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Long-Term Fundamentals of Tesla Motors (TSLA)
- Thread starter Robert.Boston
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- elon is an ass investing TSLA
Contracts have an adjustment clause.
The consumer has three options
1. Assume that your utility company will adopt whatever mix of carbon and renewables they want and pass savings to you. Cost of power increases limited by local regulatory body.
2. Buy a solar system now, pay upfront/ financing and assume maintenance & obsolescence risk, reduce carbon footprint. Cost of power mainly paid upfront, but maintenance risk still.
3. Solarcity PPA. No upfront, no maintenance risk, assume risk that this is less expensive than #1 or #2 above, reduce carbon footprint. Usually net monthly savings vs current bill. Cost of power increase limited.
In each case the consumer is assuming risk regarding the future price of energy. I think the PPAs are a very nice option for those who do not want to assume the cost of an upfront option.
In many ways this is similar to buying/ leasing a car. The best financial outcome is to buy upfront and keep the car running for 20 years. However leasing is very popular as many people do not want to assume maintenance risk, do not have the money to buy a car outright or just generally are willing to pay more for less commitment.
I can't say that I personally have ever leased a car, but since consumers have a choice of financing options I don't think that they are being ripped off either. People have a variety of reasons behind their decisions.
The consumer has three options
1. Assume that your utility company will adopt whatever mix of carbon and renewables they want and pass savings to you. Cost of power increases limited by local regulatory body.
2. Buy a solar system now, pay upfront/ financing and assume maintenance & obsolescence risk, reduce carbon footprint. Cost of power mainly paid upfront, but maintenance risk still.
3. Solarcity PPA. No upfront, no maintenance risk, assume risk that this is less expensive than #1 or #2 above, reduce carbon footprint. Usually net monthly savings vs current bill. Cost of power increase limited.
In each case the consumer is assuming risk regarding the future price of energy. I think the PPAs are a very nice option for those who do not want to assume the cost of an upfront option.
In many ways this is similar to buying/ leasing a car. The best financial outcome is to buy upfront and keep the car running for 20 years. However leasing is very popular as many people do not want to assume maintenance risk, do not have the money to buy a car outright or just generally are willing to pay more for less commitment.
I can't say that I personally have ever leased a car, but since consumers have a choice of financing options I don't think that they are being ripped off either. People have a variety of reasons behind their decisions.
mspohr
Well-Known Member
Do you know the terms of the Solar city PPA? Are there adjustments to the price paid for power delivered to the utility or is it just net metering and pay prevailing rate for excess used?
Customer (PPA) does not see the net metering, that goes to solarcity.
Customer enters into a baseline cost + max yearly adjustment for a fixed term. Solarcity is responsible for power delivery, maintenance and basically everything else
https://www.solarcity.com/sites/default/files/sc-contract-resi-ppa-2.9.pdf
Customer enters into a baseline cost + max yearly adjustment for a fixed term. Solarcity is responsible for power delivery, maintenance and basically everything else
https://www.solarcity.com/sites/default/files/sc-contract-resi-ppa-2.9.pdf
mspohr
Well-Known Member
Thanks for posting the agreement.
It seems like a really bad deal. You pay 0.16 plus 2.9% increase per year for all the electricity generated by the system for 20 years so you're paying about 0.30 at the end. Plus, you don't gain any ownership or tax credit. I assume you have to pay the power company for any excess usage.
Compare to my self financed system which will pay for itself in 6 years ( sooner as electricity rates increase) then free power after that.
It seems like a really bad deal. You pay 0.16 plus 2.9% increase per year for all the electricity generated by the system for 20 years so you're paying about 0.30 at the end. Plus, you don't gain any ownership or tax credit. I assume you have to pay the power company for any excess usage.
Compare to my self financed system which will pay for itself in 6 years ( sooner as electricity rates increase) then free power after that.
It's a bad deal compared to buying upfront and assuming all maintenance costs, but not everyone wants to do that.
Plus I don't think they have actually taken the increases, it's a ceiling not an automatic adjustment
I agree with Ken entirely.
My unhappiness with the TSLA-SCTY merger proposal arises primarily from only one thing: the refinancing poses a risk of transferring the profit potential from current stockholders to someone else.
It's quite possible for Musk to accomplish his goals while wiping out current stockholders; and also quite possible to accomplish them while severely diluting current stockholders. In which case, great for the human species, not so great for the stockholders.
I want to see a plan for refinancing SCTY's debt (thus eliminating the risk of bankruptcy, which transfers corporate ownership from stockholders to bondholders), without severe dilution to the stockholders. That's all. Hopefully Musk will present said plan in the next few weeks after completing due diligence.
My unhappiness with the TSLA-SCTY merger proposal arises primarily from only one thing: the refinancing poses a risk of transferring the profit potential from current stockholders to someone else.
It's quite possible for Musk to accomplish his goals while wiping out current stockholders; and also quite possible to accomplish them while severely diluting current stockholders. In which case, great for the human species, not so great for the stockholders.
I want to see a plan for refinancing SCTY's debt (thus eliminating the risk of bankruptcy, which transfers corporate ownership from stockholders to bondholders), without severe dilution to the stockholders. That's all. Hopefully Musk will present said plan in the next few weeks after completing due diligence.
Not really, since solarcity leaves the risk of regulatory changes with the customer. Solarcity is by no means a power company.
colettimj
Member
This information appears a bit outdated (it still mentions the MyPower loan), but it does note "Customers can choose a lease or PPA with no upfront cost and with payments escalating at a set rate, typically 2.9% per year, or they can select a lease or PPA that has some upfront cost and no annual increase in payments."
No idea what "upfront cost" would be necessary, though.
Ulmo
Active Member
(Background: I agree with your post fundamentals, and regardless of whatever happens TSLA-SCTY, that's essentially the future.)
So, you're saying, Musk has to go and buy the silly SCTY 1.0 garbage in order to own SCTY 2.0, even though we all (you, me, him) know that SCTY 1.0 is going away and is (using your word) inapposite of SCTY 2.0, and I'm saying, why not just do SCTY 2.0 in-house to TSLA while SCTY 1.0 goes away? Obviously, I fail to understand the financing behind converting SCTY 1.0 (shedding itself as its metamorphosis, nearly a reincarnation) to SCTY 2.0.
I oppose merging them for very nearly the identical reason you state that they would be merged; that the current system of SCTY is a silly one financially and doesn't match the goals of TSLA. How would it assist the overall goal to grab SCTY 1.0 when TSLA could grow a new division of sorts called TSLA Solar, get a partnership with SCTY 1.0's manufacturing division, R&D, installation, provisioning, etc. (everything but their stupid financials and pushy sales and horrible service), and just do SCTY 2.0 in-house to TSLA completely? That's been my point all along. Can SCTY prove to us they're going to shed their stupid crap to merge into TSLA? Is a merger (ok, TSLA buying SCTY) an excuse to shed the "old way of doing business" just to get to the rather thin part of SCTY's R&D & manufacturing (and provisioning, installations, etc.)? Are they going to state that outright? Do they have to? Do we KNOW they will stop trying to sink all their money into the pits? That's why I've bashed SCTY's goals as "on a Mission from God" because they don't really have a business model based on any foundations of your own (as you point out with the change in solar collection prices you predict).
My post is messy, which is prettymuch what I think of them bamboozling us with this without guaranteeing they won't keep going on with the crap, and doom the primary mission of TSLA.
Ulmo
Active Member
Ok, I let those brain cells get dusty (actually, I didn't). Let me think this through. SC (1.0) finances PV panels, and plays that silly board game with the utility bill and the payments for the loans on the panels. That's the problem: those brain cells never got dusty. I don't know what's in SC 1.0's contracts with the customers: who owns the panels? Who's obligated for the payments of the panels? If it is the customer, does that mean liens on their homes for the value of the panels once there's not enough money to pay for the financing through utility savings (i.e., default)*?
* If the customer doesn't want to make up for the excess costs associated with the failure of the financing of their panels, and would rather just give the middle finger to SC's financier (I assume a a packaged loan buyer serviced by some random service company run by ex-con's in New York State, and suddenly, they send more end-of-life gangs to take over the homes of those who selected Solar City 1.0 as their service provider, killing the debtors and taking their homes through the liens).
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Ulmo
Active Member
I think I am unaware that this is the same reason I oppose it; I claim it's because I don't want it to bankrupt and/or alter the mission of TSLA, but if TSLA keeps on mission, then is my opposition simply that this would remove profit from the TSLA shareholders? Is that your worry? That the profitability of TSLA is lower if it pulls in the electrons used by the cars directly from the sun (with local storage), but more in line with the goals of the company, and the TSLA shareholders end up investing in this via the buyout of SCTY's prior business dealings, and ends up with no profit? Floating the SCTY panel market position just long enough to bring a full package to market, rather than bringing the full package to market themselves.
Neroden, this would buy out Elon Musk's SCTY shares, and he would be financially OK, especially since he bought in to both companies at pretty good share prices, and the TSLA shareholders who bought in at around current prices wouldn't see the future growth due to Tesla Energy and Tesla Motors due to the losses incurred putting to rest the old business model of Tesla Solar's predecessor (SCTY). So am I worried that my own investment is going nowhere good rather than my own interest in the success of Tesla's mission?
kenliles said:
So, this would be the dilution neroden is mentioning? And if so, who is making that money that neroden said is being made?
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If SCTY is cash flow positive there is no reason to think that you can somehow buy 2.0 without 1.0. Why would SCTY do that deal?
The PPAs in the 1.0 model are self-financing at this point. Basically they are similar to rental properties in which the property owner is SCTY, the mortgage is held by wall st. and the homeowner is the renter. Once the mortgage is paid off then SCTY owns it outright. The anticipated PPA payback period is 13-15 years, with solar sytems lasting quite a bit longer than that representing a lot of free cash flow to SCTY.
The PPAs in the 1.0 model are self-financing at this point. Basically they are similar to rental properties in which the property owner is SCTY, the mortgage is held by wall st. and the homeowner is the renter. Once the mortgage is paid off then SCTY owns it outright. The anticipated PPA payback period is 13-15 years, with solar sytems lasting quite a bit longer than that representing a lot of free cash flow to SCTY.
He definitely wants the Silevo factory (mentions it repeatedly in the conference call). I strongly suspect there's no way to get it other than buying the whole company.
Well, basically you stop selling the non-pre-financed PPAs and leases. That part's quick. The slow part is refinancing the $3 billion in outstanding debt. This is also where the TSLA stockholders potentially get diluted (by new stock issued to raise that $3 billion), or lose the company to bondholders in a bankruptcy (worst case).
We do not *know*. However, there are specific statements from SolarCity execs within the last few months that they are trying to move over to loan-based financing rather than leases/PPAs. That's good enough for me.
It's interesting that Musk is so interested in manufacturing solar cells. In the past, he has described it as no more complicated than making drywall. He must like Silevo's technology.
*sugar* Elon Says - Transcript - Computer History Museum Presents: An Evening With Elon Musk
Musk on Jan 22 2013 said:
*sugar* Elon Says - Transcript - Computer History Museum Presents: An Evening With Elon Musk
MitchJi
Trying to learn kindness, patience & forgiveness
He was talking about "Standard Efficiency Panels ", silevo panels are thirty percent and Elon has recently had some revolutionary insights about and taken a renewed interest in manufacturing.
And I think a big part of silevo's technology advantage is manufacturing efficiency and Elon can improve on that process.
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JRP3
Hyperactive Member
Where do you get $3B that needs to be refinanced? From what I see there is about $1.6B in asset backed financing that is non-recourse and doesn't need any refinancing, about $400M in a revolver which is basically used as short term financing to bridge to PPAs, so that doesn't need any refinancing (since it is a revolver), and about $1.1B in recourse hold solar and convertibles. That last $1.1B is the only part I see that would need refinancing and not even all of it in the short term as some of the solar bonds are 10yr terms
doggusfluffy
Closed
JRP3
Hyperactive Member
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