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The Supply Side: Plug Power gets economic jolt from Wal-Mart order

story by Kim Souza
ksouza@thecitywire.com

Editor’s note: The Supply Side section of The City Wire focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by The City Wire and sponsored by Propak Logistics.

No matter your thoughts about the global retail giant that is Wal-Mart Stores Inc., there is no denying the boost this Bentonville-based company can have on a small supplier’s balance sheet.

Latham, N.Y.-based green energy company Plug Power Inc. announced that it recently received a purchase order from Wal-Mart to roll out its hydrogen fuel cell technology that will power electric fork lifts at six of Wal-Mart’s North American distribution centers.

Wall Street took notice of the deal and pushed Plug Power shares 13% higher in heavy trading on Wednesday (Feb. 26). Power Plug shares (NASDAQ: PLUG) closed at $4.41, up 51 cents from the prior day. One year ago PLUG shares were 12 cents, surpassing the $1 range in December.

Chris Sultemeier, executive vice president of logistics at Walmart U.S., announced various energy project and efforts to reduce costs at distribution centers during the retailer’s annual sustainability milestone meeting in Bentonville last week.

The Plug Power technology has been used in an Ohio distribution center and in Canada, but the first of six more sites will come online by the second quarter of 2014, the company said. Wal-Mart ordered 1,738 GenDrive fuel cell units to be deployed over the next two years, along with GenFuel infrastructure construction and hydrogen fuel supply and a six-year service contract for each site using the green energy.

Sultemeier said the logistics division continues to strive for energy savings that help improve the retailer’s overall bottom line. He said all distribution center warehouses and fulfillment centers are converting to LED lighting that will save $10 million annually in utility costs. This expansion in hydrogen fuel cell will also drive profits higher.

“We have 2,000 of these in use in our distribution centers in the U.S. and Canada, the largest fleet of its kind in the world,” Sultemeier said. “By doubling the fleet efficiency of our trucking operations we shipped 658 million more cases, driving 300 million less miles and saving 43 million gallons of fuel.”

Power Plug noted in its statement that GenDrive hydrogen fuel cells “have universal appeal in material handling applications because they can contribute to an increase in productivity.” The company said workers will spend less time fueling or powering up the forklift and more time operating the machine. GenDrive fuel cells also have no exhaust emissions so that they can be a component in implementing corporate environmental initiatives, the release states.

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"This agreement is a tripling of Walmart's commitment to Plug Power's fuel cells, and is encouraging because it comes from a company with so much experience using our product," Andy Marsh, CEO at Plug Power, said in the statement. “This is a milestone for Plug Power and its ongoing business relationship with Walmart. Plug Power's GenDrive products have a positive impact on the productivity of our customer's operations. We have proven to be a trusted partner and are confident that GenKey will enhance Walmart's material handling operations."

Plug Power also provides products to Sysco, Procter & Gamble and Mercedes Benz.

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