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SolarCity Mypower_Product_Accounting_Nov 2015

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Solarcity

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SolarCity Mypower_Product_Accounting_Nov 2015

  1. 1. MyPower Product and Accounting Overview February 18, 2015
  2. 2. Slide 2 MyPower Product Overview For more information about the MyPower product, please refer to our website at: • http://www.solarcity.com/residential/mypower-solar-loan • http://blog.solarcity.com/mypower-qa MyPower is Our New Solar Loan Product  Gives customers the opportunity to own their solar system, with zero down payment for the customer and the potential to lower monthly utility bills  Customers purchase a solar system and contemporaneously enter into a 30-year loan agreement with a SolarCity subsidiary at an interest rate of 4.5-5.0% Key Features of the MyPower Solar Loan  Low interest rate compared to other solar loans on the market  30 year term better ties to the expected life of the system  Secured by the solar system and not the home (no lien on customer’s home)  Repayment of the loan is effectively based on the amount of energy the system produces; the higher the energy production, the faster the loan is paid off  No prepayment penalties  Loan can be paid down to reduce the subsequent $/kWh repayment rate  Customer can claim 30% of the system's total cost as a federal investment tax credit [ITC] and use it as a kWh rate reduction payment
  3. 3. Slide 3 MyPower Value Propositions Customers  System ownership with no down payment  Monthly payments imply lower monthly energy costs  Loan repaid as energy produced  Adds value to the home; loan payoff and transfer may be included in a home sale or mortgage refinancing  Simple loan qualification process, terms and conditions  30 year warranty and performance guarantee at no additional cost  Customer retains benefits of the investment tax credit [ITC] and Incentives, subject to balloon payment due on June 1st of the year after installation SolarCity  Expands addressable market to include homeowners who prefer to own not lease  High visibility into cash flow generation with contracts of up to 30 years with high credit quality customers  Financing is not limited to the availability of capital from traditional tax equity sources  Financial flexibility to potentially include customer cash flows in future asset backed securitizations
  4. 4. Slide 4 Residential PPA, Lease and MyPower Comparison PPA ('Zero-down') Lease MyPower Key Contractual Terms System Ownership SolarCity or affiliates SolarCity or affiliates Customer Minimum contract term (most jurisdictions) 20 years 20 years 30 years Warranty & Performance Guarantees 20 year warranty; no performance guarantee 20 year warranty and performance guarantee 30 year warranty and performance guarantee Customer payments Variable as power produced with fixed annual rate escalation Fixed with annual rate escalation Variable as power produced with fixed annual rate escalation, subject to balloon payment Rebate and Incentives SolarCity SolarCity Customer Accounting Treatment Revenue recognition On energy production Straight-line over lease term Installment basis as cash received from customer payments Cost recognition System depreciated over 30 years System depreciated over 30 years Installment basis as cash received from customer payments Asset classification Solar energy systems leased and to be leased Solar energy systems leased and to be leased Other assets, current & non-current Customer loan receivable N/A N/A Customer notes receivable, current and non-current Deferred revenue N/A Yes – if customer lease payments to date > straight-lined revenue recognized to date Yes – represents revenue associated with system sale recognized as loan repaid
  5. 5. Slide 5 MyPower Accounting Example Assumptions System Sales Price $30,000 Federal Tax Credit (30%) ($9,000) Incentives ($1,000) Net Cost to customer $20,000 Customer loan and interest payments Year 1 $2,450 Customer loan and interest payments Year 2 (assumes customer receipt of ITC in Year 1, and rate reduction payment to SolarCity in Year 2) $10,950 Total system cost* $15,000 MyPower loan interest rate 5% This example ignores impact of sales tax, SRECs, warranty estimates, loan origination expenses and assumes interest on loan assessed at the end of the year. Interest income computation is an estimation only and is used for illustrative purposes in this example. * Includes costs of system components and other materials, burdened labor, sales and marketing, and general and administrative costs, excludes certain non-cash items. This accounting model is potentially subject to change on the adoption of the new accounting standard ASU No. 2014-09 applicable 1/1/2017. Balance Sheet Income Statement Year 1 Debit Credit Debit Credit Solar System installed Other assets Inventory $15,000 $15,000 Solar Loan executed Customer loan receivable Deferred Revenue $30,000 $30,000 Customer payments received Cash Customer loan receivable $1,000 $1,000 Installment revenue recognized Solar energy system sales Deferred Revenue $1,000 $1,000 Installment cost of system recognized Cost of solar energy system sales Other Assets $500 $500 Interest income revenue on receipt of interest payment Cash Interest income revenue on customer loan $1,450 $1,450 Year 2 Customer payments received (assumes payment of ITC received) Cash Customer loan receivable $10,000 $10,000 Installment revenue recognized Solar energy system sales Deferred Revenue $10,000 $10,000 Installment cost of system recognized Cost of solar energy system sales Other Assets $5,000 $5,000 Interest income revenue on receipt of interest payment Cash Interest income revenue on customer loan $950 $950
  6. 6. Slide 6 Thank You SOLARCITY.COM

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