Plug Power Announces Acquisition of General Hydrogen

May 08, 2007 by Jeff Shepard

Plug Power Inc. announced the acquisition of General Hydrogen Corp., claimed to be a leader in the development and commercialization of fuel cell power units that provide motive power for electric lift trucks and other mobile industrial equipment.

Plug Power paid approximately USD $10 million, consisting of approximately $7 million in cash and the assumption of $3 million in senior secured loans previously made by Plug Power to General Hydrogen, for all of the outstanding capital stock of General Hydrogen. In addition, the shareholders of General Hydrogen received warrants to purchase up to 571,429 shares of Plug Power Common Stock. The warrants become exercisable when Plug Power’s Common Stock trades at a volume weighted average price of $7.00 or more for 10 consecutive trading days. The warrants carry an exercise price of $0.01 per share and expire four years from the date of issuance.

General Hydrogen is located in Richmond, British Columbia, Canada, within close proximity to Cellex Power Products, Inc., another top supplier of fuel cell power solutions for electric lift trucks, which Plug Power acquired last month. Plug Power plans to integrate the two companies into one operation managed by Chris Reid, Cellex Power’s current President.

General Hydrogen’s initial product focus has been on the larger class 1 sit-down lift trucks that are typically used in manufacturing operations. Cellex Power has focused its initial product initiatives on class 3 rider pallet trucks primarily used to transport and select goods within large distribution centers before delivery to retail stores. Both companies are developing fuel cell power units for class 2 stand-up reach trucks, which provide flexibility and maximum floor space utilization for large distribution centers. General Hydrogen and Cellex Power are targeting the estimated $1.5 billion motive power market in which lead-acid batteries are the incumbent technology. Fuel cell power units allow users to increase productivity and reduce operating costs through a quick hydrogen refueling process that eliminates the need to change batteries repeatedly throughout the day. They also eliminate the environmental and safety issues traditionally associated with lead-acid batteries.

Large lift truck fleet users typically operate at least two of the three electric lift truck classes in their warehouses and therefore require a battery handling system and associated maintenance labor to meet their throughput requirements. Plug Power claims that having all three electric lift truck classes in its product portfolio would enable the company to create a much more compelling value proposition by allowing customers to convert the motive power requirements for their entire fleets to proton exchange membrane (PEM) fuel cell technology.

Coincident with the acquisition of General Hydrogen, Plug Power has entered into a two-year agreement with Ballard Power Systems Inc. for the purchase of fuel cell stacks for Plug Power’s commercial needs with respect to electric lift truck applications, replacing the previous agreement between General Hydrogen and Ballard. The General Hydrogen and Cellex Power products were designed around the Ballard stack. Under the new agreement, Plug Power and Ballard claim that they will work together to drive reliable, low- cost solutions, which the companies expect to significantly improve the outlook for fuel cell commercialization of material handling applications.