(Bloomberg) — Plug Power Inc. saw its biggest gain in three years after the hydrogen company said it was close to finalizing a $1.6 billion loan from the U.S. Department of Commerce. Energy and that it was reducing its expenses to consolidate its balance sheet.
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Plug gained as much as 31% on Tuesday, the most intraday since January 2021, as the Latham, New York-based company provided its annual trading update. He also noted that an electrolyzer production plant in Georgia is now operational and another in Tennessee is expected to open soon.
Government funding will be key to Plug’s growth plans. The company was informed Monday that the agency’s credit review committee was evaluating the application. The rate will not exceed 6.5% and Plug CFO Paul Middleton said he expects it to be finalized by the third quarter. The company plans to use the money to support up to six hydrogen production facilities.
“This lower cost capital is incredibly helpful,” Middleton said during the update call.
Read more: Will hydrogen power a clean energy future, or failure? :QuickTake
While this will help with the company’s long-term plans, it still faces a short-term cash flow crunch as it spends capital to expand its hydrogen production capacity. The company surprised investors in November by reporting worse-than-expected third-quarter results and warning that there were doubts about its ability to maintain operations. He revealed plans on Jan. 17 to sell up to $1 billion in stock.
“Addressing the critical issue of cash management and resolving our going concern is now our top priority,” CEO Andy Marsh said on the call.
This problem could be resolved in the coming months, according to Colin Rusch, an analyst at Oppenheimer & Co.
“Plug addressed key concerns including balance sheet resilience, operational cash burn and achieving critical technology performance benchmarks,” Rusch wrote in a research note. “We believe the company will likely be able to meet its going concern notice” in the first quarter.
The Energy Department said it could not comment on loan applications.
Plug helps promote hydrogen as a clean fuel. For years, the company specialized in forklifts and material handling equipment powered by hydrogen fuel cells before focusing on gas supply as well as machines that separate gas from water .
Plug said Tuesday that fourth-quarter revenue would be about $200 million, well below the $378 million analysts expected, and that the company would likely take a non-cash goodwill impairment charge. up to $250 million. It also plans to reduce its cash spend by 70% from 2023, with reduced capital expenditure and inventory investments.
Plug has received numerous financing offers, but “they’re not on terms that are attractive to the company,” Middleton said.
–With assistance from David R. Baker and Ari Natter.
(Updated share movements in second paragraph. An earlier version corrected the DOE loan value in the title and first paragraph.)
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