Fuel cell energy producer Plug Power (NASDAQ:PLUG) is facing new regulatory scrutiny. Republican Senator John Barrasso has requested that a federal loan the company received in May 2024 be investigated. A ranking Republican official and member of the Senate Committee on Energy and Natural Resources, Barrasso alleges that the $1.7 conditional line of financing from the U.S. Department of Energy is a conflict of interest that poses a threat to U.S. taxpayers. PLUG stock surged after the company secured this new funding package, but today, it is falling sharply on news of the Senate probe.
What This Means for PLUG Stock
Despite operating in a fast-growing industry, Plug Power has struggled significantly over the past year. PLUG stock is currently down 34% year-to-date (YTD) after a year of battling high volatility. It hasn’t traded above the penny stock line since November 2023. Now, news of this pending investigation stands to further compromise the struggling company.
In a letter to the Department of Energy’s Inspector General dated June 4, 2024, Sen. Barrasso laid out his concerns regarding Plug Power and its recent. His argument centered around Jigar Shah, director of the department’s Loan Program Office (LPO), and his previous role at sustainable infrastructure investment firm Generate Capital. Prior to his departure to join the DOE in 2021, Generate Capital provided Plug Power with a $100 million loan in 2019, which it fully repaid in 2022, while pursuing a loan guarantee from the DOE.
The senator speculated that the more recent loan to Plug could be a conflict of interest due to Shah’s history with the company, alleging potential insider knowledge. “Given the significant financial implications and the need to maintain public trust, a thorough investigation into the LPO’s conditional commitment to Plug Power is essential to ensure transparency and accountability within the LPO,” he stated.
Bloomberg reports that the Department of Energy has not responded to a request for comment on the allegations. However, while more details emerge regarding the potential investigation, PLUG stock is likely to continue struggling amid rising uncertainty.
Barrasso in Context
During his time as a senator, Barrasso has carved out a reputation as a staunch critic of the Department of Energy’s loan program, often ignoring their effectiveness and necessity. As Bloomberg opinion columnist and energy expert Liam Denning stated:
“Back in 2018, Barrasso penned an op-ed in the New York Times arguing against a carbon tax. At the time, I pointed out that the senator only grudgingly acknowledged the problem of climate change and called for “innovation” to solve it but without resorting to taxes or international agreements. Yet, as with any industry, you only get cleantech investment if you put a value on its benefit; namely, reducing emissions. Since the US abjures effective carbon pricing — the more efficient method — federal policy to encourage decarbonization centers on subsidies, including LPO loans.”
Additionally, Barrasso has received considerable campaign funding from the oil & gas industry, which stands to benefit from fewer innovations from companies like Plug Power. Data from OpenSecrets.org shows that between 2017 and 2022, he received a total of $657,587 from that specific industry. During the current election cycle, he continues to be a top funding recipient from industries such as coal mining, natural gas transmission & distribution and oil & gas.
The Wyoming Senator has made it clear how he feels about the U.S.’s clean energy transition. As of now, it remains unclear if his stance against it is playing a role in his quest to have Plug Power investigated. How much this pending probe will impact PLUG stock will depend on how the DOE decides to proceed.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
