LATHAM — Fuel cell developer and manufacturer Plug Power on Tuesday delivered a report of strong performance in 2020 and high optimism for 2021.
At the start of 2020, the Latham-based company projected $300 million in gross billings for the year. Plug Power finished with $330 million, CEO Andy Marsh said Tuesday in a conference call with finance industry analysts, and is now increasing its 2021 projection from $450 million to $475 million.
A notable difference: Plug Power usually starts the year with 70% of its anticipated billing backlogged in January, but this year it has 90% backlogged, Marsh said.
The company is on a roll lately:
- Plug is forming a joint venture with Groupe Renault to put its fuel cells in light commercial trucks in Europe. The partners plan to begin road tests in late 2021 or early 2022 with a goal of 20,000 trucks in service by 2025.
- Earlier this month, Plug announced a $1.5 billion investment from SK Group and a partnership to expand the hydrogen economy in Asia. SK Group is one of the largest conglomerates in South Korea, where the government has set a 2040 target of 6 million fuel cell vehicles on the road, 1,200 refilling stations and 15 gigawatts of fuel cell electrical generation.
- And last week, Plug announced plans to invest $125 million to create a factory near Rochester that will employ 375 people when it opens later this year. The site will increase the company’s production capabilities and house research and development work. It will also bring suppliers to the region, serve as a resource for local universities and supply local commercial fleets with green hydrogen.
Investors liked what they heard. Plug Power stock was valued as high as $75.49 in heavier-than-average trading Tuesday before closing at $73.18, an 11.4% increase over the close Monday.
2020 was, Marsh said, “a breakout year.”
The numbers are impressive: Plug Power now has more than 40,000 of its fuel cells in service for transportation uses, mostly with large customers such as Amazon and Walmart, mostly in fixed settings such as warehouses.
At the end of 2019, it had 206 temporary and 629 permanent employees.
However, the challenges that face Plug Power also are significant.
LONGSTANDING HURDLES
The fuel cell is attractive for its basic premise — harvest the electron flow created by the electrochemical reaction between hydrogen and oxygen, leaving only heat and water as the byproduct. But it’s a complicated, expensive device. And it relies on an element that once exists in molecules all around us but is hard to find in its elemental form.
Plug has had to simultaneously build itself as a company, continue the evolution of its technology, build a market for its products, develop an infrastructure for supplying elemental hydrogen, lobby for continuance of tax credits for its customers, and then accept a slim profit margin to make its products an attractive alternative to traditional power sources.
It has never turned a profit since it was founded in 1997.
Even Plug Power’s stellar stock performance in the past year — ranging as low as $2.53 and as high as $75.49 per share, a 2,883% increase — comes with an asterisk. The company did a 10-1 reverse split in May 2011, when its stock was so cheap that it was at risk of being delisted from the NASDAQ exchange. A very patient long-term investor who owned 10 shares of Plug in January 2000 would have seen the value of that investment drop 95% from $1,365 then to $73.18 on Tuesday.
Meanwhile, the tech-heavy NASDAQ composite has roughly tripled in value during that 21-year period, despite being highly inflated in January 2000, when the dot-com bubble was about to burst.
And the 2,883% jump in price in the past 52 weeks isn’t the only surge Plug stock has had — it jumped 5,965% in one very volatile 52-week stretch of 2013-2014, only to shed 90% of its value in the next few years.
PROMISE OF A NEW YEAR
Still, Plug Power clearly enters 2021 with great momentum to show for all the groundwork and money it has invested over the years.
Marsh said he is confident Plug will reach the strong projections he offered for 2021 and 2022. “The numbers that we’re giving you today … those numbers also could be slightly higher,” he told an analyst.
Plug Power, the largest user of liquid hydrogen in the world, is committed to green hydrogen — production of hydrogen fuel using zero-emission sources of electricity. Marsh said he believes the new Biden administration and some members of Congress also support green hydrogen as part of the solution to dependence on fossil fuels.
In other positive developments:
- Plug, heavily reliant on a few large customers instead of many small ones, is securing a fourth such “pedestal customer.” Marsh wouldn’t identify it, but hinted the relationship would be centered in Spring Hill, Tennessee. General Motors in October announced a $2 billion electric vehicle factory, there, and media reports indicate GM has been using Plug Power fuel cells in forklifts and tuggers there.
- Plug has been heavily focused on fixed-site vehicles such as forklifts but with the Groupe Renault partnership and the more widespread availability of hydrogen fuel, it expects to move further into on-road fuel cell vehicles after 2030.
- By the end of 2021, Plug in partnership with SK expects to deploy its first stationary power source.
- The cost of producing green hydrogen is tied to the cost of green electricity, which is more expensive than fossil-fuel generation but has been declining in cost; Marsh said fossil fuel and green hydrogen could reach cost parity in 2025 or 2026.
- Marsh hopes to have a fifth pedestal customer in the next few years. Were it not for COVID, he added, there might have been one added in Europe in 2020.
- The GenDrive, Plug Power’s centerpiece product, will continue to evolve, getting smaller, lighter, more reliable and more efficient.
- The target for 2024 gross billings is now $1.7 billion.
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