In a groundbreaking move within the solar manufacturing industry, First Solar, Inc. (Nasdaq: FSLR) has successfully inked two Tax Credit Transfer Agreements (TCTAs), totaling up to $700 million, for its 2023 Inflation Reduction Act (IRA) Advanced Manufacturing Production tax credits. The agreements, signed on December 22, 2023, mark a significant milestone, as First Solar becomes the first in the industry to engage in such a substantial credit transfer.
Under the terms of the agreements, First Solar is set to sell $500 million and up to $200 million of tax credits to Fiserv, Inc., pending the satisfaction of specific conditions. Fiserv will pay $0.96 per $1 of tax credits during the first half of 2024, inclusive of fees and commissions paid to the placement agent, Citigroup Global Markets, Inc.
The swift execution of the agreements, just eight days after the issuance of a notice of proposed rulemaking by the US Department of Treasury and Internal Revenue Service for Section 45X credits, underscores the industry’s responsiveness to regulatory developments.
Mark Widmar, CEO of First Solar, emphasized the significance of the IRA in incentivizing domestic manufacturing, stating, “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. This agreement establishes an important precedent for the solar industry, confirming the marketability and value of Advanced Manufacturing Production tax credits.”
Alex Bradley, CFO of First Solar, highlighted the expected positive impact on the company’s financial position, noting, “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. 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 are linked to the sale of photovoltaic (PV) solar modules produced in 2023 by First Solar’s integrated manufacturing facilities in the United States, including its third Ohio factory commissioned earlier this year. With a fully vertically integrated process, First Solar transforms a sheet of glass into a fully functional solar panel in approximately four hours.
First Solar’s eligibility for Advanced Manufacturing Production tax credits under Section 45X of the IRA is attributed to its vertical integration, allowing the company to produce PV wafers, cells, and modules. The solar technology and manufacturing giant plans to invest over $2 billion in new facilities in Alabama and Louisiana, expanding its Ohio footprint. By 2026, First Solar aims to achieve 14 gigawatts of fully vertically integrated US solar manufacturing capacity. Additionally, the company is investing up to $370 million in a dedicated R&D innovation center in Perrysburg, Ohio, slated for completion in 2024.
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