SolarCity Corporation and Silver Lake Kraftwerk, Silver Lake's energy and resource innovation fund, have agreed to a strategic investment of $113 million in aggregate principal amount of SolarCity's Zero Coupon Convertible Senior Notes (the "notes"). Silver Lake Kraftwerk has agreed to invest $100 million, SolarCity Chairman Elon Musk will invest $10 million and CEO Lyndon Rive will invest $3 million.
The investment by Silver Lake Kraftwerk is almost quadruple the size of its initial investment in SolarCity made in February 2012, which it subsequently exited in September 2013.
"We believe that SolarCity is a highly attractive long-term investment opportunity," said Josh Raffaelli, Managing Director at Silver Lake Kraftwerk. "We think the Company's unparalleled access to solar-specific tax equity, asset-backed security and debt clearly differentiates it from providers that are funding projects constantly via equity markets. Furthermore, we firmly believe that SolarCity's near term focus on cost reduction and cash flow breakeven is absolutely the right strategy—the Company is already the leader in both commercial and residential solar. Its technology and brand advantage coupled with its cost structure and low cost of capital position it to continue to grow in 2017 even if the federal investment tax credit steps down. Distributed solar generation is an enormous opportunity and we believe there is no other company better positioned to take advantage of it."
"Solar overtook natural gas and coal as the largest source of new energy in the U.S. in the first half of 2015, representing 40% of new capacity. Demand for SolarCity's services has never been greater than it is today, and the global addressable market in front of us is massive," said SolarCity CEO Lyndon Rive. "Silver Lake Kraftwerk knows the company and category well and we're excited to work with them again."
The notes will be senior, unsecured obligations of the Company, will not bear ordinary interest and the principal amount of the notes will not accrete. It is expected that the notes will be convertible into shares of SolarCity's common stock (the "common stock"), based on an initial conversion rate of 30.303 shares of common stock per $1,000 principal amount of the notes (which is equal to an initial conversion price of $33.00 per share), subject to adjustment in certain circumstances. It is expected that the notes will mature in December 2020, subject to earlier conversion, redemption or repurchase.