Plug Power, Inc.

we think about growth in 25. Yeah. So, Bill, look, you know, I'm not going to kid you that the price increases and the activities associated with the going concern certainly represented a shot to the system. You know, I have, you know, as many of you know, I am at heart believer in you deal with the cards you have and think how you can get better. But in many ways, it actually opened up the engagement with customers. And it allowed us to start having the serious discussions about how to change the business model. And we have moved away from PPAs, which is good, which has impacted the initial growth of those customers because they As I mentioned in the previous question, we've had to move to third-party providers of leasing for the customers, almost like dealerships and cars, but we've had to work through that with third-party providers who also had tax appetites. We've made great progress there. We expect the second half of material handling to be at least in the range of 1.75 to two times higher than the first half of the year. We spent a lot of time looking at those numbers in customers. Over the past two, three weeks, Sanjay, I think we've had two to three new customers, some of them with rather large deployments. We think the growth rate for material handling in 2025 comes back to normal. So, you know, it's been a... It's been a challenging exercise, but it actually has taught us in many ways the meaning of our value proposition. I've had one of our larger customers tell us the value proposition breaks down at $11 a kilogram for hydrogen. That's a real great data point because when you think about that $11, you know, we're out there about $8.50 today. And that shows that there's value being created and customers recognize it. But, look, there's a lot of discussions when you have those two big issues you mentioned. But I feel that we've really been able to overcome those challenges.

I appreciate your call there, Andy.

Thanks, Bill.

Thank you. Our next question today is coming from Dushaya Irani from Jeffrey's. Your line is now live.

Good morning. Thank you for taking my questions. Dean, congrats on the new role. Maybe this is for you. I know you have been there for two weeks now, and you have kind of talked about some of the areas of cost efficiency and cost outs. Maybe could you talk a little bit about what some of the low-hanging fruits are, where we could see that come from? And then secondly, how do you guys think about the margin cadence for the second half of, you know, 24. And I'll leave it there. Thank you.

So, I'll let Deshaun. Good morning. I'll let you say, Andy. I'll let Paul take the second part of that. I'll let Dean take the first part.

Yeah. I think it's a little too early to provide any details on this call. But, you know, I've talked with Andy and many people a couple months before joining. I've been aware of where the challenges are, and my first two weeks I've been digging into that. And as I mentioned, a lot of it's around manufacturing. It's reducing our inventory. It's getting cost-effective when it comes to producing green hydrogen and implementing our fuel cells and our systems in the field. And that's really where my focus is going to be, is diving deep into those cost structures, identifying where we can wring those costs out and lower those costs and get to the point where we'll be profitable in each of these lines of businesses. And a lot of it is going to be around identifying those opportunities and the rigor and the discipline with managing through each of those projects and tracking those to the point of profitability. Okay. This isn't going to happen immediately, but to your point, there's definitely low-hanging fruit and short-term things we're going to focus on, and then there's obviously bigger monsters that are going to take a longer-term view of.

Yeah, and I would just, I guess on the margin progression, you know, as you guys have seen, historically we've always had this phenomenon of the two-thirds, one-third, where there's two-thirds and a half of the sales in the second half. That's certainly what we're seeing this year. That implies doubling the sales in the second half. And plug has tremendous volume leverage opportunities. So that has a big impact for us in addition to getting full quarter benefits of all of these cost downs and price increases that we've been rolling out. And on the fuel side, Andy talked about Georgia and Tennessee being up and getting a full quarter impact of those. as well as we've made real good strides on fuel efficiency measures, and that's really going to be impactful as well as we move through the balance of the year. So you will see continued – you'll see certainly positive and continued progress in Q3 and even more progress in Q4 as we move through the balance of the year.

Thank you. Thank you.

As a reminder, that's star one to be placed in the question queue. Our next question is coming from Sherif El-Moghrabi from BTIG. Your line is now live.

Hey, good morning, team. Thanks for taking my question.

Good morning, Sherif.

Good morning, Andy. So I've got a couple on Louisiana. First off, can you tell us how hydrogen production is going to be divvied up there? Is it a straight 50-50 split between yourselves and Olin?

Yeah, so I'm going to let Sanjay take this. Sanjay sits on the board of the joint venture, so I'm going to let him handle that question.

Yeah, so, Sherry, on that, You know, so obviously it's a 50-50 JV from an ownership standpoint, but Plug is responsible for marketing all that hydrogen, right? So that's what would happen. We would actually consolidate as Plug, number one. Number two, we'll be responsible for marketing, pricing strategy, and everything else. So the access of that hydrogen between the partners, Plug will take a leading role in terms of how it gets priced, how it gets marketed, and who it goes to.

Okay, that's helpful. And then for my follow-up, do you need to further refine the output of the chloralkali process at Louisiana to produce 15 tons of liquid? And if so, what is the margin benefit there relative to your other projects?

Yeah, sure. Keep in mind, right, we've already done something like this before with Olin, right? We have an existing plant in Tennessee, so we know what exactly has to happen.

Even though we own 100%.

Exactly. We own 100% of Tennessee. So there is a purification. Yes, you have to purify. Then you also have to increase the pressure based on what the pressure of that hydrogen comes out from the Olin side. Almost think of this like a pipeline coming into our liquefier. you know, not a whole lot different than, you know, the PEM electrolyzer. It's a slightly different kind of an electrolysis process, right? So, yes, you have to purify that. You have to increase the pressure as it goes into the liquefier. Look, the reason we're doing this partnership is because we both believe that economic value of, you know, them just selling the gaseous hydrogen versus all and also getting into the liquid hydrogen market is a win-win situation for them. We see this being a low-cost opportunity for us, so it's a win-win situation for us as well. And look, and rather not get into the specific, exactly what that cost looks like and everything else, as we'll continue to also do the pricing negotiations. But similar to Tennessee, and frankly, if anything, maybe even marginally better than the cost profile in Tennessee, we feel pretty good about what this is going to bring to the table for us from cost reduction, as well as expanding the market opportunity for that hydrogen. Anything you want to add, Andy?

Yeah, I would just say, just the picture in your head, Cherie, the hydrogen coming out, you know, is, as Sanjay mentioned, purified before it goes in the liquefier. But that waste stream hydrogen and purification system essentially replaces the electrolyzer and rectifier and substations. And the rest of Louisiana is exactly a duplicate of Georgia. So it's a very straightforward. It's just essentially doing that one block differently. And I use the word differently, as Sanjay said, exactly how we do it in Tennessee.

Okay. That's helpful. Thank you both.

Thank you. Next question is coming from Chris Sung from Wolf Research. Your line is now live.

Hi. Good morning. Thank you for taking my questions.

Good morning, Chris.

Hey, good morning, Andy. I'll start with, I saw at least one competitor announce capacity reservations, agreements with electrolyzers developers developing hydrogen hubs. Is that something you're also pursuing, and maybe any updates on your participation in the three hubs that have officially launched? Thanks.

I'll let you take this feedstock, and then I'll talk about the hubs.

So again, I think as a part of this seven gigawatt of basic engineering design packet, right, we are starting to have conversation with the customer You know some of this opportunity or multi gigawatt opportunity right so it's a mega project for them obviously it's a mega project for us as Andy talked about it, even if we actually do. One quarter of that is a substantial revenue opportunity, but we're going to need to make sure that we're planning the capacity, the right way right what does that reservation look like what the cadence of staff production needs to look like and that's one area that has been talked about. Him and I are going to be working very closely together to make sure that it's being planned properly. We're thinking through the reservation right. How do we manage that? It's a win-win for both parties. Now, there is some discussion going on that we're having with other customers that are not a part of this 7.5 gigawatt basic engineering design packet where they're talking about potentially doing a reservation as they are looking at mega opportunity in the European market. So some of those discussions are happening as well. But one other thing we also try to be very, very careful about in this market is There are projects and there are projects, right? We're really trying to make sure we're aligning with the customer in terms of helping them with what we bring to the table, but also making sure that the projects are, in fact, going to eventually get to that final investment decision criteria, because there's a lot of things that has to happen. Funding has to come in place. So we do have some of those opportunities brewing as well. It could be pretty meaningful and substantial, and that is not a part of the 7.5 gigawatt of basic engineering design packet that we're talking about right now. It will be incremental to that.

On the hubs, first, I don't want to get ahead of hubs announcements as far as what they want to say about the details. But as we've talked about before, every hub in the U.S. plug is participating in, including the announcement of West Virginia where they have details. So we're pleased that they're moving ahead. I think over the next year, there's Even with the hubs which have come to agreement, there's still a great deal of planning and work to continue. And I can tell you there's a team at PLUG on the business side, as well as the technical side, that's working with the key decision makers at all the hubs to make sure that they evolve. And that, look, we're there. We're at the table. And that's a key item. I think people have to realize, and I've said this before, the PTC and the DOE lowlands are really the short-term vehicles for the U.S. government to drive hydrogen production. Long-term, the hydrogen hubs across the United States are really important for building this industry. And look, there's still lots of work to go on to really capture that vision. On top of that, there's the technology investment, where Plug was the leading company in receiving grants from the DOE, where about 20-25% of that revenue or activity investment, Plug is involved with. A lot of it associated with our plant in Rochester, where there's technology improvements for both electrolyzers and fuel cells built in. Those two won't be overnight, but they're really important for the U.S. having, from a national security point of view, from a jobs point of view, as well as for a clean climate point of view.

Thanks. And just for that, that's really helpful, Culler. And just for a follow-up, I think being touched on this and the high inventory levels is one of his priorities, but are you able to provide some context on what's in inventory broken up by product lines?

You know, I think that, Paul, I don't think we make that. Do we make that public?

No.

Yeah. And I think that probably, you know, I would just say, you know, probably a lot, you know, there's probably a lot to support our energy build out this year. And we do have goals that we can reduce that inventory down to about 700 million by year end, supporting all the product lines.

All right. Fair enough. Thanks so much for your time.

Okay, thanks, Chris.

Thank you. Next question is coming from Sky Landon from Redburn Atlantic. Your line is now live.

Hi, thanks, guys.

You mentioned that you're potentially expecting some news on the 45B rules after the Democratic Convention and that you'd expect a further announcement after the election. I mean, I appreciate timings are perhaps uncertain on this, but Perhaps you could talk us through your current thinking on how quickly this could come through and if you still think it's a 2024 event. And then related to this, from your conversations with industry and customers, how quickly after the verification on the rules do you expect to start seeing green hydrogen FIDs start flowing? And then a second question on OPEX costs, perhaps. Expectations will slightly be again in 2Q after they also be in 1Q. Maybe you could run through the work that's been done here and talk about if there's any more costs to come out going forward. Thanks.

I'll let Paul handle the second part of that question, Scott. I think where you will see potential changes after the convention probably has to do with the three pillars, and I know you're well versed in the three pillars, Scott. I think you'll see relaxation associated with additionality. And I think that nuclear power as well as hydropower and maybe states with renewable energy programs getting, receiving relaxation on additionality. I think when you look at post the election, you may see that the regulations associated with time matching will start looking more like Europe, and I think the regionality issues will be slightly less restrictive. And I think that's probably what will happen. And when you look at it, obviously I think I think we may have talked before the Chevron announcement, and I told you Chevron was going to have a dramatic impact, especially on those two other items, and I think you'll start seeing that. I think from a decision-making for FID, you know, I think many of these programs, it takes probably 18 months to get to FID. I think many of the U.S. programs, companies, I know some significant programs where work's being done, but I think it's a year for the big projects, I mean the gigawatt-scale project, after the announcements to get to where you're actually issuing POs. So I think that's probably the timeframe, and this is especially with the electrolyzers. I think there may be smaller deployments, which will happen more rapidly than that, But when you're talking about investing $2 to $3 billion, it's going to take time. Paul?

Yeah, and on the OpEx, you know, as you've made reference, I mean, we've been able to demonstrate that we've, you know, the benefits of our actions of curtailing and optimizing the workforce. Some of the rooftop consolidations obviously are, you know, most of the impact is in operations, but there's certainly a piece of that that benefits the OpEx as well. And I would tell you, as we move forward to the balance of the year, we're going to maintain our discipline and focus on making sure that we're, you know, where we can continue to optimize, that we're doing that, and that we're not investing in incremental costs in the near term on things that aren't benefiting the short term, you know. So, We're really being scrutinous in the things we're doing and trying to keep that curtailed and down, and we expect that to continue.

Great. Thanks, Andy. Thanks, Paul. Thanks, Guy.

Thank you. Our final question today is coming from Jordan Levy from Truist Securities. Your line is now live.

Hi, all. It's Henry on for Jordan here. Appreciate you squeezing me in at the end. Hi, Henry. Nice to meet you. Hi. You touched briefly on this, Andy, before. I just want to get anything more you have on how production has gone at Jordan Tennessee over the last quarter. So any kind of big operational items or learnings that have come up that you plan to take away for future plants?

Yeah. I think, Jordan, one of the big learnings, and this is really important, and it has dramatically improved the efficiency of the plant, It's really controlling. You have to remember, this is the first plan in the world that this has happened, is controlling the interaction between the output of the electrolyzers with the liquefier. And we have seen, from the month of May to today, just a dramatic improvement in our control loop. And it's been great work by one of our engineers about making sure the output of the electrolyzers always are in sync with the production output of the liquefiers. And if you put too much hydrogen in, you're going to be wasting hydrogen. And that has been a learning that I think is a uniquely positioned plug as we fine-tune that controller. We've had some, you know, there's been, you know, the plant itself, I think in Was it May or June? I think June was up 93% of the time. So we feel really good about that plan. And I think a lot of it has to do, as I mentioned, you know, as I mentioned, you know, the hurricane came through or the really rain came through that facility. We had to shut everything down for a day. And that's just kind of, and that's going to happen. But, you know, I think we're probably, you know, the fellow who built the plant, you know, who came from one of the leading oil companies told me it takes six months to burn in a plant, right? And I think we're about at the stage where that plant's burnt in right.

Thanks for that. I'm going to set a quick one on the balance sheet to follow up.

Can you just remind us again on the cadence for that restricted cash flow release, that kind of $200 million annual? Is there any seasonality that we should be aware of for that?

There's some fluctuations, but I think using $50 million as a proxy is a pretty good estimate per quarter. Thank you all.

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Andy for any further closing comments.

Thank you, Kevin. And I like to remind people of the short term and the long term. And the short term is really driving this company to be operational efficient and profitable. But the long term is critical. And you look at the activities going on with the basic design engineering work. You look at the activities and the deployments with electrolyzers. nobody's doing what we're doing with PEM electrolyzers anywhere in the world. You look, and I haven't spoken much about our stationary products. One of the leading data center operators came to me and said, we have visited 14 people who have talked about building stationary products. They tell us we're far ahead in the race. And Plug's goal is not only to be operational efficient and profitable, but continue to grow at a rapid pace. And I believe between our electrolyzers, I believe between our ability to build hydrogen plants, and on top of that, our fuel cells, we continue to strive to make improvements and develop products which are unique and will be valuable for the development of the hydrogen economy. I look forward to talking to many of you at investor conferences, as well as at the next earning call. So thank you, everyone.

Thank you. That does conclude today's teleconference and webcast. Let me just connect your line at this time and have a wonderful day. We thank you for your participation today.