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Plug Power and Hyundai Form Joint Venture

Plug Power and Hyundai Form Joint Venture
By: Micheal Kaufman
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Plug Power Inc (PLUG) announced yesterday that it has agreed to form a joint venture with Hyundai Hysco Co Ltd. The South Korean company is a steel supplier to Hyundai Motor Co Ltd (HYMLF).

The companies signed a non-binding memorandum of understanding (MOU) to facilitate the joint venture partnership, which has come about to develop and sell hydrogen fuel cells in countries throughout Asia, using Hysco’s stack and plate technology. With the MOU, the companies must finalize the fine print of the five-year joint venture by July 31 this year.

Hysco has a strong research center in South Korea founded for the purpose of providing cutting-edge technology and research on fuel cell systems and fuel cell stacks with an emphasis on low-cost stack plate technologies.

After yesterday’s announcement, Plug Power now has three alternatives to obtain its fuel cells, which can be used in power electric forklifts. The company aims to replace lead acid batteries in material handling devices with hydrogen fuel cells.

Currently, Plug Power buys most of its fuel cells from Ballard Power Systems Inc. (BLDP), another company engaged in the design, manufacturing, and sale of fuel cells. Plug Power added its second option for obtaining fuel cells, when the company acquired fuel cell stack-maker, ReliOn, in an all-stock deal worth $4 million.

The move to create a joint venture will further lessen Plug Power’s reliance on Ballard Power for key components of its fuel cell systems. It will also provide the company with an opportunity to enter the material-handling market in Asia, which, according to CEO Andy Marsh, is worth $10 billion.

Investors showed signs of optimism before the company’s conference call, with Plug Power’s stock price getting to an intra-day high of $8.37. After the conference call, however, in which the CEO provided a business update for the month of April, the same optimism rapidly faded away and the stock price closed in the red. At close of trading yesterday, the stock price of the fuel cell provider was down 4.2% to close in at $7.01.

On the other hand, the stock price of Plug Power’s leading fuel cell supplier Ballard Power increased 7.1% to close in at $4.05. Similarly, the stock price of Plug Power’s competitor, FuelCell Energy Inc (FCEL), increased 2.9% to close in at $2.52.

Flashback

Plug Power came into greater prominence when the company announced in late February that a deal has been reached with Wal-Mart Stores Inc. (WMT) to provide the largest retailer in the world with 1,738 GenKey fuel cells. Plug Power’s stock price skyrocketed after the news and speculation of more deals.

The stock price of the Latham, New-York based company reached five-year highs of $11.72 before a critical report by Citron Research published last month labeled Plug Power a “casino stock,” and referred to the same as a “speculative moonshot.”

Plug Power’s stock price, however, soared once more after a rather crafty announcement from its CEO, Andy Marsh. He declared that the company had managed to sign an additional deal with a North American auto manufacturer, and as a result, the stock price jumped 49% in a single day. The next day, a company spokesperson clarified that its CEO was just repeating what had already been announced in an earnings call.

Since the start of the year, Plug Power has been one of the best-performing stocks in terms of stock price appreciation. The stock price of the fuel cell provider has increased 330% year-to-date. Currently, however, Plug Power’s stock price is down 1.8% in pre-market trading.

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