Tesla Says It Plans To Pay Off DoE Loans 5 Years Early in 2017, Says Thanks For The Help

1 year ago by Jay Cole 9

Tesla CEO Takes To Eager European Model S Owners And Reporters In Geneva On Tuesday

Tesla CEO Takes To Eager European Model S Owners And Reporters In Geneva On Tuesday (via Cars21)

After drawing down the last of a $465 million loan allotment from the Department of Energy in 2012, Tesla has now arranged a financing deal with the government that would see them pay off those loans five years early.

In a SEC filing on Thursday, Tesla says that the DoE agreed to adjust the terms of the arrangement, that would now see the electric car maker pay off their government loans in full by December of 2017.  Five years ahead of the 2022 deadline.

Early Success Bringing The Roadster To Market Gave Tesla Access To DoE ATVM Loans in 2010

Early Success Bringing The Roadster To Market Gave Tesla Access To DoE ATVM Loans in 2010

According to Tesla’s CFO Deepak Ahuja, as part of the deal, and beginning in 2015, Tesla will accelerate their current payment structure with proceeds from the company’s ”excess free cash flow.”

It is unclear how Tesla will have “excess cash flow” in 2015,  as the company also has plans to start production of an all-electric, entry level Tesla (think $30,000)  for the masses at that time, but the auto maker remains confident nonetheless.

Similar projects at major automakers from General Motors with the Volt, and Nissan with the LEAF have cost upwards of a billion dollars to fully fund.  Tesla must therefore be making other arrangements to find this investment capital.

As a point of interest, “excessive free cash flow” is defined in the new agreement as amounts greater than $200 million plus any reservation deposits on account.

CEO Elon Musk Works "The Circuit" Earlier In The Year Promoting The Upcoming Model X SUV

CEO Elon Musk Works “The Circuit” Earlier In The Year Promoting The Upcoming Model X SUV

Additionally, part of the reason Tesla may be anxious to pay off the DoE loans is that as part of the deal, the government holds warrants to purchase 3 million shares at a discount to today’s stock price.  If the company is indeed successful at being a profitable automaker, it is conceivable those warrants could be extremely valuable when, and if, they are exercised.

In Tesla’s press release on the new early payment structure, they take a moment to reflect on the history of how the Department of Energy ATVM load was granted, and their gratitude for the existence of the program:

“ATVM loans were intended by the President and Congress to accelerate the market introduction of promising automotive technologies. This is an important point. Tesla at the time was a viable stand-alone entity. We had plans to fund the introduction of the Model S via commercial sources of capital and the proceeds of the Roadster program. However, given the economic climate at the time (recall the “Great Recession”), accessing those sources of capital would have taken time and significantly delayed the launch of the Model S.”

“Following more than a year of thorough due diligence by commercial auditors, automotive consultants and lawyers, on January 20, 2010, Tesla became the recipient of one of three initial DOE loans announced by Secretary Chu, along with Ford and Nissan – good company for a start-up automaker. Tesla’s loan of $465 million was to be paid back over ten years following the start of production of the Model S”

“…the ATVM loan has been a perfect match for our business strategy, as its charter was that loans would accelerate the market advent of EVs and other promising technologies. We expect to generate sufficient cash and profitability in our business over the next five years that it gives us confidence to proceed with this early repayment of the loan. Moreover, it is also consistent with Tesla’s mantra of speed that we would, as Elon announced last week, accelerate the repayment of our loan, a full five years earlier than required under the original loan terms, making our last payment in 2017.”

“In closing, let me (Tesla) say that we are grateful for the support of both the Bush Administration and the Obama Administration in recognizing the potential of EVs in general and Tesla in particular. We are especially grateful for the bipartisan support we have received from Congress, both before the inception of the ATVM program and since. But most of all we are grateful for the hard working employees at the Department of Energy who are the administrators of the ATVM program which, I’m confident, will be regarded by history as a model for public/private partnerships which inspire American entrepreneurship, competitiveness and innovation.”

Earlier today, Tesla also netted a netted a favorable decision decision from the state Senate that would have prohibited them from opening corporate automotive boutiques in Minnesota.

Tesla Press Release, Bloomberg

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9 responses to "Tesla Says It Plans To Pay Off DoE Loans 5 Years Early in 2017, Says Thanks For The Help"

  1. Bloggin says:

    Good for Tesla!

    Can’t wait to get more info on the $30k Tesla. Guessing it will be a smaller 4 door, using the 40kwh 160EV mile battery.

  2. NRGTom says:

    That is the way to do business!!! Apply for money in good faith & pay if off when you are able.

  3. David Murray says:

    Well, in 5 years I guess there won’t be much left for the tesla haters to complain about.

    1. Steven says:

      Unless it charges in five minutes, and has a range of 400 miles, and costs less than $20k… The haters are going to always find something to hate about it.

  4. evnow says:

    Hmmm … Tesla didn’t win any “landmark case”. The legislation was defeated in the senate …

    1. Jay Cole says:

      Ok, I’ll split that hair with you and change it to read “netted a favorable decision”, (=

      1. evnow says:

        Jay, not splitting hair. I expected a court case (isn’t that what a “landmark case” is ?).

        Even the “netted a favorable decision” implies a court case, not a bill that failed to pass.

        I’d say something like “Anti-Tesla bill defeated in the senate” or “fails to pass”.

        1. Jay Cole says:

          na-na-na-na-I can’t hear you-na-na-na-na

  5. Josh says:

    This is just confirmation of what Elon/Tesla said last October, re: early payment. I feel like Elon is actually very good to reach his promised acheivements (in comparison to most CEOs), just usually optimistic on the timing of meeting those goals.