Plug Power purchases Canonsburg-based company as part of $123 million deal

Plug Power purchases Canonsburg-based company as part of $123 million deal

Robin K. Cooper

Plug Power just invested $123 million to buy two hydrogen companies, a move designed to drive down costs, increase revenue and create a path to a bigger market.

The acquisition of United Hydrogen Group, a company headquartered in Canonsburg, and Giner ELX Inc. from Boston will allow Plug Power to produce, store and deliver hydrogen for existing customers while opening up opportunities to supply manufacturers of ammonia, steel, concrete and computer chips.

It is all part of chief executive Andy Marsh's strategy to vertically integrate the Latham fuel cell maker and compete in the emerging market for hydrogen. The international Hydrogen Council projects the global market for hydrogen and equipment will grow to $2.5 trillion over the next 30 years.

The acquisition of United Hydrogen, which operates a plant in Charleston, Tennessee, gives Plug Power access to a fleet of tanker trucks, drivers, a 6.4-ton-per-day hydrogen facility and logistics software. And it positions Plug to build a network of at least five additional hydrogen plants across the country in the next five years.

The transaction, valued at $65 million including stock, loan forgiveness and debt assumption, was completed June 18.

Acquiring United Hydrogen is expected to increase Plug Power revenue by $50 million by 2024. Meanwhile, earnings before interest, taxes, depreciation and amortization, are expected to increase by $25 million during the same time.

Plug (Nasdaq: PLUG) also acquired Newton, Massachusetts-based Giner ELX for $58 million. That deal included $25 million in cash, $17 million in stock and $16 million in future earnings. The transaction closed Monday.

The purchase of Giner gives Plug ownership of a range of hydrogen-generating electrolyzers that several retail customers and distribution centers see as a way to reduce hydrogen costs while improving corporate sustainability goals.

Marsh and Plug, who previously had been buyers and resellers of hydrogen, are determined to produce half of their hydrogen using renewable energy sources by 2024. That is expected to occur as customer demand is projected to grow from 27 tons per day to nearly 40 tons by the end of this year.

Within four years, Plug expects demand will surpass 100 tons per day.

The two hydrogen acquisitions collectively are projected to increase Plug Power's 2024 revenue projections from $1 billion to $1.2 billion.

Meanwhile, operating income is expected to increase to $210 million at the same time. Projections previously were $170 million prior to the acquisitions.

"In the end, what Plug Power brings to the table is demand for this hydrogen and demand for green hydrogen with the likes of Amazon, Walmart, Kroger and others," Marsh said.

The company is expected to start making electrode assemblies for the electrolyzers at Plug's plant in Rochester. Much of the assembly and manufacturing of electrolyzer systems will be produced in Latham. The company currently is figuring out how and where that will occur.

The investments help diversify Plug Power's markets and portfolio. The company already has 34,000 of its GenDrive fuel cells, which serve as an alternative to lead acid batteries. The fuel cells are used to power forklifts that are used in factories and distribution centers throughout North America.

With the expansion of its hydrogen portfolio, the company now sees opportunities to expand into Europe.

At the start of the year, Plug Power employed about 750 companywide. Marsh said the acquisitions add about 60 people to the payroll. And the company currently is searching for production employees at its plant in Latham.

"I don't see these growth rates and ambitions ending," Marsh said.