UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next
Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 455864  
Subject: Re: Dotcom déjà vu Date: 12/12/2012 9:33 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 7
How do you NOT make money in that business??

They probably will make money, although nothing is guaranteed, obviously.

The reason they show such big losses against sales is because they are using a very different financing model. Rather than "selling" a system to a homeowner, who goes to the bank and gets a loan for it (or less likely, pays cash), SolarCity is self-financing installations in return for a flow of payments back from the homeowner over time. This requires them to expense 100% of sales, while revenue recognition takes time, possibly as much as 20 years, depending on the deals they strike with homeowners.

This is not new. GMAC was, at first, a self-finance arm for GM so people could buy cars. Some home builders went into the self-finance business rather than pass that lucrative part of the business off to banks. SolarCity will use the proceeds from the IPO to continue the build-out, but it looks as though they will net only about 60% of what their advisors thought, which may change things in the business model.

Their figures, developed over the course of several years, show homeowners that they can realize about a 10% annual savings on energy and eventually own the system, which is decent, but not overly compelling, since the life expectancy of these sorts of systems is 25-40 years, depending. (I don't know about their system specifically, that's just a generic average.)

And yes, if the homeowner stops paying, they will come and remove the system. Of course that costs them again, but I've heard of it happening. There are other risks; it's possible that utilities will stop being required to purchase power from homeowners (and might do so), or the rates for doing so might change, or lots of other things. But yoda is off base laughing quite so hard at their "losses" versus "sales." It's about revenue recognition and timing, not some airy "solar power" pipe dream.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next

Announcements

Post of the Day:
Berkshire Hathaway

Starting a Small Business
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement