SolarCity (SCTY)

[Ulmo]

Another great quarter.

Shareholders, make sure you vote YES on that merger.

Remember the combined entity (TSLA and SCTY) will be worth one trillion $ within a decade or so, that's according to Elon Musk:

Elon Musk sees Tesla (TSLA) becoming a trillion dollar market cap company with the SolarCity (SCTY) merger

I think he's being too conservative (as he is most of the time).

I agree, vote YES on the merger.

I also agree that Tesla will do very well.

But, regarding the $1 Trillion: If Elon takes Trump seriously rather than as a joke, then this can come true. Otherwise, if he falls into the koolaid drinking crowd and starts sniping at Trump as some sort of media creation, it's possible that the foundations will start to deteriorate, and that trillion dollars will be more like $50 billion - $250 billion. The Atlantic put it best: Those who voted for and supported Trump during the election took him seriously, not literally, and those who voted against and did not support Trump during the election took him literally and not seriously (and are part of the media sucking koolaid crowd that believed everything the media spoon fed them). While I think Musk is smarter than that, Musk has been very (and appropriately) busy doing a lot of great work on his various companies, and raising his family, and hasn't had enough processing power to figure that out for himself, and fell into a political crack that isn't appropriate for the stature of his companies. Hopefully he sees where he's at and climbs out quickly. While I've said over and over that Trump won't necessarily impede Tesla, I do think that if Elon got along with Trump that Trump could facilitate Tesla in ways that none of us can imagine (please, no conjecture), and that the $1 Trillion would be easy. I'm not talking about underhanded deals, favoritism, mandates, tax incentives, or anything; I'm just talking about efficiency. If anything, Tesla could make some of that money helping the rest of the car companies get on board. (This gets even more nuanced with Solar City, so I think my thoughts are even more leveraged and less well describable.)

 

[GoTslaGo]

Time to revisit:

Battle of the Billionaires in Nevada:

Recap:

Round 1 was with Buffett (NV Energy) vs. Musk (SCTY). Musk was soundly trounced by the "independent" Nevada PUC who decided Residential Solar needed to go, and basically sent SCTY packing.

Round 2:

Sheldon Adelson (Sands) vs. Buffett (NV Energy). With decisive backing of Proposal #3, NV Energy is about to lose it's monopoly. This would eliminate the penalty that the major Casinos in NV would have to pay to get out of NV Energy's monopoly (to the tune of several hundreds of millions of dollars), and open up the energy market in NV.

Obvious benefit for Sands/Wynn, et al. would be that they could do like MGM and cover their millions of square feet of roofing with Solar, add in batteries, you can figure out the rest. Without penalty, or actually much less than the penalty. Given their real estate, they even could potentially become utilities in themselves. Recall the Adelson is a major supporter of Trump. So I am guessing that any business related renewable energy credit will likely stay in place. Also recall Buffett is (D), Adelson is (R).

It will take another vote in 2018 to make this so (as Cpt. Picard is apt to say).

There are two years between SCTY/TSLA merger and when the rules become final. IMHO, Musk has two years to prove the obvious benefits of Solar/TE, get a bunch of contracts, and show that it's the best and cost effective product out there. There's a lot of roofing waiting to be covered here in NV.

Going to be interesting times...

 

[SBenson]

Did you include changes in inventories, prepaid expenses and accounts payable/receivable as well? From an asset point of view (negative is bad) I get respectively $-23M, +$17M, $-39M and $+2M.

Yeah, good idea to include those. So they are bleeding more cash than I implied.

Another way to look at things:

Lyndon Rive's original promise, which was subsequently reinstated by Musk, was to be Cash Flow Positive using non-recourse debt but NOT-using recourse debt.

What had happened in Q3 is that while cash went up by $113mln, the recourse debt went up by $121mln. So they fell short of $8mln. Which is not too bad.

Based on the earlier math, the earlier statement still holds. They were able to get some juice out existing book and burn it.

 

[schonelucht]

@SBenson one more question as I try to understand SCTY some more. In the quarterly report they write about their solar asset backed notes as follows

In November 2013, the Company pooled and transferred qualifying solar energy systems and the associated customer contracts into a SPE and issued $54.4 million in aggregate principal of Solar Asset-backed Notes, Series 2013-1, backed by these solar assets to certain investors. The SPE is wholly owned by the Company and is consolidated in the Company’s financial statements. Accordingly, the Company did not recognize a gain or loss on the transfer of these solar assets. As of September 30, 2016, these solar assets had a carrying value of $134.4 million and are included under solar energy systems, leased and to be leased — net, in the consolidated balance sheets

I am trying to understand what they mean with the carrying value.

 

[SBenson]

@SBenson one more question as I try to understand SCTY some more. In the quarterly report they write about their solar asset backed notes as follows



I am trying to understand what they mean with the carrying value.

My understanding is that the value of systems (the collateral so to speak) they put in the SPEs is generally much greater than the amount raised through ABS. This is to offer protection to ABS investors against defaults. Thus whatever is put in these vehicles can not be further monetized.

They say this bit about how the carrying value is computed:

"Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates."

Sounds like this is the NPV 6 calculation.

 

[doggusfluffy]

Nevada approves measure to break up NV Energy's monopoly

Voters gave the greenlight to the Energy Choice Initiative, which is also called Question 3. It must pass a second consecutive vote in 2018 before it can become a constitutional amendment.

The measure calls on lawmakers to create a framework for deregulating the state's electrical market and ending the utility company's legal monopoly. It came as large companies including casinos sought to leave NV Energy and find their own providers, but chafed at high exit fees imposed by regulators.

Data center company Switch and the Las Vegas Sands casino company were the primary financial backers.

Opponents included the International Brotherhood of Electrical Workers and the Nevada State AFL-CIO.

 

[AudubonB]

Election Results concerning Solar City:

Others have noted the auspicious results in the Florida and Nevada Voter Initiatives. This is good.

Less fortunate, however, were the citizens of Arizona. That state elects the members of its utility regulator, there called the "Corporation Commission". The utility-funded candidates obtained a clean sweep; Solar City Tesla Energy's task of working in the Sunshine State just got terribly more difficult.

Were there other solar-related initiatives, etc., in other states that are appropriate to enumerate?

 

[AudubonB]

...and by the way:

Mod Note for ALL:

Off-topic posts and ranting, after a fashion, will be overlooked in the Investor Sector through this weekend. After that, ALL will be under closer scrutiny than ever.

Vetinari

 

[doggusfluffy]

Oh, Jeez
As rooftop solar costs drop, utility attempts to raise barriers may not work

“I don’t think this was their intent, but what the utilities did with Amendment 1 was bring the discussion of solar energy development in Florida to the forefront,” said Delp, who is working with a company building a 30-megawatt private solar farm in Leesburg. “It’s now a kitchen table issue. There is awareness that there is a lack of solar in Florida and that we lag behind so many other states.”

 

[AudubonB]

Mod Note:

(not specifically directed toward any recent post; rather, this note is going to ALL active Investor threads).

LAST day of tolerance toward posts that otherwise would have been, and are, unacceptable. One week of election-related wailing and gnashing of teeth and blaming it on others and overall unproductive posts is enough.

 

[AudubonB]

***MOD NOTE***

Okay, fun time is over. I hope all were able to let off all the steam needed, because from now on we will have only decorum, and that of the highest order.

Besides, these Mod Notes are suffering from a bit of overuse.

 

[Ulmo]

As rooftop solar costs drop, utility attempts to raise barriers may not work

I like reading this article. It lays out general information and angles. They included this angle, while vague, at least voiced: "But solar advocates counter that the subsidy argument is based on economic studies that do not take into consideration any of the environmental or efficiency benefits from solar installation. When those are calculated, they say, private solar installation produces cost savings for non-solar users." They also included almost as vague statements by the utilities. But what I like about the article is that it at least stated the general parties involved, the current situation and timelines, and the general direction of each of their arguments. It's a good first look at the issue for the uninitiated or forgetful. I wish there was more depth on both the internalities and externalities of those costs.

---

Another subject: As we all know already, Merger shareholder meeting this Thursday for merger vote. SCTY (11AM in Foster City) & TSLA (1PM in Fremont). Details in October 12 SEC filing (click this paragraph).

 

[doggusfluffy]

The view of voters in West Virginia coal country

“The voters of McDowell County gave Donald Trump a four-to-one margin of victory, I think ‘cause he said he’s going to bring the coal industry back,” said Koppel. “You think he can do it?”

“I think he can do anything he said he could do,” one woman said. “He’s that good.”

Deep in Virginia’s craggy coal country, they saw Trump as their only hope

The growth jobs are in retail, food services, health care and social assistance, according to data from the Virginia Employment Commission. A lot of the work is part time.

“We’ve had a lot of factories closing down. Families have lost jobs,” said Linda Smith, 39, who works part time at the Food City grocery store in Lebanon and can’t afford health insurance, even under the Affordable Care Act. Her husband, who once worked in mining, is disabled from a car accident. “Men don’t know how to do nothing at all except work in the coal mines. . . . If [Trump] can get some of that opened back up, people will be happy.”

Why isn't coal country asking for a universal basic income...or at least discussing it?

 

[3Victoria]

Do people really want to go back into coal mines? It is one of the worst and most dangerous of jobs. Surely a better solution can be found --so as alternate energy jobs?

 

[renim]

Do people really want to go back into coal mines? It is one of the worst and most dangerous of jobs. Surely a better solution can be found --so as alternate energy jobs?

Its probably safer than roof top solar installation, but not as safe as utility solar installation.....
(roof top anything is really unsafe)

but do people want to go back into coal mines, sure they would. Its more than a job, its a career.
Other types of mining is more materialistic in outlook (particularly gold), there is a certain family and generational aspect about coal mining that seems to transcend both time and cultures, This is most aptly displayed in gold miners rarely being unionised, but coal miners are nearly universally unionised.

 

[Off Shore]

Do people really want to go back into coal mines? It is one of the worst and most dangerous of jobs. Surely a better solution can be found --so as alternate energy jobs?

It was good money. People raised families for generations by working in coal mines. We're all afraid of change, but if we don't have much, we're even more afraid.

 

[3Victoria]

People are still dying in coal mines, Mining accident - Wikipedia

No Matter What Trump Says, Coal Mining Jobs Are Not Returning To West Virginia

 

[Off Shore]

Absolutely right, 3Victoria. Even when it's not lethal it's horrible work. When there's no money elsewhere, people will take that kind of work. And because of the fear of change, they won't want clean energy jobs until someone shows up at the mine gate with a job offer. (Which is something we ought to be doing, IMO).

 

[TMSE]

Trump victory won’t halt the U.S. clean energy boom
http://flip.it/NK3JMm

Those federal tax credits for wind and solar? They were passed last December by a Republican Congress with bipartisan support. Revoking them would require a legislative effort that may not be looked upon kindly by the many Republican lawmakers who have renewable energy manufacturing and development in their states. Lawmakers like Senator Chuck Grassley, an Iowa Republican, who said this summer: “If he wants to do away with it, he’ll have to get a bill through Congress, and he’ll do it over my dead body.” He won’t be the only one: looking across the country – and the electoral map – the top-10 wind-energy producing congressional districts are represented by Republicans.

 

[doggusfluffy]

House of the rising solar

“I think we’ve hit the point in 2016 when no one cannot like solar. They can claim it’s too expensive, but that just means they’re reading something from 10 years ago,” Hennessey said.

“If you’re opposing it, it’s because you’re not making money off it.”

WHITEHOUSE SLAMS TRUMP’S ENERGY TRANSITION TEAM: Donald Trump has given a “rotten signal” that he’ll follow through on his pledge to “drain the swamp” from special interests by adding lobbyists associated with the Koch Brothers to his transition team, Sen. Sheldon Whitehouse said Tuesday. “Looks a bit like if Donald Trump doesn’t watch his back, the Koch brothers are going to be running his administration for him,” Whitehouse said. Specifically, the Rhode Island Democrat mentioned former Koch lobbyist Mike McKenna, handling the Energy Department transition; Myron Ebell, in charge of EPA transition work; and Michael Catanzaro, working on energy transition efforts.