Plug Power Inc., the best performer on the Nasdaq, is looking for new markets where its fuel cells can take on fossil fuels. First on the list: refrigerated delivery trucks and airport support vehicles.
The company expects this year to report its first profit since its initial public offering in 1999 as sales grow for its fuel cell-powered forklifts.
Forklifts for the $20 billion material-handling market were never Chief Executive Officer Andrew Marsh’s ultimate goal. The ambition is to create an industrial ecosystem powered by fuel cells -- with forklifts as the first product to generate enough revenue to support the company. The U.S. Energy Department shares this view and expects to award $30 million in research grants this year, an official said yesterday at the Bloomberg New Energy Finance conference in New York.
“We had to find a market where fuel cells made sense, sufficiently large to build a business,” Marsh said in an interview at Plug’s headquarters in Latham, New York. “We focused on material handling because they needed a better product. It was never meant to be the end-all market for us.”
Growing demand for cleaner forklifts helped boost Plug shares more than ninefold in the past six months, the best return on the Nasdaq. The company expects orders to almost quadruple this year, to about $150 million. Those will go to companies including Wal-Mart Stores Inc. and Kroger Co. This year, Marsh expects to report positive income before interest, taxes, depreciation and amortization.
Now that he’s found a niche to sustain the company, Marsh wants to expand into new areas where fuel cells can compete with electricity from fossil fuels.
Fuel cells convert hydrogen or natural gas into electricity through a chemical reaction. The Energy Department also sees the potential of fuel-cell technologies in other applications, and plans to award $30 million in research grants for systems to power homes and businesses by September, according to Cheryl Martin, acting director of the Advance Research Projects Agency -- Energy.
“We’re hoping to get some really innovative applications,” Martin said in an interview at the Bloomberg New Energy Finance conference yesterday. “We want to push the boundaries of fuel-cell technology to improve grid reliability and resiliency.”
Plug developed a hydrogen-powered system that works as a drop-in replacement for the standardized lead-acid batteries that drive many of the currently available forklifts.
The appeal for warehouse managers is that fuel cells can run 24 hours a day, with short breaks to refuel with hydrogen when needed. Batteries need time to recharge, so either the forklifts are idle, or they each need a second battery, which take up valuable floor space, Marsh said.
The chemical reaction is also silent and has no carbon emissions. That makes them a good fit for refrigerated food trucks, Marsh said. Current trucks use cooling systems powered by diesel generators, which often must run even when the vehicles are parked. That can be a problem because some cities have noise ordinances aimed at restricting idling trucks.
Plug is working with the largest North American food distributor, Sysco Corp., and other existing customers and plans to demonstrate the systems this year. Commercial sales will begin in about 18 months, Marsh said.
“It’s more of a logistics play than fuel savings, but it’s a similar size to the material handling market,” Marsh said.
Plug is also developing fuel cells to power the vehicles that haul luggage, move planes and provide other support services at airports. Marsh said his systems provide the same advantage in this market as they offer for forklift owners.
Besides fuel cells, Plug also provides the hydrogen-fueling equipment to refill them. That can create a small hydrogen-powered network at sites that have numerous fuel-cell vehicles - - like a warehouse or an airport.
Plug received in 2012 a $2.5 million award from the U.S. Energy Department to develop the technology for FedEx Corp. ground-support tractors at airports in Memphis, Tennessee, and Oakland, California. Marsh expects to negotiate sales of this equipment by the end of this year.
Marsh is looking at other markets. Plug acquired ReliOn Inc. in a $4 million stock deal announced April 2 that provides its own fuel-cell stacks. The company currently buys the components from Ballard Power Systems Inc.
The deal also lets Plug offer stationary fuel cells that provide backup power for applications including mobile-phone towers. That’s a return to the company’s roots, since it offered similar products years ago, before it decided to focus on forklifts. It also developed back-up power systems for homes, hospitals and military facilities.
“We’re happy to promote fuel cells of all types,” said. “In four or five years much more devices will be using hydrogen as a fuel source.”