US green hydrogen company Plug Power predicts up to $140m of profits after years of heavy losses

US-based green hydrogen company Plug Power’s shares rose by more than 10% this week, partially recovering from a collapse since the start of this year, as CEO Andy Marsh projected the firm would turn a healthy profit after years of heavy losses.

“In my mind, this is the year... this is the inflection point,” he said. “We’ll do between $1.2 and $1.4bn revenue, that’s a 70% increase. Gross margins will become positive.”

Plug is projecting gross profits for 2023 of between $50m and $140m, depending on revenue. However, at a separate event held by investment bank Evercore on July 16th, Marsh clarified that the company would only turn “Ebitda-positive” between the fourth quarter of this year and the second quarter of 2024.

“To support our growth, we have built a strong differentiated platform that will enable us to meet our targets, including a broad foundation of technologies that enabled early adoption, deep relationships with multiple industry leaders across many sectors, new investments that are expanding our geographic and industry footprints, and a strong cost discipline that continues to drive down the total cost of ownership,” said Plug chief financial officer Paul Middleton.

Subsidies due to come into force in Europe and the US this year are another reason for Plug’s bullishness.

While Marsh anticipates a quarter of this year’s revenue to come from Europe, policy support in the US such as the Bipartisan Infrastructure Law and, in particular, the Inflation Reduction Act’s clean hydrogen production tax credits (PTC), “puts America to be the leader, unmatched globally”.

Marsh reiterates Plug’s longer-term target to produce 2,000 tonnes a day of green hydrogen production and 10GW of manufacturing capacity for fuel cells and electrolysers by 2030.

This includes shipping 5GW of electrolysers a year by the beginning of next decade.

“I believe this factory itself could produce that amount,” he said, referring to the company’s newly opened Rochester facility, which has 2.5GW of capacity — although production is in the process of ramping up to 100MW per month.

This ramp-up was noted as adding to Plug’s higher fixed costs absorption in Q1, according to a letter to investors, with the company expecting “continuous improvement throughout the year as we reach full production capacity at our new manufacturing sites”.

Plug announced in January 2021 that it would invest $125m into its Rochester plant, while its green hydrogen production facility in Georgia is expected to cost $84m to build.

But the company has struggled to match its annual revenue to this investment into new capacity and other operating costs.

While the company last turned a profit in 2019, when it made $27.9m, but the following year it saw a loss of $469m.

And while 2021 saw a less catastrophic loss of $171.3m, the company has still not returned to breaking even. Last year, the company had more than $700m in revenue, but a loss of nearly $200m.

The first quarter of this year saw a gross loss of $69.3m at a margin of minus 33%, despite revenue increasing by nearly 50% year-on-year.