Liberal billionaire Elon Musk is using his taxpayer-backed space company to prop up his ailing taxpayer-backed solar panel company.
Musk’s SpaceX will pump another $75 million into SolarCity, according to a Monday report by a financial news outlet.
SolarCity offered to sell $95 million in short-term bonds with a very high interest rate of up to 5.25 percent, according to SeeNews. Such a high interest rate and the short-term of the bonds could mean that the company needs cash fast. The new purchase means SpaceX will soon have a total of $330 million invested in the rooftop solar company.
SolarCity is a sizable investment for SpaceX, which was valued at $12 billion in 2015. Musk himself invested $10 million of his personal fortune into SolarCity in February, according to SEC filings.
SolarCity has been in rocky financial straits recently as states and the federal governments cut back on lucrative subsidies and tax credits supporting the kind of rooftop solar panel the company sells. This has caused the company’s stock to fall rapidly and currently hovers around $20.82 per share, down from its 2014 high of more than $86.
Banks and credit rating agencies have notice the company’s dire financial straights. JP Morgan downgraded projections about SolarCity’s stock in February due to unfavorable regulatory changes. Barclays also downgraded SolarCity’s stock in February, lowering the price target from $49 to $20 per share.
SolarCity’s financial problems began late last year after Nevada utility regulators cut back how much energy companies were forced to pay solar panel owners for their energy along with increasing the monthly fee for having rooftop panels. The change caused Musk’s SolarCity stock to devalue by roughly $165 million in a single day.
Many states, including Nevada, have so-called net-metering policies which allow people or businesses with rooftop solar panels to sell power they produce back to the grid at retail electricity rates. SolarCity and other companies benefited from these policies, which encouraged solar power and expanded their market.
Roughly 20 other states are considering changing their net-metering laws, which would dramatically alter the economics of rooftop solar, according to MIT Technology Review. Without net metering payments, rooftop solar “makes no financial sense for a consumer,” Lyndon Rive, CEO of SolarCity, admitted to The New York Times in February.
Nevada regulators sided with Warren Buffett and allowed his company to increase monthly service charges for solar customers by about 40 percent while paying rooftop solar customers 75 percent less for energy they sell back to the grid, according to a sample bill posted on the utility’s website. The policy devastated SolarCity, causing the company to follow through on its threat to end 550 jobs in Nevada.
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