Q3 2024 Plug Power Inc Earnings Call
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Speaker Change: Greetings and welcome to the Plug Power Third Quarter 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
A question and answer session will follow the formal presentation.
Speaker Change: You may be placed into question queue at any time by pressing star 1 on your telephone keypad. We ask that you please limit yourselves to one question and one follow up.
Then return to the conference queue.
Speaker Change: As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Meryl Fritz, Marketing Communications Manager. Please go ahead, Meryl.
Thank you. Welcome to the Plug Power Q3 earnings call.
Speaker Change: This call will include forward-looking statements. These forward-looking statements include, among others, statements of expectations, beliefs, future plans and strategies, anticipated results from operations and developments, and other matters that are not historical facts.
Speaker Change: However, investors are cautioned not to unduly rely on forward-looking statements in such statements.
Speaker Change: should not be read or understood as a guarantee of future performance or results.
Speaker Change: Such statements are based upon the current expectations, estimates, forecasts, and projections as well as the current beliefs and assumptions of management and are subject to significant 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 the risks and uncertainties discussed under Item 1A, Risk Factors, in our annual report on Form 10-K.
Speaker Change: for the fiscal year ending December 31, 2023. Subsequent quarterly reports on Form 10-Q and other reports we file from time to time with the Securities and Exchange Commission.
Speaker Change: These forward-looking statements speak only of day in which these 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. Good morning, everyone, and thank you for joining us today.
Andy Marsh: I'm pleased to share Plug Power's results for the third quarter of 2024 and provide an update on the steps we're taking to reinforce our leadership in the hydrogen economy.
Andy Marsh: 2024 has been a pitiful year, a time of strategic consolidation and focused improvement.
Andy Marsh: Through a disciplined approach to operational efficiency, financial management, and technological advancements, we're building a foundation that positions Plug for strong growth and resilience as we enter 2025.
Andy Marsh: Our focus remains on executing our mission while staying in line with evolving governmental policy that continue to support the hydrogen economy.
Andy Marsh: Plug Power has navigated a dynamic government and affairs landscape over the years to help shape clean energy policy.
Andy Marsh: We played a critical role in advancing legislation like the investment tax credit under the first Trump administration, a key milestone for our industry.
Andy Marsh: We have been deeply engaged in the development of hydrogen policy with the Biden administration. And we do expect that there will be a change in the political climate.
This landscape is not completely clear.
Andy Marsh: A positive indicator is that Politico has reported that the new administration is expected to continue to support hydrogen and nuclear power.
Andy Marsh: For Plug, an important near-term consideration is that we expect guidance on the production tax credit soon, with more favorable terms to accelerate hydrogen projects.
Will.
will be announced prior to year's end.
Andy Marsh: Additionally, we remain on track with the DOE loan process. Taken together, these policies underscore a supportive foundation for the U.S. hydrogen economy.
In Europe, support for hydrogen remains robust.
Andy Marsh: I recently returned from meetings with European partners who are increasingly committed to hydrogen as a pillar of the sustainable energy transition.
Andy Marsh: Returning to our operations, our hydrogen production infrastructure in the U.S. is advancing well.
Andy Marsh: Plants in Georgia and Tennessee, along with our joint venture facility in Louisiana, are critical to building a secure hydrogen network.
Andy Marsh: Louisiana is currently in the commissioning phase and is expected to be fully operational in the first quarter of next year, further strengthening our supply chain as demand for green hydrogen expands.
Andy Marsh: Globally, Plug's leadership in PEM electrolyzer technology continues to set us apart.
Andy Marsh: With 70 megawatts of electrolyzers deployed this quarter alone, Plug is now the largest single deployer of PEM electrolyzers worldwide. Bloomberg recently recognized Plug as the leading provider of green hydrogen solutions outside China.
Andy Marsh: I also want to highlight that in our application business we have stalled, not yet recognized, over eight megawatts of stationary power systems with energy fault. We're seeing new growth and new customers in our material handling business.
Unknown Speaker
Speaker Change: My recent trip to Europe also offered the opportunity to meet with key partners, including GALP, with whom we'll be deploying the world's largest PEM electrolyzer systems starting in April 2025.
Speaker Change: With Iberdola and BP, we're moving forward on a 25-megawatt order at their Castileon refinery, underscoring our ability to deliver at scale in international markets.
Speaker Change: These collaborations, coupled with Plug's 8 gigawatts in basic design and engineering package for the electrolyzer market, reflect the strong demand for advanced hydrogen solutions and Plug Power's essential role in enabling a global energy transition.
Thank you. Thank you. Thank you.
Speaker Change: Egger's been down, but today we announced the $200 million convertible deal with Yorkville Capital.
Speaker Change: Under the terms of this agreement, Yorkville is committed to a long position with a conversion price of $2.90.
Speaker Change: and is restricted from shorting plug stock. Our focus remains on minimizing shareholder dilution by partnering with investors who recognize the company's intrinsic value.
Speaker Change: Additionally, we continue to explore debt financing and the sale of ITC benefits to further reduce future equity-based funding needs.
Q3, we report revenue of $173.7 million.
Speaker Change: driven by strong demand for our solutions, particularly within electrolyzer and hydrogen infrastructure.
Speaker Change: Our gross margins rose by 37% quarter over quarter with gains across our equipment, service, and fuel businesses.
Speaker Change: We've also reduced cash burn by 27% compared to last quarter, demonstrating our disciplined approach to cash management and inventory optimization.
Speaker Change: These improvements highlight our commitment to building a financially resilient company prepared to grow properly in a dynamic environment.
Speaker Change: As we close 2024, we're confident that the foundation we built this year has positioned us for success.
Speaker Change: With a strengthened balance sheet, strategic global expansion, and working to ensure supported government policy, Plug Power is poised to capitalize on new opportunities in the year ahead. Thank you, and I'd like to turn the call over to Paul for a few comments.
Paul: During Q3 of 2024, we saw meaningful deployment and sales into the market for many of our new platforms, which has set the stage for continued sales growth in Q4 of 2024 and 2025 onward.
Speaker Change: In particular is our launch of a broad range of electrolyzer products.
Speaker Change: Q3 represents a major inflection point in ramping the electrolyzer business and recognizing the commercial growth in our results.
Speaker Change: We've continued to optimize the first global green hydrogen plant in Georgia, which combined with the Tennessee facility provides us 25 tons per day of capacity and close to half our current annual hydrogen needs, and we have made great progress on the third facility in Louisiana that will provide us an additional 15 tons per day over the coming months.
Speaker Change: We continue to focus on optimizing the workforce for the company. Given the rapid growth over recent years, we have added a lot of resources, and this year we've worked at optimizing that resource pool.
to maximize leverage.
Speaker Change: Since January 1, we've reduced the global workforce by over 15% through the Q1 restructuring and ongoing attrition where we've not backfilled.
Speaker Change: We've completed many rooftop consolidations and have additional warehouses and facilities we're in the process of consolidating to our two main manufacturing sites in Albany, New York and Rochester, New York.
Speaker Change: We've adjusted pricing across many equipment, fuel, and service platforms for which benefits can be seen in our Q3 results, particularly for fuel and service.
Speaker Change: These pricing impacts will continue to positively benefit results as the year progresses, and we get full periods under these pricing measures.
Speaker Change: We've increased focus on asset levers, particularly targeting inventory. We've made a lot of investment over the last two years to enable successful launch of these new product offerings, and this year the focus is on optimizing these resources, and we expect meaningful reduction near term as sales continue to ramp, which will provide a meaningful source of liquidity.
Speaker Change: Net cash used in operations combined with CapEx is down year over year from lower CapEx and inventory reductions, as well as margin enhancement.
Speaker Change: We expect the cash burn rate to improve even further over the near term as we continue to curtail at CapEx and leverage working capital further.
and drive additional sales and margin growth.
Speaker Change: Turning to Q4 and 2025 we remain laser focused on growing sales and margins improving cash flow.
Speaker Change: Our strategy includes beginning commercial production of our new Louisiana hydrogen plant and further leverage of our Georgia and Tennessee facilities.
Speaker Change: Driving more equipment sales, given our expanded manufacturing capacity, which does not require more investment and provides us an opportunity to readily source three to four times more volumes.
Speaker Change: Continue driving down costs with further force and optimization, completing the targeting roof top consolidations, driving additional leverage on our material vendors, and driving enhanced fuel network efficiency and service cost profiles.
Speaker Change: And lastly, leveraging the price increases and yielding full annual benefits as these continue to expand.
Speaker Change: In terms of liquidity, our unlevered balance sheet provides opportunities for liquidity from a number of different sources.
Speaker Change: First, our restricted cash balance continues to release quarterly at a $50 million rate.
Speaker Change: We've discussed at length the opportunity to leverage inventory. We're targeting additional reduction of $200 to $250 million in the near term.
Speaker Change: Sales growth, price increases, improved mix and continued cost downs will continue to improve operating cash flows.
Speaker Change: And we've been pursuing varied debt facilities and parties interested in equipment findings that we could expand the platform like we established earlier this quarter with Hampton.
Speaker Change: Lastly, we're working closely with the DOE to finalize the $1.7 billion loan facility. We've made tremendous progress, and we meet with them regularly. We're targeting to close in the near term, and we're extremely clear on the access and the process to successfully close this facility. I'll now turn it back to Andy.
Thank you. I think we're ready for questions.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you'd like to be placed into question Q, please press star 1 on your telephone keypad. As a reminder, we ask that you please ask one question, one follow-up, then return to the queue. And once again, that's star 1 to be placed into question Q. If you'd like to remove your question, that's star 2.
Speaker Change: Our first question today is coming from Colin Rush from Oppenheimer. Your line is now live.
Speaker Change: Thanks so much, guys. Just looking at the balance sheet, guys, can you talk a little bit about how quickly you can start monetizing the inventory here for the balance of the year and into the first part of next year?
Speaker Change: Sure, Colin. Good morning. I'm going to turn that over to Paul.
Speaker Change: Yeah, obviously one core tacit of that is sales, and so you see some of that benefit start to be realized with Q3.
Speaker Change: And, you know, based on our guidance, you can anticipate, you know, a much, you know, bigger Q4. So, we're definitely expecting even more benefit in that reduction in Q4 and we're working with the teams.
Speaker Change: To continue that leverage, we have additional reductions in leverage anticipated for the first half of next year. So you should see, you know, continued meaningful reduction in that leverage on that in Q4 and onward.
Speaker Change: Okay, thanks. And then on the restricted cash balances, you know, obviously there's a variety of covenants that I'm sure you guys are working through. Can you just give us a sense of whether any of that restricted cash could loosen up here in the near term, or if that is not a real strategy that you guys are thinking about?
Speaker Change: Yeah, we definitely work in multiple angles on that. And there are, you know, the routine servicing of those facilities, which has our, you know, normal reduction releases. We also have a number of transactions we're closing that will release
Speaker Change: Different pockets of those reserves probably a little bit faster than that, you know, in some cases that 50 per quarter
Speaker Change: But we're also working angles like what we did with Generate a few years ago where we can actually back lever that because it's effectively a deferred receivable. So it's a meaningful asset that, you know, parties like Generate definitely see value in it, and we definitely think there's
Speaker Change: There's opportunities to factor that deferred receivable effectively, similar to what we've done.
Fantastic, guys. Thanks so much.
Speaker Change: Thank you. Next question is from Soumya Jain from UBS. Your line is now live.
Soumya Jain: Hey, guys. Do you see additional price hikes for the rest of the year or in 2025? And I guess, what are we seeing as your path to positive gross margins? What could drive that?
Speaker Change: So I'm going to address price hikes and then I'll let Paul talk about driving to positive margins.
I would say that.
You know, we have had
Significant price increases with many of our customers.
Speaker Change: Some of the legacy deals, especially in the electrolyzer business, are almost completed, and all future deals are being priced at a profitable level.
Speaker Change: You know, I think, you know, a wildcard in price increase is for the future will be, you know, if there is additional inflationary pressure in the U.S. because of tariffs. So we are primarily.
Speaker Change: conscious of aware of if we need to increase pricing because the inflationary
Speaker Change: environment change. But at the moment, I think the work we're doing to make sure we price everything profitably, we work on cost reductions, well positions the company. I'll let Paul add on to that.
Paul: Yeah, I think Andy touched on a real important point that, you know, as you work through the backlog, and you start layering in the new programs that have all been launched, better pricing, material handling, electrolyzers, and other businesses.
Paul: The mix continues to grow and get better and you see more accretion from those events as that happens.
Paul: You know, but if you look at 25 and onward, and we'll be talking a lot about this tomorrow in the symposium, you know, it's it's the fundamentals, it's sales volume, it's driving down material costs, it's
Paul: Continuing to optimize the workforce. It's all the things that we've done really in material handling, you know, and we're now doing in these in these new platforms that, you know, those themes you'll continue to see, you know, continued progression and margin and we expect that.
Speaker Change: We certainly expect you will see that in Q4, and we expect you will continue to see that in Q1 onwards. And Paul, we saw 37% improvement.
Speaker Change: And Q3. Exactly. Yeah. And that's, you know, a combination of volume, price increases, leverage of the PTC, a lot of factors that are working in our, you know, towards our benefit, and you'll see those themes continue into Q4.
Thank you.
Speaker Change: Thank you. Next question today is coming from George Gianarchis from Canada Corp Genuity. Your line is now live.
George Gianarchis: Good morning. Hey, good morning, everyone. Thank you so much for taking my questions. Maybe as a first question, I'd love to ask
George Gianarchis: Do you see opportunities to really grow in other parts of the world?
George Gianarchis: to kind of push the company forward into more into Europe and maybe other parts.
of Asia.
So I'm going to touch on two layers here.
George Gianarchis: Let me talk about U.S. policy, and you probably saw the Politico article about hydrogen nuclear power, SAF. People expect that to continue to have support in the new administration.
George Gianarchis: If you kind of look at the issues, first there are what I'll call the regulation landscape with PTC.
We expected to lighten up before.
President Trump takes office.
But also
when you look at the Loper decision.
George Gianarchis: and you think about what it really says, what the law really says, we expect that...
There could be greater opportunities with the PTC.
George Gianarchis: Oil and gas likes hydrogen, and that has, you know, sometimes been a
disadvantage for plug and sometimes been a benefit to plug.
We know the details and the plan.
George Gianarchis: I think when you look at grants, we had a good deal of grants last year, and most of those contracts, I think the contracts where we are the prime were closed by October 1 for the manufacturing grants. And look, we helped create jobs.
I also think that
George Gianarchis: We are a U.S. manufacturer who's competing against China around the world.
relationships with...
Being American made, building American products, hiring American people.
George Gianarchis: Work no matter what administration you're part of. When I expand the world, if you look at our electrolyzer deployments,
most of the activities happening in Europe and Australia.
George Gianarchis: And, you know, parts of our, you know, we have built for our electrolyzer business worldwide.
George Gianarchis: capabilities with integrators to build our electrolyzer products, as well as you can see easily our stationary products and even our hydrogen infrastructure.
George Gianarchis: that kind of that, you know, whether it's a Biden administration, or whether it is a Trump administration, localization is important.
George Gianarchis: and look most of those those stacks will come from the United States but we really do have a international footprint primarily in Australia you look at the eight gigawatts of basic design and engineering drawings we're working on most of that works in Europe and Australia
George Gianarchis: You know, we've worked with President Bush's administration. We've worked with President Trump's administration. We've worked with Republican Congresses. We've worked with Democratic Congresses. And we will continue to do that.
Thank you. Maybe as a follow-up, can you...
George Gianarchis: possibly share some more details on the convert that you referenced during the call? Sure. Paul, you want to give the breakdown? Sure. And we're working on getting it posted on our website for more information. And hopefully the Edgar system gets up quickly that you'll be able to be public in that form.
It's 24 months at 6% interest rate.
Speaker Change: You know, what's, I think, really equally important is that the fund has a long view on plug and has agreed not to short the stock because they certainly have a very
Speaker Change: Positive Outlook. You can tell from the premium they expect where it's going to go with us.
Over this duration, so
Speaker Change: More details to follow, but those are some of the key details of the deal.
Thank you.
Speaker Change: Thank you. Next question today is coming from Eric Stein from Craig Hallam. Rewind is now live.
Hi, Andy. Hi, Paul.
Speaker Change: Good morning, Eric. Good morning. Hey, so when I look at the fourth quarter guide Seems to me that it's a little wider than than maybe it would typically be just curious. Can you talk to
Speaker Change: kind of what's in there for the low end, what gets you to the high end.
Speaker Change: And then I guess my follow-up would just be, I know you had electrolyzer sales.
Speaker Change: In Q2, which a good portion of those were not recognized, we're in Q3. Just curious how much of that is left and will impact Q4.
So.
Speaker Change: You know, in many ways, Eric, we're moving, now we're doing the
Speaker Change: For the electrolyzer products, most of that's been recognized from Q2. There may be some final commissioning activity which may represent about...
Speaker Change: 15% yes and maybe one deal that maybe hasn't been most of that's been recognized
Speaker Change: And Eric, we expect that the electrolyzer business will be higher in the fourth quarter.
Just because we're now
Speaker Change: doing the integration and commissioning of most products which were manufactured in the third quarter and being shipped.
Speaker Change: So that's so when you take a step back about what we expect in the fourth quarter
Speaker Change: I think three items come to mind. One is that the liquefier world is a 1-0 world. And in a 1-0 world we
We don't really
Yeah.
Speaker Change: Know for you know the probability of an event happening is either 40 millions or zero million so that kind of drives a certain range in that business.
Speaker Change: The second item that I, you know, if you really look at it, you know, the electrolyzer.
Speaker Change: funnel was strong, but as we learn to, you know, how we go about recognizing revenue as we get into the second quarter, you know, that, you know,
Speaker Change: is not as large as we thought, even though the activity associated with preparing for the first quarter of 2025 is pretty large.
Speaker Change: We expect, again, you know, the electrolyzer business to continue to grow. And in the apps business, look,
Speaker Change: material handling is improving when I look at look at what we have coming in the fourth quarter and we expect that we'll be on that 20-30% growth path come 2025. That's kind of a summary of what I see Eric.
All right, that's very helpful. Thanks a lot.
Speaker Change: Thank you. Next question is coming from Bill Peterson from JPMorgan. Your line is now live. Morning, Bill.
Bill Peterson: Hey, good morning, Andy and team. Thanks for providing all the details here. Maybe following on the question on the range of outcomes, I guess, within your base case and assuming mix.
Bill Peterson: How should we think about the exit rate of gross margin?
Bill Peterson: you know, in the fourth quarter and, you know, maybe also taking account of any sort of cost reductions you're able to provide. And then specifically, how should we think about gross margins in your fuel business?
Go ahead, Paul.
Paul: Yeah, appreciate that. So tomorrow, we'll be given a lot more detail bill on you know, kind of what we see for 25 and onward and give you more color but specific to Q4, I would say this, you know,
Paul: We definitely, as you can tell, expect more sales volume. That helps a lot. We have, you know, we have
Paul: A lot of capacity and leveraging that will drive better product margins and
You know, as we continue to ramp that up.
Paul: I think, you know, I wouldn't be surprised if it wouldn't be directionally consistent with the kind of improvement you're seeing from Q4, I'm sorry, from Q3.
Paul: to Q2, in terms of directional improvement, you know, quarter over quarter, could be better on the upper end of that guidance. And specific to fuel, you know, you can see in the numbers that we've disclosed that it's
Paul: It's continuing to progress in the right direction. So we still have an opportunity to leverage.
Paul: Even more out of our facilities that we have and and we're also looking at
Paul: mix opportunities where we can even sell more into the direct merchant market, even better pricing. So we're looking and we're driving even enhanced efficiency measures. And so
Meaningfully, and to four and then onwards.
Speaker Change: Yeah, thanks for that, Paul. And then I might have missed it, but I guess, to the extent that you can speak to it, how much is left to be done on the DOE loan closing conditions? Is there any sort of long poles, I guess, in particular for Texas? It seems like Neuquen's going well, but...
Speaker Change: Or maybe on the capital side, is there any additional capital on top of what you just announced today as a DOE looking at, you know, further contingency or reserve requirements? Just trying to get a sense of what is remaining to be done and what timing you're thinking as of now.
Speaker Change: I know I'm going to let Paul talk about a process, you know, process we have going on looking for equity partners, but that is not tied to the DOE loan.
Speaker Change: And I know everybody would like me to provide detail by detail. All I can say to you is that we know, we don't see any tall pole in the tent.
Speaker Change: We know how to execute against it. We've worked with the DOE on making sure there's a clear schedule of events, and certainly the election in some ways helped.
to structure a schedule that allows us to get there.
Speaker Change: I'll let Paul talk about the process that we're not dependent upon it, but the process we're using to look to bring in an equity investor also to sit side by side with us at the project level.
Speaker Change: Yeah, we've kicked off. I think we've talked about a parallel process that looking at strategic and project finance funds and others.
Speaker Change: could be interested in participating in the capital stack for our pipeline. That's going very well. We've had a number of partners express
Speaker Change: Express interest and we're engaging in those dialogues actually some of those partners will be at our symposium tomorrow
Speaker Change: to learn more about the company and learn more about what we're doing there. So, I would say, you know, the theme is that they look at the commercial proposition of what we're doing in Georgia and what we're forecasting to do out of Texas, and that's very attractive.
In addition to
Speaker Change: You know, the fact that the DOE is postured with this facility to
Speaker Change: Provide incredibly low cost capital for the majority of that pipeline so that those factors in addition to the success of us Executing on delivering on Georgia all bode well
Speaker Change: and is what's driving a lot of interest in this to move forward. So, I'm very encouraged and, you know, we're working hard at bringing all those things to fruition and, you know, more to come in the near term.
Andy Marsh: Thanks Andy and Paul look forward to seeing you tomorrow. Great looking forward to it Bill.
Speaker Change: Thank you. Next question is coming from Craig Irwin from Ross Capital, Ross Capital Partners, your line is now live. Thank you. Good morning guys. Hey. Good morning, Craig. Hey, Andy.
So,
Speaker Change: You know, I'm going to ask the tough question because I know a lot of the investors out there are really, really looking at it from the standpoint. And I guess it's best to answer these questions in public when we can, right?
Speaker Change: So, in the event that we do not see the DOE loan funded, how much flexibility do you have to sort of restructure the operations?
and Elizabeth E. Parker.
Speaker Change: What do you feel about the flexibility to take a slightly different path than what you've already laid out for us?
Craig.
We've obviously looked at different roadmaps.
And...
Out!
whether Texas is online or not.
is not a
Going to impact our financials.
I can say that...
There are European funds.
people who I worked with for a long time.
Speaker Change: Who would be interested in being joint equity providers in Texas with us? And look, if you look at Texas, we have the equipment already. It's essentially building out the plant.
Speaker Change: from a project point of view would be much better to have.
The DOE loan.
but there would just be an increased effort and activity.
Speaker Change: to bring in an equity partner if Texas doesn't happen and look it doesn't
dramatically changed the next two years.
Speaker Change: I think if you take a step back and look where the business growth was this quarter, if I look at over the last 18 months, you know, I've been in Europe for 10 years and I doubled the number of installations in Europe for material handling in the last 18 months.
Speaker Change: If you look at most of the electrolyzer revenue, it's flowing from international activity.
Speaker Change: If you look at the growth possibilities, much of it is outside the U.S. and much of it is planned outside the U.S.
Speaker Change: And, you know, I mentioned on the call earlier, I don't think anyone has the integration capability that Plug has established through our acquisition of.
folks in the oil and gas industry.
We have.
Top-notch integrators in Vietnam
Speaker Change: We have top-notch integrators in Dubai. We have top-notch integrators in Europe.
So, you know.
Speaker Change: I think that the pivot will probably have more of an international flavor if the U.S. policy, you know,
is more negative than we expect.
Speaker Change: I think I mentioned on the call too, the Trump administration.
Speaker Change: was helpful the first time around. I think the overturned Chevron is certainly helpful. So I guess
Speaker Change: You know, been watching elections since 1968 when I was a young kid. And, you know, it's...
How
Speaker Change: How life plays out is usually in America, things tend towards the middle.
Speaker Change: I would definitely agree with that. Thank you. So my next question, you know, if we look back in history, a plug, right, to your success, your early success with Walmart.
You would never have been able to have the tremendous
Speaker Change: Success. Tens of thousands of forklifts operating every day unless you are able to save your customers money with these products. Deliver reliably in a more environmentally sound package and save them money.
Speaker Change: Now, in the last several years, we've looked at different pieces of the business model and you've invested a lot of capital in some of these opportunities.
Speaker Change: to save your customers money in things like electrolyzers, in things like, you know, heavy transport trucking, and some of these other applications that we've talked about, you know, on and off in this last 10 years.
Speaker Change: Okay, I've let my buddy Sanjay not have to speak during this call. I'm going to give him an opportunity to speak up
Sanjay: All I can say is, I'm going to touch on electrolyzers and I will let you expound, I mean, to me electrolyzers is all about efficiency of the stacks and construction costs.
Sanjay: and the Price of Electricity. So I'll let you run on this one, Sanjay. So, Craig, I think your question is the right one, right? There's many instances where we're working on some pretty large mega-deals, as Andy referred to, on our 8 gigawatt of basic engineering design packet, and the electrolyzer offering is in pretty large scale. And by the way, we're being able to talk and have a very healthy discussion with some of this customer because it's basically…
Sanjay: For a lot of different kind of, you know, different kind of hydrogen derivatives, if you would, sort of like things like e-fuels, ammonia, where electrolyzer combined with right source of power combined with right efficiency, yes, does allow them to provide a very, very attractive economic value proposition, right? That's item number one. Item number two is when you you touched on this a little bit, but let me elaborate on this a bit.
Sanjay: So when you talk about sort of the heavy duty mobility market, you know, we have actually introduced this mobile refueler product, which is a perfect solution because the entire infrastructure of hydrogen fueling actually gets built, right. So you know, it's almost like hydrogen wheels, if you would. And that's a product that allows them to do a lot of testing faster, allows them to really roll out a lot more vehicle faster, even before the entire infrastructure kind of comes into play. Right. So when we're thinking about our liquefier business, while it's been slower, we haven't lost any opportunity, really, it's just that project haven't moved faster. And even with that offering, we have one of the best energy efficiency solution in the market. So even from that perspective, as you go from gaseous hydrogen to liquid hydrogen, we're
Speaker Change: really providing a better economic value proposition for our customer, right? And Craig, one final thing that I think we'll be able to do here, where we kind of think of this as like a facility sales where by providing a combination of our electrolyzer, our liquefaction technology, our, you know, hydrogen fueling solution, whether it's hydrogen trucks or the storage, you know, by giving all that entire offering as an enterprise sales and a facility sales, we can do a lot of optimization from a design standpoint, really continue to drive the cost and increase economics and benefit for our customer, right? So I think there's a lot of situation where it's really cost savings and a better value proposition for our customer, and that's what's going to drive the growth for us.
Speaker Change: Excellent. The last question, if I may, you know, there's been some really interesting things that have come across.
Speaker Change: My desk in the in the last 25 years, right? So green hydrogen is Interesting and you know, it looks like it could be a phenomenal business over the next number of years
Speaker Change: It's something that probably has a much longer gestation period is the use of small nuclear reactors for direct production of hydrogen.
Speaker Change: Now you guys get approached by pretty much everybody in the market since you are the market leader. Do you see any potential breakthrough hydrogen production technologies that could be available in the next decade that could bring down the cost of energy production by an order of magnitude?
The End
So that's a
Speaker Change: Interesting question. I'm going to let Sanjay take a shot at it and maybe I will add on when you get done, Sanjay.
Sanjay: So Craig, when you start to think very further out, if you would, right?
Speaker Change: So when we start to, you know, even before I come to your small modular reactor question, obviously, that's become a bit of a topic du jour here in the near term, right? You know, when you really think about our electric grid, the challenges with our electric grid, right, the amount of the renewables that's already on the electric grid, and how we're going to keep adding more of that, right? The pathway to really getting to a grid that keeps becoming more and more renewable is really going to have to go through hydrogen, right? Because I think hydrogen can be an energy carrier, it can be an energy storage, then all of a sudden, when you think about some of the stranded renewables, potentially even at negative clearing price, you use that to produce hydrogen.
Speaker Change: Then you put that hydrogen by a pipeline or in salt cavern, which by the way, from a cavern perspective is not that expensive to store that hydrogen and you can store a lot of it, right? Then you can turn around and use that hydrogen in terms of our stationary product, if you would. And by the way, our working view right now is electrolyzer drives a tremendous growth for our company till the end of this decade. And somewhere in that, you know, timeframe, our stationary product will start to have a major inflection point of growth, right? So this is where you can actually envision a world where we can really head down the path of almost that 100% renewable electric grid here in North America. Hydrogen plays a major role. Our stationary product starts to play a major role, not just for the data center or the EV charging opportunity, but even...
Speaker Change: Paul Middleton, Andrew Marsh, Unknown Executive Paul Middleton, Andrew Marsh, Unknown Executive
Sanjay Yadav
Speaker Change: I kind of have a view very similar to you with the world where hydrogen is being generated.
Speaker Change: when loads, when they need to put that load on the grid. Stabilizing the grid. Stabilizing the grid. Or if you start thinking about.
Speaker Change: where the you know then it becomes a capital cost issue and an efficiency of the electoral stack issue
Speaker Change: And we do have roadmaps that continue to drive towards that.
Speaker Change: Peak maximum efficiency of 37 kilowatt hours per kilogram and there's lots of R&D and a lot of the work our team does is really how to improve the efficiency of the stack.
The other is, how do you mace?
Speaker Change: Systems, which are Legos, so that there's very very little construction on site.
Speaker Change: So, you know, I think you'll see learning curves of 20-25% for electrolyzers from a total offering when you put construction in sight and improvement in efficiencies and then couple it with the.
How to Generate Hydrogen Off Hours.
Speaker Change: Couple with that, Craig, and I mean, Sanjay's streaming a little here, is that
Speaker Change: Driving stationary products efficiency up is also that whole efficiency gain is really the heart of what make electrolyzers work and what make fuel cells work to improve the value proposition to all potential customers.
Speaker Change: Understood. Well, thank you for that and I look forward to tomorrow. Thanks. Great. See you then, Craig.
Speaker Change: Thank you. As a reminder, that's star one to be placed into question Q. Our next question is coming from Dushyant Alaini from Jefferies. Your line is now live.
Speaker Change: Good morning. Thank you for taking my call. Good morning. I just want to quickly ask on the planned maintenance for Georgia and Tennessee. Just given the recent start-up, could you just share a little bit about what's the maintenance involved and how do we think about...
maintenance cadence going forward. Yeah, you know, I think
nothing
The End
Astronomically ast...
Speaker Change: surprising. I think like most plants of this nature we'll have, I think we had a shutdown in early October for general maintenance which lasted about a week and you know we'll have, like most folks running facilities of this nature, you know shutdowns that'll last seven to ten days.
Speaker Change: during a year, probably twice a year. We just got done through one in Tennessee. It was pretty much normal routine. I think the important item is to make sure that
Speaker Change: You know, we, and we, we did this during the Georgia and Tennessee is make sure we maximize local storage during that time. And so that the storage on site will
Speaker Change: provide us sufficient backup during the time we're going down for outages.
Thank you.
Speaker Change: Got it. That's helpful. And then just the second one on the ITC transfer monetization. I think you guys have previously talked about roughly $31 million.
A total of roughly 70 million.
Speaker Change: I just wanted to check on the timing of that and how you see that shaking out.
Speaker Change: Do you want to take that, Paul? Yeah, sure. We're working diligently on it. It's difficult because it's never, like a lot of things, plugged out. It's the first time.
Speaker Change: It just is taking longer than we'd hoped, but we actually have multiple parties that have expressed interest and we're nurturing those conversations. I think there's still a
A relatively good chance we can get it done.
Speaker Change: The coming weeks and there's meaningful additional buckets of opportunity there on the heels of this first one.
Speaker Change: We've got one of the top-tier broker firms in the U.S. engaged who handles tax equity monetization for many, many companies that's working with us.
Speaker Change: So, I'm very optimistic that we could do it potentially even before year end and not even sooner.
Thank you. Thank you.
The End
Speaker Change: Thank you. Next question is coming from Chris Sung from Wolf Research Reliance, Van Lyne.
Morning, Chris. Hey. Good morning, Andy. How are you?
Speaker Change: Okay, good. I wanted to just ask about the DOE loan. In other words, given the pending change in administration, I wanted to get your thoughts on perhaps like the durability of the loan. Like, do you need to reach financial close in order for it to be considered safe? Or is the conditional commitment, like can the conditional commitment be canceled?
Speaker Change: Yeah, I would just say we are laser focused with the DOE.
Thank you.
from my discussions with the DOE.
Speaker Change: I feel quite comfortable, but I'll let Paul add anything he thinks we should add.
Paul Middleton: Yeah, I guess I would just say, you know, so the way, and this is in the words of them,
Speaker Change: With the commitment, the federal government has committed the money to the program, so this is more about execution of the document.
Speaker Change: It's not necessarily something that it's absolute that we have to do it before.
Speaker Change: But it obviously would be a lot easier and good for everybody to get this behind us.
Speaker Change: It's a meaningful thing for FLOG, it's a meaningful program for them, and everybody is focused on getting this done as quickly as possible.
Speaker Change: It'd just be, you know, in some ways more simplistic for us to get it done quickly, but
Speaker Change: You know, the critical thing for me is that we're really clear on all of the final steps here, and there's a pretty good alignment. And as Andy said, we've got a really good detailed plan with all the final things that have to happen. And they're really engaged. I mean, the amount of energy and support they're providing to help us get this over the finish line is
Speaker Change: I'm excited and optimistic we're going to get this done beforehand, and we'll continue to provide updates as we see that unfold.
Okay, thanks. And there's one more for me.
Speaker Change: I know it's probably the last time we're going to hear from you guys before the 45-B rules are finalized. Just on- You'll hear it from me tomorrow. Oh, yes. I look forward to seeing you tomorrow. Yeah, we actually have some real experts that will be there tomorrow who are Republican lobbyists and Democrat lobbyists, and you'll get to hear from them. But sure, what's the question?
Speaker Change: What would Plug's ideal final rules be? Is it loosening additionality, time matching, regionality? What would you guys want?
Well...
[inaudible]
We believe.
As many of the senators who wrote the bill.
Speaker Change: that additionality is not in the legislation and additionality should not be part of the rules and regulations.
Speaker Change: I think on time matching, we'd be very comfortable looking like Europe where it's 2030, 2032 where it fully takes in. I think that, again, time matching.
Speaker Change: It's really questionable whether that was part of the legislation. And I think regionally, we'd like to see about four or five regions across the United States, and that probably would be the ideals.
Speaker Change: situation, you know, I think our view all along has been the administration for should follow the law instead of interpreting
positions which were not part of the congressional intent.
Speaker Change: So that would be the ideal situation for plug. And I got to tell you, that's probably one of the reasons, you know, I mentioned that, you know.
because of LOPR.
Yeah. Yeah. Yeah.
Transcription by CastingWords
Speaker Change: Alright, appreciate the cover. Thank you and look forward to seeing you guys tomorrow. Alright, see you tomorrow.
Speaker Change: Thank you. Next question is coming from Amit Dayal from H.C. Wainwright. Your line is now live.
Thank you. Good morning, everyone. Good morning, Mitch.
Unknown Speaker
Speaker Change: So with respect to this 8 gigawatt BEDP contracts that you have, what's the delivery timeline for these contracts? Is it like next 12 to 24 months or longer?
I'm going to let Sanjay take that a minute.
Sanjay: Yeah, so, I mean, it all varies, right? So I think what you should expect, however, though, and, you know.
Speaker Change: Out of that 8 gigawatt, we certainly believe that there is more than a gigawatt that gets to FID and goes from being basic engineering design packet to actual new orders and bookings sometime in 2025.
Speaker Change: And keep in mind, you know, we're going to keep adding to this eight gigawatt, this number is not going to stay stagnant, right. And I'm sure there'll be some that are going to drop out as well. But, but that's how you should think about it in terms of how this goes from, you know, sort of like the front end study to getting to full feed study detail engineering design, then getting to final investment decision. And we've actually identified quite a few of those opportunity that we believe talking to our customer does get to FID in 2025 and becomes a bookings opportunity.
Unknown Speaker
Complete man.
Speaker Change: Yeah, in that entire 8 gigawatt of basic engineering design packet, I mean, a lot of that, as Andy referred to earlier, right, majority of that is really in Europe and Australia, where, you know, so the policy here in the US doesn't really have any interplay with that. We do, however, have about 300 megawatt of opportunity, you know, related to the US market that could actually get pushed to the right, or that could actually need some further clarity. But out of that 8 gigawatt, for example, there is a 3 gigawatt opportunity in Australia, there's another 1.5 gigawatt opportunity. Again, in Australia, there's 500 megawatt opportunity out of that 8 gigawatt that's in Europe, right? So most of this mix is really Europe and Australia, if you would, in terms of what makes that up.
Unidentified Speaker... Unidentified Speaker... Unknown Executive... Unknown Speaker...
Speaker Change: Thank you. And maybe, Andy, this last one for you for me.
Speaker Change: You know, competing energy source relative to hydrogen? Or, you know, should we think about how hydrogen and nuclear can power some different applications and, you know, be designed for different purposes? Now how do we see because it's going to take time for nuclear to come about as well.
Speaker Change: So it's not a near-term threat, obviously, but longer term, you know, how do you see nuclear and hydrogen sort of coexisting?
Speaker Change: I actually see it as a good thing. I kind of view them as complementary.
Speaker Change: Sanjay talked a great deal about how to use nuclear power to generate hydrogen when demand is low.
Speaker Change: You know, even though with the new nuclear power devices, you're able to ramp up and down, certainly you want to generate as much electricity as you can to support the network. And I think you have a combination of.
Speaker Change: Hydrogen being generated at off hours, which was important for us to drive down equipment costs.
As well as construction costs.
Speaker Change: To make sure that hydrogen is low cost as possible, feeding stationary products which replace gas turbines to put power onto grids during peak hours.
Speaker Change: We did a lot of work with one of the leading consulting firms in the world.
Speaker Change: who really believe electrolyzers are the big market opportunity for plug today and during the rest of this decade. But as those electrolyzers get deployed and as stationary products become more and more efficient, they are the replacement for gas turbines.
I think it
We have some activities going on.
Speaker Change: kind of in the 28 type timeframe, which can tap into hydrogen pipelines at data centers. And actually, I think that'll be kind of the first view of what that world will evolve into.
So, you know, during the next five years.
Speaker Change: It's electrolyzers for, you know, generating hydrogens for substitution in ammonia markets, in refineries, in concrete manufacturing, all work that we're doing today. But ultimately, you know, you know,
Speaker Change: I'm a real believer in nuclear and it's really nuclear and hydrogen and fuel cells and solar and wind which make the grid up ultimately.
Speaker Change: Thank you, Andy. That's all I have. I appreciate the call.
Speaker Change: Thank you. Next question is coming from Jordan Levy from Truist Securities. Your line is now live.
Jordan Levy: Hi, Henry, I'm for joining here. Thanks for squeezing me in. Hi, Henry.
Andy Marsh: Hi Andy, maybe to start with just on the near-term outlook for the material handling business. Can you just talk to the improvements you're seeing around kind of customer receptiveness to some of the price increases from the beginning of the year? Yeah, you know
Speaker Change: always tough to increase prices and we had increased prices pretty dramatically but you will see an uptick in material handling business in the fourth quarter you know we we review it actually twice a week and
Speaker Change: feel real good about that. And we see a growth of 20% to 30% next year, which Jose and others will roll out during the symposium tomorrow.
Unknown Speaker 0
Thanks for that. And then just.
I should actually add this.
Thank you. Thank you.
We failed during this difficult process.
That our value proposition was stronger than we knew.
and has been shared with us by customers.
And for many of our customers, look.
There really isn't an alternative.
They move goods more rapidly.
Speaker Change: Bringing electricity to buildings, I think everybody knows, is challenging. You know, the backlog on the grid is three and a half years.
Speaker Change: The resiliency of our value proposition material handling. After a tough year, you know, we got rid of PPAs, you know, we got, you know, our revenue probably would have been a hundred million dollars higher this year if we would have kept the PPAs in place. But...
Speaker Change: The value proposition is much, much stronger, quite honestly, than we thought.
Paul Middleton, Andrew Marsh, Unknown Executive
Speaker Change: Thanks that's helpful and then just looking at the path the gross margin positive here
Speaker Change: And maybe this is more of a question for next year, but are there, you know, business lines you all have looked at or could look at to divest of in the future to kind of further improve, you know, cash flow and the margin profile here?
Speaker Change: We're always looking at the businesses and we've sat down and, you know, we've looked at the value and
Speaker Change: We don't see, when you look at the whole spectrum, and Sanjay, myself, and Paul spent a lot of time on this over the months, and so the answer to your question directly is no to that.
Speaker Change: Thank you. Next question is coming from Tim Moore from Clear Street. Your line is now live.
Speaker Change: Good morning. My DOE conditional loan and 45 production tax credit questions were the answer, but I wanted to ask based on the election outcome last week, when would you maybe start marketing or targeting oil and gas customers?
Speaker Change: Well, you look at our electrolyzer business, I think our biggest customers are oil and gas customers.
Speaker Change: We already are. So I mean, GALP, Iberdola BP, Moe, they're all oil and gas companies and probably a good deal of that 8 gigawatts in backlog is oil and gas.
and hydrogen.
Speaker Change: and hydrogen derivatives. So I've been a big, big focus. And I think you touched on a point that
The.
The market for hydrogen and green hydrogen today.
Speaker Change: is really, and this is a positive, you don't have to change.
Speaker Change: Your whole way of doing business. It's, you know, it's really a substitution of gray hydrogen versus green hydrogen. And in Europe, there's a goal of 42%.
Speaker Change: You know green hydrogen by the replaced gray hydrogen by 2030 and whether it happens by 2030 or 2033 that's really the push
Speaker Change: Understandable. Yeah, I was just wondering if you're going to target them more because I, you know, we keep reading about their appetite for blue hydrogen. I'm just wondering if you're really going to step it up and try to substitute a blue hydrogen wave. Yeah, we are. And we're doing it today.
Speaker Change: Good. Now, the other question I had was on your BEDP of the three gigawatts with, you know, Australia, the allied green ammonia, you put out that nice press release last month about the binding framework agreement, you know, that talked about late 2026 or early 2027 for system delivery.
Speaker Change: I'll let Sajay take that one since he works these this is part of what he does every day. Yes, so first half 2026 Probably not a big revenue rec opportunity It's probably second half 26 and 27 so it's given the size of the project and the scale of the project There's a decent amount of work that we both kind of have to do right so given where we are today It's probably more second half rather than first half of that year
Speaker Change: Great. Thanks and I'll see you tomorrow at the symposium. See you tomorrow.
Safe Journeys!
Speaker Change: Thank you. Next question is coming from Andrew Percoco from Morgan Stanley.
Good morning. Thanks for taking the question.
Andy Marsh: Morning, Andy. Thanks for taking the question. I have a higher level and maybe more longer term strategy question here. And it's just kind of, it's around the thoughts
Andy Marsh: around some of these new markets like stationary power, on-road vehicles.
Andy Marsh: Obviously, it's been somewhat of a challenge to scale those businesses. You know, the unit economics of green hydrogen has kind of ebbed and flowed depending on prices of renewable electricity, which obviously has drifted higher here over the last two years.
Speaker Change: I'm just wondering, you know, is there a scenario where you would be okay, just kind of going back to your roots and providing, you know, the material handling units and maybe meaningfully reducing
Paul Middleton, Andrew Marsh, Unknown Executive
Paul Middleton, Andrew Marsh, Unknown Executive
Speaker Change: gray hydrogen today, as well as derivatives like ammonia and methanol that Sanjay mentioned.
Paul Middleton, Andrew Marsh, Unknown Executive
Speaker Change: You know that market in electrolyzers. Just take a look at now. We did 56 million in the third quarter
It's going to be higher in the fourth quarter.
Speaker Change: And, you know, that to me is the huge market opportunity.
When it comes to the hydrogen plant.
Nothing works if we become dependent on
to companies to provide hydrogen.
Speaker Change: You're already seeing the value of the hydrogen plant in the financials as the gross margins improve.
Speaker Change: That's, we need those plants to make material handling and stationary ultimately work.
Speaker Change: So I know that may sound interesting, but when you get down to where the markets are growing and the fact that electrolyzers and hydrogen are bigger markets in material handling today,
Speaker Change: and you look at the margin improvements in hydrogen and just going to continue to improve, that's not a path we're going down.
Understood. And maybe if you could just elaborate.
on what.
Speaker Change: Global markets you do see the most attractive unit economics for for electrolyzers and maybe some of your fuel cell technologies I mean, I think we've seen obviously in the US
Paul Middleton, Andrew Marsh, Unknown Executive
Speaker Change: So Sanjay, you want to take it? I think the gigawatts of BEDPs is one example.
Andrew Marsh: So Andrew, again, I think if you just start to even think about our funnel, right, that number will be much larger than that it kick a lot of basic engineering design packets. So some of the project getting potentially canceled, some of the project getting moved to the right, frankly speaking, at the given where the state of this industry is, that's not a surprise. But the way we're looking at it is, who are the customer?
Andrew Marsh: have they secured offtake? Are they going to be able to get financial close? Are they going to get to FID? And that's the approach we've taken. So when you really look at our pipeline on the electrolyzer side, that 8 gigawatt probably continues to grow. Some probably will fall off, but we feel pretty good about it. As I just briefly mentioned earlier, like 2025, we certainly expect a pretty big booking year for that electrolyzer business.
Andrew Marsh: and that mix is going to be Europe and more likely Australia. That's the mix at this point in time.
Speaker Change: You know, I know one customer told us yesterday, Sajay, that we've been underselling our capabilities when it comes to electrolyzers and hydrogen plants.
Speaker Change: I mean, it was a large global player. I have another large global player that's in our Rochester facility today.
Speaker Change: So, if anything, we probably, I think when folks see Georgia, see Rochester, see our integrators in Vietnam and Dubai and Europe.
Speaker Change: I think they step back and say, who else has the infrastructure and capabilities to support this market growth?
Understood. I'll take the rest offline. Thank you guys. Okay.
Speaker Change: Thank you. Next question is coming from Kashi Harrison from Piper Sandler. Your line is now live.
Good morning.
Kashi Harrison: Hey, good morning all and thank you for taking my question. I just have one want to be mindful of the time here
Kashi Harrison: You know, I had a question about the fuel cell ITC, you know, it expires at the end of this year, and I was wondering if you expect your fuel cell products to qualify for the, you know, the tech neutral ITC.
Kashi Harrison: or PTC? And if not, just how are you approaching the expiration of ITC in your pricing discussions with customers for 2025? Thank you. Yeah, good question.
Speaker Change: We're probably the only fuel cell company that can really leverage tech neutral. It's challenging because the regulations are...
Speaker Change: mishmash at the moment. But because we have our green hydrogen platform, it puts us in a much better position than any other fuel cell company. So it's almost like going back to the last question.
Speaker Change: Yeah, our hydrogen plants and green hydrogen plants are really important.
Speaker Change: That being said, we are working and have been working. We think it's good for the entire fuel cell industry for the ITC to continue.
Speaker Change: and that there is work that I know there's over 18 Republicans who have signed up, many of them who sit on House Ways and Means, to extend the ITC much like they did in 2018 under President Trump before.
Speaker Change: So, important, yes, but we're probably in the only company that in the fuel cell industry that because of what we've done with plants.
and Abba Durant
Thank you.
Speaker Change: I guess monthly, is that correct? And what are the conditions that they have to have to kind of convert on a monthly basis?
Paul Middleton: Go ahead, Paul. Yeah, so they have the option, if they'd like, over the term to amortize a portion. It's a limited amount per month.
Paul Middleton: If they do elect that option, we have the option to pay them back in cash.
Paul Middleton: If we choose to, we can provide shares. It's not automatic that they get shares. So, you know, they have a long view of F.L.U.G. and where the stock will go, and they're certainly with the no short position.
Paul Middleton: you know, a clause that, you know, that reasserts that. We think, you know, this will...
Paul Middleton: Continue to show progress with the gross margin and the growth of the company, but they would like that amortization capability for the duration alone. So it's not a foregone conclusion, they will ask for that, but they have that optionality.
Speaker Change: Thank you. We have reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.
Speaker Change #100: Thank you for taking the time today and I look forward to seeing many folks either online or in person at the Plug Symposium tomorrow. So thank you everyone. Bye now.
Speaker Change #101: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line app at this time and have a wonderful day. We thank you for your participation today.