Plug Power Inc. shares have fallen 40% since Nov. 9, when the electrolyzer and green hydrogen manufacturer issued a going concern warning that it could run out of liquidity during the next 12 months.
Reporting third-quarter revenue of $198.7 million and gross margin of negative 69%, the company had $1.3 billion of working capital as of Sept. 30, including unrestricted cash, restricted cash and securities, according to a Nov. 9 SEC filing. Plug reported a third-quarter GAAP net loss of $283.5 million, or a loss of 47 cents per share, compared with a net loss of $170.8 million, or a loss of 30 cents per share, in the prior-year period. The S&P Capital IQ GAAP consensus estimate for Plug in the third quarter of 2023 was a loss of 31 cents per share.
Plug President and CEO Andrew Marsh attributed the balance sheet crunch to plant outages that limited hydrogen supplies and drove up prices, but he reassured investors during a Nov. 9 conference call that it is "just a bump on the road," adding that the company's Tennessee and Georgia facilities are due to restart and begin production by the end of the year.
Regarding the going concern disclosure, Executive Vice President and CFO Paul Middleton said Plug's $5 billion balance sheet does not have any debt.
"The language that we've included is oftentimes driven by accounting standards; you have to evaluate it and manage it, and it's a lot more conservative, obviously, than what we feel like," Middleton said.
To raise additional funds, Plug is eyeing corporate debt and considering bringing on project finance and plant equity partners, as well as working on a $1.5 billion bridge loan from the US Energy Department, according to a Nov. 9 letter to investors.
"We've had many inbound expressions of interest with different terms," Middleton said about potential equity partners. "It's not for lack of options, it's really just continuing to be picky around which ones that we've had to act on, and we haven't felt the compulsion to act quickly."
The company in October announced the signing of a memorandum of understanding with a Fortescue Metals Group Ltd. subsidiary that could result in selling a 40% stake in Plug's Texas plant and assuming a 25% stake in the Australian energy giant's Phoenix Hydrogen Hub project.
"More near-term" solutions could include asset-based loans or restricted cash advance facilities until DOE funding kicks in during the second quarter of 2024, Middleton said.
Reaction
But BMO analysts warned that the going concern filing could "jeopardize" that loan, while analysts at Keybanc noted that Plug management has yet to settle on any shorter-term solutions "despite elevated cash burn."
Even though the company aims to produce 500 metric tons per day of hydrogen in North America by 2025, Morningstar analysts said they expect Plug to put the brakes on explosive growth plans.
"Third-quarter results cause us to rethink Plug's ability to execute its ambitious strategic vision of being a one-stop-shop for green hydrogen," they told clients Nov. 10.
Investors, meanwhile, will continue to sit on the sidelines until Plug demonstrates "several quarters of improved execution, signs of margin expansion, renewed confidence in a path to profitability and, of course, an improved balance sheet," JPMorgan wrote Nov. 10.
Plug is not the only electrolyzer manufacturer struggling to translate sales into profits.
Earlier in 2023, British electrolyzer manufacturer ITM Power PLC was forced to suspend the 100-MW Gigastack project in the UK, planned with Ørsted A/S and Phillips 66 Co., and a plant redesign has delayed deployment of an ITM project at Linde AG's Leuna chemicals complex in Germany.
Under new CEO Dennis Schulz, ITM is in the middle of a yearlong restructuring project, aiming to cut down its product offering, reduce costs and scale the production process.
"The news and significant share price drop of one of our competitors on Friday caught the market by surprise," Schulz posted to LinkedIn on Nov. 12. "The company spoke of unprecedented operational and scale up challenges, supply chain issues, and rapid cash burn. ITM Power won't face these issues anymore — simply because we've worked hard to identify and fix them."
Plug also recorded a noncash $41.6 million service accrual charge for the third quarter reflecting "higher near-term cost projections, which have been impacted by delay in roll out of certain reliability investments," the letter said.
Marsh acknowledged the company could incur additional charges during the next two quarters, but "once we get through the legacy issue unit issues ... we'll be in a place in the second half of next year where that line could go in the other direction, could go gross margin positive," he said.
S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.