With shareholders giving overwhelming approval Thursday to the $2.1 billion merger between SolarCity and Tesla Motors, the company's massive solar panel factory in South Buffalo is on firmer footing.
Tesla CEO Elon Musk hopes the merger will reduce SolarCity's borrowing costs at a time when the money-losing company's ability to keep raising additional funds has been questioned by some analysts.
[Related story: Tesla merger with SolarCity approved by shareholders]
With its preliminary deal to partner with Panasonic to produce solar cells at the Buffalo factory, Tesla also is poised to bring in an experienced solar manufacturer for a key role at what will be the biggest solar panel factory in the Western Hemisphere. That's aimed at easing concerns that neither Tesla nor SolarCity have experience manufacturing solar panels on anything but a limited basis, let alone at one of the world's biggest solar energy factories.
While the outcome of the vote wasn't considered to be a sure thing heading into Thursday, the results were "overwhelmingly" in favor of the deal, winning the support of 85 percent of Tesla's shareholders who cast ballots. Tesla said the merger is expected to be completed "in the coming days."
"I think your faith will be rewarded," Musk said during a Tesla shareholder meeting."I think there will be some really amazing stuff that comes out."
The company has promised nearly 1,500 jobs at the $900 million factory in South Buffalo and more than 1,400 new jobs supplying or providing services to SolarCity. In return, the state is spending $750 million to build the factory and buy most of the equipment it will use.
The merger approval is "an enormous win for Buffalo and the entire Western New York region, which is now home to the main manufacturing hub for the world’s largest integrated sustainable energy company," said Howard Zemsky, the Buffalo developer who serves as president of Empire State Development.
With companies like Tesla and Panasonic -- both much bigger than SolarCity -- now poised to run the Buffalo plant, Zemsky said the RiverBend factory now will be in the hands of companies with more manufacturing experience and deeper pockets.
"This is as good of a scenario as we could have imagined," he said.
The merger also positions Tesla to build on Musk's vision of creating a renewable energy powerhouse that can combine electric vehicles with solar panels and the batteries needed to both power the cars and store the energy produced by its rooftop solar.
The merger approval was a strong vote of confidence by shareholders in Musk's vision is to create a company with products that can reduce greenhouse gas emissions and combat global warming. Electric cars replace vehicles that run on gasoline and diesel fuel. Electricity from solar panels replaces power generated by conventional power plants that run on coal or natural gas.
Musk also sees the two companies having a similar customer base, eventually allowing Tesla to sell not only electric vehicles at its nearly 200 stores across the country, but also solar power.
By combining Tesla, the nation's biggest electric car company, with SolarCity, the nation’s biggest rooftop solar installer, Musk believes the merger will create a renewable energy powerhouse that can provide integrated products that wouldn't be possible separately.
Late last month, the companies unveiled a new solar roof that combines solar modules with Tesla's batteries. Musk initially said the solar roof would compete with conventional roofs on price only when factoring in the savings homeowners get from the electricity the solar shingles generate over the life of the roof, prompting estimates that a solar roof could cost upwards of $70,000.
But Musk said Thursday that Tesla believes the solar roof will be able to compete on price simply based on the cost of the roof itself, without factoring in the savings from the electricity it generates.
Critics said the deal was a dubious bid to combine two money-losing companies whose sales depend on government subsidies and that rely on investors for the billions of dollars that each needs to keep operating.
Skeptics also worried that the deal will saddle Tesla with a money-losing, cash-guzzling business that could weigh the company down as it moves ahead with its own ambitious growth plans, including construction of its $5 billion battery gigafactory in Nevada and ramping up production of its more affordable Model 3 sedan. Oppenheimer & Co. analyst Colin Rusch has estimated that a merged Tesla and SolarCity could need more than $12 billion in new funding through 2018 to pay for all of its ventures.
Investors also raised concerns about the close ties between the two companies. Musk, in addition to being Tesla’s CEO, is SolarCity’s chairman. His cousins, Lyndon and Peter Rive, are SolarCity’s co-founders and hold top executive positions at the company. Lyndon Rive is SolarCity’s CEO, while Peter Rive is the company’s chief technology officer.
The merger could make it harder for Tesla to become profitable and distract its executives at a time when they already are building a massive battery factory and gearing up for a big jump in vehicle production, said Angelo Zino, an analyst at CFRA Research.
"While adding costs and risks, long-term SolarCity has the potential for its own profit stream, even excluding synergies," Zino said. "Elon Musk is clearly a force for change, but we think Tesla shareholders will see rewards delayed."
Tesla and SolarCity executives earlier this month sought to ease those concerns, predicting that the solar energy company would generate $500 million in cash for Tesla over three years and that SolarCity’s sales would nearly double to $1 billion.
Under the deal, SolarCity shareholders will receive 0.11 shares of Tesla stock for each SolarCity share they own. Because Tesla’s stock has dropped by 20 percent since the deal was announced on Aug. 1, the value of the shares SolarCity’s shareholders will receive also has declined to $20.75 per share from $25.37.