Paul Middleton, CFO
No, Plug Power does not print money, but we did have a very specific strategy when we raised the recent equity round of financing. The raise was done as part of a series of transactions to enhance our liquidity profile, and have us exit 2016 in a strong position for continued growth in 2017 and beyond.
The initial phase of the strategy had us raising $30 million in a two-part equity transaction. The first part was in common stock, and the second was in preferred stock. The reason for this structure was to give us the ability to redeem, rather than convert, the preferred stock. The result was the flexibility on how we manage our cash while minimizing dilution to shareholders.
The second part of the strategy, enabled by the equity raise, was the redemption of the existing senior debt that was in place at the time. Even though this debt was relatively light on financial covenants, it did contain a provision requiring a minimum cash balance of approximately $20 million, which ultimately constrained the way we were running our operations as we continue our growth.
Finally, we replaced the old senior debt with a new debt facility from the NY Green Bank. The Green Bank debt is covenant-light, and does not have the minimum cash restriction. It was structured to leverage our existing restricted cash balance, allowing us to repay the loan as those balances become available to us over time. The NY Green Bank is supportive of Plug Power’s plans, and their capital and structure gives us the flexibility to execute on our strategy for continued growth.
The math is simple – by executing on the strategy described above, we were able to turn the $30 million equity capital raise into nearly $50 million of available liquidity to continue to grow the business, all while retaining flexibility to minimize dilution to shareholders.
On behalf of the entire Plug Power team, we wish you all a very Happy and Prosperous New Year!