The firm belief in the vision
Not infrequently, we believe what we want to believe because it seems helpful to us in some way or takes away our fears. The American psychologist and philosopher William James (1842-1910) illustrated this in his famous essay "The Will to Believe" with the example of a man who has to jump over a precipice and knows that he can only conquer his fear if he firmly believes that he can actually make the jump. In Andy Marsh's case, it is not about jumping over a precipice but about achieving global dominance in the green hydrogen economy. And despite setbacks, Plug Power has not posted a profit in any quarter since its founding some 26 years ago**, positive thinking continues to take hold at the Company's headquarters in Latham, New York.
Playing to the potential
Plug Power impressively demonstrated last year that sales and earnings expectations are revised more often than not during the course of the year. You can read the timeline of downgrades in one of our previous updates. In the first quarter of 2023, one of the biggest hopefuls in the global hydrogen economy continued to underperform expectations. Although revenue increased by 49% to USD 210.30 million compared to the same period last year, surpassing analysts' forecasts, the net loss of -USD 209.80 million was nearly as high and significantly missed the set targets. The overall gross margin deteriorated to -33% compared to -25% in the first 3 months of 2022.
Breakthrough expected
Despite revenues of only around USD 210 million, management anticipates revenues for the full year to be a high USD 1.4 billion with a positive gross margin. Beyond the year, the growth curve appears to climb exponentially, more specifically, 50% per year through the end of the decade. By 2026, revenues are projected to exceed USD 5 billion with a gross margin of over 30%, and by 2030, Plug Power envisions revenues surpassing USD 20 billion. The gross margin is expected to be above 35% thereafter, with operating revenues expected to exceed 20%. The Energy business unit, focusing on hydrogen and electrolyzers, is expected to contribute the lion's share of USD 14.4 billion in revenue, while the existing Applications business is projected to reach USD 5.6 billion by then.
During the Analyst Day at the state-of-the-art Gigafactory in Rochester, New York, Plug Power also discussed the operational milestones to be set. For example, the Company aims to produce more than 2,000 tons of hydrogen per day from its green hydrogen network by 2030, including its first kiloton-scale plant. Plug also aims to deploy 1 GW of stationary power generation products by 2030, 5 GW of electrolyzers per year, and ship 500,000 fuel cell-powered forklifts. In addition, the US positions itself as having the manufacturing capacity for 10 GW of fuel cells and electrolyzers, and through its partnership with Renault, aims to have 100,000 HyVia vans on the road by 2030.
Growth costs money
With losses still high, cash and cash equivalents fell to USD 474.86 million at the end of the first quarter. Clearly, too little to be able to exploit the huge market potential. Therefore, another capital measure, which we expect to be announced soon, is inevitable. In the past, existing shareholders have been diluted in an almost unprecedented manner. Since the IPO, the number of shares has increased by a factor of 138, while the share price has fallen by more than 95%. This time, however, everything is to be different. Plug Power announced on the Analyst Day that around USD 1 billion per year will be invested in hydrogen. However, the instruments to be preferred this time are project financing, equity capital on a project basis, corporate bonds, and financing options with the Department of Energy in order to avoid further dilution of existing shareholders. We will see.
Interim conclusion
Despite the weak first quarter, Plug Power raised its 2023 annual guidance to USD 1.4 billion and sees growth rates of 50% annually through the end of the decade with sharply rising gross margins. Indeed, the Company's infrastructure has positioned it well to grow into one of the established players in the hydrogen economy. Whether these ambitious forecasts can be realized after several disappointments from the last years may at least be doubted. Thus the update ends again with a quotation from a well-known thinker. As stated in Goethe's Faust: "I certainly hear the message, but I lack the faith".
The update is based on the initial report 02/2022
