(Bloomberg) —
Hydrogen producer Plug Power Inc.’s stock soared Tuesday after the Biden administration offered the US company a conditional commitment for $1.66 billion in loan guarantees to build up to six facilities.
Shares of the company, which has said the financing will be key to its growth plans, gained as much as 70% in New York in the biggest intraday increase in seven years. The stock traded 43% higher at $4.13 as of 9:39 a.m.
The deal is critical for Plug, which has faced a cash-crunch in the past year as it burned through capital to develop its production capacity. The Energy Department financing comes as the Biden administration has said the clean-burning gas is needed to achieve its climate goals and has sought to jump-start the domestic production of green hydrogen to decarbonize steel, cement and other heavy industry.
“The loan guarantee will prove instrumental to grow and scale not only Plug’s green hydrogen plant network, but the clean hydrogen industry in the United States,” Plug Power Chief Executive Officer Andy Marsh said in a statement Tuesday.
Marsh said in an interview last month that the funding would initially be used to complete an industrial-scale green hydrogen plant it’s building near Beaumont, Texas by 2025. That facility will be three times larger than the company’s Georgia facility, which is already the largest in the US, Marsh said.
Read More: Will Hydrogen Fuel a Clean-Energy Future, or Fizzle?: QuickTake
Plug surprised investors in November by posting worse-than-expected third-quarter earnings and warning that there was doubt it would be able stay in business. It disclosed in January plans to sell as much as $1 billion in stock. Shares of the company have slumped more than 60% in the past year through Monday, and the government support will likely ease investors’ concerns.
“Given the importance for Plug to secure financing for its growth projects, and specifically green hydrogen projects, while noting the guarantee is not yet finalized we see this as an important step for the company’s long-term hydrogen ambitions,” Truist Securities analysts led by Jordan Levy wrote in a research note.
Green hydrogen comes from using renewable power to run a machine called an electrolyzer that splits water into hydrogen and oxygen — a process free of greenhouse gases. Costs have been one of the biggest barriers to its widespread use.
In addition to efforts to reduce its cost by 80% to $1 a kilogram by 2030, the administration has awarded some $7 billion in funding to create hydrogen hubs across the US, as well as another $1 billion to provide “market certainty” by ensuring demand.
(Updates shares in second paragraph, adds analyst comment in seventh paragraph.)
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