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SolarCity (SCTY)

Discussion in 'TSLA Investor Discussions' started by Curt Renz, Mar 24, 2014.

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  1. jhm

    jhm Well-Known Member

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    Lately, I've been spending a lot of time reading articles over at oilprice.com. I guess I'm interested in how fossil investors are framing the energy investment world. Indeed, it is hard to find a fossil-centric article that is taking a serious look at renewables. But here's one article that seems to grasp the problem at hand for utilities. It's a sober view that recognizes the folly of attempting to grow the rate base.
    Dear Electric Company CEO: Merry Xmas and Cut the Dividend? | OilPrice.com

    If this article is any indication, utility investors may be getting to walk away. If the utilities do not divest generation assets, as I have argued, shareholders will divest these companies. There is a massive, global asset bubble just waiting to pop.
     
  2. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    The top three utilities in Germany are down 70% in value in just the last 3 years and begging the government to allow them to divest from nearly all forms of production. How people don't discuss this as part of every single renewables conversation is beyond me. The Germans do everything logically and for the most part with the average consumer in mind rather than corporate interests.

    German solar reading should be step one for any investor looking to educate themselves on what the US might look like over the next few years.
     
  3. bwa

    bwa Member

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    #4044 bwa, Dec 22, 2015
    Last edited: Dec 22, 2015
    I'm on the invention side of things, so no worked out numbers and accounting on this, but from my perspective, turning the grid into an asset and profit center rather than a liability and cost center is where it's (supposed to be) at with these legacy electric utilities. For instance, sell "electricity transport services" enumerated for the real cost of transmission, and hook it up to attractive places, like distributed sinks (batteries, home generation (solar), buyers (users who want the juice), battery farms, and the whole range of other generation (including solar, wind, geothermal, nuclear, gas, etc.)). This is a great business to be in if you're the right person (i.e., corporation who knows what they have and what they don't). It's a dream come true: a new way of generating, saving and using electricity, but you already have most of the most expensive stuff done already. Now, all you have to do is introduce fair attractive all-entity trading platforms at all (micro and macro) levels (i.e., home trading of one's own generation, storage, use), make sure the competition interacts compatibly with it (don't play Not Invented Here games and don't be jealous -- make everything work right, including equipment vendors, installers), get the regulators to do their job right (sign off on this new stuff without jury-rigging it), and make a profit off of transport. The grid is the utility. (Remember "the network is the computer"? It was half right, and right enough to make sense here: it was the new thing that was underconsidered.)

    All that generation gunk? Do the accounting right. Slow down the pollution. Realize its true life and cost. Don't go hog wild. Just like the article above said (the Merry Xmas one). But like that article said, it's not the bread and butter any more.

    The grid is supposed to be a shining emblem of the company. They should treat it like a product on a shelf to sell to potential customers. Instead I see places like PG&E treat it like a dirty cost that has to be made more "stable" by killing numerous century old trees that take a century to replace on all of the prettiest roads in the area rather than just putting a little insulation around the wires. PG&E ought to be making us LIKE their grids so we WANT to buy product from them, rather than HATE PG&E and want to do everything in our power to stop using them and their dirty actions. Throwing a few wires underground is only a cost in a structure where the grid is a cost; otherwise, it's a new product to sell. Of course, that means a total redesign of the product base: you have to get the regulators to understand you want to charge for transmission according to transmission cost (no welfare for the "underserved" -- they can get solar anyway, so the grid is more of a feature than a human right), instead of treating yourself like a father figure who brings home the bacon every night from that dirty generation job every day --- that's no longer how it works. We don't recycle our energy from dirty garbage (dinosaurs and coal) any more -- we get it direct from the source (sun rays).
     
  4. RobStark

    RobStark Well-Known Member

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    Dieselgate, BEV incentives and market penetration.
     
  5. doggusfluffy

    doggusfluffy Closed

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  6. SBenson

    SBenson Active Member

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    James, My understanding of ABS is that they are pass through securities. So if a portion of homeowners default an appropriate portion of cashflows to ABS investors will be chopped. That will lower the yield they will get and can potentially take it to 0 or even negative depending on what % of the pool has defaulted.

    For a hypothetical example, there is a pool of 100 instals.
    Years 1 to 5 cashflows are earmarked for Tax-Equity folks
    Years 5 to 15 for ABS
    Years 15 to 20 left for the firm (shareholders)

    If all 100 homeowners default in year-2, tax-equity folks lose a potion of their investment but ABS and shareholders lose all of their investment in this pool.

    There is no mechanism for tax-equity folks to carry a greater burden for the sake of ABS investors.

    In theory, yes, shareholders can take up greater losses. For example if SolarCity pretends that no defaults happened and it pays back full cashflows to tax-equity and ABS investors.

    The way you are saying seems to suggest that SolarCity is on the hook to pay the ABS investors wether homeowners pay their bills or not. In fact I believe there are provisions like that for tax-equity guys but not for ABS. I remember the ratings note done by S&P. Their rating was very much based on wether homeowners will continue to pay or not. It certainly isn’t based on SolarCity’s ability to pay back.

    Here is a quote from Bloomberg Gadfly column from here: http://www.bloomberg.com/gadfly/columnists/ASe2HvynvWg/liam-denning/articles/2015-12-23/nevada-net-metering-ruling-a-reality-check-for-solar

    I agree with the solution bit. SolarCity should immediately explore the possibility of adding batteries. I believe the cost can be easily passed through to the homeowners by increasing about 2cents/kWH for each powerwall. That will be far more economical for the consumer than paying 2X the bills (or default and ruin their credit).

    But the issue is, the PUC pretty much said this to NV Energy - here are all the ways you can screw residential solar. Figure out how much you want to screw in each step for yourself.

    I am not kidding. The fixed rates and TOU rates will be determined by NV Energy that PUC will approve. So NV Energy can play with these fees in such a way that it becomes nearly impossible to overcome the burden even with batteries. For example what if fixed costs are $50/month? So we need to wait and see how this plays out. I believe we will know within a week.
     
  7. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    Interesting microgrid news.

    Microgrid System Laboratory Partners To Include NREL, DOE, Clean Coalition, Duke Energy and others

    This stuff should have been going on at a large scale 6 or 7 years ago, perhaps the military was and we just don't know about it.
     
  8. MartinAustin

    MartinAustin I Do Not Read Electrek

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    Has anyone considered the effect that all this warm weather is going to have on Q4 results? There will be next to no detriment to crews working through the winter, who are often held back by snow on roofs, etc.

    Could be a fabulous boost to the installs count.
     
  9. blakegallagher

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    Does anyone know a good site that keeps all of the analyst upgrades and downgrades for SolarCity in one spot. Like a free much less powerful Bloomberg terminal.
     
  10. jhm

    jhm Well-Known Member

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    #4051 jhm, Dec 23, 2015
    Last edited: Dec 23, 2015
    We need to look at the prospectuses for these ABS offerings. I have not been able to find them, just the ones for Solar bonds. If you can find one, let me know.

    But looking at the solar bond prospectuses, I note that SolarCity does characterize these as "asset-back" which they are in the sense of cashflow originating from solar assets. But they are "senior unsecured corporate bonds." So there is no collateral, but it is senior to other debt and obligations. Finally,

    "SolarCity will be responsible for making all interest and principalpayments on Solar Bonds. We intend to fund interest payments on Solar Bonds with cash payments we receive based on longterm energy contracts for thousands of installed and operating solar energy systems. However, payments on Solar Bonds may be made as necessary from any corporate funds available to SolarCity."

    So in the case of Solar Bonds, SolarCity would be in default if they failed to make timely interest and principle payments, regardless of how the solar assets are performing. So the only scenario where the Solar Bondholders is at risk is where SolarCity is defaulting on all junior debt and still cannot make payment. Recent developments Nevada look like a pretty remote trigger for general insolvency.

    An ABS is structured difderently. There can be numerous safeguards like traunching and over capitalization to mitigate various risks to investors.There are likely provisions for dealing with nonperforming assets. We need to get our hands on a prospectus to clarify how it is structured.
     
  11. DriverOne

    DriverOne Supporting Member

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    Yes, lunacy. This sort of options play is closer to gambling than investing. None of that is cash in the bank - the wheel is spinning and anything can happen. Your value can go to $0. I've made money with options, and I've lost it all with options. Be careful, go easy.
     
  12. doggusfluffy

    doggusfluffy Closed

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  13. Jackl1956

    Jackl1956 Active Member

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  14. ggies07

    ggies07 Supporting Member

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    I can't even read this as it will probably make me too upset and it's Christmas time, so I'll save it for after the holidays.
     
  15. drinkerofkoolaid

    drinkerofkoolaid Active Member

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    #4057 drinkerofkoolaid, Dec 23, 2015
    Last edited: Dec 23, 2015
    How can Nevada legally impose these fees on people who already have Solar?

    Lyndon's statement sounds like this should be an easy lawsuit to win. Could every person in Nevada with Solar Panels group together and form a class action lawsuit against the state?

    Following Anti-Solar Decision by Governor Sandoval's PUC, SolarCity to Cease Nevada Sales... -- LAS VEGAS, Dec. 23, 2015 /PRNewswire/ --

    I'll post this blog here to remind everyone why Solar City invested in Nevada. This should be an easy lawsuit for SolarCity to win. The same lawsuit has occurred in a few states, and the utilities lost in each case. If the new fees are forcing SolarCity to leave, every other Solar Panel company is likely to follow.

    Would every employee who is fired due to this decision have grounds to sue Nevada after this decision is overturned?

    SolarCity to Expand to Nevada | SolarCity
     
  16. doggusfluffy

    doggusfluffy Closed

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    This is an interesting angle. I think it's more ideological that preserving the utility model is more important than the Solar itself...which is of course good for the monopoly.

    Koch brothers defeat Reid on solar power - POLITICO


     
  17. Foghat

    Foghat Active Member

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    #4059 Foghat, Dec 23, 2015
    Last edited: Dec 23, 2015
    i think the actual lesson suggested by AudubonB was know what you're talking about before you say something. Clearly, your thoughts of warren buffet are not the same as mine. The truth from following the situation since buffet bought nv energy in 2013 is absolutely anti competitive with roof top solar from the start. I advise you to look into it if you are going to defend warren buffet, because your statement might come off as ignorant and uninformed by fact. One mans ad hominem is another mans straw man, etc... Pick your fallacy...


    warren buffet knows exactly what is going on with nv energy(among the other utiltiies he owns across the west).

    I'm not going to go into it again, but please read this thread in its entirety to understand the extent of Nv energy's nefarious actions that are clearly approved by the biggest owner warren buffet, just as Elon knows intimately what happens with Solarcity. Elon trusts completely Solarcity management, however, he is very much apart of all significant strategy decisions just a warren buffet is aware of the wildly significant decisions nv energy makes to restrict competition to its utiltiy revenue stream. This is not isolated to just nv energy, but all warren buffets utiltiies... Clear pattern of behavior of all his utilities.

    Please refrain from suggested censoriship of others informed options on subject matter and individuals actions directly related to Solarcity as an investment.

    thank you
     
  18. Foghat

    Foghat Active Member

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    Looking at the legal merits of doing retroactive rate changes, it clearly is unprecedented and highly likely to be overturned in a court of law.

    my feeling is they(nv energy) doesnt expect it to hold up.

    The key effect, the desired outcome by all of this is to slow down momentum of roof top solar competition in Nevada. Period. Delaying is the objective here. That is the strategy. They did it with the net metering cap. They did it during the intern net metering period, and they are doing it now with this most recent decision. Delay delay delay.
     
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