Plug Power Inc. experienced its most significant surge in three years as the hydrogen company disclosed its progress toward finalizing a $1.6 billion loan from the US Energy Department, coupled with strategic spending cuts to strengthen its balance sheet. The Latham, New York-based company saw a peak intraday gain of 31% on Tuesday, marking its highest since January 2021, following the release of its annual business update.
The potential loan from the US Energy Department is pivotal for Plug Power’s growth initiatives. The company expects the loan, with an interest rate not exceeding 6.5%, to be finalized by the third quarter. The funds will be utilized to support the development of up to six hydrogen production facilities, a move deemed crucial for Plug Power’s long-term plans.
During the update call, Plug’s Chief Financial Officer, Paul Middleton, emphasized the significance of lower-cost capital in advancing the company’s objectives. Despite this positive outlook, the company faces a short-term cash crunch due to capital-intensive efforts to expand its hydrogen production capacity.
In November, Plug Power surprised investors with weaker-than-expected third-quarter earnings, raising concerns about its ability to remain in business. To address short-term financial challenges, the company announced plans to sell up to $1 billion in stock on January 17.
CEO Andy Marsh underscored the urgency of resolving cash management issues and overcoming the going concern notice. Analyst Colin Rusch from Oppenheimer & Co. expressed optimism, suggesting that Plug Power may address its going concern notice in the first quarter, given the company’s efforts to enhance balance sheet resilience and operational cash burn.
While Plug Power is a pioneer in promoting hydrogen as a clean fuel, it revealed that fourth-quarter revenue is anticipated to be around $200 million, significantly below analysts’ expectations of $378 million. The company also plans to implement a 70% reduction in cash spending from 2023, involving decreased capital expenditure and lower investment in inventory.
Plug Power has received financing offers, but Middleton noted that they are not under terms that align with the company’s interests. The Energy Department declined to comment on loan applications.
