Tesla to use sales revenue, Daimler cash for DOE loans instead of new equity
Tesla Model S - click above for high-res image gallery
In the months leading up to the recent announcement that Tesla Motors would receive $465 million in low cost loans from the Department of Energy, we expressed some skepticism that the company would qualify. Our skepticism was based in part on the program requirement to raise matching equity funds equal to 20 percent of the loan amount. CEO Elon Musk acknowledged as much in a January interview with Green Fuels Forecast.
It appears that the DOE has waived that equity requirement, at least for Tesla, in order to give approval for the loan. Tesla will apparently put up the cash from Daimler's investment and from revenues that it's getting from sales of the Roadster and pre-orders for the Model S. Musk has publicly said that he expects Tesla to be profitable starting this month, a turn that will help provide that cash. The big question is how long will the company be able to maintain that if Roadster sales don't pick up soon.
UPDATE: Tesla has issued a statement saying that there's nothing strange going on here:
The DOE absolutely did NOT waive any equity contribution requirements for Tesla. Furthermore, in terms of the disbursement of money and the purposes to which those funds can be applied, Tesla is being held to the highest possible standards of the ATVM. Telsa did not get any exception whatsoever to the ATVM program.
Gallery: Tesla Model S: LIVE REVEAL
Photos copyright ©2009 Drew Phillips / Weblogs, Inc.
[Source: Venture Beat]
Reader Comments (Page 1 of 1)
Mike 12:39PM (7/16/2009)
There isn't an "equity requirement" as you describe it. The loan amounts are simply limited to a percentage of the overall costs; Tesla is responsible for the rest. It's like a down payment on a mortgage.
DOE doesn't care where they get the cash, they just can't borrow it from the government. They haven't waived any "equity requirement." Equity is simply what Tesla has to give in return for the cash provided from someone else. Daimler took a percentage ownership stake in Tesla in exchange for their cash - in other words, equity. If Tesla is able to use operating funds to pay the down payment, that's great, less dilution of equity.
Reply