23.02.2022, Author: Stefan Feulner

Plug Power - The pioneer gets into position — Caution is advised due to ambitious plans - The analysis

  • Wasserstoff
  • Brennstoffzellen
  • Elektromobilität
  • erneuerbare Energien

In around 20 years, industry, mobility, electricity and heat generation are to be completely climate-neutral, and fossil fuels such as oil, gas and coal are increasingly being replaced by renewable energies. In addition to wind and solar energy, policymakers are increasingly focusing on hydrogen as a source of energy. According to a study, experts such as the Hydrogen Council estimate that the invisible, odorless and non-toxic gas will have a market volume of USD 2.5 trillion by 2050. As a pioneer and leading manufacturer of fuel cells, NASDAQ-listed Plug Power aims to profit by building a comprehensive green hydrogen ecosystem that spans production, storage, delivery and power generation. The projections issued by management through 2025 sound euphoric. Yet some questions remain.

Time to read: 12 minutes

The coal of the future

In order to successfully implement the energy transition and achieve the goal of climate neutrality, society needs alternatives to fossil fuels. In addition to photovoltaics and wind energy, hydrogen, which can be used in a variety of ways, is considered a key element. The vision of hydrogen as an energy carrier has been around for a long time. In his 1874 novel "The Mysterious Island," author Jules Verne described water as the "coal of the future". Hydrogen produced in a climate-friendly way makes it possible to significantly reduce CO2 emissions, especially in industry and transportation, where energy efficiency and the direct use of electricity from renewable sources are not sufficient. The National Hydrogen Strategy aims to establish green hydrogen, especially from renewable energies. In 2021, the German federal government made EUR 8 billion available for 62 selected projects. 1

Fuel cell technology is seen as a key element of the future. In this respect, the market leader Plug Power sees itself well-positioned. Source: Plug Power Inc.

Key technology that can be used across all industries

Fuel cell technology is needed to generate electricity from hydrogen. Fuel cells generate electricity and heat from hydrogen and oxygen. By converting chemical energy directly into electrical energy and heat, hydrogen fuel cells have significantly higher efficiencies than conventional power plants. The range of applications for hydrogen fuel cells extends from heat and power supply in buildings to off-grid applications and the propulsion of vehicles, aircraft and ships.

9.50 EUR

currently costs 1kg hydrogen at the filling station.

Up to now, fuel cells have been used almost exclusively for space or military purposes. In the civilian sector, three main areas of application are being tested: portable, mobile and stationary. Portable applications include powering electronic devices such as laptops and smartphones. Mobile applications include fuel technologies for powering motor vehicles, forklifts, drones or boats, while stationary applications include systems for powering buildings. The fact that fuel cells are not yet commercially widespread, as was hoped at the beginning of developments, is partly due to high costs.

High costs prevent mass market so far

Since hydrogen does not occur in an unbound state, it must first be obtained using energy. It is therefore expensive and problematic to produce and transport. Currently, 1kg still costs around EUR 9.50. The solution for a drastic medium-term price reduction lies in the production of green hydrogen. This is produced by electrolysis of water, whereby only electricity from renewable energies is used. In conjunction with the expansion of wind and solar power, Bloomberg NEF 2 expects that there will be an 85% decrease in the extraction cost of green hydrogen by 2050. In most modeled markets, this would bring prices below USD 1.00 per kg, undercutting traditional energy sources such as diesel.

The dangerous game of expectations

Since the beginning of 2020, hydrogen and fuel cell company stocks have been rallying in a manner reminiscent of the New Market days of the early 2000s. Profits are not yet to be found in hydrogen and fuel cell companies, and even the revenues generated do not justify in the slightest the stock market valuations, which are in some cases in the billions. For this reason, only the price/sales ratio (P/S ratio) based on the annual figures for 2021 can be used as an indicator for peer group comparison. Compared to similar companies in the sector, the industry leader Plug Power is not overvalued. However, one should keep in mind that there is a lot of fantasy priced into the entire hydrogen segment. Despite the sharp corrections of individual stocks, overpriced valuations are still being paid. The consolidation is therefore unlikely to be over, and many companies will disappear from the price list altogether in the future.

Pioneer with a long history

Plug Power was founded in 1997 by George C. McNamee as a joint venture project of DTE Energy in cooperation with Mechanical Technology Inc. and went public in 1999. As a leading designer and developer of on-site power generation systems supplying residential proton exchange membrane (PEM) fuel cells, as written in the FORM S-1 REGISTRATION STATEMENT of Aug. 27, 1999, the first residential fuel cell systems were to be launched in 2001 and 100,000 systems per year were to be sold by 2003. Plug Power assumed then, as it does now, that the electricity supplied by the fuel cell systems it developed could be less expensive, more reliable, more efficient, and more environmentally friendly than electricity supplied through the existing electric grid and other power generation technologies.


is the loss of Plug Power stock since the IPO in 1999.

Plug Power has been selected by none other than General Electric as the exclusive supplier of fuel cell systems for residential and commercial applications under 35 kilowatts. In addition, a joint venture was formed with subsidiary G.E. On-Site Power under the name G.E. Fuel Cell Systems LLC to market and sell fuel cell systems. Future prospects in terms of sales and profitability seem unlimited. A new stock market story was born, in keeping with the technology hype of the time. The issue price, after a re-split of 1:10 in 2011 converted, was USD 150, within four months, the share price exploded to an all-time high of USD 1,565.00. Then the dot-com bubble burst.

First-time investors lose 87%

As if the plunge in Plug Power's stock hadn't been enough, a shareholder class-action lawsuit was filed against the Company in 2000 for securities fraud 3 for allegedly making misleading statements about its fuel cell technology capabilities and its material sales and distribution relationship with General Electric. It was settled with a USD 5 million payment in December 2004.

Operationally, the next few years were characterized by high losses and consistently low sales. As a result, the share price plummeted to USD 0.12. The US company is still searching for a sustainable business concept that will generate both sales and profits. Thus, after 24 business years, no profits have been posted to date. Investors who invested in the IPO are still sitting on price losses of 87%.

In contrast to the share price, the number of shares issued exploded, to the chagrin of existing shareholders. As can be seen from the chart, these rose from 4.22 million at the time of the IPO to the current 576.35 million. Despite the sharp correction, the market capitalization grew by around 1,647% since the IPO. This is a dilution of retail investors rarely seen on the stock market.

The graph shows the development of outstanding shares, market capitalization and share price since the IPO in 1999. source: S&P CapitalIQ Pro

Amazon cashes in

Exemplary of CEO Andy Marsh's funding strategy were two options deals from the past. In 2017, Plug Power sold warrants to Amazon that gave the online giant the right to purchase up to 23%, approximately 55,286,696 shares, of the company's common stock, tied to the occurrence of various events. The deal was struck in part to get Amazon to invest up to $600 million in Plug Power to make the warrants valid. Last year, these warrants were declared vested, and Amazon was thus free to dispose of them. The exercise price was $6.00. Since Amazon does not appear in the shareholder structure, the pieces were sold in 2021 at a significant profit.

The share price hovered around USD 25 during this time, so Amazon is likely to have taken in at least USD 1 billion. When asked by the Wall Street Journal, Plug Power CEO Andy Marsh said, "It was an extraordinary payday for them." Plug Power struck a similar deal for the same number with Walmart in July 2017. However, of the original 55.29 million shares, only about 19 million have vested and are therefore freely available. The remaining package could come to market in the future if various events are achieved and installments are paid. 4

Heavily diluted, well funded

Amazon's sale of the shares was also the reason why it had negative revenue in fiscal 2020 just ended, as the loss on the warrants was greater than the revenue from an accounting perspective. However, the transaction did not impact Plug Power's liquidity. On the contrary, the various capital increases - at the end of January 2021, around USD 1.82 billion was raised through the issuance of 28 million common shares at a high price of USD 65 - provide the leading fuel cell producer with a current cash ratio of USD 3.37 billion sufficient flexibility to be able to stem the vision of USD 3 billion in sales with an operating margin of at least 30% by 2025. The Company plans to invest a portion of its available cash to expand its current production and manufacturing capabilities and fund strategic acquisitions, partnerships, and capital projects. Accordingly, further dilution of retail investors should not be ruled out in the future.

With a good financial base behind him, Plug Power CEO Andy Marsh is focusing on expansion. Source: Plug Power Inc.

Business conditions are improving

Compared to 1999, the prospects for hydrogen fuel cell technology have greatly improved due to the demand and promotion of climate neutrality by politicians. Plug Power is planning big things. With the publication of a 75-page plan for the future on the occasion of the 3rd Plug Power Symposium on 14.1.2021, Plug Power impressively shows its visions for the coming years. 5 . The goal is to build one of the largest global energy companies focused on displacing diesel with green hydrogen. In doing so, the comprehensive platform is expected to serve multiple industries in the future, including material handling, e-mobility, power generation, and industrial applications with green hydrogen.

USD 3 billion

Plug Power aims to achieve revenue and gross margin of at least 30% in 2025.

The four building blocks for Plug Power's vertical integration of green hydrogen are hydrogen generation, liquefaction, logistics and customer equipment. This puts the US-based Company in a position to cover the value chainfully, scale the business and optimize margins for the future. In hydrogen production, the management team plans to build 13 plants by the end of 2025 and to be then able to supply 500t of liquid green hydrogen per day. In addition, the Company's goals include the construction of gigafactories and the operation of a green hydrogen highway through North America and Europe.

Strong cooperation partners

To achieve growth in its other business areas, Plug Power relies on strategic partnerships and acquisitions, as it has done in the past. After the South Korean SK Group became the largest shareholder with 9.54% through its subsidiary Grove Energy Capital, a joint venture was established with another part of the SK Group, SK E&S, in which Plug Power holds 49%. The aim of the venture is to provide fuel cell systems, hydrogen refueling stations and electrolyzers for the Asian market.

The joint venture Hyvia was founded with the Renault Group. Together with the French carmaker, Plug Power plans to capture a 30% market share of hydrogen-powered light utility vehicles in Europe by 2030. Since its founding in the summer, two prototypes have already been developed, which Renault says it plans to bring to market this fiscal year. In addition to other partnerships with Airbus and Philipps 66, a partnership was announced with Lhyfe to develop green hydrogen plants across Europe and open EU headquarters in Germany. The recently signed agreement with Atlas Copco Mafi-Trench Company and Five enables Plug Power to jointly develop hydrogen liquefaction plants. Liquefaction of hydrogen makes it easier to transport, resulting in significant cost savings and broader distribution.

The acquisition of Applied Cryo Technologies is also expected to accelerate the development of green hydrogen infrastructure, while the acquisition of Frames Group, completed at the end of last year, is expected to scale the delivery of green hydrogen solutions.

Almost all of Plug Power's revenue to date has been limited to providing hydrogen-powered vehicles to a few large customers. Source: Plug Power Inc.

Ambitious outlook

In January of this year, CEO Andy Marsh touted a revenue increase for 2022. Revenues are expected to range from USD 900 million to USD 925 million. It also aims to sell up to 155 MW in the electrolyzer market and target an order backlog of up to 1 GW. A historical event could then occur in 2024. Then, for the first time in the Company's long history, EBITDA should be in the black. The big breakthrough is planned for 2025. The sales target is USD 3 billion, with a gross margin of 30% and an operating profit of at least 17%.

The projected increases within Plug Power's divisions are impressive. While "Material Handling" - the originating business of providing hydrogen-powered equipment such as forklifts for Walmart or Amazon - is expected to generate nearly 90% of the Company's revenue of about USD 500 million in 2021. This division is expected to grow to about USD 1 billion by 2025 as the Company builds new customer groups. The New Markets division, where the Company planned to generate just USD 10 million in revenue in 2021, is projected to generate USD 0.5 billion in revenue by 2025. Exploding, on the other hand, is the "Green Hydrogen Market" segment, which is expected to bring in half of the total revenue of an estimated USD 1.5 billion**. From a geographic perspective, North American sales will dominate at around 95% in 2021; just over half is expected to be generated from North America in four years. Plug Power plans to bring in more than a quarter from Europe, with just over 10% expected to come from Asia.

SWOT analysis


  • leading supplier of turnkey hydrogen fuel cell solutions
  • high cash ratio for further expansion
  • strong collaborations
  • comprehensive value chain


  • only a few customers contribute to sales so far
  • high share of sales in the USA
  • high burn rate
  • strong dilution of shareholders due to option programs


  • strong support from politicians worldwide
  • expansion into Asia and Europe through closed joint venture
  • high scalability due to modular systems


  • growing competition
  • high production and material costs affect margins
  • delays or non-achievement of product development targets
  • alternative technologies displace fuel cell technology

Well positioned, lots of imagination

Despite the sharp correction, hydrogen and fuel cell stocks still have further downside potential. While market leader Plug Power has seen steadily increasing sales of 30% annually since 2014, it also grew significant losses due to investments and the establishment of new joint ventures. So far, the Company is only generating close to USD 500 million in revenue in the "Material Handling" segment with a handful of North American customers such as Walmart and Amazon.

By contrast, the new "New Markets" and "Green Hydrogen Market" sectors, which are expected to generate the main revenues in 2025, have not yet proven their proof-of-concept and will contribute only EUR 30 million to total revenues in fiscal 2021. Management's ambitious statements of becoming a global leader in the hydrogen ecosystem, poised for continued substantial growth, are somewhat reminiscent of the days of 1999.

After a total of 24 years without profit, investors should at least be warned if the issued visions do not fully materialize. Overall, Plug Power, with a price-to-sales ratio above 25, like most companies in the sector, still has correction potential. From a technical perspective, the breakout level in the area of EUR 8.00 is a good place to start.

  1. Data from the German Federal Ministry of Economics and Climate Protection.
  2. Data P.V. Magazine
  5. Publication on company website

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Source: Plug Power Inc.

ISIN: US72919P2020
Symbol PLUG
Last price, as of 02/22/2022 22.07 USD
Shares issued, as of: 09.11.2021 576.355.807
Short Interest 69.197.812
Sector Hydrogen Technology
Topics fuel cells, micromobility, electric vehicles
Market capitalization 12.72 billion USD
CEO Andy Marsh
Date of foundation 27.06.1997
Main stock exchange NASDAQ
Source: Source: S&P CapitalIQ Pro, as at: 22.02.2022
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Stefan Feulner

The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network. He is passionate about analyzing a wide variety of business models and investigating new trends.

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