What happened
Plug Power (NASDAQ: PLUG) shares fell 4% as of 11:20 am EDT on Monday – which is curious, given today’s news.
This morning, Plug announced that it is partnering with the natural gas equipment manufacturer Chart Industries (NYSE: GTLS) and manufacturer of oilfield equipment Baker Hughes (NYSE: BKR) to become “key investors” in something called the “FiveT Hydrogen Fund”.
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And
The companies describe the FiveT Hydrogen Fund (FiveT) as “a new private infrastructure fund exclusively for clean hydrogen”, denominated in euros and “dedicated to delivering clean hydrogen infrastructure projects on a scale”.
Its purpose will be to “exclusively finance clean hydrogen production, storage and distribution projects” (presumably buying products from Plug, Chart and Baker Hughes), and will accumulate 1 billion euros for this purpose. Plug will contribute most of the initial investment – 160 million euros, or $ 200 million – and Chart and BHI will each contribute 50 million euros, or $ 60 million.
What now
In short, companies appear to be cooperating to provide financing that can be used primarily to offer loans to potential customers – or, in other words, to sell their products on credit. And if that is really the result of the announcement, it is probably understandable why investors are less enthusiastic. If the demand for hydrogen and fuel cell products were really strong, there would probably be no necessity to offer this funding.
It is also worth noting that, so far, these three companies are contributing only the first 260 million euros, and they still need to convince other players in the nascent hydrogen economy to join them and pay the remaining 74% of the intended size of the FiveT background. Their success with this effort will give us more clues as to whether this is a great idea or a failure.
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