Shares of Plug Power (NASDAQ:PLUG) are in full focus, as the company announced this morning it had entered into a green hydrogen supply agreement with Nikola (NASDAQ:NKLA). As part of the agreement, Plug will purchase up to 75 Nikola Tre fuel cell electric vehicles (FCEVs) over the next three years, while Nikola will purchase a 30 tons per day (TPD) liquefaction system for its new Arizona hydrogen facility. In addition, Plug’s proprietary liquefaction system will have the potential to scale to 150 TPD. By 2026, Nikola seeks to provide up to 300 TPD of hydrogen and and up to 60 hydrogen dispensing stations. PLUG stock currently trades around $15 per share.
Furthermore, starting on Jan. 1 of next year, Plug will begin supplying Nikola with hydrogen. The volume of the hydrogen is expected to ramp up to 125 TPD by the end of 2026. 80% of the 125 TPD volume will be on a take-or-pay basis, which means Nikola will have to pay a fee if it backs out.
PLUG Stock: Plug Power Signs Hydrogen Supply Agreement With Nikola
The agreement is highly beneficial for both companies, providing synergies across a common industry. Plug CSO and General Manager of Energy Solutions Sanjay Shrestha added:
“Today’s announcement demonstrates Plug’s leadership in the green hydrogen economy and its ability to make the adoption of hydrogen as easy as possible. Our vertically integrated solutions, which are designed to fit individual customer needs, include hydrogen production equipment or the delivery of green hydrogen fuel, whichever is preferred. We look forward to our strategic relationship with Nikola as we advance the hydrogen economy forward.”
Nikola will commence deliveries of the Tre in 2023. The vehicles will be paired with Plug’s liquid hydrogen tankers, which is the “largest and lightest trailer ever manufactured.”
Meanwhile, Plug is currently on track to supply 500 TPD of hydrogen to the U.S. by 2025. By 2028, the company expects to have a global capacity capacity of 1,000 TPD. The supply could help Nikola expand its Tre sales and boost hydrogen acceptance.
Analysts across the board appear to be bullish on PLUG. The stock has an average price target of $30.24 among 29 analysts, implying upside of about 100%.
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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
