In a move which may send shock waves through the traditional motive power lead acid market, Plug Power, the Latham, New York, fuel cell manufacturer, has signed a multi-year contract with internet retail giant Amazon that includes the opportunity for Amazon to buy up to 23% of Plug Power.
Amazon will begin using Plug Power’s fuel cells to power its industrial equipment, including forklifts, in 11 of Amazon's fulfillment centres this year.
Plug Power said revenues from the commercial agreements are expected to be about $70 million in 2017. In addition, Amazon has acquired the right to buy up to 23% of Plug Power or 55,286,696 shares at a price of $1.1893 per share.
Under those terms, Amazon has to spend at least $600 million over the life of its contract with Plug Power to take full advantage of that deal.
Amazon and Plug Power will also begin further developing Plug's technology together, including expanding the applications for Plug Power's line of ProGen fuel cell engines.
It's all part of CEO Andy Marsh's plan to turn a profit for the first time in Plug's 20 years. Marsh came to Plug Power in 2008 and overhauled the business plan with a mission to make the company profitable. He spent the last nine years converting Plug from a research company into a manufacturer.
"It's an important step in the long journey," Marsh said in an interview.
"We have a good customer with Wal-Mart, and adding Amazon to our list of customers is important as both of them are deeply involved in revolutionizing delivery."
Plug Power makes fuel cells, called GenDrive, used to power forklifts in warehouses and distribution centers. Fuel cells are seen as an alternative to lead-acid batteries.
The company also offers hydrogen fueling stations called GenFuel to attract more recurring revenue. The full system is called GenKey.
Today, Plug has more than 14,000 fuel cells powering industrial electric vehicles for some of the largest companies in the world, including Wal-Mart, Home Depot, Nike and Carrefour, Europe's largest ‘big-box” store.
Plug Power is looking to diversify by finding new applications for its technology beyond material handling, including electric delivery vehicles.
That technology is being tested in Albany, where FedEx hybrid delivery trucks will soon go on the road with range extenders powered by Plug Power’s hydrogen technology.
The largest push for that technology will be in China, where its government plans to invest $100 billion into alternative technologies in the next few years.
Plug recently announced a memorandum of understanding with two Chinese companies to build technology for electric vehicles.
"Having Wal-Mart and Amazon is a good start," Marsh said. "We're ready to look beyond material handling."
Plug had $85.9 million in revenue in 2016. Marsh has a goal to increase revenue by 50 percent in 2017 to $130 million. Following the agreement with Amazon, he said the company is reviewing to see if it wants to change that guidance.