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Tesla’s $675 Million Loss Pulls Elon Musk Back To Earth After Stellar SpaceX Launch

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Elon Musk wowed millions of people who watched the livestream of a flawless first launch of SpaceX’s Falcon Heavy rocket, which carried a Tesla roadster into space, capped by the elegant, simultaneous landing of two boosters. Musk’s euphoria was undiminished as he shifted gears on Wednesday to Tesla, pointing to a silver lining for the high-flying carmaker that capped a year of big losses and production headaches for its critical Model 3 sedan.

The company reported a whopping $675.4 million net loss for the final quarter of 2017 and a $1.96 billion deficit for the year, the most ever on both counts. Loss per share was $4.01 on a GAAP basis, or $3.04 per share excluding some items. That was better than consensus estimates for adjusted EPS losses of $3.10 to $3.19, and likely the result of bigger than expected sales of emissions credits. Tesla shares plunged 8.6% to $315.23 on Thursday.

Musk and Tesla CFO Deepak Ahuja acknowledged 2017’s challenges in a letter to investors but also said the table was set for a much better year in 2018. Notably, they predict operating income will become “sustainably positive” at some point this year and that production of Model 3, as well as the S and X crossover, will continue to grow.

“2018 will be a transformative year for Tesla, with a high level of operational scaling,” the two said. “As we ramp production of both Model 3 and our energy products while keeping tight control of operating expenses, our quarterly operating income should turn sustainably positive at some point in 2018.”

The company stuck with its production guidance for the Model 3, nominally priced from $35,000, to reach 2,500 units a week by the end of the first quarter, and then 5,000 a week at the end of the second quarter. The Palo Alto, California-based company didn’t say when it will hit its ultimate target of 10,000 Model 3s a week, enough to hit Musk’s goal of 500,000 a year.

“Even this Tesla realist and Model 3 deposit holder has doubts about Tesla ramping up to 10,000 units/week, essentially promising production levels of over 250,000 units in 2018,” said Rebecca Lindland, executive analyst at Kelley Blue Book’s KBB.com. “I think they’ll be lucky to get 150,000 units out the door in 2018, and even that would be an incredibly impressive feat, requiring an average weekly rate of over 3,000 units for every single week left in 2018 with no breaks. Elon Musk needs a team of forecasters that he’ll listen to so he can finally provide Wall Street and depositors with achievable targets.”

READ MORE: Roadblock: Elon Musk’s Net Worth Drops $800 Million In A Day

Last month, Tesla cut its Model 3 production target for a second time after building just 2,425 in the fourth quarter. Total production, including the higher-priced Model S and Model X, was 101,027 units in 2017.

Still, the fact that the company affirmed its production goals, which were revised down in January, was the best news in the report, said Jeff Reeves, analyst and executive editor of InvestorPlace.com.

“There are never any guarantees, but Elon Musk hasn’t been shy about cutting back forecasts in recent months so he certainly would have pulled back on the reins if Tesla wasn’t confident,” Reeves told Forbes. The company also managed to burn far less cash in the fourth quarter, trimming it to $276.8 million in the quarter, compared with $1.42 billion in the third quarter and $969.8 million a year ago, he said.

“It’s always about growth with Tesla, not the bottom line,” Reeves said. “But it’s also encouraging to see a smaller-than-expected loss and a cash burn that dropped significantly from Q3 to Q4.”

Tesla’s sales of zero-emission vehicle, or ZEV, credits to other automakers that need them to comply with California’s tough emissions rules, were up significantly from a year earlier, to $179 million compared with $20 million in the final quarter of 2016. Barclays analyst Brian Johnson predicted $10 million for the quarter. Exceeding the forecast provided Tesla an adjusted net loss that was slightly better than expected.

Tesla completed the integration of SolarCity into its operations in 2017 and aims to significantly boost shipments of solar panels and power storage units this year.

“We expect energy storage products to experience significant growth, with our aim to at least triple our sales this year,” Musk and Ahuja said. “We expect energy generation and storage gross margin to improve significantly in 2018 as we enter the year with a backlog of higher-margin commercial solar projects and a more profitable energy storage business due to manufacturing efficiencies from scaling.”

READ MORE: Musk’s Multi-Billion-Dollar Tesla Comp Plan Is Shrewd Marketing Amid Rocky Patch

Capital expenditures will continue to rise in 2018, to expand output at the Gigafactory battery plant in Nevada and continued investment in production capacity at Tesla’s Fremont, California, plant, the company said. Tesla will also start investing this year to add production of the Model Y, a small electric crossover that will be the next vehicle in its lineup.

“We are going, as you suspect, to need to make some capital investments in the second half of this year, in late Q3, Q4, for Model Y. We want to wait probably three to six months before announcing any definitive plans on production location or details associated with that,” Musk said in a conference call with analysts.

His expectations for Model Y, which hasn’t yet been unveiled, are enormous.

“To give you some flavor for optimism for Model Y… we might aim for something like maybe capacity of a million units a year, just for Model Y alone. I think we’ll be able to do that for capex that is less than Model 3 capex at the half-million-unit level”, Musk said.

Notably, customer deposits for Model 3, as well as the recently announced Semi and Roadster became a major balance sheet item for Tesla, totaling $858 million at the end of 2017, up from $663 million a year earlier. While most of those funds are from the nearly half-million reservations Tesla has for the Model 3, a growing portion comes from the battery-powered Class 8 truck and high-end sports car.

Separately, Musk said that Jon McNeill, who had been head of the company’s sales and service group, had left the company. Musk said he’ll oversee those functions himself. Lyft said it hired McNeil as its chief operating officer.

“Jon is a world-class leader who brings deep experience as a highly successful entrepreneur and executive,” Lyft CEO Logan Green said in an emailed statement. “Last year, the Lyft community experienced more growth than in all previous years combined, growing rides by 2.3x and increasing market share by more than 50%. Jon is the right leader to build upon this momentum with his unique background of starting companies from scratch and managing at scale.” – Written by 

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Why This 48-Year-Old Woman Is Building Ghana’s Biggest Solar Farm

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Chairman of UBI Group Salma Okonkwo. UBI GROUP

For more than a decade, one 48-year-old entrepreneur in Ghana has been quietly building up a multimillion-dollar oil and gas outfit called UBI Group. Salma Okonkwo is a rare woman to head up an energy company in Africa. “I don’t stop when the door is being shut. I find a way to make it work,” Okonkwo told Forbes. “That’s what propelled my success.”

She’s now expanding her reach across Ghana’s energy industry, working on an independent side project that may become the biggest in her career. Okonkwo is building Ghana’s biggest solar farm, called Blue Power Energy, slated to open in March 2019 with 100 megawatts of energy. It’s set to be one of the largest in Africa.

“Most of the multinational companies that come to Ghana don’t put in infrastructure. They operate a system where they invest very little and they take it away. They sell their products and leave,” Okonkwo says. “I’m hoping to provide employment and add to Ghana’s economy.”

Okonkwo grew up in Accra, one of 14 children born to a real estate agent and developer mother and a cattle dealer father. She often visited her grandmother in her family’s ancestral village. She’s a member of the Akan clan, whose women often sell products they make, like sandwiches or smoked fish, to make sure their children are provided for—and that left an indelible mark on Okonkwo. “The women didn’t know how to read and write, but they knew how to make a margin,” Okonkwo says.

After graduating from an all-girls boarding school with little running water, Okonkwo moved to Los Angeles for college at Loyola Marymount University. (Her family was able to pay her tuition.) She graduated in 1994 and briefly worked in California for a food brokerage company. Then oil and gas company Sahara Energy Group recruited her; Okonkwo returned to Accra in 2003 for the job.

Within a few years, Okonkwo realized that the firm could grow by opening up retail gas stations. She presented the idea several times over the years, but each time she was rebuked. Executives told her they wouldn’t change their business plan because it would be too political and would require too much of an investment in infrastructure.

At 36 years old in 2006, Okonkwo decided she’d heard “no” too many times and quit to try it herself, focusing on bringing liquified petroleum gas to the hard-to-reach region of northern Ghana, where many families still rely on burning firewood for energy. Because Okonkwo’s father was from northern Ghana, she knew firsthand how the business could change lives there. “It was just too hard to pass up the opportunity,” Okonkwo recalls. “It looked quite lucrative.”

But Okonkwo hit an early snag when she realized that she didn’t take into account a complicating factor: The North had few storage facilities for the liquified gas. To get it to the remote region, she’d have to build the storage herself, and she was already struggling to secure funding. So Okonkwo pivoted and started trading diesel and petroleum wholesale. A contract to supply fuel to Dallas-based Kosmos Energy came in 2007, followed by one with Hess in 2008. In the early days, she financed the operation by mortgaging some properties that her family and husband had inherited.

A UBI Group retail gas station in Ghana. UBI GROUP.

By 2008, UBI opened its first retail gas station. It soon owned 8 outright and managed another 20 through partnerships. That caught the eye of Singapore-based multinational firm Puma Energy, which had 2017 sales of $15 billion from operations in 49 countries. Puma acquired a 49% stake in two of UBI Group’s subsidiaries (retail gas stations and wholesale fuel distribution) in 2013 for about $150 million.

After the partial acquisition in 2013, Okonkwo says, she started developing her solar company. She estimates the company will spend about $100 million—financed by roughly $30 million in loans—to create 100 megawatts of solar power by early next year. Construction started earlier this summer. The plan is to add another 100 megawatts by the end of 2020.

Despite all the sunshine in Africa, solar power isn’t a prominent energy source on the continent. Most farms are concentrated in South Africa and Kenya. In 2009, Morocco announced plans to build one of the biggest solar farms in the world. The first of the project’s three phases opened in 2016. “I don’t know of another large-scale project like this in Africa that’s led by a woman,” says Arne Jacobson, who has been studying renewable energy with a focus on Africa since 1998 and is now the director of Humboldt State University’s Schatz Energy Research Center. “Power is fairly expensive in countries like Ghana. If they can keep costs low, this is will be a profitable venture.”

The project is also personal for Okonkwo. Half of the solar farm will be located in her father’s village in northern Ghana. The rest will be spread out throughout the North, which is Ghana’s poorest region, according to Unicef. The organization says the area has seen the smallest progress in terms of poverty reduction since the 1990s.

There are so few employment opportunities in the north of Ghana besides farming that most women migrate to Accra looking for work. Many can only find jobs as “kayayo”—working in markets carrying goods for customers, sometimes known as “living shopping baskets.” They live in slums and regularly endure harassment, theft and even rape. Okonkwo, aiming to create a better alternative for some of these women, says Blue Power Energy has already created hundreds of jobs in northern Ghana and that more than 650 will be created upon completion.

Okonkwo’s ultimate goal is to bring cheap energy to northern Ghana through the solar farm, which she hopes will incentivize companies to create lasting jobs there. In the meantime, she is opening a day-care center in Accra for children born to kayayo women, where, as she explains, they can “get educated and hopefully break the cycle.”

“I want to bring support to my people in the north,” Okonkwo says. “Then there will be more Salma’s all over the place.”

 

– Chloe Sorvino

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The Bloodless Battle Against The Malaria

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With Africa having a big share of the global malaria burden, technologists are developing new, cost-effective ways to detect the disease – minus the needle.

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Africa’s New Silicon Valleys

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Perhaps most famously, Route 128 and Silicon Valley in the United States developed around the Massachusetts Institute of Technology and Stanford universities, while key European knowledge regions developed at the Sophia Antipolis high-tech park in Côte d’Azur, France, and the Leuven region in Belgium.

In Africa, however, it is a relatively new phenomenon. But some universities on the continent are working towards setting themselves up as catalysts of innovation and entrepreneurship. Notable mentions must go to the University of Nairobi and the American University in Cairo, but South Africa is leading the charge.

The likes of Stellenbosch University, the University of Cape Town (UCT) and University of the Witwatersrand (Wits) are focusing more than ever on equipping their students to be entrepreneurs, primarily in response to unemployment issues in the country. Almost 50% of those aged between 15 and 24 in South Africa are without a job, and some tertiary institutions are adapting by equipping them to become job creators.

READ MORE: Forbes Africa Under 30 Technology Entrepreneurs

Bakang Moetse is Impact Investing Project Manager at the Bertha Centre, a dedicated entrepreneurial unit within the Graduate School of Business at UCT. She says high youth unemployment had made the promotion of entrepreneurship an imperative for many African governments.

“Whilst government may be responsible for creating an enabling environment for the development of businesses, universities play a key role in delivering skills and expertise, as well as creating enabling environments for incubation of entrepreneurs,” says Moetse.

Universities also stand to gain. At a time when the relevance of university degrees has come into question due to the number of unemployed graduates and lack of employment readiness of those graduates who do enter the workforce, promoting entrepreneurship provides a way of ensuring universities continue to be recognized as key to the development of societies and economies.

“For universities interested in taking on a more active role in this regard, there is a competitive advantage to be gained in becoming leaders within this field of research, which can further bolster their credentials,” says Moetse.

Stellenbosch University runs its own incubator – LaunchLab – and also invests in some student-run tech startups. Head of Incubation Brandon Paschal says universities that do so will produce more employable and resilient graduates, and their reputations will grow as such.

“Also, with the current student fee climate, if universities are not backing and pursuing commercializing university technology, their financial sustainability and broader access to tertiary education is in jeopardy,” he says.

So how have startups incubated by universities benefitted? G-J van Rooyen was an associate professor at Stellenbosch, and launched his bitcoin-based anti-piracy startup Custos Media Technologies out of LaunchLab. He says it had been a great space from which to grow an early-stage company.

“At a startup, you’re constantly juggling concerns and issues. Being in a supportive environment where space and facilities are one less thing to worry about makes a huge difference,” Van Rooyen says. “Since LaunchLab is a hub for startups and investors, it directly impacted our fundraising efforts, and introduced us to our angel investor.”

Michael-John Dippenaar’s on-demand storage space startup Sxuirrel first encountered LaunchLab after winning a competition run by the incubator, earning funding and support.

“Amongst other intangibles thereafter, and in the period leading up to then and now, we gained help in the form of advice, community and networks,” Dippenaar says.

“We had support in finding lawyers, connecting to additional entrepreneurs to learn from, and access to soft-skill building resources.”

READ MORE: Investment Marketplace Coming To Africa

Training students – and professors – in entrepreneurial skills and providing them a safe space from which to launch their ideas in one thing, but universities also need to ensure they have solid links with corporates and funders to help incubated startups scale. This can be a challenge.

However, Tine Fisker Henriksen, Senior Project Manager, Innovative Finance, at Bertha Centre, says the credibility associated with university brands lends itself to bringing in new partnerships and streams of funding entrepreneurs on their own would not be able to tap into.

“We are seeing increased interest from the corporate sector to get involved in supporting entrepreneurship, and we have managed to establish partnerships that have been valuable in this regard,” she says.

“From our point of view, there is great potential to expand this beyond mere sponsorship of events and once-off fundraising, as is commonly the case, and move in the direction of more sustainable partnerships approaches for rising entrepreneurs.”

The initiatives at places like Stellenbosch and UCT are well developed, with a track record of helping startups launch and raise funding for their next stage of development, but are enough universities following their lead?

Paschal says there is some evidence of this, but it takes time to transform very traditional and conservative institutions. Part of the challenge is that “startup skills” are intangible, EQ-related things that you cannot learn in a classroom.

“The push for universities spinning out companies, and supporting startups and SMEs, is disrupting the traditional role of universities. The trend is going in this direction, but generally universities are battling to get beyond the academic side,” he says.

Henriksen agrees more needs to be done.

“We have seen the top universities develop more entrepreneurial courses, hubs and initiatives. But there is definitely room for greater involvement, and coordination of efforts in this space to create a synergized impact,” she says.

– Tom Jackson

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