Paul Rodden • Season: 2023 • Episode: 262
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Welcome to The Hydrogen Podcast!
In episode 262, Plug Power announces some concerning news and Japan and South Korea join forces to accelerate global hydrogen production. I'll go over these issues and give my thoughts on today's hydrogen podcast.
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Plug Power announces some concerning news and Japan and South Korea join forces to accelerate global hydrogen production. I'll go over these issues and give my thoughts on today's hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions of the long walk the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden. And welcome to the hydrogen podcast.
First in an article in bloomberg.com, Michelle Ma and David R Baker write Plug Power shares tank most in a decade on hydrogen crunch. Hydrogen producer plug powers shares fell as much as 45%. Friday the biggest intraday decline since 2013. After the company reported worse than expected third quarter earnings and issued a growing concern warning. At least five analysts have cut their ratings on the stock with Oppenheimer and company analysts writing in a note that hydrogen shortages and a delay in receiving expected Department of Energy supported financing is reflected in their downgrade to market perform from outperform plug was among companies involved in projects selected to receive funding as part of the DoE $7 billion investment into making the US a leader in the fuel.
The Latham, New York-based company late Thursday said a dearth of cash on hand raises “substantial doubt about the company’s ability to continue as a going concern.” It’s projecting its “existing cash and available for sale and equity securities will not be sufficient to fund its operations” through the next 12 months, according to a filing. In a quote from TD Cowen analysts plug noted that it will need to access capital to fund its activities over the next 12 months.
But it has continually indicated there are a few avenues that can take through corporate debt, DOE loans and or project financing. Plugs shares fell 43% to $3.38 as of 12:35pm and New York. The problems that plug are the latest in a series of setbacks across the clean energy sector, which has seen market valuations tumble in recent weeks. The biggest manufacturers of wind turbines, solar panels and other renewables are facing their most serious financial challenges in years as interest rates rise and costs surge. This week New Scale Power Corporation the first company with us approval for a small nuclear reactor design said it was canceling plans to build a power plant for a Utah provider amid higher expenses. And recently Orsted the world's largest developer of wind farms, said it was ceasing the development of some US projects. The s&p global clean index has fallen about 35% this year. And during a call with investors Thursday plugs CEO Andy Marsh called out enormous challenges with hydrogen supply due in part to industry power outages that impacted as much as 1/3 of us liquid supply.
temporary power outages impacted a plug plant in Tennessee, which the company expects to be operational again by year end. Shares for other hydrogen companies including fuel cell energy and Ballard power systems also dropped Friday plug for years focused on selling forklifts and freight handling equipment that ran on hydrogen fuel cells. But in recent years, it's built a series of hydrogen production plants and is making them machines that split the gas from water that has made the company a bellwether for the emerging hydrogen economy, but it also carried substantial costs. The going concern warning reflected common accounting standards and is a lot more conservative than the company's views.
This according to plug CFO Paul Middleton. He also says we are still extremely confident about the range of parties and solutions that we're working with. And we haven't seen any tempering of interest. Okay, so I know this news has been on the minds of all parties interested in hydrogen. Just how serious is the going concern note from plug last week? Well, first, I would say it depends on when you bought into plug because this massive drop will take considerable time to climb out of. But I do think they will climb back up. The board and senior executives have some very tough questions to answer, including whether or not there needs to be a change in management. And as serious as this news is, there are further points to consider first, specifically regarding plug but also energy investments as a whole as well as the hydrogen economy overseas. Yes, plug in is indeed facing a substantial challenge.
But let's not forget who has invested in the company and where their assets are currently, the Tennessee plant will be back up and running in the next few months, putting them back on track for hydrogen production. Couple that with the fact that many of their large corporate shareholders, including Amazon, and SK Group, with SK buying in at $29, and Amazon stocks warranty at $22. And also don't dismiss their ongoing projects with global energies such as Fortescue, and Reno, as well as the hydrogen hubs that plug is deeply involved in it will be highly doubtful that these entities would allow plugged a fault without first trying to work through their immediate issues. So ultimately, I would say this, I don't believe plug is done not by a longshot. But there are major changes that are needed to right the ship. And also keep in mind that several other stocks fell on Friday, including legacy oil and gas. We all know these patterns are cyclical, and new or disruptive technologies will be much more volatile to market fluctuations. And as Warren Buffett says, If you don't sell the stock when it drops, then you haven't lost any money.
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Next in a report from nikkei.com, Japan and South Korea to build supply chain for hydrogen and ammonia, Japan and South Korea will build a supply chain for hydrogen and ammonia together the neighbor's latest move to expand their base of cooperation and economic security. And nikkei has learned new frameworks will also be established in the fields of quantum technology and semiconductors. Japanese Prime Minister Fumio Kishida and South Korean President Yoon Suk Yeol will announce their program of cooperation next week when they will be in the US for an Asia Pacific Economic Cooperation Forum summit meeting.
The two countries will work together to enhance their ability to negotiate prices and ensure stable procurement of the two emerging fuels which do not emit carbon dioxide when burned and are expected to play a role in decarbonizing societies. Government affiliated financial institutions will assist Japanese and South Korean companies and raising funds for joint investments in hydrogen and ammonia production projects outside their home countries such as the Middle East and in the US. From Japan, the Japan bank for international cooperation will be in charge. The project aims to develop by 2030 A seaborne supply chain that transports the fuels from various parts of the world. The two leaders will announce the hydrogen ammonia global value chain concept when they visit Stanford University in California together on November 17. The two countries share common challenges such as decarbonizing their large basis of energy intensive sectors, like steel and chemicals and having to depend on imports for fuel. hydrogen and ammonia are mostly produced from natural gas.
By jointly investing in projects and gas producing nations. The two countries aim to establish a system for receiving stable supplies at lower prices. Similar collaborative projects are already underway in the private sector. Japan's Mitsubishi Corporation and South Korea's Lotte Chemical together with German energy giant RWE will annually produce 10 million tons of fuel ammonia in the US and begin procuring in 2029. They will be making Blue ammonia which entails capturing and storage of carbon dioxide emitted in the production process. Separately, Japan's Mitsui and company and South Korea's GS energy are taking part in a project in the UAE led by the Abu Dhabi National Oil Corporation. The project is expected to annually produce 1 million tons of ammonium with procurement starting in 26. More concepts exist for new businesses in the Middle East, India and South America. These cases will be targeted under the framework being launched this time.
The countries will also deepen cooperation on quantum technology to national research institutes. Japan's national Institute of Advanced Industrial science and technology and the Korea Research Institute of Standards and science will announce a Memorandum of Understanding measures to strengthen collaborate ratios among the University of Tokyo, Seoul National University and the University of Chicago will also be announced. Japan and South Korea and the US will also indicate ways to cooperate on developing semiconductors for improving computer capabilities. leaders will welcome moves like South Korean chip makers, and Japanese companies jointly developing cutting edge technologies plus increased investment in Japan.
Okay, so as I mentioned earlier, don't forget to look at the global hydrogen economy before dismissing plug or hydrogen as a whole, the alliance between Japan and South Korea is massive, as are their energy needs, which are only increasing. Now we know they are both currently receiving hydrogen from Australia, and have been in talks with the Middle East for some time, this news looks to further expand their fuel provider options considerably. And the fact that their focus is blue ammonia means clean fuel at a low cost and easy transport. And so with this news, I'm envisioning a very large deal announcement in the future with Exxon and their new Baytown facility, this would just be too elegant solution not to consider.
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