I'm pretty sure they are spending money on the factory. Similar set up to the Gigafactory in terms of incentives I believe. I'm just surprised this wasn't brought up in the presentation.
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I'm pretty sure they are spending money on the factory. Similar set up to the Gigafactory in terms of incentives I believe. I'm just surprised this wasn't brought up in the presentation.
I am referring to the official 10Q. (Not to their gimmicky presentations) There is no mention of it in the official sec filing.
No the setup is NOT similar to gigafactory. Not one bit.
In gigafactory much of the incentives are in the future, except free land and a road to it. Tesla and partners are bearing the cost of construction and equipment.
In case of riverbend, the state is bearing the cost of not only building the factory but also buying equipment in it. I specifically quoted directly from the state government website. Countering that with what? Gut feeling?
Gut feeling? I'm not even countering anything-- it was based off of what I read a while back when it was announced. Solarcity is investing it doesn't give you the split of how much that 750M is, but over time SCTY is projected to invest about $5B.
Extracted this from the 10Q.
In the nine months ended September 30, 2015, we used $1,201.4 million in investing activities. Of this amount, we used $1,134.9 million on the design, acquisition and installation of solar energy systems under operating leases with our customers, and $147.8 million in the acquisition of solar panel manufacturing equipment, vehicles, office equipment, leasehold improvements and furniture. We also invested $44.6 million in short-term investments in highly rated corporate debt securities and asset-backed securities. These expenditures were offset by $136.6 million from sales and maturities of short-term investments. As we increase our solar panel manufacturing operations, including the start of operations at our one-gigawatt manufacturing facility in Buffalo, New York and our research and development focused California Technology Center, we estimate investing approximately an additional $60.0 million in the remainder of the 2015 and approximately an additional $120.0 million in 2016 related to the acquisition of solar panel manufacturing equipment.
Also, not sure if you saw this either but they had a pretty good explanation for their calculations given on their presentation.
http://files.shareholder.com/downloads/AMDA-14LQRE/936907342x0x857522/439EECE4-13E3-4858-98A3-15B584C3C890/Q3_Cost_Memo_-_Final.pdf
JRP3
Hyperactive Member
Negative opinion on solar http://finance.yahoo.com/video/solar-stocks-worse-heres-why-222400096.html
Money spent on currently riverbend would be amortized, not expensed. So it would affect cash flow, but not a major part of P&L. Knowing the capex and cash flow of Riverbend would be interesting.
Presumably SC stated "cost of installation" is the number they use to create an asset on the balance sheet and amortize. I think some SC investors think they are writing off the cost of installation in the quarter they do the work. They do not. They are creating an asset which creates a depreciation expense each quarter.
Both SC and Tesla Tesla plan to go to cash flow neutral soon to demonstrate stability. That is their way of demonstrating that they don't need regular cash infusion to stay in business.
Presumably SC stated "cost of installation" is the number they use to create an asset on the balance sheet and amortize. I think some SC investors think they are writing off the cost of installation in the quarter they do the work. They do not. They are creating an asset which creates a depreciation expense each quarter.
Both SC and Tesla Tesla plan to go to cash flow neutral soon to demonstrate stability. That is their way of demonstrating that they don't need regular cash infusion to stay in business.
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Tedkidd
Member
Recent Energy Gang podcast discusses this. Everyone interested in this post might enjoy subscribing.
another Energy Gang podcast...
"such a sweet, sweet grid connection" - So nicely put. Having storage and production necessary to go off grid is tremendously capital wasteful.
Huge kudos to Jason (wk52) for making it very clear that, even when annual production greatly exceeds consumption, and you have huge storage, even slight misalignment between production and consumption leaves you without power.
Grid connection is like having a huge backup battery behind your backup battery.
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jhm
Well-Known Member
SolarCity is definitely spending on R&D, managing the build out of the factory and hiring workers. It is a good thing that plant equipment is included in the lease. Lease payments should be counted as part of the cost of goods sold, so whatever contibution Riverbend makes gross profit includes the capital for plant and equipment.
Gerasimental
Member
Wondering same about SUNE. Doesn't seem to me like their results justified anything like a 35% hit to the market cap.
Chanos has been prescient in forewarning us. This is exactly what he was talking about.
If CA NEM 2.0 comes even least bit unfavorably, given the context of ITC step down, the bond market will quite literally evaporate. SolarCity will not be able to do any installs even if they want to at razor thin margins or worse negative margins. They won't get financing for it.
The true breaking point for me was a nominal research into potential outcomes of CA NEM 2.0. It is not as rosy as Peter presented at all. Will I be able to handle if the stock drops to single digits? My answer was no to myself. It might not happen most likely, but it 'could' happen. I reached the threshold of my loss bearing capacity and I hit the exit button.
All the gimmicky math and deceptive presentations don't help.
Bond implications are starting to be understood. SUNE is in the worst position of all.
I'm struggling with this man. Chanos' premise is that SCTY is the subprime mortgage broker of the solar industry which is ridiculous and unfounded. Yes, admittedly he has made a significant amount of money on the dip but at the expense of others not understanding the business model.
I'm struggling with the Gimmicky math point and deceptive presentation. Everything is laid out for the key metrics that I linked in the last post. Enlighten us please? What you're implying is some sort of malfeasance on management's behalf that would trigger some type of massive audit.
jhm
Well-Known Member
Thanks for the clarification.
For me the real concern is how much cash is flowing into Riverbend because this competes with cash needed to do installations. So the amount of leverage used in deploying MW is impacted by all the cash needed to grow the business. SolarCity is essentially leveraging its longterm recievables to jump into making panels. So Net Retained Value is made smaller by the leverage needed to move in this direction. This is how I see Riverbend impacting both DevCo and PowerCo in the present situation.
Right, this is a given and I think they were looking at the rate of CF leaving which I believe made them shift strategy to being CF neutral/positive so they can only focus on utilizing internally generated cash.
There's honestly nothing that can explain this price action to me. On a technical standpoint it's totally broken and should have been due for a bounce. Fundamentals... well that's what we're talking about here
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I said this a long time ago: I wonder if SCTY presents the "nuclear option" to analyst. That is, SCTY fires 80% of its workforce at ITC non-renewal. What do the financials look like after trimming 1/2 billion off the yearly income statement?
Understanding the true profitability of the average single solarcity PPA sale today would go a long way to predicting SCTY future possibilities.
Reading this forum?
I see you haven't at least lost some humor. Remember what I wrote on Aug 3, 2015 when you recommended buying SCTY (your SA article entitled: "Solarcity: Misunderstood And Undervalued ") near the 52W-high?
Here's my critical comment again, posted in your article's comment section:
and below that I wrote in another comment on the same day:
to which you replied:
Do you have any advice for people following you into this trade near the 52W-high back in early August 2015?
How is that $100 PT working given the current price near $24? Do you reiterate it? Did/Do you buy more SCTY?
Chanos had literally 15seconds or less on air to explain his thesis on SCTY. So he said something in abbreviated language. That was misconstrued by the bulls (including me) and we all enjoyed attacking him. The real point he is making is financing will become harder in this 'environment'. It was not clear at the time what "environment" he has been talking about. Most of us naively assumed he is referring to 'rising rates' environment and countered that with the usual bull point that spreads will come down. But his environment, in retrospect, can be anything - ITC step down, NEM dilutions etc. But his key point was, it is not possible to run the shop with ever increasing amounts of debt, especially in a bad environment.
I will have to make a megapost on the gimmicky math and deceptive presentations.
TheTalkingMule
Distributed Energy Enthusiast
It's incredibly easy to spread doubt about solar right now.
All you have to do is look at this board. Nothing major has changed and SCTY is making prudent moves to be cash flow positive while still growing at 40%, but doubt has crept in. Doubt spreads and shorts take advantage.
Buy low, sell high.
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You don't think he was being purposefully vague? That's how it's done. You plant the seed of doubt and let human nature do the rest.
A month ago we all agreed that SCTY's increasing debt was a good thing because that meant sales and future profits. The chart guys on the Street just didn't get it. How is that somehow no longer the case?
People used to get rich drilling for oil, they will now get rich by financing future renewable energy production. Is that not an immutable fact? How does that equate to an adverse environment?
Focus people!
jhm
Well-Known Member
Look the market absolutely hates solar right now. Just as the price of oil has been cut in half over the last 12 months so has the price of natural gas. And coal is making its final spin in the crapper. That, my friend, generates a lot of vindictive hate.
Natural gas is at $2.40/MMBtu because the price of solar at $40/MWh is equivalent to gas at $3.41/MMBtu. If gas were any higher it would hasten the build out of solar, wind and batteries. What happens when solar drops to $35/MWh, which coukd happen within a few years? I anticipate that natural gas prices get capped at $2/MMBtu. Moreover, natural gas and oil compete in chemical feed stock, heating and transportation. So as the price of gas gets crushed by solar, so oil gets crushed by gas.
The fossil industries and all that rides on the economic health of the fossil industries cannot stop solar or batteries. The best they can do is direct enormous hate at solar and hope to slowdown the financing of solar. This is the ugly side of disruption. We are engaged in economic warfare. The excessive shorting we see is not about turning a profit on trade; it is about impairing an industry that stands as an existential threat to the oil and gas industry.
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