Shepstone Management Company, Inc.
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Kathy Hochul, New York’s especially obsequious Lieutenant Governor says there’s no need to worry about Tesla or the Buffalo Billion mess. “It’s an asset.”
There’s been a slew of news recently about the Tesla/SolarCity and Buffalo Billion scandal. New York’s Lieutenant Governor says there’s no need to worry, though:
Lieutenant Governor Hochul, while saying they were holding Tesla to its promises of job creation, defended the construction of the factory.
“This is a place that was an abandoned steel plant for decades,” she said. “There is life over there and it’s bringing back the neighborhood.”
Hochul added that in the event of a worst-case scenario – the bottoming out of Tesla – the factory could be repurposed for another business. She told reporters Friday the facility is not a Tesla property but rather a “state asset.”
Alrighty, then. Everybody put a smile on their face, vote and go back to what you’re doing. New York State is in such great shape with such magnificent leadership.
A loyal reader who’s been following the SolarCity/Tesla debacle unfold over the last few years just sent me links to numerous stories on it. They document the long slow melting of Andrew Cuomo’s dream of transforming his state into a big friendly green monster. All that’s left at this point is a green puddle of water dirtied by the endemic corruption of the Cuomo administration, Lt. Governor Kathy Hochul being right there along side Governor Corruptocrat.
The WBFO story quoted above lays out much of the debacle (emphasis added):
Anthony Ogorek of Ogorek Wealth Management in Williamsville says while Musk is a genius and a visionary, people who think as Musk does tend to act differently and get their ventures in trouble. He pointed out the original SolarCity business model, which was to produce and then lease solar panels and components to customers. Many, he tells WBFO, discovered better deals by simply buying the panels.
It’s just one of several turns since work began on the SolarCity factory, the largest investment in Governor Andrew Cuomo’s Buffalo Billion program. SolarCity was subsequently acquired by Tesla.
“The question is, did Tesla buy the company because SolarCity was rapidly going down the tubes? The answer is probably yes,” Ogorek said. “What you’ve got is a cash-starved company, which is Tesla, buying another company – Solar City – which was going down.”
Ogorek added that Tesla had no prior manufacturing experience, hence the addition of Panasonic to the Buffalo facility.
He criticizes the construction of that giant factory as “irresponsible” and an “ill-conceived scheme” by the Cuomo Administration that was motivated by a desire to win votes.
No kidding. There’s also this from WIVB:
Some analysists thought it was a head scratcher when Tesla purchased SolarCity in November 2016 for $2.6 billion.
In fact, shareholders showed their disapproval by filing a class-action lawsuit charging that Tesla’s board breached its fiduciary duties.
“SolarCity is the vast majority of Tesla’s debt and the fact that the automotive business, if that would succeed, does not necessarily mean that the Tesla Energy (SolarCity) would succeed,” Nesper said.
Since Tesla purchased SolarCity, the rate of solar production has slowed drastically.
Consider that before the sale, SolarCity deployed 253 megawatts of solar energy, a high mark in the fourth quarter of 2015.
Since Tesla bought the company, the deployment has fallen sharply, with the low-point being in the first quarter of this year at 76 megawatts. Imported solar panel tariffs imposed by the Trump Administration could further erode the industry, analysts said.
This past quarter, however, Tesla reported an uptick of 11 percent in solar energy generation systems, but the megawatts produced remains a third of the largest output when SolarCity was at the helm. Tesla has installed only a few hundred solar roofs.
These may not be the most important stats, though. Consider these from Forbes:
Tesla’s energy storage and generation unit, which includes sales of Powerwalls and other storage products as well as the SolarCity lines, accounted for 9.4% of Tesla’s revenues in the second quarter, but only 7.1% of consolidated gross profit. Layering in overhead costs and subtracting energy storage, it’s clear that the business formerly known as SolarCity is a money loser for Tesla, which, as most know, is already running an unprofitable carmaking business.
Yet, SolarCity’s debt represents an outsized proportion of Tesla’s capital structure. “Old” SolarCity paper accounted for 13.1% of Tesla’s $7.7 billion in corporate recourse debt as of June 30th, and, by my calculations, accounted for nearly 90% of the $3.2 billion in long-term debt Tesla classifies as non-recourse…
So, despite a $750 million investment from the State University of New York’s Research Foundation, it would appear that Gigafactory 2 is off to a disappointing start. An investor in a Tesla go-private transaction would have to come to terms with the fact that a massive manufacturing facility in Buffalo–and its contingent liabilities–comes with that purchase.
And, finally, there’s this from Reuters:
Repeated hold-ups since the Buffalo, New York plant opened last year have forced Tesla’s partner in the joint venture, Panasonic (6752.T), to seek other buyers for the components it had built to sell to Tesla, according to a Panasonic employee, a former Panasonic employee and a former Tesla employee. The issues have also rattled the faith of state officials in Tesla’s ability to deliver on investment and employment promises it made in exchange for $750 million in state subsidies…
Some New York state lawmakers worry Tesla may fail to hold up its end of the bargain. The state provided $350 million to build the factory, along with $274.7 million for equipment and $125.3 million “for additional specified scope costs,” according to a Tesla filing with the Securities and Exchange Commission.
But, hey, Kathy Hochul isn’t worried. It’s a state asset, after all. I’m sure they can put someone else in the building for free, sell the equipment at 10¢ on the dollar to some other down and out solar business and just write off those “additional specified scope costs.” This is the story of a corrupt New York and an industry that is pure corporatism by definition. And, Andrew Cuomo and Kathy Hochul (deeply embedded in the Buffalo Billion fiasco herself) are both in the thick of it. They sold out the Southern Tier and they used Buffalo as an opportunity for graft at public expense.
The post “Don’t Worry, It’s An Asset” Lt. Governor Kathy Hochul Tells Tesla Skeptics appeared first on Natural Gas Now.
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