SolarCity (SCTY)

[SBenson]

What? The last two ABS offerings in this quarter were not a big enough cash infusion for you? I thought you said net cash flow was not your issue.

Two? I thought only one $185mln MyPower deal. The other one for $57.45mln is still in works (underlying cashflows represent $76.4mln but the ABS is for 57.45). In Q4 there were no ABS deals but still non-recourse went up. So my understanding is that assets simply move from one non-recourse facility to another. So in a nutshell how much this will help avoid new recourse debt is anyone's guess. Overall even if a new cash infusion comes in say around 200mln, that will buy just another quarter. Unless the business model changes, this is a game of surviving one quarter at a time. One misstep - game over. More importantly I think Q2 guidance will come in quite soft at ~200MWs and they might simply abandon the yearly guidance. That will plummet the stock, as market seems to understand guidance more than the underlying cashflow dynamic.

Also, we have to see how the $57.45mln ABS pricing comes out. I am not optimistic on that one. Bad pricing on that deal will blow another hole into the long thesis, if not a death knell.

 

[TheTalkingMule]

I'm still fairly sure the $185M one was less than half MyPower loans.

 

[SBenson]

Care to show some math?

 

[hcsharp]

Another tech company issuing $12B in debt this week. Who is this AAPL and should we be concerned about their model? Are profits waning? The next Nokia? How would a pending bankruptcy drag down Samsung?

I've got a question for you. What is the effective yield on the SCTY bonds? Now what is the effective yield on the AAPL bonds?

Hint: The SCTY bonds have been trading so low that the effective yield has been about 24% until the last couple of days when it bounced up to 20%. Now tell me the effective yield for similar bonds currently being issued by AAPL. Don't accuse anyone of "going silent" until you answer this.

There's a big difference of course. AAPL doesn't need to issue bonds to keep the lights on. They're just doing it to boost the stock price slightly. SCTY by comparison would stop breathing without continuous new cash. Then again it wasn't my idea to compare these two. It was yours.

 

[TheTalkingMule]

TSLA up $11 today as well. No way this is just on the Hawaii news, right? That's been common knowledge since forever.

- - - Updated - - -

I've got a question for you.

I was not implying that AAPL was in financial difficulty. It was a joke.

 

[hcsharp]

I was not implying that AAPL was in financial difficulty. It was a joke.

Of course - that was your whole point. You were trying to say that just because a company issues debt doesn't mean they are in financial difficulty. But you didn't answer my question. Please don't make somebody suggest that the "silence continues."

 

[Foghat]

For those that are curious, who do you think is included in the working group in California rule 21? Anyone? What was that? Solarcity? No, they can't be involved in that. No way they've been involved since the start. Not a chance.

 

[TheTalkingMule]

Of course - that was your whole point. You were trying to say that just because a company issues debt doesn't mean they are in financial difficulty. But you didn't answer my question. Please don't make somebody suggest that the "silence continues."

You lost me. Is this a bad day for jokes?

If you want to talk bond rates it's been detailed for about the last 30 pages of this thread. You would see them if there weren't buried under 20 pages of electracity trolling. A perfectly nice thread roon'd!

 

[Klaus]

Can you guys please all stop replying to or commenting @electracity's posts so we can get back to a more reasonable S/N level?

 

[Foghat]

Can you guys please all stop replying to or commenting @electracity's posts so we can get back to a more reasonable S/N level?

You're right. I pledge to stop replying to him. And that pledge will be in perpetuity.

 

[electracity]

For those that are curious, who do you think is included in the working group in California rule 21? Anyone? What was that? Solarcity? No, they can't be involved in that. No way they've been involved since the start. Not a chance.

The technical people at solarcity seem quite bright, and they are certainly always looking at how they can add value. I don't recall solarcity recently making any claims of vast added value in future consolidations of customers.

The solarcity PPA price in Hawaii of $0.145/kWh for solar plus battery explains future value. Do battery owners choose 1) to get paid 7 cents/kWh by solarcity, or 2) to save 35 cents/kWh by using the stored electricity? I can do the math for you if it is a challenge.

 

[Johan]

The technical people at solarcity seem quite bright, and they are certainly always looking at how they can add value. I don't recall solarcity recently making any claims of vast added value in future consolidations of customers.

The solarcity PPA price in Hawaii of $0.145/kWh for solar plus battery explains future value. Do battery owners choose 1) to get paid 7 cents/kWh by solarcity, or 2) to save 35 cents/kWh by using the stored electricity? I can do the math for you if it is a challenge.

Does your advanced math factor in if it's the customer or SCTY who pays the upfront cost of the battery? It's not like it just appears magically in the garage.

 

[TheTalkingMule]

Under aggregation agreement, Solarcity shares revenue 50/50 with its customer which reduces net cost/kWh for the customer. So consumers save more money being a Solarcity customer under its aggregation agreement then without.

so faced with adding energy storage and a smart inverter without Solarcity aggregation contract savings, or going with Solarcity and achieving higher savings, what would a majority of consumers do?

the answer is clear who holds the keys to the total value proposition(currently at 1/3 the market) in distributed energy resources market. Solarcity. Hard to contort the reality otherwise.

You've obviously been howling about this for a while now and I get it to a degree, but I'm trying to figure out what the picture look like 3 years from now in say.....California. If I work within an SCTY PPA and agree to whatever aggregating scheme they are pushing at the time, will that potentially get my costs down similar to a straight financed local install? In other words, will I really make that much more than if I were just net metering under the newly announced CA rules? Fundamentally I would be inclined to say "perhaps".

Say I buy solar from a local installer and a mainstream battery pack, but not one that SCTY typically installs....think I will be able to "join" the SCTY aggregated group? If the SCTY grid gateway/safety hardware is robust, any solar(or other) producer should technically be able to join in, no? Do you think there will there be a ton of competing aggregators? IF successful, SCTY will clearly have massive advantages, just trying to poke holes.

 

[electracity]

Does your advanced math factor in if it's the customer or SCTY who pays the upfront cost of the battery? It's not like it just appears magically in the garage.

Solarcity will have to get the customer to pay for the battery. I was starting from the assumption that the battery already existed in some future world.

 

[Johan]

Solarcity will have to get the customer to pay for the battery. I was starting from the assumption that the battery already existed in some future world.

Says who? In case you haven't figured it out a huge part of the SCTY businesses model is to allow customers to go solar, presumably soon solar+storage, without all the upfront costs associated but instead locking them in PPAs over time.

 

[electracity]

Says who? In case you haven't figured it out a huge part of the SCTY businesses model is to allow customers to go solar, presumably soon solar+storage, without all the upfront costs associated but instead locking them in PPAs over time.

Says solarcity. They will do a PPA but the customer pays cash for the battery.

But certainly if you want to make stuff up, this is the place to do it.

 

[Johan]

Says solarcity. They will do a PPA but the customer pays cash for the battery.

But certainly if you want to make stuff up, this is the place to do it.

Not in Hawaii they don't...

 

[electracity]

Probably a Mypower loan for off grid.

For their core business, if they add the value of the battery to a PPA, the amount will exceed the prospective customers existing electric bill. SCTY salespeople can't sell that deal.

 

[TheTalkingMule]

Can you guys quit clogging the thread with nonsense?

 

[jhm]

Two? I thought only one $185mln MyPower deal. The other one for $57.45mln is still in works (underlying cashflows represent $76.4mln but the ABS is for 57.45). In Q4 there were no ABS deals but still non-recourse went up. So my understanding is that assets simply move from one non-recourse facility to another. So in a nutshell how much this will help avoid new recourse debt is anyone's guess. Overall even if a new cash infusion comes in say around 200mln, that will buy just another quarter. Unless the business model changes, this is a game of surviving one quarter at a time. One misstep - game over. More importantly I think Q2 guidance will come in quite soft at ~200MWs and they might simply abandon the yearly guidance. That will plummet the stock, as market seems to understand guidance more than the underlying cashflow dynamic.

Also, we have to see how the $57.45mln ABS pricing comes out. I am not optimistic on that one. Bad pricing on that deal will blow another hole into the long thesis, if not a death knell.

Are you saying that the sixth ABS will be issued in Q2? That would be fine with me. I think it is good to spread this cash out.

I still get the impression that you see this company living hand to mouth and could fail in one bad quarter. This sounds like basic solvency is still your issue.


Personally I don't care about the 1.25 GW goal. I'd be happy with 800 MW. Tracking cumulative installation, this would take them from 1.7 GW to 2.5 GW, an that is respectable growth. Getting to 2.9 GW would be fantastic, but not at the cost of weakening their financial position. So I would prefer to end the year with more cash, more working capital, and only a $400M decline in DevCo CF (less than half the $821M from last year). So if they did all that and got to 25 GW cumulative, I'd be quite pleased.

I'd also like to see about 250 MWh of storage installed. 140 MWh residential (20k Powerwalls ) and 90 MWh commercial (900 Powerpacks) would bring in another $120 M in revenue (not all recognized in first year). I'm not sure is Tesla Energy is upto supplying this. If the supply were there, they could double or quadruple this. As they bring on the batteries, I think the market will positive respond. This will be a nice expansion of their current business model.

I don't see their current model as broken: I see it as incomplete. So I am eager to see them offer much more. It will be much more fun when we are trying to guess how many MWh they will sell each quarter.