Tesla and Panasonic have pledged to produce solar cells at a manufacturing facility in Buffalo, New York, on one condition: that the Tesla-SolarCity merger passes, Tesla wrote in a blog post Monday.
The Buffalo plant Tesla has chosen was originally meant to be a production facility for SolarCity. SolarCity originally wanted the Buffalo plant to be up and running this year, but the plant’s production timeline was delayed until 2017, the Buffalo News reported in August.
The state of New York is spending $750 million on the Buffalo plant as part of an economic revitalization project called the Buffalo Billion initiative. Federal investigators are currently probing the initiative to see how money and contracts were distributed, according to the New York Times.
SolarCity has pledged $150 million for the Buffalo plant, which costs a total of $900 million.
Tesla and Panasonic would collaborate on the manufacturing and production of solar cells and modules at the plant, Tesla wrote in its blog post. Those products would work “seamlessly” with Tesla’s energy storage products, the Powerwall and Powerpack.
SolarCity would be responsible for installation, sales, and financing as part of the agreement, according to the blog post.
The plant’s initial solar panel production would center around the roof product SolarCity and Tesla have been teasing ahead of the merger vote, the Buffalo news also reported.
Tesla and SolarCity will unveil the solar roof product on October 28 in the San Francisco area.
On SolarCity’s second quarter earnings call, Musk said the roof would be “a fundamental part of achieving differentiated product strategy, where you have a beautiful roof. It’s not a thing on the roof. It is the roof, which is a quite difficult engineering challenge and not something that is available anywhere else.”
Panasonic currently partners with Tesla at the company’s Gigafactory plant in Nevada.
The Buffalo plant’s delay
SolarCity CEO Lyndon Rive said in August that the plant was delayed because it was taking longer to order and receive the equipment that will produce the solar panels.
SolarCity said they expected the delay would allow the company to push $65 million to $70 million of its investment into 2017, Buffalo News reported at the time. Credit Suisse analyst Patrick Jobin said that delay would help the company generate more cash by the end of 2016.
“While we suspect this is genuinely due to equipment delivery delays, it does beg the question if there is a desire to delay the Buffalo plant startup to preserve cash near-term or provide more time for scaling the technology,” Jobin wrote in a research note at the time, according to the Buffalo News.
Cash-strapped SolarCity has made changes to improve its cash flow this year. The company has conventionally leased panels, but is now selling more panels to increase cash flow. SolarCity introduced a loan program in June to incentivise purchasing as part of that change in strategy.
SolarCity has also cut its marketing costs, as first reported by the Wall Street Journal. A SolarCity spokesperson confirmed to Business Insider that there were layoffs in August to SolarCity’s marketing and sales team.
Tesla is in the process of buying SolarCity in a deal worth $2.6 billion.
The proposed merger has faced criticism. Tesla has a lot to contend with in 2017 as it ramps up production for the Model 3, and would be adding SolarCity’s $3+ billion in debt to its balance sheet.
Musk owns about 20% of SolarCity and is its chairman. Musk is also the cousin of SolarCity’s CEO Lyndon Rive.
The merger vote is scheduled for November 17.
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