By Avi Salzman

Plug Power, the country's largest producer of clean hydrogen, said it had received a $1.66 billion loan guarantee from the federal government on Thursday, as the government also finalized a $6.57 billion loan guarantee to the electric-vehicle maker Rivian.

The news comes just days before President Donald Trump takes office with plans to reduce support for clean energy companies. Vivek Ramaswamy, who will lead Trump's Department of Government Efficiency along with Elon Musk, has said they will target these kinds of loans as they look to cut costs.

"Biden's midnight spending spree is illegitimate & should be rescinded," he wrote on X last month, after the Rivian loan guarantee was announced on a conditional basis.

Plug Power stock was down 6.2% in early Friday trading, It is up 29% this year after falling 53% last year.

In an interview with Barron's, Plug Power CEO Andy Marsh said that he doesn't think his loan will be clawed back by the Trump administration. "It is a contract with the government, which is pretty strong," he said. "The best predictor of the future is often the past, and the Trump Administration didn't claw back anything that was done at the Department of Energy" in his first term.

Marsh also thinks the Trump administration will be motivated to keep supporting hydrogen because of the jobs the business creates. The government loan will go toward building several facilities to make clean hydrogen. The first one is planned for Texas.

"These projects are in very, very red districts," he said. And hydrogen appeals to constituencies that might not love all kinds of green energy. "The oil and gas industry actually likes hydrogen," he said.

Plug's loan has also been challenged by Sen. John Barrasso, a Republican from Wyoming, on the grounds that Jigar Shah, the head of the Department of Energy's Loan Programs Office, has a possible conflict of interest. Shah previously worked at Generate Capital, an investment company that had given Plug a loan.

In response, the Loan Programs Office said that Shah divested his holdings in Generate Capital, and that the loans are given out through a rigorous multistep process; the director can't personally pick and choose the winners. Marsh said that loan approval involved a "very, very disciplined process with many, many steps -- somebody wasn't snapping a finger for me to make things happen."

Hydrogen is used widely today in industrial applications in the U.S., including in the oil industry, but almost all of it is made using "dirty" processes involving natural gas. Plug is one of the few companies that is making a cleaner version that could be used to power vehicles and industrial applications.

In Rochester, New York, Plug makes equipment called electrolyzers that split water into hydrogen and oxygen. It owns factories in Georgia and Tennessee that use electrolyzers to make hydrogen and send it to companies.

Its customers include Amazon.com, Walmart, and Home Depot. Hydrogen can be used to power machinery such as forklifts at warehouses.

Plug has faced serious financial difficulties in the past, and is still a money-losing enterprise. Demand for clean hydrogen, which is costlier to make than the dirty version, simply isn't strong enough yet.

In 2023, Plug was losing so much money it issued a "going concern" notice that raised doubts about its ability to keep operating, but it resolved that going-concern issue last year. Analysts expect it to lose more than $500 million this year.

Marsh says that Plug has raised enough money to cover its cash needs, and expects to produce positive earnings before interest, taxes, depreciation, and amortization, or Ebitda, by the second half of 2026. With a tax break worth as much as $3 per ton from the Inflation Reduction Act, he says clean hydrogen's cost is now on par with the dirtier version. He also expects Plug's government loan to serve as a seal of approval to other lenders.

Plug will be paying a below-market rate on its loan. It is getting a Department of Energy "loan guarantee" that also involves a direct loan from the government's Federal Financing Bank.

The lending program gives borrowers an interest rate that is at a modest premium to Treasury rates, and is lower than they could get on the open market. Convertible debt that Plug issued in March at a 7% interest rate was recently trading at 97 cents on the dollar. Marsh said the rate on the government loan will be at most 6.5%.

Write to Avi Salzman at avi.salzman@barrons.com

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January 17, 2025 10:41 ET (15:41 GMT)

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