Plug Expects EBITDA Income in 2014 as Orders Quadruple

Plug Power Inc., the fuel-cell system maker that’s the best performer on the Nasdaq in the past year, said operations will come closer to a profit this year as orders quadruple and production costs decline.

The company expects orders of more than $150 million this year for its fuel cell-powered forklifts, almost four times the 2013 total, Chief Executive Officer Andy Marsh said in a statement today. He forecast a profit for 2014, before interest, taxes, depreciation and amortization.

Shares of Latham, New York-based Plug and other fuel-cell companies Ballard Power Systems Inc. and FuelCell Energy Inc. have surged as investors recognize their technologies as a viable alternative source of energy. With demand increasing, Marsh is seeking to cut production costs to ensure higher revenue translates into profits. The company currently buys fuel-cell stacks from Ballard, and plans to source the components from a second supplier and also begin making its own this year.

“Our own stack production will reduce costs,” Marsh said today on a conference call. “People will be surprised where we are on cost in the fourth quarter.”

Plug’s costs have declined by 10 percent to 12 percent a year, and Marsh said that will continue in 2014.

Cost reductions and expanding production will help boost gross margin to more than 30 percent in the fourth quarter. That will lead EBITDA of $1.5 million to $3 million for the year, Marsh said on the call. Revenue will more than double to $70 million from $26.6 million in 2013.

Fuel Cells

Fuel cells use hydrogen or natural gas to produce electricity through a chemical reaction. The technology has been under development for years, and Plug and its peers are starting to report growing commercial sales.

Wal-Mart Stores Inc. agreed last month to buy more than 1,700 of Plug’s forklift systems for six North American distribution centers. Revenue from that order will begin in the second quarter, Marsh said on the call. He also announced a new order, signed yesterday with an unidentified U.S. auto manufacturer.

The shares climbed 18 percent to $8 at the close in New York. Plug’s market value has increased fivefold this year.

Some investors are skeptical of its valuation, driving Plug’s short interest to more than 10 percent of shares outstanding yesterday, according to data from Markit Group Ltd., a London-based research group.

Plug shares plunged 42 percent on March 11 after Andrew Left, an executive editor at Citron Research and a self-described short-seller, said in a report that he was critical of the company’s forecasts and that the shares are worth 50 cents.

He also raised concern that Plug’s sales will slow when a federal investment tax credit for customers that use its systems expires in 2016.

“We’ve always assumed it would go away in 2016” and the company is preparing for it, Marsh said on the call.

Plug’s net loss in the fourth quarter widened to $28.9 million in the fourth quarter from $8.47 million a year earlier, mainly from $20 million charge related to a change in the fair value of previously issued common stock warrants. Excluding the charge, the loss narrowed to $8 million, or 8 cents a share, from $9.59 million, or 25 cents a share.

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