Shares of Plug Power (NASDAQ:PLUG) are up 4.5% today after the company announced an agreement with Walmart (NYSE:WMT).
Hydrogen fuel cell turnkey solutions provider Plug Power agreed to deliver up to 20 tons per day of liquid green hydrogen. Walmart will use the hydrogen to power its power material handling lift trucks across its fulfillment and distribution hubs in the U.S.
The move marks another Walmart’s effort to incorporate alternative zero-carbon energy sources in its supply chain. The deal also represents one of Plug’s first green hydrogen supply contracts.
“Walmart has been an early adopter of innovative hydrogen and fuel cell technology for over a decade, and our hydrogen-powered solutions offer a tool to enhance productivity improvements for Walmart’s operations,” said Andy Marsh, CEO of Plug.
Plug Power produces green hydrogen through the process of electrolysis of water, using electricity generated from zero-carbon sources. The process represents an affordable and clean way to produce green hydrogen, which will be delivered to Walmart via liquid transport solutions Plug gained from its purchase of Applied Cryo Technologies.
BMO analyst Ameet Thakkar weighed in positively on the announcement, which is described as an important positive first step.
“Walmart's agreement is positive, but we are curious about what sort of pricing mechanics (index vs fixed) and other contractual terms that will allow investors to get more confidence around potential for PLUG to achieve its target 30% gross margins in fuel supply agreements such as this,” Thakkar said in a client note.
“We would expect to see additional agreements given remaining open supply implied by PLUG's 70 tpd 2022 exit rate and plans to grow production to 500 tpd by 2025.”
PLUG is Market Perform-rated at BMO.
By Senad Karaahmetovic