Hydrogen Company Plug Power Closes In on $1.6 Billion Loan
Energy Department Loan 鈥楰ey鈥 for Plug Power鈥檚 Growth Plans
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surged the most in three years after the hydrogen company said it鈥檚 getting close to finalizing a $1.6 billion loan from the , and it鈥檚 cutting spending to shore up the balance sheet.
Plug gained as much as 31% Jan. 23, the most intraday since January 2021, as the Latham, N.Y.-based company provided its annual business update. It also said an electolyzer production plant in Georgia is now operational, and another one in Tennessee is expected to open soon.
The government financing will be key for Plug鈥檚 growth plans. The company was notified Jan. 22 that the agency鈥檚 credit review board is evaluating the application. The rate will be no higher than 6.5%, and Plug Chief Financial Officer said he expects it to be finalized by the third quarter. The company plans to use the money to support as many as six hydrogen production facilities.
鈥淭hat lower-cost capital is incredibly helpful,鈥 Middleton said during the update call.
While that will help the company鈥檚 long-term plans, it鈥檚 still facing a short-term cash crunch as it burns through capital to build out its hydrogen production capacity. The company surprised investors in November by posting worse-than-expected third-quarter earnings and warning that there was doubt it would be able stay in business. It disclosed Jan. 17 plans to sell as much as $1 billion in stock.
鈥淎ddressing the critical issue of cash management and resolving our going concern is now our foremost priority,鈥 Chief Executive Officer said on the call.
That may be resolved in the next few months, according to , an analyst with
鈥淧lug addressed key concerns, notably on balance sheet resilience, operational cash burn, and reaching critical technology performance benchmarks,鈥 Rusch wrote in a research note. 鈥淲e believe the company will likely be able to address its going concern notice鈥 in the first quarter.
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The Energy Department said it can鈥檛 comment on loan applications.
Plug is helping lead the charge to promote hydrogen as a clean fuel. For years it specialized in forklifts and freight-handling equipment that ran on hydrogen fuel cells before it began focusing on supplying the gas as well as machines that split the gas from water.
Plug said Jan. 23 that fourth-quarter revenue will be about $200 million, well below the $378 million analysts are expecting, and the company will likely take a non-cash goodwill impairment charge of as much as $250 million. It also plans to cut cash spending by 70% from 2023, with reduced capital expenditure and lower investment in inventory.
Plug has received numerous offers to provide financing, but 鈥渢hey are not under terms that are interesting to the company,鈥 Middleton said.
