Tesla Repays $465 Million Government Loan
Score one for electric. Tesla Motors repaid its $465 million loan to the US Department of Energy, plus interest, a full nine years before it was due.
I would like to thank the Department of Energy and the members of Congress and their staffs that worked hard create the [loan] program, and particularly the American taxpayer from whom these funds originate,” said Elon Musk, Tesla co-founder and CEO. “I hope we did you proud.”
The Department of Energy granted the loan three years ago as part of its Advanced Technology Vehicles Manufacturing program, and it was to be repaid by 2022. But last year Tesla received permission to pay the loan back by 2017. Now, thanks to the $1 billion Tesla raised last week in a stock and debt offering, it has become the first American car manufacturer in the program to fully repay the government.
Today’s repayment is the latest indication that the Energy Department’s portfolio of more than 30 loans is delivering big results for the American economy while costing far less than anticipated,” U.S. Energy Secretary Ernest Moniz said in a statement. “Today, Tesla employs more than 3,000 American workers and is living proof of the power of American innovation.”
The ATVM loan program was created by Congress under President Bush but implemented under the Obama Administration. Through the program—which is separate from the “bailout” funds offered to American auto manufacturers Chysler and GM—Tesla was lent almost half a billion dollars to assist in the development of its electric vehicles. Since then, the company has successfully launched its Model S and earlier this month became the first new US car manufacturer to post a profit in more than 50 years. According to Tesla’s first-quarter earnings report, sales were up 83 percent from the previous quarter, reaching $562 million.
After its stock rose 25 percent within 24 hours of its May 8 announcement, the company announced plans to raise additional capital by offering to more than 2 million shares of common stock. Tesla will also issue $450 million in convertible senior notes due in 2018. Plus, Tesla has granted its underwriters a 30-day option to purchase as many as 405,454 shares of common stock and $67.5 million in aggregate principal amount of notes. Meanwhile, Musk announced his intent to purchase $100 million in common-stock shares at the same public-offering price.
The loan repayment is not only significant for Tesla, but also welcome news for the DOE. Some companies that received sizable loans through the ATVM program, such as Solyndra and Beacon Power, have since filed for bankruptcy, and Fisker Automotive saw its DOE loans frozen due to “unmet milestones.” Such issues caused 2012 Republican presidential candidate Mitt Romney to call the companies—as well as Tesla—“losers.”
Out from under its loans, Tesla can now focus on further building its brand, even while it projects to deliver 21,000 Model S cars to consumers in 2013. It also expects to start the production of an even-more affordable Model X next year.
Tesla Motors stock was up nearly 2 percent in midday trading following the announcement. Currently trading above $89, shares have nearly doubled in value in the past 30 days.