Here’s Why Amazon’s Green Hydrogen Partnership With Plug Power Is A Big Deal | The Motley Fool

Amazon (AMZN 2.60%) wants to build a greener future. The colossus of e-commerce turns to Plug hole (PLUG 9.01%) contribute to making green hydrogen a major component of its clean energy strategy.

Starting in 2025, Plug Power will supply Amazon with 10,950 tons of green hydrogen per year to help power its fleet of long-haul trucks and fulfillment center equipment. The two companies say the deal will provide enough power to run 800 heavy trucks and 30,000 forklifts.

“Amazon is proud to be an early adopter of green hydrogen given its potential to decarbonize hard-to-reduce industries like long-haul trucking, steel manufacturing, aviation and shipping.” , Kara Hurst, vice president of Worldwide Sustainability at Amazon, said in a statement.

Music to the ears of Plug Power investors

Plug Power CEO Andy Marsh said the deal validates the energy solutions provider’s ambitious growth strategy.

“Plug is fully committed to a green hydrogen future, and we are building a complete hydrogen ecosystem – from molecule to applications combined with a resilient network of green hydrogen plants around the world – to facilitate adoption. hydrogen by companies looking to achieve net-zero carbon emissions,” Marsh said. “Securing this important green hydrogen supply contract with a customer like Amazon confirms our multi-year investment and strategic expansion into green hydrogen.

Marsh also suggested the two companies could expand their partnership to include other hydrogen applications, such as fuel cell electric trucks and power plants.

As it stands, Plug Power said its new deal with Amazon will help it boost revenue to $3 billion by 2025, up from nearly $600 million in the past 12 months. It will also support Plug Power’s goal of producing 500 tons of liquid green hydrogen per day in North America by then.

Notably, Amazon received a mandate to buy up to 16 million shares of Plug Power. Amazon has the right to buy 9 million of those shares at a strike price of $22.9841 per share, which is based on the average closing price of the stock over the 30 trading days ending August 23. .

The exercise price of the remaining shares will be determined based on future trading prices, if the Amazon Warrant vests in its entirety. To do this, Amazon will have to spend $2.1 billion over a seven-year period on Plug Power’s offerings.

These warrants give Amazon a financial incentive to help Plug Power achieve its ambitious expansion goals. Amazon’s participation will likely also be viewed by other potential customers as a vote of confidence in Plug Power’s technology.

A big boost for the nascent hydrogen economy

Amazon is the world’s largest buyer of renewable energy. He also co-founded The Climate Pledge, a pledge to achieve net zero carbon by 2040. More than 300 other companies have since made the same pledge, including heavyweights like Microsoft and Verizon.

“We are relentless in our quest to deliver on our Climate Pledge commitment to be zero carbon in our operations by 2040 and believe that increasing the supply and demand for green hydrogen, such as through this agreement with Plug Power, will play a key role in helping us achieve our goals,” said Hurst.

Amazon’s support for green hydrogen will likely encourage more companies to invest in this promising fuel source. This could lead to the construction of hydrogen-related infrastructure, which, in turn, should make the fuel more economically viable for even more companies.

These investments could also allow green hydrogen to become a more powerful tool in the fight against climate change. The carbon-free fuel source can be produced with renewable electricity and water – a much cleaner and more environmentally friendly process than that used to produce traditional fossil fuels.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Joe Tenebruso has the following options: January 2024 long calls at $100 on Amazon. The Motley Fool holds positions and recommends Amazon and Microsoft. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.

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