SolarCity (SCTY)

[TheTalkingMule]

Monetisations are for past projects. They help with immediate cash flow.

Credit/tax equity facilities are for future projects. SC will have to incur the cost of the installs to be able to put the projects here and then take some cash. These don't help with immediate cash flow.

An another thing, credit/tax equity facilities are for lower durations. Monetisations are for outer years.

Market cares about monetisations (ABS, cash equity sales etc.). Not so much near term credit/tax facilities.

I've been using "monetization" as a catch-all term. While I certainly understand the market's desire to differentiate between tax equity and everything else, it's all just cash to me. Pre-install, post-install, whatever....it's easier to just average it out and get a vague idea of how much money is coming in vs cost at any point in time.

The fundamental restructuring you've noted above essentially turns SCTY into a behemoth local installer with all the burden of a nationwide operation and none of the benefits. Again, why would we be looking for a Musk-run endeavor to be cash-neutral at this point in the game? Isn't building model efficiency and marketshare far more vital to future profitability?

These guys are building an insurmountable lead in the premium install sector and we all know that will be absolutely massive over the next 2 decades. Why wouldn't being merely in the neighborhood of cash-neutral on overall average installs be the goal? if you find yourself sitting on cash in a market that doubles every year, aren't you just a standing still waiting to be knocked off the top rung? If it were easy to establish yourself as the #1 residential solar installer, wouldn't everyone be doing it?

This is where the Musk solar mission to spread solar at all costs and an Amazon-style marketshare plan intersect. They just so happen to lead to absurd profits once the business model and marketplace come to scale.

For now it seems that Elon is trying to push 50% of the business into straight purchases(loans) to provide a little breathing room and that's fine. So long as they don't dilute their value too much.

 

[TMSE]

Do we know when is SolarCity earnings release for Q3?

 

[SBenson]

People underestimate how AMZN grew. Even in tesla threads it is often quoted.

Here is AMZN's cash balance on a fiscal year basis.

Year..........Cash
FY 2015...19,808,000,000
FY 2014...17,415,999,488 <-- Bonds issued $6 Bln
FY 2013...12,446,999,552
FY 2012...11,448,000,512 <-- Bonds issued $2.25 Bln
FY 2011...9,575,999,488
FY 2010...8,762,000,384
FY 2009...6,366,000,128
FY 2008...3,727,000,064
FY 2007...3,112,000,000
FY 2006...2,019,000,064
FY 2005...2,000,000,000
FY 2004...1,779,198,976
FY 2003...1,394,822,912 <-- negligible < $1mln secondary (don't know why)
FY 2002...1,300,969,088
FY 2001...996,584,960
FY 2000...1,100,521,984
FY 1999...706,188,032
FY 1998...373,444,992
FY 1997...125,375,000 <-- Equity raise $54 mln
FY 1996...6,248,000

Do you still think AMZN grew burning through cash??

 

[TheTalkingMule]

The point is they are a straight-up retailer and lost money in many a quarterly report until recently. Early profit wasn't even remotely on their radar, it was all about marketshare as the online world got to scale. If you're gonna take the lead and want 15% of an entire mainstream market, you can't be profitable as you build that lead. If you could do it profitably, everyone would already be doing it.

 

[SBenson]

I've been using "monetization" as a catch-all term. While I certainly understand the market's desire to differentiate between tax equity and everything else, it's all just cash to me. Pre-install, post-install, whatever....it's easier to just average it out and get a vague idea of how much money is coming in vs cost at any point in time.

The fundamental restructuring you've noted above essentially turns SCTY into a behemoth local installer with all the burden of a nationwide operation and none of the benefits. Again, why would we be looking for a Musk-run endeavor to be cash-neutral at this point in the game? Isn't building model efficiency and marketshare far more vital to future profitability?

These guys are building an insurmountable lead in the premium install sector and we all know that will be absolutely massive over the next 2 decades. Why wouldn't being merely in the neighborhood of cash-neutral on overall average installs be the goal? if you find yourself sitting on cash in a market that doubles every year, aren't you just a standing still waiting to be knocked off the top rung? If it were easy to establish yourself as the #1 residential solar installer, wouldn't everyone be doing it?

This is where the Musk solar mission to spread solar at all costs and an Amazon-style marketshare plan intersect. They just so happen to lead to absurd profits once the business model and marketplace come to scale.

For now it seems that Elon is trying to push 50% of the business into straight purchases(loans) to provide a little breathing room and that's fine. So long as they don't dilute their value too much.

You probably didn't get the memo. The business model you are advocating for is already tried over the course of a multi-year, multi-billion-dollar expedition. The model failed miserably. SC is burning through cash, sitting on a cash strapped position on the verge of a bankruptcy. If not for the merger proposal, it would have been dead already.

There is no "value" to PPAs in the eye of the consumer. There is no "value" to PPAs in the eye of the investor. This is what I covered in the Business model "leaks" post just recently.

The idea of PPA/lease was born out of necessity in the era when there wasn't enough bank financing available for solar installs (directly to consumers). We are well past that era. Even in that era, SC could have done things differently. But Mr.Rive realised he was "riding a tiger" much later in the game. He has been scrambling for handouts ever since.

Here is an interesting comment. I will let you guess who it is from:

"Outright ownership, which you can get an extension of your house mortgage, which is actually a very low cost of capital way to do it. Actually it's cheaper than what SolarCity can do. So I think it involves a bit more paperwork with the bank usually, but it's actually the most economically efficient way to do it in the extension of the loan you have. Or perhaps SolarCity do a lease, but SolarCity's cost, like I said, SolarCity's cost of capital is higher than that of the individual in most cases. So the logical move is actually to either own it outright with a cash purchase or to add it to your home mortgage."

Guess who it is from? and when?

 

[TheTalkingMule]

Of course it's most logical to purchase outright. Who would ever say otherwise? The point is that half the market has no desire to purchase from a local installer for a myriad of very logical reasons that won't go away.

This thread tends to always drift back to purchases vs PPA as if we're thinking only of what we would do individually. Why? Can't the marketplace have both? Now that we're finally moving into online sales, it's pretty easy to see a low-cost low-touch version of the PPA.

Where SCTY/TSLA lands with its product offerings will be interesting. I'm still in the camp predicting "solar as a service" continuing to own 50‰ of the market, that just seems to be where consumer behavior is heading.

They can install all the purchased arrays they like so long as they price at a static premium in all markets.

 

[SBenson]

You didn't answer who the quote is from.

 

[SBenson]

The most basic 3.36 kW system will put you back just over £5,000 (~$8,200), but for your money you get an in-store consultation, installation, maintenance, and energy monitoring service.

Read more: Ikea leads the solar revolution, adding panel sales to its stores in eight new countries

 

[SBenson]

Musk show better be good.

 

[TheTalkingMule]

You didn't answer who the quote is from.

Could be from anyone, I've been saying the exact same thing in this thread since the beginning.

 

[dakh]

If rolling in solar install into mortgage is a better way to do it, that doesn't mean PPA is not profitable.

 

[electracity]

Musk show better be good.

Has Tesla ever announced an undesirable product?

 

[SBenson]

Here is an interesting comment. I will let you guess who it is from:

"Outright ownership, which you can get an extension of your house mortgage, which is actually a very low cost of capital way to do it. Actually it's cheaper than what SolarCity can do. So I think it involves a bit more paperwork with the bank usually, but it's actually the most economically efficient way to do it in the extension of the loan you have. Or perhaps SolarCity do a lease, but SolarCity's cost, like I said, SolarCity's cost of capital is higher than that of the individual in most cases. So the logical move is actually to either own it outright with a cash purchase or to add it to your home mortgage."

Guess who it is from? and when?

Could be from anyone, I've been saying the exact same thing in this thread since the beginning.

Exactly! Any one of us could have said that much!

To give the exact answer though, it is from one of the most preeminent innovator, entrepreneur of our times. A true interstellar genius. The one and only Elon Musk... It was said on the CC discussing SCTY merger on Aug 1, 2016.

But seriously, does it really take a true genius to discover something which is that extremely basic??

What was Lyndon Rive doing all along? Sleeping at the wheel? No, not at all. He made himself way too busy by trying to figure our ways to cheat investors, cheat customers, and cheat employees too. These are not empty claims. There is recorded proof of cheating each of these segments. RV metric for investors, escalators/mypower gimmickry for customers, unpaid work hours (see lawsuits) for employees. Instead had he stepped back and saw where all the money is going, he would have quickly discovered that the only people making money on this is the Banks and tax equity "partners". Everybody else is a loser in this game.

The most efficient way to solve this is to promote ways to fold the cost into mortgages. He never once cared to explore that. At least there is no public evidence of such.

Thankfully pretty soon it will be Musk who will be at the helm. Musk will spend some extraordinarily tiring weeks over unraveling SC. He will destruct just about everything that exists in a step by step manner and construct what will eventually be a success. I'm positively hopeful. But both Musk and Tesla will go through some serious pain over this. Think of X manufacturing in Q1/Q2, the "manufacturing hell" but this time it will be on the financial/accounting side. Eventually Musk/tesla will prevail, as always. Or so is my hope.

 

[Mark Z]

What's going to be announced at the October 28th Tesla/Solar City event in Hollywood, CA?

I found the answer...

Tesla’s ‘solar roof’ event will be live-streamed from Universal Studios on Friday, more hints from the invite

 

[TheTalkingMule]

Exactly! Any one of us could have said that much!

To give the exact answer though, it is from one of the most preeminent innovator, entrepreneur of our times. A true interstellar genius. The one and only Elon Musk... It was said on the CC discussing SCTY merger on Aug 1, 2016.

But seriously, does it really take a true genius to discover something which is that extremely basic??

I think you still may be missing Elon's point. The optimal way to procure solar energy is obviously to purchase outright and rolling it into a refi or other home loan is an easy way to do that while rates are low. That doesn't mean that 50% of the market wouldn't prefer a zero-touch solar-as-a-service solution that they don't need to think about.

Do you really think Elon was smack talking his own product on Aug 1? He was simply pointing out what I and plenty of other have been saying forever, it's a very wide market with many different customer desires and needs.

 

[SBenson]

He was simply pointing out what I and plenty of other have been saying forever, it's a very wide market with many different customer desires and needs.

Nope, he was not. Re-read that quote.

 

[dc_h]

I think you still may be missing Elon's point. The optimal way to procure solar energy is obviously to purchase outright and rolling it into a refi or other home loan is an easy way to do that while rates are low. That doesn't mean that 50% of the market wouldn't prefer a zero-touch solar-as-a-service solution that they don't need to think about.

Do you really think Elon was smack talking his own product on Aug 1? He was simply pointing out what I and plenty of other have been saying forever, it's a very wide market with many different customer desires and needs.

The point would be valid if SCTY cost of capital was similar or better than a consumer, and their cost of sales was competitive with the market. There are competitors in the commercial market taking the tax credit and splitting the energy savings with their customers. Hedge fund type companies sitting on cash, looking for long term revenue streams. I trust SBenson knows the competition and reason for their comparative advantage in detail. The point is, SCTY prior cost of sales and installation costs are not competitive. Restructure and resell through TSLA stores, or partner with Lowes or someone and de-risk your organization. I don't know the answer either, finding these gaps in the market is what Elon does best. It will be interesting to see how he identifies the market and the marketing process.

 

[electracity]

A reason to not own a panel factory in Buffalo:

"In a more optimistic scenario, Deutsche says, it estimates system prices of $3.17/W in 2H16, $2.62/W in 1H17, $2.22/W in 2H17 and ~$1.7/W in 2H18."

Sharp Declines In Solar Module Prices Could Spark Another Gold Rush In US Market

I'll also point out that the solarcity bulls thought I was crazy for posting the very low Australian solar prices.

I am SCTY long right now based solely on the merger. My last chance to get burned by solarcity.

 

[AudubonB]

Absolutely not investor-related in any direct way, but....(as indirectly, just about everything is to an investor)

Has anyone learned of the possibilities of acquiring any bare-nekked Silevo panels? I'm looking into adding a third string of PVs in Alaska, and would like to be able to pick them up this winter during the time we're down south. It would be good to find out when they are going to be market-available, although I'm not hugely hopeful.

 

[electracity]

Absolutely not investor-related in any direct way, but....(as indirectly, just about everything is to an investor)

Has anyone learned of the possibilities of acquiring any bare-nekked Silevo panels? I'm looking into adding a third string of PVs in Alaska, and would like to be able to pick them up this winter during the time we're down south. It would be good to find out when they are going to be market-available, although I'm not hugely hopeful.

Silveo have never been sold at retail, AFAIK. SolarPanelTalk is one of the more active solar forums and might be a good place to ask.