2017 Investor Roundtable:General Discussion

[ZsoZso]

"Elon Musk will reveal new details about Tesla’s Model Y next week"

^ from last week. Anything on this yet?

AFAIK, that was an April-fool joke by some media outlet, and it was subsequently retracted.

 

[neroden]

Dude, calm down Have you been drinking heavily because stock went down by $9 today?

Dude, my average cost basis is under $150; today's stock move is meaningless to me. I just don't like bullshitters like you. Everything you say is misleading nonsense, and some of it is just plain lies. And you deflect when your falsehoods are called out directly, which is particularly dishonest. ("Gish gallop".)

Yes, put me on your ignore list. That way I have to post less replies.

As you wish!

 

[The Blue Owl]

I "whooshed" on the joke.

So did I.

They form a whole.

Right you are. Well done

 

[AudubonB]

It is always a mistake to assume that something you don't understand is worthless.

When it was an independent company, I didn't bother to analyze SCTY -- too much work! But when the merger was announced, I had to, so I did my best. It is an unbelievable hairball of accounting (and this is the fault of both GAAP and the very odd way the Production Tax Credit law is written), but I think the evidence shows that (a) they are doing their best to straighten it out and simplify it, and (b) it really is at its core breakeven-or-better, if you eliminate the very high sales costs and the refinancing risk, both of which they are trying to do. (Yes, it's OK even if they have negative growth.) It's kind of a classic "turnaround" situation. Not my usual investing style but it'll work out OK.

This likely is the exception to prove that rule of yours, but....

...one of my last actions...or inactions....before I threw away my former life and bolted for the safety of the Alaskan wilderness was to tell my bosses that the reason we weren't investing in Enron was that I simply could not understand it, or what they were doing.


Every time I had a conference with Messrs Lay & Skilling I came away in awe of their business model. But each time thereafter I would take apart their financials...and take apart...and take apart...until I had this financial goo all over my hands and throughout my head and I simply couldn't understand it one bit. It was clear to everyone including myself that every other such analyst on Wall St. was much smarter than I, because they understood perfectly what a magnificent money-making machine had been created.

 

[scaesare]

The difference is that Elon Musk isn't driven by money to buy a yacht or Bond-villain volcano island.

Well, at least he only plans on doing so after reaching specific milestones:

Musk's Lair

 

[AudubonB]

Tesla has more subsidy headwind that any other company I know of.

How're those toes tasting? I do believe that word doesn't mean what you think it does.....

But, as written, it does make that post remarkably prescient. Thank you.

 

[neroden]

This likely is the exception to prove that rule of yours, but....

Nah, it's actually more of the flip side of the same rule...

...one of my last actions...or inactions....before I threw away my former life and bolted for the safety of the Alaskan wilderness was to tell my bosses that the reason we weren't investing in Enron was that I simply could not understand it, or wehat they were doing.

...Never assume something you can't understand is worth *anything*, either. Respect the uncertainty.

My family's then-investment-advisor somehow, and I'm still not quite sure how, bailed out of Worldcom stock just a couple of years before it imploded, because there was *something suspicious* about its financial statements, even though he couldn't put his finger on it. It just smelled wrong. (We'd ended up with Worldcom by buying one of its predecessor companies -- had quite a good run through the merger.) In this case he literally couldn't find anything specific wrong with it, but it didn't feel right.

Every time I had a conference with Messrs Lay & Skilling I came away in awe of their business model.

Didn't know you'd actually talked with these guys! Wow.

But each time thereafter I would take apart their financials...and take apart...and take apart...until I had this financial goo all over my hands and throughout my head and I simply couldn't understand it at all. It was clear to all that every other such analyst on Wall St. was much smarter than I, because they understood perfectly what a magnificent money-making machine had been created.

Heh. Never invest in something you don't understand. But don't assume it's worthless, either. I don't understand why anyone buys products from Apple; I don't understand how Amazon plans to make money (and I feel like Bezos is hiding a private army somewhere in the books); I don't understand why people buy Coca-Cola. So I stay away. Others will make lots of money -- so I don't assume that they're worthless -- but since I don't understand them, *I'm* not touching them.

There are an awful lot of companies where, asked to value them, I would just say "Not in my realm of comprehension". It would be a mistake to assume that they were worthless; and an bigger mistake to assume that they were valuable. They are simply unknown to me.

As a result I will always respect someone who decides to stay on the sidelines of TSLA. If you don't get it you shouldn't be in it.

----
After I really dug into SolarCity, I figured out what they had been doing -- the accounting standards are a wild, total mismatch to it, but they were really trying to be transparent about it. They were basically operating as a bank (borrow short, lend long) to finance solar panel installs. This is not so far off from what GE Capital used to do. It's not a business I like, and it has severe liquidity risk, so I wasn't comfortable until I found the public statements saying they were gonna stop. Once out of the banking business, they become *much* more comprehensible. Tesla bought them with an "incomprehensibility discount" and a discount due to the need for refinancing; this reorganization seems to be happening and the business should make sense in about a year. At that point... well, I don't expect it to be high-margin, because no solar panel business is, but it's not a gushing chest wound like many people thought it would be.

 

[electracity]

This statement belies a fundamental lack of understanding of the EV technologies that exist today and the surrounding challenges. ICE vehicles have existed for over 100 years. It's actually easier to start a ICE vehicle company - and how many of those have started up and made 200,000+ vehicles in the past 50 years? The fueling infrastructure is already in place for such startups. As for Tesla, they are leveraging the new high energy lithium ion battery cells... cells that didn't exist 100 years ago. They are using IGBT's to invert the high power demands in an efficient manner... those didn't exist 100 years ago. From big things to small things, Tesla had to re-imagine the modern light passenger vehicle around modern power electronics, modern battery cells, and modern computers and connectivity. As well as all the hard parts of any street legal passenger vehicle startup. Not only that, they also had to help build the energy distribution infrastructure for their vehicles. All without all that much start up capital relative to the challenge.

I don't recall saying what you quoted. Check the link back.

 

[MP3Mike]

My hunch says, you guys are smart enough to figure out that KIUC will exhaust 100 MWh @11c/kwh from AES. Then, if it needs more, it will buy some more from Tesla. So, the Tesla system may end up selling very little power over a year, while AES will be selling quite a lot of power. If there is another project offering power at 11c/kwh or lower price, Tesla generated power will be purchased even less.

So, how long will it take Tesla to monetize the upfront costs and fixed costs if Tesla's power is never purchased? Or only 13 MWh is sold per day on average? 3 MWh a day?

Well considering that the AES system would only provide 11% of the energy needs, that means Tesla would provide ~6% of the needs. The question is does KIUC have other sources for more than 83% of their power needs that is cheaper to operate than what Tesla is charging?

And then there is the issue that it appears the AES system won't be operational until sometime late in 2019. (If things go as planned.) So Tesla has three years before they need to worry about the cheaper cost of the AES system during which time energy needs may increase. (More BEVs anyone?)

 

[techmaven]

I think you and everyone else missed @brian45011 's point. Intentional? I think, his point is this.
* KIUC didn't pay Tesla a penny yet, but has agreed to purchase power at 13.9c/kwh. Tesla can supply 52 MWh daily at most.
* Now comes AES, with a 100 MWh system. They offer to sell power to KIUC at 11c/kwh.
* So, everyday, when KIUC needs more power, which one will it choose first?
My hunch says, you guys are smart enough to figure out that KIUC will exhaust 100 MWh @11c/kwh from AES. Then, if it needs more, it will buy some more from Tesla. So, the Tesla system may end up selling very little power over a year, while AES will be selling quite a lot of power. If there is another project offering power at 11c/kwh or lower price, Tesla generated power will be purchased even less.

So, how long will it take Tesla to monetize the upfront costs and fixed costs if Tesla's power is never purchased? Or only 13 MWh is sold per day on average? 3 MWh a day?

If Tesla's BES power is not utilized enough, Tesla probably has an option to re-negotiate the price down, to be competitive with the current electricity pricing. But that leads to even lower margins.

Ah, they didn't sign these two projects as overcommitment to their usage. As @neroden pointed out, there's other even more expensive energy on tap. Tesla's system provides about 5% of the island's electricity:

SolarCity picks Tesla for 52MWh of dispatchable solar-plus-storage in Hawaii

 

[techmaven]

I don't recall saying what you quoted. Check the link back.

Sorry about that, it was supposed to be linked to MMD's post 2017 Investor Roundtable:General Discussion

Unfortunately, I can't edit it anymore... mods?

 

[Yuri_G]

I didn't forget. Just wanted to wait until the bears gained a little confidence back. Here's your friendly reminder to never bet against Musk.

 

[Ulmo]

You need to look at per car subsidy, as a percentage of the price of the product. It's not just me thinking. Check the Supernova effect in Denmark. Without huge subsidies, sales of electric cars (including Tesla's) just imploded.

You mean tax. -, not +.

Which means that it was a disincentive to buy any expensive vehicle, not an incentive to buy a Tesla. The tax was just waived for Tesla. (I might be remembering this wrong; one of those Scandanavian countries had this problem, I think the one Bjorn was from, and if I'm remembering correctly, so did Denmark.) This temporarily shifted some opportunity buys into a different compressed time period, which neroden explained much better than I can.

 

[Ulmo]

Seriously, whenever Musk is asked about the subsidies expiring at the investors/analysts meetings and phone calls -- and it happens *all the time*, to the point where it's actually getting annoying because they're repeating questions we know the answer to -- he practically rolls his eyes, and says that you can't build a business model on them because they don't scale up.

One of your examples is here, for others who'd like to see an actual example:

Jump to time point 1:20 in this YouTube (which is eleven days after the USA Government Federal Executive & Legislative election):

 

[electracity]

Sorry about that, it was supposed to be linked to MMD's post 2017 Investor Roundtable:General Discussion

Unfortunately, I can't edit it anymore... mods?

No problem and no need to edit.

 

[mmd]

Well considering that the AES system would only provide 11% of the energy needs, that means Tesla would provide ~6% of the needs. The question is does KIUC have other sources for more than 83% of their power needs that is cheaper to operate than what Tesla is charging?

And then there is the issue that it appears the AES system won't be operational until sometime late in 2019. (If things go as planned.) So Tesla has three years before they need to worry about the cheaper cost of the AES system during which time energy needs may increase. (More BEVs anyone?)

Yes, I agree these are good points. We don't know (at least, I don't) what's the minimum power to be purchased from Tesla BES. If anyone has access to the PPAs, please post. TIA.

So, my guess is, the situation seems to be like this:
* First comers have higher costs due to higher battery costs, but also enjoy better pricing . They have less or no competition for a period.
* Competitors coming later may have lower costs, with some pricing advantage over the incumbent power generators.
* The project break even analysis needs to consider lower power pricing/sale in the future due to competition.

Edit: OK, here is some info on clean energy goals of KIUC. The goal is 50% renewable by 2023. Something that is way cheaper is using just teh solar directly with utility scale solar, without a battery in the middle. I believe, proces are in the 2.5c-3.5c/kwh for that. It seems to me, that alone is enough to meet the 50% renewable goal?
Clean Energy | Kauai Island Utility Cooperative

Kauai Island Utility Cooperative, Hawaii’s only member-owned electric utility, is making significant progress toward its goal of using renewable resources to generate 50 percent of Kauai’s power by 2023.

By 2016, 38 percent of the electricity generated on Kauai will come from a mix of renewable resources: solar, hydropower and biomass. That’s up from 5 percent in 2009.

On the sunniest days, 60 percent of Kauai’s daytime energy needs are met by solar, which is believed to be the highest percentage of solar on an electrical grid of any utility in the U.S.

Presentations | Kauai Island Utility Cooperative
Interesting PPT on KIUC: http://kiuc.coopwebbuilder2.com/sites/kiuc/files/PDF/presentations/2015-0528-pumpedstorage.pdf
Slide #8:
Pumped Storage Project Overview 8
 Load shifting capability to firm solar generation
 25 MW design capacity and up to 250,000 kWh of daily storage
 Closed loop system – no consumption of water
 Two project locations being considered
• Puu Lua/Haeleele – this proposal involves rehabilitation of Puu Lua and construction of a new 30 MG reservoir
• Puu Opae/Mana – this proposal involves rehabilitation of Puu Opae and Mana reservoirs
 Potential to provide pressurized irrigation
 Aiming to be operational by 2019

 

[mmd]

And then there is the issue that it appears the AES system won't be operational until sometime late in 2019. (If things go as planned.) So Tesla has three years before they need to worry about the cheaper cost of the AES system during which time energy needs may increase. (More BEVs anyone?)

BTW, are you sure about your date for the project? This Jan 17, 2017 article says, operational in late 2018. 3 years to complete a BES project by AES seems too long to me.
AES’ New Kauai Solar-Storage ‘Peaker’ Shows How Fast Battery Costs Are Falling

AES will own and operate the system, and has executed a power purchase agreement to sell power to the Kauai Island Utility Cooperative (KIUC) at 11 cents per kilowatt-hour. The project is expected to be operational by late 2018.

While verifying if the 25 MW, 250 MWh pumped hydro was green lighted in Kauai, I found this. it comes at a price tag of $65M only; equivalent to $260/KWh. The duck chart of KIUC in the presentations show minimum load of ~32 MW at night. The pumped hydro project alone can supply 25 MW of that power for 10 whole hours every night. Another 20 MW can be supplied by the AES system for 5 hours.
KIUC wins pumped hydro energy storage project approval in US

To be located on the island's west side, the 25MW project is expected to cost around $65m and will be completed by 2019.

http://www.bizjournals.com/pacific/...utilitys-55m-energy-storage-project-gets.html

The Kauai Island Utility Cooperative's plan for its $55 million to $65 million pumped hydropower storage project on the island's west side has received unanimous approval of the Hawaii state Board of Land and Natural Resources
..
The cost of electricity generated by the system would be about 35 percent less than the cost of oil and once paid off, would fall to only a few pennies per megawatt-hour.

 

[jeewee3000]

General trading question:

As a conservative investor, I am trying to understand a contradiction I see pop up a lot (mainly in the TSLA Market Action thread).

On the one hand, a lot of investors claim to buy and hold "forever" (I am talking SP in the thousands or 'till 2025). Some even point out their portfolio is 100% TSLA.

On the other hand, many of those same investors claim that on a dip - such as the drop to $295 yesterday due to macro - they bought the dip.

I don't get this because:
- if they have cash lying around to buy the dip, then they weren't fully invested in TSLA with their available money for trading.
- if they were fully invested (buy & hold), they shouldn't have extra cash to buy the dip.

So are these people not being truthful? Are they not doing what they say they do? Are they selling off shares instead of holding forever, but they never post when they sell, only when they get back in?

You catch my drift. How is buying and holding compatible with all the cocky "bought more on the dip" talk?

 

[WarpedOne]

You are reading too much into those words.
You always have some $$$ 'laying around'. I'm toying with an idea to buy additional 18 pieces (yes, eighteen) just to reach a nice round total.

 

[GoTslaGo]

General trading question:

As a conservative investor, I am trying to understand a contradiction I see pop up a lot (mainly in the TSLA Market Action thread).

On the one hand, a lot of investors claim to buy and hold "forever" (I am talking SP in the thousands or 'till 2025). Some even point out their portfolio is 100% TSLA.

On the other hand, many of those same investors claim that on a dip - such as the drop to $295 yesterday due to macro - they bought the dip.

I don't get this because:
- if they have cash lying around to buy the dip, then they weren't fully invested in TSLA with their available money for trading.
- if they were fully invested (buy & hold), they shouldn't have extra cash to buy the dip.

So are these people not being truthful? Are they not doing what they say they do? Are they selling off shares instead of holding forever, but they never post when they sell, only when they get back in?

You catch my drift. How is buying and holding compatible with all the cocky "bought more on the dip" talk?

I assume that some are adding to their 100% TSLA positions on margin. That can get over 100% (borrowed money). Obviously risky, but everyone's risk appetite is different.

I bet many Long-term holders who are adding are not at 100% TSLA (I'm not, but adding). Others who have posted that they are adding look to me like they are day trading. Sometimes it can get hard to follow the exuberance on the forums.

Either way, we can never know exactly what anyone on the forum is doing, maybe except @TrendTrader007, and he goes quiet sometimes too.

Just my observations.