New Deals Cast Fresh Light on Plug Power

The worldwide green energy trend is a positive thing for the company, but it is doing its part

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Sep 07, 2022
Summary
  • Amazon signed a deal with Plug Power for 10,950 tons of liquid green hydrogen per year.
  • This deal isn't the first of its kind. Plug Power has already supplied Walmart's distribution centers with 20 tons of liquid green hydrogen fuel for its lift trucks.
  • Plug Power is facing some difficulty because of high-growth stocks diving this year, but the newer developments are a step in the right direction for a company looking to regain its mojo.
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Since the start of the year, growth stocks have taken a tumble. This is in contrast to value stocks, which have been rising. While many factors can contribute to this shift, one of the most likely reasons is investors are becoming more cautious. In times of uncertainty, growth stocks are often considered riskier than value stocks. As a result, investors may be selling off their growth stocks in favor of more stability. However, despite the general negative sentiment attached to growth stocks, Plug Power Inc. (

PLUG, Financial) is surging.

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Plug Power is a leader in hydrogen fuel cell engineering. These systems offer a clean and efficient alternative to conventional batteries, and they have the potential to revolutionize the way equipment and vehicles are powered.

In August, the company made headlines after inking a deal with e-commerce giant Amazon.com Inc. (

AMZN, Financial). Under the terms of the agreement, Plug Power will provide Amazon with 10,950 tons of liquid green hydrogen per year starting in 2025. Amazon will use the fuel in its transportation and building operations. In addition, Plug Power gave Amazon a warrant to buy up to 16 million in the company's stock. Over the seven-year contract period, Amazon will spend $2.1 billion on Plug products in order for its warrants to fully benefit.

The company expects the deal will help achieve its $3 billion revenue goal by 2025.

This deal is not the first of its kind. Plug Power also supplies Walmart Inc. (

WMT, Financial) with 20 tons of liquid green hydrogen per day for its lift trucks operating in the distribution and fulfillment centers. The deals bode well for the company as they will help build a reputation and attract more attention from other potential large-scale clients.

Plug Power is facing some difficulty this year, however, on the back of high-growth stocks diving. Regardless, the new developments are a step in the right direction for a company looking to regain its mojo.

Why are Plug Power shares making a comeback?

There is an increased focus on greener energy solutions around the globe, which will benefit Plug Power and other similar companies in years to come. The U.S. government wants to reduce the green hydrogen cost by 80% to $1 per kilogram by 2031. President Joe Biden has signed a bill to allocate nearly $370 billion to fight climate change. The EU is also working on green hydrogen and has developed a rulebook. There are concerns about using fossil fuel-generated energy for the electrolysis process, which may result in higher carbon emissions than gray hydrogen production. Lowering costs and addressing such concerns will boost the industry over the next decade.

Plug Power will also be one of the big winners from the $3 per kg clean hydrogen production tax credit in the recently signed Inflation Reduction Act. The company expects an incremental cash flow of $500 million annually at a rate of 500 tons per day targeted production by the end of 2025.

Going global

Plug Power's recent moves make it clear that it is not satisfied with only having a share of the U.S. market; it wants to be a global player. The company's expansion into new markets is wise, given the potential for growth in the U.S. market is limited. By expanding into new markets, Plug Power will be able to capitalize on untapped potential and continue to grow its business. The move into new markets is an important step in its journey to becoming a global leader in fuel cell technology.

The company is making strides both in the Asian and European markets. It is establishing a 100-megawatt green hydrogen plant in Port of Antwerp-Bruges, Belgium. The company aims to produce 12,500 tons of green hydrogen in liquid and gaseous forms. The plant will be completed in late 2024 and commissioned in 2025.

The company is partnering with French automaker Renault SA (

RNLSY, Financial) to produce a hydrogen-powered van and is also joining forces with Edison Motors of South Korea to manufacture and distribute its hydrogen fuel-powered buses.

Takeaway

Plug Power is one of the few bright spots in the stock market this year. While growth stocks have struggled, the company has succeeded thanks to a favorable external environment.

The company has seen a surge in demand for its products as businesses look for ways to reduce their carbon footprint. In addition, Plug Power has benefited from government incentives designed to promote the adoption of clean energy technologies. However, its new deals are also a positive development as they will help Plug Power to expand its customer base and continue its momentum in the coming months.

Plug Power is well positioned to continue its growth as the demand for renewable energy increases. Investors that are looking for exposure to the renewable energy space should consider the stock as a forward-looking investment.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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