First Solar to sell up to $700M in 45X tax credits
First Solar’s module manufacturing facility in Ohio (Courtesy: First Solar)
In what both sides are calling the first significant credit transfer of its kind in the solar manufacturing industry, First Solar announced that it entered into two separate Tax Credit Transfer Agreements (TCTAs) in late December to sell $500 million and up to $200 million, respectively, of 2023 Inflation Reduction Act (IRA) Advanced Manufacturing Production tax credits to Fiserv, a financial services company.
Under the terms of the agreements, Fiserv will pay a price of $0.96 per $1 of tax credits to First Solar during the first half of 2024, inclusive of fees and commissions paid by First Solar to the placement agent. First Solar says the agreement is still subject to the “satisfaction of certain conditions.”
Citigroup Global Markets, Inc. is the placement agent for First Solar’s side of the transaction. The agreements were signed just eight days following the issuance of notice of proposed rulemaking by the US Department of Treasury and Internal Revenue Service to implement the Section 45X credits.
The Treasury proposed regulations intending to incentivize the production of eligible components within the United States. Qualifying materials include solar and wind energy components, inverters, some battery parts, and applicable critical minerals.
The proposed regulations would affect eligible taxpayers who produce and sell such components and intend to claim the benefit of an advanced manufacturing production credit- including by making elective payments or credit transfer elections.
“This is the IRA delivering on its intent, which is to incentivize high-value domestic manufacturing by providing manufacturers with the liquidity they need to reinvest in growth and innovation,” said Mark Widmar, CEO of First Solar. “This agreement establishes an important precedent for the solar industry, confirming the marketability and value of Advanced Manufacturing Production tax credits.”
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“The liquidity generated as a result of this transaction is expected to accelerate the timing of enhancing our cash position in the US through the monetization of the Section 45X credits, further strengthening our balance sheet and allowing us to continue investing in key aspects of growth, such as research and development,” said Alex Bradley, First Solar’s CFO. “As it relates to the 2023 financial year, we expect a pre- and post-tax impact of up to $28 million, resulting in a reduction of our diluted earnings of up to $0.26 per share for the year.”
The tax credits result from the sale of photovoltaic (PV) solar modules produced in 2023 by First Solar’s operational manufacturing footprint in the United States, including its third Ohio factory, which was commissioned earlier in 2023. The company’s fully vertically integrated solar manufacturing facilities produce thin film wafers, cells, and modules in a single integrated process that transforms a sheet of glass into a functional solar panel in approximately four hours.
As a result of that vertical integration, First Solar claims eligibility for Advanced Manufacturing Production tax credits allowed for the production of PV wafers, cells, and modules under Section 45X of the IRA. The solar technology and manufacturing company expects to invest over $2 billion in new manufacturing facilities in Alabama and Louisiana, while also expanding its existing Ohio footprint, and expects to have 14 GW of fully vertically integrated US solar manufacturing capacity by 2026.
Additionally, First Solar is investing up to $370 million in a dedicated R&D innovation center in Perrysburg, Ohio, expected to be completed in 2024.
