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Tesla replays DOE loan nine years early (updated with Chrysler comment)

22 May 2013

Flush with its recent $1.02 billion fundraising, Tesla Motors has paid off the entire loan awarded to the company by the US Department of Energy in 2010. In addition to payments made in 2012 and Q1 2013, today’s wire of almost half a billion dollars ($451.8M) repays the full loan facility with interest.

Following this payment, said Tesla, it will be the only American car company to have fully repaid the government. (Chrysler Group, in reaction, noted that almost exactly two years ago—24 May 2011—it had repaid (in full and with interest) US and Canadian government loans, more than six years ahead of schedule.)

For the first seven years since its founding in 2003, Tesla was funded entirely with private funds, led by Elon Musk. Tesla brought its Roadster sports car to market with a 30% gross margin, designed electric powertrains for Daimler (Mercedes) and had done preliminary design of the Model S all before receiving a government loan.

In 2010, Tesla was awarded a milestone-based loan, requiring matching private capital obtained via public offering, by the DOE as part of the Advanced Technology Vehicle Manufacturing (ATVM) program. This program was signed into law by President Bush in 2008 and then awarded under the Obama administration in the years that followed.

The loan payment was made today using a portion of the approximately $1 billion in funds raised in last week’s concurrent offerings of common stock and convertible senior notes. Elon Musk, Tesla’s Chief Executive Officer and cofounder, purchased $100 million of common equity, the least secure portion of the offering.

I would like to thank the Department of Energy and the members of Congress and their staffs that worked hard to create the ATVM program, and particularly the American taxpayer from whom these funds originate. I hope we did you proud.

—Elon Musk

Commenting on the loan payment, US Energy Secretary Ernest Moniz made the following statement:

When you’re talking about cutting-edge clean energy technologies, not every investment will succeed—but today’s repayment is the latest indication that the Energy Department’s portfolio of more than 30 loans is delivering big results for the American economy while costing far less than anticipated.

More than 90% of loan loss reserve Congress established remains intact, while losses to date represent about 2 percent of the overall $34-billion portfolio. The other 98% of the portfolio includes 19 new clean energy power plants that are adding enough solar, wind and geothermal capacity to power a million homes and displace 7 million metric tons of carbon dioxide every year—roughly equal to taking a million cars off the road.

The Department first offered loans to Tesla and other auto manufacturers in June 2009, when car companies couldn’t get other financing and many people questioned whether the industry would survive. Today, Tesla employs more than 3,000 American workers and is living proof of the power of American innovation. This is another important contribution to what the Obama Administration has done to preserve and promote America’s auto industry.

Finally, this announcement is also good news for the future of America’s growing electric vehicle industry. While the market has taken longer than predicted to get going, sales of electric vehicles in the US tripled last year and are continuing to increase rapidly in 2013. Tesla and other US manufacturers are in a strong position to compete for this growing global market.

Losses to date in the Department’s loan programs represent about 2% of the $34 billion portfolio and less than 10% of the $10 billion loan loss reserve that Congress set aside to cover expected losses in the programs.

May 22, 2013 in Brief | Permalink | Comments (11) | TrackBack (0)

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Comments

Awesome. I think they repayed it though, not replayed it! ;-)

Tesla is the living proof that NOT all government loans are wasted. In fact, only 2% are.

A responsible government should help to finance local innovations with low cost loans and/or with direct investment alone side private investors. Hand outs, grants and tax credits are not really required and should be avoided.

Taking qualified risks is often required to develop new industries and to keep the country in the lead. USA needs 100++ more Tesla to ensure that the country will keep moving ahead.

USA should move ahead more aggressively with composites, 3D printing, improved batteries, improved FC & transfomers, lighter electrified vehicles, more clean electricity production, electrified light airplanes, etc.

Ponsi scheme alert!

http://mediamatters.org/blog/2013/05/16/video-foxs-tesla-re-coil/194101


Kit P may be running out of logical arguments soon?

Harvey, Interesting statement that only 2% are bad loans. Could you tell me where you found that info, also is that 2% of the number of loans or 2% of the money that was loaned. Big difference. Thanks

I do not think that they are a Ponsi scheme as the data is out there for anyone to look at and the company is not a scam but they were able to pay off the debt by selling stock at what is probably an unrealistically high price. The current price to earnings (PE) ratio is undefined as they are running a loss but the forward PE based on what profits they expect to make next year is 1744.80 Most stocks that are not growing rapidly have a price to earnings ratio somewhere between 10 and 20. GM has a PE of 11.44 and a forward PE of 9.93, GE is 16.68 and 14.42, Caterpillar is 11.80 and 12.57, Valero Oil is 7.14 and 7.54, Google is 26.48 and 19.41. If Tesla could sell 50,000 cars per year and make $5000 profit per car (some big ifs), the price to earnings ratio would still be around 40. Caveat emptor

I believe Tesla stock price is benefiting from a short squeeze along with recent good company news. Current price does seem highly optimistic, considering future risks. I might short it now, if I weren't allergic to short selling. I like to sleep at night.

>> I might short it now, if I weren't allergic to short selling. I like to sleep at night. <<

Nick, so why not buy put options? Then you can sleep knowing the maximum you can lose is what you paid for the options. Just a thought...

Treasury says that loans refunds will be/are close to 98%. It seems to be based on the $ value?

Hand outs, Grants and Tax Credits are not loans and are excluded. Those three should be stopped (or declared non-constitutional?) in favor of low cost loans and direct risk capital participation. No government should be allowed to give public $$$ to private industries.

Loans with interest are not just a debt but also a cost. By paying off this government loan early the company is doing their investors a service by reducing future costs. That's not a Ponsi scheme that's just good business.

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