Electric vehicle maker Nikola Corporation (NASDAQ: NKLA) is exploring a cheaper source of power supply through an agreement with utility company Arizona Public Service Co, Bloomberg reports.
What Happened: If the agreement falls in place, Nikola plans to produce cheap hydrogen for its refueling station. The Bloomberg report is based on a regulatory filing with the Arizona Corporation Commission seeking approval for the project.
According to the estimates in April from an SEC Filing, the EV maker stands to generate a contribution margin of 33%, excluding amortization of capital expenses incurred on the station.
The cost of producing hydrogen is estimated close to $2.5 per kilogram, according to Bloomberg. While the forecasts are made considering the electricity rate at 3.5 cents per kilowatt-hour, the Arizona Utility company has proposed a much lower special contract rate of 2.7 cents per kilowatt-hour.
Why Does It Matter: “This rate schedule enables Nikola’s planned deployment of fueling facilities in Arizona in support of zero-emission hydrogen fuel-cell electric trucks,” Nikola said in a statement to Bloomberg.
The utility company remarked that it could be a success story both in Arizona’s economic and environmental front if the agreement follows through.
In September, Reuters reported that Nikola’s efforts to engage with an energy partner were stalled after the short-seller Hindenburg research flagged the company as a fraud and former CEO Trevor Milton resigned. At the time, Mark Russell, the CEO of Nikola, expressed confidence in his plans to finalize an alliance with an energy company and kick off the fuelling stations sometime in 2021.
Price Action: NKLA stock gained 3.16% to close at $17.00 on Wednesday.
Related News: Bosch Reduces Nikola Stake To Fall Below SEC’s Beneficial Ownership Reporting Requirement Of 5%
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