Plug Power Looks to Future As It Regroups

Plug Power Looks to Future As It Regroups

Apr 19 - Associated Press

Like many of the dot-com companies of the late 1990s, fuel cell developer Plug Power seemed destined for high profits with its promise of clean, affordable energy for homes built in a booming economy.

And, like a lot of other Internet startups, Plug Power found its goals weren't so easy to attain. Once soaring shares have plunged and company officials aren't making any more profit predictions.

After spurring investor, government and public interest, hydrogen-powered fuel cells are still more than a decade away from becoming commonplace in homes or vehicles, government and company officials say. Plug Power is now paring expenses, securing government funding and developing products to generate revenue in the interim as it seeks to bring fuel cells to the mass market and regain the trust of investors.

"You have to tell investors what you're going to do and then do it," said Plug Power Chief Executive Roger Saillant, a former executive with Ford Motor Co. "We now have three years of our milestones being met. My experience has been to get an organization turned around in the shortest time possible."

Plug Power shares, offered publicly at $15 in October 1999, soared as high as $156.50, fueled by speculation and the rosy forecasts of company officials. But the executives' promises never materialized and the stock plummeted. It now trades at around $7.

The decline has been especially hard on small investors. The company, based in Latham, outside Albany, has 70,000 shareholders, with the average holding around 500 shares, officials said.

Former CEO Gary Mittleman predicted that by 2000, the company would be able to commercialize fuel cells for homes for about $3,000 and by 2002 would be producing 1,000 units a month.

Instead, the company has never turned a profit, losing $53 million last year. The company has made only a few commercial sales not supported by government grants.

Plug Power executives won't say when they'll be profitable or give forecasts for revenue. Instead, they've set goals for cutting manufacturing costs, improving their technology and finding sources of revenue.

"In the beginning, the company was suggesting it was going to have so many thousands of fuel cells for residential houses within some not-so-distant time. For us there was a lot of disappointment," said David Schoenwald, co-manager of the $46 million New Alternatives Fund, a mutual fund that invests in environmentally friendly energy companies. "Now they seem to be going about their business in a low-key manner."

Schoenwald's fund owns 25,000 shares of Plug Power.

In February, the company reported that cash used for operating activities in 2003 fell to $34.4 million from $36.9 million in 2002. The company has pared its work force to 320 from a peak of 550, said Plug Power spokeswoman Cynthia Mahoney White.

Plug Power has reduced the cost to manufacture a fuel cell system by more than 50 percent over the past three years while boosting reliability, executives said. The number of service calls for fuel cells going through tests has decreased to one a year from 20 in 2001.

Operating costs at Plug Power have been cut by about 50 percent over the past three years. More cost reductions will come through better design and increased manufacturing, executives said.

Last June, Plug Power began offering a small fuel cell designed to provide backup power for telecommunication centers. The 5,000-watt unit is being marketed as a replacement for batteries and executives hope they can make money on the product to keep the company going until its residential fuel cells are ready for the mass market.

The U.S. Department of Energy forecasts fuel cell vehicles won't be in vehicles in large numbers until 2020. Units used to power homes already hooked up to the electric grid probably won't be on the market until the middle of the next decade.

"Right now the technology is being proven," said David Jollie, editor of Fuel Cell Today, a London-based Web site that tracks the industry. "They're looking at cost and durability with very small numbers of units put in field. They still are looking for some market-driving force."

Plug Power still has powerful backers. DTE Energy Co., the owner of Detroit's electric utility, owns 19.4 percent of the company. Corporate behemoth General Electric Co. owns 7.8 percent.

In May 2002, the research arm of Honda Motor Co. and Plug Power announced plans to collaborate on research into home-based hydrogen vehicle refueling stations. That agreement was extended last month.

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On the Net:

Plug Power: www.plugpower.com

Fuel Cell Today: www.fuelcelltoday.com

Department of Energy: www.doe.gov