September 4, 2014
Tesla's gigafactory Decision a "Nevada Victory"
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -
Tesla’s gigafactory Decision a “Nevada Victory”
Yesterday’s rumor that Tesla Motors (NASDAQ:TSLA) will be building its $5-billion lithium-ion battery gigafactory in Nevada was confirmed late this afternoon at a press conference held in Carson City.
Speaking to attendees, Governor Brian Sandoval said that the “monumental” agreement “will change Nevada forever.”
The figures he cited in his speech make it hard to argue with that statement. An enthused Sandoval said that the gigafactory will immediately create 3,000 construction jobs, and when complete will employ 6,500 people on site. A further 16,000 indirect jobs will be created for a grand total of 22,500 jobs when the facility is up and running.
Altogether, the gigafactory’s economic impact will come to $100 billion over the next 20 years; it will increase the state’s GDP by 4 percent and the region’s by an impressive 20 percent. On a different note, it will also positively impact schools in Nevada - universities will receive research money, while schools operating at the K-to-12 level will receive $35 million.
“This is a Nevada victory,” Sandoval concluded.
Of course, the agreement will also be beneficial for Tesla - perhaps too beneficial, some believe.
Breaking down the tax incentive package that Sandoval used to lure the company, the Reno Gazette-Journal states that its overall value “is estimated to be $1.25 billion over 20 years.” That’s not only “one of the largest [packages] in the country,” but also “more than double the $500 million package” Tesla CEO Elon Musk said his company would require.
Ultimately, it will allow Tesla to operate in Nevada “essentially tax free for 10 years.”
The package is divvied up as follows:
•$725 million in sales tax abatements for more than 20 years.
•$332 million worth of real and personal property tax abatements over 10 years.
•$195 million in transferable tax credits “which other Nevada companies will be able to buy from Tesla in order to reduce their own tax liabilities to the state.”
•$27 million in payroll tax abatements over 10 years.
•$8 million in electricity rate discounts over eight years.
That said, Musk asserted today that Nevada’s incentive package wasn’t the biggest offered to Tesla and thus wasn’t the reason the company decided to build the gigafactory in the state. Instead, he said, the decision was based on the fact that Nevada is a “get things done state” - he’s confident that the facility will be ready by 2017 and believes that it will operate in a cost-efficient manner once it’s up and running.
With the gigafactory’s location now finalized, attention is likely to shift from Tesla itself to companies in the graphite, lithium and cobalt sectors. While there’s been no official announcement about which such companies will be supplying Tesla, the share prices of a number of Nevada lithium juniors spiked yesterday, while this past week there’s been much speculation about whether Mason Graphite (TSXV:LLG) could be a potential supplier.
Investors in all three spaces will have to keep an eye out for further - hopefully more concrete - developments.
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