing the teen people like Dan O'connell and key Schmid is that we have a footprint that can be <unk>.
We transitioned from as Andy talked about from air products to <unk>.
Andy in terms of all of the hydrogen the we're sourcing from our industrial gas company right. That's 1 that was a pretty substantial cost you know transitioning that that really was almost 2 third of the cost of increased hydrogen molecule. In Q2 second thing. We had was 1 of his unprecedented event where a P.
Plant went down for almost 2 months, where we actually had to mobilize out of high pressure tube trailers to support our existing industrial gas partner, but more important to make sure that of any disruption.
That did not happen toward the end customer and any destruction was very very minimal because as you've heard from Andy Many times, we're very customer obsessed companies that is our top priority that is our top focus but guess what that cost us money as well and then on top of that we had to go even ourselves pickup hydrogen from the other location at the higher price. This right. So when you read.
When you look at our Q2 and sort of the margin impact. It was multiple of this factors 1 of the unprecedented event promo of force Majeure perspective, how long. This plan stayed down right and how we'd continued essentially the industry had almost 50 ton of capacity that was disrupted for almost 2 months. That's obviously all of come back online now non.
1 of these is that Linda has added over 30 tonnes of capacity in Texas, which obviously helps the market and you will see a lot of green hydrogen plants come online and the cost numbers that we've talked about that will help the entire industry, obviously out of customer plug power as well. So short answer to your question, Yes, I mean, I think Q2, hopefully mark the bottom here and.
Short of any major force majeure again in the second half of the year, you should really see this trend to improve.
No that's really good to see and the here taking care of the customers.
It was the big priorities. These days right now as you sort of the commercial lines of everything. So that's good to know just 1 more question for me and maybe some of your director for you how far away all of you from green versus Green hydrogen birdie.
I mean, you've you've heard us say the many time right out of the gate. When we will have our horse of liquid hydrogen plant come a lot of come online in summer of 2022, we plan to sell that green hydrogen at the same price that our customers are paying for Greg hydrogen today, and still see pretty meaningful improvement of the margin profile of the way we.
We see at the time called Green hydrogen. It's today, it's not 5 years later, it's not 10 years later, but do you have to keep things in context right. When you talk about hydrogen when we're referring to our green hydrogen at parity with the great hydrogen we're strictly talking about the liquid hydrogen in the market today right. So we're comparing liquid green hydrogen with liquid great hydrogen.
And if you then start to think about green hydrogen for the gaseous hydrogen you have to compare that with the gaseous gray hydrogen so from our viewpoint I think price will continue to go down but the time is here. It's now and our goal is to make sure we make hydrogen the pickup that's green that's cost competitive with great hydrogen out of the gate starting in the middle of 2022.
Keep making the improvements thereafter.
Got it thanks, so much guys appreciate it.
As you know it really all comes down to the feedstock.
And I think the work that Sanjay is the is done to procure.
The term low cost P P as.
Is really the reason that the green.
Green hydrogen will be on parity with green hydrogen.
You know air products and the cost of associated with that that's sort of can you would not repeat itself right. That's 1 the second item here is the look and the we fully expect the price of hydrogen from our you know, we obviously have a very strong relationship with Lindy, where you are working with them on the variety of different things even beyond just the supply of hydrogen right. We do have a partnership do.
And provide them with out of classics vehicle as well as the classic vehicles. So we are obviously in a constant dialogue to see how we can continue to drive the cost of hydrogen down. So that we can continue to propel the growth of multiple of end markets. So that should be an incremental positive as well on top of that our capacity in Tennessee goes from 6.42.10 tons of the.
Day by the end of October that will also help you know from the overall cost perspective, so look direction of of the price will go down 1 big caveat that we cannot handicap at this point in time until our own capacity. It comes on line is is there another force mature as we go into the peak season to support out of the customer and 2.4 of the sure. If there is 1 that could certainly be a day.
The the impact we will be using a lot more of a high pressure to trailer price could be negatively impacted by that once short of something like that you should actually be expect the rationally fewer margin to start to go up and certainly what the meaningfully better as all of our capacity comes on line is there anything you would like to add and.
No I think the I I think that's right I mean.
No.
What we're doing is making sure.
And what we did the last score was maybe share the hydrogen economy.
It will happen soon.
And you know I think that it'll have.
Great incremental Ben if it's Chris and you'll see huge improvements.
And you know 8 you know a kind of going to take a step I have an attic question of policy.
And I think that the.
1 of items people should remember.
When listening tour of discussion today.
We're not even pricing in the.
The 2 opportunities in the U S. The.
The associated with items like the infrastructure Bill.
The infrastructure Bill includes $8 billion per hydrogen clubs.
The generation of hydrogen for natural gas network for generation of hydrogen <unk>.
Generation your replacement of generation of hydrogen to the.
Blending the natural gas networks.
The Andrew vehicles for fueling station.
No company.
In the World is better positioned to take advantage of that large opportunity.
When top of that when you look at a reconciliation.
You were in the United States.
Uhm no there's work going on which we're allowed the tax credit to extend for 10 more years, there's work going on which would suggest of $3 tax credit for green hydrogen the.
These are all the game changers, the make sure that will really be a another accelerant to this hydrogen economy and quite honestly, it's gonna be green, especially with green hydrogen lower cost and Greg.
The world's gonna change much more rapidly and people can imagine.
You're out there at $1.7 billion without any of this exciting work going on in the U S and Europe.
As well as the.
Potential in Asia.
So I think the pie and the opportunity to accelerate this comes to the company even quicker and this hydrogen industry, even quicker is really really important.
It's critical Sanjay get these hydrogen plants online.
From the cost point of view, but also how you make this pie is biggest possible as rapidly as possible.
When the president of United States sitting there, saying he wanted to see 30 per cent of vehicles and 2030 being zero emissions, whether they hit it or not.
Those kind of goes the news kind of the aspirations.
Yes, it's completely in line the plug the powers to the order of vision.
I don't think anybody could be better position.
Yeah.
Oh, that's great to hear maybe just the next 1 on the high via J V and kind of of the strategy as far as you know hydrogen supply in the the French market you know it sounded like the that's yana deals more around kind of industrial and you know on road types of.
Stuff within within Spain, Portugal, what what are the plans for kind of French production of hydrogen for you guys is that something that's on the table here are you planning on kind of supplying from Spain.
Absolutely Kristen, yes, and yes, and yes, I can take the if you look at the high the T V.
Doesn't include.
<unk> general using our Electrolyze years of January hydrogen the customers.
That'll be control of 100 per cent by plug. It in case, you know fueling stations. It includes of course, the vehicle and extra mortgage service and we do believe that the we will be the bell.
Hoping.
Few of <unk>.
She hydrogen generation in France, and throughout Europe over the coming years will be love, Virginia, Elektra Lodgers I would expect the just the announcements of activity in France, but we will be supporting some of the French activity, especially initially with the liquid hydrogen reported.
The in place the back to you on the.
What's really interesting is.
Really huge opportunity there because of the and you're the availability of liquid is not nearly as.
Significant in here here in the states and I think that people are beginning to realize.
Or you know storage capability, just the customer site, you need to have liquid and.
Hey, Jeff how are you.
Good.
So what happened is you know so you know sometime first week of me there was basically of plant outage at 1 of the plan to essentially supplying of 1 of our key industrial gas suppliers right and then that was supposed to be a 2 week event, but essentially they had some additional the mechanical issue where the plan that was suppose.
To come on line did not ended up coming online for additional 2 weeks at the start and stop the ended up having some additional challenges that's really where it went from what was supposed to be of plant outage industry being an allocation towards absolutely uncompleted the unplanned events triggered by some of the addition of mechanical challenges right so that really call.
The so typically what happens yet is the industrial gas customer do have a certain amount of storage on site to deal with situations like this and if it was something that required like for the 2 weeks and you know storage was depleted plant comes on line that you probably wouldn't feel the pressure like of pressure that was felt in the industry.
At that time for the more there was the additional plant that were supposed to come on line and typically in the commissioning phases of this plan, you know plus or -3 or 4 weeks of the things that tends to happen right. So the plant new plant in Texas, you know ended up coming online really by the end of June rather than at the beginning of the Jill right. So we were anticipating that that plant.
Might even come on line a little bit sooner now on top of that you had some other industrial gas customer where they also had additional ramp up issues in terms of their facility.
Even in our Tennessee plant, we had about 18 hour outage because of the feedstock supply got the curtailed by our feedstock supplier of OLED right. So you have all of the trifecta of an event that basically took what was supposed to be something somewhat manageable to an industry event, where you almost had of about 50 tons per day of capacity that was essentially off.
And again looking back now and given the where we are today, we're really looking at the situations not only of that all of that capacity of come on line..1 we're adding capacity in Tennessee to Lindsay the obviously out of this big capacity in the core Texas right. So industry, obviously has a lot more hydrogen to support some of the activity to really weather the storm.
Warm like the 1 that we just feature of it in May June and really some part of July as well. So that's really what happened here John.
Well, thanks for the for that extra color I really appreciate it.
Maybe Sanjay probably more directed at you here too I guess.
But Andy happy to.
The broadly.
Oh not installed it yet.
So.
The I guess Ah if I think of course, and I kind of split that between.
It was sort of the.
The costs associated with the building of the of the plants in Capex.
That are being.
That are weighing of.
John you because you're not producing anything from these are these plant.
If I start to look at the.
Sort of the materially higher cost the.
You're incurring how much do you attribute to sort of the.
Overhead burden that should abate as you start to ramp production and then how much are tied to sort of manufacturing inefficiencies that did you hope to to improve as you go along I'm just.
I'm wondering is it kind of an even split or is it a more of like 70% on the on the Capex burden right now.
So let me let me take that question in 2 parts of it right. So where this is somewhat meaningful today for us is really the expansion of our Tennessee plant right. So we have $6.4 tons of capacity, obviously, we're adding more stores, we're adding more human resources right.
We're obviously spending more in Capex should take that to 10 tons a day right. The today the cost of that molecule is not where we anticipate it to be on a fully loaded plan right, which is really going to have to be about of 10 tons. A day of course, it's at the beginning at 6.4 times, but frankly that is not the biggest contributor in terms of what really hurt our fuel margin.
Or the higher cost of the field in the Q2 right now as you then spend plenty of recognize the 0.2 of them, making as you then start to think about what is the impact to our cost of hydrogen when some of the newer plants come on line. You know you know this pretty well right a lot of that is really going to flow through the capex, it's going to become more about the capex. So the only.
The additional hiring we would do would really be training the plant managers out of our Tennessee facility before the new plant comes online right. So from the higher labor cost perspective, you would not be that meaningful having said that there was 1 thing that we are doing even though this is going to add to the cost from a labor perspective as well as the <unk>.
Could argue that the slightly higher cost of hydrogen in the near term is given what the industry has gone through and given how important it is for us to make sure which is what we have done all along that hydrogen is available all the time 24, 7 and customer we have actually gone ahead and plans. So that we're adding more assets in form of higher pressure.
The 2 of trailer well, adding more liquid tank cars, even before some of these plants come online because we can react if there was another force majeure like this in the month of October or November when our customers are going through the peak season. So that their work is not disrupted now is that an incremental cost of that is going to be.
Flowing through the fuel margin here in Q4, yes, it is but it would still not be as pronounced as what we saw in Q2, you when we're dealing with so many factors at once so that the incremental color I can share with you right now.
That's.
That's really helpful. Hey, if I could squeeze 1 more in I heard today of the new manufacturing process on a catalytic a decomposition of methane.
From.
From the garbage.
Just curious your your thoughts on on that I was I'm familiar with it quite frankly, we're always thought of us as more of R&D, but.
But other commercial companies seem to suggest that it's more.
Closer curious of your thoughts on on that is obviously from a competitive perspective, it would have in power.
You know.
Essentially you're feeling with orange the rate to yeah.
Yeah right good.
Yeah.
Of the delays.
How does the manufacturing plan compared to the original planning and the reason I'm asking is you didn't speak to it but it's pretty apparent the supply constraints are impacting the number of industries.
The perhaps maybe some lead times have been extending the I'm just curious if there's anything that's changed in your manufacturing plan.
In Hudson.
That's a good question Bill and I was.
I was there yesterday with our board.
It is proceeding as planned.
Right.
I think look.
The shift of 126 million in the last quarter and the ship over 150 in the third quarter.
Boy, we've had 2 of them.
You know we've had to really push hard.
And.
And I you know I.
When I was sitting with the team yesterday, we were reviewing the scheduling of activity.
We're on schedule and we're on plan.
The equipment is coming in and you know what for example.
When the key additions of that plan.
Is the metal stamping equipment per our stacks and.
I know we were.
In Europe last week of signing off when the equipment before it was shipped to us so.
No.
Let me just put it this way I think during this crisis.
<unk> management supply chain management has become incredibly.
You have to be at an all day long and.
And intense then.
The team there is doing that I can tell you.
Every day at 830 in the morning.
I go through any supply chain issues and understand.
What we can do to make sure we can support our customers and.
We've been successful and we will continue to be successful of doing it.
Okay. That's great and then if some of the lead into my next my next question a lot of us.
When asked about the hydrogen costa and those things, but unless you actually curious more about.
How we should think a bunch of margin trajectory here in the second half of it in the next year as it relates to more of the systems cost power.
We got close to 20 per cent here on the June quarter, how the how does that progress as we as we move through the year and into next year.
Mr. Paul I'll, let you take that 1.
Thanks, Andy and thanks for the question.
Yeah, I think if you're talking about of equipment in general.
I think routinely over the last few years, we've hit the 35 per cent Mark.
I expect it.
The 2 continue to hit that Mark routinely.
There are ebbs and flows things like the freight impact from in the global supply chain Carol cost impact from the supply chain initiatives put of Covid.
So there's ebbs and flows and then there's also the new product ramps sort of go.
1 on so I expect it to to to get the little stronger with the volume pick up with the volume in the second half.
1 and a half times you know the.
First half and I expect as we move into next year, you know what is going to continue.
Routinely in that 35 per cent plus margin as we move forward.
Thanks for that color.
Okay.
Great and I think we got 1 last 1 here before we have to sign off.
Yes. Our final question comes from Greg Lewis with B P. I G. Please proceed with the question.
Yeah, Hi, Thank you. Thank you for squeezing me in here and I'll just keep it to 1 Andy I wanted to touch a little bit on your comments around the the infrastructure Bill clearly, that's a huge opportunity and kind of looking through it. It looks like you know they are trying to set up a couple of hydrogen hubs look.
Some of that being natural gas focused a little bit been a clean energy focus in a little bit being nucleolar like as you think about like positioning plug the the win that business knowing that hey, you know you're going to do what you're going to do it if you're you know you're not beholden to the government, but as we think about natural gas and not blue hydrogen.
The opportunity just a I mean is that something that.
Plug is going to be targeting or just you know because it's not green hydrogen we're just going to kind of you know.
Stay on the sidelines for a lot of opportunity.
Okay.
You know I think that.
We certainly are very very interested in the apps, that's that'll support that hydrogen.
I.
Fundamentally believe the.
The green hydrogen wins in the end because of cost.
Because of the environmental impact.
And if you if you take a look at the.
It was real good question, Greg If you take a look at for example center of the currently still.
The delta between.
Supports the blue hydrogen vs Green hydrogen is dramatic.
And and quite honestly I think that.
In the house.
The support for and even the body of administration is not all of the committed to carbon capture.
That.
Oh that opportunity the opportunity for US we believe is in green we knew.
No when you speak with people like Amazon and Walmart and home depot, and others, who are targeting net zero, Microsoft you're not going to get there with the carbon capture.
And so you know I know.
My belief is that.
You know if you if you look out.
Now when you look at the cost of renewable energy.
I think carbon capture is going to go the way of coal.
Okay. Thank you for the thoughts.
Okay sounds good.
Well I I really appreciate all of the call 1 of.
Of the questions today and the engagement.
And you do right.
Where have the plug power symposium as I mentioned coming October 4 T.
And not only will we be updating 2024 will be telling you about 2025 and everything we have going on from our energy business 2 of our electric lines of business to new markets like Andrew vehicles and of course.
<unk> business of material material handling I really appreciate everyone, taking the time Tonight and you can register next week. So please register the thank you everyone.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation have a wonderful evening.