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Why no new solar bonds?

Discussion in 'Tesla Energy' started by daniel, Oct 7, 2017.

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  1. daniel

    daniel Active Member

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    I'm starting a new thread because I didn't want to revive one that's been inactive for a long time. I've asked this question before and have not seen an answer.

    I own some solar bonds from Solar City. I get 5% on ten-year bonds. The bonds are non-negotiable, so they are illiquid, but 5% is a very good return, and I don't need liquidity in this investment, and it supports something I believe in: sustainable, renewable energy. Forget perpetual-motion machines, bogus "water-for-gas" schemes, or the Bedini engine scam: Solar panels, once installed, provide free energy. Okay, so I decided I'd buy some more solar bonds, but it's been ages since they've issued any more. The web site just says they're still working on it.

    (Yes, I'm aware of the risk. It's a small company, the bonds are unsecured and illiquid. But it's a risk I'm willing to take with a small part of my portfolio. And I'm optimistic about the company and the industry, and it's a case of putting a little of my money where my mouth is.)

    Does anybody know why there are no new solar bonds? Did they find other financing? Did they raise so much money from the last issue that they don't need any more yet? Have they quit their original business model of installing solar panels at no cost to the homeowner and charging for the electricity? Do they not have enough new customers to require any additional capital? Have they been so successful that they're now self-sustaining and don't need to issue more bonds? Is Tesla now providing all the capital they need to install the systems? Or since the merger are the solar bonds being issued elsewhere and I just don't know where to look for them?
     
  2. miimura

    miimura Active Member

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    Solar City used to install a lot of system on PPA, so customers were not paying for the installation up-front. The Solar Bonds were used to pay for the hardware and installation so the customer payments could pay the bond holders. Tesla has either de-emphasized PPAs in sales or completely stopped installing systems on PPA, so the Bonds are not needed in the same quantity or at all.
     
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  3. daniel

    daniel Active Member

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    Thanks. That's too bad, though, since that was Solar City's business model, and I've told people what a great deal that is for folks who wanted solar (or just a reduction in their electric bill) but didn't have the capital to invest in the system. It was also a way for me to support solar while getting a good return on a long-term investment.
     
  4. GoTslaGo

    GoTslaGo Learning Member

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    I believe it's a cash flow issue. With the Model 3 the big issue is getting the Model 3 ramped and out and all cash is needed to help do this.

    The solar bonds assumed after the merger diverted cash from Tesla. Tesla (after the merger) has been aggressively wiping Solar Bonds off their balance sheet, and selling off their original PPAs (I believe Soros bought a large amount). While the PPAs made a lot of sense to folks (purchasers), it appears it was a financial/accounting nightmare and created a whole set of long-term liabilities. @neroden seemed to have some of the best articulated understanding (IMHO) of the issues with the solar bonds.

    I suspect you will be able to keep your bonds for a while, since your interest rate is less than the recent Corporate bond offerings.

    As for future solar bonds, I don't know. I suspect that in the future, Tesla may start having greater issuance of Tesla bonds which may partially fit with what you are asking for. However they'll probably be only available on the secondary market.
     
  5. dutchinchicago

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  6. daniel

    daniel Active Member

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    Thanks for that information. I don't think these bonds are callable. So I expect to have them until they mature or I die. (At my age, either could come first.)

    I doubt it. Market wide alternative-energy companies don't seem to be doing well, and buying stock is merely buying an ownership stake in the company, in the hopes that it will succeed and do well. It's a long-term strategy, and at my age there's not much point in betting on the long term. Bonds (especially when bought at issue from the issuing company) provide working capital and pay a set interest rate, as long as the company does not default. When I bought solar bonds, I was providing the capital that allowed people who could not otherwise afford the investment to get solar panels on their house.

    I'm interested in making an investment that directly causes more solar capacity to be installed, and pays me interest from the energy produced. Not so much in betting on the stock price of energy companies.
     
  7. daniel

    daniel Active Member

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    Okay, I just looked briefly into Wunder Capital. Apparently I was mistaken in thinking it was a stock mutual fund. It says it sells services and makes loans to companies interested in transitioning to solar. It's a start-up, which is a concern. It makes promises of big returns, but if I understood what I read, it is not contractually obligated to pay those returns (unlike a bond that has a coupon rate). And you have to be wealthy to invest, which I could do, but for me that's a red flag. IMO a legitimate bond issuer with a solid base should sell to anyone who wants to invest. Finally, there's no prospectus (that I could find). Just an "offering memorandum."

    Bottom line for me: It's too new a company and I see nothing to back up their promised returns.
     
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  8. EinSV

    EinSV Active Member

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  9. daniel

    daniel Active Member

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    Thanks for that information. (I just saw your post today because I was out of town for a week.) I've been searching, and I can't find anything about this on the Tesla web site. The Solar City web site still says there are no bonds available at this time. And nothing else I can find mentions the issue or whether it will be sold directly to the public, as was the case with the Solar City solar bonds, or through a broker (as I think corporate bonds usually are). Apparently Tesla issued some corporate bonds back in August, and a bunch of articles published soon after say they did poorly, and one article mentions Tesla bonds with a coupon of 1.2% trading at 110% of par, which makes no sense since the yield would be negative.

    The Bloomberg article gives no indication of the coupon rate of these new bonds but I'm thinking they'd need to be above 5% or nobody would buy them. I cannot find anything about investing on the Tesla web site. There is definitely risk here because Tesla's future is by no means assured. But I'd be willing and even eager to increase my investment, based on my expectation of success for the solar roof and the Model 3.
     

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