Fuel-cell developer plugs into $12M from clients and feds

qinsdau

The names of four heavy-hitters roll easily off the tongue of Plug Power Inc. CEO Andy Marsh these days.

Those companies—FedEx, Anheuser-Busch Inc., Sysco and GENCO—were awarded $9.7 million in federal stimulus money last week to green up their warehousing fleets.

About $6 million of that amount will find its way to the Latham fuel-cell developer to install and test 304 of its hydrogen-powered GenDrive units in those companies’ forklifts and pallet trucks.

Plug (Nasdaq: PLUG) was the biggest winner in the U.S. Department of Energy’s $41.9 million fuel-cell package, awarded April 15 to install 1,000 fuel-cell systems for emergency back-up power and warehousing fleets.

In addition to the $6 million for GenDrive, Plug will receive $6 million to market its GenSys and GenCore fuel cells.

In all, the Latham fuel-cell developer captured $12 million to advance its line of hydrogen-powered products.

Marsh doesn’t downplay the money, but he expects to benefit even more from the exposure.

“It’s so relevant because of the names and fleet sizes of the customers involved,” he said.

For example, Houston, Texas-based Sysco (NYSE:SYY), will replace 90 of its battery-powered pallet trucks with GenDrive units. Sysco has 169 distribution centers around the country; Arkansas-based FedEx (NYSE:FDX) will install 35 of the units at a service center in Springfield, Mo; FedEx has 470 service centers around the world.

Sysco has said it would convert fleets at some or all of its locations if the units were efficient and had the potential to save money.

Walter Nasdeo, an analyst who follows Plug Power, says the stimulus contracts are a step in the right direction for the 12-year-old company.

But, he said, they won’t do much good unless the company is able to sell the so-called “motive” market on the benefits of fuel cells over lead-acid batteries.

“They have to start getting to the law of large numbers here,” said Nasdeo, research director at Ardor Capital Investments Inc. in New York City. Nasdeo has been covering Plug Power for about 10 years.

cost cutting
When Marsh came to Plug in April 2008, he was no stranger to building a business.

His former company, Valere Power of Richardson, Texas, generated $500 million in six years and was sold to Eltek Energy in Norway for $89 million in 2007.

At Plug, Marsh pledged to step up marketing efforts for its GenDrive and GenSys lines. GenSys products are residential and commercial off-the-grid power systems.

Marsh also all but ceased development of GenCore, a backup generator for telecommunications systems, because it was still several years from commercialization. GenCore was Plug’s first product.

“I saw the market investment taking four or five more years,” Marsh said.

He expects GenSys to hit the market in another three years or so.

Plug Power has run in the red since it was founded in 1997. It has cost about $500 million to run Plug since it opened its doors.