Tesla acquires Solar City to form Tesla Energy

Tesla officially acquired SolarCity for roughly $2 billion. Tesla will integrate SolarCity’s team and operations, and it will phase out its brand in favor of ‘Tesla Energy’ over the next few months.

At the special shareholders meeting held on Nov 17th to vote on the merger, General Counsel Todd Maron announced that shareholders have approved the merger by more than 85%.
Tesla Model S

They will release the final results in a SEC filing once it will be available.

After the formal part of the meeting, the CEO of the newly combined company, Elon Musk, took a few questions and made some interesting remarks:

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The company sent out the following press release:

Tesla’s shareholders have overwhelmingly approved our acquisition of SolarCity. Excluding the votes of Elon and other affiliated shareholders, more than 85% of shares voted were cast in favor of the acquisition. With SolarCity’s shareholders also having approved the acquisition, the transaction will be completed in the coming days.
We would like to thank our shareholders for continuing to support our vision for the future. We look forward to showing the world what Tesla and SolarCity can achieve together.

Prior to the meeting Tesla promoted the merger to its shareholders with some interesting projections, including that the SolarCity will generate “more than half a billion dollars in cash over the next 3 years” for the new combined company.

solar-rooftop-instalation

The document reiterates previously emphasized potential opportunities for synergy, but it also focuses on clarifying SolarCity’s financials, which Tesla describes as “often misinterpreted.”

Tesla is trying to reassure investors that SolarCity will actually contribute to Tesla’s cash balance and not be a drain on the automaker’s already significant cash burn (last quarter aside).

Here’s the summary and you can find the full document embedded further down:

Strategic rationale:
The acquisition of SolarCity will create the world’s only integrated sustainable energy company, from energy generation to storage to transportation.

Just as Tesla has demonstrated the superiority of electric vehicles, the solar roof and Powerwall 2 will transform energy generation and storage.

Financial benefits:
The transaction is expected to be additive to Tesla’s cash balance. SolarCity increased its cash from Q2 to Q3 2016 and expects to increase it further in Q4 2016. We expect SolarCity to add more than half a billion dollars in cash to Tesla’s balance sheet over the next 3 years.

Continuing to transition to loans and cash transactions as opposed to leases will significantly improve SolarCity’s GAAP revenue and profitability.

More than half of SolarCity’s debt is project financing; this debt is non-recourse and is more than offset by the cash flows from customer payments.

SolarCity obtained about $1 billion in project financing since July 1, 2016, demonstrating the strength of its financial condition.

Tesla’s execution:
With record quarterly production and deliveries, Tesla achieved GAAP profitability and generated positive free cash flow in Q3 2016, while remaining on track with Model 3 and Gigafactory development.

Tesla also paid down $422 million of convertible debt and expanded its third-party leasing capacity by $675 million and its direct leasing capacity by $300 million.

With Tesla executing well on its existing goals, it can successfully integrate SolarCity and realize the financial benefits that come from the acquisition.

Full document embedded below:

Tesla and SolarCity by Fred Lamert on Scribd


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Wood Fuel Magazine 2016