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Hydrogen energy, along with solar energy, is most often mentioned as an alternative to oil. We would like to learn about PLUG Power, the world's most prominent company in the hydrogen field.
Company Introduction
Plug Power is a company headquartered in New York that has completed vertical integration from production, storage and transmission to energy generation and production of hydrogen-related products. It is a company that provides services to customers who need eco-friendly energy by building a green hydrogen ecosystem. In addition to being the company that created the first commercial market through hydrogen fuel cell technology, the company is also the company handling the largest amount of liquid hydrogen in the world, operating more than 60,000 fuel cell systems and more than 180 gas stations. Products include ProGen engines that support light, heavy and high-volume electric vehicles, fuel cell solutions that power forklifts and other warehouse machinery, and backup power solutions utilizing hydrogen fuel cells. In addition, it covers all hydrogen-based products such as hydrogen liquefaction and electrolytic hydrogen production products. It is the largest company in terms of scale and in a technologically leading position, and is a company that cannot be overlooked when investing in the hydrogen industry.
Issues and Outlook
**Management believes Plug Power's business is at an "inflection point." Until now, it has suffered huge losses in margins by relying on investment funds, but it is recently estimated that it will turn positive at 4.25% in FY23 and 22.7% in FY24. The largest loss in operating margin is in hydrogen production. Currently, hydrogen for power generation and supply to customers has been purchased as gray hydrogen through external customers, but the company's own green hydrogen production began in earnest in the second quarter of this year, improving profitability, and operating profit is expected to return to surplus from FY25. According to Shinhan Investment Report, the guidance does not yet include the $3/kg green hydrogen subsidy included in the U.S. IRA policy, and if the 200-ton green hydrogen production facility is completed as scheduled in 2023, the expected subsidy size is $220 million. For reference, the policy mentioned in the above report is included in the IRA policy, which provides a subsidy of $3 per kg for clean hydrogen projects with CO2 emissions of less than 0.45 kg per kilogram of H2.
- **Profits are continuously improving.
**If there is one thing that must be considered when investing in a company that is pioneering the market, it is whether it can ‘sustain’. As mentioned earlier, Plug Power is taking a strategy to secure overwhelming technological power and market dominance before the era of a full-scale hydrogen economy arrives and to increase its share of the pie. Just like Tesla. Although Tesla has now grown into a company that seems poised to conquer space, Tesla's period of loss was also long and risky, to the extent that even Elon Musk himself is known to have considered selling the business. In its most recent announcement, Plug Power said it had $1.6 billion in spare cash. This is sufficient funds to cover Plug Power's short- and long-term debt. It is unknown how long the current deficit will continue, but the situation appears to be sufficiently sustainable at least until 2025, the time of transition to surplus suggested by management.
- **There is still ample investment amount
- Active quantitative growth, and partnerships
PLUG Sales Guidence (Source: PLUG POWER )
In order to aggressively increase sales, Plug Power is forming partnerships with partners in various countries, including Korea's SK E&S, to build production plants around the world. One of them, the Finnish production plant, plans to focus on supplying the European market, the largest consumer of green hydrogen, and aims to achieve a production capacity of 850 PTD by 30 years, which, when converted to electricity, is equivalent to 2.2 gigawatts (GW). The production plant will utilize Plug Power's state-of-the-art PEM electrolyzer and liquefaction technology, which will not only reduce dependence on fossil fuels but also contribute significantly to decarbonization. This active expansion of production plants is significant in that it not only has the effect of stimulating demand through local hydrogen production in the long term, but also significantly reduces the purchase of gray hydrogen, which is one of the main causes of sales margins. Recently, we have continued to expand the scope of production and application of green hydrogen, including production of eco-friendly steel through a partnership with The APEX Group in Germany and production of eco-friendly glass with Ardagh Glass in Switzerland. Expansion of application scope and growth of infrastructure through these partnerships are expected to further accelerate the transition to the hydrogen industry.
So far, it seems like electric vehicles are set to replace internal combustion engines, but the story is not over yet. Simply, from the user's perspective, it is easy to manage and can be charged at home (electric vehicles) It may be a question of choosing a car (hydrogen car) that can be recharged in about 5 minutes without worrying about charging time, but if you think about it from a national perspective, it becomes a little more complicated. This is because problems caused by the spread of electric vehicles are being reported one after another, such as the problem of securing huge amounts of rare metals to be used in electric vehicle batteries, and environmental problems arising in securing industrial metals such as lithium. This is why hydrogen vehicles should not be left out in the transition to internal combustion engines. On the other hand, problems such as charging infrastructure (hydrogen storage and procurement issues) and limited options, which are presented as inconveniences in the spread of hydrogen vehicles, are likely to be resolved as hydrogen infrastructure spreads. Even if the discussion is not limited to hydrogen vehicles, problems that are difficult to solve through eco-friendly electricity production alone, such as the problem of storing eco-friendly electricity produced and transporting stored electricity, can be largely solved by using hydrogen, and the application of this will also accelerate as infrastructure spreads. The global hydrogen fuel cell market is expected to grow at an average annual rate of 21.5% until 2032, and the hydrogen fuel cell forklift market is expected to maintain an average annual growth rate of 15.95% until 2030. However, if the assumptions presented above are correct, the numbers seem to have ample room for improvement.
- Hydrogen vehicles not yet finished (+ hydrogen economy)
conclusion. So, should I invest?
Plug Power is a company with a high market presence in the hydrogen industry and is already receiving significant investment. There is no doubt that it is the most leading and promising company in the hydrogen industry. However, there is uncertainty about when, to what extent, and how diverse the roles the hydrogen industry will play. Despite the various positive outlooks for Plug Power, there are still numerous assumptions and expectations attached. Even if many of the predictions are correct, there still seems to be a long way to go before making a profit. Those who are confident about the advent of the hydrogen economy should purchase in installments. For those who don't, I think it won't be too late to approach it at least when the benefits become a little clearer.