Cummins and Iberdrola Partner for Large-Scale Hydrogen Projects in Spain

Cummins Inc. (CMI) and Iberdrola (IBDRY) are collaborating to create one of the world’s largest electrolyzer plants for the accelerated production of green hydrogen in Spain.

The alliance will expedite the production of green hydrogen in Spain and lead to the creation of a new industry around the production of electrolyzer systems with significant growth opportunities.

The new technology will reduce energy dependence, greenhouse emissions, and fossil fuel consumption. It will accelerate the hydrogen economy leading toward zero emissions goals and achieve carbon neutrality by 2050 as designed in Cummin’s Planet 2050 sustainability strategy. (See Cummins stock analysis on TipRanks)

The new €50 million, 22,000 square meters facility located in Castilla-La Mancha, Spain is estimated to open in 2023. It will host system assembly and testing for approximately 500 MW every year and will be scalable to more than 1 GW per year.

Cummins and Iberdrola also decided to team up for a hydrogen refueling station in Barcelona, Spain with additional partnership opportunities expected in the future. (See Iberdrola stock analysis on TipRanks)

The deal will be beneficial to both companies. Cummins will become the leading supplier of electrolyzer systems for large-scale projects in Iberia while Iberdrola will be the leading developer of electrolyzer projects and hydrogen supplier to industrial customers.

Cummins CEO Tom Linebarger commented, “Our partnership with Iberdrola will connect us with a major clean energy company and strategically positions us to be a European leader in green hydrogen production. We believe that this is just the start of our expansion into new markets, bringing new clean technology to customers, and supporting efforts to bring the European Union’s Green Deal to fruition.”

On May 17, BofA Securities analyst Ross Gilardi upgraded Cummins from Hold to Buy and increased the price target from $295 to $325 (26.6% upside potential).

Gilardi said that the engine maker will benefit from the inflation and hydrogen trade more than its peers. He estimates that the inflation trade should continue for the next few months. Furthermore, he added that ongoing negotiations on a federal infrastructure bill appear to be making some headway.

Overall, Cummins has a Moderate Buy consensus rating based on 6 Buys and 8 Holds. The average analyst price target of $293.33 implies 14.3% upside potential to current levels. Shares have jumped 53.7% over the past year.

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