Plug Power (NASDAQ:PLUG) stock rose overnight on expectations of an energy deal in Congress and a sales agreement with LNG supplier New Fortress Energy (NASDAQ:NFE). PLUG stock rose 20% after Sen. Joe Manchin signed on to climate legislation last month. The decision by Sen. Kyrsten Sinema to support the bill, announced late on Aug. 4, seems to assure passage.
The deal with New Fortress will put Plug Power electrolysis systems into a site near Beaumont, Texas, and produce 50 tons of hydrogen per day.
Green Hydrogen
The New Fortress deal doesn’t just represent a sale of electrolyzers, which use electricity to separate water into hydrogen and oxygen. It also creates a growing supply of hydrogen that could go into Plug Power’s distribution network.
New Fortress produces and exports liquified natural gas, or LNG. Hydrogen created from natural gas is usually called “blue hydrogen.” But the Plug Power release explicitly calls this a “green hydrogen” deal, indicating its hydrogen will be produced without burning.
The deal could also put Plug Power into a new financial league. New Fortress CEO Wes Edens called the deal “the beginning of [its] collaboration” with Plug Power. New Fortress recently created a joint venture with Apollo Global Management, a buyout firm, that will bring in gas from Mexico.
Plug Power has a market cap of nearly $15 billion on 2021 sales of just $500 million. But those sales rose nearly 63% last year. The New Fortress deal should help them accelerate further.
What Happens to PLUG Stock Now?
I have called Plug Power a long-term play in hydrogen, but the stock has been highly volatile. It went as high as $55 per share in early 2021 and spiked to $39 in November. But it also traded below $15 in March and fell hard again when it seemed no deal was coming from the Senate.
The agreement with New Fortress could help reduce Plug Power’s volatility and put a floor under the price. It also brings it closer to the energy industry mainstream.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
