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Tesla, Panasonic to collaborate on photovoltaic cell production at SolarCity in Buffalo

Tesla Motors plans to team up with Panasonic to make solar cells and modules at the plant that SolarCity is expected to open next summer in Buffalo.

Tesla late Sunday announced that it has signed a non-binding agreement to collaborate with Panasonic on the production of solar cells and modules at the Buffalo plant. Tesla then will use those cells in a system that will combine those solar panels with the electric vehicle maker's Powerwall and Powerpack batteries.

The agreement, which is contingent on shareholders approving the merger between Tesla and SolarCity in votes that will be held on Nov. 17, would expand Tesla's relationship with Panasonic, which already are partnering to build battery cells at Tesla's $5 billion lithium-ion gigafactory in Nevada that are will be used for Tesla's Model 3 electric car and energy storage products for home and utilities.

Under the new arrangement, Tesla said it plans to sign a long-term purchase agreement with Panasonic to buy the solar cells and modules made at the Buffalo factory, which is expected to open by the end of June.

[At the heart of the Tesla, SolarCity merger: batteries]

“We are excited to expand our partnership with Panasonic as we move towards a combined Tesla and SolarCity," said JB Straubel, Tesla's chief technical officer and co-founder, in a statement.

"By working together on solar, we will be able to accelerate production of high-efficiency, extremely reliable solar cells and modules at the best cost,” Straubel said.

SolarCity, with $750 million in state aid through the Buffalo Billion economic development initiative, is building the biggest solar panel factory in the Western Hemisphere on South Park Avenue. The plant is expected to employ 1,460 people, with another 1,440 workers at companies that provide services and supplies to the factory.

"This agreement further cements Western New York’s position as a national leader in clean power technology and cutting-edge innovation,” Gov. Andrew M. Cuomo said in a statement.

“Tesla’s partnership with Panasonic will bring world-class manufacturing expertise to the table, strengthen the company’s competitiveness and position the entire region for future economic revitalization," said Howard Zemsky, the president of Empire State Development, said in a statement.

The plant originally was intended to house Silevo, a small California company that was developing high-efficiency solar panels. SolarCity acquired Silevo in 2014 and expanded the scale of the Buffalo factory to make it five times bigger than originally planned.

The announcement did not say whether Panasonic would use Silevo's technology.

“Panasonic [photovoltaic] cells and modules boast industry-leading power generation performance, and achieve high quality and reliability," said Shuuji Okayama, vice-president on Panasonic's Eco Solutions Co., in the statement. "We expect that the collaboration talks will lead to growth of the Tesla and Panasonic relationship.”

The Panasonic deal confirms an arrangement that SolarCity executives had hinted at this summer. SolarCity said in August that it expected to use solar cells that it buys from an outside supplier when it begins panel production at the Buffalo factory.

Elon Musk, SolarCity's chairman and Tesla's CEO, expanded on that in mid-August, when he said SolarCity was thinking about bringing in a partner to make the solar cells – one of the main building blocks of a solar panel.

Each solar panel has dozens of solar cells. The solar cells, which convert sunlight into electricity, are the core part of a solar panel.

Panasonic is spending $1.6 billion so it can produce battery cells within Tesla’s  battery gigafactory, now under construction in Nevada. “There may be some merit to bringing in a strategic partner, as Tesla has with the battery cell manufacturing,” Musk said during an August conference call.

The plant’s original plan called for producing enough solar panels to generate 1,000 megawatts of electricity, although Peter Rive, SolarCity’s chief technology officer, has said that improvements to the equipment design and factory layout could allow it to produce more than 1 gigawatt in panels.

Tesla and SolarCity plan on Oct. 28 to unveil a new solar roofing product that will combine SolarCity's solar panels with a second-generation Powerwall 2.0 battery made by Tesla.

The proposed merger has spurred concerns among some investors and analysts because of the close ties between the two companies, with Musk being the biggest shareholder in both firms and close connections between some members of each company's board of directors.

Some analysts and investors also have raised concerns about the steady losses and growing debt levels at SolarCity, which needs to constantly raise new money from investors to fund its solar installations. Shareholders have several multiple lawsuits aiming to block the merger, arguing that Tesla's board breached its fiduciary responsibilities.

While Musk has called the merger a "no-brainer" that will create a renewable energy powerhouse, some investors have viewed the deal as a bailout for cash-strapped and debt-laden SolarCity.


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