It’s been a busy week for hydrogen fuel cell company Plug Power (PLUG), and at least one analyst is taking notice.
Plug’s first big news of the week arrived Wednesday morning, when the company announced it’s teaming up with Hungarian oil and gas giant MOL Group “to build one of Europe’s largest-capacity green hydrogen production facilities at MOL’s Danube Refinery in Százhalombatta, Hungary.”
Plug will contribute a 10-megawatt electrolysis unit to the joint venture, capable of producing “approximately 1,600 tons of clean, carbon-neutral, green hydrogen annually” once it begins operation in 2023. MOL will use this unit to produce green hydrogen at its Danube Refinery — and also to produce “up to 25,000 tons of carbon dioxide” reduction credits to offset about one-sixth of its carbon footprint.
Just one day later came Plug’s second announcement: Plug has signed a memorandum of understanding preparatory to teaming up with U.S. chemicals company Olin Corporation on a second joint venture to produce and market green hydrogen. Together, the companies will establish a production plant in St. Gabriel, Louisiana that can produce 15 tons per day (tpd) of green hydrogen — and to put that in context, 15 tpd is about 5,500 tons per annum, or more than 3x what the MOL refinery can do.
Like the MOL venture, the Olin project is expected to begin operations in 2023.
So far, so good. And indeed, according to Evercore ISI analyst James West, all of this is very good news for Plug Power, with the Olin partnership in particular looking like “the beginning of a beautiful friendship.” As the analyst explains, Olin already produces hydrogen as a by-product of its chlor alkali production business. Teaming up with Plug to capture and market this hydrogen, therefore, “will allow Olin to recognize the full potential of its untapped hydrogen supply.”
Starting small, West argues that over time this project could grow to include more of Olin’s North American factories, allowing Olin to capture more of the potential economic benefits of its operations, while at the same time providing Plug with an extra “abundance of low-cost H2 by-product.” The analyst also suggests that having Olin on board could open the door to Plug signing “additional, substantial offtake agreements” with other partners.
All of the above sounds like good news for Plug stock, however, either of these two announcements said a single word about how much money Plug must invest to get these projects of the ground, nor one word about payments to Plug, or the revenues or profits the company expects to generate from its efforts, either.
Nonetheless, the analyst rates Plug shares an Outperform (i.e. Buy) along with a $46 price target. At current levels, this target suggests ~108% upside for the year ahead. (To watch West’s track record, click here)
Overall, Plug gets a Moderate Buy rating from the Wall Street analyst consensus. This is based on 11 ratings, including 8 Buys and 3 Holds. The shares are trading at $22.24, and the $39.64 average price target suggests the stock has a 78% upside from current levels. (See PLUG stock forecast on TipRanks)
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