Greetings, and welcome to the Plug Power First Quarter 2021 Earnings Conference. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Teal Hoyos, Director of Marketing Communications. Thank you. Please go ahead.

Thank you. Welcome to the 2021 first quarter update call. This call will include forward-looking statements. These forward-looking statements contain projections of our future results of operations or of our financial position or state other forward-looking information. We intend these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We believe that it is important to communicate our future expectations to investors. However, investors are cautioned not to unduly rely on forward-looking statements and such statements should not be read as a guarantee of future performance or results, as such statements are subject to risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including, but not limited to, risks and uncertainties discussed under Item 1A Risk Factors in our annual report on Form 10-K for the fiscal year ending December 31, 2020 as well as other reports we filed from time to time with the SEC. These forward-looking statements speak only as of the day in which the statements are made and we do not undertake or intend to update any forward-looking statements after this call or as results of new information. At this point, I would like to turn the call over to Plug Power’s CEO, Andy Marsh.

Well, thank you, Teal and good morning, everyone and thank you for attending our first quarter conference call. We issued our investor letter this morning, which covers our performance for the first quarter. I’d like to comment on a few items before we take your questions. First item I’d like to highlight is the importance of the resilient green hydrogen network the company is constructing across the United States. We are presently targeting to have 500 tons of green hydrogen available by 2025 and an additional 500 tons globally by 2028. The network in the U.S. will go coast to coast with sites already targeted for Camden, Georgia to serve specifically Florida; a site outside Lancaster, Pennsylvania; a site west of Fort Worth, Texas; a site in Upstate New York in Genesee County. At the 45-ton plant in Genesee County, New York, the feedstock will be clean electricity generated from Niagara Falls. This will be the largest green hydrogen plant in the world. What’s important about our plants is there is pent-up demand for green hydrogen solutions among our customers today. Over the last few years, our value proposition has expanded beyond improving our customer operations and now tightly inclined with companies achieving their CO2 reduction goals. There are many applications beyond material handling like stationary power, on-road vehicles, and other industrial offerings that can only be decarbonized with hydrogen, but to truly decarbonize green hydrogen is required. Our network will not only offer the revenue and margin opportunity, but what I really think about, it’s an accelerator of all our products, both fuel cells and electrolyzers. Customers want green hydrogen and Plug Power is making that commitment to deliver. One of our distinct advantages in building our network is, unlike the industrial gas companies, we do not have existing fossil fuel-based assets. We don’t have to worry about stranding multibillion dollars of investments. This is an impediment to some companies as they seek to decarbonize their car in the middle supporting gray or blue hydrogen assets, which are not wanted by companies, governments, or the environmental community. Our network is the hydrogen network for the 21st century, and it is just starting, and not only will we be delivering green hydrogen, but we will deliver it in vehicles that operate from green hydrogen. Plug Power by the way fuels cells in those vehicles. Another subject I would like to highlight is that Plug has become a global company overnight. Two obvious examples are our joint ventures with Renault, HYVIA, and our relationship in the joint venture being established with SK. Another example of our global efforts is our funnel for the electrolyzer business is already in the billions of dollars, with over 80% of the opportunities outside North America. The funnel for vehicles is also similarly distributed and our activity in material handling is rapidly growing in New York [ph]. In 2020, the company was almost exclusively an American company in both sales and opportunities. But over the past 6 months, the company has been transformed into a global enterprise. And kind of thinking about questions you are going to ask, and finally, we are almost at the end of the second quarter and we can provide some insights on our progress. Investors should expect $115 million to $120 million of gross billings for the quarter. This is approximately 40% of our target revenue of $475 million for the year, usually at this point in the second quarter where about 33% of our annual revenue will have been achieved. We are at a run-rate that is higher from both a revenue and growth rate level than we have experienced in the past. We also foresee a very strong third quarter. We are pleased with this level of progress so far this year. So we are now ready – Paul and I are now ready to take your questions.

Thank you. [Operator Instructions] Our first question is coming from Colin Rusch of Oppenheimer. Please go ahead.

Thanks so much, guys. Can you talk a little bit about the contract – Andy, it’s always great to hear your voice. Can you talk a little bit about the sales process for the green hydrogen? Obviously, there’s a lot of moving pieces on the demand side from the truck building perspective and availability plus route codification and whatnot. But can you talk to us about where you are at with your customers in terms of preparation to really roll out fleets and move towards a zero-emissions structure for the businesses?

Sure. So, Colin, I think the first item is that one of the unique advantages Plug has, is that we have demand for our hydrogen products today. So, the qualification process for the purity of hydrogen is relatively straightforward, and we don’t see that as an impediment at all. As you know, we are already in the hydrogen delivery business and logistics business, and we will have, by the beginning of October, 10 tons of our own capacity. So, that’s really not an issue. So, when you start taking a look at it, I think during the second half of this year, you will see a number of commitments for our green hydrogen plants. And I would expect by the end of the year, about 40% to 50% of the demand by 2025, we will already have in the sales funnel and most of that will be tied to present applications.

Perfect. That’s incredibly helpful. And then with the aerospace opportunity here, it’s the first time we have seen some real articulation around timeframes and opportunities here. But obviously, that’s a very large opportunity that’s incremental to what you have got in your guided plans that you have stated in the past. Could you talk a little bit about potential partnerships, strategic positioning on that opportunity as you go forward, and how we should think about the cadence of news flow coming out?

Yes. So, I am going to give you a long answer, Colin, I am sorry. I kind of position aerospace in the kind of three buckets. One, I think very, very short duration flights, batteries will be an interesting choice for customers. I think for the majority of flights where regional flights and transcontinental flight category falls, and I think hydrogen will be an interesting solution both with fuel cells and using present internal combustion engines. And I think when you start talking about long range, I think a sustainable aviation fuel will have a place in the market. With Plug, in 2025 with universal hydrogen, we will be doing the first deployments of converting regional planes for power prop planes to fuel cell power. I think that’s a real interesting opportunity. I think -- we think a lot about – we are talking with many of the major players who are thinking about how they go about deploying both the small players and many of the new emerging companies about how they can source green hydrogen. I think that many people would conclude that the pathway for aviation, which represents 3% of CO2 reduction, hydrogen will be the most significant player in that industry. I think it will grow gradually between 2025 and 2035. And then I think by 2035, it may start having certainly a dominant position for all new planes coming off the line. I am going to add one last item, Colin. To me, it’s also my technology deployment – the technology development platform. If you think about what a plane needs, lightweight, high-power density, simple storage, all those are applicable to on-road vehicles. And that also is – it’s more to me than just the market. It’s also how we develop technology simultaneously as we develop new markets.

Perfect. Thanks. Super helpful. Thanks so much.

Okay.

Thank you. Our next question is coming from James West of Evercore ISI. Please go ahead.

Good morning, James.

Good morning, Andy. Hey, Andy, how are you?

Okay. How are you?

I am doing well. Andy, some of your pedicle customers like Amazon, Walmart have announced pretty aggressive decarbonization plans, and I suspect that’s driving a nice pickup in your activity with them. Could you perhaps describe kind of how those plans are playing into your business and their greater adoption or further adoption or further penetration into their various facilities?

Sure. So, many of these activities are starting today, as you mentioned, James. And I guess, I’d like to start out by just kind of discussing what does the future distribution center look like, which is not too far from being a reality because we are doing work on all these items today. One of the real advantages – and by the end of the year, we will have over 170 fueling stations and hydrogen storage at customer sites that the hydrogen already is there, which is a huge advantage. And when you look at the different applications from material handling, from powering robots, leveraging the same platform we have for drones from fueling stations, and we are modifying the outdoor dispensers. We have some of our customer sites for on-road vehicles today. Obviously, those on-road vehicles will be using Plug Power green hydrogen to fuel their vehicles, coupled with the fact that when you go look at things like how do you backup a facility, we’ll be doing some backup deployments this year, i.e., for our stack of stationary products through backup distribution centers, again, since the hydrogen is there. So, you start thinking about all that, and then even going further back in the chain, we have the ability to generate that green hydrogen. So obviously, the discussions with our customers have intensified. We are working through some rather large plans with many of our major customers how to be deploying green hydrogen, not as some long-term goal but as some near-term goal to help them support their decarbonization efforts.

Okay, okay. That’s very helpful. And then, Andy, when you and I were talking late last year, as you kind of alluded to in your opening comments, you were more of a domestic company and now you are global. So, I am curious how you and the rest of the team thinks about this global rollout and the execution of becoming -- what’s going to, I think, be a very, very large global company. How do you think about it from a – just a personnel standpoint, from a logistics standpoint, from a facility standpoint? I mean there is all kinds of things to think about, but how are you guys planning for this?

Sure. So, that’s a long question. And so, James, I am going to try to use – I am going to try to use Europe as an example.

Okay.

And in Europe, I think we have two efforts. We are working to do some activity with partners and we are working to do some activities alone. If you think about it, the two largest economies in the EU, France, and Germany are really where we are focusing a good deal of our retention. The Renault JV provides us an opportunity to have a home in France. That’s much broader than just the vehicles we are putting on the road, but we will be building the infrastructure and providing the hydrogen to support those activities in France. And that JV, we have a number of Plug Power employees who happily or voluntarily go to France to support that activity and really help build up that enterprise as rapidly as possible. We are opening a business center outside Dusseldorf, Germany to support the German market, which will primarily be focused on our electrolyzer business because of the huge opportunities there. We are staffing – we have a pretty fairly strong sales team in Europe, and we are staffing service and application engineers to really support that effort to grow that business. And then when you go down to the Iberian Peninsula, we have a nice position as you know with ACCIONA, and we expect to close that JV in the third quarter where we are targeting 20% of the green hydrogen, which will support both our Renault activities and other activities we have in material handling elsewhere going on in Europe. I think one of the key items is it’s really kind of a mix of how you successfully leverage partners, how you successfully leverage relationships. And we obviously can’t do it alone to grow this rapidly, but finding the right partners, right relationships, and deciding which items we will pursue on our own. And so, that’s really how we are thinking about it. And if you look globally, from a facilities point of view, there certainly will be a gigafactory in France supporting the JV as well as maybe some other activities as well as in South Korea with SK.

Okay. Makes sense. Thanks. Andy.

Thanks, James.

Thank you. [Operator Instructions] Our next question is coming from Craig Irwin of ROTH Capital Partners. Please go ahead.

Hi, good morning and thanks for taking my questions.

Good morning, Craig. How are you today?

I am absolutely fantastic.

Let me ask you, are you in London?

No, I am not in London. I am still in the U.S. We are doing our virtuals London this week, but hopefully we will see you in London next year, Andy, as we did 2 years ago, so...

That’s great.

It’s a busy day. Looking forward to the meetings with you later on today. So thank you.

Yes.

So, my question, right, is in the last year it became really obvious to the market, the broader market that customer and government interest and support for the adoption of a hydrogen economy is really taking place, right. We have seen many different layers of the story developed considerably. You are even talking more in your release and on the call today about the aviation market, which is one that I am personally a fan of, given how dirty aviation fuels are and the potential. Is there anything left for you to pursue? Is there anything you see as low-hanging fruit? You got trucks. You got data centers. You got cell sites. You got a future in aviation. Where can you fill out the portfolio?

Wow, that’s a great question, Craig. I think let’s move to the hydrogen front. And I do believe that there is real opportunities in green hydrogen for decarbonizing – helping to decarbonize the natural gas pipeline. We’re getting lots of requests for injecting hydrogen into pipelines. I think that there is opportunities in industrial applications like steel and concrete, where the hydrogen market could be – not the sexiest markets, Craig, but the hydrogen market could be really interesting. Now from an apps point of view, I think that if you think about areas, like we talked about airports, and ports in general, I think there’s large opportunities across the board to decarbonize our airports, which is ground support equipment, which is airplanes, which are the bands running around the airports. And I see most of our activity and expansion really has to do with how to think through fleet vehicles or ecosystems around airports and ports and other areas where all Plug Power products and capabilities can be deployed. That’s kind of how I look at it. And I kind of use as an example in the back of my mind is that a distribution center, we’re beginning to think about as I explained to before, as kind of a mini system where we can do everything to meet customers’ needs. And for those applications where fuel cells make sense, and there’s many where batteries make sense, we’ll be able to decarbonize. So that’s how I’m thinking about it. And you know what? There will be people who will think of – there’ll be apps and opportunities that pop up and talking to customers that, quite honestly, I haven’t even considered yet.

Understood. That makes a lot of sense. So my second question is about margins, right? So most investors that look at companies like Plug Power, companies with aggressive growth potential look at growth first, and they look at the longer term margin potential later. So you did a really good job in your shareholder letter laying out some of the issues in the hydrogen market, the force majeure events. Can you maybe describe for us what the longer term potential of green hydrogen offers to your margins and overall customer profitability, not just the environmental footprint, which is what a lot of people have been considering.

Yes. I think that’s a good – when you think about the full margin picture, Craig, the number that I think should tell investors we’re on the right track is the margins for products in the first quarter, which were 38% with all the challenges of transportation the world has seen. On the hydrogen front, we believe green hydrogen will be a 30%-plus gross margin business. And that the long-term, when you look at it it’s really – the cost is really tied to the cost of renewables. Our folks have done a great job like Sanjay finding low-cost renewables that make it attractive versus natural gas today. You have a better product in. You have a better offering. And with the deployment of our networks, and especially the resilient network we’re building, we’re in a much, much better position to support much higher margins for hydrogen. And I would like to add, which probably gets lost, is we’re actually really – when I look at the force majeures, logistically, we actually were able to manage that without impacting customers using our own logistics network and assets to make sure that customers are taken care of. To me, that was a significant achievement. So I think margins in green hydrogen will be in line with our product margins. And the service business actually performed up to our expectations for the quarter, and we’re beginning to see continued improvements. So that business should become a 30%-plus gross margin business. And look, we expect to be there across the board by 2024.

Great. My last question, if I may, is about the DOE loan guarantees you’re applying for. So it’s really nice to have a Department of Energy that, once again, is willing to lean in and support business transformation and the transformation of energy. Can you maybe talk to us about the process? Where you are in the process? And if there is maybe a potential for other capital projects that Plug will pursue over the next few years to be a recipient or at least apply for similar financing?

Yes. So Craig, we’re in the beginning of Phase 2 with the program. We got a lot of work. Actually, folks have told me we’re about halfway through Phase 2. And I think when we’re looking at this, it’s just not for one project. It’s actually the application is looking at three or four projects to deploy across North America to support all our networks. So, we are looking to do it at stages, but our thought process is somewhere between $500 million to $1 billion of support to build out these networks with low-cost loans.

Understood. Thanks again for taking my questions. Congratulations.

Alright. Thanks, Craig. Pleasure.

Thank you. Our next question is coming from Eric Stine of Craig-Hallum. Please go ahead.

Good morning, Andy.

Good morning, Eric. How are you today?

Doing well. Doing well. Thanks. So I just want to quick come back on the margins. And obviously, with the green hydrogen network you’re putting plans in place for the long-term. But just in the near-term, any thought – I know you’ve been asked this in the past, but any thought on potentially owning your own tanks, so you don’t have to necessarily switch hydrogen providers or that you’re able to buy hydrogen more cost effective rather than from one source?

Yes. That’s a good question, Eric. We actually do own probably – I’m going – Paul, what do you think. Third of our tanks at the moment?

Probably even two-third Andy. We’ve been buying tanks on our own. And even this transition, we move towards installing our own tanks. And so we haven’t rented a tank from one of the providers in years. And so I’d say, in a very short order, will be the majority of our locations will own our own tanks.

Yes. But I would say, Eric, that’s great, but also you need to be in contractual relationships with your partners, which the expectation is that they fill those tanks. I think that what I’ve been thinking more about, Eric, is actually our ability to pick up hydrogen at the sites at their facilities, which can help also drive down the cost of hydrogen. So if I think about our near-term containments, our plant in Tennessee is expanding and will be expanding on October 1. The supply issue has been relieved with the addition of 35 tons of capacity coming online, which is highlighted in our investor letter. And look, we’re obviously in negotiations to try to reduce our costs. It was with some of the severe conditions. It was a tough, tough quarter making sure customers got their hydrogen, and it caused the price to go up. That being said, prices are going down again, which is helpful. I think probably more important as we built out our network and I think the fact that we’re geographically spreading the network will have really positive impacts for us to control. I think in the next 12 months, life becomes much easier as more and more of our own capability comes online.

Got it. And I would assume that makes it easier to – you’ve got some leverage on the contract side.

I think that would be fair to say, Eric.

Okay. And then maybe last one for me. Just on the SK agreement, I know you’re working towards the joint venture and finalizing that in the second half. But just curious, given the significance of that market, what the pipeline looks like, any work that you have done in advance of closing that? And then I would, I guess, specifically on the utility scale power side, wondering the type of traction or the outlook you have there going forward?

One of the real advantage of the SK relationship is we expect that to be – by 2025 to have over 400 megawatts deployed with SK alone at their facility. So it’s a – we have a built-in customer with the JV partnership, which is really advantageous. So if you think about 400 megawatts, by 2025, you’re deploying in ‘24, that’s in the range of $400 million in revenue. We also have, not surprising, a good deal of activity going on in the electrolyzer business, but also with hydrogen fueling stations with SK because of their position. I know SK has huge, huge ambitions. We’ve had teams over there positioning material handling equipment already, working with some bus manufacturers and positioning ProGen with SK itself. And as you know, it’s a – as we’re talking here, I’m actually on the South Korean comp and also going to present at 9:30. This is really a high topic in South Korea, and we’re deeply engaged in with SK to really make this a big market.

Okay, thanks a lot.

Thanks, Eric.

Thank you. Our next question is coming from Jeff Osborne of Cowen. Please go ahead.

Hey, good morning guys.

Good morning, Jeff.

A couple of questions here. On the electrolyzer side, great to hear you were quoting billions of business, I think you said and 80% outside of the U.S. I was wondering if you could give us an update on when you thought some of those RFPs would come to a closure. When you might be awarded any business? Is that an event that you think will happen this year or more next year?

I can tell you, Jeff, I believe it will happen this year. And mainly because there are – they’re big opportunities, but there is probably four opportunities that I think we’re in a leadership position and that I would expect that very, very possible that they could close either at the end of the third quarter or early fourth quarter. And I would think we have an opportunity to close 500 megawatts this year with most of the deployments next year. So I’m really pleased. I think that many – yes, I think the combination of the fact that PEM technology can work from variable energy sources. And the fact that costs will – are coming down, will coming down, especially since we can leverage our gigafactory, I think that’s – they are all really promising signs for us.

That’s great to hear. And this would be leveraging that group in Dusseldorf that you referenced earlier, I assume, or no?

No, no. Actually, – we – the gigafactory, as you know is in Rochester. But we will be – for the European market, we do have a partner, and I think you’ll hear more about who will be supporting building the systems for within Europe. Look, we also have opportunities in places like Australia, New Zealand, India across the world to support different activities we’re engaged in.

Got it. That’s great to hear. Just a couple of other housekeeping questions. One, I saw the units sold for revenue, but can you give us the total units? Which would include the leased units for GenDrive?

Paul, I think you have it. Paul, I think it’s 13 80, isn’t it, Paul? I’ll let you take this one, Paul.

Yes. For the first quarter, it was 13 08 was total that got deployed in the quarter.

Got it. And then what’s the CapEx plan for this year and next, just given the bevy of announcements you’ve had, I just want to make sure we’ve got the right expenditure profile for ‘21 and ‘22.

That’s you again, Paul.

Yes. Well, I would say some of these long-lead items are a little tough to plan exactly when the money will be spent, but I would – I mean, just – I think $750 million this year and $750 million next year is probably a pretty good proxy, Jeff.

Got it. And last one, the stationary power, will we have our first deployment of that and live in the third quarter? I think that was your prior target for a data center backup.

We – I’ll say this, Jeff, Mike, we better, so yes.

Okay, good to hear.

Okay.

That’s all I have.

Great. Thanks, Jeff.

Thank you. Our next question is coming from Paul Coster of JPMorgan. Please go ahead.

Good morning, Andy.

Good morning, Paul. I think I will be talking to you later today, right?

I believe so. You’re busy man. So Andy, starting off with the near-term, obviously, the 2Q guidance is pretty encouraging. And 3Q, I think you said is very strong, whatever that means. It sounds like it’s incrementally better over 2Q. So perhaps you can elaborate. But what’s driving – what is driving the near-term demand? Is it the pedicle business or is it other stuff or perhaps you can just give us some color there?

So I think you know the answer to that is that primarily the pedestal business. And I think in the third and fourth quarter, you’ll see the electrolyzer business pick up significantly. But if I look at it, there are, today, five customers who really are driving the material handling business. The biggest point one is actually Amazon. There’s lots of new deployments with Amazon. Amazon is not only buying fuel cells, but electrolyzers from this. So that’s a huge – that’s a big part of our funnel, Walmart, Home Depot, GM. And we actually have a fifth customer, which I’ll tell you more about to assume when they let me announce that we’ll do over $25 million in the second half of the year with. So we’re feeling the businesses is really healthy. I mean the factory is packed. And I think that’s really the – I think the nice item is we’re beginning to spread that revenue across a larger and larger customer set.

Got it. You mentioned electrolyzers. So it sounds like some of the material handling sites will have electrolysis co-located? Is that a correct statement? And more broadly, as you look at that, I think you said billions in the funnel for electrolyzers. Can you give us some color on geography, on customer type? Is it centralized, decentralized? How big are the probable deployments in terms of, I don’t know, kilograms per day or whatever? So some kind of color would be helpful.

Sure. So Paul, if I step back, and this is a point that I probably should have made earlier in the call. We’re becoming better at bundling the offerings to really – the total system solution now incorporates our electrolyzer technology. And if I think about how we go in and sell today, it’s we can provide you the electrolyzer. We can provide you fueling stations. We can provide you the material handling equipment and the vehicles, especially in Europe. And that ability to bundle is actually probably what attracted both Renault and SK to work so closely with Plug Power. Now when I look at the deals, if I was going to spread out geography, many of the sites are, call it, 250 megawatts and above range. A lot of the sites are – and they are – the big projects are really centralized sites. But often centralized sites, which may be spread around 3 or 4 different locations, that add up to a gigawatt. And if you think about 250 megawatts of electricity, you are talking plants, which are in the 500 tons. Good size – good-sized tonnage, hundreds of tons of hydrogen. So, I think very attractive. And I think that – I think that’s really the mix of sites. And from a geography point of view, you see in Europe. We are seeing it in Australia. We are seeing activity in India. We are obviously in South Korea. So, it’s really kind of a mixture across the board.

One last question, please. You said that 35 tons of hydrogen is coming online to supplement that, which was previously available, and you have seen disruptions. Why wouldn’t – is this gray or blue hydrogen? And is it subject to the same kind of variability and risks as it’s – as the hydrogen you were previously consuming domestically?

Yes. Good question, Paul. It is gray hydrogen. And obviously, we want to transfer eventually to green. It’s not Plug Power, but it is coming off. It’s getting cleaned up versus the pipelines, which are tied to large-scale storage with caverns. So, I think the variability of that hydrogen is much, much lower.

Got it. Thanks so much.

Okay, Paul.

Thank you. Our next question is coming from Jed Dorsheimer of Canaccord Genuity. Please go ahead.

Hi. How are you Andy?

Good morning Jed.

Good morning. So, just 2 questions, I guess, first, it sounds like the contribution of revenues by end market is changing. Today, kind of first time, I am hearing you talk a bit more on aerospace or it sounds like that’s – so a bit of shift. So I was just wondering, does that change any of the projections? I think on May 10, you talked about sort of the $475 million, $750 million of $1.7 billion. Are those numbers still solid. Is it just what’s kind of the moving parts underneath to support the top line? And then I have a follow-up.

Yes, so – yes, Jed, they are our numbers today. $475 million is rock solid. And we are continuously looking at – we are in the $750 million, feel great about. I think we are spending – I think when we have the – we will have our Plug Power Symposium in September, and I hope you can attend. And I will give you not only – we will give you a much broader outlook not only what we expect for 2024 and 2023, but also kind of what the geographical and product mix will be.

Great. I hope you have the symposium – you should have it at – the electrolyzer, the gigafactory that would be great?

Yes. I think at the moment, we are scheduling NASDAQ, but I think we are debating that. So, you are voting on put it at the gigafactory?

Yes. NASDAQ is not nearly as exciting as being at a gigafactory.

I agree, Jed. That’s my vote, too.

So, just as a – I do have a follow-up, though. And as I hear, it’s interesting in terms of the European, particularly Germany and France, which really have paradoxical views on energy production. So, I am wondering how that – those conversations, particularly France being pronuclear and Germany being quite against Germany’s electricity prices being the highest of any first-world nation, I am curious, how does hydrogen play into that discussion? And how are the 2 countries thinking about Plug and hydrogen production? Is there a difference? And do you see a difference in scalability?

Yes. I think when you – first, I think that in both countries as well as the EU, I think there is a general acknowledgment that to decarbonize hydrogen is required and fuel cells are required. It’s why Jed, that with Renault – it’s the CEO, Luca, Renault tells me that every time you talk to a Minister in France, the first question is what are you doing with fuel cells and hydrogen. I think from a feedstock point of view, I think you are right. I think France is thinking a lot about how to leverage their carbon-free nuclear assets to be the electrical stock for feedstock for hydrogen. I think in Germany, I think folks are thinking more about their renewable curtailment as well as offshore wind as the feedstock for electrolyzers. So, I think both of them are very committed to fuel cells and hydrogen. I think there is a different view on what the feedstock should be based on their own internal infrastructure.

Does that have a different economic? I would think the impact – if I have a base load versus curtailment, while in one, I am solving a problem of a subsidized technology being the intermittency for the renewables. In the other, though, it would be lower-cost electricity prices. Does that change the dynamic in terms of the value proposition for green hydrogen or do you see it as net, the same?

Yes. I probably see it net. I mean, I think that underlying everything is where the cost of renewables are going. And that I think like the U.S., Europe has – and one has to be thoughtful about numbers that are put out there. I think both Europe and the U.S. strongly feel that hydrogen generated for renewables can be lower cost in hydrogen generated by natural gas. And certainly, it’s a journey. But it’s a journey that I think both nations, France and Germany, feel that it’s the best source – it will be the best source of energy for many, many applications. I mean, I think commercial vehicles, large-scale stationary, how you support these networks like ports. I think if you look and you hear these numbers, 20% of world energy from hydrogen, they really think hydrogen is really the solution to meet those needs.

That’s it for me. Thanks Andy.

Thanks Jed.

[Operator Instructions] Our next question is coming from Amit Dayal of H.C. Wainwright. Please go ahead.

Thank you. Good morning Andy. Good morning Paul.

Good morning Amit. How are you today?

I am good Andy, how are doing?

Very good.

So Andy, you mentioned 500 megawatts of potentially closing for electrolyzers this year and deployments next year? Is any of this in the current guidance for this year or next year or would this be incremental?

I would say some of it is in the present guidance for next year.

For next year?

Yes.

Okay.

It is in the current guidance for next year.

Okay. And you indicated another large customer. Is this a pedestal level customer? And maybe just in that context, are there any additional level – pedestal level customers in the pipeline?

So yes, this is a pedestal customer. It’s in the auto industry. And I – it’s a global auto manufacturer. And the answer to your question is, yes, especially in Europe, we have a number of pedestal customers, which are pending.

Thank you. And with recent increases in commodity costs, supply chain challenges, etcetera, has that impacted your CapEx executions?

Yes, it’s a good question. Paul, do you want to take a crack at that, I mean I look at our product margins, it’s – they have seen relatively very healthy. And Paul, maybe you want to comment on, I think, some of the construction work we are doing for the gigafactory. I think it’s such a modest proportion of what we are doing that it hasn’t been that impactful, but maybe you have some thoughts on that, Paul?

Yes. If you look at our history and even our projections outside of green hydrogen investments, it’s a fairly nominal percentage of sales. And so – but yet, the gig effect will be pretty impactful from a margin standpoint from many different facets. So, I don’t expect that it had a major impact on our product margins and I don’t anticipate it will as we go forward. In fact, the depreciation obviously is a GAAP effect, but the margin enhancement, will more than offset the depreciation impact because of it’s such a small percentage of CapEx to sales, respectively.

Understood. Thanks. And maybe just a high-level question, I don’t know if you have an answer to this. But why is the solution from you guys with the electrolyzers and all the other components versus just buying sort of 1 set of solutions. Like how much does that impact the customers’ IRR on these types of investments they make?

Well, I think that – I think that it really, I think, simplifies the process for them, Amit, to be able to go to 1 place and have someone put the whole solution together for them. I think that’s probably the most attractive part of this. I mean, I think in the applications, they see healthy IRRs, and then you kind of compounded with the fact that they are doing activity that really supports their long-term mission to decarbonize, be it 2035, 2040. I think being able to go to one person say, take care of all this, and having somebody who is an expert in all these technologies, I think, is a real differential advantage.

Understood. That’s all I have. Thank you, Andy. Thank you, Paul.

Alright. Thanks Amit.

Thank you. Our next question is coming from Chris Souther of B. Riley. Please go ahead.

Hey, good morning guys.

Good morning Chris.

So, the first piece I wanted to touch on was the fueling margins. You talked about improvements there in the second half and into ‘22 as some of these industrial gas partners are expanding capacity and then the longer term targets of about 30%. So, maybe you could just discuss when and where we see those breakeven levels as far as kind of positive gross margin? Is that really with some – the first 3 facilities are coming online, we will start to see that kind of switch over?

I think that – Chris, I think you will see gradual improvements, and you will see – I mean we will have some improvements with our own additional capacity coming online in October. I think you will start seeing that transition called mid-2022.

Okay. That’s helpful. And then you mentioned Amazon is now buying electrolyzer, which is great to hearing that 80% of the electrolyzer opportunities are coming from abroad. Can you maybe walk through the customer decision you are seeing between buying their own electrolyzers versus signing up for long-term hydrogen off-take agreements with the facilities you guys are building out? It sounded like Home Depot, Southern Company were more kind of in the off-take. But I am curious, is it really site-specific, geography-specific, customer-specific? How everybody is kind of looking at that kind of build it themselves versus buying it from you guys over time?

Yes. I think that’s a – if you look at it, as you mentioned, I think it’s a real mix. I think that there are companies that are building hydrogen networks in other parts of the world in which they are looking – their main business is selling hydrogen. I think that when you are looking at the smaller deployments – I have some activity going on in New Zealand, for example, which is smaller. There, people are more inclined to buy small-scale electrolyzers to support. I think most large enterprises that are called the Amazon, the Walmarts of the world, I think their primary focus will be they will want to buy green hydrogen from us. I think there will be opportunities where their facilities already have a low-cost renewable energy speed, which makes sense to use electrolyzers. But I think those who are in the – those who are, there are companies that we deal with who are primarily users of hydrogen, and I think they will want to buy hydrogen from us. And there are companies, which are primarily what I will call, want to be generators of – suppliers of hydrogen, and I think they will be more of our electrolyzer base. So – and then I think along the way, you will have a mixture of the two. But I think from a primary space point of view, that’s how I think it will line up.

Okay, it’s very helpful. Thanks guys.

Thanks Chris.

Our next question is coming from Tristan Richardson, who will be our final question for today, and he is with Truist Securities. Please go ahead.

Hi, good morning gentlemen. Thanks for squeezing me in.

Good morning Tristan.

Just a quick one, Andy, on stationary power, I appreciate the update on the order book or opportunities you are seeing this year, but curious about how that trends throughout the back half of the year and into next year. Can we see a stationary power customer become a pedestal customer over time or conversely, could you see a pedestal customer become a stationary power customer over time?

Yes and yes. And boy, Tristan, you asked a question, and you are going to get an hour into the call and you are going to get a new answer. We have over 100 customers in the funnel for the stationary products. And they range from large-scale data center customers, which can become pedestal customers, to folks who are present customers today, which are looking to back up their distribution centers with hydrogen since it’s already available. So, there is – I had every Monday, like most businesses, I do a review, and of each week of the quarter, I do – each week of the month, I do a different market, and it was our stationary products. And the funnel for that is astonishing, and many, many of those customers could become pedestal customers.

Helpful, Andy. Thank you. And then just a quick follow-up, I appreciate all the commentary on electrolyzer opportunity you are seeing. And just specifically in your letter, you noted deployments this year in New York, Georgia and Europe. But just thinking is there a way to think about how much of that is third-party versus deployments for your own internally?

So, those – so I guess you are talking about, Tristan, the green hydrogen plants we are building. Ultimately – and you used the word our own internal needs, the more that’s captured by our own internal needs for on-road vehicles and other applications that become significant. I would think that by 2025, about 75% of that will be consumed by our own internal needs, if not more. And when I say that, it’s hydrogen that we are selling to pedestal customers for all the applications that we are developing.

Alright. I appreciate it. Thank you guys very much.

Alright. Well, thank you everyone for joining our call today. I really appreciate everyone’s attention, and I really look forward to talking to everyone for the second quarter, which should be at late July, early August. So thank you, everybody. Bye now.

Ladies and gentlemen, thank you for your participation. This concludes today’s event. You may disconnect your lines or log off the webcast at this time and have a wonderful day.