Print 80 comment(s) - last by BRB29.. on May 29 at 9:16 AM

Tesla's early repayment is mainly due to last week's announcement regarding its plan to issue more stock and pay off the energy loan with the proceeds

Tesla Motors announced today that it has repaid its $465 million energy loan in full nearly a decade early.  

"I would like to thank the Department of Energy and the members of Congress and their staffs that worked hard to create the [loan] program, and particularly the American taxpayer from whom these funds originate," said Elon Musk, Tesla co-founder and CEO. "I hope we did you proud."

Tesla was approved to receive a $465 million loan from the U.S. Department of Energy (DOE) in June 2009. The loan, which was part of the Advanced Technology Vehicles Manufacturing program, was to be repaid by 2022. But in March of this year, Tesla received permission to pay the loan back five years early by mid-2017. 

But now, Tesla has repaid the whole sum -- nine years earlier than expected from the original 2022 due date.

Tesla's early repayment is mainly due to last week's announcement regarding its plan to issue more stock and pay off the energy loan with the proceeds. Tesla said it wanted to sell about $830 million in shares, and use $450 million in convertible senior notes (which are due in 2018) along with sales of 2.7 million shares (valued at about $229 million at the time) to pay back its federal loan.

Tesla Model S

Also helpful to Tesla's cause is the fact that it managed to start shipping 500 Model S sedans per week starting in March of this year, exceeding the sales outlook of 4,500 posted in the February shareholder letter. In fact, Tesla managed to sell 4,900 Model S sedans in the first quarter. The automaker plans to deliver 21,000 total for the year, which slightly exceeds previous forecasts of about 20,000. 

Tesla reported its first profitable quarter in Q1 2013, where it posted a net income of $11.2 million (a huge increase from an $89.9 million loss in the year-ago quarter). Excluding certain items, Tesla's profit came in at 12 cents a share, which was a boost from a loss of 76 cents a share in Q1 2012. Analysts expected a profit of about 4 cents a share. Revenue also saw a huge year-over-year boost, totaling $562 million (up from $30.2 million in the year-ago quarter). 

Tesla is certainly looking to keep that momentum going, and is doing by extending excellent service beyond the point of sale. Last month, the automaker announced a new battery replacement program as well as new service programs, which feature valet for customers who need to send their Model S' to the shop -- and can even borrow (or later buy) a better Model S or Tesla Roadster as loaner vehicles. 

Today's early repayment is a crucial point in the history of clean energy loans issued by the Obama administration. Even though DOE said today that losses in the loan program are at 2 percent of a $34 billion portfolio and less than 10 percent of the $10 billion loss reserve, it's hard to forget some of the large loan defaults made by now-bankrupt clean energy companies. 

Tesla/SpaceX CEO Elon Musk
In September 2011, Silicon Valley-based solar panel company Solyndra filed for bankruptcy after receiving a $535 million loan from the DOE in 2009. Government officials reportedly warned the administration of the viability of Solyndra, saying the company would go bankrupt in a matter of two years. The warnings were put aside in order to meet political deadlines.

Later in November 2011, Beacon Power, a company that creates flywheels to store power and increase grid efficiency by preventing blackouts, filed for bankruptcy after receiving a $43 million loan guarantee from the Department of Energy in August 2010.

But the failed energy loans didn't end there. Battery maker EnerDel's Ener1 subsidiary filed for bankruptcy in January 2012 after winning a $118.5 million grant from the DOE in August 2009. Ener1 was supposed to develop batteries for electric vehicles.

Just last month, it was announced that California-based Fisker Automotive -- which makes plug-in hybrid electric vehicles -- was talking bankruptcy. The automaker received $529 million in DOE loans in April 2010 for the development of high-tech vehicles. However, Fisker fell a little behind on its production schedule, and in May 2011, DOE froze the loans due to "unmet milestones." Fisker had only drawn $193 million of it at that point. 
Due to these frozen loans, Fisker is having a hard time securing funds to make its second car -- the Fisker Atlantic. Fisker is now looking for investors to help out financially, but the company's investor solution has drawn a lot of criticism because two potentials have been Chinese companies -- Zhejiang Geely Holding Group and Dongfeng Motor Group Co. This is seen as an issue because Fisker received U.S. taxpayer dollars to fund its Karma plug-in. 
Things have only gotten worse, as Fisker was forced to lay off 75 percent of its staff and even missed its DOE payment in late April. 

Thankfully, Tesla has had a better time with its clean auto production. The company can now look ahead to continued Model S success and production of its Model X crossover EV (which hoped to begin production this year, but was shelved to 2014 with deliveries expected in 2015).

Source: Tesla Motors

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RE: so what?
By BRB29 on 5/23/2013 2:02:56 PM , Rating: 2
and they didn't run pay their boards and CEO huge bonuses with lavish parties. Instead, they paid off loans early. This is a very big deal because I don't know of too many large corporations that wouldn't abuse this.

RE: so what?
By NeoReaper on 5/23/2013 3:05:26 PM , Rating: 2
im not actually sure how much executives are being paid at Tesla so i cant really comment on specifics but do you realize the size parity of Tesla and any other auto manufacturer? do you feel that all executives from a particular industry should be paid the same amount, no matter its size and/or success (aka profit)?

RE: so what?
By BRB29 on 5/23/2013 3:23:21 PM , Rating: 2
Executives salary are usually not the incentives. They are given an amount of shares of the company as package with their job offer. If they make the company successful, then the share price increases and thus they make more money. Most of the time, the CEO's salary is less than a rounding error compared to his incentives package.

I'm sure Elon's pay won't increase but he would just get more shares as a bonus at the annual performance review by the board. It's the industry's way to pay CEO based on his performance.

RE: so what?
By NeoReaper on 5/23/2013 3:34:16 PM , Rating: 2
i agree with you on how an executive is typically compensated for the success of the company but then why did you say "and they didn't run pay their boards and CEO huge bonuses with lavish parties"? first you say large companies would abuse and spend the money and now ur saying they dont... ur statements contradict each other.

RE: so what?
By BRB29 on 5/23/2013 3:38:23 PM , Rating: 2
Sorry, that was my bad. I did not delete a previous sentence completely. I would've corrected it if there was an edit option.

RE: so what?
By NeoReaper on 5/23/2013 3:46:39 PM , Rating: 2
ah ha, gotcha. overall, Tesla is an interesting company but i reserve many doubts on its long term success. with all lux car manufacturers moving to hybrid/electric powertrains options, i dont think Tesla will be able to effectively compete. they appear to be doing well right now only because competition hasnt arrived yet... thats the main reason why i feel very iffy that they would rather spend their new found money on repaying a loan early rather than furthering their R&D.

RE: so what?
By BRB29 on 5/23/2013 4:31:53 PM , Rating: 3
Tesla is aiming for the economy vehicle market. They used the top down approach to get there. They had to because they had to develop the technology and find early adopters with deep pockets to pay for it.

It's clear that hybrid is a stop gap measure to oil problems. They will go away.

There's only 3 things holding EVs back right now
1. Infrastructure
2. Cost
3. Practicality

Tesla's future is actually better than automakers like GM. It's obvious by now that EV will be mainstream well within our lifetime. They are the undisputed leader in EV technology. They are the only manufacturer that is capable of producing mass quantities. So far, they have the only practical EV that is affordable. I don't consider the leaf or spark a practical car for obvious reasons.

After paying back the loan, they actually still have plenty of cash in the bank. I'm sure most of that will go to R&D and building new facilities. It's obvious that Elon's primary objective is growth right and infrastructure development right now. Paying back the loan was to boost investor confidence so he can get more money from selling stock rather than loans and incur interest expense + increase liability.

RE: so what?
By NeoReaper on 5/23/2013 5:07:25 PM , Rating: 2
i reserve doubts that Tesla can reach the economy vehicle market ($20-25k/typical Camry) price any time in the near future because they have another major hurdle to jump. i understand that the approach is top down which seems far more effective than Nissan and GM's bottom up approach. The hurdle Tesla must overcome will likely be a battle with vehicles in the entry level luxury market ($30-40k) and that thats a battle i dont believe they can win. im also extremely hesitant about your statement that "It's obvious by now that EV will be mainstream well within our lifetime". ppl said hybrids would be mainstream too but honestly, today, its still just a niche.

RE: so what?
By BRB29 on 5/24/2013 8:46:18 AM , Rating: 2
The average vehicle price is 30k. They only need to hit $35k to be mainstream. We will get to $35k average vehicle price in just a few years.

Hybrids were never meant to be mainstream. People say that but the industry used it as a stop gap between ICE and EV/hydrogen vehicle. Even when you look at all the automakers, there's only 3 that are doing serious work for hybrids. Most automakers are doing enough to say "me too" because they know it's not worth the investment. I give hybrids 10-20 years before they completely disappear from production. In 20 years, EV will be mainstream primarily because the infrastructure will be in place.

RE: so what?
By NeoReaper on 5/24/2013 11:21:27 AM , Rating: 2
call it semantics if you'd like but youre previous statement was in regards to economy vehicles. im well aware that the average price of a vehicle is up to $30k since that number is dragged up by luxury cars, sports cars, and large trucks. the argument was about a mainstream car.

you like making very bold statements like "EV willl be mainstream soon" and "hybrids were never meant to be mainstream". hindsight is 20/20, obviously you would say this now since hybrids have essentially failed and i would disagree with you on ur statement in regards to "only 3 that are doing serious work for hybrids". honestly, only 1 company has tried and thats Toyota. and now you only have 1 company trying to really push EV which is Tesla.

in 20 years from now when the next hyped up successor is around, you can make this same argument again that EVs were only a stop gap. they never were meant to be mainstream. after all, only 1 company actually tried, everyone else said "me too".

RE: so what?
By BRB29 on 5/24/2013 12:13:41 PM , Rating: 2
call it semantics if you'd like but youre previous statement was in regards to economy vehicles. im well aware that the average price of a vehicle is up to $30k since that number is dragged up by luxury cars, sports cars, and large trucks. the argument was about a mainstream car.

Yes but the vast majority of vehicles sold are not luxury. The mainstream sedans that sells high volume are Toyota camry, Honda Accord, Nissan altima, etc... They actually outsell the economy cars like corolla by a large margin.
These mid size sedans usually start around low 20s. With just some common options, it is up to 25k+. I recently wanted to buy a 4 door accord with basic options and nothing fancy. It was over $27k. Went to Toyota and got about the same price. Chevy, Ford, Nissan was just a little lower at around $25k.

So yea in 5-10 years, if Tesla releases a $35k EV that can do 200-300 range with the same practicality as a regular sedan then it will sell like hot cakes.

Regarding hybrids not being mainstream, I found that out by doing research because I care where my money goes. I buy all stocks by myself instead of throwing it in a mutual fund. But you don't need anyone to tell you that. Government funding tells you that in clear daylight. Reinventing our transportation requires an entirely new infrastructure. Something that the private sector cannot do alone right now.

RE: so what?
By flyingpants1 on 5/24/2013 1:00:29 PM , Rating: 2
He has thrown out a figure of $20k before, let's hope for the best.

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