Financing Elio Motors Development And Production

[JEBar]

bottom line, none of us know the details .... what we do know is according to reports, EM was asked to apply .... in addition, with this loan politics will be involved .... EM has attorneys who have been a presumably still are working on it ... I find it hard to believe they would waste time and money trying for a loan for which they don't qualify ....

 

[goofyone]

Let the firestorm towards me begin.

To keep it simple, it all comes down to funding. IMO, people get carried away with a silent investor or talking about google or apple throwing money at EM. I highly doubt the latter part is going to happen. The first part is more likely.

Now most people keep talking about the ATVM loan as the Holy Grail to get EM producing cars....Well, here is why EM will not receive the loan. All you have to do is look at the requirements.

http://energy.gov/sites/prod/files/2014/05/f16/ATVM-Program-Application-Overview.pdf - ATVM Loan Overview

The link above specifically mentions a few things:

*“Ultra Efficient Vehicles” that achieve at least 75 miles per gallon
- I believe that this means the car has to be a proven 75. I don't doubt that the car itself can hit that, but it has to be proven. IMO EM is far from that. Yes they have an engine, but what about a transmission? Gear ratio? That will be important to MPGs.

*Projects must be “financially viable without the receipt of additional Federal funding associated with the
proposed project”
 ATVM is a loan program, not a grant program. It provides “expansion capital,” not working capital
- EM needs this money for working capital. Not expansion capital. They pretty much need this money to start the company.

* "While all applications will be considered on their own merits, there are several key points which set
apart a strong application. The following are just some of the hallmarks of a strong ATVM application:
• Detailed project narrative and plan with key activities and milestones
• Integrated, dynamic financial model, including cash flow, and a strong NPV for the project
• Three years of consolidated financial statements (audited, if available)
• Significant equity funding at the time of application
• Significant, unencumbered collateral, broken down by asset type
• For suppliers, sale agreement for existing (and/or planned) production strengthens the
creditworthiness of the application
• Control over the proposed project site
• Experienced leadership and senior staff with experience directly related to the proposed project
• Strong operating history of the company, parent, and/or subsidiary"
- EM has little cash flow (in terms of securing a large loan). Also, it will be hard for them to figure out the Net Present Value for the car. The 3 years of financial statements are not strong. Little equity.
- They do hit a few bullet points, but they don't hit many.

There is also more. Before you start to bash, just take a look. Nothing I have said is made up. IMO is based on my experience with Finance and Credit. Basing EM on this loan guideline does not look good.

Well based on the guidelines either they didn't or the ones who decide the loan bend the rules. Its not like Elio hasn't been off on research...

Anyone can apply for a loan. Doesn't mean you meet the criteria.

Horn, I would say that you are the one a bit off on your research. You really should have run a good search on this site as you are not trying to tell us anything we have not discussed and debunked many times now. You should also read the actual detailed applicant guidance and not just the overview. One item to take note of is the fact that some of the ATVM requirements do not apply to the 'Ultra Efficient Vehicle' part of the program and only to the 'qualify components' part.

That can be found here:

http://energy.gov/sites/prod/files/...r-Applicants-Final-Version-October-5-2012.pdf


This is the key part of that document pertaining to this discussion:

3) APPLICANT FINANCIAL ELIGIBILITY [10 CFR 611.100(A)(2)]:

In order to be financially eligible under the ATVMLP, the applicant “must be financially viable without the
receipt of additional federal funding for the proposed project”.

a) “Financially Viable”: The applicant will be deemed “financially viable” for purposes of 10 CFR
611.100(a)(2) if (i) there is a reasonable prospect that the applicant will be able to pay principal and
interest as and when due under the ATVM loan and (ii) the applicant has a net present value that is
positive, taking all costs, existing and future, into account. (See definition of “financially viable” in 10
CFR 611.2.) 10 CFR 611.100(c) sets forth a non-exhaustive list of the factors considered by the
ATVMLP in determining whether the applicant is financially viable.

b) “Additional Federal Funding”: 10 CFR 611.100(d) lists forms of direct and indirect assistance from the
federal government which would be considered “additional federal funding” for purposes of 10 CFR
611.100(a)(2).

4) ELIGIBLE COSTS [10 CFR 611.102]:

Under 10 CFR 611.105(d)(3), the principal amount of an ATVM loan can be no more than 80% of total project
costs (though the ATVMLP will generally require the principal amount to be significantly below 80% of total
project costs). In addition, the ATVMLP only allows proceeds of the ATVM loan to be used to pay (or
reimburse the applicant for payments of) eligible costs.

Eligible costs are:

a) costs that are reasonably related to reequipping, expanding or establishing a manufacturing facility in
the United States to produce ATVs or qualifying components; and

b) costs of engineering integration performed in the United States for ATVs or qualifying components;
in each case that have been incurred after substantial completion of the application.

Examples of eligible costs include, but are not limited to, (i) costs of purchasing and installing equipment into a
qualified facility and (ii) costs of direct materials and labor for reequipping, expanding or establishing a
qualified facility or performing qualified engineering integration. Examples of ineligible costs include, but are
not limited to (i) costs for vehicle variants that are not ATV, (ii) costs for components that are not qualifying
components, (iii) costs for research and development, (iv) costs for operation and maintenance and general
administration and overhead and (v) funding for reserve accounts.

The fact is that EM intends to use the loan for establishing the plant for production which is clearly allowable under the terms of the terms of the loan guidelines.

It has also been explained that simulations for both the fuel efficiency and for financials are allowed and encouraged as evidence that there is a reasonable expectation of reaching the fuel efficiency goal and EM paying back the loan which is the standard they must meet. This is also stated in the above linked document.

Many of the loans are indeed awarded for technology which is still under development so simulations are what is being used for the expected fuel efficiency gains. EM is no different in using these simulations as evidence for the loan.

From what we have heard, and it makes logical sense if you think it through, in their application EM used all the plant equipment as both a source of a capital and as their collateral. By selling off the unseeded equipment EM will raise the working capital and this equipment is expected to fetch about $100-$120 million. The equipment that is left for vehicle production, of similar value, provides for the collateral.

The guidelines do not say EM must have a net positive right now but instead 'the applicant has a net present value that is
positive, taking all costs, existing and future, into account." This of course goes back to the financial projections which must 'reasonably' show that EM can pay back the loan.

 

[TexasElio]

Do either of you think that Elio Motors didn't take the time to research and understand the qualification guidelines?

I think you're absolutely correct...I sincerely hope that Elio Motors has attempted to do diligence with regards to the guidelines...

So...obliviously they know they're a poor candidate for a ATVM loan...but Mr Elio seems to have trouble with being truthful & transparent to the public...the perception that Elio Motors will qualify for this loan...just another falsehood he perpetuates to his deposit holders...

 

[Jeff Porter]

bottom line, none of us know the details .... what we do know is according to reports, EM was asked to apply .... in addition, with this loan politics will be involved .... EM has attorneys who have been a presumably still are working on it ... I find it hard to believe they would waste time and money trying for a loan for which they don't qualify ....

Good stuff as always, but don't forget: Aptera applied and worked like crazy for an ATVM loan for which they didn't qualify. Agree with the rest of your points: politics will be involved, we've been told EM was asked to apply, by Paul himself, yes? And unlike Aptera, we've been told and thus we hope that with no ATVM loan, private investors will step up and provide the needed funding. And at that point, it'll be up to Paul as to how much control he's wanting to give in exchange for the mmmmmmmmmmmmmmoney.

 

[Jeff Porter]

I think you're absolutely correct...I sincerely hope that Elio Motors has attempted to do diligence with regards to the guidelines...

So...obliviously they know they're a poor candidate for a ATVM loan...but Mr Elio seems to have trouble with being truthful & transparent to the public...the perception that Elio Motors will qualify for this loan...just another falsehood he perpetuates to his deposit holders...

I think that's sort of the dividing line... some of us think EM is a poor candidate for the loan, some of us think they are a great candidate for the loan.

 

[JEBar]

I think that's sort of the dividing line... some of us think EM is a poor candidate for the loan, some of us think they are a great candidate for the loan.

exactly and none of us know for sure

 

[goofyone]

I think you're absolutely correct...I sincerely hope that Elio Motors has attempted to do diligence with regards to the guidelines...

So...obliviously they know they're a poor candidate for a ATVM loan...but Mr Elio seems to have trouble with being truthful & transparent to the public...the perception that Elio Motors will qualify for this loan...just another falsehood he perpetuates to his deposit holders...

You are letting your bias guide you you instead of doing your own research and searching for the truth. It is obvious that you have not done your due diligence and instead took what someone else wrote at face value without delving into it further. See the post above yours, and read the actual loan program guidelines, then come up with some good reasons why you feel EM is a poor candidate as you were just suckered by Horn's poor attempt. I believe Horn meant well and just wanted to point out some issues which he thought about but he should have dug a little bit more.

 

[Horn]

Yep goofyone.

I guess the only way to know who is right is by watching. I would really like to see their financials, but we all know that isn't happening.

It mostly comes down to financials and future financials.

 

[goofyone]

Yep goofyone.

I guess the only way to know who is right is by watching. I would really like to see their financials, but we all know that isn't happening.

Nope, however I believe most of us would settle for taking a look at the EM ATVM loan application with all the the financial projections it contains.

I believe everyone here wants to see EM succeed but just has different ideas as to how likely it is based on how they choose to view things. Most of us would also like as much information as possible, even if we know it won't happen, as the more information we have the easier it is for all of us to make an informed decision one way or another.

 

[Horn]

Nope, however I believe most of us would settle for taking a look at the EM ATVM loan application with all the the financial projections it contains.

Thats out there!?