Assignment

docx

School

Karatina University *

*We aren’t endorsed by this school

Course

Subject

Business

Date

Nov 24, 2024

Type

docx

Pages

Uploaded by vicmuriraa

Situation Description and Initial Judgement SolarCity grew into one of the country's largest solar operators in the years that followed. In the markets it entered, it hired hundreds of people to sell, maintain, and install its systems. For years the state provided rebates for homeowners who wanted to go solar through a lottery system. Nevada's legislature had been gradually changing incentives for solar customers for years and, in 2013, it did away with the lottery for rebates, so anyone could get one. The state also set a new cap on installations—3 percent of the utility's peak demand. Such provisions usually appease utilities and give regulators a chance to study what it means to have more small solar systems on the grid. Nevada had set up something called the Catalyst Fund to encourage companies to locate operations in the state. SolarCity's grant was announced in March 2013. The company would get paid as much as $400,000 annually for three years if it met certain hiring targets. SolarCity had an opening ceremony for its Vegas office, which was to serve as its main call center and handle sales and administrative functions nationally. With the new net-metering and rebate policies in place, SolarCity began taking applications on May 1, 2014. By and large, the homeowners who went solar cared about the environment. But the thought of saving a few bucks—and sticking it to NV Energy—didn't bother some of them, either. To meet the demand, Rive opened more operations centers in the state, where its crews of installers would grab panels and other supplies before going out on a job. The company had created something called the Chairman's Cup—after Musk—to honor the most productive warehouse nationally. In 2015 its two locations in the Las Vegas area dominated the competition, winning almost every month. The growth was good. But another problem was looming: Rive and his staff thought their industry was about to reach the 3 percent cap. NV Energy made its case to the utilities commission in late July, kicking off a five-month process that culminated with the December decision. Staff spent hundreds of hours requesting data and reviewing information. Ultimately, the commission decided that everyone who put panels on their roofs should be treated the same. It also found that small commercial and residential net-metering customers were getting more than $16 million in subsidies a year from other people. To fix that, the commissioners agreed on New Year's Eve to two rate increases and one decrease. A residential solar customer in southern Nevada, for instance, would see her monthly service charge gradually step up in annual increments from $12.75 to $38.51 in 2020. NV Energy tried to explain the changes by posting sample bills on its website. SolarCity's pricing undercut NV Energy by just a little bit in Nevada before the new rates, Rive says. So he knew immediately that he could no longer do business in the state. A day after the ruling, Rive announced that SolarCity would cease sales in Nevada. Later, he said the company would have to dismiss 550 workers in the state. Sunrun and other solar companies followed suit. SolarCity still employs more than a thousand people in Las Vegas at its call center, but they mostly serve other states. I would prefer Buffett's company because they bought renewable energy through long-term contracts. Buffet company may not be winning any popularity contests, but they're developing their own renewable energy to keep up with changing attitudes and to meet state mandates. In just a decade, solar has gone from an enviro's dream to a serious lobby that will be fighting these kinds of battles nationwide for years. Just about everywhere solar companies go, the industry has stirred up popular support,

often with help from celebrities. NV Energy signed up to purchase power from a giant First Solar installation outside Las Vegas for $38.70 per megawatt-hour it was one of the cheapest rates on record at that time. Commissioners cited projects like that for why it made no sense to continue encouraging net metering in Nevada. If the goal is to put more solar on the grid, it'd be far cheaper for NV Energy to procure it. Business Leader Profile on Elon Musk Elon Reeve Musk is an entrepreneur and business magnate. He is the founder, CEO, and Chief Engineer at SpaceX; early-stage investor, CEO, and Product Architect of Tesla, Inc.; founder of The Boring Company; and co-founder of Neuralink and OpenAI. A centibillionaire, Musk is the richest person in the world as of November 2021 with a net worth of around US$280 billion. Musk applied for a Canadian passport through his Canadian-born mother. While awaiting the documentation, he attended the University of Pretoria for five months; this allowed Musk to avoid mandatory service in the South African military. Musk arrived in Canada in June 1989, and lived with a second-cousin in Saskatchewan for a year, working odd jobs at a farm and lumber-mill. In 1990, Musk entered Queen's University in Kingston, Ontario. Two years later, he transferred to the University of Pennsylvania; he graduated in 1997 with a Bachelor of Science degree in economics and a Bachelor of Arts degree in physics. In 1994, Musk held two internships in Silicon Valley during the summer: at energy storage startup Pinnacle Research Institute, which researched electrolytic ultracapacitors for energy storage, and at the Palo Alto-based startup Rocket Science Games. In 1995, Musk was accepted to a Doctor of Philosophy (Ph.D.) program in materials science at Stanford University in California. Musk attempted to get a job at Netscape but never received a response to his inquiries. He dropped out of Stanford after two days, deciding instead to join the Internet boom and launch an Internet startup. In 1995, Musk, Kimbal, and Greg Kouri founded web software company Zip2 with funds from angel investors. They housed the venture at a small rented office in Palo Alto. The company developed and marketed an Internet city guide for the newspaper publishing industry, with maps, directions, and yellow pages. Musk says that before the company became successful, he could not afford an apartment and instead rented an office and slept on the couch and showered at the YMCA, and shared one computer with his brother. According to Musk, "The website was up during the day and I was coding it at night, seven days a week, all the time." The Musk brothers obtained contracts with The New York Times and the Chicago Tribune, and persuaded the board of directors to abandon plans for a merger with CitySearch. Musk's attempts to become CEO, a position held by its Chairman Rich Sorkin, were thwarted by the board. Compaq acquired Zip2 for $307 million in cash in February 1999. Musk received $22 million for his 7-percent share. Musk co- founded X.com, an online financial services and e-mail payment company. The startup was one of the first federally insured online banks, and, within its initial months, over 200,000 customers joined the service. The company's investors saw Musk as inexperienced and had him replaced with Intuit CEO Bill Harris by the end of the year. The following year, X.com merged with online bank Confinity to prevent unnecessary competition. Founded by Max Levchin and Peter Thiel, Confinity had its own money-transfer service, PayPal, which was more popular than X.com's

service. Within the merged company, Musk returned as CEO. Musk's preference for Microsoft software over Linux created a rift in the company and caused Thiel to resign. Due to resulting technological issues and lack of a cohesive business model, the board ousted Musk and replaced him with Thiel in September 2000. Under Thiel, the company focused on the PayPal service and was renamed PayPal in 2001. In 2002, PayPal was acquired by eBay for $1.5 billion in stock, of which Musk—the largest shareholder with 11.7%—received over $100 million. In 2017, Musk purchased the domain X.com from PayPal for an undisclosed amount, explaining it has sentimental value. In 2001, Musk became involved with the nonprofit Mars Society. He was inspired by plans to place a growth-chamber for plants on Mars and discussed funding the project himself.In October 2001, Musk traveled to Moscow to buy refurbished Intercontinental ballistic missiles (ICBMs) that could send the greenhouse payloads into space. He met with companies NPO Lavochkin and Kosmotras; however, Musk was seen as a novice and was even spat on by one of the Russian chief designers. The group returned to the United States empty-handed. After three failed launches, SpaceX succeeded in launching the Falcon 1 in 2008. It was the first private liquid-fuel rocket to reach Earth orbit. Later that year, SpaceX received a $1.6 billion Commercial Resupply Services program contract for 12 flights of its Falcon 9 rocket and Dragon spacecraft to the International Space Station, replacing the Space Shuttle after its 2011 retirement. Tesla, Inc.—originally Tesla Motors—was incorporated in July 2003 by Martin Eberhard and Marc Tarpenning, who financed the company until the Series A round of funding. Both men played active roles in the company's early development prior to Musk's involvement. Musk led the Series A round of investment in February 2004; he invested $6.5 million, became the majority shareholder, and joined Tesla's board of directors as chairman. Musk took an active role within the company and oversaw Roadster product design but was not deeply involved in day-to-day business operations. Following a series of escalating conflicts in 2007 and the 2008 financial crisis, Eberhard was ousted from the firm. Musk assumed leadership of the company as CEO and product architect in 2008. A 2009 lawsuit settlement with Eberhard designated Musk as a Tesla co-founder, along with Tarpenning and two others. As of 2019, Elon Musk is the longest tenured CEO of any automotive manufacturer globally. In September 2018, Musk was sued by the US Securities and Exchange Commission (SEC) for a tweet claiming funding had been secured for potentially taking Tesla private. The lawsuit claimed that discussions Musk held with foreign investors in July 2018 did not confirm key deal terms and thus characterized the tweet as false, misleading, and damaging to investors, and sought to bar Musk from serving as CEO of publicly traded companies. Musk called the allegations unjustified and claimed he had never compromised his integrity.Two days later, Musk settled with the SEC, without admitting or denying the SEC's allegations. As a result, Musk and Tesla were fined $20 million each, and Musk was forced to step down for three years as Tesla chairman but was able to remain as CEO. FOIA released records showed that the SEC itself concluded that Musk has subsequently violated the agreement twice by tweeting regarding "Tesla's solar roof production volumes and its stock price".

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Musk provided the initial concept and financial capital for SolarCity, which his cousins Lyndon and Peter Rive co-founded in 2006. By 2013, SolarCity was the second largest provider of solar power systems in the United States. In 2014, Musk promoted the idea of SolarCity building an advanced production facility in Buffalo, New York, triple the size of the largest solar plant in the United States. Construction on the factory started in 2014 and was completed in 2017. It operated as a joint venture with Panasonic until early 2020 when Panasonic departed. Tesla acquired SolarCity for over $2 billion in 2016 and merged it with its battery energy storage products division to create Tesla Energy. The announcement of the deal resulted in a more than 10% drop in Tesla's stock price. At the time, SolarCity was facing liquidity issues; however, Tesla shareholders were not informed. Consequently, multiple shareholder groups filed a lawsuit against Musk and Tesla's directors, claiming that the purchase of SolarCity was done solely to benefit Musk and came at the expense of Tesla and its shareholders. In 2016, Musk co-founded Neuralink, a neurotechnology startup company to integrate the human brain with AI. Neuralink's purpose is to create devices that are embedded in the human brain to facilitate the merging of the brain with machines. The devices will also reconcile with the latest improvements in artificial intelligence to stay updated. Such improvements could enhance memory or allow the devices to communicate with software more effectively. In 2016, Musk founded The Boring Company to construct tunnels. As a merchandising and publicity stunt, The Boring Company sold 2,000 novelty flamethrowers in 2018. The idea was allegedly inspired by the Mel Brooks- directed film Spaceballs (1987). Musk's managerial style and treatment of his employees have been heavily criticized. One person who worked closely with Musk said he exhibits "a high level of degenerate behavior" such as paranoia and bullying. Another described him as exhibiting "total and complete pathological sociopathy". Business Insider reported that Tesla employees were told not to walk past Musk's desk because of his "wild firing rampages".The Wall Street Journal reported that, after Musk insisted on branding his vehicles as "self-driving", he faced criticism from his engineers, some of whom resigned in response, with one stating that Musk's "reckless decision making potentially put customer lives at risk". The 2021 book Power Play contains multiple anecdotes of Musk berating employees. Elon Musk other activities include Hyperloop, Open Al, Tham Luang cave rescue and defamation case, in 2018 Joe Rogan podcast appearance, Music ventures, donations and non-profits. Musk made $165 million when PayPal was sold to eBay in 2002. He was first listed on the Forbes Billionaires List in 2012, with a net worth of $2 billion. At the start of 2020, Musk had a net worth of $27 billion. Throughout that year, his net worth increased by $150 billion, largely driven by his ownership of around 20% of Tesla stock. During this, Musk's net worth was often volatile. For example, it dropped $16.3 billion in September, the largest single-day plunge in the history of the Bloomberg Billionaires Index. In November of that year, Musk passed Facebook co-founder Mark Zuckerberg to become the third-richest person in the world; a week later he passed Microsoft co-founder Bill Gates to become the second-richest. In January 2021, Musk, with a net worth of $185 billion, surpassed Amazon founder Jeff Bezos to become the richest person in the world. Bezos reclaimed the top spot the following month. On September 27, 2021,

Forbes announced that Musk had a net worth of over $200 billion, and was the richest person in the world, after Tesla stock surged. In November 2021, Musk became the first person with a net worth over $300 billion. Musk has had multiple cameos and appearances in films such as Iron Man 2 (2010),Why Him? (2016), and Men in Black: International (2019). [349] Television series on which he has appeared include The Simpsons (2015),The Big Bang Theory (2015) South Park (2016),Rick and Morty (2019), and Saturday Night Live (2021). He has contributed interviews to the documentaries Racing Extinction (2015) and the Werner Herzog-directed Lo and Behold (2016). In China, Elon Musk has become a "trademark phenomenon" according to SCMP, with over 270 different companies having registered trademarks using his English name or Chinese transliteration, for a multitude of products including printing, restaurants, textiles, and design. Musk was elected a fellow of the Royal Society in 2018 In 2015, he received an Honorary Doctorate in Engineering and Technology at Yale and IEEE Honorary Membership. Awards for his contributions to the development of the Falcon rockets include the American Institute of Aeronautics and Astronautics George Low Transportation Award in 2008, the Fédération Aéronautique Internationale Gold Space Medal in 2010, and the Royal Aeronautical Society Gold Medal in 2012. He was listed among Time magazine's 100 Most Influential People in 2010, 2013, 2018, and 2021. Business Leader Profile on Warren Buffett Warren Edward Buffett born in August 30, 1930, is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is considered one of the most successful investors in the world and has a net worth of over $105.2 billion as of November 2021, making him the world's tenth-wealthiest person. He developed an interest in business and investing in his youth, eventually entering the Wharton School of the University of Pennsylvania in 1947 before transferring to and graduating from the University of Nebraska at 19. He went on to graduate from Columbia Business School, where he molded his investment philosophy around the concept of value investing pioneered by Benjamin Graham. He attended New York Institute of Finance to focus his economics background and soon after began various business partnerships, including one with Graham. He created Buffett Partnership, Ltd in 1956 and his firm eventually acquired a textile manufacturing firm called Berkshire Hathaway, assuming its name to create a diversified holding company. In 1978, Charlie Munger joined Buffett as vice-chairman. Buffett is a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Bill & Melinda Gates Foundation. He founded The Giving Pledge in 2009 with Bill Gates, whereby billionaires pledge to give away at least half of their fortunes. Buffett was elected to the American Philosophical Society in 2009. He began his education at Rose Hill Elementary School. In 1942, his father was elected to the first of four terms in the United States Congress, and after moving with his family to Washington, D.C., Warren finished elementary school, attended Alice Deal Junior High School and graduated from Woodrow Wilson High School in 1947, where his senior yearbook picture reads: "likes math; a future stockbroker."After finishing high school and finding success with his side entrepreneurial and investment ventures, Buffett wanted to skip college to go directly into business but

was overruled by his father. Buffett displayed an interest in business and investing at a young age. He was inspired by a book he borrowed from the Omaha public library at age seven, One Thousand Ways to Make $1000. Much of Buffett's early childhood years were enlivened with entrepreneurial ventures. In one of his first business ventures, Buffett sold chewing gum, Coca-Cola bottles, and weekly magazines door to door. He worked in his grandfather's grocery store. While still in high school, he made money delivering newspapers, selling golf balls and stamps, and detailing cars, among other means. On his first income tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper route. In 1945, as a high school sophomore, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in the local barber shop. Within months, they owned several machines in three different barber shops across Omaha. They sold the business later in the year for $1,200 to a war veteran. Buffett's interest in the stock market and investing dated to schoolboy days he spent in the customers' lounge of a regional stock brokerage near his father's own brokerage office. On a trip to New York City at age ten, he made a point to visit the New York Stock Exchange. At 11, he bought three shares of Cities Service Preferred for himself, and three for his sister Doris Buffett (who also became a philanthropist). At 15, Warren made more than $175 monthly delivering Washington Post newspapers. In high school, he invested in a business owned by his father and bought a 40-acre farm worked by a tenant farmer. He bought the land when he was 14 years old with $1,200 of his savings. By the time he finished college, Buffett had accumulated $9,800 in savings (about $107,000 today). Buffett worked from 1951 to 1954 at Buffett-Falk & Co. as an investment salesman; from 1954 to 1956 at Graham-Newman Corp. as a securities analyst; from 1956 to 1969 at Buffett Partnership, Ltd. as a general partner; and from 1970 as Chairman and CEO of Berkshire Hathaway Inc. In 1951, Buffett discovered that Graham was on the board of GEICO insurance. Taking a train to Washington, D.C. on a Saturday, he knocked on the door of GEICO's headquarters until a janitor admitted him. There he met Lorimer Davidson, GEICO's vice president, and the two discussed the insurance business for hours. Davidson would eventually become Buffett's lifelong friend and a lasting influence, and would later recall that he found Buffett to be an "extraordinary man" after only fifteen minutes. Buffett wanted to work on Wall Street but both his father and Ben Graham urged him not to. He offered to work for Graham for free, but Graham refused. In 1952, Buffett married Susan Thompson at Dundee Presbyterian Church. The next year they had their first child, Susan Alice. In 1954, Buffett accepted a job at Benjamin Graham's partnership. His starting salary was $12,000 a year (about $116,000 today). There he worked closely with Walter Schloss. Graham was a tough boss. He was adamant that stocks provide a wide margin of safety after weighing the trade-off between their price and their intrinsic value. Buffett revealed that 35% of the partnership's assets were invested in the Sanborn Map Company. He explained that Sanborn stock sold for only $45 per share in 1958, but the company's investment portfolio was worth $65 per share. This meant that Sanborn's map business was being valued at "minus $20." Buffett eventually purchased 23% of the company's outstanding shares as an activist investor, obtaining a seat for himself on the Board of Directors, and allied with other dissatisfied shareholders to control 44% of the shares.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

In 1962, Buffett became a millionaire because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett. He merged these partnerships into one. Buffett invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway. He began buying shares in Berkshire from Seabury Stanton, the owner, whom he later fired. Buffett's partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships began purchasing Berkshire aggressively, they paid $14.86 per share while the company had working capital of $19 per share. This did not include the value of fixed assets (factory and equipment). Buffett took control of Berkshire Hathaway at a board meeting and named a new president, Ken Chace, to run the company. In 1966, Buffett closed the partnership to new money. He later claimed that the textile business had been his worst trade. He then moved the business into the insurance sector, and, in 1985, the last of the mills that had been the core business of Berkshire Hathaway was sold. Buffett announced his first investment in a private business — Hochschild, Kohn and Co, a privately owned Baltimore department store. In 1967, Berkshire paid out its first and only dividend of 10 cents. In 1969, Buffett liquidated the partnership and transferred their assets to his partners including shares of Berkshire Hathaway. In 1970, Buffett began writing his now-famous annual letters to shareholders. He lived solely on his salary of $50,000 per year and his outside investment income. Buffett ran into criticism during the subprime mortgage crisis of 2007 and 2008, part of the Great Recession starting in 2007, that he had allocated capital too early resulting in suboptimal deals. "Buy American. I am." he wrote for an opinion piece published in the New York Times in 2008. Buffett called the downturn in the financial sector that started in 2007 "poetic justice". Buffett's Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008 and several of his later deals suffered large mark-to-market losses. Buffett became the richest person in the world, with a total net worth estimated at $62 billion by Forbes and at $58 billion by Yahoo, overtaking Bill Gates, who had been number one on the Forbes list for 13 consecutive years. In 2009, Gates regained the top position on the Forbes list, with Buffett shifted to second place. Both of the men's values dropped, to $40 billion and $37 billion respectively—according to Forbes, Buffett lost $25 billion over a 12-month period during 2008/2009. Warren Buffett's writings include his annual reports and various articles. Buffett is recognized by communicators as a great story-teller, as evidenced by his annual letters to shareholders. Buffett rebutted the academic efficient-market hypothesis, that beating the S&P 500 was "pure chance", by highlighting the results achieved by a number of students of the Graham and Dodd value investing school of thought. In addition to himself, Buffett named Walter J. Schloss, Tom Knapp, Ed Anderson (Tweedy, Browne LLC), William J. Ruane (Sequoia Fund), Charlie Munger (Buffett's partner at Berkshire), Rick Guerin (Pacific Partners Ltd.), and Stan Perlmeter (Perlmeter Investments). Buffett has been a supporter of index funds for people who are either not interested in managing their own money or don't have the time. Buffett is skeptical that active management can outperform the market in the long run, and has advised both individual and institutional investors to move their money to low- cost index funds that track broad, diversified stock market indices. In 1949, Buffett was infatuated with a young woman whose boyfriend had a ukulele. In an attempt to compete, he bought one of the instruments and has been

playing it ever since. Though the attempt was unsuccessful, his music interest was a key part of his becoming a part of Susan Thompson's life and led to their marriage. Buffett often plays the instrument at stockholder meetings and other opportunities. His love of the instrument led to the commissioning of two custom Dairy Queen ukuleles by Dave Talsma, one of which was auctioned for charity. Buffett married Susan Buffett (born Thompson) in 1952. They had three children, Susie, Howard and Peter. The couple began living separately in 1977, although they remained married until Susan Buffett's death in July 2004. Their daughter, Susie, lives in Omaha, is a national board member of Girls, Inc., and does charitable work through the Susan A. Buffett Foundation. Buffett is an avid bridge player, which he plays with fellow fan Gates, he allegedly spends 12 hours a week playing the game. In 2006, he sponsored a bridge match for the Buffett Cup. Modeled on the Ryder Cup in golf—held immediately before it in the same city—the teams are chosen by invitation, with a female team and five male teams provided by each country. He is a dedicated, lifelong follower of Nebraska football, and attends as many games as his schedule permits. Buffett was raised as a Presbyterian, but has since described himself as agnostic. In December 2006, it was reported that Buffett did not carry a mobile phone, did not have a computer at his desk, and drove his own automobile, a Cadillac DTS. Buffett was ranked by Forbes as the richest person in the world with an estimated net worth of approximately $62 billion. In 2009, after donating billions of dollars to charity, he was ranked as the second richest man in the United States with a net worth of $37 billion with only Bill Gates ranked higher than Buffett. His net worth had risen to $58.5 billion as of September 2013. In 1999, Buffett was named the top money manager of the Twentieth Century in a survey by the Carson Group, ahead of Peter Lynch and John Templeton. In 2007, he was listed among Time's 100 Most Influential People in the world. In 2011, President Barack Obama awarded him the Presidential Medal of Freedom. Buffett, along with Bill Gates, was named the most influential global thinker in Foreign Policy's 2010 report. Buffett joined the Gates Foundation's board, but did not plan to be actively involved in the foundation's investments. Buffett announced his resignation as a trustee of the Gates Foundation on June 23, 2021. Aside from countless television appearances on various news programs, Buffett has appeared in numerous films and TV programs, both documentary, and fiction. Some film and television cameos he has made include Wall Street: Money Never Sleeps (2010), The Office (U.S.), All My Children, and Entourage (2015). He has been a guest 10 times on Charlie Rose, and was the subject of the HBO documentary feature Becoming Warren Buffett (2017) and the BBC production The World's Greatest Money Maker (2009). In October 2008, USA Today reported at least 47 books were in print with Buffett's name in the title. The article quoted the CEO of Borders Books, George Jones, as saying that the only other living persons named in as many book titles were U.S. presidents, world political figures and the Dalai Lama.Buffett said that his own personal favorite is a collection of his essays called The Essays of Warren Buffett, which he described as "a coherent rearrangement of ideas from my annual report letters". Responsibilities to Stakeholders

Stakeholders are individuals or companies with a vested interest in the outcome of their specific projects. Stakeholders have legal decision-making rights and may control project scheduling and budgetary issues. Most project stakeholders have responsibilities to businesses that include educating developers, financing projects, creating scheduling parameters and setting milestone dates. A stakeholder has a vested interest in a company and can either affect or be affected by a business' operations and performance. Typical stakeholders are investors, employees, customer, communities, suppliers, environment, governments, or trade associations. Example of Internal Stakeholder is Investors who are significantly impacted by the associated concern and its performance. If, for example, a venture capital firm decides to invest $5 million in a technology startup in return for 10% equity and significant influence, the firm becomes an internal stakeholder of the startup. The return on the venture capitalist firm's investment hinges on the startup's success or failure, meaning that the firm has a vested interest. Employees have a direct stake in the company in that they earn an income to support themselves, along with other benefits (both monetary and non-monetary). Depending on the nature of the business, employees may also have a health and safety interest (for example, in the industries of transportation, mining, oil and gas, construction, etc.). Communities are major stakeholders in large businesses located in them. They are impacted by a wide range of things, including job creation, economic development, health, and safety. When a big company enters or exits a small community, there is an immediate and significant impact on employment, incomes, and spending in the area. With some industries, there is a potential health impact, too, as companies may alter the environment. Many would argue that businesses exist to serve their customers. Customers are actually stakeholders of a business, in that they are impacted by the quality of service/products and their value. For example, passengers traveling on an airplane literally have their lives in the company's hands when flying with the airline. Governments can also be considered a major stakeholder in a business, as they collect taxes from the company (corporate income taxes), as well as from all the people it employs (payroll taxes) and from other spending the company incurs (sales taxes). Governments benefit from the overall Gross Domestic Product (GDP) that companies contribute to. Suppliers and vendors sell goods and/or services to a business and rely on it for revenue generation and on-going income. In many industries, suppliers also have their health and safety on the line, as they may be directly involved in the company's operations. In environmental and conservation planning, stakeholders typically include government representatives, businesses, scientists, landowners, and local users of natural resources. A common problem that arises for companies with numerous stakeholders is that the various stakeholder interests may not align. In fact, the interests may be in direct conflict. For example, the primary goal of a corporation, from the perspective of its shareholders, is to maximize profits and enhance shareholder value. Since labor costs are unavoidable for most companies, a company may seek to keep these costs under tight control. This is likely to upset another group of stakeholders, its employees. The most efficient companies successfully manage the interests and expectations of all their stakeholders. What happened in the real world? What did NPUC decide to do?

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Earlier this year the Nevada state legislature ordered the Public Utility Commission (PUC) to formulate a new net-metering payment by the end of 2015 after the state maxed out the allotted 235 megawatt net-metering program. Vivint Solar, another solar developer, pulled out of Nevada last summer after the net-metering program became fully subscribed, which forced solar installations to grind to a halt. The impasse meant that a lot was riding on the PUC's decision. Just days before a New Year deadline, the Nevada Public Utility Commission (PUC) voted 3-0 to slash the payments that homeowners receive for solar energy and also increase charges on them. The solar industry cried foul, saying that the PUC decision was made without evidence or debate, and that it "flies in the face of Nevada law, which requires the state to 'encourage private investment in renewable energy resources, stimulate the economic growth of this State; and enhance the continued diversification of the energy resources used in this State' through net metering," as Bryan Miller, Senior Vice President of Public Policy at solar developer Sunrun, said in a statement. "We believe the Commission, appointed by Governor Sandoval, has done the exact opposite today." The move also does not grandfather in homeowners who have already installed solar, even though many of those people likely made solar investments based on the net-metering payments. The retroactive penalty could be a death blow for solar in Nevada, and one that the solar industry says might also be illegal. The Alliance for Solar Choice, an industry trade group, filed a lawsuit against the PUC. Sunrun also filed a lawsuit against Nevada Governor Brian Sandoval (R) in order to obtain records of text messages between him and NV Energy lobbyists. The PUC decision will cut those payments by 75 percent. SolarCity threatened to leave the state if the PUC moved forward on slashing the net-metering payments. "It will destroy the rooftop solar industry in one of the states with the most sunshine...There is so much wrong with the decision, the only option for the PUC is to reject it," SolarCity's CEO Lyndon Rive told Bloombergahead of the vote. After the PUC voted to roll back net-metering payments, SolarCity followed through on its threat. On December 23, SolarCity announced that it would stop selling and installing solar panels in Nevada. "The PUC has protected NV Energy's monopoly, and everyone else will lose," SolarCity's Rive said. "We have no alternative but to cease Nevada sales and installations, but we will fight this flawed decision on behalf of our Nevada customers and employees." NV Energy said it was reviewing the PUC's decision to determine how it would affect its customers. In other words, what happened in Nevada was by all indications a raw exercise of power and influence on the part of the utility and conservative groups. It didn't hurt that Sandoval and the majority in the legislature are Republicans. That it all comes down to political power shouldn't be surprising. The fact is in most of these skirmishes over net metering, there are two self-interested parties battling — utilities and conservative business groups on one side, solar companies and advocates on the other — and the side with the most power wins. Such is politics. Reflection The main reason SolarCity owns its market (its share is equal to its next 14 competitors combined) is its various Power Purchase Agreement plans. The first option was the "Pay as you go" plan. This plan is popular because it requires no

money down and would reduce the price of my energy by about 41.5%. My new estimated average electric bill would be about $50 less per month and I would save nearly $24,000 over 20 years. Obviously, with no upfront costs, I would be cash flow positive from day one. The second option was the "Pay only for what you produce" plan. This required a $3,125 investment, but cut the price of my energy by 51%. Over 20 years, I would have saved nearly $29,000 and I would have gotten my money back by the fourth year. But in my opinion, the smartest way to go is the "Full pre-pay plan." In this scenario, you pay for the amount of power your system will produce up front. It would have cost me only $0.066 per kWh, compared to the $0.188 I currently pay my electric company. That's a savings of 66% and I would save about $125 per month. My initial investment of $10,000 would be recovered by year six, and over 20 years, I will have saved more than $36,000. So why wouldn't I want to buy my system outright? It's not a terrible idea -- after a $9,000 fed tax credit, I would only be on the hook for $15,000. But I won't break even until my ninth year and I'll only save $31,000 over the life of the system. The reason it doesn't benefit me to own the panels is that I can't depreciate them, but if SolarCity retains ownership, it can. The company then passes on some of the savings to its customers. In this scenario everyone wins, the customer gets the benefit of low upfront costs and SolarCity gets 20 years of steady cash flows. I think SolarCity has created a revolutionary method to get solar systems to its customers. In my opinion, this is the only way to sidestep sizable upfront costs, which have historically slowed solar adoption. Its competition has yet to catch on and market these types of hybrid payment plans, and in time, I think you'll see others trying to copy that model. But right now, SolarCity has a huge head start and is aggressively building its business. The only problem SolarCity may end up having is if it tries to focus too much on profitability, gets away from fanatical customer service, and installs underperforming systems. But from what I've seen, that is highly unlikely. The Rive brothers and Elon Musk don't seem like the type of entrepreneurs to mess up a good thing.

Assignment

Related Documents