Operating for more than two decades, Plug Power (PLUG -4.56%) has neither become profitable nor been able to generate positive cash flow from its operations. But the fuel cell company has been growing its revenue at an accelerated rate in the last few years. Does that hint that profitability, which so far has been elusive, is around the corner? Let's look at Plug Power's operations and progress to find three positive reasons and one negative.
1. Revenue growth is strong
In the last five years, Plug Power's revenue has risen by nearly six times, from $86 million in 2016 to $502 million in 2021. By contrast, from 2011 to 2016, the company's revenue just roughly tripled. Clearly, Plug Power has been growing its revenue rapidly lately.
A Plug Power hydrogen production plant. Image source: Plug Power.
Plug Power's strong recent revenue growth can be attributed to the aggressive steps the company is taking to expand. In the fourth quarter, over 20% of revenue came from new businesses, including about 6% from electrolyzer sales. The company intends to continue pushing new businesses for growth.
Plug Power is constructing multiple hydrogen plants to build a green hydrogen network in North America. Green hydrogen is produced through electrolysis of water using renewable power. No emissions are produced in the process, which splits water into hydrogen and oxygen. The company is targeting 70 tons per day (TPD) of green hydrogen by the end of 2022. It hopes to generate 500 TPD by 2025 and 1,000 TPD by 2028. Plug Power believes that such a network will make hydrogen easily accessible, thereby helping promote fuel cell applications.
Additionally, the company is pushing sales of its electrolyzers. It is building a 2.5 gigawatts (GW) fuel cell and electrolyzer factory.
2. Partnerships are fueling growth
In addition to its own projects, Plug Power has entered into different partnerships to accelerate growth. Its deal with SK Group aims to advance fuel cell use in South Korea, and it's working with Acciona to build green hydrogen plants in Spain and Portugal. Its joint venture with Renault aims to promote hydrogen fuel cell electric vehicles.
The company has also partnered with hydrogen producer Lhyfe to jointly develop green hydrogen plants in Europe. Along with Fortescue Future Industries, it is building an electrolyzer factory in Australia. Airbus is its partner in a joint feasibility study of hydrogen in aircrafts, as well as in ground-support equipment at airports. Plug Power has also joined with refiner Phillips 66 to advance the use of green hydrogen in industrial and mobility sectors. All in all, Plug Power seems to be working aggressively to expand its operations.
3. A deep expertise in hydrogen fuel cells
Plug Power has been building hydrogen fuel cells for more than two decades. Irrespective of profitability, the company has a rich expertise in fuel cell technology. It has deployed more than 50,000 fuel cell systems, which it believes are more than any other company in the world.
But the future remains too uncertain
Despite the rapid revenue growth, the key issue with Plug Power is that its future continues to be marred by uncertainty. The company doesn't seem to be anywhere near breakeven in its core materials-handling business segment.
On the other hand, it is still developing its green hydrogen and electrolyzer business. Green hydrogen tends to be far more expensive than blue hydrogen, which is produced from natural gas. While green hydrogen is clearly the preferred choice, since it is truly emission-free, its adoption could be slow. Whether Plug Power will be able to make this part of its business profitable remains to be seen.
In short, even though Plug Power seems to be at the forefront of hydrogen fuel cell technology, that doesn't guarantee its eventual success. Before investing, it is important to bear in mind that the company is several years away from achieving bottom-line profits, if ever.
