First Solar Inks Deal for $700 Million in Tax Credits to Boost U.S. Solar Manufacturing
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- Deal with Fiserv, Inc., believed to be the first significant Section 45X credit transfer in the solar industry
- Tax Credit Transfer Agreements signed eight days following issuance of notice of proposed rulemaking by the US Department of Treasury and Internal Revenue Service to implement the Section 45X credits
- The Section 45X credits transacted at a price of $0.96 per $1 of 2023 tax credits, inclusive of fees and commissions paid by First Solar to the placement agent
First Solar, Inc. announced that it entered into two separate Tax Credit Transfer Agreements (TCTAs) on December 22, 2023, to sell $500 million and up to $200 million, respectively, of 2023 Inflation Reduction Act (IRA) Advanced Manufacturing Production tax credits to Fiserv, Inc. subject to satisfaction of certain conditions. 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.
Citigroup Global Markets, Inc. is the placement agent for First Solar on the transaction, which is believed to be the first significant credit transfer of its kind in the solar manufacturing industry. The agreements were signed just eight days following issuance of notice of proposed rulemaking by the US Department of Treasury and Internal Revenue Service to implement the Section 45X credits.
“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, chief executive officer, First Solar. “This agreement establishes an important precedent for the solar industry, confirming the marketability and value of Advanced Manufacturing Production tax credits.”
“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, chief financial officer, First Solar. “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 this year. The company’s fully vertically integrated solar manufacturing facilities produce thin film wafers, cells, and modules in a single integrated process that sees a sheet of glass transformed into a fully functional solar panel in approximately four hours.
As a result of its vertical integration, First Solar is eligible 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 gigawatts 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.