First Solar Finalises $700mn Tax Credit Agreements, First In Solar Manufacturing

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The agreement came up  just eight days after the US proposed rules for Section 45X credits. 

Arizona’s First Solar, Inc. has finalised two tax credit transfer agreements (TCTAs) worth up to $700 million. Associated with the 2023 Inflation Reduction Act (IRA) Advanced Manufacturing Production tax credits, the agreements  were signed on December 22, 2023, making First Solar the first in its sector to undertake such a notable credit transfer.

As per the agreement details, First Solar will sell $500 million and an additional amount up to $200 million in tax credits to Fiserv, Inc., contingent on certain conditions. Fiserv agrees to purchase these credits at $0.96 for every $1 of tax credit, inclusive of associated fees and commissions to Citigroup Global Markets, Inc., with the transaction expected to take place in the first half of 2024.

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This rapid agreement has come up  just eight days after the US Department of Treasury and Internal Revenue Service proposed rules for Section 45X credits. This demonstrates the solar industry’s quick adaptation to regulatory changes.

Image for representational purpose

Mark Widmar, CEO of First Solar, highlighted the role of the IRA in promoting domestic manufacturing, stating that the agreement not only provides liquidity for manufacturers to reinvest in growth and innovation but also sets a valuable precedent for the solar industry regarding the marketability of Advanced Manufacturing Production tax credits.

The tax credits are tied to the sale of photovoltaic (PV) solar modules produced in 2023 at First Solar’s US manufacturing facilities, including its newest Ohio factory. The company’s unique vertical integration process enables it to transform a glass sheet into a solar panel in about four hours.

First Solar’s eligibility for the tax credits under Section 45X of the IRA is due to its vertical integration in PV wafer, cell, and module production. The company plans to invest over $2 billion in new facilities in Alabama and Louisiana, expanding its Ohio operations.

Alex Bradley, CFO of First Solar, pointed out the beneficial financial impact of this transaction. It is anticipated to accelerate the enhancement of the company’s cash position in the US through the monetization of Section 45X credits. This improvement in liquidity will bolster their balance sheet and support investments in growth areas like research and development. For the 2023 fiscal year, the company anticipates an impact of up to $28 million on its pre- and post-tax earnings, potentially reducing diluted earnings by up to $0.26 per share.

By 2026, First Solar aims to reach a manufacturing capacity of 14 gigawatts in the US. It is also investing up to $370 million in a dedicated R&D innovation center in Perrysburg, Ohio, expected to be completed by 2024.

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