Tesla Is Buying SolarCity for $2.6 Billion (thenextweb.com)

Tesla Motors announced Monday that it has reached a deal to buy SolarCity (San Mateo-based provider of energy services), the next step in Elon Musk's plan to combine his electric-car and solar-energy companies. It's already a family affair: Musk, Tesla's chief executive, owns about 21% of SolarCity and serves as chairman. His cousins Lyndon R. Rive and Peter J. Rive are SolarCity's chief executive and chief technology officer, respectively. The independent members of both companies' boards approved the $2.6-billion all-stock deal, Tesla said. Tesla said it expects to have cost synergies of $150 million in the first year after the deal closes. Tesla said it expects the deal to close in the fourth quarter, although the proposal must still be approved by a majority of the disinterested shareholders of Tesla and SolarCity and requires regulatory approval. It also contains a "go shop" provision that gives SolarCity 45 days to "solicit, discuss or negotiate alternative proposals from third parties."

Comments

all he needs now is...

[Anonymous Coward]

a fluffy white cat to stroke and a subterranean volcano layer.

Re:all he needs now is...

[ScentCone]

a subterranean volcano layer

While he may indeed build it in some geologic layer involving a volcano's structure, the word you're look for is "lair." Lair.

Re:all he needs now is...

[Sir_Eptishous]

a subterranean volcano layer

While he may indeed build it in some geologic layer involving a volcano's structure, the word you're look for is "lair." Lair.

You just missed his emphasis on a southern accent.

Musk is an alien

[trybywrench]

What Musk is getting done in one lifetime is surreal. An old gf of mine thinks Musk is an alien and enlisting humans to help him build the technology he needs to get back home.

Re:Musk is an alien

[DarkOx]

Space X is doing some really cool work but it is also not meeting it's predicted launch rate.

True, but I think most outsiders 'priced' a bit of optimism into Space X's press releases. Overall they are enjoying a lot of success considering the complexity of what they are trying to do.

Tesla has some big problems with quality

Is that statistically true? I did some google searches and its hard to find good data. All the other big manufacturers are doing recalls with some frequency. Quality problems have always been a thing in the auto industry. Do you have proof Tesla is doing worse than average on per vehicle basis.

Tesla has some big problems with quality and the "beta" autopilot.

No the media has big problems with it, namely understanding and evaluating risk. Many of the known cases where auto pilot has caused problems have been in situations where it was not being used as directed. In terms of accidents per miles driven its a got a good record, with caveat that most people are using it in situations where humans typically do have a lower than average accident rate too.

Re:Musk is an alien

[LWATCDR]

"Is that statistically true? I did some google searches and its hard to find good data."
Consumer Reports no longer gives the Tesla S a recommended because of problems with reliability.

"No the media has big problems with it, namely understanding and evaluating risk. Many of the known cases where auto pilot has caused problems have been in situations where it was not being used as directed. In terms of accidents per miles driven its a got a good record, with caveat that most people are using it in situations where humans typically do have a lower than average accident rate too."

Yea that is really making excuses. The Ford Bronco II had no problem with roll overs if you drove it like a short wheelbase, high center of gravity truck and not like a car...

Re:Musk is an alien

[LWATCDR]

"(highways only, no side roads, maintain constant lookout for situations the autopilot is overlooking)"
The last bit is a great excuse. It is all your fault no matter what.

So if it is highway only then they should have a white list of roads you can use it on GPS should allow for that. My guess is that they mean limited access roads like interstates and turnpikes vs just highway like US highway 1.

The lack of "effort" to prevent abuse IMHO shows a lack of experience in life critical software.

"Someone once said "if you're not failing regularly, you're not trying hard enough", and I have to agree."
Yea but not when end users die. We are not talking about test pilots we are talking about consumers.

Re:getting money out without effecting share price

[swb]

Wait, you're saying Musk might be dabbling in an accounting/balance sheet/share price gambit and not unifying Tesla and Solar City for the benefit of humankind?

Re:getting money out without effecting share price

[dave420]

Or maybe Musk is a better entrepreneur than you are. Naaah - can't be! We all know you are way better at making electric cars and rockets.

Re:getting money out without effecting share price

[MachineShedFred]

Yeah, because there is absolutely no synergy between a company that produces electric cars, and a company that empowers people to produce their own electricity at home... where they keep their car.

Re:getting money out without effecting share price

[Mr D from 63]

Or maybe Musk is a better entrepreneur than you are. Naaah - can't be! We all know you are way better at making electric cars and rockets.

And what does that personal speculation of yours have to do with anything? If you'd like to offer a deeper explanation of your take of the transaction, I'm all ears.

Maybe Solar City won't be scammy and vague now?

[netsavior]

It takes 3 or 4 phone calls, and some "do not disclose" paperwork in order to find out that you won't save any money, and you won't own anything.

Re:Maybe Solar City won't be scammy and vague now?

[whoever57]

It takes 3 or 4 phone calls, and some "do not disclose" paperwork in order to find out that you won't save any money, and you won't own anything.

Depending on the state in which you live, your roof orientation, shading, etc., a solar installation can pay off in as little as 5 years,

But leasing or PPAs are a mug's game. As you state, with leases or PPAs, you don't own anything. Worse still, the solar panels may make it more difficult to sell or refinance your home. Also, some states have rescinded their net energy metering programs, which means that only the smallest solar installations have any chance of paying off.

SolarCity, in particular, claims that they don't put a lien on your house, but, they do put a UCC-1 fixture filing against your house, which has the same effect as a lien.

Re:Maybe Solar City won't be scammy and vague now?

[Jeremi]

It takes 3 or 4 phone calls, and some "do not disclose" paperwork in order to find out that you won't save any money, and you won't own anything.

Our condo building's HOA has been saving about $300/month for the last 5 years via a SolarCity PPA.

It's true we don't (and won't) own anything, but for us that is a benefit -- that means that if something breaks, we're not on the hook to fix it. If the system ever goes down, it's SolarCity who loses money until it gets fixed, not us (since we pay per kWh generated, not per month). Since nobody on the HOA board is an electrician or technically minded, the zero-responsibility-for-maintenance aspect is important.

The upshot is: $300/month savings on our power bill, with no risk to us, and no money out of the HOA's pocket, ever. The only thing we had to give up was some space on our roof, which wasn't being used for anything anyway.

Re:Maybe Solar City won't be scammy and vague now?

[aaarrrgggh]

What is your beef with the UCC1? How else would you expect to have the asset loaned to you? Would you prefer unsecured debt-- do you want to pay the payday-loan rates for your solar installation?!

Bottom line is that with entering into a purchase agreement like this, you should do a TVM calculation to separate the cost of purchase outright vs finance and establish if the interest rate is acceptable/beneficial.

The games the installers play is typically in rate escalation assumptions; a smart consumer should look at how sensitive the payback is to the escalation...

As a Tesla shareholder, I think they are paying too much for SolarCity-- but I can see the strategic opportunities from merging.

Re:Maybe Solar City won't be scammy and vague now?

[whoever57]

so my cost situation is that it will increase my electricity costs by about 20% for 10 years, then it'll be paid off and I'll have "free" electricity for another 15, plus however long the system lasts after the warranty period ends.

If the company that installed it and provides the warranty is still in business then. Warranty support is the single advantage that a lease or PPA has. If the company that owns the lease goes bankrupt, either another company will take on your contract (including the warranty), or the system will effectively be yours.

I sell surplus electricity to the utility during the day at an average price of $0.35/kWh in summer and about $0.25/kWh in winter. I buy back the electricity I use to charge my EV at night at about $0.12 per kWh. I estimate the system will have paid for itself in 5-6 years.

Re:getting money out without effecting share price

[Mr D from 63]

Synergies don't require acquisitions to work. In fact, one could argue that Tesla has restricted their supplier options by this move. What does Solar City really bring to the table that they could just get as needed?

If you think it is all about synergies and not about shareholder value you are fooling yourself. Solar City has been struggling due to tight margins in that competitive industry, and the future doesn't look any better with reductions in subsidies and tax assistance going forward. Its a remarkably convenient time to be getting a premium price for such a company. I am sure that Solar City shareholders unanimously support the move, whilst some Tesla shareholders will have concerns.

Re:getting money out without effecting share price

[yodleboy]

"What does Solar City really bring to the table that they could just get as needed?"

The ability to provide an Apple like end to end ecosystem and the attendent lock-in. Solar hardware and storage optimized for your Tesla. Go ahead, laugh, but people will buy it, just like they buy Monster HDMI cables because the bits are cleaner.
Then again, maybe it's not bad. Imagine a person that would like to go solar and get an EV, but man that crap is expensive. What if Tesla/Solar City could give you a bundle deal? Maybe even amortize your Tesla payments out over the 20 years they estimate for a Solar City installation? Do an iPhone-like upgrade program, maybe every 5 years, you pay a fee and get a new car? Damn it, now I'm starting to get myself interested.

Re:getting money out without effecting share price

[Immerman]

Doesn't the Tesla Powerwall include the inverter components as well? So they can provide all the hardware, plus the installation (whether or not it's subcontracted out).

Which brings in another very important aspect they can streamline: financing. As any car dealership can attest, financing is a MAJOR profit center, and Tesla now stands positioned to not only finance your shiny new electric car, but also your home solar upgrade at the same time - hardware and installation as one big, shiny, easy to finalize bundle. Great profit for Tesla, and potentially a great deal for the customer as well. No overhead due to coordinating between organizations (other than the power company connect), and no finger-pointing runaround if something goes wrong.

Re:getting money out without effecting share price

[MachineShedFred]

SolarCity does their own installs, and they are the fastest install you can get in the US. And, they are leading the market in price per watt installed, which is only going to go down once they open their own manufacturing facility in New York next year, and are not beholden to the import tariffs on all the other panels coming from China.

Re:getting money out without effecting share price

[im_thatoneguy]

If you'd like to offer a deeper explanation of your take of the transaction, I'm all ears.

Tesla will soon be the world's largest lithium ion battery manufacturer, and with the size of batteries each Tesla will need... perhaps the largest customer if they meet sales goals. If solar city starts leasing a lot of residential solar panels with batteries built into the unit they'll probably be the 2nd largest customer for batteries after Tesla.

People think there are a lot of lithium ion batteries out in the world... and there are. But each Tesla 85KWh battery is equivalent to ~1,500 laptop batteries.

The two most battery intensive industries are energy storage and transportation. You have to start thinking of Tesla as a "Battery Company" not an "Automotive company". And as a "battery company" it makes perfect sense to buy up one of the largest "battery charger companies". Renewable energy doesn't work on its own. You need some form of storage to make renewable power work. We're not very heavily invested in solar power so the power companies are just taking it on the chin to supply regulated constant power. If Solar City wants to grow, they have to be able to eliminate the need for baseline generators (fossil fuel and nuclear) otherwise the legacy power generators will rightfully complain that they can't affordably maintain energy security.

Re:getting money out without effecting share price

[MachineShedFred]

Yeah, or I can use Google.

"The total installation time for a standard 3-kilowatt solar system of about 20 solar panels is usually somewhere between 1 and 3 days. Average labor time is 75 man-hours, which can be further broken down into electrician installation labor (49 man-hours) and non-electrician installation labor (26 man-hours)." - source

You can do the next one: go ahead and find the numerous references to SolarCity getting installs done in a few hours, or YouTube timelapse videos of the whole thing being done before lunchtime.

If the solar industry themselves are saying 1 to 3 days, and yet one company is able to get it done in less than half a work day, I'd say they are far above the average when it comes to install time. Do you think that massively reducing install labor by having better mounting hardware might have some effect on installed cost per watt?