SolarCity (SCTY)

[ke6jph]

+1 I purchased SCTY at $18.50 and sold at $74 to buy more TSLA. Took a hit with the pull back, but will be buying SCTY bonds soon. Will need a higher return on some "cash" than my credit union. Been a Tesla long since $32. (Was doing the buy\sell from $28, but did not have the "time" to work and trade successfully."

 

[hcsharp]

SpaceX are very profitable and has always been. It makes sense to help the "elon empire" grow since solarcity, tesla and SpaceX share many of the same investors.

Thanks for this analysis. How do you know that SpaceX has always been very profitable? It's privately owned. Isn't SpaceX growing at a good pace and therefore probably in need of cash itself? I thought about the fact that all three companies share the same investors but concluded that was not a good reason for SpaceX to buy the bonds. Yes it helps the empire to support each other but doesn't that also concentrate risk? Or not because they are very different companies?

 

[jhm]

I still don't see why it makes sense for SpaceX to buy those bonds. Obviously there's something I'm missing.

My impression is that the CFO just needed to park some cash and these bonds happen to offer a competitive yield with low risk. The motive need not be any deeper than that.

They got a 1 year solar bond at 2.0%. Same duration jumbo CDs are under 1.2% and UST is at 0.26%. So if you need to park cash for a year and find the default risk of solar bonds to be quite low, then 2% a damn good rate.

 

[yesla]

That's part of the brilliance... it is so logical.
It even makes sense even if EM was not at the centre of all of this.
As SpaceX will need to partner up with solar and battery company to power their internet satellites that they will be launching in the next 15-20 years
which, having internet in space is part of the masterplan of being multiplanetary...

I'd like to hear the masterplan behind space x actually...

 

[joachimm]

Thanks for this analysis. How do you know that SpaceX has always been very profitable? It's privately owned. Isn't SpaceX growing at a good pace and therefore probably in need of cash itself? I thought about the fact that all three companies share the same investors but concluded that was not a good reason for SpaceX to buy the bonds. Yes it helps the empire to support each other but doesn't that also concentrate risk? Or not because they are very different companies?

From VentureBeat in 2010: http://venturebeat.com/2010/06/09/s...e-musk-being-cash-poor-but-is-an-ipo-needed/:

But now SpaceX has responded to this question: Board member Luke Nosek of Founders Fund, a major investor in the company, told PEHub that SpaceX has been profitable for the last several years, and that it will be again in 2010, with or without federal funding. The company successfully sent its Falcon 9 rocket 155 miles up into orbit last week, and has more than 24 orders (totaling $2.5 billion in revenue) to deliver satellites into space over the next five years. The plan is to reinvest this cash in the company.

Also Elon has mentioned that SpaceX is profitable in many interviews over the years. Regarding the money. SpaceX took a $1B investment from Google and Fidelity not long ago. In conjunction with that, Elon announced that SpaceX would build worlds largest communications network of 4000+ satellites. They probably can't deploy that money both intelligently and immediately so parking some of it in bonds for a while probably makes sense. Not long after that the media started writing stories that after the Google/Fidelity investment SpaceX was now profitable, which I suppose is technically correct, they also were profitable before the investment.

 

[MartinAustin]

What's going on with SCTY these days? It is up $9 since March 16th.

 

[Newb]

Yep, nice price movement, surely in part related to the upcoming April 30th announcement, but also due to positive analyst notes reaffirming high price targets in the range of 75-100 USD.

I'm long SCTY, bought a while ago at around 50 USD.

OT:
btw, finally decided on a profile/avatar pic. :smile:

 

[hirox]

https://twitter.com/elonmusk/status/587421152819208193

Elon: "Have asked SolarCity if we can do something philanthropic with the CA aqueducts to help the water crisis. Investigating…"

 

[LakeForest]

https://twitter.com/elonmusk/status/587421152819208193

Elon: "Have asked SolarCity if we can do something philanthropic with the CA aqueducts to help the water crisis. Investigating…"

I would imagine it will be a proposal of covering the open-air aqueducts with panels to shade the water and decrease evaporation. SolarCity could tout not only the decrease in evaporation but also the decrease in water needed for energy production. If they could make this work there are a lot of cool possibilities and interesting implications...
1. While SC has done some larger scale work, this could be a much higher level project. If state leaders/ public opinion are favorable to the deal, it could force the utilities to be somewhat friendlier to SC, at least for this project.
2. Could this be one of the first projects they develop themselves without a customer contracting...they would obviously need to work with water commissions etc, but maybe they own it and offer the shading "philanthropically."
3. This could be a perfect project to push their solar bonds with. If the Elon hype machine is able to have this blasted over the media like he always is, I'd imagine the public would want to buy in to their common well being. Likely, some of the big name companies would like to as well.

I put the odds of this happening within 12 months low (less than 20%), but if they can pull it off that would be really cool! Thoughts?

A 350 MW project in brazil to provide shading for a reservoir - http://www.popsci.com/brazil-building-giant-floating-solar-farm

 

[Cosmacelf]

I still don't see why it makes sense for SpaceX to buy those bonds. Obviously there's something I'm missing.

SpaceX has extra cash in the bank. Normally companies invest such money in short term US Treasuries. The SpaceX CFO has determined that the 1 year SolarCity bonds are essentially risk free, and they, of course, pay more than 1 year Treasuries, so he decided to invest.

Not many CFOs would do this. There is always a risk of a company going under. I am assuming that he assumes that Elon would tell the SpaceX CFO if there was going to be a significant problem with SolarCity since Elon is on the board of both companies.

 

[Thumper]

I love the aqueduct solar panel cover concept. It looks like a win for everyone!

 

[Robert.Boston]

I was stunned when I first saw the water canals in the American west--they're uncovered and relatively shallow. The evaporation losses must be high. SolarCity installing solar covers for these canals in California could be a win-win: more solar power and less evaporation.

 

[replicant]

Bloomberg: SolarCity Works With Google Nest to Spur Solar in Homes

- - - Updated - - -

I've noticed transaction of 500k SCTY stocks after market, 3 days in a row. Note the volume peaks in the bottom chart.

Is this standard ? If unusual, what does this tells you?

 

[Cosmacelf]

I've noticed transaction of 500k SCTY stocks after market, 3 days in a row. Note the volume peaks in the bottom chart.

Is this standard ? If unusual, what does this tells you?

I don't think it means much. It is a large investor (probably a fund that has made its money) selling to another large investor (probably another fund) in an arranged cross sale. Both funds might be clients of the same brokerage and they have arranged sales to be done at end of day pricing or some such.

 

[doggusfluffy]

Sandoval to meet with SolarCity on net metering - Las Vegas Sun News

 

[FluxCap]

Hyperbole, but I'll take it.

Fossil Fuels Just Lost the Race Against Renewables - Bloomberg Business

 

[jhm]

Hyperbole, but I'll take it.

Fossil Fuels Just Lost the Race Against Renewables - Bloomberg Business

It's an interesting question how to tell when the race has been won. This article points to when renewables became a majority of new capacity. But suppose globally capacity is growing at say 4% annually while 2% of existing capacity must be replaced. I am totally making up these stats because I am too lazy to try to look them up, but for the sake of illustration lets go with it. These rates mean that new capacity is 6% of existing base. If 50% of this is still fossil fuels, the 3% minus the 2% replaced means that the fossil fuel fleet is still growing at 1% per year. So the fossil fuel fleet will not peak and begin to decline until renewables comprise 67% of new power, 1 - 2%/6%.

 

[ItsNotAboutTheMoney]

It's an interesting question how to tell when the race has been won. This article points to when renewables became a majority of new capacity. But suppose globally capacity is growing at say 4% annually while 2% of existing capacity must be replaced. I am totally making up these stats because I am too lazy to try to look them up, but for the sake of illustration lets go with it. These rates mean that new capacity is 6% of existing base. If 50% of this is still fossil fuels, the 3% minus the 2% replaced means that the fossil fuel fleet is still growing at 1% per year. So the fossil fuel fleet will not peak and begin to decline until renewables comprise 67% of new power, 1 - 2%/6%.

It's not capacity that matters, it's capacity x capacity_factor. 1MW solar < 1MW natural gas combined cycle < 1MW coal < 1MW nuclear.

 

[jhm]

It's not capacity that matters, it's capacity x capacity_factor. 1MW solar < 1MW natural gas combined cycle < 1MW coal < 1MW nuclear.

That's a fair point. Making matters more complex, adding more intermittent renewable calacrity added to the mix reduces the utilization of fossil fuel. Renewables have no marginal cost, so they can go all the way down to $0/MWh (and below!) on the spot market. NG is more dispatchable than coal. So it is in a better position to tolerate real time competition with wind and solar. The economics of coal are becoming increasingly poor because it is losing so much utilization. At least in the US almost all new capacity is wind, solar and NG.

Ironically, inclusion of battery storage into the grid will not only help wind and solar, but may also help coal and nuclear. Batteries will smooth out the intermittency of wind and solar, while smoothing out the intermittency of demand making it more conformable to base load generation. Any home with solar that charges the battery during peak sunshine and late at night when grid rates are low is actually helping all both extremes. However, depriving coal and nuclear access to the peak power rates that occur when the sun shines brightest will undermine the profitability of baseload power. So while batteries can help with utilization it will put a cap on peak rates. So either way coal is doomed.

The virtue of batteries is that they enable the cheapest marginal producers of energy to optimize their utilization. Batteries will squeeze out the peakers. So this will reduce the total capacity grids require. This is potentially more threatening to utilities than wind and solar. Because utilities make money on their total capacity and recapture the investment from ratepayers. So as capacity requirements decrease, both the size of their asset portfolio shrinks and many assets lose value. The utility industry could be headed into a massive asset bubble. Will they be able to pass these capital losses onto ratepayers? Maybe not, if enough ratepayers defect by throwing up rooftop solar and rounding it out with batteries. This is what I find so fascinating about home storage, it will empower consumers with choices that transform them from being mere ratepayers to being customers who must be won over with superior service and prices.

 

[30seconds]

That's a fair point. Making matters more complex, adding more intermittent renewable calacrity added to the mix reduces the utilization of fossil fuel. Renewables have no marginal cost, so they can go all the way down to $0/MWh (and below!) on the spot market. NG is more dispatchable than coal. So it is in a better position to tolerate real time competition with wind and solar. The economics of coal are becoming increasingly poor because it is losing so much utilization. At least in the US almost all new capacity is wind, solar and NG.

Ironically, inclusion of battery storage into the grid will not only help wind and solar, but may also help coal and nuclear. Batteries will smooth out the intermittency of wind and solar, while smoothing out the intermittency of demand making it more conformable to base load generation. Any home with solar that charges the battery during peak sunshine and late at night when grid rates are low is actually helping all both extremes. However, depriving coal and nuclear access to the peak power rates that occur when the sun shines brightest will undermine the profitability of baseload power. So while batteries can help with utilization it will put a cap on peak rates. So either way coal is doomed.

The virtue of batteries is that they enable the cheapest marginal producers of energy to optimize their utilization. Batteries will squeeze out the peakers. So this will reduce the total capacity grids require. This is potentially more threatening to utilities than wind and solar. Because utilities make money on their total capacity and recapture the investment from ratepayers. So as capacity requirements decrease, both the size of their asset portfolio shrinks and many assets lose value. The utility industry could be headed into a massive asset bubble. Will they be able to pass these capital losses onto ratepayers? Maybe not, if enough ratepayers defect by throwing up rooftop solar and rounding it out with batteries. This is what I find so fascinating about home storage, it will empower consumers with choices that transform them from being mere ratepayers to being customers who must be won over with superior service and prices.

Even though it may take some time I think you just answered you previous post on when it was won.