Ending weeks of rumors, today Plug Power (NASDAQ: PLUG) officially expanded its fuel cell pallet truck portfolio, announcing the acquisition of privately-held General Hydrogen Corporation and a new deal with Ballard Power Systems (NASDAQ: BLDP).

It's a move that financial analysts say validates materials handling as the early market to watch for fuel cell vehicle adoption... but warned it might mean a margin squeeze for Ballard.

Plug today announced it paid approximately $10 million USD, consisting of about 7 million in cash and the assumption of 3 million in senior secured loans previously made by Plug Power to General Hydrogen.

In addition, the shareholders of General Hydrogen received warrants to purchase up to 571,429 shares of Plug stock.

General Hydrogen develops and commercializes of fuel cell power units for electric lift trucks and other mobile industrial equipment. The company is located in Richmond, British Columbia, Canada, literally a stone's throw from Cellex Power Products—another supplier of fuel cell power solutions for electric lift trucks that Plug snapped up last month (see Plug Power acquires forklift fuel cell maker Cellex.)

Plug plans to integrate the two companies into one operation in the Vancouver suburb of Richmond, B.C., managed by Chris Reid, Cellex's president.

Plug says it expects to realize "significant technology and operational synergies" from the acquisition, and will have proton exchange membrane (PEM) fuel cell-based power systems in its product portfolio for all three major classes of electric lift trucks: the larger class 1 sit-down lift trucks typically used in manufacturing (General Hydrogen's initial focus), class 3 forklift pallet trucks used in warehouses (Cellex's focus), and class 2 stand-up reach trucks, which both companies have been working on.

Large fleet users typically operate at least two of the three lift truck classes in their warehouses.

While Plug points out General Hydrogen generated approximately $780,000 USD in revenue last year, and received the equivalent of $1.6 million USD in government R&D tax credits, analysts didn't seem to think the company was profitable.

"The modest acquisition price suggests General Hydrogen was in financial difficulty," said analyst Brian Piccioni of BMO Nesbitt Burns.

Yet the acquisition, along with Cellex Power, positions material handling as an attractive near-term market and central component of Plug's revenue growth strategy, said analyst Richard Rambaldo of Pacific Growth Equities to Cleantech.com.

"Now customers have a provider with a full spectrum of offerings and a healthy balance sheet to back up those warranty expenses. Companies like General Motors and Wal-Mart (see Fuel cell trucks complete trials at Wal-Mart) that are looking for a supplier their supply chain want to stay with the same company, especially if it's a new technology and one you're a little apprehensive about. If anything goes wrong here, their supply chain comes to a halt."

"The move validates [competitor] Hydrogenics' stance, which has been targeting this space for a while."

Hydrogenics, based in Canada, has been conducting trials of its fuel cell-based lift trucks with GM in Canada. [ed.: so, what's with Canadians and fuel cells?!?]

Plug Power also announced today it has entered into a two-year agreement with Ballard Power Systems [again, of Canada] to purchase fuel cell stacks for its electric lift truck applications.

The General Hydrogen and Cellex Power products were designed around the Ballard stack, which may give Plug some supply chain leverage of its own, said BMO's Piccioni.

"We would not be surprised if Plug was able to place pricing pressure on Ballard in this new agreement. On the one hand, Ballard could be cajoled to be more aggressive on price, but this could be justified by the combined volume requirements of Plug Power/Cellex/General Hydrogen. On the other hand, we believe consolidation will result in a more rapid development of the market."

And that would be good for Ballard. Yet, according to Piccioni, the opportunity exists for Plug to try using its own fuel cells that it's developed internally. The move is unlikely, however, he says, given that doing so could set Plug back with customers.

Fuel cell based trucks requires less downtime than a battery power system because of faster and less frequent refueling. Nor do vehicles lose power during the course of a shift or require multiple battery packs and chargers per truck, as with today's technology.

With an estimated three million electric lift trucks in service today, Plug Power estimates the global new and replacement industrial market to be a $1.5 billion USD annual opportunity.