Plug Power: Focus Remains on Financing Plans, Clarity on Green Hydrogen Tax Credit

We maintain our $11.50 per share fair value estimate for no-moat Plug Power PLUG following its annual Plug Symposium. We see shares as undervalued and continue to view the company as a high-risk high-reward investment in the green hydrogen economy. Our focus remains on the company’s financing plans and final details of the hydrogen production tax credit in the U.S.

In conjunction with the symposium, Plug announced two separate preferred supplier agreements for its electrolyzers, which use electricity to split water into hydrogen and oxygen. Plug has been selected as preferred supplier for Fortescue’s 500 megawatt Gibson Island project in Australia, which is anticipated to make a final investment decision by year-end. In addition, Arcadia has selected Plug to provide a 280-megawatt electrolyzer system for a sustainable aviation fuel project in Denmark, where the project’s final investment decision is expected in mid-2024.

Plug’s balance sheet remains in focus as it incurs peak operating losses and heavy capital investment associated with its green hydrogen network. In addition to the electrolyzer agreement, Plug and Fortescue announced they will evaluate co-investment opportunities in green hydrogen production plants in North America. Plug highlighted its near-term financing plans to continue to evaluate nondilutive forms of financing, such as corporate debt, project finance, and project equity partners. Additionally, it continues to pursue a $1 billion U.S. Department of Energy loan.

The green hydrogen industry in the U.S. continues to eagerly await final details of the hydrogen production tax credit, which we expect by year-end. Plug highlighted a focus on regionality within the final rules, with its preference being for as large of regions as possible. In general, we view the more flexible the rules, the better for Plug Power’s green hydrogen plants.