Walmart and Plug Power revise collaboration agreement

by Inside Logistics Online Staff

LATHAM, New York — Plug Power Inc and Walmart have agreed to facilitate further expansion of the hydrogen fuel cell supplier’s relationship with Wal-Mart Stores, Inc.

Plug Power’s hydrogen fuel cell technology replaces traditional lead-acid batteries, helping customers increase warehouse productivity with a more energy efficient solution, while reducing the costs and sustainability issues related to traditional battery maintenance.

The new agreement includes revised deal terms with Walmart that allow Plug Power to access project financing at a lower cost of capital and no restricted cash, making Plug Power’s future distribution transactions with Walmart cash flow positive up front.

Plug Power expects to provide its GenKey hydrogen fueling station and fuel cell energy solutions to up to 30 additional Walmart sites in North America over the next three years, with ten sites already under contract and scheduled to be finished by the end of 2017.

The value of these 2017 commitments is expected to be around $80 million. On average, Plug Power has deployed a new Walmart site every six weeks since 2014, resulting in a deployed fleet of 5,500 Plug Power fuel cells at 22 of Walmart’s US distribution centres as of the end of 2016.

“Our expanding relationship with Walmart validates Plug Power’s advanced capabilities in fuel cell products and systems, allowing the world’s largest retailer to maintain its leading position as an industry innovator,” said Andy Marsh, CEO of Plug Power.

“Walmart’s long-term supply agreement is a great example of our strategy in action, as it enables us to improve both our revenue visibility and cost structure, all while allowing our customers to experience improved productivity and operational cost savings. We see a growing market opportunity for our power and fueling station technologies within the material handling segment, as well as new mobility applications worldwide, positioning us for long-term success and shareholder value creation.”

As part of the agreement, and as an incentive to align Walmart’s future business with Plug Power’s growth and success, Plug Power has granted Walmart warrants to acquire up to 55,286,696 of Plug Power’s common shares. Warrants for the first 5,819,652 shares vested upon execution of the new program agreements at an exercise price of $2.1231 per share, which is based on the volume weighted average closing price of Plug Power common shares for the thirty trading days ending July 19, 2017.

Additional warrants will vest in installments tied to successive $50 million payment thresholds, up to a total of $600 million in the aggregate, made by Walmart in connection with qualified purchases of goods and services from Plug Power. The exercise price for warrants vesting after the first 34,917,912 warrant shares will be based on the volume weighted average closing price at the time that such warrants vest.

The new agreement is a milestone in a longstanding relationship with Walmart, which has been at the forefront of fuel cell technology adoption and commercialization in material handling, becoming Plug Power’s first GenKey customer in 2014. Plug Power supplies the retail giant with fuel cells, hydrogen fueling stations, and ongoing maintenance services.

Today, Walmart operates the largest fleet of hydrogen fuel cell powered electric vehicles in the world, totaling more than 6,600 units in DCs across North America.

“Plug Power’s material handling solutions represent a critical component in our supply chain,” said Jeff Smith, Walmart’s senior director of logistics maintenance and purchasing services. “Plug Power’s hydrogen fuel cell technology, coupled with their innovative fueling stations has proven to be a reliable, cost-effective alternative to traditional energy solutions.”

Plug Power has introduced a suite of ProGen fuel cell engine platforms to provide clean, scalable power for on- and off-road applications around the world. In addition to the GenKey contract, Walmart and Plug Power will continue to collaborate on developing, testing, and commercializing new motive power applications that utilize Plug Power’s ProGen line of fuel cell engines and systems. Advancing the electrification of mission-critical devices, is an important piece of Walmart’s future plans.