RecommendationforTesla|BoardofDirectors DiscussionMaterials|April29th,2023 FIR
DealTeam
KartikMaheshwari RohinDutt
From:LosAngeles.CA
KelleySchoolofBusiness|2026
Major:Finance
Minor:Spanish
From:Prospect,KY
KelleySchoolofBusiness|2026
Major:Finance
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TableofContents I.ExecutiveSummary II.CompanyOverview III.IndustryAnalysis IV.StrategicRecommendation V.Valuation VI.StrategicAlternatives VII.Appendix 4-5 6-9 10-11 12-13 14-15 16-18 19-25 3 FIR
I.ExecutiveSummary
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ExecutiveSummary
Overview
ScopeofProposal StrategicAssessment
•Tesla,headquarteredinAustin,Texas,isamultinationalautomotiveandcleanenergycompanywhich manufacturessolarpanelsandrooftiles,batterystorage,andmostnotablyelectricvehicles
•Itssubsidiary,TeslaEnergy,isoneofthelargestglobalsuppliersofbatteryenergystoragesystems
•Tesla’smarketpositionandextensiveresourcesputthecompanyinastrongpositiontoacquireand operateanemergingleaderinthecleanenergyandsolarenergysolutionsspace
•Thisproposaliscenteredaroundcoveringbatteryenergystorageandsolarenergy
•Tesla’sleadingpositionwithintheenergyindustry,aswellascleanenergyinitiativessurrounding solarenergyandelectricvehicle(EV)charging,makesEnphaseEnergyasuitableacquisition
•FinancialInvestmentReview(FIR)usesitsexpertisetoproposethemostdesirableinvestment opportunityforTeslatopursuetofurtheritsstrongpositionincleanenergy-basedEVcharging
Proposal
•Tesla’sstrongfinancialpositionandinterestinexpandingitsenergystoragecapabilitiesmakeEnphase anidealcandidateforanacquisition.
•Enphase’smarketleadingmicro-invertersallowTeslaauniqueopportunityobtainastrongpositionin thesolarandbatterysystemmarkets,withamicro-invertermarketCAGRof19.6%through2028
•Tesla’sacquisitionofEnphasewillallowforreducedcostsinresearchanddevelopmentdueto Enphase’sproprietaryinformation.
GivenTesla'smarketplacement,theFIRrecommendstheacquisitionofEnphaseEnergyatanoffer priceof$259.02pershareatanimpliedequityofferpriceof$35.5billionwithafinancingsplitof $14.2billionincash,$2.4billionindebt,and$18.9billioninequityofferings.
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II.CompanyOverview
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CompanyOverview
CompanyDescription
•Tesla,Inc.isanAmericanmultinationalcorporationthatdesigns, manufactures,andsellselectricvehicles,energystoragesystems,andsolar products.
•Theyareknownfortheirelectricvehicles,whichhavegainedpopularity fortheirsleekdesigns,high-performancecapabilities,andinnovative technology.
•Inadditiontotheirvehicles,Teslaalsoproducesenergystoragesystems, suchasthePowerwallandPowerpack,whichareusedforresidentialand commercialenergystoragesolutions.Teslaalsoofferssolarproducts, includingsolarpanelsandsolarroofs.
•In2022,thecompanydeployedsolarenergysystemscapableof generating348megawatts,anincreaseof1%over2021,anddeployed 6.54gigawatt-hoursofbatteryenergystorageproducts,anincreaseof62% over2021.Thedivisiongenerated$3.91billioninrevenueforthecompany in2022,a40%increaseover2021.
•TeslaacquiredColorado-basedbatterystartupSilLioninNovemberof 2021foranundisclosedamount,indicatingtheirinteresttofurtherexplore theenergygenerationandstorageindustry.
CompanyOutlook
•CEOElonMuskrecentlylaunchedtheso-called“masterplan3”,which includesfiveoverarchingelements:
1.Repoweringtheworld'sexistingpowergridwith renewableenergy
2.Switchingtoelectricvehicles
3.Switchingtoheatpumpsforhome,businessand industryclimatecontrol
4.Electrifyinghightemperatureheatdeliveryand developmentof"green"hydrogenforindustrial processes
5.Fuelingshipsandairplaneswithsustainableenergy
•TheMexicangovernmentinFebruary2023revealedplansforaTesla gigafactoryinMonterrey
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CompanyOverview
CompanyDescription
•EnphaseEnergyprovidesanextensivecatalogofcleanenergysolutions, includingstorage,solar,andelectricvehiclecharging
•EnphaseEnergywasthefirstcompanytosuccessfullylaunchsolarenergy microinverters—devicesbeneatheachsolarpanelwhichconvertdirect currentfromsolarpanelstousablealternatingcurrentelectricity
•Thecompanyrecentlyannouncedthedevelopmentofbi-directional chargerswhichhavethecapabilitytosupplyhomeenergysystems
•Since2020,Enphasehasacquiredsixdifferentcompaniesthatimprove variousbatteryenergystorageandsolarmicroinverteroperations,with recentnotableacquisitionsbeingClipperCreekandSofdesk
•EnphaseEnergyisaleaderwhenitcomestocreatingnewtechnologiesin energystorage,solar,andEVcharging.Currentlytheyhave484patents andpendingapplicationswith259ofthoseintheUnitedStates
•Oneoftheirmostpopularproducts,themicroinverter,whichconverts solarDCtoAC,hasbeenshippedover48milliontimesandusedinmore than2millionEnphasesystemsinover140countries
CompanyOutlook
•Enphase’sfuturegoalsareprimarilycenteredaroundadvancinga sustainablefuturethroughtheusageofsolarenergybatterystorage
•RecentinnovationsinEVchargingcapabilitiesareexpectedtocontinue drivingincreasingrevenuesupwardsinthenearfuture
•Enphaserecentlylauncheditsnextgenerationofmicro-inverters,the EnphaseIQ8,in2021inadditiontoexpandingitsenergystorage solutions
•Enphaseiswellpositionedtocapitalizeonthegrowthindemandforsolar energyandenergystorage
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2,330.9
503.72
452.0
397.4
1,288.3
StockPerformance(NYSE:STEM)
January2022:AcquisitionofClipperCreekleadstoEVchargingmarketentrance
August2022:InflationReductionActof2022isannounced
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Revenue:
NetIncome:
CompanyOverview FinancialSummary(USD,inmm)
EBITDA:
EBIT:
MarketCapitalization:30,761.7 TotalEnterpriseValue:36,895.9 CashandSTInvestments:337.6 TotalDebt:
CapitalExpenditures:(46.4)TotalAssets:
2,697.8
December2021:IQBatterybecomesavailableforsaleinUS
January2023:IQBatteryexpansionintoEuropebegins(Portugal&Austria)
III.IndustryAnalysis
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IndustryAnalysis
USRenewableEnergyIndustryKeyStatistics
•In2021,renewableenergysourcesaccountedfor12.4%oftotalUSprimary energyconsumptionand19.8%oftotalutility-scaleelectricitygeneration
•By2050,renewableenergysourcesareexpectedtoprovide42%oftheUS’s electricity,between2022-2030theindustryhasanexpectedCAGRof9.6%
USEnergyStorageIndustryKeyStatistics
•TheUSEnergyStoragemarketisexpectedtobe$8.9billionannuallyby2026 withaCompoundedAnnualGrowthRate(CAGR)of23.9%
•InflationReductionActof2022isexpectedtocontributetosignificantindustry growthasaresultof30%taxcreditsforsustainableinitiatives
Trends:IncreasedSMBAdoption
Trends:IncreasedRenewableEnergyUsageIncentives
•Withincreasedincentivestoutilizerenewableresources,thesolarenergyand batterystoragesectorsareexpectedtoexperiencetremendousgrowthinthe comingyearsfrombothhomeandbusinessowners
•Companiesthatoffersolarenergysolutionswillbecomeprime acquisitiontargetsforthegreaterpartofthisdecadeduetoaprojected increaseinconsumerdemandforsolarelectricitytopowerhomes
•Enphase’sdiversefocusesinofferingsolarenergysolutionsandbattery storageforEVvehiclechargingmakesforapromisingfuture
Trends:TheIncreasedNeedforEnergyStorage
•EnergystoragehasbecomeanincreasinglyimportantcomponentoftheUS energysystem,drivenbythegrowthofrenewableenergyandtheneedfor moreflexibleandresilientpowergrids.
•Adaptationofresidentialenergystorage:Therehasbeenatrendof decreasedrelianceonthegrid,theUSresidentialenergystoragemarket grew34%in2020.
•Batterystoragehasbeenthefastest-growingsegmentoftheenergy storagemarketintheUS.TheUSenergystoragemarketgrewby240% in2020,withbatterystorageaccountingfor83%ofthetotalstorage capacityinstalled.
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VI.StrategicRecommendation
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StrategicRecommendation
Performance Catalysts FIR
SolarEnergy:Homeandbusinessownersarelargelyfavoringtheutilizationofsolarenergyasacleanandreliablesourceofenergy
BatteryStorage:AdvancementsinbatterystoragetechnologywillaidthegrowthofEVchargingcapabilitiesintheforeseeablefuture
Tesla’sPopularity:IncreaseddemandforelectricvehicleswillresultinsubstantialgrowthofTesla’sofferingsandsales
Synergies
PotentialConcerns &Mitigations
RevenueSynergies:Tesla’sacquisitionofEnphaseEnergywouldresultinahybridmixofhighlydesiredservicesandtechnologywithin thesolarenergyandbatterystoragespaces.TheincreaseindemandforTeslavehicleswillbemirroredbyanincreaseinsolarenergyand batterystoragetechnology—primarilyintheformofbidirectionalcharging—thatEnphasewillbeabletooffer.Enphase’sleading positionandpatentsindevelopingmicroinverterswilldirectlyaidTeslaandcustomersofitssolarofferingsandvehiclecharging capabilitiesalike.
CostSynergies:Tesla’sacquisitionofEnphasewouldresultinsignificantcostreductions.Enphasehasalargemanufacturingfacilityin MexicowhichcouldbeusedbyTeslatoproducemicro-invertersandotherenergyproducts.Furthermore,Enphase’sextensiveresearch anddevelopmentinthesolarenergyspacewillleadtoreducedproductioncostsforTesla.
•Clashofbatterytypeusage
•BothTeslaandEnphasecurrentlyutilizelithium-ionbatteries,thoughTeslaisexpectedtoswitchtoLFPsoon
•Changesinconsumerdemand
•Currenthighborrowingratesmaymakeconsumersmorehesitanttobuy,leadingtopotentialchangesinEnphase’srevenue
InflationReductionAct:Biden’sgoalofhavinghalfofallcarandtrucksalesbeingelectricvehiclesby2030willincreaseEVdemand 13
VII.Valuation
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DiscountedCashFlow
VIII.StrategicAlternatives
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StrategicAlternatives
Fluenceprovidesenergystorageservicesanddigitalapplicationsforrenewableenergyusage,withits primaryfocusbeingonincreasingenergystoragecapacity.Thecompanyisfinanciallybackedand highlyexperiencedasaresultoftheirdualownershipbyAESandSiemens.Bybeing81%ownedbyAES andSiemens,though,anacquisitionofFluencewouldbeunfeasibleduetomanagementdiscrepancies. Additionally,Fluence’sindustrialfocushasprohibitedthemfromexpandingintotheEVchargingspace inrecentyears—makingtheirfutureariskybet.
SunPowerofferavarietyofsolarenergyoptions,includingsolarstorage,EVcharging,andsolarpanels, primarilyforresidentialcustomers.SunPowerhasbecomeincreasinglyprofitableinrecentyearsdue totheadditionofEVchargingasarevenuestream.Whiletheyofferasimilarsetofservicesas Enphase,theypossessaslimshareoftheEVchargingmarketshare,astheirprimaryfocusrevolves aroundhome-basedsolarenergystoragesolutions.SunPowerhasalsoincurredhighcostsofrevenue inrecenthistoryasaresultoftheirEVcharginglineresearchanddevelopment.
Sunrunhas15yearsofexperiencewithinsolarenergysolutionofferingsandmaintainedalong-term presenceinofferingsolarpanelsandrooftiles.EVchargingventureshavecontributedtostrong revenuegrowthinrecentyears—mostnotablybypartnershipwithFord’sF-150EVcharging.This partnership,however,couldpotentiallyleadtochargingportissuesforfutureEVpartnershipsSunrun maydecidetopursue,asaspecialtypeofadapterwouldbeneededtomakeTeslavehiclescompatible. Sunrunhasyettoannounceanyplansforbidirectionalcharging
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StrategicAlternatives
Financial Fit StrategicFit 18 FIR
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VII.Appendix
Appendix
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Appendix
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Appendix
Appendix
Appendix
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Appendix
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