In a first, First Solar cashes out 45X credits

The top line

‍Solar panel maker First Solar Inc. will sell up to $700 million worth of 2023 IRA advanced manufacturing production tax credits to the financial services company Fiserv Inc., the company said Wednesday.

The deal, which involves two separate tax credit transfer agreements worth up to $200 million and $500 million, respectively, was inked just eight days after the Department of Treasury and the IRS announced additional guidelines regarding component value and eligibility. First Solar said it believes the sale marks the first “significant transfer credit of its kind” in solar manufacturing. 

“This agreement establishes an important precedent for the solar industry, confirming the marketability and value of advanced manufacturing production tax credits,” said First Solar CEO Mark Widmar.

In the first half of 2024, Fiserv will pay 96 cents for each dollar of tax credits that First Solar accumulated in 2023 for its U.S. production of PV wafers, cells, and modules.

The transfer will provide First Solar with liquidity to “accelerate the timing of enhancing our cash position in the U.S.,” CFO Alex Bradley said in a statement. That cash flow will allow First Solar to strengthen its balance sheet, and continue investing in growth areas including research and development, Bradley added.

Market grounding‍

The transfer announcement comes at the tailend of what was a strange year for cleantech broadly, and a mixed year for solar in particular, as the industry battled high interest rates and a glut of modules.

Arizona-based First Solar hasn’t been completely immune to those challenges, but in recent weeks analysts have upped their ratings of the company, in part because of the benefits it stands to reap from IRA credits.

Selling 2023’s credits to Fiserv doesn’t mean First Solar can’t play around with other delivery mechanisms in coming years. Over the summer, Treasury released additional guidance on delivery methods including tax refunds, known as “elective pay” or “direct payments,” and transferability.

Under those guidelines, 45X recipients may receive tax refunds equal to the credit amount for five years out of the total 10-year span of the credit. First Solar, having elected to transfer up to $700 million of 2023 credits, could opt to receive its credits in the form of tax refunds in future years.

2024 outlook

‍First Solar said it will invest more than $2 billion in new manufacturing facilities in Alabama and Louisiana, as well as expand its existing presence in Ohio. The company expects to have 14 gigawatts of vertically integrated solar manufacturing capacity in the U.S. by 2026.

Additionally, the company said it is investing up to $370 million in a research and development center in Ohio, which is expected to be completed in 2024.

Want to know more about how the market for transferrable tax credits will work? Sign up for Latitude Media’s Frontier Forum on January 31, featuring Crux CEO Alfred Johnson, who will break down the budding market for clean energy tax credits. We’ll dissect current transactions and pricing, compare buyer and seller expectations, and look at where the market is headed in 2024.