I'm kinda rehashing old thoughts here. Not much new.
Come to think of it, the merger eliminates the short term refinancing risk of these loans. You would expect that SolarCity would have had 20 yr loans to match 20 year PPA revenue stream. Instead, they opted for short term 5 yr loans to reduce interest payments. Because the business outlook started floundering, when it is time to refinance, lenders would have jacked up interest rates citing increased risk. That risk is mostly eliminated under Tesla as Tesla is a much bigger entity with much less risk profile.
This was mentioned in the SCTY conference call Elon was on during his public promotion of the merger deal, I'm pretty sure. Either that, or I figured it out for myself and assumed it during the call and it got associated in my memory with thoughts during the call. But that's not very material either way. I'm just trying to say (a) I agree mostly and (b) you state it as an absolute, and I wouldn't --- "eliminates short term refinancing risk of these loans" --- absorbs, sponges, etc..., but it will still be there, just buffered much better. Why am I saying all of this without a background in financing? Probably everyone else on this forum could explain this better to me than I could to them.
This is something I've been hesitant to say, but I'll say it: From what I understand, SCTY seems to have a borrowing problem because of lack of faith in its future, and TSLA doesn't have as huge a borrowing problem, because of abundant faith in its future. SCTY needs money now, and TSLA needs money in a more regular timeline (not all right now). In essence, this TSLA buying SCTY's effect on borrowing benefit is TSLA lending faith in TSLA to SCTY. This only works as beneficial if SCTY pays that faith back somehow, such as integrated product increasing marketshare and/or profit margin per marketshare and/or increasing profit somehow. TSLA really wants that, and is looking to integrate its TE (home battery) products into the marketplace efficiently and profitably, so this is the stated benefit for having the assets of SCTY in TSLA's pocket.
TSLA needs money, but it has tapped into a well of money that a % of flow directed toward its cousin would allow its cousin to survive that it would not survive the same way without, and there is a (claimed and plausible integration) benefit to eating its cousin.
My original complaint was that there might be a cheaper way to do this energy integration. My capitulation came in that (a) those ways might have been exhausted and (b) those ways might never have existed. I'm leaning toward (a) years ago, but with today's Silevo Buffalo factory, if Tesla+Solar City has inside knowledge of their product effectiveness and saleability that will help the payback that they are being coy about, then this becomes contingent upon that coming through. That's not only plausible, but how they're selling it.
Someone else's point is that may be a front for avoiding a catastrophe that could be too negative. If that's the case, then they better pair the two companies well, and QUICKLY clean house of the rough financing, pushy sales, and poor customer service at Solar City. During my Solar installation proposal reviews, I didn't even look at Solar City as an installer due to very poor customer review ratings. At the last moment, I said what the heck, let's see if they've started learning their lesson and started playing good. The rep that came was completely held down by poor policies at his company. Maybe I'm just not dealing with national companies (all of my real proposals came from local outfits) and that's par for the course for the large national companies, but the revamping has not begun at all, as I see it --- those SC policies were ridiculous and basically had me running the rep out the door as fast as I possibly could without being overly impolite. I don't know what they're waiting for, quite frankly. If the merger fails, Solar City is going to bed.
Either way, they should clean up SC urgently. Now, before the merger, during the merger, after ---- maybe they're just waiting until after the merger so that people aren't caught in a churn of multiple reformats within months.
