Not All Is Going Well In The Solar Patch -- August 7, 2017; New Tesla Bonds? Junk Rated

Updates

August 12, 2017: apparently Tesla's JUNK bonds went at $1.8 billion for 5.3%. 

August 11, 2017: Tesla's JUNK bonds are over-subscribed; will pay 5.25%.

Original Post

Junk: Phil LeBeau, the #2 cheerleader (after Musk Melon) for Tesla was just on CNBC announcing the $1.5 billion bond Tesla offering. The bonds have received a JUNK rating. I could have missed it, but I don't think Phil LeBeau mentioned these bonds have a JUNK rating. Link here.

Following the announcement, Standard & Poor's reaffirmed its negative outlook for the automaker and assigned a "B-" rating for the bond issue - deep into junk credit territory. S&P also maintained its "B-" long-term corporate credit rating on Tesla.

Now, back to the solar patch story.

Now that President Obama is no longer in office, it appears that the mainstream media is feeling a bit more comfortable reporting stories suggesting not all is going well in the solar patch.

From the StarTribune (Minneapolis/St Paul):

• Sunvia: a Georgia solar-panel and solar-cell maker, filed for bankruptcy in April, 2017; Sunvia is majority-owed by a company in Hong Kong
• SolarWorld: Oregon, joined the suit; SolarWorld is a German company
• Ten K Solar: Minnesota's only solar-panel maker of any size; Bloomington; announced in May, 2017, it was getting out of the solar-panel business
• Heliene: based in Sault Ste. Marie, Ontario; was left "out in the cold" (perhaps better said, left in the dark) when Silicon Energy, which manufactured panels for Heliene closed down

Meanwhile, St Louis Post-Dispatch reports that St Louis area companies are reeling from the bankruptcy filing of Sunvia.

I've always felt the solar panels being sold for residential rooftops reminded me of the aluminum siding craze in Williston, ND, when I was growing up there in the 50's and 60's.

***************************
Note For The Granddaughters

Over the weekend I read a note suggesting that for three-year-olds, the "great room" in Goodnight Moon was particularly superb. I forget where I read that; perhaps in the "Review" section of The Wall Street Journal, but most likely somewhere else. Having toddlers name everything they see in the "great room" is quite compelling.

Today, coincidentally, I get this daily update from TutorTime where Sophia attends "school" and loves it:

Goodnight Moon, Margaret Wise Brown

GM Losing "Some $9,000" On Every Bolt It Sells, But It's Actually Much Worse -- Financial Times -- August 7, 2017

I'm re-posting the Financial Times story on EVs (see link below). I don't think the writer could have spelled it out any simpler:

GM believes it is losing "some $9,000" on every Bolt it sells. 

What can that possibly say about Tesla's Model 3? But note also, even with government subsidies, EVs cost significantly more than ICEV by a wide margin. EVs are simply not mainstream yet, and the tea leaves suggest that will not change for at least ten years.

From an earlier post:

And yet another article on the downside of EVs: Electric vehicle realities in the Financial Times.

In the spirit of non-consensus thinking, it’s time for FT Alphaville to ask just how green electric cars really are. Are policies to ban diesel and gasoline cars at some arbitrary point in the future likely to unleash a barrage of negative externalities that no one’s yet even thought about?

Brian Piccioni and team at BCA Research offer a good starting point to our questions on Thursday, in a report entitled Electric Vehicles Part 1: Costs of Ownership.

The bad news for EV fans is their work determines that the cost of ownership of an EV still far exceeds that of an internal Combustion Engine Vehicle (ICEV), even after subsidies are accounted for.

With numbers crunched, a comparison between the Chevy Bolt EV and two equivalent ICEVs, the Chevy Sonic and the Open Astra, over 100,000 miles, shows that there’s no denying EVs are still more expensive than ICEVs.

Three points come up in particular.

1) Excluding subsidies, the net expense difference is about $16,000 in the US, $18,500 in Germany and $13,200 in France.

2) After subsidies, the difference is about $6,600 in New York State, $13,900 in Germany and $6,000 in France.

3) Even if electricity were free (which of course it isn’t), after subsidies, the difference in cost of ownership in NY would be $3,400, $3,200 in Germany and $600 in France.

With respect to the Bolt specifically, the analysts note GM believes it’s losing some $9,000 with every Bolt it sells. The automaker would need manufacturing costs to be cut by about $14,750 — 34 per cent — to make the vehicle competitive with GM’s Opel Astra in France.

I'm re-posting this story because there are so many other data points from the article. For example:

• the numbers above can thus be adapted for a “What If…” scenario, wherein GM actually begins selling the Bolt at average corporate profitability
• in that case the numbers get even more bleak. Excluding subsidies, a Bolt would be $26,900 more expensive in the US than the equivalent ICEV, $29,300 more expensive in Germany and $24,000 more expensive in France

More:

• there are additional manufacturing costs for “Pure Play” EV vendors like Tesla, meanwhile, because unlike integrated auto manufacturers, they can’t use many of the same components from ICEV production, limiting economies of scale
• but the common denominator for all EVs is the cost of batteries, say the analysts, since that’s a commodity. It’s also the key factor behind the faster rate of depreciation of EVs versus ICEVs

More:

• here, arguably, some significant issues are being overlooked. For example, while the consensus view is that EV battery prices have been experiencing price declines over the past few years (in the order of 8 to 14 per cent), the analysts themselves could not find any evidence to support that position
• some confusion is probably also occurring on the comparables. While some reports claim battery cells cost $145/kWh, the analysts stress this is not the same thing as a battery pack, which comes as a fully assembled unit with wiring, electronics and a cooling system. In the case of the Bolt, GM lists the cost of its battery pack as $15,734, so about $262/kWh

And this:

• the analysts further suspect it may be part of GM’s commercial strategy to subsidise the battery packs so as not to show EV buyers that a replacement battery is overwhelmingly expensive.
• given the Bolt comes with a 100,000-mile guaranty and an 8-year warranty on the battery, however, the analysts believe it’s highly unlikely many consumers will spend $15,734 (plus labour) to replace the battery on an eight-year-old EV. This allows GM to sell them below cost, since it’s unlikely to sell many replacements. Accordingly the analysts note: “We believe that most likely the actual cost of the battery pack of the Bolt is much higher than $15,734”
• regardless, when it comes to degradation, GM's own expectation is that depending on use, the battery may degrade as little as 10% to as much as 40% of capacity over the warranty period
• overall, batteries currently don’t last much more than 100,000 miles and yet 18,300 miles per year is the average UK mileage for a company car. Assuming a normal distribution, the BCA analysts predict up to half of all EV drivers may experience degradation sooner than the eight year guarantee because of surpassing the 100,000-mile limitation on the warranties (comment: a flaw in this argument: most agree that EVs will be bought as a second or third car and used for local trips; not long trips; thus average mileage will be will less than 18,000 miles per year)

I have to quit here. But I haven't even gotten to the "most important" part of the article. See the linked article for more. If behind a paywall, googling it will get you there.

Re-Posting: Canada's "Permian Of The North" Now In Question -- August 7, 2017

I'm re-posting an earlier post. I had forgotten how "big" the Montney was. On May 20, 2017, the Montney, as a natural gas play, described as the "Permian of the North" was said "to be back."

With the cancellation of the Pacific Northwest LNG project, the Montney is now said "to be in question." Mr Trudeau is quickly learning it's hard to govern a socialist-leaning, faux-environmental country.

From earlier:

Boom and bust: canceled LNG project casts shadow over Canada's biggest shale play.

Petronas' decision to cancel its Pacific NorthWest LNG project is a blow to the growth outlook for Canada's largest shale play, eliminating a potentially huge source of future gas demand.

Gas from the Montney shale play in western Canada would have supplied the C$36 billion ($28.7 billion) project in northern British Columbia. The project, majority-owned by Malaysia's Petronas, would then have shipped 12 megatonnes per year of liquefied natural gas to Asia.

Instead, state-owned Petroliam Nasional Bhd (Petronas) subsidiary Progress Energy will keep developing and selling gas from its vast Montney position into a North American market where prices have been languishing at historically low levels.

The Montney is linked at the sidebar at the right (same link as above).

Filloon Updates The Midland -- Similar To Previous Updates -- August 7, 2017

Summary over at SeekingAlpha:

• new well completions continue to produce more oil and this will continue to pressure the US Oil ETF (USO)
• production improvements more than offset the increased costs
• completions using more than 10 million lbs of proppant are improving economics in the Midland Core
• the Midland core continues to be one of the best areas in the US, and this is why operators like PXD are hedging below $50/bbl

Update On Permian Natural Gas Processing -- Part 2 -- RBN Energy -- August 7, 2017

Active rigs:

$49.11↓	8/7/2017	08/07/2016	08/07/2015	08/07/2014	08/07/2013
Active Rigs	58	34	73	192	181

RBN Energy: Permian natural gas processing plants and NGL pipelines, part 2.

WTI: down 1%; but 10-year Treasury bonds up sharply. But is that the reason. Over at Reuters, oil slide from nine-week high as traders take another look at OPEC's cuts (wink, wink).

Oilprice: "nothing to see here" -- frackers ignore rising well decline rates. Oilprice.com notes what is going on in the Permian; mentions something similar in the Eagle Ford; but, interestingly, the Bakken is not mentioned.

Boom and bust: macroeconomic risks for the oil industry -- John Kemp, Reuters oil analyst. Long article; doesn't say much but does suggest, to the newbie, how an oil sector recovery begins.

Cramer (CNBC): WTI to remain at $50 for years (not 2, 3, or 4 years, but at least five years).

Boom and bust: canceled LNG project casts shadow over Canada's biggest shale play.

Petronas' decision to cancel its Pacific NorthWest LNG project is a blow to the growth outlook for Canada's largest shale play, eliminating a potentially huge source of future gas demand.

Gas from the Montney shale play in western Canada would have supplied the C$36 billion ($28.7 billion) project in northern British Columbia. The project, majority-owned by Malaysia's Petronas, would then have shipped 12 megatonnes per year of liquefied natural gas to Asia.

Instead, state-owned Petroliam Nasional Bhd (Petronas) subsidiary Progress Energy will keep developing and selling gas from its vast Montney position into a North American market where prices have been languishing at historically low levels.

The Montney is linked at the sidebar at the right.

Coal: I'll be posting this as an update to an earlier post, and may re-post it as a stand-alone post. This is a big story over at notalotofpeopleknowthat.com: German's long goodbye to coal despite Merkel's green push.

Tesla: this tells me all I need to know about Musk Melon lowering the price of the Model X. Tesla is planning a $1.5 million bond offering to support Model 3.

And yet another article on the downside of EVs: Electric vehicle realities in the Financial Times.

In the spirit of non-consensus thinking, it’s time for FT Alphaville to ask just how green electric cars really are. Are policies to ban diesel and gasoline cars at some arbitrary point in the future likely to unleash a barrage of negative externalities that no one’s yet even thought about?

Brian Piccioni and team at BCA Research offer a good starting point to our questions on Thursday, in a report entitled Electric Vehicles Part 1: Costs of Ownership.

The bad news for EV fans is their work determines that the cost of ownership of an EV still far exceeds that of an internal Combustion Engine Vehicle (ICEV), even after subsidies are accounted for.

With numbers crunched, a comparison between the Chevy Bolt EV and two equivalent ICEVs, the Chevy Sonic and the Open Astra, over 100,000 miles, shows that there’s no denying EVs are still more expensive than ICEVs.

Three points come up in particular.

1) Excluding subsidies, the net expense difference is about $16,000 in the US, $18,500 in Germany and $13,200 in France.

2) After subsidies, the difference is about $6,600 in New York State, $13,900 in Germany and $6,000 in France.

3) Even if electricity were free (which of course it isn’t), after subsidies, the difference in cost of ownership in NY would be $3,400, $3,200 in Germany and $600 in France.

With respect to the Bolt specifically, the analysts note GM believes it’s losing some $9,000 with every Bolt it sells. The automaker would need manufacturing costs to be cut by about $14,750 — 34 per cent — to make the vehicle competitive with GM’s Opel Astra in France.

Do the dots connect?

• Warren Buffett's Berkshire Hathaway reports a loss on it insurance division
• new "attitude" by millennials as evidenced in car insurance commercials: "What good is car insurance if you can't use it?"

Solar: This will test the grid -- will be interesting to observe ...