Andy Marsh: Go ahead, Sanjay.
Sanjay Shrestha: Hey, Andrew, how are you. So look, I think we’ve actually had this conversation on our last call as well, right? So this has obviously been a very core to our strategy in terms of identifying the location. And as you can imagine, it’s going to be really region-by-region basis, right, in terms of where do you want to go, how do you want to allocate, where do you want to put the plant. When we think about building this green hydrogen generation network, not just a plant, but the network in North America, we’ve always said we want to go to a location where there is going to be either an existing player we can work with that’s pretty far along from a development standpoint that can provide us with that green electron at a price where economics make sense, right?
And in that green electron, you should think about, obviously, solar, wind complemented with nuclear and hydro. That’s how we think about it, right. And today, as you rightfully pointed out, Georgia, pricing is looking pretty attractive for us. New York, we’re getting a lot of hydro allocation for that. Texas, I’m glad we signed the PPA, what we did based on some of the comments you’re making. So we — you should think about this as like we’re looking at the West Coast, where we believe that you can actually get some hydro as well as solar power in terms of the location of where we build the next plant from a network standpoint. That we’re also looking at an opportunity in the middle of the country where you might be able to access low-cost attractive nuclear power.
We’re also looking at somewhere between that middle of the country and the West Coast, where they are really doing a lot of solar, wind development as well in that region. Don’t be surprised if there is a plant number two and three in Texas as well. We can obviously always expand our existing footprint and the presence in Georgia as well. But look, I mean, I think on this power pricing, given everything that’s going on, you are right, there is probably some inflationary pressure here. But let’s not forget, right, as the supply chain comes back in line, as the rates do what they do, levelized cost of electricity, it’s not just one faceted situation, right? You’ve got a variety of different things. And directionally it should continue to go down while there might be some disruption on a short-term basis, and this is a long game at the end of the day, right?
If there is a situation of where the power prices went up over the next six months, we will more likely wait to make sure that it is normalized before we really go down the path of doing anything. But today for us to accomplish what we’re looking to accomplish, we certainly have tentacles in a lot of different locations where we don’t feel like there is any need to change our strategy in terms of what we’re trying to do. Would you like to add anything to that, Andy?
Andy Marsh: Yes, I would just say that if you listen to Craig’s comments and questions, you listened to what the price we’re paying in Georgia, what the price we’re paying in Texas, what the price will pay in New York, I think it’s incredible differential advantage that we already have these contracts in place to allow us to do future — for our future expansions over the next couple of years. So I actually think it makes me feel pretty good.
Sanjay Shrestha: Andy, this is one of the key benefits of the first move.
Andy Marsh: Yes.
Andrew Percoco: Got it. Understood. I guess just to follow up on that, do you have any excess power supply kind of banked already or transmission access banked already or for additional projects beyond Texas and New York or would you be kind of starting from scratch on those additional facilities?
Sanjay Shrestha: So we’ve been in this development journey now for over three years, Andrew, right. So nothing is really for us in terms of what we’re thinking about the new build and the new opportunities starting from scratch, right. Now having said that, have we secured a PPA for opportunity in the West Coast. Look, I mean, this is — depends on what kind of power you’re looking to get, what kind of opportunity you’re looking to get, right? You can think about California, you can think about Arizona, right. Arizona is probably the likely location where we’re really trying to figure out what’s the best model that works. So like in case of Georgia, we already have additional power allocation if we wanted to expand that capacity.
Texas, you know very well. There are reasons in Texas where you can still get fully attractive renewable electricity, right. So nothing is from scratch, but in the level of activity, I wouldn’t say is completely buttoned up, but it’s far along enough that it really gives us a view on multiple new plans, where we think what our input cost is going to look like that really gives us that arbitrage and the profit margin opportunity while continuing to drive the cost of hydrogen there.
Andrew Percoco: Understood. Thank you.
Sanjay Shrestha: Sure.
Operator: Thank you. Our next questions come from the line of Amit Dayal with H.C. Wainwright. Please proceed with your questions.
Amit Dayal: Thank you. Good morning, everyone. Most of the questions have been answered.
Andy Marsh: Hey, Amit.
Amit Dayal: Hey, Andy. How are you?
Andy Marsh: Okay.
Amit Dayal: Yes. I mean just have some adjacent questions to things already discussed. Starting with maybe the sales mix for this year. Excluding fuel and other services, just on the equipment side, material handling versus other hardware offerings for ’24, what the sales mix would look like? And then how that changes in ’25 and ’26?
Andy Marsh: So, Paul, I’ll take an initial shot at this, and I’ll let you answer. I would expect about one-third of our business of 35% will be material handling, probably about 30% will be electrolyzers, probably 10% to 15% hydrogen and the remaining will be associated with liquefaction and other cryo business.
Amit Dayal: Understood. Thank you for that. And does this remain similar in 2025? Or do you see sort of other parts of the business outside material handling like ramping more aggressively?
Andy Marsh: Yes. I think, Amit, we think electrolyzers will be the biggest part of our business come 2025. And that I would expect our liquefaction business to grow in ’25 to be a larger percentage.
Amit Dayal: Okay. Thank you. And then maybe for Paul, yes, so maybe for Paul, just from an operating cost perspective, Paul, like what should we sort of assume on a quarterly basis going forward, 2Q onwards for the rest of 2024?
Paul Middleton: Yes. So our OpEx run rate, we expect from last year to this year to be down for a host of reasons. And one of the biggest drivers is the cost reductions that we’ve been focused on. A lot of the things we did in Q1, we’ll benefit that. So I would — I think a good proxy is about, let’s call it, $120 million to $125 million on a quarterly run rate going on through the balance of the year.
Amit Dayal: Okay. Thank you. That’s very helpful. That’s all I have guys. I appreciate it.
Andy Marsh: All right.
Operator: Thank you. Our next questions come from the line of Skye Landon with Redburn Atlantic. Please proceed with your question.
Andy Marsh: Good morning, Skye.
Skye Landon: Hi. Good morning, guys. Firstly, we recently had the results from the EU Hydrogen bank auction where we saw what were lower-than-expected winning bids. I’d be interested to hear your thoughts on the results because on one hand, it’s great to have a low figure as this kind of provides higher electrolyzer capacities. But on the other end of the things potentially adds more risk to projects reaching FID. So do you think the subsidy is enough? Or would you actually prefer to see a higher subsidy level, but with less capacity awarded? And then related to this, if you could provide any commentary on your involvement with any of the winning bids and projects there, that would be great as well. Thanks.
Andy Marsh: I would just say, Skye, yes, we would have liked to see the prices higher. Sanjay, you’ve been involved and maybe you can talk about our customers. I know some of our customers were successful.
Sanjay Shrestha: Some of our customers have, but I think, Andy, this is still an evolving process. So I think look, we’d love to talk, as you rightfully pointed out, right, I think this is an evolving process. Look, I think like an energy industry subsidies should be fair even to every piece of the energy industry. So we want to see how it all unfolds and maybe not get into the customer specifically at this point in time.
Andy Marsh: Yes. I think that probably is helpful. I know that doesn’t help you. But Skye I think that is — I think that’s the general consensus of us in the hydrogen industry.
Skye Landon: Fair enough. No. That’s good color. And then maybe on the 20 electrolyzer systems that you’re currently, I guess, commissionings currently undergoing on. Are you able to put a capacity figure on this? And then also while I’m sure there’s differences on a project-by-project basis, can you share a little bit more about the process involved to kind of get the site acceptance and the process of getting some of the equipment sites and a process that needs to go through in order to actually reach revenue recognition? Just so that we can get a bit more clarity around exactly how this works.
Sanjay Shrestha: Absolutely. And look and this is something we’ve obviously been spending a lot of time and very fair question, Skye, right? So the breakdown here of all this commissioning effort that’s going on it, it is actually — there’s over 20 5-megawatt system, okay. And just to put that in context, all of that is not Q2, it’s throughout the year. but there’s over 20 5-megawatt system that we’re actually going through commissioning phases, making sure that the customers are ready, and there’s over 20 1-megawatt system. And as we just touched on it, right, there is also some large-scale projects that are continuing to go through fabrication, and upwork, rectifiers and things like that. But here is the key when it comes to going from — so you’ve got a couple of process, right.
You do a factory acceptance test. When the system leads the factory. And you don’t — depending on the situation, sometimes you produce how much hydrogen is produced in that factory acceptance test depends on whether it’s a 1-megawatt system versus a 5-megawatt system. And the key to actually get the site acceptance test is make sure that you have stack performance buttoned up in terms of what the turndown of that stack needs to be like make sure that all the compliance and the documents are ready to go. That’s another piece. And finally, what it really comes down is have you produced enough hydrogen at the specification for that site. And that’s really the final piece before you do the handover and say, all right, we’ve completed the site acceptance test.
That’s really what it comes down to.
Skye Landon: Just a follow up on that. Would it be fair to say that some of these — some of the sort of delays in commissioning is on the customer side of things as well rather than just on Plug Power side of things?
Sanjay Shrestha: Look, we always work hand-in-hand with customers, right? But the customer’s site also has to be ready. It’s not just our commissioning team and everything we do. You’re absolutely right about that. And look, there are some situation where some of those sites could end up being Q3 rather than Q2, but we have tremendous activities going on where the customer is also ready. And the team is really working hand-in-hand with them to be sure that we can do the handover and get the site acceptance tests done. But you are right. In some cases, there are things that customers need to do as well.
Skye Landon: Perfect. Thanks for the extra details guys. Cheers.
Sanjay Shrestha: Thank you.
