Q4 2021 Plug Power Inc Earnings Call
Greetings and welcome to plug Power's fourth quarter 2021 earnings conference call.
At this time all participants are in a listening only mode.
A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Teal Hoyos director of marketing.
Thank you.
Welcome to the 2021 fourth quarter update call.
Call will include forward looking statements. These forward looking statements contain projections of our future results of operations or financial position or other forward looking information.
We intend these forward looking statements to be covered by the safe Harbor provisions for forward looking statements contained in section 27, eight other Securities Act of $19 33, and section 21 E of the Securities Exchange Act of $19 34.
We believe 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 or understood as a guarantee of future performance or results.
Such statements are subject to risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including but not limited to risks and uncertainties discussed under item one a risk factors in our annual report on Form 10-K for the fiscal year ending.
December 31 2001.
As well as other reports, we file from time to time with the SEC.
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 this 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.
T O and good afternoon, and thank you for jewelry, our year end conference call.
Before we take questions I'd like to make a few comments about the future.
2021 plug power grew revenue over 50%, despite the constraints of supply chain and the impact of the pandemic.
In 2020 to buckle almost double revenue.
Our position as the first mover in creating the hydrogen economy is our top priority.
We've achieved this position because we have focused on customers like Walmart.
Partnerships like SK, our technologies our products.
And probably what I'm, most proud of foster creative environment for our great staff.
Well, here's our position as a first mover so important.
Because hydrogen and fuel cell or 10 trillion dollar opportunity that will change the energy landscape.
Many large financial institution are predicting that up to 20% of world's energy will come from hydrogen.
It is our belief.
It is our belief to accelerate that transition to a hydrogen economy requires green hydrogen.
Because it is critical for reaching the global climate goals.
And to achieve that goal green hydrogen need to be ubiquitous.
Sometimes I think it's mess that the steps we have taken in the past few years had been to achieve this goal.
Let me reemphasize it needs to be green.
Cause any other solution is a half Steph.
The focus in Green hydrogen is why we're building out the first green hydrogen network in the U S.
We will have over 500 tonnes per day by 2025 and.
And are going to duplicate this network around the world with partners like Gaxiola in Spain.
It's also why we've acquired companies that know how to build hydrogen plants generate hydrogen leveraging electrolyze yours liquid flying hydrogen like our recent acquisition jewel and transporting hydrogen.
We're also leveraging all the learnings from our own years' of experience to make these offerings better.
This journey will continue as we explore partnerships for pipeline and storage.
Plug cannot only plugged can not only provide the green hydrogen but also the apps, we have built more fuel cells and any one else in the world.
Fuel cells that can be used in a variety of applications from powering forklift trucks for home depot for on road vehicles with our JV with Renault stationary products with SK and Youll see more and more apps in the future.
We believe that green hydrogen creates the possibility that the business can continue to double for years and years to come.
We believe the future is now.
Many I've been watching the tragedies unfolding in Ukraine.
This crisis is highlighting the people and nations at autocratic governments can't be the gas stations to the world.
Liberal democracies will be accelerating the energy transition because of this horrible event.
And plug is uniquely positioned to create the future as we can help people companies and governments.
Transition to a carbon free solution not in some distant future, but today.
We can do this because in very simple terms plug create and build real plug products today for this new world.
Pulse on Jay and I are now ready to take your questions.
Thank you.
We will now conduct a question and answer session. If you would like to ask a question. Please press star one on your Touchtone telephone keypad.
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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, while we poll for questions.
Our first question today comes from James West of Evercore ISI. Please proceed with your question.
Hey, Andy how you doing.
Hey, good afternoon James.
Turning to you as well.
So first one for me.
I don't think you announced any new green.
Green H, 2% production facilities.
Already off take agreements.
Yet.
I write about that or should we be expecting some announcements very soon.
That's one of the reasons I have Sanjay here with me let me.
Sorry about that James.
Yeah. Okay. Good. Thanks, good so let me first talk about the plans right. So again as we said.
We plan to have three plants.
Built in 2022, and we said that we're looking to break ground on many more this year right. So that actually gives you basically a network carrier in North America by the end of 2023 in early 2024 and as it relates to actually our off take agreements with its green hydrogen for stuff.
<unk> talked about this a little bit in our shareholder letter our funnel right now the sales funnel for that is about 600 tonnes per day right. It comes from a variety of different market mobility market industrial application and natural gas blending and our goal here as Andy talked about it before is to secure about 200 tonnes per day asked about offtake. So you absolutely should be expecting to hear more.
More about it as we go into Q2 of this year in terms of new announcement and signing of this deals okay. Great Great and then just a follow up for me.
The factory in upstate.
State where does that stand today are we are we rolling out production, what's the production ramp look like.
Dr. <unk> really starts heavy early April James Okay. We have started making some electrolyze your stacks there.
If you go there today.
Not only do you see you see the plate stamping equipment.
We're well well positioned I think in May James I think we'll be inviting you all up there to Rochester to show off the new facility to the analysts and our investors. So we're planning a big day in May to have a real showcase to walk everyone around.
Great looking forward to it thanks, Andy Thanks, Andy.
The next question is from Craig Irwin of Roth Capital Partners. Please proceed with your question.
Hi, good evening and thanks for taking my questions.
So Andy good.
Good afternoon. Good afternoon, Greg Good afternoon. Good afternoon, it's definitely good afternoon and in the northeast that's for sure yes.
Yes. It is so Andy there's a lot of moving parts right now right you've got so many different initiatives.
So many fantastic partners.
<unk> lines.
Just a lot of things to really work through so can you help us prioritize the key drivers of improving margins over the course of 2022. So in your shareholder letter you talked a little bit about some of the some of the changes that have been made on the service side.
To improve the serviceability reliability and economics of service for both plug in your customers.
<unk> got the Giga factory coming online with obviously utilization revenue from.
The electrolyze their business and everything else it's working.
Green hydrogen coming on.
There's a lot of different things that can really.
Move the margins in a positive way how would you rank these different initiatives and which ones do you think will make sort of a higher dollar margin contribution to the company as.
As we exit 'twenty two.
I think by far Craig the top priority for margins is the green hydrogen network, we're building out.
That focus and having 70 tons per day green hydrogen.
We'll have a dramatic impact on our margins.
That will stop.
Start to ramp at the end of 2022 and have had significant impact on 2023.
That will take a business that has negative margins today.
Jay you expect that to be at 30% margin business, absolutely and by the end of 2023, we should be in that position correct.
And then when you think about service.
What I'm really thrilled about was the 5000 units that we put out in the field, which represented our latest technology.
And those units we already have seen at 50% reduction in service costs I think from a dollar point of view it won't be as big as green hydrogen, but it will be significant.
And look scale matters and production facilities matter.
And the <unk>.
Work that we're doing in the production facility, we expect to start seeing continued.
Continual improvement even with this very difficult supply chain.
We brought in I think you know Craig.
A lot of the leadership in light of the leadership, who worked in the Tesla Giga factory in Reno, Nevada, and they've already identified significant cost savings for our products without changing them.
Even in this very very difficult climate, we exist in today.
Excellent. Thank you for that so then as a follow up and again to keep things simple in the context of understanding the levers that are going to drive margins right 70 tons per day exiting 2022, what portion of your total production is that and then what would that be exiting 2020.
Our site production.
Production, but customer demand yourself right.
And.
Is it fair to assume those target margins of 30% or what youll, probably achieving on some of these early green hydrogen sales does that simply mathematically come into the mix.
I'm going to let Sanjay take that since as you know Craig he runs that business every day, yeah. So Craig as you know right I mean, I think once we get to <unk>.
<unk> 70 tons per day, a couple of points to highlight here right. I mean look as you've already pointed out just by looking at our margin here in the near term you can actually extract what kind of pricing we're paying for it and it can also extract what kind of ASP. We have right. We've shared with you all what is going to be that cost of green hydrogen even without force plant and how that cost continuously.
Go down with plant number two plant number three right so without even with a similar pricing of what our customers are paying for gray hydrogen today with our in house production of Green hydrogen, yes, Youre absolutely right you will see that 30% kind of gross margin in that business number one number two things only gets better as you go.
Through 2023, and if you go into 2024, right because we are going to keep adding more production capacity in terms of our internal demand that number is between 40 to 50 tonnes per day right. That's what our demand is so as we get to 70 tons as we get to bigger numbers. This will have multiple effects. One we actually have an opportunity to sell it to.
Additional new customers additional new markets and another thing that also allows us to do is and this is something very important to us and in our opinion very important to the entire hydrogen economy, which is help industry get through all this force majeure challenge is that it often sees right mixture of green hydrogen as economical at big hitters. So.
<unk> North American network gets build that logistics costs will go down cost of our green hydrogen continues to go down and without even changing the pricing structure, we feel very comfortable about the fact that the you should see step change in our margins.
Fantastic Thanks for taking my questions. Thanks, Craig.
The next question is from Colin Rusch of Oppenheimer. Please proceed with your question.
Thanks, so much guys.
Can you give us a sense of the applications for the green hydrogen demand in the 1000 tonnes per day pipeline like what percentage is refining and how much of it is material handling and over the road transportation.
Colin you make it <unk> do a lot of good to hear.
I think the workout man.
Yeah, Let me, let Sanjay take that one thank.
Thank you Andy so so collyn I think when we talk about the 600 tons of sales funnel right call. It about 50, or so opportunities right and look I think in that mix. Obviously, you can imagine that as some of our existing customers that are transitioning from greater green hydrogen, which means it's in material handling which means it's also a new apps like.
Stationery and some of the mobility opportunity right that certainly makes up a pretty important chunk of that then you go forward and then you look at some of the recent announcement, we made with customers like Setara right, where they are actually buying some of our green hydrogen we have 10 tons per day off take agreement with them and that is more for blending purposes, right, where you can actually start to almost like a virtual <unk>.
Gas pipeline, where youre starting to do green hydrogen blending right then beyond that we have a lot of opportunity surrounding the refining industry as well and some of the mainstream industrial application as well right. So it's a pretty broad mix. If you would comment when you really think about it it's not just your traditional transportation market type applications would be.
Final is pretty broad and our goal here is to really get that 600 tend to be more former somewhere around that 200 tonnes per day by the end of the year and Thats what were working towards.
Okay. That's super helpful and then.
All of these products, where youre bidding an electrolyzed your capacity.
Curious what the competitive landscape and how aggressive you guys talked about the fact that Youre actually building, which is a competitive advantage.
Curious how the competition is at this point.
From a from a cost perspective.
The technology performance perspective.
Calm.
Like many businesses.
The first gate with customers or are these people capable of divine designing a system.
It can meet their needs.
And I think in that area. When you think about the hydrogen ecosystem, we've built out.
The kind of companies we acquired.
We walk through that gate.
<unk> cleaner.
Then.
Our competition in most cases.
I think when I look at that.
That's a real differential advantage.
And then the second gate is.
We have a factory.
That can build.
Stacks for Electrolyze yours.
That's a big differential advantage.
I think the combined.
In fact that were experienced that we can build the product.
Bob.
We make decisions.
My first criteria with our sales force and Electrolyze or.
<unk>.
Really a screening the customers and not to be pretentious about it.
We screen and my first question is sales team as always.
Are we working with people, who actually can build a plant.
Understand the basics.
Can they be Kennedy fund their projects.
Do they have a application knowledge of an application where it can be used.
And in many ways the screening process is the other way around.
You take what we're doing with the Ross com over in Egypt.
Youre dealing with people, who really know how to build them.
Lance.
Youre dealing with.
Youre dealing with folks who are well funded.
Youre dealing with folks who have an application green ammonia, which you can you substitute green hydrogen today for great hydrogen.
So the screening process is actually the other way around for plug at the moment.
So I would say.
When you start looking at a $13 billion funnel.
Youre really begin to screen through who really can execute.
Okay. That's super helpful. Thanks, so much.
The next question is from Greg Lewis of <unk>. Please proceed with your question.
Yes, Thank you and good afternoon, everybody Hi, Greg.
Always a pleasure to talk to you.
I would hope I was hoping for a little color.
This morning.
I guess there was an announcement that a company is looking to move forward with the Green hydrogen project in Houston, I believe 100 megawatt project realizing that.
Plug was.
As a first mover.
We're going to be the only supplier of green hydrogen and in the U S. But as we think about that.
Projects like that something the company is actively going after with our integrated solution or is it at this stage in the game. We have a couple of big key customers were looking to supply, obviously in Australia and elsewhere as well as building out.
Your existing hydrogen network in the U S. Just trying to understand if as we see more projects like these these are opportunities for plug.
Okay. So.
So Greg I know that project quite well.
Good to hear.
So.
Hi.
I'm well familiar with it plugs well familiar with it.
Okay.
It's a very interesting project.
Okay.
Yeah.
We're really we know it.
Okay, but so I guess really what I'm trying to understand as we think about your manufacturing capacity across your business lines, you do have excess capacity to kind of.
Be a supplier to some of these new potential wave of projects beyond just what the company is targeting for its own capacity.
That is absolutely correct, Greg and look.
Yeah.
We're looking to increase capacity in ways.
That go.
Go beyond.
Just putting more equipment in.
When you were at this stage of our business.
You can improve.
Capacity by making enhancements to the product.
A lot of work going on with the Electrolyze Your EMEA.
How to improve how to up the power of the same EMEA by 50% and having the same tack time.
So we feel well.
Well position.
With our present factory the other item I'd like to highlight.
Is.
If you go.
Look at that factory.
There is I think today 300, plus pieces of equipment that had been specified.
And had been designed and integrated so that we can take that model and duplicated again.
So.
Feel we have plenty of capacity for 2023.
But we are.
We are Greg looking at.
And one of our items for this year is where do you build the next Giga factory.
Okay Super helpful and they always a pleasure have a great night.
You too.
The next question is from Eric Stine of Craig Hallum. Please proceed with your question.
Hi, everyone. Thanks for taking the questions.
Hey, Eric how are you.
Doing well.
Chad.
So maybe just on materials handling I know you've got the five pedestal customers you mentioned in your in your write up.
<unk> got three near term too in the EU one in North America, just curious how we should think about that.
Those may be playing out in terms of announcements throughout this year and then curious.
As you think about your 2025.
Expectations. Our outlook is there a number you have in mind for the ultimate number of materials handling customers.
Okay.
That's a good question, Eric and let me.
Let me step back from the question and.
And highlight the fact, how important Europe , becoming to plug power.
Europe when you start looking at the pure play hydrogen and fuel cell players.
Plug probably has the largest staff for the second largest staff in Europe .
We have.
The facility in the Netherlands.
I'm about to go to the Grand opening to our facility in Germany in mid March.
We are well positioned in Europe .
And when I look at Europe .
Jose has about five or six customers.
His list.
<unk>.
To reach the level it is tool customers for Europe .
Or who we've been doing business with.
And in the U S. I think the announcement will come first there is.
One customer that.
We're we're.
In final stages of to announce.
Golden Italy.
Now I'd like to think about it like Jose I think.
Jose has outlined for 2030, what we as a business have to do to achieve $4 billion in revenue in that sector.
And that's really our target I think you probably also see as the products become simpler as the hydrogen synthesis systems become simpler.
Probably be more work on channels also and that will become more important for the business.
So I don't know if there is a.
Ultimate number for <unk> customers I think there is a goal for market share that.
We believe penetration rates can be in the 20% level by 2030.
Got you.
That's a good segue actually was curious.
I know years ago, you had acquired a small acquisition, but it was a reformer company and the thought was that.
Essentially how do you expand the market.
Two sites with fewer forklifts.
Just curious given what Youre building out on the green hydrogen side and the cost profile coming down.
Maybe some thoughts about where that process stands and how you see that playing out going forward getting into those smaller sites.
Yes.
Good question, Craig and when I think about it.
And we've been doing some work already.
We are developing.
A 50 kilograms per day system, which is much smaller which looks more like gas delivery.
Which can can be done either through <unk> hydrogen plants.
<unk> through think about Walmart as a depot point and we actually do this today, where we pick up gas at Walmart and May move it to another customer when it makes sense.
What we're designing our smaller systems.
Much lower much lower cost so essentially that.
You'll have a.
A 40 foot.
44.
Container pick it up and drop it off come back three days later for the new container in place.
Which had not to divert but I will a little but it also is very similar to.
How we will maintain units at smaller sites, we have a universal and Jim were calling it that comes out by the end of this year and not only those sites will not require service people, but we will be able to deliver hydrogen.
Take care of any issues that are onsite when we dropped by.
The modules will be able will be picked up and take that taken back through centralized center, if they need any work.
That's really clear and both of those projects are being done and they're really closely linked together will be finished by year's end and we expect to ship.
Probably 1500 to 1000 of our Universal engine by year's end, which reduces both the product cost, but also the service costs.
And Eric if you wanted to call me another time ill be happy to give you more of a detail on that one because.
It is it is interesting.
Yes, no I'll take that at some point.
And I didn't do it justice.
<unk>.
Alright, Thanks, Andy.
Thanks, Eric.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question is from P. J <unk> of Citi. Please proceed with your question.
Yes, good afternoon, Nbn, Sanjay and Paul go ahead.
Afternoon P J.
Hello, My first question is on the IV.
I think the sales should ramp up in that joint venture in 2022.
Our new vehicles do you think you can make this year given sort of this difficult supply chain backdrops and chip shortages.
And it still is about how do you see this JV that thing up.
<unk>.
First let me take a step back and say I am thrilled with the work at the JV.
We have people who are plugged people in France.
Every week I think we have folks from France, who has been coming to plug.
We expect that.
I reviewed it. This morning, we expect that we will be shipping approximately 250 vehicles. This year, probably to a list of about 20 different customers. So.
Of wide variety of customers.
That master band product.
Can be leveraged to deliver goods by people like Amazon and it is a real real attractive offering by.
By 2030, we expect to deliver about 250000 of those units I know that.
It's another facility I think I'm going to a grand opening March 14th 15th deal for a grand opening of the high volume manufacturing facility in France. So.
It is.
It is.
I've been around a long time.
Outside back.
Back at other companies like Lucent it.
Is.
It is a really well run.
Brewery.
Okay.
Very thoughtful product development cycle that we're just we're just really pleased so the master band will be on the road. We will have the people mover that will come by year's end there is work going on with taxes.
There'll be a next generation platform, where there is work going on for two to three years out so.
P J.
I'm really pleased.
And I think 2023 with all the seeding we're doing with customers. This year I think 2023 will continue to grow and ramp.
Alright, Thank you and my second question is maybe for Sanjay.
As you ramp up your hydrogen production.
What kind of investments do you need in logistics like trucks and.
Liquefaction tanks, and all that kind of stuff.
Storage tanks do you have that built out as well.
Great question P J right so.
So let's take a step back right typically how we think about it is like when you talk about a 15 ton plant you need about seven liquid tankers to deliver that hydrogen right that number could go down as the network really gets built out through the U S. Right. So you can actually leverage plans, even better than even one off plans, if you will right and as you.
As you've seen right with the acquisition of applied Cryo now we can build our own tank cars, we can build our own onsite storage. We can do the vaporizer. So it really puts us in a position where we can not only control the delivery timeline. We can also reduce the cost and really think about building it faster and thats totally in our control as a pause.
Our vertical integration strategy and also in Q1 of this year you saw that we made an acquisition of June processing rate that gets us into the liquefaction business. So when you know take a step back and think about our capability in the green hydrogen generation business, we have our own electrolyze. It we're the largest user of it and we're looking to sell it at.
Third parties right, we now have our own liquefaction capabilities, we're using it to ourselves and we believe it will actually rival some of the energy efficiency kilowatt hour per kilogram of electricity users versus some of the better local fires out there in the market out of the gate and we see a path where the energy consumption could even get better as you go.
Forward, that's very important to continue to reduce the cost of green hydrogen and finally from a logistics perspective now we are able to make it all ourselves so really puts us in a very unique position from we buy renewable power and we do everything else if customers looking for gases hydrogen that we can provide that they're looking for components. We can provide that theyre looking for <unk>.
Quit hydrogen we can provide that theyre looking for local fires or the tankers, we can provide that as well. So we feel very very good about the team that has now become a part of plug power and we see a lot of great things coming out of it.
Alright, great work. Thank you.
Thanks P J.
The next question is from Bill Peterson of Jpmorgan. Please proceed with your question.
Yes, hi, good afternoon, and the entire Bill how are you doing today.
Doing great it's been a great day.
First question I have is related to the deal we held an event last week, it's kind of an RFP request for information phase with feedback to you by the end of March.
Section.
<unk> for electric <unk> 13 for hubs.
Look I know you guys are aiming for coverage and most of the country that project's lease. Your first set of projects are ahead of any Hudson arrived, but I guess my first question is and its plug doing anything in terms of engagement or I guess, it's important to kind of steer in that direction and then secondarily what are your expectations, if they're already in terms of benefits.
Some of these.
<unk> things from their bye bye.
Bipartisan infrastructure loss.
So Phil I will say this first if there is a hub in the hubs in the U S F.
Every one of them will use plug power products in my opinion.
We have been deeply involved in all of the hubs that are going on across the country.
But specifically here in New York.
I think if you look there was a press release put out by Senator Schumer.
Right after the RFP came out.
We're centers Schumer highlighted plug power three times in the press release.
That.
<unk> been working very closely with the folks at <unk> and other folks in the northeast.
In thinking through how you make new York the Green hydrogen.
For the country.
So we are actively in fob.
Sitting here Gerry Conway, who is by government as fares first is here with me.
We meet.
They meet daily I mean twice a week with them when they work with the hubs.
My view of the hubs and the successful hub is one that builds the foundation for the future.
I don't view that.
As a single.
Governments.
That allows you to build something.
I view it as how do you build a hydrogen pipeline that many people can put hydrogen and many people can take hydrogen out and thats. How were trying to help folks think through this is that this is not.
A one time 8 billion dollar opportunity. This is an opportunity for places or maybe more across United States that build the foundations for the hydrogen economy that really can help grow not not only our business, but this entire industry.
<unk>.
Okay. Thanks for that second question I guess, it's somewhat related but it's also related to a few other earlier questions. When we think about your sort of merchant business for Electrolyzed ours as well as captive for your green hydrogen production.
I guess, yes, I know you've announced some projects in the U S. But I guess how important is also let's say.
Hello, Hey gained share or or sell outside of your captive business or would you expect these opportunities to address by competitors I guess really holistically. What does your win rate you kind of talked earlier about you being somewhat selective on this but just curious obviously you have Australia in Egypt, and other things overseas, but curious on how you view other hydrogen projects in the U S.
I'd say not your own sort of capital production.
I would say bill.
Our win rate.
The ones that have come to the finish line, it's probably close to 50%.
And I know if you talk to our team they would say higher but probably close to 50%.
We're not.
We want to build make the pie big.
We've been selling.
We're selling to people, who are who could be competitors to sanjay.
We're leveraging our technology.
We believe that a huge pie helps the hydrogen economy.
So we're winning deals and I think we're winning the kind of deals we want.
I think that we haven't spoken much about government policy during this.
Discussion, but.
It could really accelerate here in the United States.
No we've seen previews of the state of the Union Tonight and in the state of the Union the President's going to address.
The need for the climate change legislation, where theres, a $3 tax credit for green hydrogen, which senator Manchin supports.
We think that for the election, there will be a climate Bill and we believe there will be a climate bill thats very very friendly to hydrogen.
That portion of the bill in buy and build back better has not been controversial.
Okay. Thanks for that and good luck.
Thanks Bill.
The next question is from Stephen Byrd of Morgan Stanley . Please proceed with your question Hey.
Hey, good afternoon, thanks for taking my questions.
David how are you today doing great doing great How're you doing.
Good.
Well. Thank you I wanted to explore the U S green hydrogen hub opportunity more I guess as I understand it I mean, obviously the infrastructure build that did pass does include quite a bit of money for these and we could see I guess as many as eight or more of these at these hubs I guess, it's unclear would you mind, just talking a little bit to at least.
As you understand that the process for determining the allocation of these money and.
Just building on what you mentioned earlier I wasn't completely sure how how dependent you felt you were on that money. I mean, you guys are doing so much anyway, but I'm just curious how kind of your work ties into that federal money that's available for hubs.
First I want to make it clear Steven My business plan through 2025 is not dependent upon those hubs.
That being said hubs or agreed opportunity.
If youre asking me a process question as you know the RFID went out I think it's due more chase share the response the RFID.
Pretty general the RFID, there's about 20 questions surety about 20 questions, which are rather should never be I think helpful for the Doe to stored formulating.
We expect the formal RFP Im hearing late May.
And that.
I think you would start seeing awards and directions by the end of the year and it may start out with smaller projects that grow and Thats I think the process thats going on at the moment, Stephen and look we're working closely as I mentioned with all of the folks.
I think there is still quite honestly a lot not known about the process.
<unk>, who can lead to hub is one of those debates and discussions that hasnt been clarified yet, but I think in.
In this or buy is trying to get that clarification from a plug perspective.
See this as additive anything that helps grow see hydrogen economy makes hydrogen more attractive.
Good for plug power, because we have all the capabilities to meet People's needs.
That's helpful. It does sound like a good opportunity and I wanted to also just talk about the <unk>.
Green hydrogen generation network in Europe , you've given some updates in the past the <unk> letter gave some context here, but could you just maybe expand a little bit on your latest thinking on the expansion in the size of the the EU hydrogen network that you mentioned in the <unk> letter as well just any additional color would be.
Greatly appreciate it.
I'm going to give that to <unk> J.
Hey, Stephen how are you great. Thank you.
So again look I think.
Given some of this.
Fortunate events here right I'm sure you've seen what has the LNG price is done in Europe , right. I mean, it's touching the levels, where all of a sudden it high.
<unk> is getting into parity, even before anything else even from a btu content standpoint, right, but look our business plan is not contingent upon what the commodity prices. It does from a short term perspective right. So we've been thinking a lot about it and our focus in Europe really has been the.
Electricity price in Europe , as you very well know right in some location can be very high whether it's renewable or just the standard electricity prices.
That's why the partnership with <unk> is a very important one because in Spain, given the solar resources that you have you can really get a very attractive price ups that solar energy and that's why we're working with them. We have about five sites that we're evaluating.
Honing into two that is going to lead to about two of the <unk> tons per day plant that we're looking to have operation by the end of 2024, that's what the axiom that JV right and we're looking at locations, where you have the right wind resources right, where you can actually have a right from.
From a wind power perspective, and how do you bring that hydrogen into the demand center right. That's another area, where we're spending a lot of time and we're even looking at it we almost think about Steven from a triangle perspective, how do you bring that lowest possible green hydrogen in Europe right. So as a part of our 500 tons by 2025, and then go into <unk>.
By 2028, Europe is absolutely a very important and a big part of that we have said that with <unk>. We want to have about 100 tonnes per day in the medium term and we're working with several other partners and as we sit here right now we can kind of soft circle. If you would visibility on what we might be building over the next several years to about 200 tonnes per.
Okay.
Got it thank you.
I'm just going to have one I would add one item Sanjay.
Is that.
In Europe because of what's happening.
In Ukraine.
I really strongly believe is no.
I was sitting with a natural gas pipeline operator, one of the largest yesterday in New York.
And both of US spent the spend at all time you explain to me how natural gas is we'll get to Europe .
What the real discussion was about this will accelerate the transition.
Europe is.
Not going to want to be dependent.
On Russia for natural gas in the future and all of the focus is on how do you accelerate this climate change goals.
In in sync with also improving national security and hydrogen is one of the solutions.
Super helpful. Thank you very much.
Thanks, Steve.
The next question is from Alex Kania of Wolfe Research. Please proceed with your question.
Great. Thanks.
Hi, how are thinking about hi, there how are you.
Okay.
Good.
I have a question for.
Paul.
His way.
But then given the cash position.
How would the accounting end up working for the investment portfolio as we think about kind of earnings.
Over the course of the year.
Okay.
If you're talking about the cash investments we made in the portfolio, Yes, that's right yes.
Given how volatile thank you Paris, yeah, yeah, well I mean.
The markets that we're in as you probably know the in short term instruments youre not getting a lot of yield anyway. So we're just trying to squeeze what we can out of that.
Some very strange rules that given the particulars of what we have so much cash it's actually a problem for me that limits the amount of cash I can invest in so that's an interesting problem I've ever had before.
But.
Im not im not I don't think thats going to be.
Unfortunately, not a huge contributor because of those limitations, but it's also not a huge impact because of the markets, where theres just not a lot of yields to begin with.
Our focus is really preservation, it's it's the big things that we're investing in where we're going to get the big yield between hydrogen platform and the different acquisitions, we've made in growing those and things like that where our primary focus is on investments. So.
Hopefully that answers your question.
Yeah, great. Thanks.
And then the other one just kind of going back to Europe .
Just trying to think about.
There's certainly a lot more kind of focus on networks there.
From some of the network operators, probably more seriously or in more advanced stages, we're seeing kind of United States. So kind of how do you see.
If you're developing this hydrogen network.
How would you kind of integrate with that and maybe kind of differentiate differentiate yourself versus some of the some of the other peers that are active on kind of pure hydrogen electrolysis or whatever in the continent there.
Sure Fair question right I think the way we're looking at it is obviously Europe . So far has really been mostly a gaseous market right now given I think what we just touched on with what we're trying to do with <unk> is we're actually going to be building two liquid plants out of the gate right. Because we think liquidity is going to have to be a part of the mix, but <unk>.
Really important and a good point, what we're doing here right. Alex is we are working with some of the renewable developers in the right location, where they either have secure the land or they are working on securing the right PPA and I think what ends up happening here and some of those locations right you might actually end up and again Europe actually has a better network as you.
Pointed out even from a hydrogen delivery perspective from a pipeline standpoint, Europe hasnt, mostly of gaseous markets. So the way I think this is such a big market I'm sure there'll be many players that will be successful, but the way we see it we're going to work with the renewable developer in the right location, where we can really secure the lowest possible cost of electricity. That's the first thing right.
It's Denmark, whether it's Spain, whether its even thinking about North Africa, if you what bringing hydrogen via pipeline into the European market and the second piece that you will see here is for the sort of that 100 100 plus mile delivery. It is almost going to be like a last mile liquefaction. If you would and that's the capability, we bring to the table and we will work.
With the right partners on that front trade. So that's basically how we see it so there'll be many players that are going to be successful, but I think given what Andy just touched on that this energy transition is going to have to be even happening faster, becoming even more critical given this recent environment. This market, probably moves very fast and Thats why were being very thoughtful and strategic.
<unk> about who are all the right <unk> that we can work with so that we're actually putting a flag post if you would in terms of really being able to secure this right source of renewable in the right location to serve that market.
Great. Thanks very much.
Thanks, Alex.
The next question is from Amit Dayal of H C. Wainwright. Please proceed with your question.
Thank you good afternoon, everyone.
So good to hear from you.
Thank you, Andy we're getting well.
Just a quick question on the outlook.
For revenues for 2022, what portion of that do you think comes from international markets.
Oh, that's a good question.
I think the international market will be about 25%.
Yes, that's good.
25%.
Okay. Thank you and then as we get into 'twenty three.
All of these partnerships we have in those markets.
Does that portion go to like 30%, 40% or maybe even higher in the next few years.
I think the answer to that question is yes, I think part of it will have to do with that.
Okay.
I think I would say, yes, I would I would think by 2025, you're probably talking 40%.
Okay. Okay. Thank you for that color, Andy and just with respect to the new.
The new units the ones with this advanced technology that you have been deploying is that now the standard units that are going to other customers.
Yes.
Okay got it.
<unk>.
Alright and are you getting.
The higher sales prices for these offerings as well.
Obviously.
Hey, just saving costs on those.
As the price point also supporting the margins.
<unk>.
So I would just say this that.
Yeah.
<unk> discussing pricing strategies on calls like this.
Let me just say that we try to get the best price for the value we create with aircrafts.
Okay understood I'll take my other questions. Thank you.
Sure.
The next question is from Joseph Spak of RBC capital markets. Please proceed with your question.
Thanks, So much I was wondering if you could spend maybe a minute on the.
K E&S JV that was completed this past quarter.
A little bit more maybe on the ambitions, but what are some of the near term goalposts, we should look for in that country or what exactly is each partner contributing.
And maybe also on the capitalization like that SK investment you got.
A while back is that earmarked for the <unk>.
No.
That is plug power has money to spend as plug power pleases Joseph.
Let me take a step back I was actually on a board call for the JV. This morning.
And the JV top priority.
The development of the South Korean market.
With a real focus on stationary.
Products and by this year, we will be shipping stationary products to the JV.
The initial offering.
That will grow and continue to grow through 2024.
The JV also has won some mobility opportunities for buses, which could be about 750.
Jen <unk>.
<unk> per year.
But Korea is the first and main focus there is a good deal of activity.
Going on in South Vietnam, which is another or Vietnam by showing my age and Vietnam and that.
That is another area.
One of the areas that I'm trying to make sure the.
The JV is really focus on because of huge opportunity is putting power on the grid and South Korea in South Korea.
Which could be.
Help us meet our 2025 goals and most of the focus most of the people working on that product.
<unk> and that JV at the moment, we're focused on that product from.
From a capital point of view, Paul I think.
I would probably put the number over the next three years and the $100 million type range.
Yes.
Okay. Thanks, Thanks for all that color and maybe just.
Next question, just really a housekeeping one gigawatt electrifies our backlog target by the end of the year can you just.
Remind us where that stands right now sorry, if I missed that and also is that.
That's captive and external or is that maybe just the break down there and how youre thinking about that.
So all of that's external what we provide sanjay is not part of our numbers I mean <unk> business is a just a transfer.
Within the business itself.
As I mentioned earlier in the call Joseph.
Today at $13 billion funnel for that business, which is.
Rough numbers is probably.
17 to 18 gigawatts of opportunity.
So our ambitions.
As I mentioned earlier in the call.
We're really focused on.
Folks, who we feel can execute that they understand.
Folks who have the money.
And folks who have real applications.
What are the.
Really interesting parts of this market is that there is this huge opportunity to substitute.
The plant were doing in Egypt.
The off take for that Green hydrogen is really.
It is really just.
Sorry, everyone.
They would go to the off to George you asked for that Green hydrogen that offtake is actually the feeder ammonia plant that exists today. They use is great hydrogen and I keep on finding more and more of these opportunities, which I really like where it's easy substitution.
Net debt assures that the revenue and the business model actually works, so that's where a good deal of that bundle with in a good deal of the growth opportunity exists I hope that helped Joseph.
Yeah. Thanks, Thanks for the color so.
Sorry about the phone.
Yes.
The next question is from Tom Curran of Seaport Research Partners. Please proceed with your question.
Good afternoon.
Zero.
Zero in on the on the gross margin ambition to bid this might be another rare one for Paul.
So before services I know that you set a target of reducing costs on a per unit basis by 30% by the end of this year could.
Could you confirm or update that goal of 30% and then now that we are two months into the year with presumably better visibility give us some idea of what the quarterly progression towards that year end level should look like.
Yes, well.
There is multiple initiatives that we're working on.
<unk>.
One the mix of the units that we put in last year, just perform better out of the gate and so youre going to see that element in the mix second is that we've actually we're retrofitting a number of those initiatives back into the fleet that's happening in different stages of different customers have different timelines.
So youre going to see a progression in that regard as well.
The.
The percentage that you quoted is still our target thats what were working towards.
Youre going to see probably more of the benefits starting to really feed and in the second half just because of timing in terms of how it works basically at the end of the day. These initiatives extend the life of these parts extend and caused less touches and so as we make these improvements you start to feel that and what would've been the previous <unk>.
Michael that happened in that second half and onward, right. So thats why youre going to start to see the big benefits in the latter part of this year.
It's going to be a step function change as we continue to.
Make these improvements continue to ship new units with the new technology and and then of course, you've got as we move forward a lot of customers that refresh sites and units and so that helps and provides benefits as well. So you will definitely see.
More progression in the second half towards those goals and then and then more of a step function change next year.
That was a helpful summary, thanks.
Paul and then.
Andy what what does last month's announcement about your strategic collaboration with Atlas Copco on fees tell us about your strategy for <unk> liquefaction plants and equipment do remain open to and expect to stay competitive in bidding on projects, where the customer wants to these arrival of Atlas copco or fees for that.
Political prior components, just trying to parse this out you chose to bring it all in house, but have opted for collaboration when it comes to what those to do and what do you expect your strategy to be for distribution and storage.
Where for example.
A company like Williams.
The midstream.
Company expects to play a role.
Trying to parse where youll be expecting to actually own it or have a piece of it in the vertical integration strategy, and where youll be partnering and if so.
The extent to which that partnering will be exclusive.
So Tom I am going to let Jay answer that question because he worked on that strategic feel with this team.
So Tom again, I think as you know right. One look I mean Atlas is you know obviously from the Turbo Expander standpoint, obviously is a very big player in that market right. The reason to do that is they have the visibility on what our needs are right and we have a visibility from a lead time perspective, right with fees being the fabrication house that has been.
And for such a long time, so what this consortium really brings to the table right is now we obviously have the design capabilities within jewel in terms of making the liquefied with hopefully the best possible energy efficiency now we have a partner in the turbos right compressors, we have a partner in the fabrication right. So when you put that consortium together.
One for our internal use as a cost savings opportunity for us is controlling the channel. It's basically also controlling and making sure that there is no supply chain challenges that is beyond our control that we can manage it ourselves right. So thats what comes to the table and second thing is similar to our Electrolyze a business right look this is a massive market if we have.
Parties and partners that are looking to buy liquefy, our electrolyze. It from US. This consortium, obviously would be able to supply to the third party as well because as Andy said our goal is to basically grow the pie here hydrogen is a massive market green hydrogen or would be a massive industry, we really want to make sure that we're providing to our customers if they want a capital it.
Welcome from US we're prepared to do that if theyre looking for a hydrogen molecule from US. We're also able to supply to them as well. So that's really what that consortium is.
Got it thanks for taking my questions.
Thank you Tom.
The next question is from Amit <unk> of BMO capital markets. Please proceed with your carload Hello, Amit.
Hi, Andy Thanks for squeezing me in.
Real quick for me real quick for me it looked like there was a pretty big sequential increase in R&D and SG&A.
60%, 70%.
The third quarter, and just kind of thinking about how we should think about that for the upcoming year or kind of next quarter or is there some lumpiness associated with that at the end of the year.
Do we think about that going forward, yes, some of that R&D associated with building out the first big stationary plant.
So I do think that there's probably six $7 million I would call cause lumpiness, where it's kind of just R&D material.
To build out to build out the.
The engineering model for the first products, but I think that portion of it Paul yes.
Please go away. We also have as you know, we announced three acquisitions and so there was some legal.
Im legal cost a lot of that work would have been done prior to prior to year end other.
Specialty.
Firms that help us with diligence accounting and things like that that's all in there so definitely some lumpiness.
Thank you.
Rough numbers.
And of that $90 million bucket per quarter is probably a good proxy.
Great that's super helpful and then.
Just going back to that the hydrogen supply business and kind of thinking back from the start of the year.
Obviously some of the force majeure issues that you guys have highlighted kind of throughout the throughout 'twenty one.
But kind of going forward like you guys mentioned kind of prices as well as kind of impacting the margins on that business as we kind of exit 'twenty one.
There are no additional force matures.
Encountered in the second half of 'twenty one.
You guys had mentioned that a couple of times I think just kind of getting out of that force majeure cycle has that been.
Broadly you've incurred a lot.
What drives that besides kind of gas supply related to weather kind of disrupted.
Alright.
Yeah, So Don back right. So a couple of factors in play so when it's strictly relates to our hydrogen molecule costs from our suppliers right natural gas is a pretty big impact to that so the price goes up as a function of increase in that natural gas prices. So you saw some of that in Q right Thats what happens now in terms of the force majeure rate and Thats why.
We think about this is.
Not only supporting plug power customers right. We think the network that we're building is so critical for also the entire hydrogen industry. Because what is often happened is you've had either planned maintenance, where the plant went down for longer than expected, sometimes right. You had a supply curtailment. The feed gas that was supposed to go into some of this hydrogen plants right. So we have had.
To deal with situations last year, where in situations, where a couple of plants that are being down at the same time right. So we've managed through that which is why logistics costs went up to make sure that our customers mission critical application or maintain or supporting that going forward, it's difficult to say that theres not going to be force majeure, but as we go into second half of this year.
And really think about 2023 and as our network is built I think it's going to be very beneficial for the entire hydrogen economy, because we'll be able to step up and really deal with this force majeure and even support some of our suppliers frankly as we have some of this plant come online as well as our customers.
Great. Thanks for that guys.
Thank you I think that is our last call for the day.
And.
I'd like to kind of ended.
Personal remarks ended.
No plug is creating.
The new world today, with our real products.
In the energy transition is going to happen faster than people thought even just a week or two ago.
And I would tell you there is no one in a better position because all the years of experience because of our hydrogen ecosystem. We've built to take advantage of this change.
Net to plug is.
Really looking forward to.
Talking to you more throughout the year. So thank you everyone.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.
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