We made our gigafactory predictions the other day and, it turns out, we were pretty much on target. Today, Tesla Motors released the first official details on its upcoming massive battery plant and we see sun and wind power feeding energy into a plant that will employ around 6,500 people and make enough packs for around a half-million Tesla EVs a year. You read that right. Tesla is getting ready to produce 500,000 EVs a year, and that's already in 2020. Tesla hopes to start selling a lower-cost EV, the Model E, in about three years.

The finalists for where the Gigafactory will be built include the Southwestern states of Nevada, Arizona, New Mexico and Texas (our money is on Nevada). We were a little low on the estimated battery output. Instead of being able to make 30 Gigawatt-hours of batteries per year, Tesla is saying that it will have enough capacity to produce 35 GWh of cells and 50 GWh of packs a year. We think that's for both EVs and stationary applications and have reached out to Tesla for confirmation on this point. You can see the details for yourself here and in our gallery below.

Through 2020, Tesla will directly invest around $2 billion in the plant and its partners will pony up another $2-3 billion for a total cost of $4-5 billion. That's a lot of cash, but Tesla says that it will make buying an EV much, much cheaper. The company is saying that, once the plant is up and running for the first year, the per-kWh cost of a Tesla battery pack will be lowered by "more than 30 percent." Maybe that Model E isn't such a pipe dream after all.

Also today, Tesla announced a new convertible notes offering worth $1.6 billion. Details are available in the press release below.
Show full PR text
Tesla Announces $1.6 Billion Convertible Notes Offering
Wednesday, February 26, 2014

PALO ALTO, Calif., February 26, 2014 – Tesla announced today an offering of $1.6 billion aggregate principal amount of convertible senior notes in an underwritten registered public offering. Of the total offering, Tesla will offer $800 million aggregate principal amount of convertible senior notes due 2019 and $800 million aggregate principal amount of convertible senior notes due 2021. In addition, Tesla intends to grant the underwriters a 30-day option to purchase up to an additional $120 million in aggregate principal amount of convertible senior notes due 2019 and an additional $120 million in aggregate principal amount of convertible senior notes due 2021, for a total potential offering size of up to $1.84 billion.

Tesla intends to use the net proceeds from the offering to accelerate the growth of its business in the U.S. and internationally, for the development and production of its "Gen III" mass market vehicle, the development of the Tesla Gigafactory and other general corporate purposes.

The convertible senior notes due 2019 will be convertible into cash, shares of Tesla's common stock, or a combination thereof, at Tesla's election. The convertible senior notes due 2021 will be convertible into cash and, if applicable, shares of Tesla's common stock (subject to Tesla's right to deliver cash in lieu of such shares of common stock). The interest rate, conversion rate and other terms of the notes are to be determined.

In connection with the offering of the notes, Tesla intends to enter into convertible note hedge transactions and warrant transactions, which are generally expected to prevent dilution up to approximately 100 over the common stock price at the time of pricing of the notes due 2021. Tesla intends to use a portion of the proceeds from the offering to pay the net cost of the convertible note hedge transactions. In connection with establishing their initial hedge of the convertible note hedge and warrant transactions, the hedge counterparties or their affiliates expect to enter into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the notes, including with certain investors in the notes.

Goldman, Sachs & Co., Morgan Stanley, J.P. Morgan and Deutsche Bank Securities are acting as joint book-running managers for the offering.

An effective registration statement relating to the securities was filed with the Securities and Exchange Commission on May 15, 2013. The offering of these securities will be made only by means of a prospectus supplement and the accompanying prospectus. Copies of the preliminary prospectus supplement and the accompanying prospectus may be obtained from Goldman, Sachs & Co., via telephone: (866) 471-2526; facsimile: (212) 902-9316; email: prospectus-ny@ny.email.gs.com; or standard mail at Goldman, Sachs & Co., Attn: Prospectus Department, 200 West Street, New York, NY 10282-2198; from Morgan Stanley & Co. LLC, Attn: Prospectus Department, 180 Varick Street, Second Floor, New York, NY 10014, or by telephone at (866) 718-1649 or email: prospectus@morganstanley.com; from J.P. Morgan Securities LLC, via telephone: (866) 803-9204; or standard mail at c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717; or from Deutsche Bank Securities Inc., via telephone: (800) 503-4611; email: prospectus.cpdg@db.com; or standard mail at Attn: Prospectus Group, 60 Wall Street, New York, NY 10005.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. The securities being offered have not been approved or disapproved by any regulatory authority, nor has any such authority passed upon the accuracy or adequacy of the registration statement, the prospectus contained therein or the prospectus supplement.

Forward-Looking Statement
Certain statements in this press release, including statements regarding the proposed public offering of convertible notes, and the convertible note hedge and warrant transactions, are "forward-looking statements" that are subject to risks and uncertainties. These forward-looking statements are based on management's current expectations, and as a result of certain risks and uncertainties, actual events or results may differ materially from those contained in the forward-looking statements. Please refer to the registration statement on Form S-3 on file with the SEC and the prospectus and prospectus supplement included or incorporated by reference therein, as well as the other documents Tesla files on a consolidated basis from time to time with the SEC, specifically Tesla's most recent Form 10-K. These documents contain and identify important factors that could cause the actual results for Tesla on a consolidated basis to differ materially from those contained in Tesla's forward-looking statements. Tesla disclaims any obligation to update information contained in these forward-looking statements.


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  • 70 Comments
      DaveMart
      • 9 Months Ago
      The Energy Report Interview with Chris Berry (3/27/12) "Western Lithium has a clay deposit in northern Nevada called Kings Valley. It recently completed a prefeasibility study, which shows very strong economic potential. Western Lithium will have the ability to produce up to 27 Kt/year of lithium carbonate several years down the road after commercial production commences. One of the keys to Western Lithium is its potential operating costs, which are sub-$1,000/t when byproduct credits are included. This is what would allow a company like Western Lithium to compete with the big boys.
        jeff
        • 9 Months Ago
        @DaveMart
        New supplies recently found in Wyoming will easily cover this so don't worry to much about it... http://oilprice.com/Energy/Energy-General/New-Wyoming-Lithium-Deposit-could-Meet-all-U.S.-Demand.html
        DaveMart
        • 9 Months Ago
        @DaveMart
        So Musk plans to use around the entire Nevadan output of lithium carbonate for his ~500,000 cars a year. Lets hope the other ~15 million car buyers a year don't want to switch to electric too soon, as developing more lithium resources would take time.
          Val
          • 9 Months Ago
          @DaveMart
          Even if it uses it all up, what exactly is stopping any other manufacturer from importing lithium from argentina, chile or bolivia? What would stop them from importing batteries from asia, which will still make most of the batteries in the world in 2020? And let's assume that tesla doesn't buy a single kg of lithium carbonate from nevada, the output would still be only enough for 500,000 cars a year, or maybe 1,5m if they use 1/3 of the tesla battery. So what happens to the other 14 million car buyes? Oh, right, they will be able to buy a perfectly cheap FCV car from toyota, honda and nissan or hyundai, right? So what's your problem again?
        Spec
        • 9 Months Ago
        @DaveMart
        It would be really awesome to have the desert turned into rechargeable batteries using wind and solar power.
        Edge
        • 9 Months Ago
        @DaveMart
        Pumping Western Lithium stock? Up 35% today, as I think investors see some correlation here, but that does not mean Tesla will be buying any of their Lithium.
      Technoir
      • 9 Months Ago
      Tesla wishes they would have waited with the IPO. They could have raised 10x more money!
        Grendal
        • 9 Months Ago
        @Technoir
        They can really do that at any point by doing a secondary offering. In retrospect, it makes a lot of sense for them to do it the way that they did.
      SublimeKnight
      • 9 Months Ago
      50GWh = 50,000,000 kWh that would be an average of 100kWh per car (500,000 cars). So the pack count must be for solar too. This also assumes I did the math right, that's a lot of zeros.
      PeterScott
      • 9 Months Ago
      This is why Tesla won't be buried by the established car companies. The old companies are moving at car company speed, with a baby toe in, testing the EV waters. Tesla is moving at Web Speed, have leaped in, and are swimming away. Buy the time anyone else gets serious, Tesla will have a host of infrastructure advantages.
        Grendal
        • 9 Months Ago
        @PeterScott
        Word. Luckily for them, Tesla is trying to create a revolution. Which means that they are going to be willing to work with the major manufacturers long term. It's looking like they will be willing to sell them any extra battery packs they might have left over. I expect that other manufacturers will be allowed to buy into the Supercharger Network as long as they help to expand it further.
      Rotation
      • 9 Months Ago
      I'm glad to hear the factory will not just make packs but will make the cells also. This is great news for the US as an industrial concern. And it's good news for Tesla too. The expressed financial transaction sounds rather crafty. Perhaps too crafty. I'd love to see more details.
      CoolWaters
      • 9 Months Ago
      The size of this venture brings up the question: What is Wrong with Exxon and Where is Exxon. Now lead by a CEO perfectly willing to frack, and destroy the Common Good, and yet not accept Fracking in his own back yard. So, here's a question. What percent of your company's products should BENEFIT the COMMON GOOD? And Why should a company be allowed to make sick to the point of more CANCER DEATH's for it's Corporate Good, purely Corporate Profit, Directly at the Expense of HUMANS. And these humans are typically REPUBLICANS in Rural Areas.
        Rotation
        • 9 Months Ago
        @CoolWaters
        No one would be pulling this lithium from the ground without burning oil (Diesel).
          Joseph Brody
          • 9 Months Ago
          @Rotation
          True. Oil is great. So much energy for so little invested to pull Oil out of the ground. Yet, we know that oil is getting harder and harder to get, so while we have still have easy oil, its important to invest in alternatives. Switch too late and the economy and quality of life could change for everyone.
          purrpullberra
          • 9 Months Ago
          @Rotation
          Hopefully only for a while longer. Maybe that's one of Tesla's newest potential markets! There is room in the field and just a small% share would be HUGE. High torque electric motors in work site vehicles and excavation equipment. Builders can partner with Solar City to set up the PV panels first to power the construction then moved on the roof after it's all built to power the factory/house/apartment/business whatever. You've got to think BIG when imagining what Elon is shooting for.
        jeff
        • 9 Months Ago
        @CoolWaters
        The CEO of Exxon is suing to stop fracking near his personal property....
      Technoir
      • 9 Months Ago
      Yep. Isn't that amazing?
      Spec
      • 9 Months Ago
      You know . . . this is kind of annoying. A123 set up a battery factory and it went bankrupt. Enerdel set up a battery factory and they went bankrupt. But because this is a Tesla factory, it is a huge deal?
        purrpullberra
        • 9 Months Ago
        @Spec
        It is stunning when you think about how little Tesla has accomplished in relation to the power they now seem to wield. The accomplishments may be few but they aren't insignificant. Fisker got $1.1 billion from 'people who know' to start his pipe-dream company. How absurd is Tesla's financial weight in relation to that? I doubt anyone at Tesla would disagree that this is astonishing. They are just smart enough to take advantage of their situation and succeed more wildly than they dared hope.
        brotherkenny4
        • 9 Months Ago
        @Spec
        Under the ARRA battery manufacturing work $2.4B was spent on supplier facteries, battery facteries and infrastructure, with another $2.6B supplied by the companies who received the grants. The total expected pack output from all of those factiories was 500,000 packs per year. Note, the whole ARRA action was about the same price and with the same output as the single Tesla plant. The tTesla plant will produce 500,000 units and cost $4-5B. On a side note, you can buy batteries from A123 and Enerdel. Bankrupt, yes, but now nonexistent? No, they are alive, bwah ha ha ha ha, alive I say. Go to their website and put in an order if you want. You need to buy tens of thousnds of cell lots, but you can do that. Note also, that for Tesla to buy batteries from any one ARRA recipient would require the battery companies to build more capacity because the ARRA funded factories are not large enough for Tesla
        m_2012
        • 9 Months Ago
        @Spec
        Tesla actually has a plan and money. They have a customer for their product - themselves. This will make A123 look like a mom-n-pop store. Not just a couple of execs just making to make a buck, and exit under bankruptcy leaving the taxpayers with the bill.
        Joeviocoe
        • 9 Months Ago
        @Spec
        It is not annoying, because it is a big deal. Elon Musk tends to succeed where many fail. He help built an Internet commerce company before the Dot Com burst... Paypal succeeded where 99% of the startups failed. Elon helped commercialized space, when nobody thought it could be privatized for cheaper costs to orbit. SpaceX is successful, in a realm usually reserved for Governments. Elon built Tesla Motors, after decades of failed EV startups. He has a knack for realizing crucial elements that could be included to rectify the pass failings of others. And with this battery factory.... he is likely to do it again.
        kEiThZ
        • 9 Months Ago
        @Spec
        You can't make money selling commodities. That was the problem with A123 and Enerdel. On the other hand, you can make money selling finished goods and your margins improve if the commodities you use up are cheaper. So Tesla building the gigafactory is a big deal. It will give them the lowest cost batteries in the world. And that will enable them to build the Model E. The only way the competition will be able to compete is by: 1) dumping their product at losses to drive Tesla out of business 2) investing billions themselves into a similar facility
        Edge
        • 9 Months Ago
        @Spec
        Spec, the main difference is that Tesla has two products that these batteries can go into, and both products are selling well. The Model S, and batteries are also needed for Elon's Solar City operations. I think the 'risk' is how fast they scale the size of this plant in relation to how their products is selling. 500,000 battery packs is a lot! I hope the Model E sales can absorb that, as those are the kind of production numbers they are aiming for in 2017, but my guess, the plant will scale according to demand, and maybe start at 150,000 to 200,000 packs a year. Tesla's risk on these financial notes is covered by Tesla's stock price, the higher the price, the less the dilution when those notes are converted. Of course, the stock can only maintain a high price, if they continue to meet their targets for growth.
        • 9 Months Ago
        @Spec
        A123 did NOT have the product pipeline that Tesla has. Business 101: You must make a great product everyone wants. A123 and Solyndra made overpriced junk nobody wanted and did not have a great plan for improving our lives.was Tesla can sell every car it can make, months in advance. The other automakers, with lots full of cars few want, must be GREEN with envy (pun intended).
      Dactyl
      • 9 Months Ago
      This is certainly good news. I think the next big hurdle in the EV business model is the apartment dweller's dilemma: how to charge an EV in a car stall in an apartment complex. This population represents a huge percentage of the potential customers for EVs. Who pays for the installation of a charging station in the tenant's assigned stall? Does one need a separate meter? And what happens do with it when the tenant move (cost recovery)? This problem can be solved, but currently it puts apartment dwellers at an extreme disadvantage when it comes to EVs. All the external charging stations in the world do not count for squat when it comes to being able to charge at home - I know, I've owned a Leaf for 3 years and charge it every night at home because it is infinitely more convenient. Perhaps this is where Nissan could bite into Tesla's future market share by solving this problem?
        Spec
        • 9 Months Ago
        @Dactyl
        California has a law that says that if a tenant wants to install a charger and is willing to pay for the install, then the tenant is allowed to do so. It is not much but better than nothing.
        m_2012
        • 9 Months Ago
        @Dactyl
        New apartments require (at least around me) L2 charging station in apartment parkimg lots.
        Ziv
        • 9 Months Ago
        @Dactyl
        Dactyl, I leased a Volt in June and only got a plug at my condo a week or so ago. It took a bit of work but I kept my mpg at 300 mpg even though I had to charge at local 3.3 kW rate chargers an average of 2-3 hours a day. If a future electric car charges at a 6.6 kW rate that would go down to just 1-1.5 hours a day, and if the rate goes up to 10 kW per hour, just 40 minutes to an hour. 10 kW charge rates are not even close to fast charging and will be considered to be the minimum an electric car buyer will expect within a few years. So this 'apartment' dweller has already lived the life of having no plug at home with an EREV. Doing it with even a Leaf would have been much easier because I could have plugged it in Monday, Wednesday and Friday mornings and headed to work, then gone back and gotten lunch and a topped off battery. With 10 kW charge rates all you have to do is find a place to have lunch that has a 10 kW charger and you are good to go.
      Edge
      • 9 Months Ago
      Morgan Stanley is handling the underwriting of that $1.6 billion note. The same financial institution that said the other day, that Tesla stock price target was $320. The very same news that propelled the stock upwards by $40 on that day. Hmmm?
        purrpullberra
        • 9 Months Ago
        @Edge
        If they are certain of the company's value they have to say so even if they are going to make money off of Tesla. So is it better info since MorganStanley are involved and know so much or is there some way to see this as manipulation? If they were lying it would be manipulation. Otherwise I don't get why it might look underhanded.
          Rotation
          • 9 Months Ago
          @purrpullberra
          Because of the section about debt convertibility and derivatives. It is quick likely Morgan Stanley benefits from TSLA's stock going up under this issue. That's why it would look underhanded. Whether it is or isn't is a different matter. Also note if MorganStanley's stock analysts were to have info of this deal and act upon it, even to make a recommendation it would be a violation of Regulation FD and a serious problem.
          Edge
          • 9 Months Ago
          @purrpullberra
          I know that the investment banks always give stock price guidance, but I just question the timing of their news. I'm sure it made their client Tesla happy. I find all that, a little bit questionable.
          Joeviocoe
          • 9 Months Ago
          @purrpullberra
          And the short selling hedge fund managers give advice in the opposite direction. It is the balance of the beast.
          purrpullberra
          • 9 Months Ago
          @purrpullberra
          Rotation: that's why I'm sure completely different groups SHOULD be doing the different work. I expect that was the case. I'd like to see regulation ensuring that in fact, but I happen to like big gubmint.
      Edge
      • 9 Months Ago
      It's all very exciting news, especially keeping it US based, the renewables powering the plant, but most of all the excitement of maybe owning an "affordable" Gen III mass market vehicle one day.
      diffrunt
      • 9 Months Ago
      When will Tesla City plans be announced ? Campus , dorms , apts, --or what?
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