SolarCity (SCTY)

[woof]

Just watched the Town Hall. It was...disappointing. The information could have fit on a single slide of FAQ presentation. No new information, except that it sucked to grow up in Bombay without power.

 

[blakegallagher]

New patent showed up today relating to installing solar on carports. Seems like a smart solution.

Solar Photovoltaic Module Clamping System (Solarcity)

 

[Foghat]

Interesting to learn that the same Hawaiian PUC member that cut net metering, skipped the cue of thousands and got their solar permit approved days before the decision to cut net metering... Now they are currently under investigation for ethics violations... That's real good representation of utility oversight!

Dont know if anyone has seen this, but if this doesn't sell the case for man made global warming nothing will. Bloomberg report on NASA findings in clear plan comparison charts:

What's Really Warming the World? Climate deniers blame natural factors; NASA data proves otherwise

The case for supporting renewable growth is very clear. Solarcity has a very strong business case just in these data points alone. Also strong support for taxing emissions or incentivizing non emitting production capabilities such as solar (and storage). It is clear we all paying the price for someone else's Pollution costs.

 

[dalalsid]

Just watched the Town Hall. It was...disappointing. The information could have fit on a single slide of FAQ presentation. No new information, except that it sucked to grow up in Bombay without power.

I didn't hear the thing but I grew up in Bombay with far fewer power failures than here in the US.

 

[gene]

I was not free to hear the Town Hall meeting. I was thinking there would be a way to play it afterwards but I can not find any link to listen to a recording of the meeting. Anyone have a link?

 

[TheTalkingMule]

PR and positioning continues to be an issue for SCTY. Cut the silly commercials and put some resources into proper PR presentations.

 

[electracity]

The idea of some kind of short-term existential "risk" for SCTY is just laughable. They've been doubling every year with massive revenue, have pivoted to 40% growth to show profit, install costs have been cut in half and you want us to think there's a major threat somewhere in the net metering minutia of the mainland states? That's just not reality IMO.

The battle in PA for instance is whether there will be a 110% cap, 200% cap or no cap at all and we have essentially the same type of ridiculous legislature as Kentucky or Oklahoma. There's no stopping solar, it's far too simple of a technology and so far superior. SCTY has proven to be the "favorite" provider of solar energy. Cut some soft costs and start printing cash. What's the problem?

This portion of the thread will be a hoot in a year or so, just like the 2013 Tesla threads are a hoot right now.

SC Q4 results will probably be good. I've been trying to process what the good and bad news in the next year will do to the stock price. I think the market hasn't fully processed the understanding that PPA doesn't work without classic NEM. Yet I think it is likely that SCTY will meet guidance through 2016.

 

[SBenson]

SC Q4 results will probably be good. I've been trying to process what the good and bad news in the next year will do to the stock price. I think the market hasn't fully processed the understanding that PPA doesn't work without classic NEM. Yet I think it is likely that SCTY will meet guidance through 2016.

The first part is what I was trying to make in many number of posts. With data, with models, with step-by-step instructions. But as I keep looking I see more wrinkles to the story. You and I may be overlooking some negative aspects that can turn into surprising positives (potentially huge). Will post more with proper info and put it up for discussion.

What guidance are you referring to? MWs? Revenues? EPS? "cash flow positive"?

 

[TheTalkingMule]

The idea that consumers will for some vague reason not be compensated for kWhs pumped into the grid is just a silly.

 

[Foghat]

I was not free to hear the Town Hall meeting. I was thinking there would be a way to play it afterwards but I can not find any link to listen to a recording of the meeting. Anyone have a link?

i saw some of it. Lyndon did an introduction to the business and himself. Introduced a Solarcity rags to riches story of a low level sales rep rising to becoming a director of sales, and an emphasis of never giving up and building on the momentum of the grass roots efforts through things like the ambassador program and proactive support for solar in general. He said because of the size of Solarcity and the solar industry in general, solar is a significant agenda item across all local/federal climate change legislation and initiatives. He is also confident in California governor Jerry brown in supporting roof top solar as well as all renewable initiates in the state. He also mentioned New York governor cuomo as a significant renewable minded leader.

a few other key notes:

i saw a picture of silveo. It looks completely done from the outside. I imagine they are in full swing on finishing the inside and getting the factory tooled out and set up. It appears they are still on schedule which is outstanding in my ooinion.

Lyndon made it very clear that 100% of all home sales have had successful transfers of lease/ppa/loans. And he said they do an average of 20 transfers a day. Not only is there 100% success rates, he sees sellers getting better pricing on their homes. In fact, he noted some leasing solar right before a home sale in order to make the home value go up. He strongly rejected they myth that leasing and ppas are liability to home owners. Leases and ppas are assets.

 

[SBenson]

The idea of some kind of short-term existential "risk" for SCTY is just laughable. They've been doubling every year with massive revenue, have pivoted to 40% growth to show profit, install costs have been cut in half and you want us to think there's a major threat somewhere in the net metering minutia of the mainland states? That's just not reality IMO.

You have thrown a curve ball into the whole argument. I don't even know where to begin...

Lets start with this: where do you think money comes from for SolarCity to do 40% more installs or any installs for that matter?

SolarCity bears the cost of doing the install upfront, remember? So, where does that money come from?

 

[TheTalkingMule]

Low risk corporate bond demand is through the roof with low supply. Direct to investor bonds.

Edit: The idea that monied individuals and major institutions will not want to be involved in financing solar projects with the best borrowers in America might be the silliest of all!

 

[SBenson]

Low risk corporate bond demand is through the roof with low supply. Direct to investor bonds.

Edit: The idea that monied individuals and major institutions will not want to be involved in financing solar projects with the best borrowers in America might be the silliest of all!

Ok... can you get 100% mortgage on a home purchase? What's a reasonable/normal down payment expected?

 

[electracity]

Lyndon made it very clear that 100% of all home sales have had successful transfers of lease/ppa/loans. And he said they do an average of 20 transfers a day. Not only is there 100% success rates, he sees sellers getting better pricing on their homes. In fact, he noted some leasing solar right before a home sale in order to make the home value go up. He strongly rejected they myth that leasing and ppas are liability to home owners. Leases and ppas are assets.

How would he have any idea of the impact of attached PPA's on a home? How would he have data on potential buyers who walked away? How would he know when owners had to cut the price in negotiations?

Leased solar panels can complicate a home sale - LA Times

This only gets worse as solar gets ultra cheap in the next decade.

 

[TheTalkingMule]

Ok... can you get 100% mortgage on a home purchase? What's a reasonable/normal down payment expected?

Generally 3-20%.

I'm starting to get concerned that you're not being entirely forthright with your opinions on SCTY. You've done some AMAZING research and are clearly an intelligent and logical thinker, but to pose some of these questions does not square with rational investment research. As I mentioned before, it doesn't matter to me either way since an assertion that can't be refuted is still a great conversation point.

In other words, I can't imagine that you honestly think down payment necessity will be a barrier to success for SCTY. Even with the ITC only at 10% and no state incentive, a $1.50 install cost continues to make the model a no-brainer for bond investors and customers. Some kind of small down payment could always be added and spread out over the first 6 months.

 

[Rarity]

Low risk corporate bond demand is through the roof with low supply. Direct to investor bonds.

Edit: The idea that monied individuals and major institutions will not want to be involved in financing solar projects with the best borrowers in America might be the silliest of all!

I would like to see some discussion about what would happen if SolarCity loses access or partial access to the bond market because of exogenous factors.

 

[electracity]

The first part is what I was trying to make in many number of posts. With data, with models, with step-by-step instructions. But as I keep looking I see more wrinkles to the story. You and I may be overlooking some negative aspects that can turn into surprising positives (potentially huge). Will post more with proper info and put it up for discussion.

What guidance are you referring to? MWs? Revenues? EPS? "cash flow positive"?

Deaccelerating growth in a high demand 2016 market should allow them to concentrate on higher margin sales. They should be able to improve all financial measures, although I have no idea if they will go cash flow positive late next year. With no ITC extension they may be reducing sales expense by Q3. Good individual sales people only need to have many real buyers to make their numbers.


Chanos will be proven right or wrong by how SC responds as states replace NEM 1.0.

 

[TheTalkingMule]

How would he have any idea of the impact of attached PPA's on a home? How would he have data on potential buyers who walked away? How would he know when owners had to cut the price in negotiations?

Leased solar panels can complicate a home sale - LA Times

This only gets worse as solar gets ultra cheap in the next decade.

It's actually much more likely to be the reverse. Buying cheap panels in 2022 is all well and good, but unless you're off grid your electric bill is still going to be rough due to increased retail rates.

You can't make the argument that solar is going to tank due to net metering erosion and then turn around and say a guy 10 years down the line will be on easy street with just cheap panels.

Unless you're saying there's batteries involved 10 years down the line?

 

[gigglehertz]

Hey JHM, what's your current best guess BFPT for SCTY around Jan 2018 given the new slower growth strategy? I was planning on using profits to help pay for my Model 3 but now I'm thinking I might have to settle for a used Leaf for now, but possibly still buy a M3 down the road a bit if/when the stock recovers. I was saving up for my reserve amount in March (I'm obviously not rich) but I may forgo reserving and buy more SCTY now while it's down.

Edit - let me add, I understand the ITC step down, Fed interest rate hikes, and state by state feedin tarrif battles are all large unknowns at this point and none of us have a crystal ball. You seem like the smartest guy in the room numbers wise so I just wanted your take on things given whatever you think might happen. I specifically want to know when you think sp could get back up to about $100. I was hoping by start of M3 production but recent events could mean that gets pushed back a few years and that's fine, I just want to brace myself for that and arrange my finances accordingly.

 

[SBenson]

Generally 3-20%.

I'm starting to get concerned that you're not being entirely forthright with your opinions on SCTY. You've done some AMAZING research and are clearly an intelligent and logical thinker, but to pose some of these questions does not square with rational investment research. As I mentioned before, it doesn't matter to me either way since an assertion that can't be refuted is still a great conversation point.

In other words, I can't imagine that you honestly think down payment necessity will be a barrier to success for SCTY. Even with the ITC only at 10% and no state incentive, a $1.50 install cost continues to make the model a no-brainer for bond investors and customers. Some kind of small down payment could always be added and spread out over the first 6 months.

Hey Mule, As you threw a curve ball, I am trying to bring the conversation back to a reasonable point to further the discussion. If you were to look at my post 3105 now it might make more sense.

- - - Updated - - -

I'm getting suckered into one more...

it it might be advisable to really understand the business model. Solarcity is in the business of selling electricity. Low cost electricity compared to the local utility. They are not looking to make revenue off the sale of storage. The revenue stream is not from selling storage.

Solarcity's revenue stream is from selling cheaper energy. Solar+storage is all about a cheaper cost/kWh for the consumer. That's the value proposition. That's sales pitch. That's the Bottomline.

Current contracts of solar+storage already have 50/50 sharing under the whole sale market aggregation rate plan. It's already in place. Solarcity solar+storage is meant to lower cost per kWh and that's what customers are buying into.

revenue is measured just like it is today, only instead of net metering, aggregation services revenue goes to cost of energy delivery by Solarcity which translates into cheaper retail electricity as well as healthy profit margins for Solarcity.

Like I said before again and again, this is a time of uncertainty and transition(net metering, ITC, aggregation, value of solar,etc.). Long term investors either weather the storm or sit it out until they are comfortable. Otherwise, traders run this from day to day until some kind of longer term financial modeling can be established.

Again, good luck with your investments.

Foghat, Thanks for being patient. I overlooked the main point you are trying to make, as I was blinded by the -pilot- project terminology. My bad.

So if we were to adjust my simplified model, we would be adding an extra step in between, right?

Step-1) Take SolarCity's current economics

Step-2) Remove renewal portion (as it is NOT financ'able/bankable)

Step-3) Add in the impact of ITC drop

Step-4) Add in the cost savings

Step-5) Factor in the impact of Net-Metering scale back. Whether it is lower FIT or adding battery costs

Step-6) Add in any additional revenues or utility/state credits for added batteries

Step-7) Is there still 20% profit margin left?

Answer: Yes - SolarCity can continue to operate in the state. The model is bankable.

Answer: No - The contract is not bankable. Thus SolarCity will need to pull back from the state.

** Even with this, my original point remains. How do we measure or even guess this new step-6? Do we have any clues?